Date: 19980916
Docket: T-528-98
BETWEEN:
ROBIN GILES BRANT O/A FREE FLOW GAS BAR
Plaintiff
- and -
HER MAJESTY THE QUEEN
Defendant
REASONS FOR JUDGMENT
PRELIMINARY QUESTIONS 1 AND 2
[Delivered from the Bench at Toronto, Ontario
on Monday, August 31, 1998 as edited]
ROTHSTEIN J.
[1] Three preliminary questions of law are submitted to the Court for determination (a fourth question was also added). These reasons will deal with the first two questions only. The relevant facts are contained in an agreed statement of facts.
QUESTION 1
[2] The first question is:
| Are gas tax refunds payable by the Ontario Ministry of Finance the personal property of the plaintiff situated on a reserve and accordingly not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution by virtue of section 89 of the Indian Act1, R.S.C. 1985, c.I-5? |
[3] The only issue in this case is whether property of an Indian that had been seized by Her Majesty the Queen was situated on a reserve.
The Connecting Factors Test
[4] The question of whether property of an Indian is situated on a reserve for taxation or seizure purposes is to be determined according to the application of the connecting factors test enunciated by the Supreme Court of Canada in Williams v. Canada, [1992] 1 S.C.R. 877. At p. 892 Gonthier J. states:
| 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. |
[5] Assuming that the connecting factors test for taxation cases is applicable to seizure cases, considerations in respect of seizure must be substituted for those relating to taxation.
[6] Although each case must be decided on its own facts, some guidance may be derived from some of the decisions of the Federal Court of Appeal and other Courts that have applied the Williams connecting factors test.
[7] In Clarke v. M.N.R., [1997] 3 C.T.C. 157 (F.C.A.), income earned off a reserve was considered to be closely connected to the reserve and therefore situated on the reserve and exempt from income tax because the employee resided on the reserve and the hospital where she worked, although technically off the reserve, attended to the needs of the reserve community.
[8] In Southwind v. The Queen, [1998] 1 C.T.C. 265 (F.C.A.) income was considered to be situated off the reserve and subject to income tax because all services performed by the business earning the income were off the reserve. The source of the income was off the reserve and the business was considered to be in the commercial mainstream as it dealt with persons off the reserve.
[9] In Recalma et al. v. The Queen, [1998] 98 D.T.C. 6238 (F.C.A.) investment income was considered to be off the reserve and subject to income tax. More weight was placed on factors such as the residence of the issuers of the security, the location of the issuers' income generating operations and the location of the security issuers' property which were all off the reserve. Less weight was accorded to factors such as the residence of the taxpayers, the source of the capital with which their securities had been bought, the place where the securities had been purchased and were being held, and where the income derived therefrom had been spent.
[10] In Alberta (W.C.B.) v. Enoch Band, [1994] 2 C.N.L.R. 3 (Alta C.A.), garnishee summons were served on a trust company where a judgment debtor Indian band had its account. The Court considered that the funds were situated off the reserve and subject to seizure having regard to the facts that the monies were never on the reserve, they did not stem from activities on the reserve, the monies came and went in downtown Edmonton off the reserve, and all legal rights could only be exercised in downtown Edmonton. The fact that monies were situated on the reserve of a different band because the banker had its head office there was not considered to change the circumstances.
FACTS
[11] The facts in the case at bar are reasonably straightforward. The plaintiff, an Indian, owns a gas bar on the Tiendinaga Mohawk First Nation's territory, a reserve under the Indian Act. The gas bar sells gasoline to Indians and non-Indians. The Minister of National Revenue assessed the plaintiff for GST in respect of sales of gasoline to non-Indians2.
[12] The Minister estimated that the plaintiff's liability with respect to GST amounted to $474,825.83 for the period January 1, 1991 to June 30, 1996 inclusive of interest and penalties and assessed the plaintiff for this sum. However, because the plaintiff refused or neglected to pay, collection action was instituted against him.
[13] The funds of the plaintiff in an off reserve bank account were seized. In addition, the Minister of National Revenue seized Ontario gasoline tax rebates payable by the Ontario Minister of Finance to the plaintiff. The question for determination here is whether these rebates are situated on the Tiendinaga reserve and are therefore exempt from seizure.
Ontario Gasoline Tax Rebates
[14] The plaintiff purchases his inventory of gasoline from a wholesaler, Ross Chalmers. Chalmers' price per litre to the plaintiff includes the 14.7 cents per litre Ontario gasoline tax. Chalmers purchases his gasoline from suppliers such as Esso, Shell or Petro-Canada. Chalmers pays his suppliers a price per litre that includes the 14.7 cents per litre Ontario gasoline tax. On the sale of gasoline to Chalmers, the Ontario gasoline tax is deemed due and owing under the Gasoline Tax Act3. The supplier submits a return and cheque to the Ontario Minister of Finance covering the Ontario gasoline tax (and perhaps other taxes).
[15] On sales to qualified Indians with identification who purchase gasoline for personal use, the plaintiff reduces his price by 14.7 cents per litre. The plaintiff then submits an application for refund to the Ontario Minister of Finance. The application includes vouchers which are prepared each time a tax exempt sale is made to an Indian and which includes the date, vehicle license number, the tax included price, and the tax exempt price. The vouchers are verified by the Ontario Minister. Cheques for accepted claims for refund of gasoline tax are then sent to the plaintiff.
[16] From October 1997 until April 1, 1998 all refunds of Ontario gasoline tax due to the plaintiff were paid by the Minister of Finance for Ontario to the Minister of National Revenue under a "Requirement to Pay" served on the Ontario Minister by the Minister of National Revenue pursuant to subsection 317(1) of the Excise Tax Act4. Between April 1 and April 27, the Requirement to Pay was lifted by the Minister of National Revenue and refunds were paid to the plaintiff. The Requirement to Pay was resubmitted on April 28, 1998.
ANALYSIS RELATING TO QUESTION 1
[17] The parties have identified a number of connecting factors which one or both of them say are relevant to the question of whether the Ontario gasoline tax refunds are situated on the reserve. Each relevant factor must be analyzed in accordance with the Williams connecting factors test. The Williams connecting factors test pertains to exemption from taxation. The consideration of connecting factors in Williams must take account of the purpose of the exempting provision, the nature of the property sought to be taxed and the nature of taxation. In the present case, it would be the nature of the property seized and the nature and incidence of the seizure that would be relevant to consider.
1. Residence of the plaintiff
[18] The plaintiff maintains a residence on the Tiendinaga reserve. However, for the last couple of years he has been living off the reserve in New York State about six days a week establishing an electronics business there. At times he spends more time on the reserve for family or business reasons.
[19] The purpose of subsection 89(1) of the Indian Act is to prevent seizure of the assets of an Indian qua Indian - as they relate to use or occupancy of the reserve; see Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85 at 131 per La Forest J.:
| In summary, the historical record makes it clear that ss. 87 and 89 of the Indian Act, the sections to which the deeming provisions of s. 90 applies, constitute part of a legislative "package" which bears the impress of an obligation to native peoples which the Crown has recognized at least since the signing of the Royal Proclamation of 1763. From that time on, the Crown has always acknowledged that it is honour-bound to shield Indians from any efforts by non-natives to dispossess Indians of the property which they hold qua Indians, i.e., their land base and the chattels on that land base. |
and at page 133:
| But I would reiterate that in the absence of a discernible nexus between the property concerned and the occupancy of reserve lands by the owner of that property, the protections and privileges of ss. 87 and 89 have no application. |
As the applicant is living off the reserve generally six days per week, it is difficult to see how the gasoline tax refunds have much to do with his use and occupancy of the Tiendinaga reserve as an Indian. Certainly, they are related to the operation of the gas bar on the reserve but not to the use and occupation of the reserve by the plaintiff as an Indian. This connecting factor weighs against the refunds being considered as situated on the reserve.
2. Location of the business on the reserve and the location of the
generation of the property in question.
[20] The business is located on the reserve. It is the operation of the business on the reserve and sales to Indians on the reserve that ultimately give rise to the indebtedness of the Ontario Minister of Finance to the plaintiff for gasoline tax rebates. This is a factor connecting the rebates to the reserve and is entitled to significant weight.
3. Staff of the business
[21] Apparently half of the staff of the business are status Indians. If one could say that the property (gasoline tax rebates) enables the business to be viable and to provide employment to Indian residents of the reserve to enable them to live on and enjoy the benefits of the reserve, this might be considered a strong connecting factor. However, half the employees are not status indians. There is no indication of the plaintiff's employment motivation - that is, whether it is specifically intended to generate employment opportunities for Indians on the reserve or whether employees are chosen on merit regardless of whether or not they are status Indians residing on the reserve. Where there is no evidence of a specific employment policy that connects the business to the reserve, that half of the employees are status Indians residing on the reserve may simply be a coincidence. This factor is entitled to little weight in connecting the rebates to the reserve.
4. Nature of clientele
[22] The plaintiff says 50% of his clientele are Indians and that this is a strong connecting factor. The defendant says 50% of the plaintiff's clientele are non-Indians and that this is a weak connecting factor. The cases such as Southwind suggest that where a business caters to Indians and non-Indian customers alike, this is an indication it is a commercial mainstream business which would tend to be a factor that discounts the property in question from being considered as situated on the reserve. That is the situation here.
5. The property flows from subsection 87(1) of the Indian Act
[23] The plaintiff says that the gasoline tax refunds arise by reason of subsection 87(1) of the Indian Act and therefore this should be a strong connecting factor. I have some difficulty with this argument because I think it mistakenly suggests that the rebates themselves accrue to the plaintiff because of subsection 87(1). Rather, the gasoline tax exemption accrues to the Indian consumers of gasoline by reason of subsection 87(1). Because of this, a mechanism has been established whereby the Indian consumer pays a tax exempt price and the plaintiff, who has paid for the gasoline on a tax included basis, claims a rebate from the province of Ontario. The plaintiff is entitled to the refund, not because he is exempt from taxation under subsection 87(1) but rather because his customers are exempt under subsection 87(1). Indeed, any retailer of gasoline on the reserve who sold gasoline to status Indians and filed the appropriate claim and vouchers would be entitled to the rebate. The dicta of La Forest J. in Mitchell, supra, at page 131 is relevant here:
| It is also important to underscore the corollary to the conclusion I have just drawn. The fact that the modern-day legislation, like its historical counterparts, is so careful to underline that exemptions from taxation and distraint apply only in respect of personal property situated on reserves demonstrates that the purpose of the legislation is not to remedy the economically disadvantaged position of Indians by ensuring that Indians may acquire, hold, and deal with property in the commercial mainstream on different terms than their fellow citizens. An examination of the decisions bearing on these sections confirms that Indians who acquire and deal in property outside lands reserved for their use, deal with it on the same basis as all other Canadians. |
The fact that any retailer of gasoline on the reserve would be entitled to the rebate places the rebate in the commercial mainstream thus weighing against it being considered situated on the reserve.
6. Off-reserve location of the debtor
[24] The government offices where the rebates were seized are off the reserve. In taxation cases, location of the debtor has not been considered a strong determining factor because its significance had been based on conflicts of law principles rather than Indian Act principles. See Williams, supra, at pp. 890-891. In the case of seizure however, the property must be in the possession of the debtor for the seizure to be effective and therefore the location of the debtor continues to be a more critical factor. In this case, the location of the property where the seizure was effected was off the reserve. Therefore, having regard to the nature and incidence of seizure, the off-reserve location of the government office when seizure was effected is a factor that weighs against the property being considered as situated on the reserve.
7. Gasoline is obtained from off the reserve
[25] This would tend to be a commercial mainstream consideration which would weaken the connection of the rebates to the reserve.
8. Plaintiff's banking is off the reserve
[26] The plaintiff initially paid for gasoline by cheque although recently he has started to pay in cash. I consider cash payment to be an artifice solely to bring the property in question within subsection 89(1) of the Indian Act and I place little weight on it. The normal business practice is payment by cheque. Payment is made from the plaintiff's account off the reserve. This would tend to weigh against the rebates being considered as situated on the reserve.
Conclusion Relating to Question 1
[27] Of the connecting factors which the parties have identified, the only one that strongly connects the gasoline tax rebates to the reserve is the location of the business. All other factors are neutral or weigh in favour of the rebates being considered situated off the reserve. I refer particularly to the nature of the clientele, that the rebates are in the commercial mainstream and the off-reserve location of the debtor. Again, I think the dicta of La Forest J. in Mitchell, supra, at page 138 is relevant:
| When Indian bands enter the commercial mainstream, it is to be expected that they will have occasion, from time to time, to enter into purely commercial agreements with the provincial Crowns in the same way as with private interests. The provincial Crowns are, after all, important players in the market-place. If, then, an Indian band enters into a normal business transaction, be it with a provincial Crown, or a private corporation, and acquires personal property, be it in the form of chattels or debt obligations, how is one to characterize the property concerned? To my mind, it makes no sense to compare it with the property that enures to Indians pursuant to treaties and their ancillary agreements. Indians have a plenary entitlement to their treaty property; it is owed to them qua Indians. Personal property acquired by Indians in normal business dealings is clearly different; it is simply property anyone else might have acquired, and I can see no reason why in those circumstances Indians should not be treated in the same way as other people. |
Applying the connecting factors test, and based on the facts before me, I am satisfied the situs of the rebate was off the reserve and therefore subject to seizure and not protected by reason of subsection 89(1).
[28] This decision is consistent with that in Maracle v. Ontario (Minister of Revenue), [1993] O.G. 1173 (Ont. Gen. Div.). In that case, it appears the parties did not consider the connecting factors test relevant for purposes of seizure of the Ontario gasoline tax rebates and did not argue the issue on that basis. On the ground that the business in that case was in the commercial mainstream and relying on Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85; Charron J. (as she then was) found the rebates non-exempt from seizure under subsection 89(1) of the Indian Act. I agree with the determination of Charron J. and find that, on the basis of the connecting factors test also, the Ontario gasoline tax rebates are not exempt from seizure by virtue of subsection 89(1) of the Indian Act.
QUESTION 2
[29] The second question is:
| Does a "person" for the purpose of subsection 317(1) of the federal Excise Tax Act include the Ministry of Finance of the Province of Ontario? |
ANALYSIS RELATING TO QUESTION 2
[30] Subsection 317(1) of the Excise Tax Act is the provision under which Canada seized Ontario gasoline tax refunds owing by the Ontario Minister of Finance to the plaintiff. Subsection 317(1) provides:
| 317. (1) Where the Minister has knowledge or suspects a person is or will be, within 90 days, liable to make a payment to another person who is liable to pay or remit an amount under this Part (in this subsection and subsections (2), (3) and (6) referred to as the "tax debtor"), the Minister may, by letter served personally or by registered or certified mail, require the person to pay forthwith, where the moneys are immediately payable, and in any other case, as and when the moneys become payable, the moneys otherwise payable to the tax debtor in whole or in part to the Receiver General on account of the tax debtor's liability under this Part. |
[31] For purposes of this case, paraphrasing the words of subsection 317(1), the Minister of National Revenue either had knowledge or suspected that Ontario would be liable to make a payment to the plaintiff and, as a result, served a letter on Ontario requiring it to pay moneys it owed to the plaintiff, to the Minister of National Revenue.
[32] The issue is whether Ontario is a person within the meaning of subsection 317(1) of the Excise Tax Act. If so, the subsection operates to bind and apply to Ontario; otherwise, it does not.
[33] Subsection 123(1) of the Excise Tax Act defines the word "person" for the purposes of Goods and Services Tax, Part IX (including subsection 317(1)) of the Act. "Person" means:
| "person" means an individual, partnership, corporation, trust or estate or a body that is a society, union, club, association, commission or other organization of any kind. |
[34] Also of relevance is section 17 of the Interpretation Act5 which provides:
| 17. No enactment is binding on Her Majesty or affects Her Majesty or Her Majesty's rights or prerogatives in any manner, except as mentioned or referred to in the enactment. |
[35] The reference to Her Majesty in section 17 refers not only to the Crown in right of Canada but also to the Crown in right of a province. See Alberta Government Telephones v. Canada (CRTC), [1989] 2 S.C.R. 225 at 271-275 per Dickson C.J. Clearly, unless the Excise Tax Act mentions or refers to Her Majesty in right of a province, Ontario is not bound and subsection 317(1) is not applicable when the funds sought to be seized by the Minister of National Revenue are in the hands of Ontario.
[36] The principles applicable in determining in what circumstances Ontario may be found to be bound by a statute are set out in Alberta Government Telephones v. Canada (CRTC), supra at 281 where Dickson C.J. (as he then was) states:
| In my view, in light of P.W.A. and Eldorado, the scope of the words "mentioned or referred to" must be given an interpretation independent of the supplanted common law. However, the qualifications in Bombay, supra, are based on sound principles of interpretation which have not entirely disappeared over time. It seems to me that the words "mentioned or referred to" in s. 16 are capable of encompassing: (1) expressly binding words ("Her Majesty is bound"); (2) a clear intention to bind which, in Bombay terminology, "is manifest from the very terms of the statute", in other words, an intention revealed when provisions are read in the context of other textual provisions, as in Ouellette, supra; and, (3) an intention to bind where the purpose of the statute would be "wholly frustrated" if the government were not bound, or, in other words, if an absurdity (as opposed to simply an undesirable result) were produced. These three points should provide a guideline for when a statute has clearly conveyed an intention to bind the Crown. |
[37] The first and third of these points are clear in this case and the defendant's counsel concedes that they do not support her position. It is clear there are no words which expressly refer to the Crown in subsection 123(1) or 317(1) of the Excise Tax Act. Further, the purpose of the Excise Tax Act would not be wholly frustrated if the provinces, and Ontario specifically, are not bound by it. An absurdity would not be produced.
[38] The second point is whether there is clear intention to bind, manifest from the very terms of the statute or its context. Some other provisions of the Excise Tax Act were pointed out such as paragraphs 122(a) and (b):
| 122. This Part is binding |
| (a) on Her Majesty in right of Canada in respect of obligations as a supplier to collect and to remit tax in respect of taxable supplies made by Her Majesty in right of Canada; |
| (b) on Her Majesty in right of a province in respect of obligations as a supplier to collect and to remit tax in respect to taxable supplies made by Her Majesty in right of the Province; |
[39] It is noteworthy that these are express references to specific obligations on the part of Her Majesty in right of Canada and Her Majesty in right of a province. It the latter case, the obligation is on Her Majesty in right of a province to remit tax in respect of obligations the province incurred as a supplier. That is not relevant for purposes of subsection 317(1). Indeed, the express reference to "binding On Her Majesty" is for a particular purpose, albeit important, but also very specific. The reference to "binding On Her Majesty in right of a province" for a specific purpose suggests that Parliament did not intend to bind Her Majesty in right of a province generally for other obligations under the Excise Tax Act. Indeed, no other provision of the Excise Tax Act has been shown to me that would create contextual support for reading subsection 317(1) to include within the term "person", Her Majesty in right of a province.
[40] The defendant submits there is no prejudice to Ontario being included within subsection 317(1). While I am not convinced that prejudice is a relevant factor, I do not agree that there may not be prejudice. If a person bound by subsection 317(1) does not honour a Requirement to Pay, that person may be found personally liable to pay the amount. That is at least potential prejudice to anyone who is bound by subsection 317(1).
[41] The defendant also relies on cases such as MNR v. Braithwaite, 70 D.T.C. 6001 in which the word "person" was found to include the Crown. However, I think that the test to be applied is the dicta of Dickson C.J., in Alberta Government Telephones, supra, which supercedes Braithwaite on the principles to be applied in determining whether the Crown is bound by a statutory provision.
[42] Finally, the defendant argues that Ontario has the authority to pay when there is a federal request for funds. Reference was made to section 43 of the Ontario Financial Administration Act, R.S.O. 1990, c. F.12:
| 43. (1) In this section, Crown "includes any agency of the Crown; |
| (2) Where in the opinion of the Treasurer, a person is indebted to the Crown in right of Ontario or in right of Canada in any specific sum of money, the Treasurer may, |
| (a) retain by way of deduction or set-off, out of any money that is due and payable by the Crown in right of Ontario to such person, such sum as the Treasurer sees fit in the circumstances; and |
| (b) pay such sum to such public officer as the Treasurer thinks appropriate to receive it. |
[43] I would first observe that this argument does not address whether the Province of Ontario is a person within the meaning of subsection 317(1) of the Excise Tax Act and therefore does not directly relate to the question before the Court. In any event, section 43 provides Ontario with authority to pay Canada should the Treasurer be of the opinion that a person is indebted to Canada and Ontario owes any amount to that person. However, there is no evidence before me that the Treasurer has formed that opinion. Here, there is only a Requirement to Pay that Ontario is honouring. I would need further evidence before I could conclude that the moneys paid in this case were pursuant to an opinion formed by the Treasurer under section 43 of the Ontario Financial Administration Act.
CONCLUSION
[44] The first question is answered:
| Gasoline tax refunds payable by the Ontario Ministry of Finance to the plaintiff are not personal property of the plaintiff situated on a reserve, and accordingly, are subject to charge, pledge, mortgage, attachment, levy, seizure, distress and execution notwithstanding section 89 of the Indian Act. |
[45] The second question is answered:
| "Person" for the purpose of subsection 317(1) of the Excise Tax Act does not include the Ministry of Finance for the province of Ontario. |
Marshall Rothstein
J U D G E
CALGARYY, ALBERTA
September 16, 1998
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-528-98
| STYLE OF CAUSE: ROBIN GILES BRANT O/A FREE FLOW GAS BAR |
- and -
| HER MAJESTY THE QUEEN |
DATE OF HEARING: MONDAY, AUGUST 31, 1998
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR ORDER BY: ROTHSTEIN, J.
DATED: SEPTEMBER 1, 1998
APPEARANCES:
Mr. Michael Sherry
For the Plaintiff
Ms. Wendy Linden and
| Mr. Gorden Bourgard |
For the Defendant
SOLICITORS OF RECORD: Michael Sherry
| Barrister & Solicitor |
For the Plaintiff
Morris Rosenberg
Deputy Attorney General
of Canada
For the Defendant
FEDERAL COURT OF CANADA
Date: 19980901
Docket: T-528-98
Between:
| ROBIN GILES BRANT O/A FREE FLOW GAS BAR |
Plaintiff
- and -
| HER MAJESTY THE QUEEN |
Defendant
REASONS FOR ORDER
__________________
1 Subsection 89(1) of the Indian Act provides:
89. (1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a Band.
Also of relevance is subsection 87(1) of the Indian Act which provides:
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.
2 The plaintiff denies he is liable to remit GST in respect of sales to non-Indians. Amongst other reasons, the plaintiff relies on aboriginal and treaty rights and subsection 87(1) of the Indian Act .
3 R.S.O. 1990, c. G-5, as amended.