Appeal Watch: Obonsawin and Klymchuk Denied Leave to Appeal

Supreme Court Denies Leave in Indian Act GST Exemption Case

The Supreme Court will not reconsider whether an Aboriginal’s interest in employment contracts can be considered “property” for the purposes of tax exemption under the Indian Act.

In Roger Obonsawin v Her Majesty the Queen, 2010 TCC 222, the Tax Court of Canada determined that the appellant’s failure to collect GST owed by his clients for services he provided to them was not justified by his exemption from paying tax on personal property pursuant to section 87(1)(b) of the Indian Act, RSC 1985, c I-5. The Federal Court of Appeal (2011 FCA 152) upheld this decision and the SCC recently dismissed the appellant’s application for leave.

The appellant lived on a reserve and ran an “employee leasing business” where he hired a client’s employees and then “leased” them back to the placement organization. His clients involved not for profit organizations and none were Indian or located on any reserve. When the GST was implemented in 1991, he gave his clients a choice as to whether they wanted to pay GST because he didn’t view himself as a “tax collector for the GST” and he did not want to collect “from people that are just barely getting by and finally getting out of poverty.”

To determine whether the tax exemption could be extended to the appellant’s obligation to collect GST from his clients, the Tax Court considered two questions:

(a) is any personal property of the Appellant being taxed; or

(b) is the Appellant being taxed in respect of the ownership, occupation, possession or use of any of his personal property or is otherwise being subjected to taxation in respect of any such property?

The court concluded that the appellant’s business was clearly providing “services,” which is defined in section 123 of the Excise Tax Act, RSC 1985, c E-15, as being anything other than “property, money and anything that is supplied to an employer by a person who is or agrees to become an employee of the employer.” Because no prior jurisprudence demonstrated where “services could be property for the purposes of the Indian Act,” the court refused to allow the exemption to justify the appellant’s discretionary collection of GST.

The appellant also relied on the argument that “anyone who purchases his property that is situated on the reserve should not have to pay GST in relation to the purchase of this property.” The Tax Court also rejected this argument on the basis that if successful, it would allow anyone without status to purchase the appellant’s property without paying GST, and “effectively ‘enlarge’ the exemption to include persons who were not intended to benefit from the Indian Act.” The court also concluded that because the GST was imposed on his clients, rather than his own property, the obligation to collect GST “did not erode the appellant’s property,” nor did it “thwart the purpose of s. 87 of the Indian Act.”

Obonsawin demonstrates that the rights granted to Canada’s Aboriginal peoples under the current Indian Act should be read strictly to ensure that any benefits are not taken advantage of by non-status members of society. The court’s decision was reasonable because the evidence revealed that the appellant was aware of his obligation to collect GST, but chose to provide his clients with the option nonetheless. Though his motivations were benevolent, his actions were contrary to the law.

The long history of this case, which began with the appellant’s initial tax assessment in 1995, also demonstrates the persistent tension that exists between aboriginal communities and the Canadian government. While The Indian Act grants special rights and privileges, aboriginal communities are still denied the right to self-government and, as this case demonstrates, the right to conduct business in a manner that complements their own worldview. However, the recent First Nations Summit indicates that changing attitudes towards the Indian Act mean that challenges similar to Obonsawin’s in the future may be litigated within a new legal framework.

Klymchuk Leave Denial Ends 12 Years of Appeals and Retrials

Twelve years after his initial conviction for the first degree murder of his wife, Kirk Klymchuk has run out of grounds for appeal.  On February 9, the Supreme Court denied leave to appeal in Klymchuk’s third trial. Klymchuk was initially convicted in 2000 for the 1998 murder, but that conviction was set aside and a new trial ordered (see R v Klymchuk (2005), 203 CCC (3d) 341 (ONCA)). A mistrial was ordered in the second trial when the jury could not reach a verdict.  Finally, in 2008, he was convicted of second degree murder, a decision which was appealed to the Ontario Court of Appeal and upheld (2011 ONCA 258).

Klymchuk’s appeal was founded on the argument that the trial judge erred in failing to order disclosure of the identity of a confidential police informer and that, the verdict of second degree murder is unreasonable. Klymchuk’s wife was killed in her drive shed on April 12, 1998. Klymchuk reported to 911 that he found her unconscious with a severe head injury. The Crown theorized that Klymchuk had murdered her to clear the way for a life with his new girlfriend, while Klymchuk maintained that it was an unknown intruder who committed the murder in a break-and-enter.

A police informant claimed to have had conversations with associates who had spoken of a break-in in which a woman was struck in the head, evidence that would have favoured the accused. However, the trial judge ruled his testimony too unreliable to be admissible (based on a transcript of an interview with Crown counsel), a conclusion with which the appeal judge agreed. The identities of the men the informer claimed had spoken of the break-in were not revealed, as this would inevitably result in the disclosure of the informer’s identity.

The near absolute privilege of police informants is subject only to the “innocence at stake exception,” whereby the identity of the informant must be revealed to demonstrate the innocence of the accused. The trial court chose not to exercise the exception in this case, due to the unreliability of the evidence and the judge’s assessment that it was not “likely to raise a reasonable doubt as to the guilt of the accused.” The Court of Appeal agreed with this reasoning.

The unreasonable verdict line of reasoning holds that the jury could not accept the Crown’s theory, that Klymchuk staged a break-and-enter in order to murder his wife, and enter a verdict of second degree murder as such a killing would be planned and deliberate. The appeal judge rejects this as well, as it denied the possibility that the crime scene was manipulated to appear like a break-and-enter after the murder. He also points out that the jury is not bound to accept the Crown’s theory in rendering a conviction.

With the Supreme Court’s decision not to grant leave, it appears there is finally some finality to Klymchuk’s conviction.