Charles John Gordon Benoit, Joan Elizabeth Benoit and Gordon James Alfred Benoit v. Her Majesty the Queen in Right of Canada, [1993] 2 CTC 281

Jerome, A.C.J.:— This is an application by the defendant for an order pursuant to Rules 419(1)(a), (c) and (f), striking out the plaintiffs’ amended statement of claim on the grounds that this Court should decline to exercise its discretion under section 18 of the Federal Court Act, R.S.C. 1985, c. F-7, as am. S.C. 1990, c. 8, s. 4, or alternatively on the grounds that the amended statement of claim discloses no reasonable cause of action. The defendant also seeks an order pursuant to Rule 415(3), requiring the plaintiffs to provide further and better particulars.

This matter came on for hearing on July 16,1993, in Edmonton, Alberta. At that time, I dismissed the application indicating these written reasons would follow.

The plaintiffs, who are Indians as defined by the Indian Act, R.S.C. 1985, c. I-5, allege in their amended statement of claim that they are entitled to the benefits of Treaty No. 8, which confers upon them the right to tax exempt status. Despite the terms of the treaty, the plaintiffs allege they have been subjected to the payment of tax pursuant to the requirements of various Acts and Regulations enacted by the Government of Canada and the Province of Alberta, including, but not limited to, the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), and the Excise Tax Act, R.S.C. 1985,

c. E-15. As a result, the plaintiffs seek a declaration that they are entitled to claim the benefits of Treaty No. 8 and that the imposition of any tax by the Crown is an unjustified breach of the treaty.

The Crown seeks to have the amended statement of claim struck on the grounds that an assessment of tax is subject to challenge pursuant to the provisions of the Income Tax Act and the Excise Tax Act in the Tax Court of Canada. Accordingly, pursuant to section 18.5 of the Federal Court Act, an appeal from an assessment of tax may only be challenged under the applicable provisions of those taxation statutes. The defendant submits this Court should decline to exercise its jurisdiction to entertain an action for declaratory relief in respect of taxation questions for which an appropriate remedy is provided under the relevant taxing statues.

It is further submitted by the Crown that the Court should decline to exercise its discretion to grant declaratory relief on the grounds that, considered outside the framework of the appeal processes provided under the Income Tax Act and Excise Tax Act, the issue of whether Treaty No. 8 grants an exemption from taxation is theoretical and obscure, and incapable of sufficient definition for the purposes of a declaratory action.

As stated in my reasons given from the Bench, the Crown cannot succeed since the very arguments tendered in support of its position have already been considered and rejected by the Federal Court of Appeal in Erasmus v. Canada (No. 2), [1992] 2 C.T.C. 21, 92 D.T.C. 6301. In that case, six taxpayers filed a statement of claim in this Court seeking various forms of declaratory relief, all predicated on their alleged tax exemption status under sections 87 and 90 of the Indian Act as Indians employed by the Dene Nation. The Crown's motion to strike was dismissed by Pinard, J. whose reasoning was upheld upon appeal (see Pratte, J.A. at page 24 (D.T.C. 6304)):

This reasoning would be compelling if the plaintiffs were seeking by their action to set aside or vary income tax assessments. But that is not what they claim. They merely pray for a declaration that certain kinds of income be declared to be exempt from tax and that the tax they paid on that income be refunded. As they are not attacking any assessments, section 29 has no application here.

This does not mean that the plaintiffs’ action could succeed for the taxation years where their income tax liability has been determined by an assessment. Obviously, it could not. The reason for this, however, is not that the Court has no jurisdiction to grant the relief sought for those years, but rather, that, in those years, the plaintiffs are not entitled to that relief since under subsection 152(8) of the Income Tax Act, an income tax assessment is deemed to be valid and binding as long as it has not been vacated or varied under the provisions of that Act.

It follows that, contrary to what was argued by the appellant, the affidavit filed in support of the motion does not show that section 29 ousts the Trial Division of its jurisdiction with respect to the years where the plaintiffs’ tax liability was confirmed by an assessment; it merely shows that, for those years, the plaintiffs have no reasonable cause of action, a purpose for which the affidavit cannot be used.

The appellant also argued that, in any event, the jurisdiction of the Court to entertain the plaintiffs' action is impliedly taken away by the Income Tax Act which provides for a scheme for tracking income tax assessments and for recovering taxes unduly paid. I do not agree. I do not see anything in that Act which limits the jurisdiction of the Trial Division, in an appropriate case, to issue a declaration as to the taxability of certain revenues or to order the repayment of taxes that the Minister unduly retains.

[Emphasis added.]

Counsel for the Crown also refers to the decision of the Supreme Court of Canada in Harelkin v. University of Regina, [1979] 2 S.C.R. 561, [1979] 3 W.W.R. 676, relating to the Court's overriding discretion to refuse the grant of alternative remedies such as declaratory relief, even where the substance of the applicant's case may have been made out, if a specific remedy exists in the empowering statue.

Again, this argument might succeed if the plaintiffs were seeking to set aside or vary income tax assessments.

The facts pleaded in the amended statement of claim disclose a reasonable cause of action for declaratory relief. The claim refers to a specific term of Treaty No. 8 and seeks to have this Court consider and declare the plaintiffs’ rights with respect to that term. This is precisely the kind of subject matter that an action for declaratory relief in our Court should embrace. As stated by Nitikman, D.J. in Dreaver v. The Queen, F.C.T.D., File No. T-1074-82, August 23, 1982, (unreported) at page 7:

While not included in the motion by defendant, at the hearing counsel raised the issue of the right of plaintiff to a declaratory judgment. What plaintiff asks for in his prayer for relief are determinations of his rights as a Treaty Indian on the grounds set forth in the statement of claim. The declarations requested are neither hypothetical nor academic issues. They are directly related to material facts alleged in the pleadings. Consideration and determination of claimed rights and obligations of Treaty Indians have been canvassed, considered and adjudicated in numerous cases inferentially involving determination for declarations of rights and privileges involved.

Neither is there any doubt that the plaintiffs have satisfied the test for declaratory relief. In Montana Band of Indians v. Canada, [1991] 2 F.C. 30, [1991] 2 C.N.L.R. 88 (EC.A.), the plaintiffs sought a declaration regarding the validity and effect of the "Rupert's Land Order” on the relationship between the Canadian government and First Nations in the affected area. The Federal Court of Appeal did not find the outcome of the claim to be“ "plain and obvious” or “beyond doubt" and allowed the plaintiffs’ appeal from the decision of the Trial Division to strike out the statement of claim. The Court considered the three part test to be applied in the matter of declaratory judgments as established by the House of Lords in Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd., [1921] 2 A.C. 438 (H.L.), and concluded as follows at page 40 (C.N.L.R. 93):

I have no problem whatsoever in concluding that the appellants at bar satisfy this test. The issues raised by these appellants are certainly real and not theoretical since, at bottom, the central issue raised is the very large question of aboriginal rights. The appellants most certainly have a vital and real interest in those issues since they are chiefs, councillors and members of the Indian Bands resident in the area of Canada encompassed by the Rupert's Land Order. Finally, the respondent Crown is most certainly the proper contradictor, with a true interest in opposing the declarations being sought.

The defendant's alternative application for particulars is also dismissed. The term of Treaty No. 8 upon which the plaintiffs rely refers to "any tax". Accordingly, the taxes which are referred to in paragraph 9 of the amended statement of claim are any and all taxes levied by the defendant against, and paid by, the plaintiffs. In my view, any particulars of specific payments made by the plaintiffs which are not within the knowledge of the defendant, are properly the subject of examinations for discovery.

Therefore, for reasons expressed orally at Edmonton, Alberta, on July 16, 1993 and filed this day, the Crown's application is dismissed. Costs in the cause.

Application dismissed.