Date: 19981211
Docket: T-1284-98
BETWEEN:
ROGER OBONSAWIN, CARRYING ON BUSINESS
AS NATIVE LEASING SERVICES
Plaintiff
(Appellant)
- and -
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA AS REPRESENTED BY
THE MINISTER OF NATIONAL REVENUE
Defendant
(Respondent)
REASONS FOR ORDER
REED, J.:
[1] This is an appeal from a decision of the Senior Associate Prothonotary, which decision struck the plaintiff's Statement of Claim as containing no reasonable cause of action.
[2] The plaintiff is an employer of a number of status Indians, some of whom at least work off the reserve. The headquarters of his business is located on the reserve. As a result of the decision in Williams v. Canada, [1992] 1 S.C.R. 877, the defendant changed its practice with respect to taxing the income of the plaintiff's employees. The changed practice is articulated in a document called Guidelines, which was prepared for the guidance of officials of Revenue Canada and the relevant taxpayers. The Guidelines were developed after consultation with a number of groups (native groups). The plaintiff considers that the Guidelines do not accurately reflect section 87 of the Indian Act, as interpreted by the Williams decision, and that the Guidelines should be more broadly drafted so as to include his employees within the scope of the exemption.
[3] Initially there was agreement by the defendant to test the scope of the Guidelines in Court in as expeditious and efficient manner as possible. Unfortunately the discussions broke down, counsel are now adversarial, and there are before the Court four test cases initiated by employees, all slightly different fact situations, for the purpose of obtaining a determination of some of the issues.
[4] The plaintiff employer, Mr. Obonsawin, also started an action. He seeks a declaration that the Guidelines are of no force and effect. He seeks:
| a) a declaration that the Guidelines are of no force or effect to the extent that they are construed or applied to require, as a major connecting factor for employers, that the employer must be: |
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| iii) an Indian organization controlled by bands or tribal councils; and the persons benefitting from the employment for the most part live on reserve; |
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| in order for an Indian to have the benefit of section 87 of the Indian Act; |
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| b) a declaration that the administration of s. 87 of the Indian Act through Guideline #4 is a breach of the Defendant's fiduciary obligations to the Plaintiff; |
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| d) such further and other relief as this Honourable Court may deem appropriate and just in the circumstances. |
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[5] The Associate Senior Prothonotary found that the plaintiff had a direct personal interest in the litigation but that the action must be struck because the Guidelines were not justiciable - they had no legal force or effect.
[6] In order to assess the status of the Guidelines, Guideline 4 which is of particular interest, will be set out below. It states that all the income of an Indian will be exempt from income tax when:
| " THE EMPLOYER IS RESIDENT ON A RESERVE; AND |
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| - AN INDIAN BAND WHICH HAS A RESERVE, OR A TRIBAL COUNCIL REPRESENTING ONE OR MORE INDIAN BANDS WHICH HAVE RESERVES, OR |
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| - AN INDIAN ORGANIZATION CONTROLLED BY ONE OR MORE SUCH BANDS OR TRIBAL COUNCILS, IF THE ORGANIZATION IS DEDICATED EXCLUSIVELY TO THE SOCIAL, CULTURAL, EDUCATIONAL, OR ECONOMIC DEVELOPMENT OF INDIANS WHO FOR THE MOST PART LIVE ON RESERVES; AND |
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| " THE DUTIES OF THE EMPLOYMENT ARE IN CONNECTION WITH THE EMPLOYER'S NON-COMMERCIAL ACTIVITIES CARRIED ON EXCLUSIVELY FOR THE BENEFIT OF INDIANS WHO FOR THE MOST PART LIVE ON RESERVES; ... [Examples omitted.] |
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[7] The Guidelines also set out definitions ("Meanings of Terms Used") of the terms used:
| "Employer is resident on a reserve" means that the reserve is the place where the central management and control over the employer organization is actually located. |
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| "Indian" means an Indian as defined for the purposes of the Indian Act. |
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| "Indian lives on the reserve" means the Indian lives on the reserve in a domestic establishment that is his or her principal place of residence and that is the centre of his or her daily routine. |
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| "On a reserve" means on a reserve as defined for purposes of the Indian Act, including any settlements deemed to be reserves for purposes of the Indian Settlements Remission Order, and any other areas given similar treatment under federal legislation (for example, Category I-A lands under the Cree-Naskapi (of Quebec) Act). |
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| "Social, cultural, educational or economic development" includes the provision of social services such as health care or counselling. |
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| The central management and control of an organization is usually considered to be exercised by the group that performs the function of a board or directors of the organization. However, it may be that the real management and control of an organization is exercised by some other person or group. Generally, management and control is exercised at the principal place of business but it is recognized that this function may be legitimately exercised in a place other than the principal administrative office of the organization. It is a question of fact where the central management and control is exercised. |
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[8] Counsel for the plaintiff argues that these Guidelines have a different character from the usual tax directives or advance rulings that Revenue Canada issues because they were developed after consultation with various Indian group pursuant to the defendant's fiduciary duty to consult with those groups. She argues that this characterization of the Guidelines is set out in the Statement of Claim and must be accepted as true for the purposes of the motion to strike.
[9] I am not persuaded that even if the consultation took place pursuant to a fiduciary obligation to consult, that the Guidelines have a character different from the ITA Bulletins or advance rulings that Revenue Canada routinely gives with respect to the interpretation of the Income Tax Act. These are not justiciable.
[10] In my view, the decision of the Senior Associate Prothonotary must be confirmed. I make this decision with some regret because I think counsel for the plaintiff is attempting to get the issues resolved in as efficient and as cost effective a manner as possible. As I mentioned at the hearing of this motion, it may be that the plaintiff could reformulate his claim (albeit probably not before this Court) to challenge the obligation on him as employer to withhold income tax payable by his employees, and thus raise the issues he seeks to raise in the present action in a justiciable form. I must, however, dismiss the present appeal.
Judge
OTTAWA, ONTARIO
December 11, 1998
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