Violet Pachanos v. Minister of National Revenue, [1990] 2 CTC 2273, 90 DTC 1668

Lamarre Proulx, T.C.J. [Translation]:—The appellant is appealing from assessments by the respondent for the years 1975 to 1978 inclusive. This appeal was heard at the same time as The Grand Council of the Crees (of Quebec) appeal.

The issues concern:

1. The application of Order in Council P.C. 1989-740, April 28, 1989, entitled Indian Statute-Barred Income Tax Assessment Remission Orders [1]

And the subsidiary issues:

(a) jurisdiction of this Court to apply it;

(b) meaning of the term “paid” in section 3 of the Order in Council.

2. The application of sections 87 and 90 of the Indian Act? [2] (exempted income) to the wages paid by her employer, The Grand Council of the Cris [sic] (of Quebec), hereinafter referred to as "the corporation", if the appellant cannot rely on the aforementioned Order in Council.

The appellant is an Indian within the meaning of the Indian Act. During the years in dispute, she was the general secretary of the corporation. The corporation's principal establishment was located first in Montreal, then in Val d'Or. According to the corporation's letters patent, its head office was at all times in Fort George. The appellant worked at all times in the place where the corporation's principal establishment was located. Her salary was paid to her at her place of work. The employment contract was not produced as evidence.

The appellant has never agreed to pay taxes on the income earned from her work with the corporation. The tax and interest amounted to $6,768.64 at the end of 1978, according to Exhibit 1-15, which is a document prepared by an employee of the respondent. Since the appellant has subsequently worked for other employers, the respondent has, in some years, instead of repaying the appellant for excess tax payments, allocated these payments to the payment of the taxes that were established by the respondent for the years in dispute, pursuant to subsection 164(2) of the Income Tax Act (the "Act"). The respondent also garnished $2,247.07 held by the appellant in a bank account.

Counsel for the appellant argues that the appellant falls within the ambit of the Order in Council, supra, of which section 3 (in fact, the only substantive section in the Order) reads as follows:

3. Remission is hereby granted to any Indian of income tax equal to the amount payable by that Indian pursuant to an assessment under the Income Tax Act, including any assessed penalty relating thereto and all interest payable thereon, where the amount assessed, the penalty and the interest have not been paid and the statutory limitation period in respect of the assessment expired before 1988.

They submit that the attributions and the garnishment that were referred to previously do not constitute payments within the meaning of Articles 1138 et seq. of the Civil Code of Lower Canada.

Counsel for the respondent argues that I have no jurisdiction to consider the Order in Council. The Order in Council deals not with tax assessment, which is the area of jurisdiction of this Court, but with the collection of an amount payable as tax. Courts other than this Court have jurisdiction to determine whether the persons concerned, indebted for taxes, may benefit from the remission provided for in the Order in Council.

The situation is, in my opinion, different from the one that obtained with regard to Order in Council P.C. 1985-2446, [3] which was referred to in Valerie Henry v. M.N.R., [1987] 2 C.T.C. 2013; 87 D.T.C. 338. In the circumstances of that judgment, this Court interpreted the Order in Council as an exemption order and took this into account in its judgment. In the case of P.C. 1989-740, [4] which we are concerned with, the issue is not the validity of the assessment but simply the procedures for collecting taxes that are owing and unpaid. The application of this Order in Council is not, therefore, within the jurisdiction of this Court, in my opinion.

I must therefore consider the submissions of the parties regarding the validity of the assessments.

The submission by counsel for the appellant concerning the application of section 87 of the Indian Act is as follows:

1. The appellant had Indian status within the meaning of the Indian Act;

2. The appellant's income tax was a taxation of her personal property or of an Indian in regard to her personal property; and

3. This personal property of the appellant, her salary, was situated on a reserve, either by the effect of the presumption in paragraph 90(1)(b) of the Indian Act or because Fort George was a reserve.

Points 1 and 2 of appellants’ counsel were not contested.

The first part of point 3 relies on the presumption in paragraph 90(1)(b) of the Indian Act, which reads:

90. (1) For the purposes of sections 87 and 89, personal property that was

(b) given to Indians or to a band under a treaty or agreement between a band

and Her Majesty, shall be deemed always to be situated on a reserve.

Counsel submit that the salary paid to the appellant for the years in question was paid to her from the funds given to the Cree Indian bands under a treaty or agreement with Her Majesty and, accordingly, the said salary was deemed to be situated on a reserve under the terms of section 90 of the Indian Act.

The salaries were paid out of the moneys derived from loans and contributions made to the corporation by the governments of Canada and Quebec. Counsel propose that the corporation was the mandatary of the Indians and that, accordingly, the Victuni judgment applies (Victuni Aktiengesellcshaft v. Minister of Revenue of the Province of Quebec, [1980] 1 S.C.R. 580; 112 D.L.R.

(3d) 83) and the moneys legally belong to the Indians. Moreover, counsel submit that these moneys were donations.

With regard to the loans and contributions, I see no agreement of mandate or prête-nom (figurehead) within the meaning of the Quebec Civil Code between the Indians and the corporation. In Victuni, Pigeon, J. stated at page 85 (D.T.C. 583):

It can thus be seen that the question that must be asked is not whether Victuni was the owner of the subject property, but whether it had an '"indebtedness" in an amount equal to the value of this asset. It was conclusively proved that Victuni, although it bought the land in its own name, did so only as mandatary of two other companies, which are the real owners and for which it holds the land.

[Emphasis mine.]

In the present case, it is the corporation, not the Indians, which is responsible for the "indebtedness" on the loans or contributions. This is an ordinary situation of a non-profit corporation that is acting in the interest of its members and whose property, in the event of dissolution, will be distributed to charitable organizations. [5] I conclude that, in fact and in law, this is not a case involving a figurehead as in Victuni, supra. See Kinookimaw Beach Association v. R. in Right of Saskatchewan, [1979] 6 W.W.R. 84; 102 D.L.R. (3d) 333; leave to appeal to Supreme Court of Canada denied (1979) 1 Sask. R. 179n; 30 N.R. 267n.

The contracts for loans are drafted as genuine contracts for loans. They are entered into between Her Majesty and the corporation, and no evidence has been presented that might lead me to view them as disguised donations. The loans became due at the time provided in the loan instruments and the corporation agreed that the amount be paid from the proceeds of the settlement that was to be reached over the James Bay project. The corporation was not free to use the moneys that were loaned as it wished; it had to use them for the purposes specified in the loan instruments. It is true that under section 25.5 of the agreement [6] Quebec paid the James Bay Crees $2.2 million as compensation for the cost of the negotiations. [7] This does not change the nature of the moneys received under the loan contracts. The corporation remained liable to the lender for the money loaned.

I conclude that the sums of money paid to the corporation by the governments of Canada and Quebec pursuant to contracts for loans were not sums given to Indians or to a band as required by paragraph 90(1)(b) of the Indian Act. (The contracts for contributions were not presented in evidence. But I do not know that these are gifts. It is normally characteristic of a contribution that the recipients cannot dispose of it as they wish and are accountable to the contributing agency for its use.)

While I would like to construe this section liberally, (Gene A. Nowegijick v. The Queen, [1983] 1 S.C.R. 29; [1983] C.T.C. 20; 83 D.T.C. 5041; at page 26 (D.T.C. 5046; S.C.R. 36)), I cannot change the terms used by Parliament. In the context of the terms of this paragraph 90(1)(b), the sums in question were not given but loaned or contributed, for specific purposes and in accordance with terms and conditions pertaining to contracts for loans or contributions. Moreover, as previously mentioned, the corporation was not the mandatary or figurehead for the Indian bands in respect of these sums of money. These sums were therefore not given to the Indians but loaned or contributed to the corporation.

Since I have concluded that paragraph 90(1)(b) of the Indian Act is inapplicable in this case, it remains for me to determine whether Fort George, the head office of the corporation, was situated during the years in dispute on a reserve, since this is a precondition for the application of section 87 of the Indian Act. If I conclude that it was, I will then have to determine whether the situs of the salaries was the head office of the corporation.

Was Fort George, during the years 1974 to 1978 inclusive, a reserve?

A reserve is defined in section 2 of the Indian Act as follows:" 'reserve' means a tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band;”

Band means:

'band" means a body of Indians

(a) for whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after the 4th day of September 1951,

(b) for whose use and benefit in common, moneys are held by Her Majesty, or

(c) declared by the Governor in Council to be a band for the purposes of this Act;

Indian means: "'Indian' means a person who pursuant to this Act is registered as an Indian or is entitled to be registered as an Indian;”

I will at this point quote from the submissions by counsel for the appellant in support of the position that Fort George was a reserve.

[Translation]

In fact, Fort George was during this period a "reserve" within the meaning of the Indian Act, in that:

1. Prior to November 15, 1974, Fort George was administered by the federal government for the use and exclusive benefit of the Indians and the juridical title to these lands was attributed to Her Majesty (in right of the Province of Quebec).

2. On November 15, 1974, an Agreement in Principle was reached between the Grand Council of the Crees (of Québec), the Fort George Band, the Government of Quebec and the Government of Canada, under which Quebec undertook to set aside the territories occupied by the Cree communities, including Fort George, to make reserves thereon within the meaning of the Indian Act (see paragraph 10, pp. 12 to 18).

3. On November 11, 1975, the James Bay and Northern Quebec Agreement (the "Agreement") was entered into between the above-mentioned parties, and this Agreement confirmed in Sections 4 (Appendix 1, paragraph 4) and 5 the setting aside of the Category IA lands of the Cree Indian bands, and in particular, of the Fort George reserve. This Agreement came into force on October 31, 1977, in accordance with paragraph 2.7, concerning the coming into force of the federal and Quebec legislation approving the Agreement (S.C. 1977, c. 32; S.Q. 1976, e. 46).

Subsequently, Quebec transferred the control and administration of the Category IA lands to Canada by Order in Council 3046-78 of 4 October 1978; Canada accepted this transfer by Order in Council P.C. 1978-3183, dated 19 October 1978. However, the setting aside of the Category IA lands for the benefit of the Cree Indians took effect no later than the signing of the Agreement on November 11, 1975, pursuant to paragraph 2.9.1 of the Agreement. Under this provision, Quebec undertook "not to alienate, cede, transfer or otherwise grant rights respecting the lands which are to be allocated as Category I lands to or for the benefit of the James Bay Crees .. .”. With this undertaking, the Fort George community was in effect set aside for the exclusive use and benefit of the Fort George Band. Consequently, the Fort George community has constituted a reserve within the meaning of the Indian Act at least since November 11, 1975.

Thus, Fort George has had the status of a reserve within the meaning of the Indian Act from November 14, 1974, the date when the Agreement in Principle was signed, or, in any event, from November 11, 1975, the date when the Agreement was signed.

It should be noted that the Supreme Court of Canada held in Canadian Pacific Ltd. v. Paul et al., [1988] 2 S.C.R. 654; [1989] 1 C.N.C.R. 47, at 58, that no deed or formal concession by the Crown is required to create a reserve within the meaning of the Indian Act. A de facto allocation is sufficient to constitute reserve lands.

I cannot subscribe to the conclusions of the appellant's counsel that Fort George was situated in a reserve during the years in dispute. A review of the authorities and the case law [8] indicates that reserves are delimited territories known as such by the Indians and the federal and provincial governments. The legal system that applies on a reserve is the one provided for in the Indian Act, and in particular, a local government as described in that Act. Normally a reserve is created by specific instruments. If, as suggested by the Supreme Court of Canada in Canadian Pacific Ltd. v. Paul et al., [1989] 1 C.N.L.R. 47 at page 58 cited in the written submissions by counsel, it may happen that a reserve has not been constituted on the basis of formal deeds but from a de facto situation, the factual evidence must then be preponderant. Yet no representative of either government came to testify. The Indian witnesses, Chief Billy Diamond, the chief of the Rupert House band and the appellant, who is a member of the Fort George Indian Band, did not say that Fort George was situated on a reserve.

Chief Billy Diamond testified in substance that there were institutions at Fort George administrated and financed by the Government of Canada, such as the hospital, the school, etc. He did not say it was a reserve. In this respect, he stated: [9]

Q. And what was Fort George, please?

A. Fort George was a Cree village on the mount of the Grande River.

Q. Who formed the population of Fort George at that time, please?

A. Cree Indians.

Q. Exclusively Cree Indians?

A. There is a small Inuit population too, I believe.

Q. Were there any whites living there?

A. Yes, there were several non-native people who were there as teachers, nurses, other medical personnel.

Q. You were personally familiar with Fort George at that time?

A. Yes, I had to be there on several occasions for meetings, so on and so forth.

Q. And these people, the Cree inhabitants of Fort George, they are of the same nationality as you? They form part of the Cree Nation as you do?

A. Yes, they are.

Q. At that time, were you familiar with the administration grosso modo of Fort George?

A. I had a pretty good idea of how the administration was organized, and I knew several of the individuals who worked for the band Council and for the Grand Council from that community.

Q. Can you tell us, generally speaking, which government department had the administration of Fort George at the time?

A. At that time it was the federal government.

Q. Acting through what Department?

A. Acting through the Department of Indian Affairs.

Q. In the course of your testimony, you indicated that Fort George was administered or managed by the federal government at the time back in nineteen seventy- four (1974). What do you mean by that?

A. Well, the Department of Indian Affairs were organized that they had what they call a District Office out of Val d'Or, and all of the funding for any programs and projects came through that office.

Some of the programs and projects were administered by the band, the Fort George Band Council. There were a lot of projects and programs administered by the District Office.

For instance, to use an example, the school at Fort George was managed, operated by the Department of Indian Affairs Office out of Val d'Or. Okay?

Q. Okay, so there was a school over there managed by the Department of Indian Affairs?

A. That is correct. They did all the hiring of the teachers, the maintenance staff, everything there.

Q. And as well as the District Office of the Department of Indian Affairs?

A. Yes, they had the office, the District Office was in Val d'Or.

Q. In Val d'Or?

A. Yes. And their personnel would go regularly to all of the Cree communities in fact. You know, when they carried out their responsibilities there.

Q. Including Fort George?

A. Yes.

Madame le Juge: What about Fort George, is it a reserve, what is it?

Witness: Fort George, as I described it, was on an island. At that time, there were no reserves as such set aside for the Cree people in that community. It was only after the agreement that you could say we had a reserve.

Nor did the appellant, who is now the Chief of the Chisasibi (formerly Fort George) Indian Band, testify in the sense that Fort George was a reserve.

Fort George was a place which, according to the various agreements, conventions, orders in council and decrees, seems to have been inhabited at that time by Indian and Inuit communities. See, in particular, Order in Council A.C. 2084-78 of 28 June 1978, [10] and the agreement in principle, [11] in which it is stated, at page 11: "The Crees and Inuit of Fort George shall together decide the selection of the land to which the Inuit of Fort George are entitled.”

Besides, it seems to me that if the lands on which Fort George was situated had constituted a reserve within the meaning of the Indian Act, the agreement in principle of November 15, 1974, supra, and the James Bay agreement would have noted it when they noted the existence of three reserves, namely, the reserves of the Waswanipi, Mistassini and Eastmain bands. See, likewise, the Orders in Council A.C. 3046-78 of October 4,1978 [12] and A.C. 1851-79 of June 27, 1979. [13]

With regard to point 2 of the submissions by appellant's counsel, what I get from section 10 of the agreement in principle of November 15,1974 in relation to the land regime is that the parties agreed on the number of square miles of land that were to be set aside but not on the description of the limits of these lands. In the agreement, the parties agreed on the preliminary territorial descriptions but they also agreed on the major provisions of section 2 of the agreement where it is stated in paragraph 2.5:

Canada and Québec shall recommend to the Parliament of Canada and to the National Assembly of Québec respectively, forthwith upon the execution of the Agreement, suitable legislation to approve, to give effect to and to declare valid the Agreement and to protect, safeguard and maintain the rights and obligations contained in the Agreement. Canada and Québec undertake that the legislation which will be so recommended will not impair the substance of the rights, undertakings and obligations provided for in the Agreement.

[Emphasis mine.]

The parties also agreed on the land regime described in section 5 of the agreement, and in particular on this provision in the final paragraph of paragraph 5.1.2:

Québec shall, by legislation giving effect to the Agreement, transfer, subject to the terms and conditions of the Agreement, the administration, management and control of the Category IA lands to Canada and Canada shall accept such transfer. Québec shall retain bare ownership of the land and, subject to the provisions herein, ownership of the mineral and subsurface rights over such lands.

[Emphasis mine.]

The Act respecting Cree and Inuit Native persons, [14] the legislative instrument of the agreement, states in sections 3 and 4:

3. The territory is divided into lands of various categories, namely Categories I, l-A, I-B, Il and III lands, including Special Category I lands and Special Category l-B lands. These lands are delimited in conformity with the Act respecting the land regime in the territories of James Bay and New Québec (1978, chapter 93) and shall be disposed in conformity with the said act.

4. Notwithstanding section 3, the Government may, so long as the lands contemplated therein have not been delimited in conformity with the said section, delimit them provisionally by a special order made under this section, published in the Gazette officielle du Québec. The special order ceases to have effect, in whole or in part, on any date fixed by at order of the Government published in the Gazelle officielle du Québec.

Any reference in an act, order in council or other document to the Act respecting the land regime in the territories of James Bay and New Québec (1978, chapter 93) accompanied with the mention of one of the categories of lands contemplated in section 3 is considered a reference to the said special order, so long as it is in force. The same rule applies to any mention of the said categories of lands, in any manner whatever, in any act, order in council or document.

The Government, on the conditions it determines, may provisionally transfer to the Government of Canada the management and administration of the Category IA lands delimited under the first paragraph for the exclusive use and benefit of the Cree beneficiaries.

The Act respecting the land regime in the James Bay and New Quebec territories' [15] states, in sections 18 and 22:

18. The Government shall, as soon as possible, by order in council, and upon such conditions as it may determine in accordance with this act, allocate and transfer the administration, management and control of the Category IA lands of a total area of three thousand two hundred and ninety-nine and six-tenths (3 299.6) square kilometres to the Government of Canada for the exclusive use and benefit of the local governments.

22. As soon as the delimitation of the lands and the documents relating thereto have been completed, the transfers of the lands contemplated in sections 18 and 19 shall be made by final deed, based upon technical territorial descriptions.

Order in Council A.C. 2084-78 [16] is the initial instrument delimiting the lands in Category IA and Order in Council A.C. 3046-78 [17] is the initial Quebec transfer instrument. By P.C. 1978-3183, dated October 19, 1978 [18] Canada accepted the transfers of administration and control of these lands in Category IA for the exclusive use and benefit of the Cree bands designed in the James Bay and Northern Québec Agreement. On September 28,1979 the then Minister of Revenue wrote to the solicitors for the Cree bands.

. . . I am pleased to confirm that Category IA lands will be regarded as reserves since October 19, 1978 for the purposes of Interpretation Bulletin IT-62. Thus an Indian will not include in his income for income tax purposes the income he earns on those lands after that date.

It has not been proved to me that Fort George was a reserve in the years in dispute. Under the terms of the final paragraph of paragraph 5.1.2. of the agreement, the administration, management and control of the Category IA lands are transferred to Canada by the legislation giving effect to the agreement. The Category IA lands were delimited only by Order in Council A.C. 2084-78 of 28 June 1978, the transfer by Quebec is dated 4 October 1978, and the acceptance by Canada is dated 19 October 1978. These instruments were essential to the delimitation and constitution of the Category IA lands as reserves in order for sections 87 and 90 of the Indian Act to apply. These instruments do not refer to any retroactive effect. It is necessary, therefore, under the Interpretation Act,' [19] to give effect to them from the date they were assented to. It was the acceptance by Canada that gave effect to the transfer.

The issue of the situs of the appellant's salaries was discussed by both parties. As I have determined that the head office of the appellant's employer was not situated on a reserve, I need not decide the matter of the situs of the salaries. However, in the interest of any discussion of this matter, I would like to refer to the Quebec doctrine of conflict of laws, according to which a debt is situated in the place where it is payable. [20] To determine that place, it is necessary to refer to article 1152 of the Civil Code, which states that payment must be made in the place expressly or impliedly indicated by the obligation. It is also necessary to consider article 68 of the Code of Civil Procedure. It may well be asked, therefore, whether the situs of a debt arising out of a contract of employment would be in the employer's head office when the contract was not concluded there and the salaries were not payable there. (See Petersen v. Cree and Canadian Pacific Express Co. (1940), 79 Que. S.C. 1; The King v. Irvine A. Lovitt et al., [1912] A.C. at 212 at pages 219-220.)

The appeal is dismissed.

Appeal dismissed.