Justice Campbell of the Federal Court dismissed an application by the Buffalo Point Cottagers that challenged The First Nations Tax Commission’s (“Commission”) decision in implementing a tax regime with respect to the Applicant’s leased lands.

The Reserve Lands of the Buffalo Point First Nation are located in the southeast corner of the Province of Manitoba along the shores of the Lake of the Woods.  Buffalo Point First Nation is the home of the First Nation’s members, and also the home of full-time and recreational non-Aboriginal cottagers who reside on reserve lands available to the First Nation for lease purposes.

The Buffalo Point First Nation, acting through its wholly owned corporate entity, the Buffalo Point Development Corp. LTD., is the lessor of the leased lands (collectively referred to as “Buffalo Point”), and the Applicant, an authorized representative of cottage owners, who are lessees of the lands (“Cottagers”). The relationship between Buffalo Point and the Cottagers was developed to meet a mutual need to establish a reliable lessor and lessee financial agreement.

In 2005, the First Nations Fiscal and Statistical Management Act, S.C. 2005, c.9 (“Act”), was passed which made it possible for Buffalo Point to replace the agreed cost-sharing regime with a statutory land tax regime, and Buffalo Point signalled an intention to do so. The Commission administers the Act, and as early as 2010 the Cottagers began to consult with the Commission on what impact they might expect to their leasehold rights from the implementation of a tax regime by Buffalo Point. At that time, the Cottagers advised the Commission’s staff that, under the 2008 Agreement, an agreement had just been reached respecting their annual fees to be paid for the next two years and requested that their concerns about the disruptive effect of the imposition of a tax be considered. The Cottagers received assurances from the Commission’s staff that the transition to a tax regime would be successful and that the Commission would work with Buffalo Point to resolve any concerns.

Nevertheless, after much consultation, on June 25, 2012, in a single decision the Commission approved six Tax Laws proposed by Buffalo Point; namely: Buffalo Point First Nation Property Assessment Law, 2011; Buffalo Point First Nation Property Assessment Amendment Law, 2012; Buffalo Point First Nation Property Taxation Law, 2011; Buffalo Point First Nation Property Taxation Amendment Law, 2012;Buffalo Point First Nation Annual Rates Law, 2012; and Buffalo Point First Nation Expenditure Law, 2012.

The change resulted in a shift from the cost-sharing regime to a land tax regime which was not well accepted by the Cottagers because, in their view, they unjustly lost the financial control over their lease rates and the financial stability that they enjoyed in the cost-sharing regime.

As a result, the Cottagers sought legal redress in two proceedings; one through a Manitoba Court of Queen’s Bench action in which the Cottagers seek to enforce an arbitration clause in the 2008 Agreement; and the second is the present Application that challenges the Commission’s decision in implementing the tax regime with respect to the Cottagers’ leased lands.

By the present Application, the Cottagers attack the Commission’s approval of the entire tax regime proposed by Buffalo Point as well as substantive and procedural issues with respect to the Commission’s application of the Act.  The Cottagers argue that, because the tax regime overrides the legal rights of the Cottagers arising from the 2008 Agreement negotiated with Buffalo Point, the Commission was required to, but failed to, take this reality into consideration and to give it effect in deciding whether to approve the tax regime.

In addition, the Cottagers advance fairness arguments that misrepresentations and evidentiary mistakes made by Commission staff in the course of implementing the tax regime are such that the decision under review must be set aside.

Further, the Cottagers’ main concern about the implementation of the tax regime is the resulting increased annual lease costs imposed. With respect to this concern, the primary focus of the Application is on one specific aspect to the tax regime placed before the Commission for approval: the approval of the Buffalo Point First Nation Annual Rates Law, 2012 (“Rates Law”).

With regard to the standard of review, Justice Campbell of the Federal Court, held the standard of review of the Commission’s substantive decision-making was reasonableness, citing Canadian Artists’ Representation v. National Gallery of Canada, 2014 SCC 42 (CanLII), at para. 13.

Justice Campbell of the Federal Court held the Commission’s substantive decision-making met the standard of reasonableness, and there was no breach of the duty of fairness owed to the Cottagers.  In dismissing the Application, Justice Campbell addressed five issues: (i) the Commission’s Consideration of the 2008 Agreement; (ii) the Substance of the Commission’s Consideration of Buffalo Point’s Rates Law; (iii) the Process of the Commission’s Consideration of Buffalo Point’s Rates Law; (iv) the Commission Decision-Making Error; and (v) the Commission’s Consideration of the Cottagers’ Final Representations.

The Commission’s Consideration of the 2008 Agreement

The Cottagers argued that there was no evidence on the record, apart from the contents of the decision itself, to establish that the Commissioners themselves knew of their concerns and took them into consideration in rendering the decisions under review.  However, there was ample evidence that Commission staff knew of the Cottagers’ concerns.  

Justice Campbell rejected this position for two reasons: (i) the record was incomplete because the Cottagers did not make a request under Rule 317 of the Federal Courts Rules, for material relevant to the Application that was in the exclusive possession of the Commission to support their argument with evidence rather than speculation; and (ii) Justice Campbell held, “the Commission is a specialized tribunal charged with very serious decision-making responsibilities, a presumption exists that knowledge possessed by the Commission’s staff is attributable to the Commissioners, unless evidence can be found to rebut that presumption.  There was no such evidence.”

The Commission’s Consideration of Buffalo Point’s Rates Law: Substance

The Cottagers also argued for the imposition of a tax rate that would result in taxes comparable to those paid under the cost sharing arrangement of the 2008 Agreement. 

Pursuant to s. 35(1)(a) of the Act, the Commission established the Standards for First Nation Tax Rates Laws, 2011 (“Rates Law Standards”). Section 5 of the Rates Law Standards contains a requirement for “Rate Setting in the First Taxation Year”. Since the Cottagers were not subject to a former taxation authority, Buffalo Point was required to apply the same tax rate as a “reference jurisdiction”  which is defined as “the taxing jurisdiction that a First Nation specifies to the Commission for the purpose of setting tax rates and comparing local service standards”.

The Cottagers had no objection to the selection by Buffalo Point of the Rural Municipality of Piney (“Piney”) as the reference jurisdiction but they had an expectation that the Piney rate would be adjusted regarding the school tax portion because Buffalo Point did not provide a school service.  However, the Rates Law Standards did not allow for adjustments to the reference jurisdiction’s tax rate.

The result of Buffalo Point selecting Piney as the reference jurisdiction and the Commission approving the Tax Rate Law, was that the Piney’s mill rate of 30.97 was applied to the Cottagers’ leased lands. However, the Cottagers objected to the rate because the rate does not take into account their “no school tax” expectation. 

Justice Campbell of the Federal Court held that the selection of the geographically adjacent Piney was reasonable and the Commission’s approval of it was reasonable because, “while the definition of “reference jurisdiction” requires a comparison of local service standards in selecting the tax rate, there is no requirement that a jurisdiction must be selected that provides the exact same services, if that might even be possible”.

Further, the Cottagers objected to the tax regime because they would be required to pay much more on their leases than the shared cost amount they were used to paying under the 2008 Agreement.   However, Buffalo Point made a strong effort to mitigate the effect of the new rates that benefitted the Cottagers.  Justice Campbell stated: 

While the mill rate proposed by Buffalo Point and approved by the Commission was that for RM Piney at 30.97, the Buffalo Point mitigation arises from the actual tax that the Cottagers were required to pay in the first year of the tax regime. By operation of s. 6 of the Rates Law Standards, the amount paid in the first year is required to be the amount paid in the second year and all subsequent years, and in the normal course, the tax bill cannot increase in a given year by more than the annual rate of national inflation. Thus, in the first year of 2012, because the Cottagers received a substantial credit on their tax bill and only paid 48% of what would otherwise be required, that credit resulted in an effective tax rate of 16.4 mills, and resulted in an effective rate being paid in 2013 of 17 mills because of an increase in the rate of inflation, and 18.4 for 2014.

As a result, Justice Campbell stated, “the impact of this matter of fact is to significantly reduce the weight that can be placed on the Cottagers’ argument that significant prejudice to them arose from the imposition of the tax regime”.

The Commission’s Consideration of Buffalo Point’s Rates Law: Process

The Cottagers also argued that erroneous statements made by the Commission’s staff misled the Cottagers, and therefore, the decision under review should be set aside because of a breach of the duty of fairness the Commission owed to the Cottagers to give correct advice. 

The record showed that there was extensive contact between the Cottagers, Buffalo Point, and the Commission’s staff pursuant to, and compliant with, the Commission’s purposes under s. 29 of the Act.   The Commission’s staff and Buffalo Point made misleading representations.  However, there is no evidence on the record to establish that the representations were made in anything but good faith.

The Cottagers were misinformed that a Taxation Representation Law (“TRL”) was mandatory under the Act. Section 5(1)(c) of the Act makes it clear that a First Nation may make laws “respecting procedures by which the interests of taxpayers may be represented to the council”.  Therefore, there is no requirement in the Act that a First Nation must create a TRL, but rather, it was optional.

Justice Campbell dismissed the Cottagers’ argument concerning a breach of duty of fairness and stated, “[w]hile the Commission, through its staff, failed to meet the duty owed to the Cottagers to give correct advice, in my opinion, apart from very understandable deflated expectations, there is no evidence that the Cottagers relied upon the representations to their detriment. Therefore, because there is no detriment, I find there is no available remedy.”

Commission Decision-Making Error

The June 25, 2012 decision under review was delivered in collaborative decision-making between seven Commissioners on five Tax Laws resulting in a single decision. Each Tax Law was advanced for approval, the material in support of passage was tabled, a motion was made for approval, and on a recorded vote, the motion was passed without a narrative explaining the reasons.

The Cottagers argue that this form of decision-making is deficient because the decision does not include reasons, and it is impossible to know what factors were considered in reaching a decision.  However, Justice Campbell held, “… in applying the provision, the only determination that is required to be made is whether a given tax law complies with the Commission’s standards. Given the Commission’s decision-making obligation required by law, and the procedures for approval established by the Commission, in my opinion the Cottagers’ objections are misplaced”.

In addition, the Cottagers took issue regarding the sequencing of the approval process because the technical analysis of Buffalo Point’s proposed Laws was conducted and signed off before the Commissioners met to reach a decision.  However, Justice Campbell indicated that it was clear that the technical analysis provided advice to the Commissioners, upon which they were entitled to act in reaching a decision.

Further, the Cottagers alleged that the Technical Review had found that the Assessment and Taxation Laws did not meet the Commission’s standards, and that this required Buffalo Point to rectify the problems found, and to resubmit the Laws for approval.  However, the Amended Laws were approved upon the Commission granting exemptions from the usual notice provisions as permitted pursuant to s. 6(2) of the Act on finding that the amendments were not significant. Therefore, in the end, the problems were rectified and the Amended Laws were passed.

Finally, the Cottagers argued that they were prejudiced as a result because they were required to pay their taxes before they had a chance to challenge their assessments.  However, Justice Campbell gave this argument “no weight because there was never a question that the Cottagers could challenge their assessments in any event”.

Therefore, Justice Campbell held that none of the Cottagers’ concerns supported a finding of reviewable error and held the Commission’s decision-making was reasonable.

The Commission’s Consideration of the Cottagers’ Final Representations

On May 14, 2012, the Cottagers received notice that Buffalo Point had passed the Tax Laws on October 25, 2011 and that the Tax Laws had been sent to the Commission for approval. As a result, Counsel for the Cottagers sent a letter to the Commission, dated May 24, 2012, which set out their financial concerns with respect to the proposed laws.

The Cottagers argue that a breach of fairness arose from the fact that in the decision, the Commission did not provide a full narrative addressing the school tax issue or the recommendations advanced for consideration.

Justice Campbell held that there was no doubt that the Commission considered the letter because it is contained in documentation supplied by the Commission in the present Application. In addition, the letter was specifically referred to in the decision under review, and the recommendations advanced are specifically quoted.

Justice Campbell stated, “[i]n my opinion, given the mandatory nature of the purpose and scheme of the Act as described above, I find that the Commission’s duty of fairness to the Cottagers existed at the lower end of the spectrum.”             

With respect to the school tax issue, the Commissioner’s decision stated that the Cottagers received a 48% reduction in the tax burden imposed for the first year of taxation, and that the reduction, “meets the First Nation’s policy intention to moderate the impact on taxpayers from the transition to real property taxation from a fee for service regime”.

Finally, with respect to the recommendation, given the high level of consultation and engagement between the Cottagers, Buffalo Point, and the Commission beginning well in advance of the decision-making phase by the Commission under the Act, Justice Campbell stated it was not “unreasonable or a breach of the duty of fairness for the Commission not to accede to the Cottagers’ requests. At that point, all of the Cottagers’ arguments were already submitted, and a mediation process could not have impacted on the Commission’s statutory obligation to proceed to consider Buffalo Point’s Tax Laws for approval”.

Consequently, Justice Campbell of the Federal Court dismissed the application and awarded costs to the Respondents.


Other Author

Isabella Mentina


Aboriginal Law