Docket: 2012-2252(IT)I
BETWEEN:
LAURA BALDWIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-1839(IT)I
AND BETWEEN:
CHARLES CHAKASIM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-2042(IT)I
AND BETWEEN:
VIRGINIA FORSYTHE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-2035(IT)I
AND BETWEEN:
CARRIE MARTIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-2609(IT)I
AND BETWEEN:
DIANE SHERIDAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
2012-1920(IT)I
AND BETWEEN:
ART ZOCCOLE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion by
telephone conference call on November 5, 2013 at Ottawa, Ontario
|
Counsel for the Appellant:
|
G.
James Fyshe
|
|
Counsel for the Respondent:
|
Gordon Bourgard
|
__________________________________________________________________
ORDER
Upon consideration of a motion by the
Respondent for an Order:
1. Striking the clause “that was
treated as tax exempt by the CRA” from each Fresh Notice of Appeal at:
(a) 2012-2252(IT)I – Laura Baldwin:
paragraphs 13(h) and 22;
(b) 2012-1839(IT)I – Charles Chakasim:
paragraphs 16(h) and 25;
(c) 2012-2042(IT)I - Virginia
Forsythe: paragraphs 12(h) and 21;
(d) 2012-2035(IT)I – Carrie Martin;
paragraphs 24(h) and 33;
(e) 2012-2609(IT)I – Diane Sheridan;
paragraphs 15(h) and 24;
(f) 2012-1920(IT)I – Art Zoccole;
paragraphs 11(h) and 20.
2. Striking the sentences “If
the basis of this connecting factor is to establish a level playing field for
businesses providing employee leasing services to off-reserve non-profit and
charitable organizations, then this connecting factor should weigh in favour of
NLS being located on reserve. Otherwise, Native Leasing Services would be
placed at a singular disadvantage compared to its competitors.” From each Fresh
Notice of Appeal at:
(a) 2012-2252(IT)I – Laura Baldwin:
paragraph 22;
(b) 2012-1839(IT)I – Charles Chakasim:
paragraph 25;
(c) 2012-2042(IT)I - Virginia
Forsythe: paragraph 21;
(d) 2012-2035(IT)I – Carrie Martin;
paragraph 33;
(e) 2012-2609(IT)I – Diane Sheridan;
paragraph 24;
(f) 2012-1920(IT)I – Art Zoccole;
paragraph 20.
The Motion is granted to the
extent that the clause stated in point number 1 above is struck from each Fresh
Notice of Appeal. The sentences at point number 2 are not struck. No costs are
awarded.
Signed at Halifax, Nova Scotia, this 19th day of November 2013.
“V.A. Miller”
Citation: 2013TCC363
Date: 20131119
Docket: 2012-2252(IT)I
BETWEEN:
LAURA BALDWIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-1839(IT)I
AND BETWEEN:
CHARLES CHAKASIM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-2042(IT)I
AND BETWEEN:
VIRGINIA FORSYTHE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-2035(IT)I
AND BETWEEN:
CARRIE MARTIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-2609(IT)I
AND BETWEEN:
DIANE SHERIDAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-1920(IT)I
AND BETWEEN:
ART ZOCCOLE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
V.A. Miller J.
[1]
The Respondent has
brought a motion for an Order striking a clause and certain sentences contained
in each of the Fresh Notices of Appeal for each of the Appellants.
[2]
In particular, the
Respondent seeks to have the following underlined clause struck from each of
the Fresh Notices of Appeal on the basis that the clause is not relevant and
may prejudice or delay the fair hearing of these appeals. This clause appears
twice in each Fresh Notice of Appeal.
“In
the present case, the only competitors for Native Leasing Services are employee
leasing firms created by Band Councils and, in one case, another employee
leasing firm located on reserve that was treated as tax exempt by the CRA.”
[3]
The Respondent also
seeks to have the following underlined sentences struck from each of the Fresh
Notices of Appeal on the basis that they are not relevant as these appeals are
not about how Native Leasing Services should be treated for competitive or tax
purposes.
“The
employee leasing business of Native Leasing Services was focused on providing
necessary administrative services to employees working for social service
organizations in the First Nations community and who were not providing
services in the commercial mainstream. Alternatively, in Southwind, the
Federal Court of Appeal’s concern about this connecting factor was that an
Indian taxpayer should enter into the commercial mainstream on the same terms
as other Canadians with whom he competes. In the present case, the only
competitors for Native Leasing Services are employee leasing firms created by
Band Councils and, in one case, another employee leasing firm located on
reserve that was treated as tax exempt by the CRA. If the basis of this
connecting factor is to establish a level playing field for businesses
providing employee leasing services to off-reserve non-profit and charitable
organizations, then this connecting factor should weigh in favour of NLS being
located on reserve. Otherwise, Native Leasing Services would be placed at a
singular disadvantage compared to its competitors.”
[4]
Each appeal has been
brought under the Informal Procedure. Although the Tax Court of Canada Rules
(Informal Procedure) do not provide for the striking of pleadings, it is
within the inherent jurisdiction of the Court to control its own process: Garber
v The Queen, 2005 TCC 635 at paragraph 31; Sackaney v The
Queen, 2013 TCC 303. It is my view that this Court has the jurisdiction to
strike pleadings or portions of pleadings in informal appeals. This is
especially true when the pleading is not relevant to the issues in dispute.
[5]
However, as this is the
informal process, I do not want to encourage the Crown to bring a motion
whenever there are statements in a Notice of Appeal which it considers to be
irrelevant. Most often the matter can be dealt with at the hearing of the
appeal.
[6]
The test used for
striking pleadings or parts of pleadings was stated by Chief Justice MacLachlin
in Knight v Imperial Tobacco Canada Ltd., 2011 SCC 42 at
paragraph 17:
...
A claim will only be struck if it is plain and obvious, assuming the facts
pleaded to be true, that the pleading discloses no reasonable cause of action:
Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263 , at para. 15;
Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980. Another way of
putting the test is that the claim has no reasonable prospect of success. Where
a reasonable prospect of success exists, the matter should be allowed to
proceed to trial: see, generally, Syl Apps Secure Treatment Centre v. B.D.,
2007 SCC 38, [2007] 3 S.C.R. 83 ; Odhavji Estate ; Hunt ; Attorney General of
Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735.
[7]
The question is
whether, assuming the clause and sentences pleaded by the Appellants are true,
is it “plain and obvious” that they disclose no reasonable cause of action.
[8]
The issue in each of
these appeals is whether the income earned by the Appellants, as employees of
Native Leasing Services (“NLS”), was personal property of an Indian situated on
a reserve within the meaning of section 87 of the Indian Act and thus
exempt from taxation under the Income Tax Act (“ITA”).
[9]
NLS is a sole
proprietorship which is owned and operated by Roger Obonsawin, a status Indian.
NLS has its head office on Six Nations of the Grand River Reserve.
Appellant’s Position
[10]
It is the Appellants
position that the clause and sentences in question relate to the circumstances
surrounding the “connecting factors test” and in particular whether their work
activities constitute participation in the commercial mainstream. Counsel for
the Appellants argued that if the Respondent concedes that ‘participation in
the commercial mainstream’ is not a factor in this appeal, then the Appellants
would delete the clause and sentences in issue on consent. In the Appellants’
submissions, counsel wrote:
The
term “commercial mainstream” had been understood to be a consideration which
prevents Indians from securing a competitive advantage in the commercial
mainstream with respect to (sic) other taxpayers. Thus, the issue of
competition and specifically, who are the alleged competitors, has been brought
into play by the respondent.
[11]
In conclusion, the
Appellants argued that if ‘participation in the commercial mainstream’ is an
issue, then the Appellants should not be prevented from presenting evidence to
identify “its competitors in order to establish that no unfair competitive
advantage arises.”
Decision
(a) that
was treated as tax exempt by the CRA
[12]
It is totally
irrelevant to these appeals that an employee leasing firm located on a reserve
was treated as “tax exempt” by the Canada Revenue Agency. Whether each
Appellant is entitled to an exemption under the ITA will be decided on
the basis of the facts in each of their situations. That others have been given
the benefit of the exemption is simply not relevant: Sinclair v R,
2003 FCA 348. These appeals have no chance of success on the basis that the CRA
has found that another entity is entitled to the exemption. As stated by Noel
J.A. in RCI Environnement Inc. v R, 2008 FCA 419 at paragraph 51:
…no logic can justify that the tax treatment of a taxpayer
should be determined according to the circumstances relating to another
taxpayer.
[13]
The clause “that was
treated as tax exempt by the CRA” is to be struck from each of the Fresh
Notices of Appeal. It appears at:
(a) 2012-2252(IT)I –
Laura Baldwin: paragraphs 13(h) and 22;
(b) 2012-1839(IT)I –
Charles Chakasim: paragraphs 16(h) and 25;
(c) 2012-2042(IT)I -
Virginia Forsythe: paragraphs 12(h) and 21;
(d) 2012-2035(IT)I –
Carrie Martin; paragraphs 24(h) and 33;
(e) 2012-2609(IT)I –
Diane Sheridan; paragraphs 15(h) and 24;
(f) 2012-1920(IT)I –
Art Zoccole; paragraphs 11(h) and 20.
[14]
I am aware of the
decision in the motion in Tuccaro v R, 2013 TCC 300 where the
Crown sought to have a paragraph struck in the Notice of Appeal because it pled
facts related to the tax treatment of other taxpayers. Bocock J. found that it
was premature to strike the paragraph. He allowed it to remain in the notice of
appeal on the condition that the Appellant had to amend the notice of appeal to
plead facts concerning the application of the connecting factors test to the
third party.
[15]
I respectfully disagree.
It is my view that pleading the facts and circumstances of a third party will
not assist the Appellants in convincing the trial judge that the income they
received from NLS was situated on a reserve within the meaning of section 87 of
the Indian Act: Sinclair (supra). As a matter of
principle, a taxpayer must prove that it meets the requirements of the
legislation on its own merits: Ford Motor Co of Canada v Minister of
National Revenue, [1997] 3 FC 103 (FCA) at paragraph 48.
(b) If the basis of this connecting factor is to establish
a level playing field for businesses providing employee leasing services to
off-reserve non-profit and charitable organizations, then this connecting
factor should weigh in favour of NLS being located on reserve. Otherwise, Native
Leasing Services would be placed at a singular disadvantage compared to its
competitors.
[16]
Prior to commenting on
these sentences, I want to emphasize to counsel for the Appellants that NLS is
not an Appellant in these appeals. The Appellants are some of the individuals
who were employees of NLS. If the commercial mainstream as a connecting factor
is relevant to these appeals, it is the activities and services of the
Appellants which are to be considered in this connecting factor. The focus is
not on NLS or a third party: Bastien Estate v The Queen, 2011 SCC
38 at paragraph 60. Whether NLS is located on a reserve must be established by
its own facts and not how the CRA treated another employee leasing business.
[17]
It is the Respondent’s
position that the above sentences should be struck because the alternative
argument made by the Appellants actually requests that the Court vacate the
assessments on grounds of fairness or equitable grounds. The Tax Court’s
jurisdiction does not include the power to make declarations or to instruct the
Minister to correct a situation not resulting from an assessment.
[18]
It is my view that the
underlined sentences are arguments which the Appellants intend to make based on
their interpretation of the decision in Southwind v R (1998), 98
DTC 6084 (FCA). Whether or not I agree with the Appellants’ interpretation of Southwind
is really not the question at this stage of the proceeding. It is my
opinion that the Appellants’ argument based on their interpretation of a
decision should not be struck from the pleadings.
[19]
The motion is granted.
No costs are awarded.
Signed at Halifax, Nova Scotia, this 19th
day of November 2013.
“V.A. Miller”
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