Zoccole v. R. - FCA: “Connecting factors” test determines whether income from Reserve

Zoccole v. R. - FCA:  “Connecting factors” test determines whether income from Reserve


Zoccole v. Canada  (November 18, 2015 – 2015 FCA 258, Dawson (author), Ryer, Webb JJ.A.).

Précis:   This was an appeal from a Tax Court decision blogged earlier on this site under the name  Baldwin v. The Queen, 2014 TCC 284.  The case dealt with the appellants’ claim to an exemption under paragraph 87(a)(b) of the Indian Act in respect of income earned on a Reserve.  The Tax Court held that the income in question was not connected with a reserve and dismissed the appeals.  Three of the appellants appealed to the Federal Court of Appeal.

The Court held that the Tax Court had correctly applied the “connecting factors” test.  The appeals were dismissed from the bench with one set of costs.

Decision:   The appellant argued that the salaries in questions were debts situate on a reserve.  In the alternative they argued that the Tax Court Judge misapplied the “connecting factors” test.

[3]               The appellants raise a number of issues in these appeals. The essence of their submissions is that the salaries owed to them are a simple debt; the situs of the debt must be determined in accordance with the common law principle that such a debt is situated at the location of the employer. Here, Native Leasing Services is located on the Six Nations of the Grand River Nation Reserve, and in the present case, following the decision of the Supreme Court of Canada in Nowegijick v. The Queen, [1983] 1 S.C.R. 29, this is determinative with respect to the location of the appellants’ employment income.

[4]               In the alternative, in the event of ambiguity about the application of this common law principle, other connecting factors may be considered to locate the situs of the appellants’ employment income, but the Judge erred in the application of those factors.

The Federal Court of Appeal held that the Tax Court had not erred in applying the “connecting factors” test:

[5]               In Horn v. Canada (Minister of National Revenue), 2008 FCA 352, 302 D.L.R. (4th) 472, a case concerning other employees of Native Leasing Services, this Court held that the “connecting factors” test should be applied to determine where employment income is situated. See also: Kelly v. Canada, 2013 FCA 171, 446 N.R. 339, and Pilfold Estate v. Canada, 2014 FCA 97, 459 N.R. 159. The appellants have not shown these decisions to be manifestly wrong.

[6]               Additionally, by analogy, in Bastien Estate v. Canada, 2011 SCC 38, [2011] 2 S.C.R. 710, the Supreme Court applied the “connecting factors” test to determine the location of interest income.

[7]               It follows that the Judge did not err in law by applying the “connecting factors” test to determine whether the appellants’ salaries were property “situated on a reserve”. Nor have the appellants established that the Judge made any palpable and overriding error in the application of the “connecting factors” test to the evidence before her. While the appellants may wish that the Judge had weighed the factors differently, they have not demonstrated any palpable and overriding error in her appreciation of the evidence or the weight she gave to each connecting factor.

As a result the appeals were dismissed from the bench with one set of costs.