Docket:
A-236-13
Citation:
2014 FCA 97
CORAM:
BLAIS
C.J.
SHARLOW
J.A.
STRATAS
J.A.
|
BETWEEN:
|
|
THE ESTATE OF CHARLES PILFOLD
|
|
Appellant
|
|
and
|
|
HER MAJESTY THE QUEEN
|
|
Respondent
|
REASONS
FOR JUDGMENT
SHARLOW J.A.
[1]
The late Charles Pilfold was an “Indian” as that
word is defined in the Indian Act, R.S.C. 1985, c. I-5. Mr. Pilfold
claimed that the income he derived from fishing for the years 2000 and 2002 was
exempt from tax by virtue of the combined operation of section 87 of the Indian
Act and paragraph 81(1)(a) of the Income Tax Act, R.S.C. 1985, c. 1
(5th Supp.). The Minister did not agree, and assessed Mr. Pilfold
accordingly. Mr. Pilfold appealed to the Tax Court of Canada. The appeal was
heard by Justice Campbell Miller and dismissed (2013 TCC 181). Mr. Pilfold’s
estate now appeals to this Court.
[2]
The estate of Mr. Pilfold is entitled to the exemption
claimed only if the income in issue was “property located on a reserve” within
the meaning of that phrase as used in section 87 of the Indian Act. In
that context, the location of income is determined by applying a judge-made
principle that has come to be known as the “connecting factors” test. Stated
simply, income is located on a reserve if the relevant facts disclose a
sufficient connection between the income and the reserve.
[3]
Justice Miller’s reasons include a lengthy
analysis of the case law through which the connecting factors test has been
developed, including Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, Williams
v. Canada, [1992] 1 S.C.R. 877, Bastien Estate v. Canada, 2011 SCC 38,
[2011] 2 S.C.R. 710, Dubé v. Canada, 2011 SCC 39, [2011] 2 S.C.R. 764, Canada
v. Robertson, 2012 FCA 94 and Ballantyne v. Canada, 2012 FCA 95. His
legal analysis is correct and complete. It is not argued for Mr. Pilfold that Justice
Miller misapprehended the relevant legal principles or the basic facts of the
case. Rather, the argument is that Justice Miller erred when he did not give determinative
weight to the fact that Mr. Pilfold’s income was received by him directly from
corporations that were located on a reserve.
[4]
The direct source of Mr. Pilfold’s income was a
group of corporations owned by Mr. Pilfold and his family. One or another of
the corporations owned the fishing boat and most of the fishing equipment and
actually carried on the fishing business, although Mr. Pilfold owned the
fishing licence. The corporations’ head offices were located in a house on the
Musqueam Reserve, all of its books and records were kept there, and certain
corporate decisions were made there. Mr. Pilfold was one of four owners of the
house (the others being his spouse, his son and his son’s wife), but Mr. Pilfold
lived in that house for only part of the year, dividing the rest of his time
between his homes in Prince Rupert, Palm Springs and Washington State.
[5]
Justice Miller considered whether the location
of the corporations on the Musqueam Reserve and the corporate decisions made
there would justify a conclusion that for the purposes of section 87 of the Indian
Act, Mr. Pilfold’s income from the corporations was property located on the
Musqueam Reserve. He concluded that it would not, as explained at paragraph 65
of his reasons:
My
interpretation of the Appellant's argument is that simply having the corporate
head office on-Reserve, regardless of the nature or location of the business,
is, since Dubé and Bastien,
sufficient to locate any business derived by these corporate entities
on-Reserve, and such situs flows through to an
individual Status Indian recipient of the fishing income, such as Charles
Pilfold. With respect, this would move the subtle shifts in the connecting
factors jurisprudence recommended by the Supreme Court of Canada to an
altogether different bright line test, akin to that of a permanent
establishment-like test. I do not read Dubé or Bastien as going that far.
[6]
In my view, Justice Miller made no error in
reaching this conclusion. I agree with him that the application of the connecting
factors test to income is a search for a substantive basis for connecting the
income to a reserve. That requires a complete consideration of all of the facts
relating to the income, which must include but cannot be limited to the formal legal
structure through which the income is received. A useful framework for the
application of the connecting factors test to income can be found in the recent
decision of this Court in Kelly v. Canada, 2013 FCA 171. In my view,
although Justice Miller did not have the benefit of Kelly, in substance
his analysis is consistent with that framework.
[7]
Justice Miller acknowledged that the location of
the corporate offices and their books and records was a factor that connected
Mr. Pilfold’s income to the reserve, as was the fact that some corporate decisions
were made there. But he found that those connections to be insufficient to
overcome the factors relating to the substantive aspects of the source of the
corporate income – the fishing business – which did not have a substantial
connection to the reserve.
[8]
Justice Miller found no substantial connection
between the operational aspects of the fishing business and any reserve. The
fishing boat and fishing equipment were kept off reserve. The extensive
preparations required each season occurred off reserve under Mr. Pilfold’s
direction as captain of the fishing boat. The fishing took place off reserve under
Mr. Pilfold’s direction. All sales were made by Mr. Pilfold to commercial buyers
off reserve. The only factual connections between the fishing operation and the
reserve were weak or insubstantial: some telephone calls were made from the
Musqueam home with respect to equipment repairs, and some trimmings from the roe
on kelp harvesting – a relatively small amount – were donated to First Nations.
[9]
I am unable to discern any error in Justice
Miller’s analysis, or in his conclusion that the income in issue was not
property of Mr. Pilfold located on a reserve. Accordingly, I would dismiss the
appeal with costs.
“K. Sharlow”
“I agree
Pierre Blais C.J.”
“I agree
David Stratas J.A.”
Email this Content