LBL – Federal Court of Appeal finds that tobacco sales to a reserve Indian for flash resale to the ultimate customers were exempted under the Indian Act

A Sobeys subsidiary (“LBL”) sold $98 million of tobacco products during a 14-month period to a status Indian (Ms. MacNaughton) operating a variety store on an Indian reserve. As soon as LBL delivered the products to the store vicinity, and it received the cash consideration, the products were loaded onto the waiting trucks of customers, in turn, of Ms. MacNaughton.

Before going on to confirm that the sales by LBL were exempted under s. 87 of the Indian Act, Woods JA noted that the parties had framed the issue before her as one of whether Ms. MacNaughton was the recipient of the tobacco products, i.e., the one liable to pay the consideration therefor, and suggested that the s. 87 exemption instead required that the products have become the personal property of Ms. MacNaughton. She then stated:

I have concluded that it is sufficient for the purpose of this appeal to consider whether the Tax Court erred in finding that the Products were sold and delivered to Ms. MacNaughton. Quite simply, the “owner” and the “recipient” are bound to be one and the same person in this case.

On this basis, she concluded that the Tax Court had not made a palpable and overriding error in finding that the products had been sold and delivered by LBL to Ms. MacNaughton, given the evidence before the Tax Court that:

• the witnesses considered Ms. MacNaughton to be LBL’s client;
• the documentary evidence was largely supportive of that view; and
• the flash resales to the customers were a common type of sale.

Neal Armstrong. Summaries of Canada v. LBL Holdings Limited, 2025 FCA 186 under General Concepts – Ownership, Indian Act s. 87 and Federal Courts Act, s. 27(1.3).