Citation: 2010 TCC 98
Date: 20100315
Docket: 2006-1838(GST)I
BETWEEN:
VEITCH HOLDINGS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
[1]
This is an appeal from
an assessment by the Minister of National Revenue (the “Minister”) of Veitch
Holdings Ltd. (the “Appellant”) for goods and services tax (“GST”), interest
and penalties owing for the period from February 1, 2002 to
January 31, 2004 (the “relevant period”). The GST was with respect to sales
made to Indians, as defined in the Indian Act. The Appellant
operated a Home Hardware store (the “Hardware Store”) in The Pas, Manitoba. It did not collect GST on sales made to Indians
living on The Pas Indian Reserve on the grounds that those sales were exempt
from tax under section 87 of the Indian Act. The Minister argues that
the sales do not qualify for exemption under section 87 because they occurred
at the Hardware Store, which is not located on a reserve.
[2]
The Appellant’s case is
largely based on the title information pertaining to the property in the Manitoba land registry system. The land is therein described as
being in “Block A The Pas Indian Reserve”. This reference on title was added by
officials of the federal government when the land was under federal
jurisdiction. The description was carried over to the Manitoba title system
when the area of The Pas was added to the territory of the province of Manitoba. Two issues are in dispute in this appeal:
1. Is
the Hardware Store located on a reserve within the meaning of the Indian Act
such that sales made to Indians are exempt from tax under section 87 of the Indian
Act?
2. In
the negative, does the legal principle of estoppel “in pais” preclude the
Respondent from assessing the Appellant on the grounds that it made a
representation of fact to the Appellant that the Hardware Store was located on
land forming part of a reserve?
Factual Background
[3]
William Veitch, the
sole shareholder of the Appellant, testified that he purchased the hardware
business from its prior owner in 1998. The building and land were leased by the
Appellant from their then owner, Home Hardware Stores Limited (“Home
Hardware”). Recently, the Appellant purchased the land and building from its
lessor. Mr. Veitch explained that the prior owner of the Hardware Store
had agreed to stay on for a transition period lasting six months. During that
period, the prior owner instructed Mr. Veitch regarding the procedure to
follow for sales to Indians. In brief, a separate electronic file folder is
opened for each purchaser who is a status Indian. The sale is made tax-free if
the purchaser provides proof that he is a status Indian living on a reserve.
Mr. Veitch explained that this practice is followed by all businesses located
in the town of The Pas.
[4]
Following his
testimony, I was left with the impression that Mr. Veitch believes that
members of The Pas Band would boycott the Appellant’s hardware store if the
Appellant chose to collect GST from them when other merchants in the town do
not collect the tax.
[5]
The witness identified
Exhibits A-1 to A-7 as extracts from the Manitoba land title data storage system. These documents were introduced into
evidence by the Appellant to show that the land is described as being “at The
Pas and being Lot 1, Plan 29595 PLTO in Block A The Pas Indian Reserve”
(“Block A”). Home Hardware is described as the registered owner of the land.
The witness said that he was aware of the fact that the title deed referred to
the land as being part of The Pas Indian Reserve when he chose to adopt the
prior owner’s practice of not collecting GST on sales made to members of The
Pas Band. On cross-examination, Mr. Veitch admitted that he knew that the
legal owner of the land was not the federal Crown in trust, which, generally
speaking, it would have been if the Hardware Store was situated on land forming
part of a reserve.
[6]
The Appellant called
James Morrison as an expert witness to testify concerning the history of the
creation of the Pas Reserve and the surrender of Block A. Mr. Morrison’s
report, produced as Exhibit A-9, describes the circumstances surrounding the
1906 surrender by The Pas Band of Indians (now the Opaskwayak Cree Nation) and
hereinafter referred to throughout as (“The Pas Band”) of land in a portion of
their reserve (“The Pas Reserve”) known as Block A. The Pas Reserve was
established following the adhesion by The Pas Band to Treaty No. 5 in 1876. The
Pas Band was unable to select its reserve in one contiguous tract. Block A
is a parcel of approximately 1,500 acres located on the southeast side of the
junction of the Saskatchewan and Pasquia
Rivers. This parcel of land was chosen because it was the most suitable for a
town site for The Pas Band in the region of The Pas. At that time, many of the
members of the Pas Band had permanent homes in Block A.
[7]
In 1905, the Canadian
Northern Railway Company (now CN and hereinafter referred to as “CN”) informed
the Department of Indian Affairs that it wanted to extend passenger and freight
service to The Pas. CN notified the government that it wished to expropriate
land in Block A for a right of way and a railway station. The local Inspector
of Indian Agencies initially opposed the request. He recommended that CN should
locate its station on the north side of the river on land which was not part of
The Pas Reserve. Senior officials based in Ottawa
did not support this recommendation. Ultimately, the Inspector of Indian Agencies
recommended that the northern 500 acres of Block A be surrendered to the
federal government. Part of the surrendered land was purchased by CN and used
for the purposes noted above. The balance of the land was sold and the proceeds
were eventually distributed to members of The Pas Band or used for their
benefit.
[8]
No historical evidence
remains to explain why the local Inspector of Indian Agencies changed his mind
and recommended the surrender of 500 acres of Block A. I surmise that he
believed it would be unwise to have a railway station situated in the middle of
The Pas Reserve. The station brought a flood of new settlers to the area of The
Pas.
[9]
Mr. Morrison alleges
that there were irregularities with regard to the surrender of Block A. He
claims that Indian Affairs officials misled The Pas Band by claiming that the
surrender was urgent. The surrender took place in 1906 and passenger service to
The Pas commenced only in 1909. In addition, the first payment from the
proceeds of land sales was not made until more than two years after the
surrender took place.
[10]
Mr. Morrison points out
that the Justice of the Peace before whom was signed the affidavit certifying the
surrender was Mr. Gideon Halcrow, a local Hudson’s
Bay Company trader. Mr. Halcrow was granted a right of first purchase of a
parcel of land included in Block A. There is thus some question as to whether
Mr. Halcrow was qualified to act with respect to the surrender because of the
appearance of a conflict of interest. In addition, Mr. Morrison testified that
the affidavit accompanying the surrender document specifies that a majority of
the male members of The Pas Band approved the surrender (a requirement imposed
by law). However there is no surviving voters list showing the names of the
male members who voted in favour of the surrender, making it impossible to
verify whether this requirement was met.
[11]
Mr. Dewey Hoplock,
a land surveyor, appearing for the Respondent, testified that the words “Block
A The Pas Indian Reserve” appearing on the title certificate are a historical
reference to the first survey that was conducted to establish the original
boundaries of The Pas Reserve. According to this witness, it is common practice
in the Manitoba title registry system to refer to the
first official survey of the property to enable surveyors to understand how the
property was first subdivided or laid out. The description in question does not
refer to legal ownership, as the title certificate specifies the current owner
of the property.
[12]
Eric Angel was
qualified as an expert on aboriginal history and culture. He provided on behalf
of the Respondent an opinion on the circumstances surrounding the 1906
surrender. Mr. Angel disagrees with Mr. Morrison’s view that The Pas
Band was pressured into endorsing the land surrender. Mr. Angel characterizes
Mr. Morrison’s opinion as speculative because there is no evidence in the
historical records to support that view. Mr. Angel suggests that The Pas Band
did want to surrender the land because the historical records show that the band
members were interested in the question of the quantum and the timing of the
distribution of the proceeds of the land sales. This shows that they were
active participants in the surrender. The only dispute with Crown officials was
over the mechanics of the distribution of the proceeds of the land sales.
Written correspondence referred to in Mr. Angel’s report confirms this
point of view, as does the later amendment to the terms of surrender. The
amendment raised the percentage of the proceeds of land sales to be distributed
to members of The Pas Band from a minimum of 10% to 25%.
Analysis
[13]
Subsection 221(1) of
the Excise Tax Act reads as follows:
Every person who makes a taxable supply
shall, as agent of Her Majesty in right of Canada, collect the tax under Division II payable by the recipient in
respect of the supply.
[14]
Section 87 of the Indian
Act provides that the personal property of an Indian or a band located on a
reserve is exempt from taxation. For a sales tax, such as the GST, the case law
has established a “point of sale” test to determine whether retail sales are
eligible for exemption under section 87. Under that test, goods purchased
off-reserve are subject to tax, while goods purchased on-reserve are tax
exempt. The parties do not dispute this interpretation or application of the
rule in the case at bar. The Appellant is challenging the assessment on the
grounds that the certificate of title establishes that the Hardware Store is
located on a reserve, or alternatively, that the Crown is estopped from
suggesting otherwise because the notation to that effect on title originates
from an action of the federal Crown. The Appellant argues that it would be
inequitable for the Crown to maintain its assessment because the Crown made representations
of fact which misled the Appellant into believing that sales made to
individuals of The Pas Band were exempt from GST.
Is the Hardware Store located on a reserve?
[15]
The testimony of the
land surveyor establishes that the reference to The Pas Indian Reserve is a
reference to the first land survey that fixed the boundaries of the reserve. It
is not meant to suggest that the land remains part of The Pas Indian Reserve. On
this point, I note that the title certificate clearly identifies Home Hardware
as the owner of the property. Legal title to the land must be vested in the federal
Crown in order for the land to be part of a reserve. In addition, the land must
be set aside for the communal benefit of a band. The Indian Act makes
this clear by defining a reserve as, “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”.
The Appellant takes issue with this on the grounds that section 36 of the Indian
Act allows for land not vested in the Crown to be considered as “reserve”
land for the purposes of that statute. Section 36 reads as follows:
36. Where lands have been set apart for the
use and benefit of a band and legal title thereto is not vested in Her Majesty,
this Act applies as though the lands were a reserve within the meaning of this
Act.
[16]
The Appellant cites the
cases of A.G. of
Canada v. Canadian Pacific Ltd. (2002), 217 D.L.R. (4th) 83 (B.C.C.A.) and Osoyoos Indian Band v.
Town of Oliver et al. (2001), 206 D.L.R. (4th) 385 (S.C.C.) as
authority for the proposition that land need not be vested in the Crown to be considered
as reserve land. The first case deals with land expropriated by Canadian
Pacific for a railway right of way. Under the then applicable legislation a railway
undertaking’s power of expropriation was limited to property that was necessary
for the operation of the railway. If reserve land so expropriated is no longer
needed for railway purposes, it can revert to reserve status. The second case
deals with local government authorities’ powers of expropriation. Their powers have
been interpreted to be limited in a similar way. The facts of these cases are
very different from the facts in the case at bar. In the present case, the evidence
shows that Home Hardware was the owner of the land during the relevant period
and that the Appellant operated the Hardware Store for its benefit.
[17]
What the case law does
establish as regards section 36 is that it is essential for the Crown to
declare, either implicitly or explicitly, that the land was set aside for the
benefit and use of Indians. This point is illustrated in the Musqueam case. That
is a case in which, the Musqueam Indian Band unilaterally declared certain land
owned by Musqueam Holdings to be reserve land. The corporation argued on that
basis that the land was exempt from tax pursuant to section 87 of the Indian
Act. The Court of Appeal in that case ruled that, in order for the land to
be considered reserve land under section 36, the Crown must have declared it to
have been set apart for the use and benefit of band members. If the Crown has
failed to do so, section 36 cannot be invoked to claim exempt tax status under
section 87.
[18]
From the cases
considered above it can be seen that section 36 operates if land that was part
of a reserve was expropriated for some limited purpose and that purpose has
ended, or if the federal Crown has declared land to be set apart for the
use and benefit of a band and for whatever reason title to that land is not
specifically vested in the Crown.
[19]
The land on which the Hardware
Store is situated has not been set apart for the use and benefit of The Pas Band,
as it was held in fee simple by Home Hardware during the relevant period. The
certificate of title establishes this fact. Today, the Appellant is the owner in
fee simple of the property. The Hardware Store is operated exclusively for the
economic benefit of the Appellant. The evidence shows that members of The Pas
Band purchase goods at the Hardware Store no differently than other Canadians
living in The Pas. The Hardware Store has not been set aside for the communal
benefit of The Pas Band.
[20]
The Appellant also
argues that Section 58 of Manitoba’s The Real Property Act, C.C.S.M. c.
R30, requires the federal Crown to respect the land’s designation as “Block A
The Pas Indian Reserve” on the certificate of title. Section 58 reads as
follows:
Restrictions on certificate
58(1) The land, mentioned in a certificate of
title, shall, by implication and without special mention in the certificate,
unless the contrary be expressly declared, be deemed to be subject to
(a) any subsisting reservation contained in the original grant of the
land from the Crown.
[21]
This provision applies
to certificates of title that are part of a provincial property registry
system. Reserve land is defined under federal law. It would follow that any
reference, in a provincial certificate of title, to land being reserve land, such
as is found here, has no effect on the land’s status.
[22]
The Appellant also
suggests that the 1906 surrender of the land at issue by The Pas Band was
invalid (see paragraph 10 of these reasons). The members of The Pas Band only
ever took issue with the timing and quantum of the distribution of the proceeds
from the sale of the land surrendered. Even if the surrender was found to be
invalid, which I do not find here, the transaction would at best be voidable, and
that would have no impact on whether or not the land was reserve land during
the taxation years under appeal. The transaction would not be void ab initio
because that would have a detrimental impact on the interests of innocent
third parties who subsequently purchased the land in good faith (see Chippewas
of Sarnia Band v. Attorney General of Canada et al. (2000), 51 O.R. (3d) 641 (C.A.), at paragraph
292).
Does estoppel apply?
[23]
The Appellant argues
that the Minister is estopped from assessing GST against the Appellant because
the federal Crown failed to change the misleading reference to The Pas Reserve
on title between 1906 and 1912 when the land was part of the Northwest Territories and subject to exclusive federal
administration. This error on title was carried over into the provincial title registry
system because the federal Crown did not take action to correct the title
before the land became part of the province of Manitoba. According to the Appellant, the actions or
conduct of the federal Crown constitute a misleading and erroneous
representation of fact relied on by the Appellant in deciding not to collect GST
on the sales at issue in this case.
[24]
The leading case on estoppel by representation is the Supreme Court of
Canada’s decision in Canadian Superior Oil v. Hambly, [1970] S.C.R. 932,
in which Martland J. summarized the essential elements of estoppel by
representation as follows at pages 939 and 940:
The essential factors giving rise to an estoppel are I think:
(1) A representation or conduct amounting to a representation
intended to induce a course of conduct on the part of the person to whom the
representation is made.
(2) An act or omission resulting from the representation,
whether actual or by conduct, by the person to whom the representation is made.
(3) Detriment to such person as a consequence of the act or
omission.
[25]
In the Tax Court case of Alameda Holdings Inc. v. Canada,
[1999] T.C.J. No. 839 (QL), Judge Dussault discussed the “intention”
element of the doctrine of estoppel by representation as follows:
74 As may be seen, the
intention to induce a course of conduct constitutes an essential element of the
doctrine of “estoppel by representation”. On this point, in The Law Relating to
Estoppel by Representation, 3rd ed. (London: Butterworth, 1977), Bower and
Turner emphasize the essential nature of this factor as follows, at page 93:
It is clear that for the purposes of estoppel, no less than
for those of an action for misrepresentation, inducement in fact is established
by proof that the representation was made both with the object, and with the
result, of inducing the representee to alter his position. Neither element
suffices without the other. To prove the representor’s intention to produce the
effect comes to nothing, unless the effect itself be proved; and it is equally
idle to establish the result, unless it be also shown that the representor,
actually or presumptively, intended to bring it about.
[Emphasis
added.]
[26]
In Alameda Holdings, intent was not
proved, or alleged for that matter, so the argument of estoppel by
representation failed.
[27]
In Goldstein v. Canada, [1995] T.C.J. No. 170 (QL), [1995] 2 C.T.C. 2036 at
paragraph 23 (QL), Judge Bowman (as he then was) discusses estoppel in pais:
It is sometimes said that estoppel does not lie against the
Crown. The statement is not accurate and seems to stem from a misapplication of
the term estoppel. The principle of estoppel binds the Crown, as do other
principles of law. Estoppel in pais, as it applies to the Crown,
involves representations of fact made by officials of the Crown an relied and
acted on by the subject to his or her detriment. The doctrine has no application
where a particular interpretation of a statute has been communicated to a
subject by an official of the government, relied upon by that subject to his or
her detriment and then withdrawn or changed by the government. In such a case a
taxpayer sometimes seeks to invoke the doctrine of estoppel. It is
inappropriate to do so not because such representations give rise to an
estoppel that does not bind the Crown, but rather, because no estoppel can
arise where such representations are not in accordance with the law. Although
estoppel is now a principle of substantive law it had its origins in the law of
evidence and as such relates to representations of fact. It has no role to play
where questions of interpretation of the law are involved, because estoppels
cannot override the law.
[28]
In my opinion, the
evidence presented in this case does not favour the Appellant’s estoppel
argument. The description on title that is alleged to be the proof of the Respondent’s
intention does not identify the federal Crown as the owner of the land in trust
for The Pas Band. The reference on title is simply a historical reference to
the first survey conducted for the purpose of establishing the reserve. The
title certificate clearly shows Home Hardware as the owner of the land. Moreover,
Mr. Veitch, the sole shareholder of the Appellant, acting on behalf of the
Appellant, entered into a lease transaction with Home Hardware for the rental
of the Hardware Store. The Appellant subsequently purchased the property from Home
Hardware. This behaviour does not seem consistent with the allegation that the
description on title caused Mr. Veitch to believe that the property was
situated on The Pas Reserve and that The Pas Band would have some claim to the
property. The case law establishes that there must be an element of intention
behind the misleading representation of fact that causes the other party to
alter his conduct in some way that causes him prejudice. In other words, there
must be evidence to show that the federal Crown wanted to represent the land as
being part of a reserve with the object and result of causing the Appellant not
to collect GST on sales made to Indians.
[29]
I do not believe that
the reference to The Pas Indian Reserve, which is meant to refer to the first
survey, shows such intent. Moreover, the title information relied on by the
Appellant originated from the province of Manitoba and not the federal Crown. Neither
party herein cited a case that dealt with a situation of alleged consecutive actions
of misleading representation of fact.
[30]
Mr. Veitch
testified as follows regarding the information he would gather for the
Appellant’s records to justify not collecting GST on sales made to Indians
living on reserves:
So the procedure was that when Native people
came to the store to purchase that we would first of all record their name,
their individual band number or Treaty number, whatever is the right term now,
their reserve address, and then we would process the sale and have them sign
the invoice that the information was -- that they were who they said they were.
[31]
What is odd in this
statement is Mr. Veitch’s reference to the practice of noting the
purchaser’s reserve address. That information would not be required if, as
alleged by Mr. Veitch, the reason the Appellant did not collect the GST
was its mistaken belief that the Hardware Store was located on a reserve. I
suspect that there may be some confusion on the part of Mr. Veitch and
other merchants of The Pas concerning the CRA’s administrative practice of
exempting sales if the goods are delivered by the merchant to Indians living on
a reserve. That administrative practice does not extend to goods delivered at
the store and brought on reserve by status Indians.
[32]
The Appellant’s
position also runs counter to the principle that there can be no estoppel with
respect to a point of law. The question whether the Hardware Store is part of a
reserve is a mixed question of law and fact. Save for the narrow exception set
out in section 36 of the Indian Act, the law requires that reserve land
be held in trust by the federal Crown for the benefit of a band. The law on
this point cannot be represented to be otherwise. The title certificate does
not say that the land was held in trust by the Crown or that it was set aside
for the benefit of The Pas Band. Mr. Veitch knew that the Hardware Store
was being operated exclusively for his own indirect economic benefit.
[33]
I have sympathy for the
hardship caused to the Appellant by the application of the point of sale test. According
to his evidence, if he charges the tax he runs the risk of losing 30% to 40% of
his annual sales. The CRA’s administrative policy of exempting sales of goods
delivered on reserve is not a practical solution in the present case. The
merchants of The Pas cannot afford to deliver goods to the reserve when small
purchases are involved. I suspect that their clients would also be unwilling to
wait to take possession of the goods in such circumstances. It appears to me
that the CRA administrative practice favours those merchants that are fortunate
enough to sell goods in larger quantities or at higher prices over those that
must rely on a greater volume of smaller sales for their revenue. The former
can offer delivery services while the latter cannot. I leave it to the CRA to
consider whether it is time for it to reconsider the scope of its
administrative policy or, for that matter, to recommend legislative action in
this regard.
[34]
For all of these
reasons, the appeal in this matter is dismissed.
Signed at Ottawa, Canada, this 15th day of March 2010.
"Robert J. Hogan"
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