Tax Court of Canada Judgments

Date: 19990720

Dockets: 96-51-IT-G; 96-53-IT-G; 96-54-IT-G; 96-56-IT-G; 96-334-IT-I

BETWEEN:

DAVID MONIAS, LEONA ST. DENIS, BEVERLY ROBINSON, WALTER SPENCE, KAREN CHEVILLARD,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Sarchuk J.T.C.C.

[1] The Appellants, David Monias, Leona St. Denis, Beverly Robinson, Walter Spence, and Karen Chevillard[1] were, during the relevant taxation years, employees of the Awasis Agency of Northern Manitoba. The Appellants filed their respective income tax returns on the basis that the salary each earned from Awasis was not subject to tax by virtue of paragraph 81(1)(a) of the Income Tax Act (the Act) and section 87 of the Indian Act. By consent of all parties, these appeals were heard on common evidence.[2]

The Awasis Agency of Northern Manitoba (Awasis)

[2] Kaye Dunlop (Dunlop) is currently the general counsel for Awasis. She testified that because the reserves were under the jurisdiction of the Government of Canada under section 91 of the Constitution Act and the protection of children and services relating thereto was a provincial responsibility under section 92 of the Constitution Act, it was unclear who was responsible for child and family services on reserves. For a number of years, this function had been carried out by an Indian agent, an employee of the Department of Indian and Northern Affairs (Indian Affairs). In or about 1983, Manitoba Keewatinowi Okemakanac (MKO), the political organization representing the 25 northern reserves, approached both the Government of Canada and the Province of Manitoba and negotiated an agreement with respect to the provision of these services. In result, Awasis was incorporated under the Child and Family Services Act, c. 80 (Order in Council no. 879) on July 18, 1984.[3] Its jurisdiction is limited to providing its services to children and families in Indian Bands residing on reserves in the northern part of the Province of Manitoba. The City of Thompson was chosen as the location of the head office of Awasis because it was the largest centre geographically located closest to the majority of the reserves that were within its jurisdiction.[4]

[3] At all material times, Awasis received its funding from Indian Affairs pursuant to a series of Comprehensive Funding Arrangements entered into between it and Her Majesty in right of Canada as represented by the Minister of Indian Affairs. Dunlop testified that although Indian Affairs was not the sole source of funding for Awasis, non-governmental funding was rare, and more specifically, Awasis never received any funding from MKO.

[4] The by-laws of Awasis required that the membership elect the board of directors at the general assembly which took place at different locations from year to year. According to Dunlop because of the large venues required the assembly traditionally took place off reserve, either in Winnipeg, The Pas or Thompson. Directors' meetings were held ten times per year, generally in Winnipeg, although several had been held in The Pas and Thompson. According to Dunlop if the meetings were to be held on a particular reserve, directors from other reserves would be required first to fly to Winnipeg, overnight, then fly to Thompson, overnight and then fly, drive or take the train to the reserve where the meeting was to be held. For that reason and since there were generally no adequate meeting places on reserves, the meetings were held in Winnipeg or Thompson.

[5] A subsidiary agreement reached between Canada, Manitoba and MKO mandated that Awasis be organized "on a local and regional basis". Accordingly, Awasis was initially structured on a regional level, with regional levels being defined as Thompson, Winnipeg and The Pas. Thus, as a general rule, unit supervisors were responsible for several reserves and worked out of Winnipeg or Thompson. With few exceptions, the social services required i.e. counselling, group homes, treatment centres, and other similar facilities, existed only off reserve. There was only one on-reserve hospital, that being in Norway House. Consequently, assessments, treatment, and the like were generally required to be done off reserve. As well, almost 90% of the court services were provided off reserve since the Manitoba Provincial Court only travelled to four reserves. As a result, proceedings were of necessity held in Thompson or Winnipeg. Because there was a four-day filing requirement, staff responsible for that function was located in both Thompson and Winnipeg. Furthermore, because Awasis was not permitted to apprehend children off reserve, its representatives needed to liaison with the provincial family services, arrange for legal services and brief counsel, all of which could only be done by its personnel in Thompson or Winnipeg.

[6] According to Dunlop, although the administrative centre of Awasis performing the financing and policy functions was located in Thompson, matters such as the development of new programs, and the production of material (videos, books, etc.) were all done by necessity off reserve. She testified that due to a lack of resources, it would not have been feasible to perform any of the off-reserve functions on reserves.

[7] Ms. Cheryl Freeman (Freeman), a chartered accountant was retained as the financial administrator for Awasis in 1992. She was based in Thompson where the majority of Awasis' financial records and its client files were maintained and archived. At all relevant times, the payroll for Awasis employees was prepared at the Thompson office and each Appellant's salary was paid by cheque out of this office. Freeman noted that in 1990/1991, the total number of employees on Awasis payroll was 171 (49 located in Thompson, seven in Winnipeg, 47 in The Pas and 22 at Island Lake with the remainder "scattered through the communities"). By the following year, the total number of employees had increased to 256 (77 in Thompson, 7 in Winnipeg, 46 in Okemac Cree Nation, 60 in the Garden Hill Reserve office, and the rest "scattered"). Freeman testified that since 1992, there has been a steady movement of employees "down to the local level". This was demonstrated by the fact that in April 1997, the child services for the Garden Hill Reserve were devolved to a separate agency located on reserve and that currently only 31 employees worked in the Thompson office.

The Appellants

[8] Each of the Appellants is an Indian pursuant to section 2 of the Indian Act, R.S.C. 1985, c. I–5 as amended (the Indian Act). None of them were resident on a reserve during the relevant periods of time and in two instances, Chevillard and Robinson, had never resided on a reserve. Although the issue raised in these appeals is common to all five Appellants, in each case their employment functions were different particularly with respect to the places they were performed.

[9] David Monias (Monias) is a member of the Cross Lake Band. He has earned a Masters Degree in Arts from the University of Victoria, specializing in child and youth care and public administration. He was employed in June 1991 as a case manager for the community (reserve) of Shamattawa First Nations and was responsible for the assessment of child protection referrals to Awasis. Initially, he flew to Shamattawa on Monday evening and generally remained there until Thursday to perform assessments, meet with the local child care committees and deal with other resources such as the RCMP, the schools and nursing stations.[5] Monias was required to be in Thompson on Mondays and Fridays since those were the days on which matters such as applications for Orders with respect to the status of children as "temporary or permanent wards" were processed through the Provincial Court system. This function required a substantial amount of paperwork particularly with respect to the preparation of Court summaries, all of which was done in Thompson. In 1992, Monias became unit supervisor for the God's Lake Narrows, God's River, and Oxford House Communities. Based in Thomspon his primary responsibilities were the assignment and review of cases; co-ordination of the work between the case managers and the local workers on reserve; training the local workers and overseeing cases before the Courts. He estimated that to perform these duties, approximately 30% of his time was spent on a reserve. In May 1993, he became the co-ordinator for the Awasis Child and Family Service Program Centre and had primary responsibility for research, training and development. In this capacity, he was involved in developing programs and procedures as well as conducting research on topics affecting First Nations people. As he became more actively involved in formulating policy, Monias spent much more time in Winnipeg dealing with other government agencies, both provincial and federal and ultimately, took up residence there and worked out of the Winnipeg office. He estimated that he now spent approximately 15% of his time on reserves. At all relevant times prior to his move to Winnipeg, he resided in Thompson, worked out of the Awasis office there and maintained his bank accounts there.

[10] In 1990, Walter Spence (Spence) was hired by Awasis as a regional services worker for the Cross Lake, Nelson House and Ilford areas. Later that year, he was appointed senior supervisor responsible for service delivery, program management and supervision of unit supervisors. As such he formed part of the management team for policy, procedure, staffing and agency development. Although based in Thompson, his position required frequent attendance at executive meetings which were held in Winnipeg, The Pas and Garden Hill. These locations were chosen, according to Spence, to reduce travel and accommodation costs. As senior supervisor, he estimated that approximately 10% of his time was spent on reserve. In 1992, he was appointed operations manager for the Keewatin Tribal Council (KTC), a position within Awasis and was responsible for child and family services at the 11 communities that comprised KTC. Shortly thereafter, he became director of programs for Awasis which involved "policy development with program co-ordinators, assisting and planning organization and the development of strategic plans". He testified that even with these additional responsibilities, he still spent approximately 5% of his time on reserve. Throughout the periods in issue, he resided in Thompson, worked out of the Thompson office and maintained his financial and banking arrangements in Thompson.

[11] Beverly Robinson (Robinson) was initially hired as an administrative secretary in the Winnipeg office of Awasis in 1988. In 1990, she was appointed the "Winnipeg resource worker for independent Bands" and acted as "liaison to our children and families who had to leave their communities to attend a resource centre which was not available in the north". All of her duties were carried out at the Winnipeg office of Awasis and she was never required to spend any time on reserve. In 1993, Robinson became legal assistant to the general counsel, Dunlop. As such, she dealt with the Winnipeg Child and Family Services, acted as liaison between Awasis counsel and lawyers located in Winnipeg and attended Court with respect to children placed in Winnipeg and surrounding areas. Robinson has lived her entire life in Winnipeg.

[12] Leona St. Denis (St. Denis) was hired by Awasis in 1987 as a receptionist and since then has been employed as a clerk-typist, a travel clerk and most recently, a statistical clerk. Her duties during the relevant years involved typing for all regional workers and unit supervisors; issuing purchase orders and making travel arrangements for wards and staff; maintaining up-to-date statistical records on all children in the care of family services; maintaining the filing systems and statistical lists. All of her duties were carried out at the Thompson office. In 1993, she became senior statistics officer in which position she supervised other staff and provided orientation training and workshop to clerks at Norway House, Cross Lake, Nelson House and Garden Lake. She estimated that during this latter period approximately 75% of her time was spent on reserve. At all relevant times, she was resident in Thompson.

[13] Karen Chevillard (Chevillard) is a member of the Cross Lake First Nation Band. From June 1, 1991 to June 30, 1992, Chevillard was the financial administrator for Awasis in Thompson. During her period of employment, she reported to the Awasis board of directors. Her duties included the preparation of interim financial reports which were presented to the directors at their monthly board meetings as well as the presentation to the board of the annual financial statements. These meetings were almost invariably held in Winnipeg or Thompson. None of her responsibilities required her to spend any time on any of the reserves. At all relevant times, she was resident in Thompson.

Appellants' Position

[14] The Appellants do not dispute that the registered office of Awasis was located in Thompson and not on a reserve, and that the meetings of its board of directors were, as a general rule, held in Winnipeg, albeit for economic reasons. It is also not disputed that the chief executive officer of Awasis and other senior personnel were located in Thompson, the payroll was prepared at the Thompson office, the cheques were drawn at the CIBC branch in Thompson and the books and financial records of Awasis were maintained at that office. Furthermore, the Appellants concede that most of their duties were performed in the Thompson or in the Winnipeg sub-office and indeed, that in the cases of Chevillard and Robinson, all of their duties were performed off reserve. While not disputing that the foregoing are potentially connecting factors the Appellants contend that they are no more than marginally relevant given the role of Awasis in the Indian communities and the overall circumstances of their employment.

[15] The Appellants rely on a series of cases commencing with Nowegijick v. The Queen, Mitchell et al v. Peguis Indian Band et al, Williams v. The Queen, McNab v. Canada (Minister of National Revenue), and Folster v. The Queen.[6]Counsel made specific reference to the following comments by Linden J. in Folster at 5322-5323:

Thus, a more in-depth analysis reveals that the connecting factors relied upon by the Trial Judge were inadequate in the context of this case. The inquiry must, therefore, be expanded in order to consider other connecting factors. In my view, having regard for the legislative purpose of the tax exemption and the type of personal property in question, the analysis must focus on the nature of the appellant's employment and the circumstances surrounding it. The type of personal property at issue, employment income, is such that its character cannot be appreciated without reference to the circumstances in which it was earned. Just as the situs of unemployment insurance benefits must be determined with reference to its qualifying employment, an inquiry into the location of employment income is equally dependent upon an examination of all the circumstances giving rise to that employment. ...

It is the Appellants' position that the only distinction between Folster and the Appellants is that Folster lived on the reserve although her underlying employment was performed off reserve for the benefit of Indians on reserve.

[16] The Appellants contend that although a substantial portion of their work occurred off reserve, none of them "has entered the commercial mainstream". Their Counsel argued that it is only in those instances where an Indian has done so that the place of work or the residence of the employer becomes highly relevant. However, in the present appeals these two connecting factors must be considered in the context of the specific and unusual circumstances before the Court. The fact that Awasis primary offices were in Thompson and Winnipeg and that these particular Appellants worked out of them most of the time must be viewed in light of the fact that in the judgment of both management and the employees, it was not possible to practically carry out the mandate of Awasis other than from those places where resources not available on reserve were located. Accordingly, too much weight must not be accorded to the exact geographical location of the employment and the residence of the employer.

[17] The Appellants further contend that the Minister's conclusion that the situs of the head office of Awasis was not located on a reserve because the reserve was not the place where the central management and control over the business was actually located is flawed. In particular, it ignores the fact that the true control of Awasis was in the Band membership through their election of the Chiefs who then elected the board. This fact and not the place where the directors met must be considered as the relevant connecting factor in the present appeals.

Respondent's Position

[18] Counsel for the Respondent submitted that in the present appeals, none of the potentially relevant connecting factors linking the property at issue to a reserve support the Appellants' proposition that their respective salaries were property held by an Indian qua Indian on a reserve. The residence of the employer was Thompson; the residence of each of the Appellants and the place where the bulk of his or her employment duties were performed was either Thompson or Winnipeg; and the salary of each was paid by Awasis from its head office in Thompson.

[19] The Respondent also takes the position that the employer, Awasis, was not resident on a reserve. Thompson was its registered office and the directors' meetings were without exception held off reserve in Thompson or Winnipeg. DeBeers Consolidated Mines Limited .v. Howe[7]was referred to as authority for the proposition that in order to determine the situs of a corporation, it is necessary to look at all of the circumstances to determine where the central management and control actually resides. In this case, Counsel argued, the evidence clearly established that the directing mind and the administrative control of Awasis was off reserve. It was there, in Winnipeg or in Thompson, that the financial records were put to the board of directors for their information and approval and it was there where proposals and policy directives were discussed and accepted or rejected.

[20] The Respondent further takes the position that the Folster and Williams decisions do not support the Appellants' proposition that the location of the employer and the place where the duties to be performed by the employees are not to be given particular significance. In particular, Counsel argued that Folster is to be distinguished since in that case the Appellant resided on the reserve while performing the duties of her employment at a facility whose function was essentially intertwined with the reserve community situated just beyond the reserve boundary.

[21] Before proceeding with an analysis of the evidence and applicable law, reference should be made to the administrative policy adopted by Revenue Canada in response to the Williams and Folster judgments and its application in the present appeals by the Minister. In 1993, following a thorough review of those decisions and extensive input from the Indian community, Revenue Canada developed fresh guidelines with respect to various employment situations which might qualify for the tax exemption under the Indian Act. These guidelines were, in brief form:

a) Where the duties are performed on a reserve;

b) Where the duties are performed primarily on a reserve and either the Indian lives on a reserve or the employer is resident there;

c) Where the duties are performed off reserve but the Indian lives on a reserve and the employer is resident on a reserve; and

d) Where the Indian is an employee of a Band, tribal council or organization described above.

With respect to the last guideline, Revenue Canada observed that:

... in the case of non-commercial activities of a band or tribal council representing Indians on a reserve or an organization controlled by one or more of these entities and dedicated to the social, political, economic or cultural development of those Indians which is resident on a reserve, it is reasonable to conclude that there is sufficient connection to a reserve to warrant an exemption. This would be the case even if the Indians are employed off a reserve by the entity. Emphasis added

With respect to each of the foregoing examples, it was the position of Revenue Canada that sufficient connection would exist to a reserve to locate the income there and grant the tax exemption.[8]

[22] On March 7, 1994, the Assistant Deputy Minister, Legislative & Intergovernmental Affairs Branch, Revenue Canada, wrote to the Awasis agency confirming that its employees were not exempt from income tax on their employment income because:

As you know, draft guideline # 4 requires an organization to meet various criteria in order for its employees to be tax exempt. The Winnipeg District Taxation Office has conducted an audit and concluded that the head office of Awasis is not located on a reserve and therefore does not presently meet the residence test. The Department considers that an employer is resident on a reserve if the reserve is the place where the central management and control over the business is actually located. ... [9]

It was on this basis that the Appellants' claims were denied by the Minister.

Conclusion

[23] As has frequently been stated, paragraph 87(1)(b) of the Indian Act does not exempt all Indians from income tax liability. In these appeals, it is agreed that each Appellant's income is personal property which is subject to tax and that in each case, the Appellant was an Indian within the meaning of subsection 2(1) of the Indian Act. The sole issue is whether each of the Appellants is entitled to the claimed exemption from income tax in respect of their employment income as "personal property situated on a reserve" within the meaning of paragraph 87(1)(b).

[24] In Williams v. The Queen,[10] Gonthier J. suggested the following analysis for determining where income is situated:

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.

[25] In these appeals, the relevant connecting factors to be considered are the residence of the employer; the connection between Awasis and the reserves it serves; the manner in which the employment performed benefits the reserve, and the nature and circumstances surrounding each Appellant's employment,

[26] The Respondent's emphasis on the "employer's residence" test in the particular circumstances of these appeals is misplaced. I accept that for sound practical and financial reasons Awasis' board meetings were held in Winnipeg and not on reserves. The evidence is that the board members were resident on a number of different reserves, many of which are situated in remote communities. None of the reserves had adequate facilities or accommodation for the board members and others required to attend the meetings. It was reasonable for the meetings to be held in Winnipeg as a central point to which all of the Chiefs had relatively ready access as contrasted to the impractical, time-consuming and costly arrangements which would otherwise have been required. Furthermore, by raising the issue, as the Respondent did, ignores the composition of the board, that is, all of its elected members were Chiefs of the Bands involved, their residences were in each case on reserve and they were elected by and answerable to the members of their particular community.

[27] Furthermore, the testimony, particularly that of Dunlop, Monias and Spence, established that it would have been equally impractical to locate Awasis' head office on one of the reserves. Aside from their remote locations, there simply were no adequate facilities available on any reserve to house its administrative staff.

[28] In Williams, supra, the Supreme Court refused to adopt conflict-of-laws residency principles in a section 87 context because, as Gonthier J. observed at page 6325:

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.

The foregoing reasoning suggests strongly that recourse to corporate law principles with respect to residency in these appeals is equally inappropriate. In these circumstances, giving much weight to the situs of the employer as a connecting factor would be less than satisfactory in achieving the legislative purpose behind the section 87 tax exemption.

[29] I turn next to the connection between Awasis and the reserves it serves as well as the manner in which that employment benefited the reserves. In Folster, Linden J. also observed at page 5323 that:

... 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.

In the present appeals, this connecting factor is of substantial import.

[30] Prior to the tripartite agreement and the incorporation of Awasis, child protection and family services were provided in Thompson by the Province of Manitoba through the Department of Family Services. This office, on occasion, offered services on reserve which consisted of, in Dunlop's words:

The run and grab scenarios for workers would fear for the life of a child and run in and take the child off the reserve. But they didn't actually have offices located on reserve. The didn't actually do social service work on reserve. They didn't work with families on reserve. It was simply a matter of removing children from the reserve.

It was the ongoing failure to ensure the welfare of Indian children in Northern Manitoba which led to the creation of Awasis. Its objects were:

To create a Corporation without share capital with objects of general philanthropic, charitable, educational and social nature and in particular, to provide the services of a Child Care Agency and do the following:

(a) to act as an Indian Child Care Agency as defined in The Child and Family Services Act of Manitoba and to accept the duties and carry out the powers provided therein and such further duties as may be directed by the Indian Bands served by the Corporation as communicated through the Board of Directors;

(b) to strengthen and unify Indian families in general and those Indian families living on or having ties to the Indian Bands ( the "Bands") whose Chiefs are members of the Corporation, being Bands served by the Corporation as a Child Care Agency ...;

(c) to strive for the placement of any native children coming into the care of the Corporation within their own communities or with native families within the Province of Manitoba;

(d) to assist in returning any and all native children to their families or Bands who were previously placed in the care of some Child Care Agency or family outside the Province of Manitoba by any Child Care Agency who previously or presently has or had jurisdiction over native children;

(e) to perform such other actions as are deemed necessary to forward either the general or specific aims set out above.[11]

Since its inception, Awasis has been funded under the National Indian Child Welfare Funding Formula through Indian Affairs. It is required to use these funds in accordance with its authority under the Child and Family Services Act of Manitoba to provide child and family services to status Indians residing on reserve. An examination of the program terms and conditions appended to each of the annual Comprehensive Funding Arrangements disclose in detail the framework for child and family services which Awasis must provide.[12] Most of those services are provided to the respective Band members on their reserves, although it must be observed from the nature of the services required, that many aspects such as the placement of children in foster homes, group homes, institutions or in an adoption home still required approval by the Provincial Courts which, as previously noted, could only be obtained off reserve.

[31] It is in this context that the nature of each Appellant's employment must be considered. In The Queen v. Poker et al,[13] Cullen J. observed at page 6666:

... Not to consider the circumstances surrounding the employment does not accord with the purpose of the tax exemption in the Indian Act as stated in Mitchell, supra, and Williams, supra. The predominance of a single connecting factor, be it the residence of the debtor or the location where the duties of employment were performed, does not address the erosion of the entitlement of an Indian qua an Indian on a reserve. ... To look solely at where the duties of employment are performed, without considering the circumstances surrounding the employment or the residence of the employer, is similarly too restrictive.

The respective work of each of the Appellants was performed on the instruction of an employer whose sole purpose and indeed, mandated responsibility, was to benefit Indians on their reserves. That certain of these functions could only be performed off reserve, and this includes both necessary administrative functions as well as the apprehension and provision of assistance for runaway children does not alter that fact. I am satisfied that each of the Appellants was not dealing with property in the "commercial mainstream" despite the fact that much of their work was performed off reserve. Each of the Appellants was working for the betterment of native communities, in my view even more so than in the Folster case. Their clients, if one may refer to them as such, are mainly served on the reserve, and the services provided are done so strictly for the improvement of life on the reserve and are not in any sense ancillary services provided to reserve residents.

[32] In the present appeals, in each case the Appellant's employment was intimately connected with the various Indian communities all of which were located on reserve. To paraphrase the comments of Linden J. in Folster – to attribute great significance to the fact that the employees were physically situated off the reserve, obscures the true nature of the employment income in this case. Taking into account the purpose of Awasis, the nature of the work, the beneficiaries of that work, I am satisfied that the situs of these particular employees' salaries must be taken to be the reserve. I believe this approach is consistent with the legislative purpose behind the section 87 tax exemption.

[33] In reaching this conclusion, I must admit to some concern with respect to the Appellants, Chevillard and Robinson. It might readily be argued that an Indian who leaves the reserve to help the reserve population by working as a case worker for Awasis ought not to be considered part of the "commercial mainstream" while an urban Indian, such as Chevillard, who simply accepts employment with Awasis is part of the "commercial mainstream". To refuse the deduction to the first would erode her entitlement qua Indian on a reserve, while to grant it to the second might, as was observed by Archambault J. in Desnomie v. The Queen:[14] "be granting him a privilege that his fellow citizens of Winnipeg do not enjoy while working in that City". I have, however, ultimately concluded that once each of the Appellants began working for Awasis, their situations became identical and that it would be discriminatory to reject any of the appeals solely on the basis of this distinction.

[34] The appeals are allowed, with costs.

Signed at Ottawa, Canada, this 20th day of July, 1999.

"A.A. Sarchuk"

J.T.C.C.

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