[2] This case involves the determination of whether Ms. Shilling's employment income for 1995 and 1996 is exempt from income tax by reason of section 87 of the Indian Act, R.S., c. I-6, s.1 and, in particular, application of the connecting factors test first described in Williams v. The Queen, [1992] 1 S.C.R. 877.

FACTS

[3] A brief chronology of the procedural history is necessary to understand the issues on appeal.

1. February 7, 1997 Ms. Shilling issues a Statement of Claim requesting a declaration that her salary income for the years 1995 and 1996 is exempt from taxation pursuant to section 87.

2. October 29, 1998 Motion by Ms. Shilling for an order pursuant to rule 220 of the Federal Court Rules, 1998, SOR/98-106, for a determination of a preliminary question of law based on a statement of agreed facts.

3. November 23, 1998 Order of Reed J. stating the following question for determination under rule 220:

Is Rachel Shilling entitled by operation of section 87 of the Indian Act to exemption from income tax with respect to the salary paid to her by Native Leasing Services for the years 1993-1996 [sic] in the circumstances described in the Statement of Agreed Facts...?

and confirming that the question would be argued on the basis of the Statement of Agreed Facts and excerpts from an examination for discovery of Ms. Shilling referred to in the Statement.

4. June 9, 1999 Order of Sharlow J. (as she then was) answering the preliminary question of law in the affirmative, i.e. that Ms. Shilling's salary income is exempt from income tax.

5. June 4, 2001 Judgment of the Federal Court of Appeal reversing and answering the preliminary question of law in the negative, i.e. that Ms. Shilling's salary income is not exempt from income tax.

6. March 14, 2002 Order of the Supreme Court of Canada denying Ms. Shilling's application for leave to appeal.

7. November 18, 2003 Order of Simpson J. granting the motion of the Crown for summary judgment and dismissing Ms. Shilling's action.

ISSUES

[4] Ms. Shilling says Simpson J. erred in granting summary judgment and in not permitting this matter to go to trial. Ms. Shilling says that in her Reasons of June 9, 1999, Sharlow J. identified a new connecting factor. She submits that before the decision of Sharlow J., she did not know of the new connecting factor and, as a result, did not bring evidence related to this new factor. She says it would be unfair to deny her the opportunity to adduce such evidence at trial.

[5] An additional Charter issue is raised by letter of counsel for Ms. Shilling to the Court dated November 15, 2004, two days before this appeal was to be heard. Whether the Charter issue constitutes a genuine issue for trial was argued orally before the Court at the commencement of the appeal.

ANALYSIS

Is there a new connecting factor?

[6] I will first deal with the alleged new connecting factor. In oral argument and at various places in the factum, counsel for Ms. Shilling describes the new connecting factor in different words. I think the issue is adequately described in the factum in these words: "Does the location of the employer on reserve provide a benefit to the reserve?"

[7] Simpson J. did not accept that there was any new connecting factor of which Ms. Shilling was unaware when the preliminary question of law was argued. In her reasons, Simpson J. expressly cited a July 27, 1998, letter that pre-dated Ms. Shilling's motion for determination of a preliminary question of law. In that letter, written by Ms. Shilling's former counsel, reference was made to the decision of this Court in Folster v. The Queen, [1997] 3 F.C. 269 (C.A.). The letter stated that the issue raised in Folster was "whether the purpose of the employment must be for the benefit of natives living on a reserve."

[8] At paragraph 23 of her Reasons, Simpson J. stated:

Counsel for the parties clearly recognized that the Court would be interested in the location of the Plaintiff's employer and counsel for the plaintiff recognized that the question of benefit to the reserve would be important (see paragraph 11, supra, [i.e. the letter]). The Plaintiff's counsel now says that she was unaware that Sharlow J. would assign significant importance to the benefits to the reserve from the location of the Plaintiff's employer's office on the reserve but this position does not accord with that taken in her letter to Crown counsel of July 27, 1998. [Emphasis added.]

[9] Simpson J. also noted that, in Williams, the Supreme Court acknowledged that the most significant factor after the connecting factors analysis might be the location of the employer's place of business. She continued at paragraph 24:

Because of Williams, it was foreseeable that mere location would not satisfy the Court and that a benefit to the reserve would have to be demonstrated and the Plaintiff's counsel recognized that fact.

[10] Finally, Simpson J. observed that in Folster, this Court affirmed that the location of the employer was a potentially relevant factor linking an Indian's employment income to a reserve (at paragraph 25).

[11] Simpson J. concluded that having regard to the Williams and Folster decisions, the approach taken by Sharlow J. could not be called "new or unexpected" (at paragraph 26).

[12] I can find no fault in Simpson J.'s analysis. Indeed, I can only add that in Folster, Linden J.A. expressly noted at paragraph 27, that Ms. Folster "...works for a hospital which attends to the needs of the reserve community; a hospital that was once located on, and is now adjacent to, the reserve it services." It seems obvious that the benefits to the reserve from the location of the employer on or near the reserve was a known connecting factor prior to Ms. Shilling's agreement to the Statement of Agreed Facts in these proceedings. Ms. Shilling's argument based on the identification of a new connecting factor has no merit.

The legal effect of the determination of a preliminary question of law

[13] Proceeding by way of preliminary question of law requires agreed facts. It was Ms. Shilling who brought the motion for determination of the preliminary question. The Statement of Agreed Facts commences with the representation of the parties, "The parties hereto agree to the following facts for the purpose only of this litigation." If she was not satisfied that the Statement of Agreed Facts adequately set forth the facts she considered necessary to make out her case that her salary income was exempt from income tax, she need not have agreed to the statement and need not have proceeded with the preliminary question. But having done so, she cannot now resile from what has transpired. As Pelletier J. (as he then was) said in Gearbulk Pool Ltd. v. SCAC Transport Canada Inc., 2002 FCT 353, (2002), 218 F.T.R. 210 (T.D.) at paragraph 2:

When parties agree to proceed by Agreed Statement of Facts, they should not be surprised when they are held to those facts.

[14] Rule 220(3) provides that a preliminary question of law is final and conclusive for the purposes of the action. Rule 220(3) states:

(3) A determination of a question referred to in subsection (1) is final and conclusive for the purposes of the action, subject to being varied on appeal.

(3) La décision prise au sujet d'un point visé au paragraphe (1) est définitive aux fins de l'action, sous réserve de toute modification résultant d'un appel.

[15] To the extent that the answer to the preliminary question of law resolves all issues in the action, it determines the outcome of that action. There is nothing left after the preliminary question to go to trial. I acknowledge that a preliminary question may be relevant to only certain issues in an action and, in such case, the remaining issues may well be reserved for a trial. But that is not the case here. The claim of Ms. Shilling, in her Statement of Claim, is consistent with the wording of the preliminary question. The answer to the preliminary question determined that her claim was not well-founded and that disposed of the action.

[16] In his oral argument, counsel for Ms. Shilling submitted that if the granting of summary judgment was based on application of the doctrine of issue estoppel, then the interests of justice require that an exception be made, allowing her to continue to trial. Issue estoppel is a common law doctrine and, in limited circumstances, there may be exceptions to its application. These limited exceptions operate to balance the "public interest in the finality of litigation with the private interest in achieving justice between the litigants." (See Minott v. O'Shanter Development Co. (1999), 42 O.R. (3d) 321 at 340 per Laskin J.A.)

[17] I have a serious doubt that issue estoppel is relevant here. But even if it is, the interests of justice do not favour allowing this matter to proceed to trial. Ms. Shilling's argument is based on there being a lack of evidence relevant to a new connecting factor allegedly identified in Sharlow J.'s reasons. However, I have found that Simpson J. did not err in concluding that there was no new connecting factor identified in Sharlow J.'s reasons. If issue estoppel is relevant, this is not a case for application of the limited exception so as to allow the matter to proceed to trial.

[18] This disposes of Ms. Shilling's primary argument.

THE CHARTER ISSUE

[19] I turn now to the Charter matter. I infer that Ms. Shilling's position is that the Charter issue she wishes decided is discrete from the decision on the preliminary question of law and therefore is not precluded from being considered a genuine issue for trial. As the matter was orally argued by Ms. Shilling's counsel, there appeared to be two Charter issues: first, as pleaded in the Statement of Claim, that the administration of section 87 of the Indian Act through "Guidelines" issued by the Crown discriminates between Indians who live on reserve and Indians who live off reserve, contrary to section 15 of the Charter; and second, a Charter challenge to some words in section 87.

[20] The Crown says that for Ms. Shilling to raise these issues now constitutes an abuse of process.

[21] I agree with the Crown. The first Charter issue was raised by Ms. Shilling in her Statement of Claim. It was later withdrawn. Thereafter, it reappeared at various steps in these proceedings and was successively withdrawn. The second Charter issue was not pleaded and has never appeared before in any pleadings or submissions in the Record before this Court.

[22] In chronological order, I list the various introductions and withdrawals of the Charter issue in these proceedings.

1. February 7, 1997 Statement of Claim issued alleging that administration of the tax exemption under section 87 of the Indian Act through Guidelines issued by the Crown discriminates against Ms. Shilling on account of "where she lives" - off reserve, contrary to section 15 of the Charter.

2. July 27, 1998 Letter from counsel for Ms. Shilling to counsel for the Crown. "My client is prepared to drop the Charter issue from the pleadings in Shilling and from the proposed question of law."

3. April 8, 2003 Ms. Shilling's Memorandum of Fact and Law on the Crown's motion for summary judgment resurrecting the pleaded Charter issue.

4. May 28, 2003 Reasons of Simpson J. stating, "the Plaintiff's counsel acknowledged in submissions before me that the [pleaded] Charter issue was no longer in dispute in this Action." (paragraph 12 )

5. December 15, 2003 Ms. Shilling's Notice of Appeal from the decision of Simpson J. again resurrecting the pleaded Charter issue as a ground of appeal: "the learned motions judge erred in finding that 'there are no outstanding Charter issues'."

6. April 16, 2004 Ms. Shilling's Memorandum of Fact and Law on this appeal filed. Paragraph 6 thereof states:

6. The Appellant is not pursuing the fourth (4^th) ground of appeal in her Notice of Appeal, which stated that, "The learned motions judge erred in finding that 'there are no outstanding Charter issues'."

7. November 15, 2004 Letter from counsel for Ms. Shilling to the Court, once again resurrecting the Charter issue.

The Appellant's factum, which was drafted and filed by the Appellant's former counsel, contains the following statement at paragraph 6:

We are writing to advise the Court that paragraph 6 is withdrawn.

[23] As can be seen, the Charter has been raised three times and has been withdrawn three times. The Charter is now raised a fourth time on this appeal.

[24] I agree with Ms. Shilling that a party may withdraw a concession on a point of law in the absence of prejudice to the other party. See Shilling v. M.N.R. (C.A.), [2001] 4 F.C. 364 at paragraph 56. If this was the first reversal of position by Ms. Shilling concerning the relevance of the Charter and there was no prejudice to the Crown, she might be allowed to withdraw her concession. But that is not what has transpired here. In this case, Ms. Shilling has changed her position on the relevance of the Charter seven times (raising it four times and withdrawing it three times).

[25] It is also significant that on the basis of counsel for Ms. Shilling advising Simpson J. that the Charter issue was no longer in dispute in the action, Simpson J. concluded that there was no genuine Charter issue for trial. Ms. Shilling does not say that the representation was not made or that Simpson J. misunderstood the representation. In these circumstances, it cannot be said that Simpson J. erred when she found that there were no outstanding Charter issues.

[26] Finally, Ms. Shilling's Charter argument is materially different from what was pleaded in her Statement of Claim. She now wishes to challenge the constitutionality of certain words in section 87. The precise words were not provided to the Court. At the same time, her counsel at this appeal advised the Court that she was not pursuing the issue of the justiciability of the Guidelines. However, in her pleadings, the Charter was raised solely in respect of the application of the Guidelines.

[27] If the Guidelines are no longer in issue, then the only Charter issue asserted by Ms. Shilling is the challenge to some words in section 87. The Court and counsel opposing have not received any formal notification or, indeed, any document indicating what the challenged words are, let alone any argument that might be made in support of the challenge. Even if Ms. Shilling's change of heart might be accepted in other circumstances, to try to introduce a new Charter issue in these circumstances is unacceptable. A genuine issue for trial must surely be derived from the pleadings. It cannot for the first time be raised orally on appeal.

[28] The doctrine of abuse of process was extensively reviewed by Arbour J. in Toronto (City) v. Canadian Union Of Public Employees (C.U.P.E.), Local 79, [2003] 3 S.C.R. 77. As she points out at paragraph 35: "Judges have an inherent and residual discretion to prevent an abuse of the court's process." The doctrine of abuse of process is used to prevent the misuse of the court's procedure in a way that would bring the administration of justice into disrepute. At paragraph 37, Arbour J. quotes, with approval, the words of Goudge J.A. in Canam Enterprises Inc. v. Coles (2000), 51 O.R. (3d) 481 at paragraph 55, dissenting, (approved by the Supreme Court in Canam Enterprises Inc. v. Coles, [2002] 3 S.C.R. 307):

The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute.

[29] In the case at bar:

(1) Ms. Shilling has changed her position on whether the Charter was in issue seven times;

(2) counsel for Ms. Shilling represented to Simpson J. that the Charter was no longer in dispute in this action, causing Simpson J. to conclude that there was no genuine Charter issue for trial, a conclusion that cannot be said to be in error; and

(3) counsel for Ms. Shilling on this appeal withdrew the Charter issue as pleaded but substituted a new Charter challenge to some as yet undefined words in section 87 of the Indian Act.

[30] The Court should not demand slavish adherence to its rules when to do so would cause an injustice. However, litigation cannot properly proceed in a state of uncertainty. That is precisely what has occurred here.

[31] It is not correct to say as Ms. Shilling does, that this is a simple withdrawal of a concession on a point of law. When a party represents to a motions judge that there is no genuine Charter issue for trial, and the motions judge's decision is made based on that representation, the party has irrevocably taken a position and is bound by it. An appellate court cannot be asked to reverse the motions judge when there was no error in what she decided.

[32] Finally, contrary to Ms. Shilling's argument, when an issue as pleaded is withdrawn and a fresh issue is raised on appeal, that does not constitute the withdrawal of a concession. It amounts to asking the appeal court to refer a fresh, unpleaded and indeed, in this case, undefined issue for trial.

[33] For these reasons, I am of the opinion that to allow the appeal and permit the matter to go to trial would be an abuse of the process of the Court.

TEST CASES

[34] The Court was advised that Ms. Shilling's action, along with three other actions that have been filed but held in abeyance, are test cases in respect to the application of section 87. While dismissal of Ms. Shilling's action denies her exemption from income tax on her salary income for 1995 and 1996, the other test cases remain to be litigated. Nothing in the record on this appeal suggests that the dismissal of Ms. Shilling's action constitutes a disposition of the other actions.

CONCLUSION

[35] The appeal should be dismissed with costs.

"Marshall Rothstein"

J.A.

"I agree

Alice Desjardins J.A."

"I agree

J.D. Denis Pelletier"

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-583-03

STYLE OF CAUSE: RACHEL SHILLING v.

HER MAJESTY THE QUEEN

PLACE OF HEARING: TORONTO

DATE OF HEARING: November 17, 2004

REASONS FOR

JUDGMENT: Rothstein J.A.

CONSENTED TO BY: Desjardins J.A.

Pelletier J.A.

DATED: December 10, 2004

APPEARANCES:

Mr. Stephen Reynolds

Mr. Christopher Reid

Mr. Nigel Marshman FOR THE APPELLANT

Mr. John Shipley FOR THE RESPONDENT

SOLICITORS OF RECORD:

Reynolds, Dolgin

Ottawa, Ontario FOR THE APPELLANT

Morris Rosenberg

Deputy Attorney General of Canada

Ottawa, Ontario FOR THE RESPONDENT

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Shilling v. Canada, 2004 FCA 416

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2004 FCA 416