[Corporation of Surrey et al. v. Peace Arch Enterprises Ltd. et al. (1970), 71 W.W.R. 380; Smith v. Rur. Mun. of Vermillion Hills, 30 D.L.R. 83, [1916] 2 A.C. 569, [1917] 1 W.W.R. 108; Crosskill v. Sarnia Ranching Co. (1901), 5 Terr. L.R. 181; Re Spring Creek School District (1904), 7 Terr. L.R. 259; Rur. Mun. of Spy Hill v. Bradshaw (1912), 7 D.L.R. 941, 2 W.W.R. 399; Calgary & Edmonton Land Co. v. A.-G. Alta. (1911), 45 S.C.R. 170; City of Montreal v. A.-G. Can. and A.-G. Que., 70 D.L.R. 248, [1923] A.C. 136, 92 L.J.P.C. 10; Bennett & White (Calgary) Ltd. v. Municipal District of Sugar City (No. 5), [1951] 4 D.L.R. 129, [1951] A.C. 786, 3 W.W.R. (N.S.) 111, [1951] C.T.C. 219; Re Lynn Terminals Ltd. Assessment (1963), 40 D.L.R. (2d) 925, 44 W.W.R. 604; City of Halifax v. Fairbanks, [1927] 4 D.L.R. 945, [1928] A.C. 117, [1927] 3 W.W.R. 493; City of Van- couver v. Chow Chee, [1942] 1 W.W.R. 72, 57 B.C.R. 104, refd to; Town of Kamsack v. Canadian Northern Town Properties Ltd., [1924] 4 D.L.R. 824, [1924] S.C.R. 80, distd]
APPLICATION challenging certain tax exemptions.
B. F. Squair, for applicant.
A. F. James, Q.C., for respondent.
WILSON, J.:--Applicant challenges the action of the re- spondent municipality in according certain tax exemptions. These relate to two categories of lands, the first being por- tions of an Indian reserve Iying wholly within the respondent municipality, and the second being lands owned by the muni- cipality itself. In each case, however, the concerned parcels are occupied by lessees for purposes unrelated to the owner, otherwise than by way of the income springing from the lease.
Exhibits 2, 3 and 4 were filed as typical of disposition of lands on the Rolling River Indian Reserve. The tenants, sixty- seven in number and none of them an Indian, in each case occupy land under a formal lease from Her Majesty, presum- ably under the authority of s. 58 [am. 1956, c. 40, s. 14] of the Indian Act, R.S.C. 1952, c. 149 [now R.S.C. 1970, c. I-6, proclaimed in force July 15, 1971]. It could have been done by way of "surrender" under s. 37 of the Act: and see Cor- poration of Surrey et al. v. Peace Arch Enterprises Ltd. et al. (1970), 74 W.W.R. 380. In any event, the council of the band are in complete agreement with the creation and existence of such leases, the tenants occupying the concerned lands for grazing or farming.
Respondent apparently adopted the practice of addressing to each lessee a demand for tax, ex. 5, reading in part as follows:
The Department of Indian Affairs states, quote "The Indian
Affairs Branch will not be responsible for the collection of taxes."
Each lease form of the lessee contains the following clause "that
the lessee will pay and discharge all rates, taxes, duties and assess-
ments whatsoever now charged or to be charged upon the said
demised premises or upon the lessee or occupier in respect thereof
or payable by either in respect thereof."
The Department of Municipal Affairs of the Province of Mani-
toba, rules that the lands of the Indian Reserve are exempt from
all taxation, but that the "Right, Interest, or Estate in such land"
is liable to taxation. In other words, we are not trying to tax the
land(s) but only the interest in it, as allowed under the Act. The
interpretation of this is that we must "tax", as we are doing.
While not in the language cited, each of the leases before me contains a clause whereby the lessee agrees to pay taxes. By s. 86(1) of the Indian Act, subject to exceptions not here applicable, exempt from taxation are:
(a) the interest of an Indian or a band in reserve or sur-
rendered lands, and
(b) the personal property of an Indian or band situated on
a reserve,
and no Indian or band is subject to taxation in respect of the owner-
ship, occupation, possession or use of any property mentioned in
pargraph (a) or (b) or is otherwise subject to taxation in
respect of any such property; . . .
Title to the reserve is in Her Majesty in right of Canada and, of course, by s. 125 of the B.N.A. Act, 1867, "No lands or property belonging to Canada or any Province shall be liable to taxation." [Italics added.] Section 2(2) (b) of the Municipal Assessment Act, R.S.M. 1970, c.M226 [enacted 1970, c. 33], exempts from municipal taxation "Lands held in trust for any tribe or body of Indians". Nevertheless, and no doubt relying upon the opinion exhibited to the taxpayer with ex. 5, supra, the municipality assessed tax, but owing to the storm of protest that followed, the lands described in the leases in question were transferred to the "Exempt" section of the tax roll.
So also were certain lands, owned by the municipality itself, but occupied by mobile homes -- "house trailers" -- some on and some off the wheels. The owners having been assessed for tax, this, too, was protested, the taxpayers in this instance pointing to s. 2(3) (a) of the Municipal Assessment Act, which exempts from taxation "Lands belonging to, or held in trust for, the municipality the council of which levies the taxation".
Broadly, the argument turns upon the construction of the taxing statute, to determine whether the interest of the Crown is being taxed, or the interest of a private person; to borrow from Mr. Justice Laskin in his Canadian Constitutional Law, 3rd ed., p. 768. Earlier, at p. 767, he remarks that the tax immunity given by s. 125 of the B.N.A. Act, 1867, to "lands or property belonging to Canada" is an immunity in favour of lands vested in the Crown, and that s. 125 does not operate to confer immunity upon private persons who have some interest in Crown land. By analogy, the same may be said of the immunity created by s. 2 of the Municipal Assessment Act in favour of municipal lands.
Applicable, too, are the following provisions of the Muni- cipal Assessment Act :
By s. 7(1):
7 (1) The right, interest, or estate, of an occupier in Crown land or land exempted from taxation under this or any other Act, whether used by the occupier in an official capacity or as a
servant or otherwise, is liable to assessment and taxation from the date of the occupancy or claim of the occupier, who may be assessed therefor.
and s. 17(1):
17(1) Subject to subsection (2) of section 7 [not here applicable] in the assessment of the right, interest, or estate, of an occupier in Crown land or in land exempted from taxation under this Act or any other Act, the occupier shall be deemed to be the owner of the right, interest, or estate, and the assessor shall assess the right, interest, or estate to him; and it is not necessary to set forth correctly or at all the particular nature of the right, interest, or estate so assessed.
Section 1(g):
1. In this Act,
(g) "land" means land, messuages, tenements, and heredita-
ments, corporeal and incorporeal, of every kind and descrip-
tion, whatever the estate or interest therein and whether
legal or equitable . . . and includes
(ii) . . . the right, interest, or estate, of an occupier to
or in Crown or tax exempted land, or in any building
thereon whether or not it is affixed to the land; but
excepting also the right or interest of an employee
of the government in Crown lands that he is occupy-
ing as his residence;
(i) "occupier" as used with relation to Crown lands includes
lessee, licensee, permittee, purchaser, homesteader, pre-emption
entrant, and squatter and a person claiming through or under
any of them; and as used with relation to other land exempt
from taxation, includes any such person and also the employee
of any of them who is in occupation of the lands;
These definitions are not significantly different from those before the Privy Council in Smith v. Rur. Mun. of Vermillion Hills, 30 D.L.R. 83, [1916] 2 A.C. 569, [1917] 1 W.W.R. 108, of which, at p. 86, Viscount Haldane said they
make it easy to interpret the expression "land" as excluding any interest which still remains in the Crown. Their Lordships agree with this reasoning. They are of opinion that, although the appel- lant is sought to be taxed in respect of his occupation of land the fee of which is in the Crown, the operation of the statute imposing the tax is limited to the appellant's own interest. It appears to them that not only can the statutes be read as meaning this and no more than this when it uses the word "land," but that they ought to be so read in order to make them consistant with s. 125 of the B.N.A. Act of 1867 and not a nullity.
Starting with Crosskill v. Sarnia Ranching Co. (1901), 5 Terr. L.R. 181, the Courts have consistently distinguished between taxation of an owner, or the interest of an owner, of lands, and the beneficial enjoyment of the use of such lands by an occupier, so that the matter of such taxation is "a draft-
ing problem rather than a constitutional issue", to borrow again from Laskin, op. cit., at p. 770. In every such case the liability for tax is personal, a debt owed by the taxpayer to the taxing authority enforceable by suit or distress under the Municipal Act, R.S.M. 1970, c. M225 [enacted 1970, c. 100]: Re Spring Creek School District (1904), 7 Terr. L.R. 259.
Indeed, the term "occupier" takes in the interest of a mere squatter, an interest in fact taxed in Rur. Mun. of Spy Hill v. Bradshaw (1912), 7 D.L.R. 941, 2 W.W.R. 399, where, although in different language, the effect of the Saskatchewan legislation was, I think, the same.
The question reached the Supreme Court of Canada with Calgary & Edmonton Land Co. v. A.-G. Alta. (1911), 45 S.C.R. 170, when the Court were at one in dismissing an appeal against the taxation of lands occupied by the appel- lant, but for which patent from the Crown had not yet issued. Davies, J., said at p. 179, "The interest of the Crown what- ever it might have been could not be taxed, but the beneficial interest of the appellants certainly was not exempted under or by virtue of . . ." (s. 125). Idington, J., p. 185, "the estate or interest of the appellants is all that is touched and all that becomes forfeitable or forfeited if not redeemed"; and Anglin, J., at p. 191:
. . . it is within the power of a province to authorize the taxation of the beneficial or equitable interest of a subject in lands of which the Crown in right of the Dominion holds the legal title and in which it has some beneficial interest as well. I think that full effect is given to section 125 of the "British North America Act, 1867," by holding that it precludes the taxation of whatever interest the Crown holds in any land or property and that so long as such interest subsists, the taxation of any other interest in the land and any sale or other disposition made of it to satisfy unpaid taxes, while valid, is always subject to the rights of the Crown which remain unaffected thereby.
This last case was approved by the Privy Council in Ver- million Hills, supra, where the taxpayer was the lessee of two parcels of Crown lands, using them for grazing. The principle there affirmed -- that the tax is not one imposed on the land itself, which would conflict with s. 125, but rather it is a tax imposed only on the "interest" of the tenant of such lands -- was applied by their Lordships in City of Montreal v. A.-G. Can. and A.-G. Que., 70 D.L.R. 248, [1923] A.C. 136, 92 L.J.P.C. 10, and in Bennett & White (Calgary) Ltd. v. Muni- cipal District of Sugar City (No. 5), [1951] 4 D.L.R. 129, [1951] A.C. 786, 3 W.W.R. (N.S.) 111.
As to the basis for assessment, in the Montreal case, Lord Parmoor said, at p. 253:
Their Lordships in this respect agree with the reasons given in
the judgment of Meredith, C.J.O., in Re Town of Cochrane and
Cowan (1921), 64 D.L.R. 209, at p. 213, 50 O.L.R. 169:--
"I see no reason why a Provincial Legislature may not provide
that, in assessing the interests of an occupant of Crown lands or
of any other person in them, it shall be assessed according to the
actual value of the land, or in other words, that the taxes payable
by him shall be based on that value; the manifest injustice that
would otherwise exist, at all events in the case of an occupant or
tenant, is obvious. He would be assessed only for the value of his
interest, which might be little or nothing, while his neighbour,
who is an occupant or tenant of property owned by a private
person, would be taxed on the actual value of the land."
In British Columbia the basis is set out with some particu- larity in the Municipal Act, R.S.B.C. 1960, c. 255, and see Re Lynn Terminals Ltd. Assessment (1963), 40 D.L.R. (2d) 925, 44 W.W.R. 604.
With City of Halifax v. Fairbanks, [1927] 4 D.L.R. 945, [1928] A.C. 117, [1927] 3 W.W.R. 493, the Privy Council rejected the plea that such taxation offended against s. 92(2) of the B.N.A. Act, 1867 as being an indirect tax, falling upon the lessor in the way of a reduction in the rental income from the land. Of that argument, Viscount Cave, L.C., said [quoting Bank of Toronto v. Lambe (1887), 12 App. Cas. 575 at pp. 581-2], at p. 948:
"Doubtless, such remarks have their value in an economical dis- cussion. Probably it is true of every indirect tax that some persons are both the first and the final payers of it; and of every direct tax that it affects persons other than the first payers; and the excellence of an economist's definition will be measured by the accuracy with which it contemplates and embraces every incident of the thing defined. But that very excellence impairs its value for the purposes of the lawyer. The legislature cannot possibly have meant to give a power of taxation valid or invalid according to its actual results in particular cases. It must have contemplated some tangible dividing line referable to and ascertainable by the general tendencies of the tax and the common understanding of men as to those tendencies."
And (at p. 950) while it may be true to say as to any impost that the taxpayer would very probably seek to pass it on to others, it may none the less be a tax on property, and so remain within the category of direct taxes, "It is the nature and general tendency of the tax and not its incidence in particular or special cases which must determine its classification and validity".
So, the possibility that rentals might be reduced did not defeat the tax in City of Vancouver v. Chow Chee, [1942] 1 W.W.R. 72, 57 B.C.R. 104, where the taxpayer was a truck farmer raising his produce on land leased from an Indian
reserve, a case on all fours with that before me. Of course, if in fact what occurs is clearly an attempt to tax reserve land as such, the tax must fail: Town of Kamsack v. Canadian Northern Town Properties Ltd., [1924] 4 D.L.R. 824, [1924] S.C.R. 80, but that is not the case before me.
And see North West Lbr. Co. v. Mun. Dist. of Lockerbie, [1926] 1 D.L.R. 20, [1926] S.C.R. 155; City of Vancouver v. A.-G. Can. et al., [1944] 1 D.L.R. 497, [1944] S.C.R. 23; Phillips and Taylor v. City of Sault Ste. Marie, [1954] 3 D.L.R. 81, [1954] S.C.R. 404, and Re Halifax City Charter (1966), 53 M.P.R. 22. In the Phillips case, where the taxpayer was the employee/occupant of premises owned by the Crown, Taschereau, J., rejected the argument that the tax was in- direct because a tax so levied would be "passed by the Crown servants, from whom it is demanded, to the Crown".
And so, there will be a declaration that the interest of the several lessees in the subject lands is liable to assessment and taxation, to be removed from the "exempt" column and placed in the "Taxable" column of the assessment and tax rolls. The order of the Court of Revision granting the exemption so denied is set aside. Applicant is entitled to costs.
Order accordingly.