I.—Facts
and
Procedural
History
The
appellant
received
a
notice
of
assessment
by
the
Minister
of
National
Revenue
which
included
in
his
income,
for
the
taxation
year
1984,
certain
unemployment
insurance
benefits.
The
appellant
contested
the
assessment.
His
objection
was
overruled
by
the
Minister
of
National
Revenue.
The
appellant
appealed
to
the
Federal
Court-Trial
Division:
[1989]
1
C.T.C.
117,
89
D.T.C.
5032.
The
appeal
proceeded
on
the
basis
of
an
agreed
statement
of
facts.
At
all
material
times,
the
appellant
was
a
member
of
the
Penticton
Indian
Band
and
resided
on
the
Penticton
Indian
Reserve
No.
1.
In
1984
he
received
regular
unemployment
insurance
benefits
for
which
he
qualified
because
of
his
former
employment
with
a
logging
company
situated
on
the
reserve,
and
his
employment
by
the
Band
in
a"
NEED
Project"
on
the
reserve.
In
both
cases,
the
work
was
performed
on
the
reserve,
the
employer
was
located
on
the
reserve,
and
the
appellant
was
paid
on
the
reserve.
During
his
employment,
contributions
to
the
unemployment
insurance
scheme
were
paid
both
by
the
appellant
and
his
employers.
All
of
the
regular
unemployment
insurance
benefits
were
paid
by
federal
government
cheques
mailed
from
the
Canada
Employment
and
Immigration
Commission's
regional
computer
centre
in
Vancouver.
(While
the
instruments
of
payment
may
not
technically
have
been
cheques,
this
is
of
no
consequence
in
this
appeal.)
In
addition
to
regular
benefits,
the
appellant
also
received
"enhanced"
unemployment
insurance
benefits
paid
in
respect
of
a
job
creation
project
administered
on
the
reserve
by
the
Band,
pursuant
to
a
written
agreement
between
the
Band
and
the
Commission.
The
appellant
was
employed
pursuant
to
this
project
in
work
which
took
place
on
the
reserve,
during
a
time
in
which
he
would
otherwise
have
received
regular
benefits.
The
Band
paid
the
appellant
$60
per
week
during
the
program.
The
enhanced
benefits
constituted
the
bulk
of
the
appellant's
remuneration
for
his
work
in
this
program.
Section
38
of
the
Unemployment
Insurance
Act,
1971,
S.C.
1970-71-72,
c.
48,
authorized
the
creation
of
such
programs
on
a
general
basis,
without
any
limitation
to
Indians.
The
enhanced
unemployment
insurance
benefits
were
also
paid
by
the
Commission's
regional
computer
centre
in
Vancouver.
The
issue
at
trial
was
whether
the
unemployment
insurance
benefits
received
by
the
appellant
were
exempt
from
taxation
pursuant
to
section
887
of
the
Indian
Act.
With
regard
to
the
requirements
of
that
section,
the
disputed
issue
was
whether
the
benefits
received
by
the
appellant
were
"situated"
on
a
reserve.
Cullen,
J.
agreed
with
the
appellant's
argument
that
the
situs
of
the
benefits
was
on
the
reserve.
While
acknowledging
that
prior
cases
had
focused
on
the
residence
of
the
debtor
in
order
to
determine
the
situs
of
a
debt,
Cullen,
J.
was
of
the
view
that
the
residence
of
the
debtor
was
only
one
of
a
number
of
“connectin
factors"
which
must
be
examined
in
order
to
determine
situs.
In
this
case,
all
the
connecting
factors
except
the
residence
of
the
debtor
suggested
that
the
situs
of
the
debt
was
on
the
reserve.
Cullen,
J.
also
found
that
the
enhanced
unemployment
insurance
benefits
had
been
given
to
the
appellant
due,
in
part,
to
an
agreement
between
the
Band
and
the
government,
so
that
the
benefits
in
question
were
deemed
to
be
situated
on
a
reserve
by
reason
of
section
90
of
the
Indian
Act.
In
the
result,
Cullen,
J.
found
that
the
appellant
had
established
that
the
relevant
provisions
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
and
the
Indian
Act
operated
to
exempt
both
the
regular
and
enhanced
unemployment
insurance
benefits
from
taxation.
The
respondent
appealed
the
decision
of
the
Trial
Division
to
the
Federal
Court
of
Appeal:
[1990]
2
C.T.C.
124,
90
D.T.C.
6399.
The
Federal
Court
of
Appeal
distinguished
between
the
regular
unemployment
insurance
benefits
and
the
enhanced
unemployment
insurance
benefits
in
assessing
their
liability
to
taxation.
Stone,
J.A.
held
that
the
regular
benefits
were
not
exempt
from
income
tax
by
virtue
of
section
87(b)
of
the
Indian
Act
because
they
were
not
"property
.
.
.
situated
on
a
reserve".
Stone,
J.A.
rejected
the
trial
judge's
"connecting
factors"
test
and
stated
that
the
leading
cases
had
been
decided
in
accordance
with
the
well-established
contract
principle
that,
in
the
absence
of
an
intention
in
the
contract
to
the
contrary,
the
residence
of
the
debtor
determines
the
situs
of
a
simple
contract
debt.
The
debt
in
this
case
was
therefore
situated
off
the
reserve.
However,
with
regard
to
the
enhanced
unemployment
insurance
benefits,
the
Federal
Court
of
Appeal
agreed
with
the
trial
judge
that
paragraph
90(1)(b)
can
apply
to
agreements
whereby
a
band
merely
participates
in
a
national
program.
The
Court
decided
that
these
enhanced
benefits
did
fall
within
paragraph
90(1)(b),
and
were
therefore
exempt
from
taxation.
The
Federal
Court
of
Appeal
thus
allowed
the
appeal
in
part,
set
aside
the
judgment
of
the
Federal
Court-Trial
Division,
and
referred
the
matter
back
to
the
Minister
of
National
Revenue
for
reassessment
on
the
basis
that
the
regular
unemployment
insurance
benefits
received
by
the
appellant
were
not
exempt
from
income
tax
but
the
enhanced
portion
of
those
benefits
were
exempt.
II—Relevant
Statutory
Provisions
The
following
sections
of
the
Indian
Act
are
relevant
to
the
issues
to
be
determined
in
this
appeal:
87.
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.
89.
(1)
Subject
to
this
Act,
the
real
and
personal
property
of
an
Indian
or
a
band
situated
on
a
reserve
is
not
subject
to
charge,
pledge,
mortgage,
attachment,
levy,
seizure,
distress
or
execution
in
favour
or
at
the
instance
of
any
person
other
than
an
Indian.
(2)
A
person
who
sells
to
a
band
or
a
member
of
a
band
a
chattel
under
an
agreement
whereby
the
right
of
property
or
right
of
possession
thereto
remains
wholly
or
in
part
in
the
seller,
may
exercise
his
rights
under
the
agreement
notwithstanding
that
the
chattel
is
situated
on
a
reserve.
90.
(1)
For
the
purposes
of
sections
87
and
89,
personal
property
that
was
(a)
purchased
by
Her
Majesty
with
Indian
moneys
or
moneys
appropriated
by
Parliament
for
the
use
and
benefit
of
Indians
or
bands;
or
(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.
(2)
Every
transaction
purporting
to
pass
title
to
any
property
that
is
by
this
section
deemed
to
be
situated
on
a
reserve,
or
any
interest
in
such
property,
is
void
unless
the
transaction
is
entered
into
with
the
consent
of
the
Minister
or
is
entered
into
between
members
of
a
band
or
between
the
band
and
a
member
thereof.
(3)
Every
person
who
enters
into
any
transaction
that
is
void
by
virtue
of
subsection
(2)
is
guilty
of
an
offence,
and
every
person
who,
without
the
written
consent
of
the
Minister,
destroys
personal
property
that
is
by
this
section
deemed
to
be
situated
on
a
reserve,
is
guilty
of
an
offence.
The
following
section
of
the
Income
Tax
Act
is
relevant
to
this
appeal:
56.
(1)
Without
restricting
the
generality
of
section
3,
there
shall
be
included
in
computing
the
income
of
a
taxpayer
for
a
taxation
year,
(a)
any
amount
received
by
the
taxpayer
in
the
year
as,
on
account
or
in
lieu
of
payment
of,
or
in
satisfaction
of,
(iv)
a
benefit
under
the
Unemployment
Insurance
Act,
1971,
III—Framing
the
Issues
In
order
to
decide
the
basis
upon
which
a
situs
is
to
be
assigned
to
the
unemployment
insurance
benefits
in
this
case,
it
is
necessary
to
explore
the
purposes
of
the
exemption
from
taxation
in
section
87
of
the
Indian
Act,
the
nature
of
the
benefits
in
question,
and
the
manner
in
which
the
incidence
of
taxation
falls
upon
the
benefits
to
be
taxed.
A—The
Nature
and
Purpose
of
the
Exemption
from
Taxation
The
question
of
the
purpose
of
sections
87,
89
and
90
has
been
thoroughly
addressed
by
La
Forest,
J.
in
the
case
of
Mitchell
v.
Peguis
Indian
Band
(sub
nom,
Mitchell
v.
Sandy
Bay
Indian
Band),
[1990]
2
S.C.R.
85,
71
D.L.R.
(4th)
193.
La
Forest,
J.
expressed
the
view
that
the
purpose
of
these
sections
was
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
sections
was
not
to
confer
a
general
economic
benefit
upon
the
Indians
(S.C.R.
at
pages
130-31):
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.
It
is
also
important
to
underscore
the
corollary
to
the
conclusion
I
have
just
drawn.
The
fact
that
the
modern-day
legislation,
like
its
historical
counterparts,
is
so
careful
to
underline
that
exemptions
from
taxation
and
distraint
apply
only
in
respect
of
personal
property
situated
on
reserves
demonstrates
that
the
purpose
of
the
legislation
is
not
to
remedy
the
economically
disadvantaged
position
of
Indians
by
ensuring
that
Indians
may
acquire,
hold,
and
deal
with
property
in
the
commercial
mainstream
on
different
terms
than
their
fellow
citizens.
An
examination
of
the
decisions
bearing
on
these
sections
confirms
that
Indians
who
acquire
and
deal
in
property
outside
lands
reserved
for
their
use,
deal
with
it
on
the
same
basis
as
all
other
Canadians.
La
Forest,
J.
also
noted
that
the
protection
from
seizure
is
a
mixed
blessing,
in
that
it
removes
the
assets
of
an
Indian
on
a
reserve
from
the
ordinary
stream
of
commercial
dealings
(S.C.R.
at
pages
146-47).
Therefore,
under
the
Indian
Act,
an
Indian
has
a
choice
with
regard
to
his
personal
property.
The
Indian
may
situate
this
property
on
the
reserve,
in
which
case
it
is
within
the
protected
area
and
free
from
seizure
and
taxation,
or
the
Indian
may
situate
this
property
off
the
reserve,
in
which
case
it
is
outside
the
protected
area,
and
more
fully
available
for
ordinary
commercial
purposes
in
society.
Whether
the
Indian
wishes
to
remain
within
the
protected
reserve
system
or
integrate
more
fully
into
the
larger
commercial
world
is
a
choice
left
to
the
Indian.
The
purpose
of
the
situs
test
in
section
87
is
to
determine
whether
the
Indian
holds
the
property
in
question
as
part
of
the
entitlement
of
an
Indian
qua
Indian
on
the
reserve.
Where
it
is
necessary
to
decide
amongst
various
methods
of
fixing
the
location
of
the
relevant
property,
such
a
method
must
be
selected
having
regard
to
this
purpose.
B—Nature
of
Benefit
and
the
Incidence
of
Taxation
Section
56
of
the
Income
Tax
Act
is
the
section
which
taxes
income
from
unemployment
insurance
benefits.
That
section
specifies
that
unemployment
insurance
benefits
which
are
"received
by
the
taxpayer
in
the
year"
are
to
be
included
in
computing
the
income
of
a
taxpayer.
The
parties
have
approached
this
question
on
the
basis
that
what
is
being
taxed
is
a
debt
owing
from
the
Crown
to
the
taxpayer
on
account
of
unemployment
insurance
which
the
taxpayer
has
qualified
for.
This
is
not
precisely
true,
since
the
liability
for
taxation
arises
not
when
the
debt
(if
that
is
what
it
is)
arises,
but
rather
when
it
is
paid,
and
the
money
is
received
by
the
taxpayer.
However,
it
is
true
that
the
taxation
does
not
attach
to
the
money
in
the
hands
of
the
taxpayer,
but
instead
to
the
receipt
by
the
taxpayer
of
the
money.
Thus,
the
incidence
of
taxation
in
the
case
of
unemployment
insurance
benefits
is
on
the
taxpayer
in
respect
of
the
transaction,
that
is,
the
receipt
of
the
benefit.
This
Court's
decision
in
Nowegijick
v.
The
Queen,
[1983]
1
S.C.R.
29,
[1983]
C.T.C.
20,
83
D.T.C.
5041,
stands
for
the
proposition
that
the
receipt
of
salary
income
is
personal
property
for
the
purpose
of
the
exemption
from
taxation
provided
by
the
Indian
Act.
I
can
see
no
difference
between
salary
income
and
income
from
unemployment
insurance
benefits
in
this
regard,
therefore
I
hold
that
the
receipt
of
income
from
unemployment
insurance
benefits
is
also
personal
property
for
the
purposes
of
the
Indian
Act.
Nowegijick
also
stands
for
the
proposition
that
the
inclusion
of
personal
property
in
the
calculation
of
a
taxpayer's
income
gives
rise
to
a
tax
in
respect
of
that
personal
property
within
the
meaning
of
the
Indian
Act,
despite
the
fact
that
the
tax
is
on
the
person
rather
than
on
the
property
directly.
Therefore,
most
of
the
requirements
of
section
87
of
the
Indian
Act
have
clearly
been
met
in
this
case.
The
receipt
of
unemployment
insurance
benefits
is
personal
property.
That
property
is
owned
by
an
Indian.
The
Indian
is
being
taxed
in
respect
of
that
property,
since
it
is
being
included
in
his
income
for
the
purpose
of
income
taxation.
The
remaining
question
is
whether
the
property
in
question
is
situated
on
a
reserve.
Since
it
is
the
receipt
of
the
benefit
that
is
taxed,
the
simplest
argument
would
be
that
the
situs
of
the
receipt
of
the
benefit
is
where
it
is
received,
which
would
generally
be
the
residence
of
the
taxpayer.
However,
the
Income
Tax
Act
qualifies
"received"
by
"in
the
year".
This
suggests
that
the
notion
of
receipt"
in
the
Income
Tax
Act
has
more
to
do
with
when
the
income
is
received,
rather
than
where.
Thus,
aside
from
the
fact
that
the
incidence
of
taxation
falls
upon
the
transaction
itself,
rather
than
the
money
in
the
hands
of
the
employer
or
the
taxpayer,
little
ought
to
be
made
of
the
notion
of
receipt
in
this
context.
C—Comments
on
the
"Residence
of
the
Debtor"
Test
The
factor
identified
in
previous
cases
as
being
of
primary
importance
to
determine
the
situs
of
this
kind
of
property
is
the
residence
of
the
debtor,
that
is,
the
person
paying
the
income.
This
was
clearly
stated
by
Thurlow,
A.C.J.
in
The
Queen
v.
National
Indian
Brotherhood,
[1978]
C.T.C.
680,
78
D.T.C.
6488
(T.D.),
at
page
684
(D.T.C.
6491):
A
chose
in
action
such
as
the
right
to
a
salary
in
fact
has
no
situs.
But
where
for
some
purpose
the
law
has
found
it
necessary
to
attribute
a
situs,
in
the
absence
of
anything
in
the
contract
or
elsewhere
to
indicate
the
contrary,
the
situs
of
a
simple
contract
debt
has
been
held
to
be
the
residence
or
place
where
the
debtor
is
found.
See
Cheshire,
Private
International
Law,
seventh
edition,
pp.
420
et
seq.
This
conclusion
was
cited
with
approval
by
this
Court
in
Nowegijick
v.
The
Queen,
supra,
at
page
22
(D.T.C.
5043,
S.C.R.
34):
The
Crown
conceded
in
argument,
correctly
in
my
view,
that
the
situs
of
the
salary
which
Mr.
Nowegijick
received
was
sited
on
the
reserve
because
it
was
there
that
the
residence
or
place
of
the
debtor,
the
Gull
Bay
Development
Corporation,
was
to
be
found
and
it
was
there
that
the
wages
were
payable.
See
Cheshire
and
North,
Private
International
Law
(10th
ed.,
1979)
at
536
et
seq.
and
also
the
judgment
of
Thurlow
A.C.J.
in
R.
v.
National
Indian
Brotherhood,
[1979]
1
F.C.
103
particularly
at
109
et
seq.
The
only
justification
given
in
these
cases
for
locating
the
situs
of
a
debt
at
the
residence
of
the
debtor
is
that
this
is
the
rule
applied
in
the
conflict
of
laws.
The
rationale
for
this
rule
in
the
conflict
of
laws
is
that
it
is
at
the
residence
of
the
debtor
that
the
debt
may
normally
be
enforced.
Cheshire
and
North,
Private
International
Law
(11th
ed.
1987),
quote
Atkin,
L.J.
to
this
effect
in
New
York
Life
Insurance
Co.
v.
Public
Trustee,
[1924]
2
Ch.
101
(C.A.),
at
page
119:
.
.
.
the
reason
why
the
residence
of
the
debtor
was
adopted
as
that
which
determined
where
the
debt
was
situate
was
because
it
was
in
that
place
where
the
debtor
was
that
the
creditor
could,
in
fact,
enforce
payment
of
the
debt.
Dicey
and
Morris
adopt
the
same
explanation
in
The
Conflict
of
Laws
(11th
ed.
1987),
vol.
2,
at
page
908,
as
does
Castel
in
Canadian
Conflict
of
Laws
(2nd
ed.
1986),
at
page
401.
This
may
be
reasonable
for
the
general
purposes
of
conflicts
of
laws.
However,
one
must
inquire
as
to
its
utility
for
the
purposes
underlying
the
exemption
from
taxation
in
the
Indian
Act.
The
respondent
argues
that
the
situs
of
the
receipt
of
unemployment
insurance
benefits
should
be
determined
in
the
same
way
the
conflict
of
laws
determines
the
situs
of
a
debt.
The
debtor
is
the
federal
Crown,
or
the
Canada
Employment
and
Immigration
Commission,
neither
of
which
reside
on
a
reserve,
therefore
the
receipt
of
benefits
is
not
situated
on
the
reserve.
The
appellant
argues
that
while
National
Indian
Brotherhood
and
Nowegijick
focus
on
the
residence
of
the
debtor,
both
cases
leave
room
for
additional
factors
to
be
considered.
For
instance,
National
Indian
Brotherhood
refers
also
to
"anything
in
the
contract
or
elsewhere
to
indicate
the
contrary"
and
Nowegijick
refers
to
where
the
wages
are
to
be
paid.
It
is
therefore
open
to
the
courts
to
consider
these
factors
and
others
in
fixing
the
situs
of
a
debt
for
the
purposes
of
this
exemption.
However,
the
respondent
argues
that
the
other
factors
referred
to
in
National
Indian
Brotherhood
and
Nowegijick
are
merely
factors
used
in
conflicts
law
where
the
debtor
has
more
than
one
residence
and
it
is
necessary
to
choose
between
them
(see
Castel,
supra,
at
pages
401-402,
and
Cheshire
and
North,
supra,
at
pages
804-805).
The
residence
of
the
debtor
test
would
then
remain
the
primary
focus
of
the
test.
In
resolving
this
question,
it
is
readily
apparent
that
to
simply
adopt
general
conflicts
principles
in
the
present
context
would
be
entirely
out
of
keeping
with
the
scheme
and
purposes
of
the
Indian
Act
and
Income
Tax
Act.
The
purposes
of
the
conflict
of
laws
have
little
or
nothing
in
common
with
the
purposes
underlying
the
Indian
Act.
It
is
simply
not
apparent
how
the
place
where
a
debt
may
normally
be
enforced
has
any
relevance
to
the
question
whether
to
tax
the
receipt
of
the
payment
of
that
debt
would
amount
to
the
erosion
of
the
entitlements
of
an
Indian
qua
Indian
on
a
reserve.
The
test
for
situs
under
the
Indian
Act
must
be
constructed
according
to
its
purposes,
not
the
purposes
of
the
conflict
of
laws.
Therefore,
the
position
that
the
residence
of
the
debtor
exclusively
determines
the
situs
of
benefits
such
as
those
paid
in
this
case
must
be
closely
re-examined
in
light
of
the
purposes
of
the
Indian
Act.
It
may
be
that
the
residence
of
the
debtor
remains
an
important
factor,
or
even
the
exclusive
one.
However,
this
conclusion
cannot
be
directly
drawn
from
an
analysis
of
how
the
conflict
of
laws
deals
with
such
an
issue.
IV—The
Proper
Test
Because
the
transaction
by
which
a
taxpayer
receives
unemployment
insurance
benefits
is
not
a
physical
object,
the
method
by
which
one
might
fix
its
situs
is
not
immediately
apparent.
In
one
sense,
the
difficulty
is
that
the
transaction
has
no
situs.
However,
in
another
sense,
the
problem
is
that
it
has
too
many.
There
is
the
situs
of
the
debtor,
the
situs
of
the
creditor,
the
situs
where
the
payment
is
made,
the
situs
of
the
employment
which
created
the
qualification
for
the
receipt
of
income,
the
situs
where
the
payment
will
be
used,
and
no
doubt
others.
The
task
is
then
to
identify
which
of
these
locations
is
the
relevant
one,
or
which
combination
of
these
factors
controls
the
location
of
the
transaction.
The
appellant
suggests
that
in
deciding
the
situs
of
the
receipt
of
income,
a
court
ought
to
balance
all
of
the
relevant
"connecting
factors”
on
a
case-by-
case
basis.
Such
an
approach
would
have
the
advantage
of
flexibility,
but
it
would
have
to
be
applied
carefully
in
order
to
avoid
several
potential
pitfalls.
It
is
desirable,
when
construing
exemptions
from
taxation,
to
develop
criteria
which
are
predictable
in
their
application,
so
that
the
taxpayers
involved
may
plan
their
affairs
appropriately.
This
is
also
important
as
the
same
criteria
govern
an
exemption
from
seizure.
Furthermore,
it
would
be
dangerous
to
balance
connecting
factors
in
an
abstract
manner,
divorced
from
the
purpose
of
the
exemption
under
the
Indian
Act.
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.
However,
an
overly
rigid
test
which
identified
one
or
two
factors
as
having
controlling
force
has
its
own
potential
pitfalls.
Such
a
test
would
be
open
to
manipulation
and
abuse,
and
in
focusing
on
too
few
factors
could
miss
the
purposes
of
the
exemption
in
the
Indian
Act
as
easily
as
a
test
which
indiscriminately
focuses
on
too
many.
The
approach
which
best
reflects
these
concerns
is
one
which
analyzes
the
matter
in
terms
of
categories
of
property
and
types
of
taxation.
For
instance,
connecting
factors
may
have
different
relevance
with
regard
to
unemployment
insurance
benefits
than
in
respect
of
employment
income,
or
pension
benefits.
The
first
step
is
to
identify
the
various
connecting
factors
which
are
potentially
relevant.
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.
This
approach
preserves
the
flexibility
of
the
case-by-case
approach,
but
within
a
framework
which
properly
identifies
the
weight
which
is
to
be
placed
on
various
connecting
factors.
Of
course,
the
weight
to
be
given
various
connecting
factors
cannot
be
determined
precisely.
However,
this
approach
has
the
advantage
that
it
preserves
the
ability
to
deal
appropriately
with
future
cases
which
present
considerations
not
previously
apparent.
A—The
Test
for
the
Situs
of
the
Unemployment
Insurance
Benefits
Unemployment
insurance
benefits
are
income
replacement
insurance,
paid
when
a
person
is
out
of
work
under
certain
qualifying
conditions.
While
one
often
refers
to
unemployment
insurance
"benefits",
the
scheme
is
based
on
employer
and
employee
premiums.
These
premiums
are
themselves
taxdeductible
for
both
the
employer
and
employee.
There
are
a
number
of
potentially
relevant
connecting
factors
in
determining
the
location
of
the
receipt
of
unemployment
insurance
benefits.
The
following
have
been
suggested:
the
residence
of
the
debtor,
the
residence
of
the
person
receiving
the
benefits,
the
place
the
benefits
are
paid,
and
the
location
of
the
employment
income
which
gave
rise
to
the
qualification
of
the
benefits.
One's
attention
is
naturally
first
drawn
to
the
traditional
test,
that
of
the
residence
of
the
debtor.
The
debtor
in
this
case
is
the
federal
Crown,
through
the
Canada
Employment
and
Immigration
Commission.
The
Commission
argues
that
the
residence
of
the
debtor
in
this
case
is
Ottawa,
referring
to
section
11
of
the
Employment
and
Immigration
Department
and
Commission
Act,
S.C.
1976-77,
c.
54
(now
R.S.C.,
1985,
c.
E-5,
s.
17),
which
mandates
that
the
head
office
of
the
Commission
be
located
in
the
national
capital
region.
There
are,
however,
conceptual
difficulties
in
establishing
the
situs
of
a
Crown
agency
in
any
particular
place
within
Canada.
For
most
purposes,
it
is
unnecessary
to
establish
the
situs
of
the
Crown.
The
conflict
of
laws
is
interested
in
situs
to
determine
jurisdictional
and
choice
of
law
questions.
With
regard
to
the
Crown,
no
such
questions
arise,
since
the
Crown
is
present
throughout
Canada
and
may
be
sued
anywhere
in
Canada.
Unemployment
insurance
benefits
are
also
available
anywhere
in
Canada,
to
any
Canadian
who
qualifies
for
them.
Therefore,
the
purposes
behind
fixing
the
situs
of
an
ordinary
person
do
not
apply
to
the
Crown,
and
in
particular
do
not
apply
to
the
Canada
Employment
and
Immigration
Commission
in
respect
of
the
receipt
of
unemployment
insurance
benefits.
This
does
not
necessarily
mean
that
the
physical
location
of
the
Crown
is
irrelevant
to
the
purposes
underlying
the
exemption
from
taxation
provided
by
the
Indian
Act.
However,
it
does
suggest
that
the
significance
of
the
Crown
being
the
source
of
the
payments
at
issue
in
this
case
may
lie
more
in
the
special
nature
of
the
public
policy
behind
the
payments,
rather
than
the
Crown's
situs,
assuming
it
can
be
fixed.
Therefore,
the
residence
of
the
debtor
is
a
connecting
factor
of
limited
weight
in
the
context
of
unemployment
insurance
benefits.
For
similar
reasons,
the
place
where
the
benefits
are
paid
is
of
limited
importance
in
this
context.
This
leaves
two
factors
to
be
considered:
the
residence
of
the
recipient
of
the
benefits,
and
the
location
of
the
employment
income
which
was
the
basis
of
the
qualification
for
the
benefits.
In
order
to
assess
the
importance
of
the
second
factor,
the
location
of
the
qualifying
employment,
a
further
analysis
of
the
nature
of
unemployment
benefits
and
their
taxation
is
required.
In
Tétreault-Gadoury
v.
Canada
(Employment
and
Immigration
Commission),
[1991]
2
S.C.R.
22,
at
page
41,
this
Court
quoted
from
the
judgment
of
Lacombe,
J.
in
that
case
to
the
effect
that
the
purpose
of
the
Unemployment
Insurance
Act,
1971
was
“to
create
a
social
insurance
plan
to
compensate
unemployed
workers
for
loss
of
income
from
their
employment
and
to
provide
them
with
economic
and
social
security
for
a
time,
thus
assisting
them
in
returning
to
the
labour
market.”
It
is
apparent
from
this
that
the
purpose
behind
unemployment
benefits
looks
to
the
past,
present
and
future.
Benefits
are
contingent
on
qualifying
employment
in
the
past.
They
are
meant
to
provide
income
and
security
for
the
present,
in
lieu
of
the
employment
income
which
has
been
lost.
However,
the
benefits
also
look
to
the
future,
enabling
the
recipient
to
find
a
new
job
without
hardship
and
with
a
sense
of
security.
There
is,
therefore,
a
connection
between
the
receipt
of
benefits
and
the
place
where
the
employment
which
gave
rise
to
those
benefits
was
located.
However,
it
cannot
be
said
that
unemployment
insurance
benefits
look
exclusively
to
the
past.
They
are
not
a
form
of
delayed
remuneration.
The
general
scheme
of
taxation
with
regard
to
unemployment
insurance
premiums
and
benefits
bears
further
examination
in
this
regard.
As
noted
above,
unemployment
insurance
is
premium
based.
The
intent
of
the
scheme
is
that
the
premiums
received
will,
overall,
largely
equal
the
benefits
paid
out.
This
is
not
to
say
that
the
scheme
is
completely
self-financing.
However,
it
is
more
accurate
to
characterize
an
unemployment
insurance
benefit
as
something
paid
for
through
the
premiums
of
employed
persons
than
to
characterize
it
as
a
benefit
granted
by
the
government
out
of
its
general
revenues.
This
becomes
important
in
analyzing
the
tax
implications
of
the
unemployment
insurance
benefit
scheme.
The
treatment
of
premiums
and
benefits
for
the
purposes
of
taxation
is
that
the
premiums
paid
by
employed
persons
are
deductible
from
their
taxable
income,
whereas
the
benefits
paid
to
unemployed
persons
must
be
included
in
their
taxable
income.
By
allowing
premiums
to
be
deducted
from
taxable
income,
and
mandating
that
benefits
be
included
in
taxable
income,
the
effect
of
the
unemployment
insurance
scheme
on
general
tax
revenue
is
minimized.
The
tax
revenues
lost
by
the
government
due
to
the
deductibility
of
premiums
are
offset
by
the
revenues
gained
by
the
taxation
of
the
benefits.
This
is
not
to
say
that
the
unemployment
insurance
scheme
has
no
effect
on
taxation
revenues,
since
premiums
may
not
precisely
equal
benefits
overall,
and
the
effect
of
different
rates
of
taxation
cannot
be
ignored.
However,
it
is
clear
that
the
scheme
established
by
Parliament
was
intended,
in
principle,
to
minimize
the
tax
implications
of
unemployment
insurance.
Since
unemployment
insurance
benefits
are
based
on
premiums
arising
out
of
previous
employment,
not
general
tax
revenue,
the
connection
between
the
previous
employment
and
the
benefits
is
a
strong
one.
The
manner
in
which
unemployment
insurance
benefits
are
treated
for
the
purposes
of
taxation
further
strengthens
this
connection,
as
there
is
a
symmetry
of
treatment
in
the
taxation
of
premiums
and
benefits,
since
premiums
are
tax-deductible
and
benefits
are
taxed,
thereby
minimizing
the
influence
of
the
unemployment
insurance
scheme
on
general
tax
revenues.
The
location
of
the
qualifying
employment
income
is
therefore
an
important
factor
in
establishing
whether
the
taxation
of
subsequent
benefits
would
erode
the
entitlements
of
an
Indian
qua
Indian
on
the
reserve.
For
in
the
case
of
an
Indian
whose
qualifying
employment
income
was
on
the
reserve,
the
symmetry
in
the
tax
implications
of
premiums
and
benefits
breaks
down.
For
such
an
Indian,
the
original
employment
income
was
tax-exempt.
The
taxation
paid
on
the
subsequent
benefits
therefore
does
more
than
merely
offset
the
tax
saved
by
virtue
of
the
premiums.
Instead,
it
is
an
erosion
of
the
entitlements
created
by
the
Indian's
employment
on
the
reserve.
Furthermore,
since
the
duration
and
extent
of
the
benefits
are
tied
to
the
terms
of
employment
during
a
specified
period,
it
is
the
location
of
the
qualifying
employment
income
during
that
period
that
is
relevant.
Having
regard
to
the
importance
of
the
location
of
the
qualifying
employment
income
as
a
factor
in
identifying
the
location
of
the
unemployment
insurance
benefits,
the
remaining
factor
of
the
residence
of
the
recipient
of
the
benefits
at
the
time
of
their
receipt
is
only
potentially
significant
if
it
points
to
a
location
different
from
that
of
the
qualifying
employment.
B—The
Situs
of
the
Appellant's
Unemployment
Insurance
Benefits
In
the
present
case,
the
residence
of
the
appellant
when
he
received
the
benefits
was
on
the
reserve.
It
has
been
assumed
by
the
parties
that
the
previous
employment
of
the
appellant
which
gave
rise
to
the
qualification
for
unemployment
insurance
benefits
was
also
located
on
the
reserve,
since
the
two
employers
in
question
were
located
on
the
reserve.
This
question
must
be
re-examined
in
light
of
our
determination
that
this
conclusion
cannot
safely
be
drawn
from
the
principles
of
the
conflict
of
laws.
However,
this
would
not
be
an
appropriate
case
in
which
to
develop
a
test
for
the
situs
of
the
receipt
of
employment
income.
All
the
potential
connecting
factors
with
respect
to
the
qualifying
employment
of
the
appellant
point
to
the
reserve.
The
employer
was
located
on
the
reserve,
the
work
was
performed
on
the
reserve,
the
appellant
resided
on
the
reserve,
and
he
was
paid
on
the
reserve.
A
test
for
the
situs
of
employment
income
could
therefore
only
be
developed
in
an
abstract
vacuum
in
this
case,
since
there
is
no
real
controversy
of
relevant
factors
pulling
in
opposite
directions.
The
same
would
be
true
of
any
consideration
of
the
weight,
if
any,
to
be
given
to
the
residence
of
the
appellant
upon
receipt
of
the
benefits
as
this
was
also
on
the
reserve.
Furthermore,
as
can
be
seen
from
our
discussion
of
the
test
for
the
situs
of
unemployment
insurance
benefits,
the
creation
of
a
test
for
the
location
of
intangible
property
under
the
Indian
Act
is
a
complex
endeavour.
In
the
context
of
unemployment
insurance
we
were
able
to
focus
on
certain
features
of
the
scheme
and
its
taxation
implications
in
order
to
establish
one
factor
as
having
particular
importance.
It
is
not
clear
whether
this
would
be
possible
in
the
context
of
employment
income,
or
what
features
of
employment
income
and
its
taxation
should
be
examined
to
that
end.
Therefore,
for
the
purposes
of
the
present
appeal,
we
merely
note
that
the
employment
of
the
appellant
by
which
he
qualified
for
unemployment
insurance
benefits
was
clearly
located
on
the
reserve,
no
matter
what
the
proper
test
for
the
situs
of
employment
income
is
determined
to
be.
Because
the
qualifying
employment
was
located
on
the
reserve,
so
too
were
the
benefits
subsequently
received.
The
question
of
the
relevance
of
the
residence
of
the
recipient
of
the
benefits
at
the
time
of
receipt
does
not
arise
in
this
case
since
it
was
also
on
the
reserve.
C—The
Situs
of
the
Enhanced
Unemployment
Insurance
Benefits
According
to
subsection
38(3)
of
the
Unemployment
Insurance
Act,
1971
enhanced
benefits
are
to
be
considered
unemployment
insurance
benefits
for
the
purpose
of
the
Income
Tax
Act:
38.
(3)
For
the
purposes
of
this
Part,
a
week
during
which
the
claimant
is
employed
on
a
job
creation
project
and
is
paid
benefit
under
subsection
(2)
shall
be
deemed
to
be
a
week
of
unemployment
and
for
the
purposes
of
this
Part,
Part
IV,
the
Income
Tax
Act
and
the
Canada
Pension
Plan,
any
benefit
paid
to
a
claimant
under
subsection
(2)
shall
be
deemed
not
to
be
remuneration
from
employment.
This
is
also
the
manner
in
which
enhanced
benefits
should
be
characterized
for
the
purpose
of
the
exemption
from
taxation
in
the
Indian
Act,
since
this
only
reflects
the
reality
of
the
situation.
The
appellant
only
qualified
for
participation
in
the
job
creation
program
because
he
had
been
receiving
regular
unemployment
insurance
benefits,
that
is,
because
of
his
prior
employment
that
had
ceased.
The
benefits
which
he
continued
to
receive
would
not
have
ceased
had
he
quit
his
employment
with
the
program.
The
program
itself
was
located
on
the
reserve.
Therefore,
the
conclusion
that
the
unemployment
insurance
benefits
received
by
the
appellant
were
situated
on
the
reserve
applies
to
both
the
regular
and
enhanced
benefits.
For
purposes
other
than
the
application
of
the
Income
Tax
Act,
enhanced
unemployment
insurance
benefits
may
be
characterized
in
a
different
manner
(see
YMHA
Jewish
Community
Centre
of
Winnipeg
Inc.
v.
Brown,
[1989]
1
S.C.R.
1532,
59
D.L.R.
(4th)
694).
Also,
the
portion
of
the
unemployed
person's
income
which
is
paid
to
them
directly
by
the
employer
in
the
job
creation
program
is
not
itself
an
unemployment
insurance
benefit,
and
should
be
characterized
simply
as
employment
income.
The
Federal
Court
dealt
with
the
further
question
whether
the
agreement
giving
rise
to
the
enhanced
unemployment
insurance
benefits
was
the
type
of
agreement
referred
to
in
section
90
of
the
Indian
Act.
In
light
of
our
conclusion
that
the
enhanced
unemployment
benefits
were
located
on
the
reserve
in
any
event,
it
is
not
necessary
to
discuss
this
issue.
V—Conclusion
Determining
the
situs
of
intangible
personal
property
requires
a
court
to
evaluate
various
connecting
factors
which
tie
the
property
to
one
location
or
another.
In
the
context
of
the
exemption
from
taxation
in
the
Indian
Act,
there
are
three
important
considerations:
the
purpose
of
the
exemption;
the
character
of
the
property
in
question;
and
the
incidence
of
taxation
upon
that
property.
Given
the
purpose
of
the
exemption,
the
ultimate
question
is
to
what
extent
each
factor
is
relevant
in
determining
whether
to
tax
the
particular
kind
of
property
in
a
particular
manner
would
erode
the
entitlement
of
an
Indian
qua
Indian
to
personal
property
on
the
reserve.
With
regard
to
the
unemployment
insurance
benefits
received
by
the
appellant,
a
particularly
important
factor
is
the
location
of
the
employment
which
gave
rise
to
the
qualification
for
the
benefits.
In
this
case,
the
location
of
the
qualifying
employment
was
on
the
reserve,
therefore
the
benefits
received
by
the
appellant
were
also
located
on
the
reserve.
The
question
of
the
relevance
of
the
residence
of
the
recipient
of
the
benefits
at
the
time
of
receipt
does
not
arise
in
this
case.
The
appeal
is
therefore
allowed
and
the
cross-appeal
dismissed,
with
costs
throughout.
The
matter
is
referred
back
to
the
Minister
of
National
Revenue
to
be
reassessed
on
the
basis
that
all
of
the
unemployment
benefits
in
question
are
exempt
from
taxation.
Appeal
allowed.