Citation: 2010 TCC 607
Date: 20101130
Docket: 2008-447(IT)APP
BETWEEN:
JODI ROCK,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent;
Docket: 2009-1117(IT)APP
AND BETWEEN:
MICHELLE RICE,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent;
Docket: 2009-199(IT)APP
AND BETWEEN:
BRENDA LAFORME,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Hershfield J.
Introduction and Background
[1] Applications are
made by each of the Applicants under subsection 167(5) of the Income Tax Act (“the Act”)
requesting an extension of time to file notices of appeal in respect of certain
assessments which have denied the exemption afforded Indians under section 87
the Indian Act. Both Michelle Rice and Brenda Laforme testified at the
hearing. Counsel for Jodi Rock submitted documentary evidence respecting her
employment but she did not appear as a witness due to a personal emergency.
[2] During each of the
years in respect of which the Applicants seek an extension of time to file notices
of appeal, they were employed by Native Leasing Services (“NLS”).
[3] NLS is a sole
proprietorship owned and operated by a status Indian having its head office on
the Six Nations of Grand River reserve.
[4] During the years in
question NLS contracted each of the Applicant’s services for placement at
particular workplaces. The services of Brenda Laforme were contracted to work
at the Fort Erie Native Friendship Centre located in Fort Erie, Ontario which is not on a
reserve. Ms. Laforme has her Bachelor of Social Work degree. She provided
social work services. The Applicant, Michelle Rice, was contracted by NLS to
provide bookkeeping services to the Ontario Federation of Indian Friendship
Centres located in Toronto, Ontario. Ms. Rice completed a four year CGA program. The documentary
evidence submitted in respect of Jodi Rock does not indicate specifically where
she performed her employment duties although contracts submitted in evidence
indicate that she would take direction from Pine Tree Native Centre of Brant
with respect to the performance of her duties which involved providing
employment services to clients of the Centre.
[5] In order for the
Applications to succeed 5
requirements prescribed under subsection 167(5) of the Act must be met.
[6] Paragraph (5)(a) requires that the Applications
be brought within a year and 90 days from the mailing of the confirmations. The
Respondent agrees that requirement has been met.
[7] With respect to subparagraphs (5)(b)(i) and
(iii), the Respondent agrees that the Applicants had a bona fide
intention to appeal and has not taken issue with the assertion that the
Applications were made as soon as circumstances permitted. The evidence
supports the Respondent’s concessions in this regard. Accordingly, I find the
requirements of those subparagraphs have been met.
[8] Subparagraph (5)(b)(ii) requires a finding
that it would be just and equitable to grant an application given the reasons
set out in the application and the circumstances of the case. The Respondent
argues that this requirement has not been met.
[9] Similarly the Respondent argues that the requirement in subparagraph
(5)(b)(iv), that there be reasonable grounds for the appeal, has not been
met.
[10] Counsel for the Applicants argues that a prima
facie case has been set out by the two Applicants who gave evidence at the
hearing and that is sufficient to meet the requirement in subparagraph
(5)(b)(iv), that there be reasonable grounds for the appeal. Relying primarily
on the inequity of imposing an impossible financial burden on the Applicants
without allowing them their day in Court to defend the basis of their appeal, it
is argued that the just and equitable requirements of subparagraph (5)(b)(ii)
have been met.
[11] The evidence of the two Applicants that
testified at the hearing as it relates to the requirement in subparagraph
(5)(b)(iv), that there be reasonable grounds for the appeal, was that they
provided services to status Indians at friendship centres the nature of which
was inherently linked to aboriginal life on reserves. They are both status
Indians themselves although neither lived on a reserve at any relevant time.
They both carried out some of their work on reserves but clearly, for the most
part, their work and the most significant part of their duties, were performed
at locations that were not located on reserves.
[12] One of the main thrusts of the legal
argument that there are reasonable grounds for the appeals, is centred around
the decisions of the Supreme Court of Canada in Williams v. Canada
that confirmed that an Indian
under the Indian Act has a choice with regard to where to situate a
property on or off the reserve, and Nowegijick v. R.
that found that the situs
of employment income was where the debtor resided. While these arguments seem
doomed to failure based on authorities relied on by the Respondent, the
Applicants also placed emphasis on the requirement that the Court consider each
individual case to weigh in other connecting factors such as, most
particularly, the type of endeavor
and the nature of the work.
[13] That
takes me then to review the evidence of the two Applicants that testified.
The Testimony of the Applicants
[14] Brenda Laforme identified
herself as Haudenosaunee and although she said that she was in a legal sense attached
through her father to the Six Nations of Grand River reserve, her testimony was
somewhat confusing as between her status and connection in respect of that
reserve and the neighbouring reserve of New Credit of the Mississauga. Regardless, I am
satisfied, and it is not disputed that she is a status Indian under the Indian
Act.
[15] She testified she fled
from her reserve with her mother when she was some 5 years old. They fled to Buffalo to avoid her being put
in a residential school. After fleeing the reserve, she never went back there
to live. She grew up in Buffalo and returned to Canada and after working in St. Catharines, she went back to
school and got her degree in social work. She did post graduate studies in a
masters program at Carlton but never finished her thesis.
[16] Even though she
never went back to live on the reserve she maintained strong family connections
there at both the Six Nations of Grand River reserve and the New Credit reserve
where her parents’ families lived. Further, she regularly attended at the
reserve for Long House ceremonies. It keeps her and her children aware of who
they are and of the community of which they are a part. She maintained that her
connection to the reserves was fundamental to who she was. I believe that to be
true and respect her sense of who she is which emphatically is Haudenosaunee,
People of the Long House.
[17] As a social worker, she
contracted through NLS to work at Fort Erie Native Friendship Centre. She
performs her duties off reserve in Fort Erie and St. Catharines. She dealt with high
risk or at-risk aboriginal youth who lack a connection to their heritage. She
referred to her job as a youth reunification officer working with urban youth
to build their connection to the reserves running programs about native
ceremonies, healing circles and history and building spiritual and cultural
connections to help them out of their dysfunctional lifestyles.
[18] She also worked with
elders on reserves to help them through the process of dealing with their
residential school experience. She took the urban youth there too for services.
Stretching it she said she might spend cumulatively a month a year working on
the reserves such as Six Nations which was an hour and a half drive from Fort Erie.
[19] In summary, I can
only add that she strongly believes that she is serving both the aboriginal
peoples at large and the native reserve community no matter where she provides
that service. Indeed, I take it from her testimony that she would draw no
distinction between the two.
[20] The testimony of Michelle
Rice was more sparse than that of Ms. Laforme. She worked primarily in Toronto where she lived. She testified
that she did provide some accounting services on reserve as part of her role of
overseeing programs of different friendship centres some of which were located
on the reserves. Her memory as to specific reserves that she spent time at, in
any capacity, was vague at best although she did mention Fort Francis, Kenora and Perry Island more than once.
[21] Both Laforme and
Rice had contracts with NLS that provided for 1.5% or 3% payment to NLS to create
a fund for fighting Canada Revenue Agency if they instructed NLS not to deduct
tax from their salary payments. Neither had tax withheld. Both had their wages
paid by NLS presumably to their off reserve bank accounts.
[22] Both Applicants
testified as to the significant financial strain that they would suffer should
they be required to pay the tax assessments that have been levied. Such
concerns do not inform or impact the issues before me.
Applicants’
Argument
[23] As noted at the
outset, the Applicants’ main thrust in asserting that they have met the burden
to establish that they have reasonable grounds to appeal is that working for
NLS and being paid on their reserve where the debtor resides is exercising a
choice they have a right to make to locate their property on and under the
protection of their reserve. The ground asserted as a sound basis for deciding
their appeals is the presence and work of NLS on the reserve as the employer
and as the debtor in relation to personal property, the income entitlement that
is situated on the reserve. As noted at the outset, this argument is drawn from
the Supreme Court case of Nowegijick and from a single
paragraph of the Supreme Court case of Williams, namely, paragraph 18. If a status Indian can choose where to locate
personal property so as to prevent the diminution of that property by seizure
or taxation, nothing should interfere with that choice, exercised by choosing
an on reserve employer who contracts your services off reserve.
[24] Another ground is to
emphasize that even under the connecting factors test there is an arguable
basis to suggest that there is a reasonable ground to appeal in these cases.
The combination of factors and the weight to be given to each is flexible and
allows for case by case consideration. In Williams at paragraph 35, it
is pointed out that in respect of different categories of cases, one connecting
factor in one category might be given more weight than in another. Similarly, in
McKay v. The Queen,
Justice Little at paragraph 51 noted that the situs of employment income
for the purposes of section 87 of the Indian Act was fact specific. Even
Justice Evans said in Horn et al. v. M.N.R., and Williams at paragraph 8
that applying the connecting factors test is very fact specific. Further, even
in Shilling v. The Minister of National Revenue, at paragraph 33,
it is acknowledged that the weight to be given to different factors will vary
from case to case giving particular attention to the nature of the work and the
circumstances surrounding it. At paragraph 31 and 32 of that case, it is noted
that any benefit accruing to the reserve and the place of payment are
potentially relevant connecting factors.
[25] The connecting
factors that the Applicants rely on most heavily are where the employees are
paid, the nature of the work, their connections to the reserve and the benefit
to the reserve. In McKay, Justice Little focused on the type of work
being done and the nature of the benefit of the work to the reserve. Residence
off the reserve was given less weight given the appellant’s strong connections
to the reserve and her regular visits there. He found that the performance of
the work off the reserve was not determinative of locating the employment
income derived from such work off-reserve.
[26] Aside from asserting
that there is a prima facie case that there are reasonable grounds for their
appeals, counsel for the Applicants argues that the right to be heard, to have
one’s day in court, is of paramount importance and cannot be undermined by
premature decisions of what might be a reasonable ground to appeal.
Respondent’s Argument
[27] The Respondent cites
Johnston v R. as authority for finding that the subject
applications do not meet the requirement in subparagraph (5)(b)(iv), that there be reasonable
grounds for the appeal.
[28] That case deals with
four applications which the Respondent describes as test applications relating
to three types of groups. The one of concern in the respect of the present
Applications, is the group that filed outside the 90 day initial filing time requirement
but within the further year allowed subject to meeting the 4 requirements, noted
above, as set out in paragraph 167(5)(b). The applicant that was in that group
was Pamela Johnston. The requirement that the Judge focused on in her case was
that set out in subparagraph
(5)(b)(iv), that there be reasonable grounds for the appeal.
[29] It was found that
the circumstances of Ms. Johnston were indistinguishable from those of Ms.
Shilling whose appeal had gone to the Federal Court of Appeal. Ms. Shilling was
employed by NLS to work at Anishnawbe Health Toronto, the exact same place at
which Ms. Johnston worked. No possible connecting factors that were not already
examined in Shilling were even suggested. Accordingly, the Court held
that there were no reasonable grounds for Ms. Johnston’s appeal and her
application was dismissed.
[30] The Respondent
argues that the facts of the current Applications are similar, if not
indistinguishable, from Shilling. In all cases, the applicants lived and
worked off reserve at a facility that served the interests of aboriginal
peoples. In Shilling, those facts did not give rise to the exemption
afforded by section 87 of the Indian Act, regardless that they were paid
by an employer situated on the reserve.
[31] The connecting
factors test established in Williams, is argued to be the relevant test
to be applied and any assertion that places reliance on Nowegijick as simply requiring the debtor to reside on reserve
as good law is not correct. The Respondent cites Justice Evans of the Federal
Court of Appeal in Horn
and Williams at paragraph 5 where he states, after noting that the Supreme
Court of Canada has consistently refused leave to appeal from section 87 cases
decided by the Federal Court of Appeal by applying the connecting factors test.
He went on to suggest, in effect, that short of Parliament intervening, the
soundness of the analytical approach of the connecting factors test, developed
and applied to date, could only be reviewed by the Supreme Court of Canada.
[32] It is argued that
based on that test, as in Johnston, no evidence has been produced in the
respect of the Applications before me now that would even suggest any
reasonable possibility of the Appeals being successful. Accordingly, the
Applications should be denied.
[33] Counsel for the
Respondent also referred me to Roe v. Canada. In that case, some of the arguments raised by the
Applicants’ counsel were dealt with by Justice Paris. Indeed, some of the factual
elements dealt with in that case are similar to those presented in the subject
Applications. One of the Appellants, for example, worked at a friendship centre
presumably doing similar good work for aboriginal people as noted in respect of
the work performed by Ms. Laforme. Similarly in each of Googoo v. Canada
and McIvor et al. v. The Queen,
one of the appellants worked at a friendship centre in circumstances that the
Respondent would suggest should not be distinguished from those relating, for
example, to Ms. Laforme’s appeal. In all these cases, the appeals were
dismissed. In Roe, one of the Appellants, Matilpi, worked for an
association of friendship centres which suggests the nature of her work might
have similarities to that of Ms. Rice. Ms. Matilpi lost her appeal.
Analysis
[34] Interestingly, I was
not referred to any cases specifically discussing the extent of the burden of
proof and the meaning of “reasonable grounds” in the context of the requirement
in subparagraph 167(5)(b)(iv) that there be reasonable grounds for the appeal.
[35] I have not requested
any submissions on that nor have I ventured off on my own to research this
issue. My conclusions are simple and straightforward. They are pragmatic and to
my mind, as a matter of common sense, they rely principally on the Applicants’
right to be heard. Simply put, the test in subparagraph 167(5)(b)(iv) is not
about the relative chances of success but about having a ground to appeal.
[36] The Applicants have
capable counsel, who represent earnest persons seeking to either fit into a box
that has excluded them and others, or to have that box expanded by persistently
seeking to apply those legal principles and arguments that they hope might yet
prove capable of succeeding, in some cases at least. The law is not static, after
all, and some circumstances may warrant applying the connecting factors test as
urged by counsel in respect of these Applications. However, I specifically note
that any pursuit of the application of the section 87 exemption based on
anything other than the connecting factors test might be so futile as to
warrant a finding that there is no reasonable ground for the appeal. The
Federal Court of Appeal has made that much clear. Justice Evans did so at
paragraph 5 in Horn and Williams where, as noted above, he concludes that
the connecting factors test is the only applicable test. He also concludes that
the protection afforded Indians in the Supreme Court case of McDiarmid
Lumber Co. v. God’s Lake First Nation
of property situated on reserve determined by where the debtor resides, applies
only to protection from seizure not protection from taxation.
[37] Still, I have
reservations about the use of subparagraph 167(5)(b)(iv) as a means of invoking
the doctrines of res judicata,
non-mutual issue estoppel or abuse of process so as to prevent re-litigating an
issue. Surely, subparagraph 167(5)(b)(iv) might be more appropriately seen as there to
prevent frivolous, vexatious or nuisance appeals. Appeals should not be
prejudged by these informal initial application hearings. If no further
evidence is adduced at an appeal the appeals of the Applicants may well be
dismissed, but it is not consistent, in my view, with our system of justice to
deny a trial at this stage of the proceedings in respect of these Applicants. That
is not to say that subparagraph 167(5)(b)(iv) should never be invoked on the
basis that to do so would inevitably be tantamount to prejudging. It would not
be pre-judging an application where, combined with the other requirements of subsection
167(5), it is clear that there is no legitimacy to the pursuit of the appeal.
In that case, they may not succeed in an application even under the banner of
their fundamental right to be heard.
[38] On balance then, as
likely as it is that these cases will fail on appeal, I am going to grant the
Applications. I am encouraged to take this view, in respect of these Applications,
at this time, due to two other factors. Firstly, both Ms. Laforme and Ms. Rice
have other years at issue that have been set down for trial on the same facts
and issues as they relate to the year or years in respect of which the
Applications are made. It has been agreed by counsel that should I allow the
Applications, the appeals in respect of which Applications relate will be heard
together at the same time and place as those other appeals already scheduled
for trial. This would include Ms. Rock, as well. This ensures that even if the
appeals prove unsuccessful, no time or resources will have been expended by the
allowance of the Applications. I have heard six NLS cases this week and there
is no hint that adding another year to any of the appeals would have added one
extra minute to the proceedings.
[39] Secondly, having
heard those six appeals this week, I remain undecided as to their outcome. That
is to say, there may well be limited circumstances where the particular facts
and surrounding circumstances of an NLS appeal might invoke the section 87 exemption. As noted by Justice Evans in Horn and Williams at paragraph 8, it
is the function of the trial judge to assess the relative weight to be given to
the constituent elements of a multi-factored test in the particular
circumstances of a particular case. Caution must therefore be exercised that an
application’s judge not pre-maturely perform that function by categorizing all
NLS cases, even those with apparent similar facts with those that have failed,
as following into a non-exempt category. Some cases with very similar facts can
be presented in a very different light, evidence Robertson et al. v. Her
Majesty the Queen
versus Ballantyne v. Canada.
In those cases, each judge was influenced by different factors based on the
evidence presented. And here, I note that in Shilling at paragraphs 40
and 41, absences of evidence were noted. Fuller evidence might have resulted in
a different outcome. Hence, the caution not to pre-judge.
[40] That caution, however,
is not an invitation to allow all applications for extensions. It is simply a
caution that I am heeding in allowing the years under these Applications
to go to trial on an expedient basis. I have added my own emphasis here.
[41] Accordingly, the
Applications are granted. The appeals to which the Applications relate shall be
heard here at these premises in Toronto during the weeks commencing, in the
case of Michele Rice, January 11, 2011, in the case of Brenda Laforme, December
6, 2010 and in the case of Jodi Rock, February 7, 2011. The specific dates and
times of the hearings shall be as arranged by counsel with the permission of
the Court. Times for the Respondent to file Replies to the Amended Notices of
Appeals now received as properly filed shall be as follows: in respect of
Michele Rice, January 3, 2011; in respect of Brenda Laforme, November 30, 2010;
and, in respect of Jodi Rock January 24, 2011.
Signed at Ottawa, Canada this 30th day
of November 2010.
"J.E. Hershfield"
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