Date: 20000518
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
McDONALD J.A.
Docket: A-527-98
BETWEEN:
HARRY BELL
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-528-98
BETWEEN:
ROBERT WALKUS SENIOR
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-529-98
BETWEEN:
PATRICK CHARLIE
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-551-98
BETWEEN:
CORRINE WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-552-98
BETWEEN:
BRIAN WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-553-98
BETWEEN:
DOREEN WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-554-98
BETWEEN:
ROBERT CHARLIE
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-555-98
BETWEEN:
JOHNSON BELL
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-556-98
BETWEEN:
ALVIN WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-557-98
BETWEEN:
RAYMOND E. CLAIR
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-558-98
BETWEEN:
JOYE WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-559-98
BETWEEN:
HENRY WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-560-98
BETWEEN:
LLOYD WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-561-98
BETWEEN:
JAMES WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-562-98
BETWEEN:
CHANTAL CHARLIE
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, B.C., Wednesday, May 3, 2000
Judgment delivered at Ottawa, Ontario, Thursday, May 18, 2000
REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A.
CONCURRED IN BY: DESJARDINS J.A.
McDONALD J.A.
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
Are the 15 appellants entitled to claim for their income the benefit of the tax exemption found in paragraph 87(1)(b) of the Indian Act (Act), R.S.C. 1985, c. I-5? This is the issue raised in this appeal from a decision of Bowie J.T.C.C..
Paragraph 87(1)(b) of the Act must be read in conjunction with paragraph 81(1)(a) of the Income Tax Act, R.S.C. 1985, 5th Supplement. The two relevant provisions read as follows:
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.
87. (1) Nonobstant toute autre loi fédérale ou provinciale, mais sous réserve de l"article 83, les biens suivants sont exemptés de taxation:
a) le droit d"un Indien ou d"une bande sur une réserve ou des terres cédées;
b) les biens meubles d"un Indien ou d"une bande situés sur une réserve.
81. (1) Amounts not included in Income -
There shall not be included in computing the income of a taxpayer for a taxation year,
(a) statutory exemptions - an amount that is declared to be exempt from income tax by any other enactment of Parliament, 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;
Article 81: Sommes à exclure du revenu
(1) Ne sont pas inclus dans le calcul du revenu d"un contribuable pour une année d"imposition:
a) exemptions prévues par une autre loi - une somme exonérée de l"impôt sur le revenu par toute autre loi fédérale, autre qu"un montant reçu ou à recevoir par un particulier qui est exonéré en vertu d"une disposition d"une convention ou d"un accord fiscal conclu avec un autre pays et qui a force de loi au Canada;
The appellants also presented to us, on the morning of the hearing, a motion for an order authorizing them to file as part of the record in the appeal a number of exhibits attached to the affidavit of a Mr. Aaron Blake Evans. As a result, they also sought to be authorized to file an Amended Memorandum of Fact and Law. Needless to say, the respondent vigorously opposed the motion. The parties were heard and the decision of the Court on this issue was reserved. I will address that issue first. But before I do, a brief summary of the material facts and of the decision of the Tax Court judge is necessary to fully understand the motion presented by the appellants and their arguments on the merits of the appeal.
Facts and Procedure
All the appellants are status Indians within the definition of that term in section 2 of the Act. They are members of either the Gwa'Sala-Nakwaxda'xw or the Quatsino Band (Band), which is located on a reserve at Port Hardy (Reserve), in Vancouver Island.
The taxation years in question in this appeal vary from appellant to appellant, ranging from 1986 to 1989. Some appellants were employed for all four of those years while some were employed for only one, two or three of those years.
One of the appellants, James Walkus, was at all relevant times the president, sole shareholder and sole director of the James Walkus Fishing Co. Ltd. (Company), which employed the other appellants. His income derived both from his ownership interest in the Company and from his share of the catch of one of the Company"s fishing boats, the Pacific Joye , which he captained. Generally, the appellants" income consisted of their individual portions of a 7/11 share of the catch while the remaining 4/11 belonged to the Company.
During the years under appeal the Company had about 100 employees in total, between 12 and 18 of which were status Indians. Six of the appellants lived on the Reserve in Port Hardy, while the rest lived off the Reserve.
A few of the appellants were captains of the Company"s fishing boats, and most of them were deck hands. Working for the Company involved not only fishing at sea but also doing maintenance on the Company"s nets. The net maintenance work took place at a large building located off the Reserve but owned in conjunction with the three Indian bands located in Port Hardy.
The Company"s fleet docked in Port Hardy at a short distance from the Reserve, and close to the premises of Seafood Products Company (SPC), which was the firm to which almost all of the fleet's catch was sold. SPC not only purchased the catch, but in many ways it acted as an agent and a banker for the Company. When the boats returned to Port Hardy the catch was unloaded at SPC"s dock, where its employees calculated the catch value and then calculated the respective shares of the catch payable to the Company and to the crew members.
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. This change coincided with the decision of the Company, on the advice of its accountant, to set up an office on the Reserve. Prior to 1986 the Company had no permanent office of its own. James Walkus conducted the affairs of the Company from a variety of settings, including his homes, the Pacific Joye, and the offices of SPC. In 1985, the Company rented a room measuring 10 square feet in a building on the Reserve. James Walkus testified that the main reason for renting it was to secure a tax advantage for himself and the other status Indian employees: see Appeal Book, Vol. IV, p. 926. SPC continued to pay cheques directly to the non-status employees of the Company, but it aggregated the shares of the status employees and paid them in a lump sum to the Company. The Company then paid the status employees, issuing the cheques from the office on the Reserve. All the status employees, except for James Walkus and his wife, picked up their cheques at that office.
A few times a year the Company donated its crews and boats for a few days to the native food fishery, a non-commercial activity that took place while the season is closed to commercial fishing, on the basis that the catch would only be used by native people for food and ceremonial purposes. The Company was not compensated and the appellants received no payment for their participation in the food fishery.
The Minister assessed the 15 appellants as being ineligible for the tax exemption afforded to Indians in respect of property situated on a reserve. The kind of property at issue was the employment income (i.e., the share in the catch) of all the appellants and, for James Walkus, the ownership interest in the Company. The appellants appealed against the Minister"s assessment to the Tax Court of Canada. They further appealed to this Court against the decision of the Tax Court. By order of Stone J.A. rendered on November 24, 1998, their separate appeals were consolidated into one and were to be conducted as a single proceedings under Court File No. 527-98. It was also ordered that the style of cause of the consolidated proceedings consist of the style of cause in all the files.
The Decision of the Tax Court of Canada
The Tax Court judge held that the property of the appellants was not property situated on a reserve, in light of the "connecting factors" test. He found that the most important factors bearing upon the result in this case were the nature of the employment and the manner in which it is carried out. He ruled that there was no evidence that the fishing activity of the Company which gave rise to the appellants" income had any close connection with the Reserve, nor any evidence to show that the Company carried on its business in a way that is different from fishing companies owned and operated by non-Indian interests. The appellants represented only a small proportion of the work force of the Company. The Company's fishing activity, other than the food fishery, was simply a commercial activity: its catch entered directly into the mainstream of commerce.
He found as a fact that the Native food fishery was closely connected to the Reserve but that it was irrelevant to these appeals. It was clear from the evidence that none of the income to which these appeals relate was derived by the appellants or the Company from their food fishing activities.
The fact that the work was performed at a location away from the Reserve was not by itself determinative. Indeed, the work could only be done away from the Reserve, because that is where the fish were.
The residence of the appellants was not, in the Tax Court judge"s view, a factor to which great weight could be given. Most of the appellants did not live on the Reserve but near it. However, there was no rational reason to give a different tax treatment to those appellants who lived on the Reserve than to those who lived just blocks from them. And James Walkus and his wife who lived off the Reserve could not be said to be located there by an argument based on his considerable leadership and charitable activities on the Reserve.
The evidence concerning the residence of the employer was inconclusive, as management functions were carried out in a number of locations, and the few activities carried out in the Reserve office were mostly not of a managerial nature.
The fact that from 1986 onward the status employees picked up their cheques on the Reserve was one that did not have great significance. The place at which the person was paid could only be of use in the analysis to the extent that it was a factor which genuinely gave 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?". The answer to that question could hardly be different simply because the employee picked 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. The fact that the Reserve office was rented in order to secure a tax advantage tended to suggest that this factor should not be given great weight as a connecting factor.
The Minister therefore correctly assessed the appellants: the income they received from the Company in the years under appeal was not situated on the Reserve; and they were therefore not entitled to the benefit of the exempting provision in paragraph 87(1)(b) of the Act.
The Motion and the Background to its Presentation
On June 16, 1999, the Native Indian Brotherhood of British Columbia sought leave to intervene in this appeal and be permitted to file historical documents regarding an alleged connection between reserve allotments to coastal Indian Bands and the fishing activities of these Bands. The motion was dismissed by our colleague Décary J.A. on July 8, 1999.
In the fall, more precisely on November 9, 1999, the appellants, in their turn, brought a motion to be authorized to file documents regarding an alleged relationship between fishing and the appellants" Reserves. They relied upon Rule 351 of the Federal Court Fules, 1998 which govern the admissibility of new evidence on appeal or, alternatively, on the fact that the Court could take judicial notice of that evidence. Mr. Justice Isaac dismissed the appellants" motion on December 15, 1999, but without prejudice to their right to raise before us "the issue of whether the panel will take judicial notice of the exhibits mentioned in the affidavits filed in support" of the motion before him.
It is important to state that the denial of the appellants" motion by Mr. Justice Isaac entailed a refusal of an authorization to file, as requested:
| a) an affidavit of Mr. Aaron Blake Evans sworn on October 15, 1999; |
| b) an affidavit of James Walkus; and |
| c) an Amended Memorandum of Fact and Law. |
Decision on the Motion
The appellants submitted that the documents identified as Exhibits A to I attached to the affidavit of Mr. Evans are "state documents" that this Court must take judicial notice of by reason of section 40 of the Canada Evidence Act , R.S.C. 1985, c. C-5 and section 25 of the British Columbia Evidence Act, R.S., 1996, c. 124. The relevant portions read:
Provincial Laws of Evidence
40. In all proceedings over which Parliament has legislative authority, the laws of evidence in force in the province in which those proceedings are taken, including the laws of proof of service of any warrant, summons, subpoena or other document, subject to this Act and other Acts of Parliament, apply to those proceedings.
Lois provinciales concernant la preuve
40. Dans toutes les procédures qui relèvent de l"autorité législative du Parlement du Canada, les lois sur la preuve qui sont en vigueur dans la province où ces procédures sont exercées, y compris les lois relatives à la preuve de la signification d"un mandat, d"une sommation, d"une assignation ou d"une autre pièce s"appliquent à ces procédures, sauf la présente loi et les autres lois fédérales.
| Proof of state documents |
| 25. (1) In this section: |
| [...] |
| "state document" includes any Act or ordinance enacted or made or purporting to have been enacted or made by a legislature, and any order, regulation, notice, appointment, warrant, licence, certificate, letters patent, official record, rule of court or other instrument issued or made or purporting to have been issued or made under any Act or ordinance so enacted or made or purporting to have been enacted or made, and any official gazette, journal, proclamation, treaty or other public document or act of state issued or made or purporting to have been issued or made. |
| [...] |
| (4) The existence and the contents, in whole or in part, of a federal or provincial state document may be proved by producing |
| (a) a copy of |
| (i) the Canada Gazette, |
| (ii) the official gazette for a province, |
| (iii) a volume of the Acts of the Parliament of Canada, or |
| (iv) a volume of the Acts of the legislature of a province, |
| purporting to contain a copy of the state document or an extract from it or a notice of it, |
| (b) a copy of it or an extract from it purporting to be printed by the Queen"s Printer for Canada or for a province. |
| (c) a copy of it or an extract from it, whether printed or not, purporting to be |
| (i) certified as a true copy or extract by |
| (A) the minister, head, deputy minister or deputy head or a ministry or department of the government of Canada or of a province, or |
| (B) the custodian of the original document or of the public records from which the copy or extract purports to be made, or |
| (ii) an exemplification of the state document under the Great Seal of Canada or of a province, |
| and the federal or provincial state document proved must be judicially noticed. |
(Emphasis added)
They also argued that we are entitled to take judicial notice of these documents on the basis of common law principles.
The documents consist of excerpts of Government or Royal Commission reports, letters from the Superintendant General of Indian Affairs addressed to the Indian Reserve Commission Office in Victoria and one set of Minutes of Decisions taken at a meeting of Quatsino Indians in Quatsino Sound on July 15, 1889. Some of the Government and Royal Commission reports were published by the Queen"s Printer (Exhibits B and C), while others were not (Exhibit A and perhaps Exhibit D). As for the letters and the Minutes of the Quatsino meeting, they were handwritten and certified, in March 1988, to be true copies by a Commissionner, Robert James Turcotte, appointed by the Minister of Indian Affairs and Northern Development pursuant to paragraph 108(a ) of the Act for the purpose of taking oaths.
I am not sure that the appellants are correct in their submissions with respect to each and every document submitted because some relate to contentious issues while others arguably cannot qualify as state documents. However, in practice, it makes no difference whether we file them or not as additional evidence in this appeal.
As a matter of fact, the appellants asserted at the hearing, in response to a question from the Bench, that the documents were tendered for the purpose of establishing that the appellants were members of a coastal Indian Band which had a tradition of fishing. They conceded that the documents, however, could not establish that the appellants" Band had a tradition of commercial fishing and that, in any event, they were not filed for that purpose. To the extent that they are filed for the stated purpose, they are unnecessary because the Tax Court judge accepted as a fact that coastal Indians fished as a way of life. This is made clear in the following passage of his decision, at page 15, when he was dealing with the food fishing activity of the Company:
| The food fishery no doubt has its roots in the traditions of the coastal Indian people. |
What the judge experienced difficulties with, however, is the fact that there was no evidence of commercial fishing as a tradition.
In this respect, the appellants have contended that they were prevented at trial, by the Tax Court judge, from introducing this kind of evidence. Their contention is not supported by the record as excerpts of the transcript show not only that the learned judge was willing to accept evidence of the appellants" fishing traditions, but that he cautioned them that they would have to lay the proper foundation for this kind of evidence: see pages 22 to 39 of the respondent"s Motion Record where the judge said: "If you are going to ask the witness to tell us about hundreds and hundreds of years ago, you"re going to have to lay a proper foundation for it", to which counsel answered: "I won"t raise that issue any more. I think we"ve dealt with that issue, Your Honour".
I hasten to add that no request was made to the Tax Court judge to take judicial notice of historical facts or documents and that no attempt was made to file the documents that were presented to us.
The fact that the documents submitted to us are unnecessary and beside the point is sufficient to dispose of the motion. However, there is more. They are also unhelpful for the following reasons.
First, they do not assist in this case because the core issue is one of commercial fishing in which the appellants were involved and from which they obtained their income. As admitted by the appellants, they do not establish that their Band had a tradition of commercial fishing.
Second, the nature and contents of the documents require, in my view, testimonial evidence in order to enable the Court to safely interpret them and draw reasonable inferences. For example, Exhibit A consists, as already mentioned, of a map which appears to have been drawn, in 1916, by a Technical Officer to the Royal Commission on Indian Affairs for the Province of British Columbia. Without testimonial evidence to explain its accuracy, its context and its significance, it is difficult, if not impossible, to draw any valuable inference from it, let alone one with respect to the issue raised in the appeal. The same can be said of Exhibit B which refers to some recommendations which appeared to have been accepted by the Governor in Council in 1874. But there is no evidence that these recommendations were subsequently acted upon or implemented. The appellants pointed out that both Exhibits B and C had been referred to by the Supreme Court of Canada in the case of Jack et al. v. The Queen, [1980], 1 S.C.R. 293, at pages 302-303 and 307. However, these documents had been filed for the purpose of establishing the accused"s right to food fishing during a prohibited period and they were commented upon at trial by experts: see pages 305-308. The issue is different in the case at bar and, obviously, these Exhibits are of no help.
Third, the documents are of no assistance since it is not disputed that the commercial fishing of the appellants and the Company they worked for took place outside of the Reserve and we have no ways of determining, on the basis of these documents alone, whether the fishing grounds referred to in some of these documents are the location where the commercial fishing activity in issue was performed. In any event, even if it were the same location, this fact cannot alter the nature of the appellants" fishing which gave rise to their income.
For these reasons, I would dismiss the appellants" motion with costs.
Analysis of the Decision of the Tax Court
The appellants have raised seven grounds of appeal. They have submitted that the Tax Court judge erred in concluding that the fishing income was not property situated on the Reserve as a result of:
| 1) failing to recognize evidence which was before the Court that the fishing activities were traditional Native activities or that those activities had connections to the Reserve and the Native way of life; |
| 2) failing to recognize that the fishing activities themselves did benefit the Native Indians and their Native way of life; |
| 3) giving any weight at all to the fact that the fish caught by the Appellants were sold commercially; |
| 4) failing to give sufficient weight to the fact that although the fishing activities themselves can only take place off the Reserve, in these cases they did take place as close as reasonably possible to the Reserve; |
| 5) wrongly determining that to exempt the Appellants" employment income in these cases would simply give them an economic advantage over other employees of the Company; |
| 6) wrongly considering the purpose for which the Company"s business office was situated on the Reserve and failing to give sufficient weight to the fact that the Company"s business office was on the Reserve; and |
| 7) failing to give sufficient weight to the role James Walkus and the Company through carrying on the fishing activities played in providing leadership, training, employment, benefits and financial assistance to Native Indians. |
Most of the issues underlying these grounds of Appeal were dealt with thoughtfully by the Tax Court judge. He correctly identified the factors to be taken into account in this instance in determining the situs of personal property exempt from taxation pursuant to paragraph 87(1)(a) of the Act, to wit the nature of the employment, the residence of the appellants, the residence of the debtor, the place at which cheques were paid and the location where the employment duties were performed. I am satisfied that he correctly applied the "connecting factors" test developed by the Supreme Court of Canada in Williams v. The Queen, 92 DTC 6320.
As this Court said in Folster v. The Queen, 97 DTC 5315, at page 5323, in a context of employment income, the connecting factor that best indicates whether the personal property in question is within the commercial mainstream or not is the nature of the employment and the circumstances surrounding it. In other words, the character of this particular form of property cannot be appreciated for the purpose of the section 87 tax exemption "without reference to the circumstances in which it was earned", such as the residence of the taxpayer, the place where the work was done and the nature of the benefit to the Reserve: Ibid ., see also Recalma et al. v. The Queen, 98 DTC 6238, at page 6240, (F.C.A. per Linden J.A.). The Tax Court judge did precisely what these cases indicate should be done.
I see no merit in the appellants" submission that the judge erred in considering the fishing activity of the Company instead of considering the fishing activities of the appellants. In order to properly assess the nature of the appellants" employment, it was necessary to look at the nature of the work performed by the Company which employed them, especially as the appellants represented only a small proportion of the work force of the Company.
As I am in substantial agreement with the conclusions of the learned Tax Court judge, I do not intend to review each and every ground of appeal raised by the appellants. However, there are two issues that they raise which deserve comment: the benefit to the Native community as a connecting factor and the facts which form the substratum of some of the connecting factors invoked in the case at bar.
The Benefit to the Native Community and their Native Way of Life as a Connecting Factor
The appellants submit, as an additional connecting factor, the benefit to the Native community and life on a Reserve. As the argument goes, the appellants" ability to fish and support themselves and their families in an activity which is a traditional Native activity allowed for a continuation of the traditional Native way of life in today"s society. They find support for their submission in the following passage from our colleague Linden J.A. in Folster , at page 5323:
| In my view, when the personal property at issue is employment income, it makes sense to consider the main purpose, duties and functions of the underlying employment; specifically, with a view to determining whether that employment was aimed at providing benefits to Indians on reserves. |
(Emphasis added)
I want to emphasize at the outset that the benefit concept relied upon by the appellants is not an independent, free-standing connecting factor, but rather is a standard by which to evaluate the "nature of the employment" factor. In Folster , the appellant worked for a hospital which attended to the health needs of the Reserve community. It is clear in that case that the hospital provided services to the people of the Reserve and that it is this kind of benefit directly connected to, and resulting from, the employment that our Court retained as a yardstick against which to measure the "employment" factor. In McNab v. Canada, [1992] 2 C.T.C. 2547, at page 2551, the Tax Court found that the claimant"s work was for an employer whose sole purpose was to benefit Indians on Reserves. Common to both these employments was the fact that Indians on a Reserve benefitted from the actual work done. In Amos et al. v. The Queen, 99 DTC 5333, our Court found that the employment of Band members benefited the Reserve because there was an express agreement, between the Band and the corporation who leased lands from the Band, that these leased lands whose use was integral to the operation of the corporation"s pulp mill would be used to provide employment to Band members. Our Court found that the "employment was directly related to the realization by the Band and its members of their entitlements to the reserve land": Ibid ., at p. 5335. There is no such understanding in the present instance and, as previously mentioned, the appellants represent only a small portion of the entire work force of the Company.
There is no doubt that the fact that the appellants drew a salary and brought it back to the Reserve provided some economic benefits to the Reserve but it is obviously not benefits of this nature that this Court sanctioned in Folster and in Recalma, supra. Indeed, as this Court said in Southwind v. The Queen, 98 DTC 6084, at page 6087 (F.C.A.), the phrase "commercial mainstream" "seeks to isolate those business activities that benefit the individual Native rather than his community as a whole, recognizing, of course,... that a person benefits his or her community by earning a living for his family". Otherwise, any employment located off the Reserve, no matter how unconnected, would be seen as benefiting life on the Reserve and, therefore, would attract the tax exemption. This is not the purpose of section 87 of the Act which, as La Forest J. stated in Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85, at pages 130-131, is aimed not at conferring a general economic benefit upon Indians, but rather at protecting them against attempts by non-natives to dispossess them of the property which they hold qua Indians, i.e., their land base and the chattels on that land base.
Like the Tax Court judge, I believe that the appellants are "engaged not in a business that is integral to the life of the Reserve", but in a business that is in the "commercial mainstream": Southwind v. The Queen, supra, at page 6087 (F.C.A.). I agree with counsel for the respondent that the appellants cannot remove themselves from that "commercial mainstream" merely through asserting that, by earning a living for an individual"s family, they benefit the Native community.
The appellants also submit that their employment goes beyond providing an economic benefit to their Native community: it permits Band members to carry on their traditional way of life, albeit in a modern context. In this regard, the Tax Court judge found at page 15 of his decision that "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". In other words, there was no evidence that the commercial fishing activity of the Company, as opposed to the annual food fishery in which the appellants participated to the benefit of the Band, was an activity closely connected with either the Band or the Reserve. The appellants have not demonstrated to us that this finding of fact is erroneous. In the absence of a proper factual foundation for the appellants" allegation, we are left to speculate, and neither speculation nor well-intended guesses are valid substitutes for real and probative evidence.
Moreover, in isolating as a connecting factor the maintaining and enhancing of the native life on the Reserve as a means of supporting themselves, the appellants assume and submit that paragraph 87(1)(b) of the Act has a second purpose: the tax exemption therein aims at securing for Indians their right to enjoy the benefits of their traditional ways of life such as hunting and fishing. They claim that trade and commerce was not foreign to the members of the First Nations and, therefore, that, in a modern context, the traditional Indian activity of fishing, from which they derive the income necessary to pursue a career that is consistent with their aboriginal identity, dictates that it be performed in the commercial mainstream. Hence, they should be entitled to the benefit of the tax exemption when fishing in the commercial mainstream.
The short answer to the appellants" contention is, in my view, that it runs contrary to the decisions of the Supreme Court of Canada in Williams and Mitchell, supra, where the Court held that those Indians who acquire, hold and deal with property "in the commercial mainstream" must do so on the same terms as their fellow citizens. Happily or not, in our modern society and context, income obtained from commercial fishing in the commercial mainstream is taxable. Section 87 of the Act ought not to be given an expansive scope by ascribing an overly broad purpose to it: see Union of New Brunswick Indians and Tomah v. N.B. (Min. of Finance), (1998), 227 N.R. 92, at page 115 (S.C.C.); see also R. v. Lewis, [1996] 1 S.C.R. 921 where the phrase "on the reserve" was given a narrow interpretation as the Court held that it did not mean "adjacent to", but in or within the boundaries of the Reserve, and that it should receive the same construction wherever used within the Act.
In the end, I am satisfied, as the Tax Court judge was, that the appellants" property, derived from commercial fishing with a private company in the commercial mainstream had, to use the words of La Forest J. in Mitchell , supra, at page 137, no "immediate and discernable nexus to the occupancy of reserve lands".
The facts underlying some of the connecting factors
The appellants have contended that the Tax Court judge failed to give proper weight to the fact that the Company had its business office on the Reserve. They also submitted that little weight ought to be given to residency as a connecting factor.
I think it is fair to say that crucial facts relied upon by the appellants as the basis for their connecting factors have somewhat been embellished. With respect to the business office on the Reserve, the evidence showed that, in 1985, on the advice of its accountant, the Company rented a room in a building on the GWA"SALA Reserve to secure a tax benefit pursuant to the decision of the Supreme Court of Canada in Nowegijick v. The Queen et al., 83 DTC 5041. There is nothing wrong with securing a tax benefit. However, the facts necessary to give rise to the benefit must be real and supportive.
The appellants claimed that the business office was on the Reserve and that the business was managed from the Reserve. They relied upon the facts that there was a furnished office on the Reserve, that an employee was working in that office and that Mr. James Walkus held meetings therein. However, the evidence showed that:
| a) the rented room was quite tiny (10 feet by 10 feet) for the size of the Company: see cross-examination of James Walkus, A.B. vol. IV, at pages 925-926; |
| b) James Walkus, the owner and single shareholder of the Company, very infrequently met his accountant and Company mechanics at that office on the Reserve: see cross-examination of James Walkus, A.B. vol. IV, at pages 931-932 and 933 to 936; |
| c) James Walkus went to that office to sign cheques only three times a year: see cross-examination of Chantal Charlie, A.B. vol. V, at page 1079; |
| d) Chantal Charlie, who was the only Company"s employee assigned to work in that office during the relevant taxation years, had no training as a bookkeeper and received respectively as wage for 1987, 1988 and 1989 the sums of $735.00, $1,875.00 and $2,760.00. As she was paid $15.00 per hour, this means that she worked in that office for only 49 hours in 1987, 125 hours in 1988 and 184 hours in 1989: see cross-examination of Chantal Charlie, A.B. vol. V, at pages 1071 to 1073; |
| e) Chantal Charlie never dealt with the Company"s general ledger, the fisherman"s ledger, the Company"s minutes or any other corporate documents. She merely picked up the mail and paid native employees and local suppliers. She was also herself much involved in fishing at sea: see her cross-examination, A.B. vol. V, at pages 1074 to 1078; |
| f) only some of the corporate documents of the Company were kept in the office on the Reserve. Most were kept at the home of Mr. James Walkus in Nanoose Bay or at his accountant"s office in Nanaimo: see cross-examination of James Walkus, A.B. vol. IV, at pages 945 to 950; cross-examination of the accountant, Mr. Braithwaite, A.B. vol. V, at page 1020; and |
| g) the Radio Shack computer allegedly bought for the operation of the office on the Reserve was never used and remained in the box during the relevant taxation years: see cross-examination of Chantal Charlie, A.B. vol. V, at pages 1075-1076. |
The evidence also established that Mr. James Walkus managed the Company from wherever he was with the assistance of his accountant. Mr. Walkus spent most of his time off the Reserve. After having said in direct examination that he spent only half of November and the occasional weekend at his home in Nanoose Bay, he admitted in cross-examination that he could have spent as much as five months per year at his house in Nanoose Bay. He also admitted that he spent the rest of the year on his boat, in Hawaii and in his other home situated off the Reserve in Port Hardy: see his cross-examination, A.B. vol. IV, at pages 880 to 888. As the House of Lords said in Unit Construction Co. Ltd. v. Bullock, [1960] A.C. 351, at page 366 per Lord Radcliffe and at page 372 per Lord Cohen: "a company resides, for purposes of income tax, where its real business is carried on... and the real business is carried on where the central management and control actually abides"; see also Pet Milk Canada Ltd. v. Olympia and York Developments, (1974), 4 O.R. (2d) 640 (Ont. Master).
The evidence indicates that the office on the Reserve was decidedly not the place where the "real business" of the Company was carried on, or where its "central management and control" actually abided.
The Tax Court judge heard the witnesses with respect to all the connecting factors. He saw the tax planning attempts for what they were and drew unassailable inferences and conclusions from the totality of the evidence. In such circumstances, we have no authority to reverse his findings: see Schwartz v. Canada, [1996] 1 R.C.S. 254, at pages 278 to 289; Hodgkinson v. Simms, [1994] 3 R.C.S. 377, at page 425.
For these reasons, I would dismiss with costs the appellants" motion to introduce new evidence and an Amended Memorandum of Fact and Law. I would also dismiss their appeals with costs.
"Gilles Létourneau"
J.A.
"I concur,
Alice Desjardins J.A."
"I concur,
F. Joseph McDonald J.A."
Date: 20000518
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
McDONALD J.A.
Docket: A-527-98
BETWEEN:
HARRY BELL
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-528-98
BETWEEN:
ROBERT WALKUS SENIOR
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-529-98
BETWEEN:
PATRICK CHARLIE
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-551-98
BETWEEN:
CORRINE WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-552-98
BETWEEN:
BRIAN WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-553-98
BETWEEN:
DOREEN WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-554-98
BETWEEN:
ROBERT CHARLIE
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-555-98
BETWEEN:
JOHNSON BELL
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-556-98
BETWEEN:
ALVIN WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-557-98
BETWEEN:
RAYMOND E. CLAIR
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-558-98
BETWEEN:
JOYE WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-559-98
BETWEEN:
HENRY WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-560-98
BETWEEN:
LLOYD WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-561-98
BETWEEN:
JAMES WALKUS
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
Docket: A-562-98
BETWEEN:
CHANTAL CHARLIE
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent