Citation: 2011 TCC 205
Date: 20110408
Dockets: 2007-1761(IT)G
2007-1765(IT)G
2007-1768(IT)G
BETWEEN:
GERALDINE ROBERTS,
STANLEY HUNT,
C. AUBREY ROBERTS,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Boyle J.
[1]
The three Appellants
are native Canadians living on British Columbia coastal reserves. They have
brought a motion for an advanced costs order in respect of their appeals
instituted in April 2007 claiming that their fishing income should not be
taxable because of the exemptions set out in paragraph 81(1)(a) of
the Income Tax Act (the “ITA”) and section 87 of the Indian
Act. In their advanced costs motion they are requesting $350,000 in any
event of the cause. The taxpayers’ income from fishing constitutes only a small
portion of their revenues each year, the rest of which is tax exempt. The total
amount of federal tax involved in the three appeals is just over $3,000;
nonetheless they are being pursued by the taxpayers under this Court’s general
procedure and not its informal procedure. The taxpayers appear from their filed
financial information to enjoy modest Canadian middle class incomes. The
taxpayers have not paid anything towards the legal costs of pursuing their
appeals. They have unsuccessfully sought funding from provincial legal aid
authorities, the Department of Indian and Northern Affairs, the federal Court
Challenges Program, their band councils and the Native Indian Brotherhood, an
association made up of coastal fishers from a number of coastal reserves. None of
the Native Indian Brotherhood, coastal bands or others native fishers living on
coastal reserves have made any financial contribution to the legal expenses of
these appeals, nor have any intervened or filed affidavits in support of there being
a significant or broad public interest in their communities to these appeals
being pursued and decided by this Court. The Respondent has been able to
determine that objections have been filed by approximately 100 residents
of B.C. coastal reserves claiming that their fishing income should be tax
exempt.
[2]
In the appeals, the
taxpayers take the position that a significant connecting factor in these cases
that should cause their fishing income to be sited on their reserves is that,
when B.C. coastal reserves were allocated, it was intended that they be fishing
stations from which their residents could continue to fish in order to sustain
themselves. In essence, their argument is that there is an inherent historical
and traditional connection between their reserves and their fishing activities
such that they should be tax exempt even if they are commercial fishing
activities. It is their counsel’s position that this aspect of native fishers
living on B.C. coastal reserves is of great public importance and has not
previously been reviewed or resolved for purposes of siting fishing income and
the subsection 81(1) exemption. Of the 100 objections mentioned above,
less than 20 expressly take such a position.
I. Law
[3]
In virtually all
aboriginal rights cases, the honour of the Crown is at stake: per Hugessen J.
in Joseph v. Canada, 2008 FC 574. I have no doubt that this
extends to litigation before this Court involving subsection 81(1) of the ITA
and section 87 of the Indian Act.
[4]
The Supreme Court of
Canada in Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, addressed
the history and scope of the section 87 tax exemption. In particular, La Forest J.
wrote:
In summary, the historical record makes it clear that ss. 87
and 89 of the Indian Act, the sections to which the deeming provision of
s. 90 applies, constitute part of a legislative “package” which bears the
impress of an obligation to native peoples which the Crown has recognized at
least since the signing of the Royal Proclamation of 1763. From that time on,
the Crown has always acknowledged that it is honour‑bound to shield Indians from any efforts by non‑natives to
dispossess Indians of the property which they hold qua
Indians, i.e., their land base and the chattels on that land base.
It is also important to underscore the corollary to the conclusion I
have just drawn. The fact that the modern‑day
legislation, like its historical counterparts, is so
careful to underline that exemptions from taxation and distraint apply only in
respect of personal property situated on reserves demonstrates that the purpose
of the legislation is not to remedy the economically disadvantaged position of
Indians by ensuring that Indians may acquire, hold, and deal with property in
the commercial mainstream on different terms than their fellow citizens. An
examination of the decisions bearing on these sections confirms that Indians
who acquire and deal in property outside lands reserved for their use, deal
with it on the same basis as all other Canadians.
[5]
In Williams v.
Canada, [1992] 1 S.C.R. 877, the Supreme Court of Canada set out the tests
to be applied in determining whether the situs of intangible property
was on a reserve. Gonthier J. writing for the Court said:
The approach which best reflects these concerns is one which
analyzes the matter in terms of categories of property and types of taxation.
For instance, connecting factors may have different relevance with regard to
unemployment insurance benefits than in respect of employment income, or
pension benefits. The first step is to identify the various connecting factors
which are potentially relevant. These factors should then be analyzed to
determine what weight they should be given in identifying the location of the
property, in light of three considerations: (1) the purpose of the exemption
under the Indian Act; (2) the type of property in question; and (3) the
nature of the taxation of that property. The question with regard to each
connecting factor is therefore what weight should be given that factor in
answering the question whether to tax that form of property in that manner
would amount to the erosion of the entitlement of the Indian qua Indian
on a reserve.
This approach preserves the flexibility of the case by case
approach, but within a framework which properly identifies the weight which is
to be placed on various connecting factors. Of course, the weight to be given
various connecting factors cannot be determined precisely. However, this
approach has the advantage that it preserves the ability to deal appropriately
with future cases which present considerations not previously apparent.
Earlier, he had written:
. . . A connecting factor is only relevant in so much as
it identifies the location of the property in question for the purposes of the Indian
Act. In particular categories of cases, therefore, one connecting factor
may have much more weight than another. It would be easy in balancing
connecting factors on a case by case basis to lose sight of this.
[6]
The courts have often
applied the Williams connecting factors test in cases of off‑reserve
income.
[7]
For example, in Southwind
v. The Queen, 98 DTC 6084, the Federal Court of Appeal dealt with
logging business income of a native living on a reserve. The Court wrote:
For the Crown, Mr. Bourgard rightly offered a more complex set
of factors to consider in deciding whether business income is situated on the
reserve. He suggested that we examine (1) the location of the business
activities, (2) the location of the customers (debtors) of the business, (3)
where decisions affecting the business are made, (4) the type of business and
the nature of the work, (5) the place where the payment is made, (6) the degree
to which the business is in the commercial mainstream, (7) the location of a
fixed place of business and the location of the books and records, and (8) the
residence of the business’ owner.
As was found by the Tax Court Judge, and having considered all of
these factors, I am of the view that the appellant’s business income does
not fit within paragraph 87(1)(b) because it is not property
situated on a reserve. While it is significant that the appellant lives on a
Reserve, engages in some administrative work out of his home on the Reserve,
and stores the business records and the business assets which he owns on the
Reserve when they are not in use, the appellant, in my view, is engaged not in
a business that is integral to the life of the Reserve, but in a business that
is in the “commercial mainstream”.
According to the Supreme Court in Mitchell, where an Indian
enters into the “commercial mainstream”, he must do so on the same terms as
other Canadians with whom he competes. Although the precise meaning of this
phrase is far from clear, it is clear that it seeks to differentiate those
Native business activities that deal with people mainly off the Reserve, not on
it. It seeks to isolate those business activities that benefit the individual
Native rather than his community as a whole, recognizing, of course, as Mr. Nadjiwan
says, that a person benefits his or her community by earning a living for his
family.
[8]
This Court applied the
connecting factors test to the fishing income of a native living on a reserve
in Ballantyne v. The Queen, 2009 TCC 325, 2009 DTC 1188,
and dismissed the appeal. In Ronald Robertson v. The Queen,
2010 TCC 552, this Court allowed an appeal in respect of native
fishing income. Both of these decisions have been appealed to the Federal Court
of Appeal. I will address this Court’s decision in Bell et al. v. The
Queen, 2000 DTC 6365, in detail below.
[9]
Outside the scope of
the section 87 tax exemption, courts have considered the scope and
relevance to aboriginal rights and claims of the history and purpose of B.C.
coastal reserve allocation and allotment. This is reviewed at length by the
Supreme Court of Canada in R. v. Nikal, [1996] 1 S.C.R. 1013, and was
also considered by the Supreme Court in R. v. Lewis, [1996] 1 S.C.R. 921.
In neither case did the Supreme Court conclude that the historic coastal
reserve allocation was done in order to recognize or extend commercial fishing
rights. Similar B.C. coastal fishing rights issues are again before the Supreme
Court of Canada in the appeal pending from the British Columbia Court of Appeal
decision in Lax Kw’alaams Indian Band v. Canada (Attorney General),
2009 BCCA 593.
[10]
The considerations
applicable to dealing with an application for an advanced costs order are set
out by the Supreme Court of Canada in British Columbia (Minister of Forests)
v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371. The
Supreme Court identified the following stringent preconditions for the making
of such an order:
38 The present appeal raises the question of how the
principles governing interim costs operate in combination with the special
considerations that come into play in cases of public importance. In cases of
this nature, as I have indicated above, the more usual purposes of costs awards
are often superseded by other policy objectives, notably that of ensuring that
ordinary citizens will have access to the courts to determine their
constitutional rights and other issues of broad social significance.
Furthermore, it is often inherent in the nature of cases of this kind that the
issues to be determined are of significance not only to the parties but to the
broader community, and as a result the public interest is served by a proper
resolution of those issues. In both these respects, public law cases as a class
can be distinguished from ordinary civil disputes. They may be viewed as a
subcategory where the “special circumstances” that must be present to justify
an award of interim costs are related to the public importance of the questions
at issue in the case. It is for the trial court to determine in each instance
whether a particular case, which might be classified as “special” by its very
nature as a public interest case, is special enough to rise to the level where
the unusual measure of ordering costs would be appropriate.
39 One factor to be borne in mind by the court in making this
determination is that in a public law case costs will not always be awarded to
the successful party if, for example, that party is the government and the
opposing party is an individual Charter claimant of limited means.
Indeed, as the B. (R.) case demonstrates, it is possible (although still
unusual) for costs to be awarded in favour of the unsuccessful party if
the court considers that this is necessary to ensure that ordinary citizens
will not be deterred from bringing important constitutional arguments before
the courts. Concerns about prejudging the issues are therefore attenuated in
this context since costs, even if awarded at the end of the proceedings, will
not necessarily reflect the outcome on the merits. Another factor to be
considered is the extent to which the issues raised are of public importance,
and the public interest in bringing those issues before a court.
40 With these considerations in mind, I would identify the
criteria that must be present to justify an award of interim costs in this kind
of case as follows:
1. The party seeking interim costs genuinely cannot
afford to pay for the litigation, and no other realistic option exists for
bringing the issues to trial — in short, the litigation would be unable to
proceed if the order were not made.
2. The claim to be adjudicated is prima facie
meritorious; that is, the claim is at least of sufficient merit that it is
contrary to the interests of justice for the opportunity to pursue the case to
be forfeited just because the litigant lacks financial means.
3. The issues raised transcend the individual
interests of the particular litigant, are of public importance, and have not
been resolved in previous cases.
41 These are necessary conditions that must be met for an
award of interim costs to be available in cases of this type. The fact that
they are met in a particular case is not necessarily sufficient to establish
that such an award should be made; that determination is in the discretion of
the court. If all three conditions are established, courts have a narrow
jurisdiction to order that the impecunious party’s costs be paid prospectively. . . .
. . .
46 Applying the criteria I have set out to the evidence in
this case as assessed by the chambers judge, it is my view that each of them is
met. The respondents are impecunious and cannot proceed to trial without an
order for interim costs. The case is of sufficient merit that it should go
forward. The issues sought to be raised at trial are of profound importance to
the people of British Columbia, both aboriginal and non‑aboriginal,
and their determination would be a major step towards
settling the many unresolved problems in the Crown‑aboriginal
relationship in that province. In short, the circumstances of this case are
indeed special, even extreme.
[Emphasis in original.]
[11]
In Okanagan, the
Supreme Court of Canada was dealing with land rights litigation involving the
extent of native rights to log on a Crown land in order to build desperately
needed homes on a reserve. The Court upheld an advanced costs order and concluded
that the issues to be raised at trial were of profound importance to the people
of British Columbia, both aboriginal and non‑aboriginal.
[12]
The Supreme Court of
Canada returned to the issue of advanced costs awards in Little Sisters Book
and Art Emporium v. Canada (Commissioner of Customs and Revenue),
2007 SCC 2, [2007] 1 S.C.R. 38. In reviewing the Okanagan
principles, the Supreme Court wrote:
2 The situation in Okanagan was clearly out of the
ordinary. The bands had been thrust into complex litigation against the
government that they could not pay for, and the case raised issues vital both
to their survival and to the government’s approach to aboriginal rights. The
issue before the Court in that case was whether the bands’ inability to pay
should have the effect of leaving constitutional rights unenforceable and
public interest issues unresolved. Mindful of the serious consequences to the
bands and of the contours of the anticipated litigation, this Court decided
that a real injustice would result if the courts refused to exercise their
equitable jurisdiction in respect of costs and if, as a consequence, the bands’
impecuniosity prevented the trial from proceeding.
. . .
5 The fact that the appellant’s claim would not be
summarily dismissed does not suffice to establish that interim costs should be
granted to allow it to proceed. That is not the proper test. Quite unfortunately,
financial constraints put potentially meritorious claims at risk every day.
Faced with this dilemma, legislatures have offered some responses, although
these may not address every situation. Legal aid programs remain underfunded
and overwhelmed. Self‑representation in courts is a growing phenomenon. Okanagan
was not intended to resolve all these difficulties. The Court did not seek to
create a parallel system of legal aid or a court‑managed comprehensive
program to supplement any of the other programs designed to assist various
groups in taking legal action, and its decision should not be used to do so.
The decision did not introduce a new financing method for self‑appointed
representatives of the public interest. This Court’s ratio in Okanagan
applies only to those few situations where a court would be participating in an
injustice — against the litigant personally and against the public generally —
if it did not order advance costs to allow the litigant to proceed.
. . .
33 An exceptional convergence of factors occurred in Okanagan.
At the individual level, the case was of the utmost importance to the bands.
They were caught in a grave predicament: the costs of the litigation were more
than they could afford, especially given pressing needs like housing; yet a
failure to assert their logging rights would seriously compromise those same
needs. On a broader level, the case raised aboriginal rights issues of great
public importance. There was evidence that the land claim advanced by the bands
had prima facie merit, but the courts had yet to decide on the precise
mechanism for advancing such claims — the fundamental issue of general
importance had not been resolved by the courts in other litigation. However the
case was ultimately decided, it was in the public interest to have the matter
resolved. For both the bands themselves and the public at large, the litigation
could not, therefore, simply be abandoned. In these exceptional circumstances,
this Court held that the public’s interest in the litigation justified a
structured advance costs order insofar as it was necessary to have the case
move forward.
. . .
37 The nature of the Okanagan approach should be
apparent from the analysis it prescribes for advance costs in public interest
cases. A litigant must convince the court that three absolute requirements are
met (at para. 40):
1. The party seeking interim costs genuinely cannot
afford to pay for the litigation, and no other realistic option exists for
bringing the issues to trial — in short, the litigation would be unable to
proceed if the order were not made.
2. The claim to be adjudicated is prima facie
meritorious; that is, the claim is at least of sufficient merit that it is
contrary to the interests of justice for the opportunity to pursue the case to
be forfeited just because the litigant lacks financial means.
3. The issues raised transcend the individual
interests of the particular litigant, are of public importance, and have not
been resolved in previous cases.
In analysing these requirements, the court must decide, with a view
to all the circumstances, whether the case is sufficiently special that it
would be contrary to the interests of justice to deny the advance costs
application, or whether it should consider other methods to facilitate the
hearing of the case. The discretion enjoyed by the court affords it an
opportunity to consider all relevant factors that arise on the facts.
38 It is only a “rare and exceptional” case that is special
enough to warrant an advance costs award: Okanagan, at para. 1. The
standard was indeed intended to be a high one, and although no rigid test can
be applied systematically to determine whether a case is “special enough”, some
observations can be made. As Thackray J.A. pointed out, it was in failing
to verify whether the circumstances of this case were “exceptional” enough that
the trial judge committed an error in law.
39 First, the injustice that would arise if the application
is not granted must relate both to the individual applicant and to the public
at large. This means that a litigant whose case, however compelling it may be,
is of interest only to the litigant will be denied an advance costs award. It
does not mean, however, that every case of interest to the public will satisfy
the test. The justice system must not become a proxy for the public inquiry
process, swamped with actions launched by test plaintiffs and public interest
groups. As compelling as access to justice concerns may be, they cannot justify
this Court unilaterally authorizing a revolution in how litigation is conceived
and conducted.
40 Second, the advance costs award must be an exceptional
measure; it must be in the interests of justice that it be awarded. Therefore,
the applicant must explore all other possible funding options. These include,
but are not limited to, public funding options like legal aid and other
programs designed to assist various groups in taking legal action. An advance
costs award is neither a substitute for, nor a supplement to, these programs. An
applicant must also be able to demonstrate that an attempt, albeit
unsuccessful, has been made to obtain private funding through fundraising
campaigns, loan applications, contingency fee agreements and any other
available options. If the applicant cannot afford all costs of the litigation,
but is not impecunious, the applicant must commit to making a contribution to
the litigation. Finally, different kinds of costs mechanisms, like adverse
costs immunity, should also be considered. In doing so, courts must be careful
not to assume that a creative costs award is merited in every case; such an
award is an exceptional one, to be granted in special circumstances. Courts
should remain mindful of all options when they are called upon to craft
appropriate orders in such circumstances. Also, they should not assume that
the litigants who qualify for these awards must benefit from them absolutely.
In the United Kingdom, where costs immunity (or “protective orders”) can be
ordered in specified circumstances, the order may be given with the caveat that
the successful applicant cannot collect anything more than modest costs from
the other party at the end of the trial: see R. (Corner House Research) v.
Secretary of State for Trade and Industry, [2005] 1 W.L.R. 2600, [2005]
EWCA Civ 192, at para. 76. We agree with this nuanced approach.
. . .
44 A court awarding advance costs must be guided by the
condition of necessity. For parties with unequal financial resources to face
each other in court is a regular occurrence. People with limited means all too
often find themselves discouraged from pursuing litigation because of the cost
involved. Problems like this are troubling, but they do not normally trigger
advance costs awards. We do not mean to minimize their unfairness. On the
contrary, we believe they are sufficiently serious that this Court cannot
purport to solve them all through the mechanism of advance costs awards. Courts
should not seek on their own to bring an alternative and extensive legal aid
system into being. That would amount to imprudent and inappropriate judicial
overreach.
[13]
Most recently, the
Supreme Court of Canada again considered the issue of advanced costs orders in R.
v. Caron, 2011 SCC 5. In Caron, the Supreme Court upheld
such an order in the context of a language rights challenge applicable to the
laws of Alberta and the Alberta Languages Act’s purported abolition of
French minority language rights in the province. It was the engagement of this
fundamental aspect of the rule of law throughout a province that made the case
sufficiently special to warrant such an award per the Court.
[14]
The Federal Court has
recently issued an advanced costs order in Daniels v. Canada,
2011 FC 230, a case which is expected to determine whether 200,000
Métis and non‑status Indians are “Indians” for purposes of the Canadian
Constitution.
[15]
This Court has also
recently been called upon to decide an advanced costs order in Édouard Robertson
c. La Reine, 2011 CCI 83. I will discuss this decision in more
detail below. In Édouard Robertson, as in the present motion, neither
counsel questioned this Court’s jurisdiction to make such an order if it
concluded one was warranted.
II. Prima Facie Meritorious
[16]
There is some question
whether these cases satisfy the Okanagan prima facie meritorious
requirement. This concern arises in particular because of this Court’s decision
in Walkus v. The Queen, 98 DTC 1857 (sub nom. Bell et al.
v. The Queen), which decision was upheld by the Federal Court of Appeal in Bell
et al. v. The Queen, 2000 DTC 6365.
[17]
The Walkus/Bell
decisions involved the taxability of off‑reserve fishing income of
taxpayers living on Vancouver
Island coastal reserves. The
courts found it to be taxable after applying the Williams connecting
factors test. At trial, the taxpayers advanced the argument that one of the
significant connecting factors which should be given great weight was the
tradition of fishing as a way of life among B.C. coastal Indians, its intimate
connection with the reserves and with the bands’ traditional way of life. This
was rejected by Bowie J. given, among other things, the lack of evidence
before him of any historic commercial fishing activity associated with the
coastal reserves.
[18]
On appeal to the
Federal Court of Appeal, the Native Indian Brotherhood sought to intervene and
to file historical documents regarding an alleged connection between reserve
allotments to coastal Indian bands and fishing activities of those bands. The
intervention was denied, however, without prejudice to the right of the Appellants
to ask the Court to take judicial notice of the historical documents which had
not been before the trial judge. As a result, historical documents were put to
the panel and were found not to establish a historical tradition of commercial
fishing.
[19]
It is very important to
note that the majority of the historical documents upon which the Appellants on
this motion are relying were before the Federal Court of Appeal in Bell.
[20]
I do not need to decide
whether the Okanagan prima facie meritorious precondition is met
in these cases because, as detailed below, even if all three Okanagan
preconditions are presumed to be met, I conclude that these appeals do not rise
to the level of special, rare and exceptional circumstances which warrant the
favourable exercise of my discretion in the granting of an advanced costs
order.
III. Impecuniosity
[21]
The Respondent argues
strenuously that the Okanagan impecuniosity requirement is not met in
these circumstances and refers to second homes, Cadillacs, boats, new cars and
comfortable income levels. The Court is satisfied on the evidence before it,
including the incomes, assets and expenses of the Appellants, and their ages,
that they will not likely be able to pay $350,000 of legal fees.
[22]
The Respondent also
points out that the Appellants have made no financial contribution whatsoever
to the legal fees to date of pursuing these appeals, nor did they propose to
make any. This is a valid concern, shared by the Court. However, I think
that the issue of contributions from or through the Appellants would be best
dealt with as a condition of the funding order and its mechanics if the Court
were to decide to make such an order, which it is not. I note that this is
consistent with the comments on contributions of the Ontario Superior Court of
Justice in Keewatin v. Ontario (Minister of Natural Resources), [2006] O.J. No. 3418 (QL).
[23]
Again, given my
decision that these are not special, exceptional or rare circumstances, I do
not have to finally decide if the Okanagan impecuniosity requirement is
met.
IV. Special, Rare and Exceptional Circumstances
[24]
The determining factor
in these cases is that they do not rise to the level of particular
circumstances warranting an advanced costs order even if the three Okanagan
preconditions are met.
[25]
The litigation in Okanagan
involved native land claims by several bands and logging rights on Crown lands,
to be used to refurbish the poor housing stock on the bands’ reserves, matters
described by the Court as profoundly important to all British Columbians. Caron
involved an attempted provincial repeal of minority language rights and the
possible invalidity of the province’s statute books. Daniels involves
whether 200,000 Métis and non‑status Indians are Indians for purposes of
the Indian Act and all rights and benefits which flow therefrom.
[26]
I am simply unable to
see these income tax appeals as being in the same category as those where such
orders have been made. These are personal tax appeals of three individuals
involving the taxation of a fraction of their income. Their outcome may affect
another 100 taxpayers’ pending objections. Undoubtedly, it may also affect such
persons’ future tax liabilities. These people have not invested any amount
towards the cost of these appeals, nor has any other person, band or
organization who or whose members are perhaps similarly situate. There is not
anyone else before the Court as intervenor or affiant confirming the
significance of these appeals. The bands and the Native Indian Brotherhood and
its members were asked to contribute or participate but have declined. The
potentially affected taxpayers have not even funded the expert’s report which
is budgeted at $40,000: It is for these reasons that I am dismissing the
Appellants’ motion and not requiring Canadian taxpayers generally to fund these
tax appeals.
[27]
In reaching this
decision, I find strong support in the decision of Tardif J. in Édouard
Robertson. That appears to be the only other decision of this Court
involving a request for an advanced costs order. In dismissing that request,
Tardif J. similarly observed that there was doubt that the prima facie
meritorious requirement had been met given the state of the jurisprudence and,
in any event, was not satisfied that the circumstances were of the special, rare
and exceptional nature warranting such an order.
[28]
The motion is
dismissed. If the parties wish to address costs, they may file written
submissions within 30 days.
Signed at Ottawa, Canada, this 8th day of April 2011.
“Patrick Boyle”
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