Walkus v. R., [1998] 4 CTC 2526

Bowie T.C.J.:

By agreement of the parties, the appeals of these 15 Appellants were heard together on common evidence. The appeals are from assessments for income tax for the years 1986, 1987, 1988 and 1989.1.[1] The description of the facts which follows is as they existed during the years under appeal. Some of these facts have changed since 1989, but to the extent that they have, it is not relevant to the disposition of the appeals.

Each of the Appellants was employed by James Walkus Fishing Co. Ltd. (the company) during the years in question, and each of them claims that his or her income from the company is not subject to taxation by reason of paragraph 81 ( 1)(a) of the Income Tax Act?[2] and paragraph 87(1)(b) of the Indian Act.[3]

Income Tax Act

81(1) There shall not be included in computing the income of a taxpayer for a taxation year,

(a) an amount that is declared to be exempt from income tax by any other enactment of the Parliament of Canada, other than an amount received or receivable by an individual that is exempt by virtue of a provision contained in a tax convention or agreement with another country that has the force of law in Canada;

Indian Act

87(1) 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.

(2) No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph ( 1 )(a) or (b) or is otherwise subject to taxation in respect of any such property.

The Appellants

All of the Appellants are status Indians within the definition of that term in the Indian Act.^[4] They are members of the Gwa’Sala-Nakwaxda’xw Band (the Band), which is located on a reserve at Port Hardy (the Reserve), in the northeast part of Vancouver Island. The Band has some 565 members, living in 106 homes, and is part of the Kwakiutl Nation. It is one of three Bands located at Port Hardy, each of which has its own reserve. For many years the principal activity of most of the members of the Band has been fishing. There was no evidence, however, of any history of a commercial fishery in the area, other than that of the company.

The Appellant James Walkus is the founder and sole shareholder, sole director, and president of the company. He has fished since 1955, when he was 16 years old. In 1974 he incorporated the company to engage in the business of commercial fishing on Canada’s west coast. He has been exceptionally successful, and has built his business steadily to become one of the largest and most prosperous fishing companies in British Columbia. In addition to managing the business affairs of the company and overseeing the maintenance of the vessels and nets, he is captain of the fishing boat Pacific Joye, and in that capacity takes an active part in the company’s fishing operations. His income is derived both from his ownership interest in the company, and from his share of the catch of the Pacific Joye. It is not disputed that James Walkus is an influential member of the Band, one of the leading citizens in the area, and a generous contributor to many worthy causes.

Doreen Walkus is the wife of James Walkus. They were married in 1962, and she has fished with him every year since then. She purchases supplies for the Pacific Joye, cooks for the crew while at sea, and works as a hand on the boat when necessary. She also helps with the net mending between fishing seasons. She derives income both from her share of the catch of the Pacific Joye, and from management fees paid to her by the company. The evidence did not reveal the nature of her management activities. In the period from 1986 to 1989 they had a home at Nanoose Bay, near Nanaimo, and one at Peel Street in Port Hardy. Neither of these homes was on an Indian reserve.

The other Appellants are, or were during the years under appeal, all employed by the company, some as the skippers of fishing vessels, and the others as hands on the vessels. Many of them worked at mending the company’s nets when the fleet was not at sea. Their incomes were derived from their portions of the crews’ share of the catch of the boats on which they worked, together with pay on an hourly basis for such additional work as net mending.

Brian Walkus and Henry Walkus are the two oldest children of James and Doreen Walkus. At the relevant time, each of them was skipper of one of the company’s vessels, and they both lived in Nanaimo. The two younger children, Lloyd Walkus and Joye Walkus, were both attending school in Alberta during the years under appeal, but worked on the company’s boats during their summer vacation period. All four children began to work on the boats at a very early age, and have done so ever since. Neither Lloyd nor Joye lived on the Reserve. All four of them received their pay cheques from the company at its office on the Reserve, as will be described later.

Robert Charlie has fished almost all his life. During the years under appeal he was skipper of one of the company’s vessels, the Eliza Joye, and also was in charge of overseeing the company’s net repair operations. He did not live on the Reserve, but he did pick up his cheques from the company’s office on the Reserve.

Chantal Charlie was born in France, and became a status Indian when she married Robert Charlie in 1974. She started to work for the company as a cook on the Eliza Joye in about 1980. Later she also became secretary to James Walkus, and in that capacity her duties included picking up the mail and receiving telephone messages, reviewing bills from some of the suppliers, and preparing and mailing cheques in payment of them. During the years under appeal she did the payroll for the company employees who were status Indians, as is described later. She also spent several weeks per year working on the boat skippered by her husband, during which time someone else performed the secretarial duties. She was paid on the basis of $15.00 per hour for her office work, in addition to her share of the catch of the Eliza Joye. She did not live on the Reserve during the relevant time period, but she did receive her pay cheques at the company’s office on the Reserve.

Patrick Charlie worked for the company as a deck hand and as a skiff man from 1983 to 1994. He also worked one or two weeks per year mending nets for the company at the net loft. He lived on the Reserve during the relevant time period, and he received his pay cheques at the office on the Reserve.

Alvin Walkus worked for the company as a deck hand during the years 1988 and 1989. He also did some net mending at the net loft. He has lived on the Reserve since 1963, and he picked up his pay cheques from the company’s office on the Reserve.

Raymond Clair worked for the company as a beach man between 1988 and 1995. He also lived on the Reserve, and picked up his cheques at the office on the Reserve.

Harry Bell began work for the company in 1989 as a deck hand and mending nets. He lived on the Reserve during the relevant time period, and he picked up his pay cheques at the office on the Reserve.

Johnson Bell worked for the company as a deck hand during the period from 1986 to 1989. He also did some net mending. He lived on the Reserve, and he picked up his pay cheques at the company office on the Reserve.

Neither Robert Walkus Sr. nor Corrine Walkus was available to give evidence at the trial. However, it is agreed between the parties that they each worked for the company during the years under appeal as a crew member on one of the vessels, and that they both received their pay cheques by picking them up at the company office on the Reserve. Robert Walkus Sr. lived on the Reserve; Corrine Walkus did not.

The Company

The company has been extremely successful. By 1986 it had grown to the point where it owned six boats; by 1989 it had 15. In those years it was engaged in fishing for salmon, herring and halibut. It had a total of six salmon and ten herring licenses in 1986, and 22 and 14 respectively in 1989. By the time of the trial in 1997 it had 14 vessels, ranging in size from 34’ to 80'. The Pacific Joye is a 75’ vessel with a crew of six. The other vessels also have a permanent skipper, and a crew of between five and eight additional hands. The crews are hired by the skippers of the vessels, but James Walkus encourages them to hire members of the Band, and students, to the extent possible. During the years under appeal the company had about 100 employees in total, including two full-time mechanics. At any given time during the period covered by these appeals between 12 and 18 of these employees were status Indians; the remainder were not. There was no evidence to suggest that the duties of the native and the non-native crew members were different in any way, or that they were carried out differently.

The fleet’s home port is Port Hardy, and when the vessels are there they dock at the municipal wharf, which is located a short distance from the Reserve, and close to the premises of Seafood Products Company (SPC), which is the firm to which almost all of the fleet’s catch is sold. The vessels’ port of registry under the Canada Shipping Act is Nanaimo, which, although several hundred kilometres south of Port Hardy, is the closest port at which they may be registered.[5]

Apart from the vessels and the nets, the company’s other major physical asset is its share of the net loft where the nets are checked, repaired and stored when they are not in use. Nets may be as large as 225 fathoms by 45 fathoms, so a very large area is required to work on them and to house them. The company, together with the three Port Hardy Indian Bands, purchased a former Beaver Lumber store to use as a net loft. The company paid $300,000 for its share. The net loft is located in Port Hardy, but not on any of the reserves.

Method of Remuneration

Remuneration of both the crew and the company depends, of course, on the sale of the fish caught. Fishing is strictly regulated by the federal government, which issues licenses and determines, according to the run of the fish, when and where the licensees may fish. In the waters off Canada’s west coast there are five different species of salmon. These are fished at different times, but in general the salmon fishing begins each year about the middle of July, and continues until the end of November. The herring season is between late February and mid-April. Fishing may be opened and closed by directive of the Department of Fisheries and Oceans (DFO), and it is important for boats to be in position to take advantage of an opening as soon as it is announced, and to keep in touch with the processors, for it is through them that information as to openings is disseminated by DFO.

The company sells its herring and salmon catch almost exclusively to SPC; its halibut is generally sold to the buyer paying the highest price. SPC not only purchases the catch, but in many ways it acts as an agent and a banker for the company. When the boats return to Port Hardy the catch is unloaded at SPC’s dock, where its employees grade and weigh it, calculate its value according to the prevailing price, and then calculate the respective shares of the catch payable to the company and to the crew members. The crew, including the skipper, share 7/11 of the total value of the catch; the company, as owner of the boat and the net, is entitled to the remaining 4/11. The company’s share is credited to it in the books of SPC. The shares of the crew members were, prior to the years under appeal, paid to them directly by SPC, by cheques which were distributed at the SPC office. At the beginning of 1986, or just prior, this system was changed, so that the shares of crew members who are status Indians are paid in a lump sum to the company, which then issues its own cheques, net of deductions, to those crew members. I shall say more about this later. In conjunction with this payroll function, SPC made the necessary deductions and remittances for income tax, unemployment insurance and the Canada Pension Plan.

SPC also made payments directly to various suppliers on behalf of the company for such things as insurance premiums, licenses, fuel and supplies for the vessels. On at least one occasion it made payment for a new vessel on the company’s behalf. When requested, it would wire cash to the company’s banks in Nanaimo and Port Hardy. SPC maintains a fisherman’s ledger for the company (and for its other suppliers) in which the various transactions and the company’s credit or debit balance are recorded. Generally speaking, the company will be in a debit position with SPC early in the year, until the landing of the salmon catches in the second half of the year, when the situation is reversed.

Food Fishing

All, or almost all, of the Appellants took part each year in the native food fishery. James Walkus, through the company, donated the use of the vessels and nets, as well as the cost of operating them. He and the other Appellants donated their time to man the boats, and to land the catch. Food fishing takes place two, three or four times each summer for sockeye salmon, and two, three or four times each fall for chum salmon. The fishing takes place while the season is closed to commercial fishing, and on the basis that the catch will only be used by native people for food and ceremonial purposes. No part of the catch may be sold commercially. On each occasion the duration of the fishery is several days. Upon the return of the boats to Port Hardy, the catch is taken to the SPC wharf and unloaded. All members of the Band are free to take sufficient fish to meet their requirements for food. Any fish left, after satisfying the needs of the Band members for food and ceremonial purposes, is given to the members of the neighbouring bands.

The company received no remuneration of any kind for the use of its vessels and nets, and the captains and crews received no remuneration for their labour. The Band members paid nothing for the fish they acquired. The use of the vessels and the nets, the cost of operating them, and the efforts of the captains and crews were in the nature of a gift to the community at large, for which no reward was sought or given. The value of the catch varied from year to year depending on its size and the prevailing price of salmon, but during the years under appeal it was in the magnitude of $75,000 to $125,000.

The Office on the Reserve

Prior to 1986 the company had no permanent office of its own. The registered office under the Company Act of British Columbia was at various times listed as the office of its solicitors in Nanaimo, or as the home address of James and Doreen Walkus, either in Nanaimo or Port Hardy. No doubt James Walkus at various times attended to company business, either in person or by telephone, from his home, at his lawyer’s office, at his accountant’s office, at the offices of SPC, on the Pacific Joye, in his car, at the wharf in Port Hardy, at the net loft, and occasionally in Vancouver and Victoria. The company’s accounting functions were, in part, performed by SPC at its offices, and, in part, at the office of Mr. Braithwaite, the accountant who had been retained by the company since 1977. Mr. Braithwaite maintained the books of account and prepared financial statements and income tax and corporate returns. One room of the house at Nanoose Bay was used as an office by James Walkus, and there were some company records there, and some in the Peel Street house at Port Hardy.

In about 1984 Mr. Braithwaite advised Mr. Walkus that there was a potential tax advantage to be obtained if the company established an office on the Reserve, and if it paid the status Indian employees there. The only office space available within the Reserve was an unused room about 10 feet square in the building which houses the Band Council offices. James Walkus arranged to rent it, beginning in December 1995, for $175.00 per month, a sum which he negotiated at arms’ length with the Band Council. Chantal Charlie was engaged as a secretary to work there.[6] The office was furnished with a desk and chair, a filing cabinet, a photocopier, and a telephone. A computer was purchased from Radio Shack, but it appears that it was never used during the years under appeal, but simply remained in the office in its original box. Some records were moved to the office from Mr. Braithwaite’s office in Nanaimo, but they seem for the most part to have been historical records that were simply kept there for convenient storage. Chantal Charlie worked in the office part-time, about 12 hours per week, when she was not away fishing as part of the crew of the Eliza Joye. During the fishing season she was replaced in the office by a temporary secretary. She was paid an hourly wage for her office work, in addition to her share of the catch from fishing.

The method of paying crew shares to the employees who were status Indians was changed in 1986. I find that to have been done as a result of the advice given by Mr. Braithwaite. SPC continued to issue individual cheques to the non-status employees as before, but instead of issuing individual cheques to the status Indian employees, it issued one cheque to the company for the aggregate of their shares. This cheque was deposited in the bank by Chantal Charlie, who then prepared individual cheques drawn on the company’s account for the status Indian employees. These cheques were picked up by them from her at the office on the Reserve. The evidence was not clear as to how these cheques were cashed; certainly there was no evidence that the employees were able to cash them on the Reserve, and I should think it likely that they either deposited them to their own accounts, or presented them for payment, at the bank. The bank branch at Port Hardy is not located on any of the reserves there.

Chantal Charlie had little other involvement with the company’s finances, except for maintaining a synoptic ledger to record the transactions which she processed. This she did in accordance with instructions she received from Mr. Braithwaite at the time he set up the system. From time to time she would consult by telephone with him or one of his staff if she required advice. Mr. Braithwaite went to Port Hardy three or four times each year, and on those occasions he would meet with Chantal Charlie at the office to review the bookkeeping.

Chantal Charlie and James Walkus together had cheque signing authority. The evidence was unclear as to the frequency with which James Walkus visited the office, but he certainly went there from time to time to sign cheques, and, infrequently, to meet with Mr. Braithwaite. He often picked up the company’s copy of the reconciliation of the fisherman’s ledger from SPC and took it to the office to review. He also reviewed bills from suppliers there, as did Robert Charlie, who was responsible for checking the invoices for supplies relating to the mending of nets.

The Law

I should make it clear at this point that the only dispute in this case is whether the income that the Appellants derived from their work for the company, and in the case of James Walkus from his ownership of the company, is “situated on a reserve”, within the meaning of paragraph 87(1)(b) of the Indian Act.

The application of paragraph 87( 1)(b) of the Indian Act to exempt the income of status Indians from taxation pursuant to the Income Tax Act emerged with the judgment of the Supreme Court of Canada in Nowegijick v. R..7[7] It reached full flower in that Court’s judgment in Williams v. R.,^[8] a case involving the question whether or not unemployment insurance benefits received by the taxpayer were entitled to the exemption. In that case the Court rejected the notion that the question might be answered so simply as by applying the conflict of laws rules which determine the situs of a debt. Instead, it found that the proper approach is for the Court to identify all of the “connecting factors” which may be relevant to the determination of the location of the transaction giving rise to the income which the Minister seeks to tax, and then to analyze these to determine what weight they should each be given, having regard to the purpose of the exemption provided for in paragraph 87(1 )(t), the type of property in question, and the nature of the taxation of it. That analysis is to proceed in accordance with the following directive found in the Supreme Court’s judgment in Williams:[9]

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.

This formulation of the appropriate approach to the analysis derives from the reasons for judgment of La Forest J., concurred in on this point by five other members of the Court, in Mitchell v, Sandy Bay Indian Band,^[10]

wherein he concludes, following a thorough review of the history underlying sections 87 to 90 of the Indian Act, and the jurisprudence surrounding them, that the purpose of the exemptions contained there is, as it was paraphrased by Gonthier J. in Williams^[11]

...to preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve lands was not eroded by the ability of governments to tax, or creditors to seize. The corollary of this conclusion was that the purpose of the section was not to confer a general economic benefit upon the Indians.

The Connecting Factors

I turn now to a consideration of the various connecting factors in this case. Mr. Little argued that great weight should be given in this case to the nature of the income earning activity, because of the tradition of fishing as a way of life among the coastal Indians of British Columbia. As he described it, the fishing done by these Appellants has an intimate connection with the Reserve, and with the traditional way of life of the Band. However, as I have noted above, there was no evidence before me of any tradition, or history, of a commercial fishery prior to 1974, when James Walkus incorporated the company. Nor is the fishing done by the company peculiarly a native Indian activity; the great majority of its employees are not natives.

The other factors to which Mr. Little would have me attach great weight are the residence of the debtor, which is to say the company for which the Appellants work, and the place of payment of the remuneration, which he characterizes as being the office on the Reserve where the Appellants, or at least those other than James and Doreen Walkus, picked up the cheques for their shares of the catch. The evidence was silent as to exactly where and how James Walkus and Doreen Walkus received their income from the company, and as to where and how the others negotiated their cheques.

As to the residence of the company, a great deal of the evidence led for the Appellants was intended to establish that it resided on the Reserve. The cross-examination of counsel for the Respondent was intended to establish that it did not. The Appellants’ position is that the company should be considered to be situate on the Reserve because its boats are docked as close to the Reserve as is possible (there being no dock available on the Reserve itself), the fishing takes place from a port close to the Reserve, and the company has an office on the Reserve, where it keeps at least some of its corporate records and does some of its business.

For the Respondent it is argued that the most important of the connecting factors are the place where the work is done, the nature and purpose of the employment which gives rise to the income, the circumstances surrounding that employment, and the residence of the employees. The following factors are said by counsel for the Respondent to be of less significance: the residence of the employer, the location at which the employees pick up their cheques, and the location of the bank on which those cheques are drawn.

Analysis of the Connecting Factors

i) the nature of the employment

In my view the most important factors bearing upon the result in this case are the nature of the employment, and the manner in which it is carried out. Nothing about those factors suggests to me that any of the Appellants in this case, if taxed on the income, would tend to be deprived of property which they hold qua Indian. There is no evidence that the fishing activity of the company which gives rise to the incomes of the Appellants has any close connection with the Reserve, or any historic, social or cultural connection with either the Band or the Reserve. So far as the company is concerned, there is no evidence before me to show that it carries on its business in a way that is different from fishing companies that are owned and operated by non-Indian interests. The Appellants represent only a small proportion of the work force of the company. Of a total of about 100 employees, only 12 to 18 were status Indians during the relevant time period.

The company’s fishing activity, other than the food fishery, is a commercial activity, pure and simple. The catch is sold in the open market to SPC, a processor which is a subsidiary of a large national food processing firm. The catch thus enters directly into the mainstream of commerce, indistinguishable from the catches of any of the other fishing companies, Indian- owned or non-Indian-owned, which become part of the Canadian food supply.

Mr. Little in his argument put great emphasis on the food fishing activity of the company, and of these individual Appellants, as lending an Indian identity to the income here in question. That is not, in my view, a consideration which should weigh heavily, if at all, in the balance. The food fishery no doubt has its roots in the traditions of the coastal Indian people, although there is scant evidence of that before me in this case. If income were to derive from this food fishery, then perhaps a sound argument could be made for the exemption of that income pursuant to paragraph 87(1)(b), provided that a proper evidentiary base were laid. That is not the case here, however. It is clear from the evidence that none of the income to which these appeals relate, nor any income whatsoever, is derived by the Appellants or the company from their food fishing activities. Indeed, the food fishery costs the company money, and the Appellants time and labour, for which they receive no recompense. The fishing which gives rise to the income with which these appeals are concerned takes place at a different time from the food fishery, and is unconnected to it. The catch does not go to sustain the Band, but into the mainstream of commerce through the sale of it to SPC and other processors.

ii) location

The fact that the work is performed at a location away from the Reserve is not of itself determinative of anything. Indeed, the work could only be done away from the Reserve, because that is where the fish are. In both Nowegijick^[12] and Folster^[13] work done away from the reserve by an Indian was held to give rise to exempt income. Nowegijick was decided principally on the rather narrow basis of where the payor, and therefore the liability for wages, was situated. The same result might well have been arrived at in that case by the application of the “connecting factors” analysis developed later in Williams. In Clarke the work was done near to but not on the reserve, at a hospital which had a significant historical and cultural connection to the reserve and to the Band. It had originally been situated on the reserve, but was rebuilt at a location just outside the reserve boundary after being destroyed by fire. The Federal Court of Appeal found the precise location of the hospital to be a less important factor than the historic significance of the hospital in the life of the Band. No such special connection exists in the present case. The paid work of the Appellants, as opposed to the food fishery, is of no peculiar benefit to the Band. There is no connection between the paid work done by the Appellants and either the Reserve or the Band. To exempt their income would simply be to give them an economic advantage over the other employees of the company who work alongside them.

iii) residence of the Appellants

The place of residence of the Appellants is not, in my view, an important consideration in this case. Mr. Little took the position in argument that it is an important factor for the Appellants other than James Walkus. I am unable to see why he should be singled out in this way. He and his wife did not live on the Reserve during the years in issue. They had two residences, and split their time between them. One was at Nanoose Bay, near Nanaimo, a long way from the Reserve. They spent more time there than at their house on Peel Street in Port Hardy. It too is not on the Reserve. They also spent 100 or more nights per year aboard the Pacific Joye, either fishing or in anticipation of the opening of a fishing season.

If I understood the argument correctly, it is that the fact that James Walkus did not live on the Reserve should be offset by his important leadership role in the affairs of the Band, and his generous contributions to the Band, and to a great many worthy causes in Port Hardy and on the Reserve. Neither his leadership role nor his generosity can be questioned. Virtually all of the witnesses spoke of these in glowing terms, and they were not challenged. He himself gave evidence of them reluctantly. I am sure that he is as modest about these aspects of his life as he is generous in giving his time and money. Nevertheless, I do not see how either his leadership role in the Indian community or his generosity can serve to recharacterize his income for the purposes of the section 87 analysis. The issue here is the character of his income, not how he chooses to spend it, or how he spends his leisure time. A great many people, native and non-native, give generously of their time and money to charity, but this does not provide a basis to exempt their incomes from taxation. The Income Tax Act makes specific provisions for deductions for charitable donations, and both James Walkus and his company have had the benefit of those deductions.

Nor do I see a rational reason to differentiate between those Appellants who live on the Reserve, and those who do not. Most of them live in the small community of Port Hardy, very close to one another. It would be puzzling indeed if some of them were to be subject to income tax, and some were not, simply on the basis of their street address. As Gonthier J. put it in Williams:^[14]

A connecting factor is only relevant in so much as it identifies the location of the property in question for the purposes of the Indian Act. In particular categories of cases, therefore, one connecting factor may have much more weight than another. It would be easy in balancing connecting factors on a case by case basis to lose sight of this.

It would distort the analysis in such a case as this to differentiate among the Appellants on the basis of the part of the town in which they happen to live.

iv) the residence of the employer

This case exemplifies the reason that it is inappropriate to apply a test of situs developed for other purposes to govern the operation of section 87 of the Indian Act. The place of residence of the company was the subject of much attention by counsel at the trial. They relied variously on the place of registry of the head office, the place where the accounting and other records are kept, the place of registry of the vessels, the place at which the boats are docked when not at sea, the place where the fish are caught, the place where the fish are sold, the place where the nets are mended and stored, and the place where James Walkus is most often to be found exercising management and control. Mr. Little, of course, relied heavily upon the office in the Band Office building as establishing a situs on the Reserve. In my view there is not much assistance to be had from any of those elements in characterizing the incomes of the Appellants.

It was argued by Ms. Yoshida for the Respondent that the situs of this company at any given moment is where Mr. Walkus is, because, from a practical point of view, he is the company. This submission has merit. The major corporate decisions are certainly taken by Mr. Walkus. I heard no evidence to suggest that he made many of them at the 10’ by 10’ office on the Reserve. It is not, in my view, very useful to consider in fine detail where the various corporate functions are carried out. To the extent that it is relevant at all, it does not seem to me to assist the Appellants. The only corporate activities that take place on the Reserve are those carried out in the small office located there; they are few, and for the most part not of a management nature. For reasons that I shall come to shortly, I consider that office, and the few activities carried on there, not to be connecting factors to which I should give significant weight.

v) the place at which the employees are paid

Mr. Little put great emphasis on the fact that the employees, or at least those other than James and Doreen Walkus, picked up their cheques at a location on the Reserve. This, he said, was important in fixing the location of their incomes on the Reserve for the purposes of section 87. Ms. Yoshida suggests that neither this nor the location of the bank on which the cheques are drawn should be given much weight.

The place at which the person is paid can only be of use in the analysis to the extent that it is a factor which genuinely gives some indication of the answer to the underlying question, “would taxation of this income adversely affect the property interest of the Appellant qua Indian, or would it simply serve to confer an economic benefit not available to others?” I do not see how the answer to this question can be different simply because the employee picks up the cheque at an office on the Reserve, rather than at the office of SPC a few blocks away, as was the former practice. Nothing of significance has changed, in terms of the interests which section 87 is meant to protect. To conclude otherwise would be to take a simplistic, rigid and mechanical approach to a complex question which calls for “a sophisticated analysis of a series of factors”.[15] As Gonthier J. said in the passage from Williams which I have cited above “[a] connecting factor is only relevant in so much as it identifies the location of the property in question for the purposes of the Indian Act.” (emphasis added). The delivery of the cheques at the office on the Reserve, rather than at the office of SPC, does not in my view assist the Appellants in this case.

I am confirmed in this by the fact that the office in the Band Office building was clearly created, not for any purpose related to the operation of the Indian Act, or the identity of the Appellants as Indians, but, on the advice of Mr. Braithwaite for the purpose of providing a tax advantage to the company and its employees. Its purpose has nothing to do with the property of an Indian qua Indian, and everything to do with securing an economic advantage. To accept it as a significant connecting factor would be to per- mit the “manipulation and abuse” against which the Supreme Court warns in Williams)^[16]

The Office Work of Chantal Charlie

I was advised that the Minister, in reassessing the Appellant Chantal Charlie, treated her income from the office work which she did on the Reserve as being exempt under paragraph 87(1)(b). No issue is before me, therefore, with respect to that part of her income, and so I express no opinion as to the correctness of the position that the Minister has taken.

Conclusion

In my view a proper analysis of the connecting factors in the present case, focusing on the purpose behind section 87 of the Indian Act, as it has been explained by the Supreme Court of Canada in Mitchell and in Williams, leads to the conclusion that the income which the Appellants received from the company in the years under appeal was not situated on the Reserve, and that they are therefore not entitled to the benefit of the exempting provision in paragraph 87(1)(b). The appeals are dismissed.

At the conclusion of the trial both counsel agreed that I should make no disposition with respect to costs until they had the opportunity to read these reasons, and to make submissions. If counsel are able to agree as to the appropriate Order they may so advise the Registrar. Otherwise, counsel for the Respondent shall have 20 days from the receipt of these reasons to deliver a written submission, and counsel for the Appellant shall have 20 days to reply to it.

Appeal dismissed.