Brenda McNab v. Her Majesty the Queen (Informal Procedure), [1992] 2 CTC 2547

Beaubier, T.C.CJ.:— This matter was heard in Regina, Saskatchewan, on August 24, 1992. It is an appeal pursuant to the informal procedure of this Court.

The appellant called as witnesses Isobel McNab, President of the Saskatchewan Treaty Indian Women's Council (hereinafter called the “ council”); Edith Dreaver, Executive Director of the council; Elizabeth Pratt, a secretary at the council and herself. The Crown called Don Perala who was the auditor for Revenue Canada respecting this matter.

At issue is the salary paid by the council to the appellant for the 1987, 1988 and 1989 taxation years. The appellant contends it is not taxable because of the Indian Act.

The appellant and all of the witnesses she called are Treaty Indians. The council is funded partly by grants of $125,000 from the government of Canada during the years in question and works with and for women and children on Indian reserves in Saskatchewan for their health, protection and betterment. The council also receives grants from the government of Saskatchewan towards its administration expenses. Isobel McNab testified there were two employees in administration during the period in question: Brenda McNab and Edith Dreaver.

Isobel McNab and Edith Dreaver held their positions with the council at all times material to this action. Isobel has her residence on the Gordon Indian Reserve near Punnichy, Saskatchewan. In 1987 the council closed its office in Prince Albert, Saskatchewan and moved to Punnichy but could not afford the rent for an office in Punnichy. As a result the council moved some of its records and a desk, a filing cabinet and a typewriter to Isobel McNab's basement on the nearby Gordon Reserve. There was no telephone at Isobel McNab's residence and there is still no telephone at Isobel McNab's residence. In 1989 and 1990 the council's material at the Gordon Reserve was moved to the Piapot Reserve.

Throughout the years in question the council also had an office and a telephone and about 500 square feet of office space at 109 Hodsman Road in Regina, Saskatchewan. These premises and all office equipment there were provided to the council, free of charge, by the Saskatchewan Federation of Indian Nations which either owns or operates the entire building at 109 Hodsman Road. Throughout the years in question the letterhead of the council always listed the Regina address and telephone number (See Exhibits R-1 and R-2) although the appellant testified that some letterhead existed with the Gordon Reserve address as well.

All ordinary administration and the ordinary clerical and telephone answering by the council occurred in Regina. Reports and briefs were finalized, typed and copied in Regina. The bank account was in Regina. Financial records were taken out to the Gordon Reserve and cheques were signed there by Isobel McNab about twice a month. Brenda or Edith attended at the Gordon Reserve for this purpose. The council used the office premises, typing equipment, copying equipment, mailing equipment, and telephones, desks and premises at 109 Hodsman Road for its purposes. Both Edith Dreaver and Brenda McNab had desks and office facilities there which were for their exclusive use and they commonly used them for their administrative duties. The day-to-day administration and operation of the council was conducted in Regina. Isobel McNab specifically testified that Brenda McNab answers the telephone at the Hodsman Road office in Regina on behalf of the council. The testimony of Elizabeth Pratt, who trained as a secretary of the council and became a secretary of the council from 1987 through 1989 inclusive and the testimony of Don Perala as to the original answers of Edith Dreaver upon his initial interview with her are also accepted as to the truth of the matters described in this paragraph. Edith Dreaver was specifically asked about the interviews with Don Perala and recalled some parts of them and did not recall other parts. Mr. Perala had made notes of the interviews and his recollection was based upon his notes, which were available for cross-examination. During the years in question Brenda McNab was the secretary of the council and did all of its typing, documentary and budget work in Regina, where the general administrative work of the council was always conducted.

Both Isobel McNab and Edith Dreaver travel extensively to Indian Reserves in Saskatchewan. Brenda McNab travels with Isobel McNab and acts as secretary for meetings Isobel conducts.

There is no record of the trips to the reserves. The evidence is that no expenses were paid. Rather each traveller receives a travel allowance. No record of the travel allowances was put into evidence. However Exhibit A-4 confirms that Brenda McNab travelled extensively in Saskatchewan and also travelled outside of Saskatchewan on council business to do work at meetings on Reserves and at various towns and cities. Exhibit A-4 is essentially a series of diary sheets of Brenda McNab for the years in question with an attached summary sheet of Isobel McNab's time spent on and off the reserves. It is Brenda McNab's time that is at issue and her diary sheets indicate a heavy travelling schedule of meetings on council business which in large measure occurred at cities and towns in Saskatchewan. A smaller number of meetings occurred on reserves or out of Saskatchewan. Generally speaking it appears

from Exhibit A-4 that Brenda McNab spent more time at the Gordon Reserve than at Regina in 1987. Thereafter she appears to have spent more time at Regina than at the Gordon Reserve. On the 1st and 15th of each month her records show that she was in Regina and on the Gordon Reserve for about an equal number of times during the years in question.

The first question in the appeal is whether or not the salary paid to the appellant constituted personal property of an Indian situated on a reserve pursuant to paragraph 87(1)(b) of the Indian Act, R.S.C. 1985, c. 1-5.

In 1987 and until December 12, 1988, section 87 of the Indian Act provided as follows:

Notwithstanding any other Act of the Parliament of Canada or any Act of the legislature of a province, but subject to section 83, the following property is exempt from taxation, namely:

(a) the interest of an Indian or a band in reserve or surrendered lands; and

(b) the personal property of an Indian or band situated on a reserve;

and no Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (a) or (b) or is otherwise subject to taxation in respect of any such property; and no succession duty, inheritance tax or estate duty is payable on the death of any Indian in respect of any such property or the succession thereto if the property passes to an Indian, nor shall any such property be taken into account in determining the duty payable under the Dominion Succession Duty Act, being chapter 89 of the Revised Statutes of Canada, 1952, or the tax payable under the Estate Tax Act, on or in respect of other property passing to an Indian. R.S., c. 149, section 86; 1958, c. 29, s. 59; 1960,

c. 8, section 1.

Thereafter, during the period in question, subsection 87(1) of the Indian Act provided:

Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83, the following property is exempt from taxation, namely,

(a) the interest of an Indian or a band in reserve lands or surrendered lands;

and

(b) the personal property of an Indian or a band situated on a reserve.

The type of property in uestion is salary received by cheque from the council to the appellant. This has been described in Nowegijick v. The Queen, [1983] 1 S.C.R. 29, [1983] C.T.C. 20, 83 D.T.C. 5041, as personal property since it constitutes the receipt of salary for services.

It remains to be determined whether or not this was personal property situated on a reserve.

The principles respecting this appeal are set out by the Supreme Court of Canada in Glenn Williams v. Canada, [1992] 1 C.T.C. 225,92 D.T.C. 6320. In that case the Supreme Court of Canada analyzed the purpose of the exemption under the Indian Act. It then analyzed the type of property in question, unemployment insurance cheques. This case deals with a contract for wages paid to Brenda McNab by the council. The connecting factors in this case, as analyzed on pages 234-35 (D.T.C. 6328) of Glenn Williams v. Canada, supra, are:

(a) Employer's location

The employer had its registered office on Gordon Indian Reserve #81. The only evidence as to meetings of directors is that some were held by telephone as was testified to by Isobel McNab. Isobel McNab used a friend's telephone on the reserve. The Court finds that the working ordinary day-to- day administration of the council was in Regina at all material times. However, Isobel McNab lived on the reserve and appears to the Court to be the directing mind of the council. The head office was at her address during the years in question. The council is now a non-profit corporation which was incorporated in Saskatchewan as “The Saskatchewan Indian Women's Association” on June 18, 1988 (Exhibit A-2). The purpose of the council was to assist Indian women on the reserves and the evidence is clear that the council did so and that its operations off of the reserve were ancillary to its work on the reserves. In these circumstances I find that the employer's location was on the Gordon Indian Reserve.

(b) Work location

The appellant’s work was performed throughout Saskatchewan and elsewhere but according to Exhibit A-4 it was performed more often off the reserves. It was conducted out of the City of Regina, Saskatchewan. I find the appellant's work location was in Regina.

(c) Appellant's residence

The appellant lived approximately five days of each week of the year in Regina and the rest of the time on an Indian reserve. She states that her legal residence was on the Gordon Indian Reserve during the years in question. Her statement is accepted as fact that her legal residence at all times material to this action was on the Gordon Indian Reserve.

(d) Place of payment

The appellant states that she was paid about 75 per cent of the time at the Gordon Indian Reserve and the rest of the time in Regina. Her cheque was given to her. This evidence is accepted as fact.

In referring to the above"connecting factors" the Supreme Court of Canada pointed out on page 232 (D.T.C. 6326) of Glenn Williams v. Canada, supra, as follows:

These factors should then be analyzed to determine what weight they should be given in identifying the location of the property, in light of three considerations:

(1) the purpose of the exemption under the Indian Act; (2) the type of property in question; and (3) the nature of the taxation of that property. The question with regard to each connecting factor is therefore what weight should be given that factor in answering the question whether to tax that form of property in that manner would amount to the erosion of the entitlement of the Indian qua Indian on a reserve.

The purpose of the exemption under the Indian Act was described by Mr. Justice La Forest in the case of Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, 71 D.L.R. (4th) 193, at page 130-31 S.C.R.:

I take it to be obvious that the protections afforded against taxation and attachment by sections 87 and 89 of the Indian Act go hand-in-hand with these restraints on the alienability of land. I noted above that the Crown, as part of the consideration for the cession of Indian lands, often committed itself to giving goods and services to the natives concerned. Taking but one example, by terms of the" numbered treaties" concluded between the Indians of the prairie regions and part of the Northwest Territories, the Crown undertook to provide Indians with assistance in such matters as education, medicine and agriculture, and to furnish supplies which Indians could use in the pursuit of their traditional vocations of hunting, fishing, and trapping. The exemptions from taxation and distraint have historically protected the ability of Indians to benefit from this property in two ways. First, they guard against the possibility that one branch of government, through the imposition of taxes, could erode the full measure of the benefits given by that branch of government entrusted with the supervision of Indian affairs. Secondly, the protection against attachment ensures that the enforcement of civil judgments by non-natives will not be allowed to hinder Indians in the untrammelled enjoyment of such advantages as they had retained or might acquire pursuant to the fulfillment by the Crown of its treaty obligations. In effect, these sections shield Indians from the imposition of the civil liabilities that could lead, albeit through an indirect route, to the alienation of the Indian land base through the medium of foreclosure sales and the like; see Brennan J.’s discussion of the purpose served by Indian tax immunities in the American context in Bryan v. Itasca County, 426 U.S. 373 (1976), at page 391.

In summary, the historical record makes it clear that sections 87 and 89 of the Indian Act, the sections to which the deeming provision of section 90 applies, constitute part of a legislative package" which bears the impress of an obligation to native peoples which the Crown has recognized at least since the signing of the Royal Proclamation of 1763. From that time on, the Crown has always acknowledged that it is honour-bound to shield Indians from any efforts by non-natives to dispossess Indians of the property which they hold qua Indians, i.e., their land base and the chattels on that land base.

In view of the foregoing findings respecting the connecting factors as analyzed in Glenn Williams v. The Queen, supra, it is the finding of this Court that the connecting factors as determined in this case point to the fact that the salary paid to Brenda McNab constituted personal property of an Indian situated on a reserve. The employer's location was on the Gordon Indian Reserve. The appellant worked partly in Regina and partly on various Reserves all over Saskatchewan. In the first year in question a great deal of her work was conducted on the Gordon Indian Reserve. Thereafter parts of her work were conducted on the Gordon Indian Reserve on a regular basis and she attended upon Isobel McNab in order to have cheques signed and at other times parts of her work were conducted on other reserves when she attended upon Isobel McNab. The appellant's residence was on the Gordon Indian Reserve. Seventy- five per cent of the time she was paid on the Gordon Indian Reserve. All of her work was with Indians and all of her work was on the instructions of an employer whose sole purpose was to benefit Indians on reserves.

The preponderance of evidence presented in this case enables the appellant to fall within the exemptions contained in subsection 87(1) of the Indian Act because the combined force of the connecting factors, when taken together, indicate that the salary was the personal property of an Indian situated on a Reserve.

As a consequence of the foregoing findings, it is not necessary for the Court to deal with the provisions contained in subsection 90(1) of the Indian Act.

The appeal is granted and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment.

Costs are granted to the appellant.

Appeal allowed.