Jewers, J.:—The applicant appeals from a decision of the Board of Revision of the respondent City of Thompson dated January 24, 1989 which dismissed the complaint of the applicant and sustained the assessment for the lands and premises known as 24 Westwood Drive, 336 Thompson Drive and 344 Thompson Drive in the City of Thompson in Manitoba. The applicant submits that the lands are exempt from taxation pursuant to paragraph 2(2)(b) of The Municipal Assessment Act, R.S.M. 1988, c. M226 in that they are lands held in trust for a tribe or body of Indians.
The parties were able to agree on the following facts:
1. Keewatin Tribal Council Inc. (the "Corporation") was incorporated and registered under the Corporations Act of Manitoba on March 15, 1979.
2. The Articles of Incorporation have not been amended or changed since the date of registration.
3. Paragraph 7 of the Articles of Incorporation indicates the members of the Corporation to be the following Indian Bands:
Northlands Band, Barren Lands Band, Churchill Band, Split Lake Band, York Factory Band, Fox Lake Band, Shamattawa Band, Nelson House Band, God's Narrows Band, Cross Lake Band, God's River Band, Norway House Band, Oxford House Band.
4. The members of those Bands and the War Lake Band are registered Indians and the Bands are constituted as tribes and bodies of Indians pursuant to the Indian Act (Canada).
5. The undertaking of the Corporation is restricted, by its Articles of Incorporation, to providing resource and human development among Indian people in Northern Manitoba.
6. By-Law No. 1 of the Corporation enacted on March 5, 1980, indicates that the members of the Corporation shall be composed of the elected chiefs from each of the following regions:
(a) The Northeast Region which includes the following Bands:
Northlands Band, Barren Lands Band, Churchill Band, Split Lake Band, York Factory Band, Fox Lake Band, Shamattawa
(b) The North Region which region includes the following Bands:
God's Narrows Band, God's River Band, Oxford House Band, War Lake Band, Cross Lake Band, Nelson House Band.
7. By-Law No. 1 of the Corporation re-enacted on July 5, 1988 (the “By-Law”), indicates the "Regular Members" of the Corporation to be the elected chiefs as representative of the following Indian Bands:
Northlands Band, Barren Lands Band, Churchill Band, Split Lake Band, York Factory Band, Fox Lake Band, Shamattawa Band, God's Narrows Band, God's River Band, Oxford House Band, War Lake Band.
There are no "Associate Members".
8. Article 2.02 of the By-Law indicates that:
The Corporation shall hold its assets in trust for the benefits of the members of the Bands comprising the Regular Members of the Corporation and upon dissolution or winding up of the Corporation any funds and assets of the Corporation remaining after satisfaction of its debts and liabilities shall be distributed equally among its Regular Members at the time of dissolution.
9. The Applicant's position is that the membership provisions of the By-Law determine the members of the Corporation and that the members of the Corporation are the elected chiefs of the Bands listed in Article 8.02 of the By-Law. The Respondents' position is that the Articles of Incorporation determines the members of the Corporation and that the members of the Corporation are the Bands listed in the Articles of Incorporation. To accommodate the differing positions of the parties for the purposes of this Agreed Statement of Facts, references hereinafter to the "members" of the Corporation shall be worded so as to encompass both positions.
10. The elected chiefs as representatives of Nelson House Band and Cross Lake Band, or Nelson House Band and Cross Lake Band, ceased to be members of the Corporation on July 27, 1987 and July 31, 1987 respectively. Neither Norway House Band, nor its elected chief, though the former is listed in the Articles of Incorporation, is or has been a member of the Corporation. No compensation or distribution of assets of any kind was made to Nelson House Band or Cross Lake Band or their elected chiefs on the cessation of them on their elected chiefs from membership in the Corporation. The elected chief of War Lake Band as representative of War Lake Band, or the War Lake Band, became a member of the Corporation in or about 1980 to 1981 though the exact date is not known.
11. Pursuant to the By-Law, the Regular Members of the Corporation elect a Board of Directors consisting of not fewer than 3 nor more than 11 directors who must each be a representative of a “Regular Member". The Board appoints an Executive Council of three Officers, which is subject to the direction of the Board of Directors. The Executive Council is responsible for, inter alia, carrying out the policies and directives of the members of the Corporation as determined by resolution at any meeting of the members of coordinating the day to day operations of the Corporation. The Executive Director is directly responsible for the daily management and operation of the Corporation. There are at present 11 Directors and 3 members of the Executive Council. They, the executive positions they hold, and the bands they are representatives of are as follows:
Chief Robert Wavey, Chairman, Fox Land Band, Chief Eric Saunders, Secretary, York Factory Band, Chief Larry Beardy, Vice-Chairman, Split Lake Band, Chief Marcel Okimaw, God's River Band, Chief Philip Michel, Barren Lands Band, Chief Alex Okemow, God's Narrows Band, Chief Sam Miles, Shamattawa Band, Chief Ila Bussidor, Churchill Band, Chief Arnold Ouskin, War Lake Band, Chief Jerome Denechezhe, Northlands Band, Chief Tommy Weenusk, Oxford House Band.
12. On or about July 3, 1985, the Corporation became the registered owner of the lands and premises in the City of Thompson legally described as follows:
subject to all reservations contained in The Crowns Land Act and commonly known as 24 Westwood Drive, 336 and 344 Thompson Drive North (the "Lands"). Located on the Lands are three apartment buildings, the two apartment buildings on Thompson Drive North having 17 suites used for student housing purposes. Twenty-four Westwood Drive has six suites rented for apartment purposes and six suites rented for day care purposes.
13. The Lands were purchased by the Corporation from Canada Mortgage and Housing for consideration of $130,000 which moneys were contributed to the Corporation by Her Majesty the Queen in Right of Canada as represented by the Regional Director General of the Manitoba region of the Indian and Inuit Affairs program on behalf of the Minister of Indian and Northern Development.
14. The Corporation is a special member of the non-share corporation, Keewatin Housing Association Inc. Keewatin Housing Association Inc. is the registered owner of approximately 40 properties, either single-family dwellings or duplexes, located within the City of Thompson. The Keewatin Housing Association Inc. has not claimed exemption from property tax under The Municipal Assessment Act for or with respect to any of these approximately 40 properties. The regular members of the Keewatin Housing Association are the elected chiefs of the constituent bands of the Keewatin Tribal Council and the directors of the Keewatin Tribal Council.
15. The Corporation executed a document entitled Trust Indenture and dated as of Jul 1, 1985, between it and Northlands Band, Barren Lands Band, Churchill Band, Split Lake Band, York Factory Band, Fox Lake Band, Shamat- tawa Band, God's Narrows Band, God's River Band, Norway House Band, Oxford House Band and War Lake Band (the "Trust Indenture"). Some of the Bands also have executed the Trust Indenture. The inclusion of the reference to the Norway House Band in the Trust Indenture, though it is not a signatory, was an error. Norway House Band is not, and has never been, a beneficial owner of the Lands as referred to under the Trust Indenture. The Trust Indenture was executed by all those who are signatories thereto sometime in the calendar year 1987.
16. The Trust Indenture has not been amended or revised in any manner.
17. At present, all the beneficial owners as referred to under the Trust Indenture, or their elected representatives are members of the Corporation and there are no other members.
18. The Lands were purchased to provide housing for students from the various member bands of the Corporation attending high school in Thompson. At present the student housing requirements are met by using 336 and 344 Thompson Drive North for student residences. The Corporation does not charge rent to the students or their member Bands with regard to the student residences. Funding comes from the student services program of the Corporation. Twenty-four Westwood Drive is rented at commercial rents at this time.
19. The buildings located on the Lands are managed by the Keewatin Housing Authority, a division of the Corporation. The daily operation of the buildings is the responsibility of the property manager employed by the Corporation. The three buildings are managed in the same fashion except for the amount of rent charged.
20. A resolution passed by the parties thereto (the band, the applicant, the applicant's board of directors) asserts that the Trust Indenture is legally effective and binding among them, that the Corporation has no beneficial interest in the lands and premises and that since July, 1985 and, in particular, throughout 1988 and up until the present time the said Trust Indenture has been in effect and operative and the said lands and premises have been held in trust and administered in accordance with the terms of the Trust Indenture.
21. By the City of Thompson Assessment Roll No. 188750 the Lands are classified by the respondent Provincial Municipal Assessor as liable for taxation.
22. On November 1, 1988, pursuant to The Municipal Assessment Act the Corporation applied to the Board of Revision for the City of Thompson for revision of the assessment roll affecting the assessment of the Lands and its liability to taxation.
23. On January 24, 1989, the Corporation received a notice of decision of the Board of Revision sustaining the assessment on the Lands.
The foregoing is essentially an exact reproduction of those portions of the agreed statement which I deem relevant, omitting certain documents which were attached as shedules.
The operative part of the trust deed is:
1. The Trustee hereby acknowledges and declares that it stands possessed of the Lands as bare Trustee only for and on behalf of the Beneficial Owners and the Trustee covenants and agrees that it shall at all times obtain the consent of the Beneficial Owners prior to and in respect of any and all dealings in connection with the Lands and it shall at all times receive and stand possessed of any and all monies, receipts, incomes or other rights or benefits arising out of the Lands on behalf of the Beneficial Owners and shall account to the Beneficial Owners for any and all benefits received by it from time to time in connection with or in any way relating to the lands; PROVIDED HOWEVER that the Beneficial Owner hereby indemnify and save the Trustee harmless of and from any and all losses, costs and expenses of whatsoever nature and kind that the Trustee may bear, suffer or incur by reason of its Trusteeship herein and any act in good faith done or omitted to be done by virtue of the terms hereof.
The “Beneficial Owners" referred to in the deed are the bands. The Trustee, the applicant, therefore holds the lands in trust for the bands.
The main submission of the applicant is that the lands are exempt from taxation as they are lands held in trust for a tribe or body of Indians pursuant to pararaph 2(2)(b) of The Municipal Assessment Act which reads:
2(2) The following lands are exempt from all taxation levied by the council of a municipality,
(b) lands held in trust for any tribe or body of Indians;
The submission of the applicant is really quite simple: The applicant holds the lands as trustee for certain Indian bands under a trust indenture dated July 1, 1985; the bands are within the definition of a "tribe or body” of Indians; and therefore the lands are exempt from taxation. All of the essential features of a trust are present: a trustee, namely the applicant; trust property, namely the lands in question; and beneficiaries, namely the In- dian bands. The applicant’s argument appears prima facie correct, and the appeal must be allowed, unless effect can be given to any one or more of the objections raised by the respondents.
The respondents submit that the lands are not exempt from taxation for a number of reasons including: that paragraph 2(2)(b) of the Act was intended to apply only to Indian reserves and that the lands in question are not such reserves; that the trust is a sham device to avoid taxation; that, in any event, the trust is void because the trustee and the beneficiaries are essentially the same; that the trust is void because the Indian bands as unincorporated associations cannot be the beneficiaries of a trust; and that the applicant, by transferring its assets to a trust naming its members as beneficiaries, has effected a distribution of its assets and has caused its members to receive a pecuniary gain contrary to The Corporations Act, R.S.M. 1987, c. C225.
The respondents submit that the application of paragraph 2(2)(b) of the Act should be confined to Indian reserves. They cite authorities to show that the term "trust" was used in legislation dealing with Indian reserves.
In the text Aboriginal Peoples and the Law: Indian, Metis and Inuit Rights in Canada 1985 (Morse, Bradford W., (Ed.) 509 there is the following:
By 1867 it was common to use the term "trust" in legislation dealing with Indian reserves. Additionally, the idea of protection had been established both conceptually and in the language of legislation. As suggested earlier, the rationale behind the assignment of legislative jurisdiction over Indians and Indian lands to the federal Parliament in 1867 appears to have been the protection of Indians from local competing settler interests. While the British North America Act itself does not use the term "trust" in relation to reserves, trusteeship terminology occurred in later constitutional documents. In 1871 the Terms of Union of British Columbia and Canada provided:
"The charge of the Indians, and the trusteeship and management of the lands reserved for their use and benefit, shall be assumed by the Dominion Government . . ."
In 1912 lands were added to both the provinces of Quebec and Ontario. The transfers were effected by joint federal-provincial legislation. In each case the legislation provided:
"That the trusteeship of the Indians in the said territory, and the management of any lands now or hereafter reserved for their use, shall remain in the Government of Canada subject to the control of Parliament.”
For example, section 6 of An Act providing for the organisation of the Department of the Secretary of State of Canada and for the management of Indian and Ordnance Lands, S.C. 1868, 42 stated:
6. All lands reserved for Indians or for any tribe, band or body of Indians, or held in trust for their benefit, shall be deemed to be reserved and held for the same purposes as before the passing of this Act, but subject to its provisions; and no such lands shall be sold, alienated or leased until they have been released or surrendered to the Crown for the purposes of this Act.
In the Indian Act, S.C. 1951, c. 29 "reserve" was defined as follows:
"Reserve" means a tract of land, the legal title to which is vested in His Majesty, that has been set apart by His Majesty for the use and benefit of a band;
(See s. 2(1)(0).)
In subsection 18(1) of the same Act it was stated that "reserves shall be held by His Majesty for the use and benefits of the respective bands for which they were set apart”.
The Indian Act, R.S.C. 1970, c. 1-6 is in the same terms.
It will be seen that in these latter Acts the use of the word "trust" is no longer employed.
The words “for the use and benefit of” do suggest the notion of a trust, but it has been held that the relationship of the Crown and Indian bands with respect to reserve lands does not amount to a "trust" in the private law sense, although it does give rise to certain fiduciary obligations on the part of the Crown. See R. v. Guerin, [1984] 2 S.C.R. 335; [1984] 6 W.W.R. 481 (S.C.C.), particularly the remarks of Dickson, J. (as he then was) at 494.
The respondents traced the legislative history in Manitoba with respect to the tax exemption of tribes or bodies of Indians.
The Land Tax Act, 1873 S.M. 37 Vic. c. 42, paragraph 1(c) exempted from a land tax "land held for the benefit of any tribe or body of Indians”.
The Municipalities Act, S.M. 1875 38 Vic., c. 31, subsection 20(3) exempted from taxation "real estate vested in or held in trust for any tribe or body of Indians”.
The County Municipalities Act S.M. 1875 38 Vic., c. 41 subparagraph 52(b)(i) exempted from taxation "real estate vested in or held in trust for any tribe or body of Indians”.
Finally, reference should be made to section 87 of the Indians Act, R.S.C. 1985, c. 1-5 which exempts reserves from taxation and reads in part:
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
(2) No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.
The respondents submit that as it was common for legislatures to use the word "trust" in relation to reserve lands, particularly in the earlier statutes, therefore the Manitoba Legislature must have had reserve lands in mind when they enacted that lands held in trust for any tribe or body of Indians should be exempt from taxation. They further point out that the exemption was originally enacted at a time when the federal legislation did not provide such an exemption. I cannot agree with this submission. It may very well be that the legislature did contemplate that the exemption would cover Indian reserves, but, in my opinion, it cannot be said that they intended the exemption to apply only to reserves and not to be extended to other lands held in trust for a tribe or body of Indians. As the applicant points out if the legislature had intended the exemption to refer to Indian reserves—and Indian reserves only—they could have said so either by using the word "reserve", or some phrase incorporating that word, or by incorporating by reference the definition of "reserve" contained in the Indian Act. It may be that when the earlier legislation was enacted there was no land tax exemption for reserves contained in the federal legislation, but it was introduced subsequently and there is now no need to deal with the matter provincially. The Manitoba Legislature could have amended the municipal tax laws at any time to reflect this, and to delete the exemption if it had been intended that it should apply only to Indian reserves. The legislature has not done so, and, as noted by the applicant, The Municipal Assessment Act, C.C.S.M. c. M226 was enacted in 1970, after the use of the term "trust" in the federal legislation was discontinued and when there was a clear exemption of reserve land from taxation contained in the current Indian Act.
The respondents submit that one principle of construction is that before extending the interpretation or the meaning of a certain passage or phrase in a statute, one ought to look at the effects or consequences which might flow from it for they often point out the real meaning of the words, citing Medical Centre Apartments Limited v. City of Winnipeg (1969), 3 D.L.R. (3d) 525 at 542. They submit that under the Indian Act subsection 83(1) a band may assess and tax reserve land, but there is no provision for a bank to assess and tax non-reserve land, and that to grant an exemption to nonreserve land would result in an inconsistency. I am not able to follow this submission. Reserve land is exempt from taxation under the Indian Act and there is no inconsistency in making non-reserve land equally exempt. Nor is there an inconsistency in restricting the taxing power to the reserve land where the aboriginals essentially reside and the title to which is held by the Federal Crown. The respondents also submit that through the device of a trust, any tribe or group of Indians could hold and develop land tax free for commercial purposes for a profit, and that, in fact, is what is occurring with respect to at least one of the three properties in question. That may be so but it may reasonably have been in the contemplation of the legislature that, as aboriginals, the tribes or groups of Indians should be treated in this special way.
Treaties and statutes relating to Indians should be liberally construed. In Nowegijick v. The Queen, [1983] 1 S.C.R. 29; [1983] C.T.C. 20; 144 D.L.R. (3d) 193, the Supreme Court stated per Dickson, J. (as he then was) [at page 23]:
It is legal lore that, to be valid, exemptions to tax laws should be clearly expressed. It seems to me, however, that treaties and statutes relating to Indians should be liberally construed and doubtful expressions resolved in favour of the Indian. If the statute contains language which can reasonably be construed to confer tax exemption that construction, in my view, is to be favoured over a more technical construction which might be available to deny exemption. In Jones v. Meehan (1899), 175 U.S. 1, it was held that:
Indian treaties must be construed, not according to the technical meaning of their words, but in the sense in which they would naturally be understood by the Indians.
I would apply that principle here. In the absence of clear words absolutely requiring the exemption to be restricted to reserves, in my opinion, the use of the word "trust" should be liberally construed to apply to lands off the reserve.
(In a sense it is curious that the statute should have exempted lands held in trust for a tribe or group of Indians and not also lands owned outright by such bodies. However, it may be that those drafting the statute realized that in the normal case, a tribe or group of Indians as such, might not be legally capable of holding legal title to lands. See R. v. Cochrane, [1977] 3 W.W.R. 660 and Afton Band of Indians v. A.G. N.S. (1978), 85 D.L.R. (3d) 454; 29 N.S.R. (2d) 226. Theoretically, a tribe or group of Indians could be incorporated, but, for all practical purposes, it would seem that virtually any lands used or enjoyed by a tribe or group of Indians would likely have to be held in trust for them.)
The respondents submit that the trustee and the beneficiaries of the trust are really the same individuals, and that no real trust was created. I disagree. I do not think it can be said that the trustee and the beneficiaries are one and the same. The trustee is a distinct corporate body, and the beneficiaries are the member shareholders of that body. It is trite law that they have a legal existence, quite apart and distinct from the corporation of which they are shareholders.
The respondents submit that the trust was a "sham". Again, I am in disagreement.
The Supreme Court of Canada has suggested this definition of a sham transaction in Stubart Investments Limited v. The Queen, [1984] C.T.C. 294; 84 D.T.C. 6305 per Estey, J. at 298 (D.T.C. 6308):
1. A sham transaction: This expression comes to us from decisions in the United Kingdom, and it has been generally taken to mean (but not without ambiguity) a transaction conducted with an element of deceit so as to create an illusion calculated to lead the tax collector away from the taxpayer or the true nature of the transaction; or, simple deception whereby the taxpayer creates a facade of reality quite different from the disguised reality.
If a "sham" is to contain an element of deceit or deception, I cannot see any such features in the instant case. The transaction was completely above board, open and fully documented. Any person looking at the transaction and the supporting documents would be able to see exactly what occurred. There may be room for disagreement as to the legal effect and consequences of the transaction, but, in my view, it contained no elements of deceit or deception. There was a duly executed trust document which, on the face of it, constituted the applicant as a trustee for certain properties for certain Indian bands. The document was there for all to see, and the facts were there for all to know.
In fairness, I think it should be said that I did not understand the respondents to be stating, or even implying, that the applicant, or its various members, were guilty of any deceit or deception. They did, however, submit that the trust was a simulacrum. "Simulacrum" is defined by the Oxford English Dictionary as, inter alia, "something having merely the form or appearance of a certain thing, without possessing its substance or proper qualities.” See the discussion of this in Durnford, John W. "The Corporate Veil and Tax Law", Canadian Tax Journal, 1979 Vol. 23 #3 281 at 305.
In my opinion, it cannot be said that the trust was a mere "empty shell”. It is true that perhaps in the broad sense, there has not been much changed as a result of the trust. The applicant was bound to hold and use the lands for the benefit of its shareholder members in any event, and indeed, by-law #1 states just that. However, in the legal sense there has been a significant and real change in that all dealings with the land will now be governed substantially, if not wholly, by the law of trusts; and, for example, will be subject to The Trustee Act regarding sale or other disposition, variation, etc.
It is difficult to see any reason for the creation of the trust, other than to take advantage of the tax exemption. However, it is axiomatic in taxation law that one may arrange one's affairs as one sees fit in order to minimize the impact of tax. The Supreme Court of Canada has now made it clear that lack of any business purpose for a transaction is not enough to attract tax that otherwise would not be payable, and that even if the only reason for a transaction is to avoid tax, that is no reason to disregard the arrangement, and view it as a mere sham. See Stubart, supra.
The respondents submit that the Indian bands are unincorporated associations; that they are not legal entities; and that, in law, they are incapable
of being the beneficiaries of the trust. They cite the following from Waters: Law of Trusts In Canada (1974), page 97:
Trust beneficiaries are persons, but the objects of a trust may not be persons. They may be purposes. Purposes do not give rise to the question of capacity to receive, but they do give rise to the issue of whether trust objects may take the form of purposes. For instance, a testator may leave money on trust for the upkeep of his grave, or for the provision of toys at Christmas for deprived children. There are two problems here, despite the apparent innocence or merit in the purposes chosen. First, how is a trust in favour of a purpose to be enforced? A purpose is inanimate, abstract, and without legal personality. Secondly, how definite or certain have such purposes to be, even if they are to be accepted as legally possible? It must be possible for a court to determine the confines of the purpose the trustee is to carry out. These are questions that will be pursued later, but in the meantime it should be noted that an unincorporated association, like a golf club or playreading society cannot itself be the recipient of a property interest under a trust. Having no legal personality, the unincorporated association has no capacity to receive property. It is only the sum of its members. They are the recipients of the beneficial interest under the trust, and unless it is clear that the trust interest is for the members as persons, the trust for the association will be void. However, if the trust interest is for the members of the association, then the issue is as to the certainty of the class. If the court discovers that the gift is for future as well as present members, then the trust will fail for uncertainty of objects, but this is a different issue from capacity.
[Emphasis added.]
At page 425 of his text, Prof. Waters elaborates the following principles respecting trust gifts to unincorporated associations:
(1) If the gift is for a non-charitable purpose, the gift is void.
(2) If the gift is to the present members of the association and they can expend capital as well as income when they will, this is an absolute and immediate gift to persons, and is valid.
(3) If the gift is for present and future members so that the present members must hold it on trust, then the gift is void, both for uncertainty of beneficiaries and for perpetuity.
(It is to be noted charitable purpose gifts are an exception, and are perfectly valid on the principle that they will be enforced by the Attorney- General.)
No doubt, the Indian bands are unincorporated associations, but, with rather special features. They are not like an ordinary club or association, existing by consent of its members, but are creatures of statute, namely the Indian Act. Indian band councils have been likened to municipal councils. See the discussion of Cameron, J.A. in Whitebear Band Council v. Carpenters Provincial Council of Saskatchewan and Labour Relations Board of Saskatchewan, [1982] 3 W.W.R. 554; 135 D.L.R. (3d) 128 at 559-561 [W.W.R.] as follows:
As municipal councils are "creatures" of the legislatures of the Provinces, so Indian band councils are the "creatures" of the Parliament of Canada. Parliament, in exercising exclusive jurisdiction conferred upon it by s. 91(24) of the B.N.A. Act to legislate in relation to "Indians", an act of the Indian Act, R.S.C. 1970, c. 1-6, which provides . . . for the election of a chief and 12 councillors . . .
More specifically, section 81 of the Act clothes Indian band councils with such powers and duties in relation to an Indian reserve and its inhabitants [as] are usually associated with a rural municipality and its council . . . Hence a bank council exercises —by way of delegation from parliament—these and other munie- ipal and governmental powers in relation to the reserve whose inhabitants have elected it.
In summary, an Indian bank council is an elected public authority, dependant on parliament for its existence, powers and responsibilities, whose essential function is to exercise municipal and government power—delegated to it by parliament—in relation to the Indian reserve whose inhabitants have elected it . . .
Counsel for the applicant points out that in paragraphs 8 and 11 of Interpretation Bulletin IT-62, issued by Revenue Canada, an Indian band council has been likened to a “municipality” (municipal authorities are exempt from income tax under subsection 149(1) of the Income Tax Act.
I do not believe that the gift can be interpreted as being in favour of the individual members of the bands, either for the present, or for the present and future. For one thing, the trust deed just did not say that. The gift was to the bands. Furthermore, the number of people involved is very large and it could hardly have been the intention of the settlor to give an interest in these properties to such a great number of individuals so that they could each hold respective shares as tenants in common. In my opinion, the gift must be viewed as one to be used for the purposes of the individual bands: In other words, a purpose trust. Normally, such a trust might be void as a perpetuity and also for want of a beneficiary or beneficiaries. However, in Manitoba the situation is unique in that our legislature has abolished the rule against perpetuities, and so that is no longer a problem here. The only question is whether there is in this case, a want of beneficiaries.
As to this last point, the case of Re Denley's Trust Deed, [1968] 3 All E.R. 65 is instructive. There, land has been donated to trustees as a recreation ground for the employees of a certain company. This was a non-charitable purpose trust, although the trust was limited to the perpetuity period so it was not void as a perpetuity. There was, however, a problem of enforceability. Goff, J. stated, at page 69:
Counsel for the first defendant has argued that the trust in cl. 2(c) in the present case is either a trust for the benefit of individuals, in which case he argues that they are an unascertainable class and therefore the trust is void for uncertainty, or it is a purpose trust, that is a trust for providing recreation, which he submits is void on the beneficiary principle, or alternatively it is something of a hybrid having the vices of both kinds.
I think that there may be a purpose or object trust, the carrying out of which would benefit an individual or individuals, where that benefit is so indirect or intangible or which is otherwise so framed as not to give those persons any locus standi to apply to the court to enforce the trust, in which case the beneficiary principle would, as it seems to me, apply to invalidate the trust, quite apart from any question of uncertainty or perpetuity. Such cases can be considered if and when they arise. The present is not, in my judgment, of that character, and it will be seen that cl. 2(d) of the trust deed expressly states that, subject to any rules and regulations made by the trustees, the employees of the company shall be entitled to the use and enjoyment of the land.
The court went on to hold that the trust did not offend the beneficiary principle.
In the case at bar, the ultimate, albeit indirect, beneficiaries of the trust, are the individual members of the bands; indeed, ther are potentially very real benefits in that the children are entitled to use the properties free of charge as accommodation while attending school in Thompson. Even if this were not enough to give individual band members locus standi, surely the trust could, and would be enforced by the band councils, or any one or more of them, or failing that, the chiefs, or any one or more of them. If the band councils have a status similar to that of municipalities, surely they have the necessary standing to enforce the trust. The real question is one of enforceability and nothing else. There is absolutely no problem with a charitable purpose trust, which will be enforced by the Attorney-General, however impersonal its objects; similarly, there should be no problem with a non-charitable purpose trust where there are any number of persons with standing to enforce it.
Finally, I note that under Queen's Bench Rules 8.09 to 8.12 special recognition is given to an unincorporated association, and the rules provide for proceedings to be brought by or against an association in the name of the association (8.10); that an order against an association may be enforced against the property of the association, including property held in trust for the association (8.11(1)); and that an association shall, for the purposes of the rules, "be deemed to be a corporation”. These rules are surely wide enough to enable the bands to sue in their own names.
It follows that in Manitoba, at least, the type of trust in question is perfectly valid as a non-charitable purpose trust which neither contravenes the rule against perpetuities, for there is no such rule here, nor fails for want of beneficiaries having standing to enforce the trust.
The applicant is a corporation without share capital, incorporated under Part XXII of The Corporation Act, R.S.M. 1987, c. C225. The respondents submit that section 268 of the Act provides that such a corporation shall be carried on without pecuniary gain to its members, that all profits and accretions to the corporation shall be used in furthering its undertaking and that the applicant, by purporting to make its members beneficiaries of a trust of the corporate property, has, in effect, conferred a pecuniary gain upon the members in contravention of the Act.
Section 268 of The Corporation Act is as follows:
268 The articles shall be in the prescribed form and in addition shall state
(a) the restrictions on the undertaking that the corportion may carry on;
(b) that the corporation has no authorized share capital and shall be carried on without pecuniary gain to its members, and that any profits or other accretions to the corporation shall be used in furthering its undertaking; . . .
[Emphasis added.]
The above section does require that the articles of incorporation shall state that the corporation shall be carried on without pecuniary gain to its members. Clause 9 of the Articles complies with the section.
I take the undertaking to carry on without pecuniary gain to its members to mean that the corporation will not engage in enterprises or activities which would result in its members receiving some profit or commercial advantage. Generally speaking, the applicant was not carrying on business for the profit or commercial advantage of its members, and I do not think that an isolated transfer of assets would change this. The members were entitled to a distribution of assets on dissolution anyway.
The respondents also submit that the applicant, by transferring its assets to a trust naming its members as beneficiaries, has effected a distribution of its assets contrary to subsection 277(1) of the Act.
Subsection 277(1) reads as follows:
277(1) The articles of incorporation may provide that upon dissolution, the remaining property may be distributed among all the members or among the members of a class or classes of members or to one designated organization or more, or any combination thereof.
By-law No. 1(s. 2.02) provides that upon dissolution of the corporation, any funds and assets of the corporation remaining after satisfaction of its debts and liabilities shall be distributed equally among its regular members at the time of dissolution.
I see nothing in the Act, the Articles of Incorporation or the by-laws which would prevent the corporation from disposing of, or dealing with its assets—even in favour of its members —at any time during its existence and prior to dissolution. Subsection 277(1) référés to the “remaining assets" and, by its very terms, contemplates that there may be cases where the corporation will have disposed of assets prior to dissolution.
In my view, the applicant did not breach The Corporations Act by entering into the trust.
The appeal is allowed with costs.
Appeal allowed.