Judgments

Decision Information

Decision Content

T-5178-79
E. H. Price Limited (Plaintiff) (Respondent)
v.
The Queen (Defendant) (Applicant)
Trial Division, Smith D.J.—Winnipeg, February 9 and September 27, 1982.
Customs and excise — Sales tax — Crown — Limitation of actions — Department of National Revenue demanding taxes and penalties dating back to February 1972 — Assessment commenced in July 1975 — Department filing certificate in February 1980, pursuant to s. 52(4) of Excise Tax Act — Plaintiff pleading collection proceedings barred by limitation — Defendant applying under R. 474(1)(a) for determination of questions of law — Is there a limitation period applicable to an action for collection of taxes and penalties under Excise Tax Act? — Parliament having constitutional power to estab lish limitation periods for collection of taxes — Crown's general immunity re statutes expressly removed with respect to limitations by general rules in s. 38 of Federal Court Act Rules subject to exception where "expressly provided by any other Act" — Provincial laws relating to limitations apply Manitoba statute establishing 6-year limitation — S. 52 of Excise Tax Act providing two methods of recovery: by action and by certificate — Certificate does not become judgment — S. 52(1) stating taxes or sums payable "recoverable at any time" — Express provision excepts case from general rules and exempts Crown from limitation — No particular form of words required for exception — "At any time" meaning unli mited period — Court action only affected by phrase — No conflict between s. 52 and s. 38 — S. 38 making non-exemp tion from limitation general rule for Crown — Trend toward eliminating Crown prerogative in relation to limitations — Exception in s. 38 preserving Crown' prerogative where Parlia ment provides — Circumstances wherein statutes provide money recoverable at any time as debt due to Her Majesty — Amendments to s. 52 of Excise Tax Act supporting judge's interpretation — Limitation period otherwise applicable: 6 years — Date on which limitation period would have com menced to run: date when taxes ought to have been paid — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 38 — Excise Tax Act, R.S.C. 1970, c. E-13, s. 52(1) (rep. & sub. S.C. 1980-81-82-83, c. 68, s. 21), (4) — The Limitation of Actions Act, R.S.M. 1970, c. L150, ss. 2(a),(h), 3(1)(g),(h) — The Special War Revenue Act, 1915, S.C. 1915, c. 8, s. 20 — Federal Court Rules, C.R.C., c. 663, R. 474(1)(a).
The Department of National Revenue (Customs and Excise) sought to collect, from the plaintiff, sales tax and penalties
dating back to February 1972. The relevant assessment of the plaintiff was begun in July 1975. In February of 1980, the Department filed a certificate in the Federal Court, pursuant to subsection 52(4) of the Excise Tax Act. The plaintiff brought an action, pleading that the collection proceedings against it were barred by limitation. The defendant then applied, under Rule 474(1)(a), for the determination of certain questions of law, the key question being: Is there a limitation period appli cable to an action for the collection of taxes and penalties under the Excise Tax Act?
Held, during the relevant period, there was no limitation period applicable to an action for the collection of taxes and penalties under the Excise Tax Act. There is no doubt that Parliament has the constitutional power to establish limitation periods relating to proceedings for the collection of taxes; and by section 38 of the Federal Court Act, the Crown's immunity is expressly removed with respect to limitations—"Except as expressly provided by any other Act". Also by virtue of section 38, provincial laws regarding limitations are made applicable to Federal Court proceedings; and the relevant provision of the Manitoba statute specifies a 6-year limitation period. However, one must take account of section 52 of the Excise Tax Act. That section sets out two methods for the recovery of taxes or other sums: first, by a court action, as dealt with in subsection (1); secondly, via a certificate of the Deputy Minister, dis cussed in subsection (2). Note that the filing of a certificate does not convert the certificate into a judgment. Subsection 52(1) states that taxes or sums payable are "recoverable at any time". These words constitute an express contrary provision, as contemplated by section 38 of the Federal Court Act. Thus, they oust the general limitation rule set forth in section 38, and exempt the Crown therefrom. No particular form of words is required in order for there to be such an express contrary provision. In this instance, the words "at any time" do refer to an unlimited period. These words are found only in subsection (1) of section 52, and therefore relate only to the alternative of a court action. There is no conflict between section 52 and section 38. Section 38 has indeed departed from earlier law, in that the Crown is prima facie bound by the limitation period stated in that provision, and exempted only where expressly provided. Nonetheless, and notwithstanding the trend towards eliminating the Crown's immunity in relation to limitations, the exception in section 38 does entail the preservation of the privilege of exemption, where Parliament so provides. Parlia ment has done this, by using the phrase "at any time", in several statutes. Furthermore, recent amendments to subsection 52(1) of the Excise Tax Act are supportive of the foregoing views.
COUNSEL:
J. Barry Hughes, Q.C. and P. N. Thorstein- sson for plaintiff (respondent).
H. Glinter for defendant (applicant).
SOLICITORS:
Inkster, Walker, Westbury, Irish, Rusen & Hughes, Winnipeg, for plaintiff (respondent).
Deputy Attorney General of Canada for defendant (applicant).
The following are the reasons for judgment rendered in English by
SMITH D.J.: This is an application by ,the defendant under Rule 474(1)(a) for the determi nation of three questions of law, which are stated in the notice of motion as follows:
(1) Is there a limitation period applicable to an action for collection of taxes and penalties under the Excise Tax Act, 1970, R.S.C. Cap E-13;
(2) If the answer to (1) above is yes, what is the limitation period applicable; and
(3) If the answer to (1) above is yes, what was the date from which the limitation period commenced for the taxes and penalties claimed?
An agreed statement of facts signed by the solicitors for the parties has been filed in the Court. With the exception of paragraph 9, which simply states the issues to be decided on this motion, already stated supra, the statement reads:
1. Representative of the Department of National Revenue, Customs and Excise, representing Her Majesty the Queen, as a result of an audit performed on the Plaintiff's business opera tions, claimed that the Plaintiff was indebted to Her Majesty the Queen on an accumulating basis since February 1, 1972, in the amount of $63,127.61.
2. Over the course of the last several years, the Plaintiff and Defendant have had numerous discussions with respect to the claimed outstanding taxes accrued and owing, and the Defend ant has also sent several notices for payment by registered mail the last of which was sent on September 10, 1979. The Defend ant continued to send periodic notices for payment to the Plaintiff by regular mail.
3. The Plaintiff has not acknowledged any liability to pay these taxes and/or penalties.
4. The total amount claimed by the Defendant due and owing as of January 31, 1980, is $95,116.06 sales tax and penalty together with additional penalty at the rate of two-thirds of one per cent per month on the sum of $63,127.61 from February, 1980.
5. On February 7, 1980, a Certificate dated January 31, 1980, was filed in this Honourable Court, pursuant to Section 52(4) of the Excise Tax [sic] certifying as due and owing and unpaid the following:
Sales Tax Due and Accruing for the Period from
February 1, 1972, to November 30, 1974 $63,127.61
Penalty Accrued to January 31, 1980 31,988.45
$95,116.06
together with additional penalty at the rate of Two-Thirds of One Per Cent per Month on the said sum of $63,127.61 from February 1, 1980, to date of payment.
'6. The date of the relevant assessment of the Plaintiff, which was commenced by Officials of the Department of National Revenue, Customs and Excise, was July 25, 1975.
7. The accumulated amount of taxes and penalties charged within the six years preceding the date of the filing of the said Certificate in this Honourable Court and included in such Certificate is $17,343.16 and $7,689.22 respectively for a total of $25,032.38.
'8. The Plaintiff by this Action raises the question of prescrip tion concerning collection of these taxes and penalties by virtue of the Excise Tax Act, The Federal Court Act of Canada and the Limitations [sic] of Actions Act of Manitoba.
There is no doubt that the Parliament of Canada has the constitutional power to enact that proceedings for the collection of taxes under the Excise Tax Act [R.S.C. 1970, c. E-13] or any other taxing Act of Parliament must be com menced within a time period established by Parliament.
Pursuant to this power under the Constitution of Canada, Parliament has enacted the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, section 38 of which reads:
38. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in such province, and a proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within and not after six years after the cause of action arose.
(2) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions referred to in subsection (1) apply to any proceedings brought by or against the Crown.
In the present case the cause of action arose in Manitoba. Therefore, in accordance with section 38 of the Federal Court Act, the laws in force in Manitoba relating to limitation of actions apply to proceedings in this Court, between subject and subject, except as otherwise expressly provided in any other Act. Further, subject to the same excep tion, the laws of Manitoba relating to limitation of action apply to proceedings in this Court brought by or against the Crown. The effect is that the
general immunity of the Crown from the effect of any enactment, is taken away in respect of statutes of limitation by the express provisions of section 38 of the Federal Court Act.
The law of Manitoba relevant to this case is found in paragraph 3(1)(g) of The Limitation of Actions Act, R.S.M. 1954, c. 145 [rep. and sub.] S.M. 1966-67, c. 32, s. 2 [being para. 3(1)(g) of R.S.M. 1970, c. L150], which reads as follows:
3. (1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned:
(g) Actions for the recovery of money (except in respect of a debt charged upon land), whether recoverable as a debt or damages or otherwise, and whether a recog nizance, bond, covenant, or other specialty, or on a simple contract, express or implied, and actions for an account or not accounting, within six years after the cause of action arose.
From this provision it is clear that an action to recover money (in this case, taxes) recoverable as a debt must be brought within six years after the cause of action arose.
I note also that by paragraph 2(a) of the same Act [R.S.M. 1970, c. L150; being para. 2(a) of R.S.M. 1954, c. 145 (as am. by S.M. 1966-67, c. 32, para. 1(a))], "action" means any civil proceed ing, and that by paragraph 2(h) [R.S.M. 1970, c. L150; formerly para. 2(g) of R.S.M. 1954, c. 145]:
2...
(h) "proceedings" includes action, entry, taking of possession, distress, and sale proceedings under an order of a court or under a power of sale contained in a mortgage or conferred by statute;
Other legislative rules that require consideration are found in the Excise Tax Act, section 52. Subsection (1) of this section provides:
52. (1) All taxes or sums payable under this Act shall be recoverable at any time after the same ought to have been accounted for and paid, and all such taxes and sums shall be recoverable, and all rights of Her Majesty hereunder enforced, with full costs of suit, as a debt due to or as a right enforceable by Her Majesty, in the Exchequer Court of Canada or in any other court of competent jurisdiction.
And subsection (4) provides:
52....
(4) Any amount payable in respect of taxes, interest and penalties under Part II or Parts III to VI, remaining unpaid whether in whole or in part after fifteen days from the date of the sending by registered mail of a notice of arrears addressed to the licensed air carrier or taxpayer, as the case may be, may be certified by the Deputy Minister of National Revenue for Customs and Excise and on the production to the Exchequer Court of Canada or a judge thereof or such officer as the Court or a judge thereof may direct, the certificate shall be registered in that Court and shall, from the date of such registration, be of the same force and effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in that Court for the recovery of a debt of the amount specified in the certificate, including penalties to date of payment as provided for in Part II or Parts III to VI, and entered upon the date of such registration, and all reasonable costs and charges attend ant upon the registration of such certificate are recoverable in like manner as if they were part of such judgment.
There are thus two procedural methods of recov ering taxes or sums payable under the Excise Tax Act. "Sums payable" include interest and penal ties. Subsection (1) provides for recovery by action in the Exchequer Court of Canada or in any other court of competent jurisdiction. Subsection (4) provides a procedure without bringing an action in court. It enacts that after fifteen days from the sending by registered mail of a notice of arrears addressed to the taxpayer, any amount remaining unpaid may be certified by the Deputy Minister of National Revenue, Customs and Excise, and that on production of the certificate to the Exchequer Court of Canada or a judge or duly-directed offi cer thereof, the certificate shall be registered in that Court and shall, from the date of registration, be of the same force and effect as if it were a judgment obtained in that Court for the recovery of a debt of the amount specified in the certificate, including penalties and all reasonable costs and charges of the registration. All proceedings may be taken on the certificate as if it were a judgment of that Court.
The provisions of subsection (4) do not mean that the certificate becomes a judgment. It remains a certificate of the Deputy Minister, but has the same effect and force and may be acted on as if it were a judgment.
The references to the Exchequer Court of Canada in section 52 and other sections of the Excise Tax Act now mean to the Federal Court of Canada, which on coming into existence, took over, inter alia, the functions and duties of the Exchequer Court of Canada.
The defendant (applicant on this motion) sub mits that the time limit of six years prescribed in subsections 38(1) and (2) of the Federal Court Act and paragraph 3(1)(g) of The Limitation of Actions Act of Manitoba does not bind the Crown. This submission is based on the words "Except as expressly provided by any other Act", at the begin ning of subsection (2) of said section 38, and the words "recoverable at any time" in the second line of subsection 52(1) of the Excise Tax Act. Coun sel for the applicant [defendant] (Her Majesty the Queen) contends that the words "recoverable at any time", as applied to taxes or sums payable under the Excise Tax Act, mean that there is no time period within which proceedings to recover taxes must be taken, and therefore they accord with what is meant by the words "Except as expressly provided by any other Act".
The full expression about recoverability of taxes in subsection 52(1) of the Excise Tax Act is that "taxes or sums payable under this Act shall be recoverable at any time after the same ought to have been accounted for and paid". Read simply in conjunction with the words "Except as expressly provided by any other Act", the words "recover- able at any time" are certainly susceptible of the above interpretation by Crown counsel.
Counsel for the respondent [plaintiff] maintains that this interpretation is wrong. His first submis sion is that the words "at any time" do not amount to an express contrary provision as intended by the exception proviso in section 38 of the Federal Court Act. He thinks such an express contrary provision would be worded something like: "Not- withstanding any limitation of action provision otherwise applicable." I do not agree that any particular form of words is required. Any words which clearly mean that the limitation period does not apply are sufficient to satisfy the exception proviso. Nor is it necessary that a different limita-
tion period be substituted for that indicated by the general limitation. Where the Crown is affected, Parliament may intend that there will be no limi tation period. Counsel then contends that the words "at any time" do not mean an unlimited period of time after the taxes or sums ought to have been accounted for and paid. He referred to section 20 of The Special War Revenue Act, 1915 [S.C. 1915, c. 8] as the origin of the provision: "All taxes or sums payable under this Act shall be recoverable at any time after the same ought to have been accounted for and paid ...." At that date the Crown's privileged position of not being bound by statutes of limitation had not been restricted by statute. There would therefore have been no point in stating that the taxes or sums were recoverable at any time in the future. Coun sel concludes from these facts that the words "at any time" meant, in 1915, and still mean, immedi ately after the taxes or sums payable ought to have been accounted for and paid, without waiting for any period of time to elapse and before judgment in the ordinary course. On this reasoning, the words "at any time" in subsection 52(1) of the Excise Tax Act would not constitute an exception "expressly provided by any other Act" within the intention of those words as used in subsection 38(2) of the Federal Court Act, and the limitation period of six years established by section 38 of the Federal Court Act and paragraph 3(1)(g) of the Manitoba Limitation of Actions Act, read to gether, for actions by Her Majesty in right of Canada to recover taxes, would not be affected by those words.
This argument is largely destroyed by the fact that the words "at any time" are found in subsec tion (1) of section 52 of the Excise Tax Act. That subsection deals only with recovery of taxes, with full costs of suit as a debt due to Her Majesty in the Federal Court of Canada or other court of competent jurisdiction. It says nothing about obtaining security or enforcing payment before judgment, or about any short cut to secure pay ment before judgment. The words "at any time"
do not appear in subsection (4) of the section, which subsection provides a short procedure by filing a certificate which has the same force and effect as if the certificate were a judgment. The two procedures are quite distinct; only the proce dure by court action is affected by the words "at any time".
The great change that has taken place in the status of the Crown in relation to statutes of limitation may be stated succinctly, as follows. Under the earlier law the Crown, as stated in the Interpretation Acts of both Canada and Manitoba, was not bound by the terms of a statute except where it was expressly so stated by the statute, and this rule applied to statutes of limitation. Now, as provided by section 38 of the Federal Court Act, the shoe is on the other foot: the Crown is bound by statutes of limitation except where it is other wise expressly provided by statute.
It may be useful to state one obvious fact which has long been true. In modern times, when we speak of the Crown as being bound or not bound by the terms of a statute, we are not referring to the person of the Queen, but to the Government, either as a whole or the appropriate minister, or to an officer or employee of the Government. The Queen acts only through her ministers. In Canada this means her Canadian ministers or the ministers of a province, many of whose functions are dele gated to the appropriate deputy minister or some other officer or employee.
Another submission of the respondent's [plain- tiff's] counsel is that section 38 of the Federal Court Act was enacted in 1970, while the original provision "at any time" was enacted in 1915, and that if they conflict, the later enactment must prevail. Unfortunately for this argument, there is no conflict between the two provisions. Section 38 provides for an exception, and if the words "at any time" conform to the exception, they are effective. The only question is whether they do conform to the exception.
Counsel's final submission on this point is that "Section 38 of the Federal Court Act manifests a
clear intention to make the Federal Crown subject to the same limitations that affect others, con sistent with, the erosion of ancient Crown preroga tives .... That clear intention is not to be thwart ed by a statutory provision carried forward unchanged from 1915, from an era when Crown prerogative reigned unchallenged and no one dreamed of the Crown being affected by limitation periods." He adds that "construing the words 'at any time' literally and out of context means the Crown could commence proceedings today to col lect tax due on a transaction back in 1915—clearly an unreasonable result". In his view, if a more reasonable interpretation of the words "at any time" is possible and would avoid such an unrea sonable result, that interpretation should be adopted.
The first part of this argument is wrong in that it ignores the exception contained in section 38 of the Federal Court Act. That exception clearly means that the Crown's privilege of not being subject to rules of limitation is preserved in cases where Parliament so provides. In such cases, the Crown is not to be subject to the limitations that affect others. Once again, the only question to be answered on this point is whether the words "at any time" conform to the exception.
There are many statutes which provide that in circumstances described therein money may be recovered at any time as a debt due to Her Majes ty. The circumstances in which such a provision occurs seem generally to be of two types. One type is where money has been paid to a person by the Government under the provisions of a statute and subsequently it becomes clear that he or she was not entitled to receive the money. The other type is where money becomes payable to the Crown by an individual, individuals, or a corporation under the terms of a statute, and the money has not been paid as required by the statute.
Counsel for the defendant filed extracts from a number of Acts of Parliament where such a provi sion is found. These are:
1. The Adult Occupational Training Act, R.S.C. 1970, c. A-2, s. 14.
2. The Canada Pension Plan, R.S.C. 1970, c. C-5, subs. 65(2).
3. The Anti-dumping Act, R.S.C. 1970, c. A-15, subss. 33(1), (2).
4. The Industrial Research and Development Incentives Act, R.S.C. 1970, c. I-10, subs. 10(3).
5. The Old Age Security Act, R.S.C. 1970, c. O-6, subs. 22(2).
6. The Petroleum Administration Act, S.C. 1974-75-76, c. 47, ss. 76, 86.
7. The War Veterans Allowance Act, R.S.C. 1970, c. W-5, s. 19.
8. The Two-Price Wheat Act, S.C. 1974-75-76, c. 54, s. 9.
In none of these Acts is there anything to sug gest that the Crown's right of recovery is subject to any limitation period. The frequency with which the provision for recovery of money at any time has occurred suggests to my mind that it is the policy of Parliament that in circumstances of these types the Crown's long-time prerogative right of not being subject to rules of limitation should be, and is intended to be, preserved. In my view, the liability of manufacturers and others to pay excise tax under the Excise Tax Act arises in circum stances similar to those in several of the cases cited supra. I have been unable to find anything in the words "at any time", as used in all these statutes, from which I could conclude that they are not intended to have their grammatical meaning.
Up to this point, I have been referring to section 52 of the Excise Tax Act as it stood during the whole of the period relevant to this action. How ever, that section was amended by Parliament in the session of 1980-81 [S.C. 1980-81-82-83, c. 68, s. 21] and in my opinion the amendments have some relevance to the point I have been discussing, particularly the amendments to subsection (1). As amended, subsection (1) reads:
52. (1) Subject to subsections (1.2) and (1.3), no proceedings to recover taxes or sums payable under this Act shall be commenced after four years from the time the taxes or sums first became payable.
(1.1) For the purposes of subsection (1), proceedings are deemed to be commenced within four years from the time taxes or sums first became payable under this Act if, on or before the expiry of that period, an audit or inspection under section 57 of the records and books of account of the person required to pay or collect the taxes or sums is commenced or, at the request of such person, is deferred.
(1.2) All taxes or sums payable under Part I are recoverable at any time.
(1.3) All taxes or sums payable under this Act are recover able at any time if payment thereof was avoided by reason of neglect, wilful default or fraud.
The first point to notice about the new subsec tion 52(1) is that it provides a general limitation period of four years from the time the taxes or sums first became payable, for commencing any proceedings to recover taxes or sums payable under the Act. No provision of this kind existed in the Act prior to this amendment. No conclusion can be drawn from the amendment as to the state of the prior law. The wording is, in any event, equally susceptible of indicating an intent to create a limitation period where none existed before, or to reduce an existing general period of six years under section 38 of the Federal Court Act to four years.
On the other hand, subsections (1.2) and (1.3) are significant. Read in the context of a general four-year limitation in subsection 52(1), the provi sion in subsection (1.2) that all taxes or sums payable under Part I are recoverable at any time can only mean that there is no limitation on pro ceedings to recover those taxes or sums. Part I is concerned with a tax payable in respect of certain insurance premiums. Similarly, the provision in subsection (1.3) that all taxes or sums (which appears to mean all except those referred to in subsection (1.2)) payable under the Act are recov erable at any time if payment thereof was avoided by reason of neglect, wilful default or fraud, can only mean that there is no limitation on proceed ings to recover taxes or sums where the prescribed conditions exist. There was no provision of this kind in the Excise Tax Act prior to this amend ment, nor is there such a provision in the Federal Court Act. There is a more limited provision in the
Manitoba Limitation of Actions Act [R.S.M. 1970, c. L150] paragraph 3(1)(h) of which [for- merly para. 3(1)(g) of R.S.M. 1954, c. 145] pro vides that "Actions grounded on fraudulent misre presentation" must be commenced "within six years from the discovery of the fraud." No fraudu lent misrepresentation has been alleged in this case.
The significance of subsections (1.2) and (1.3) for this case is that they show quite clearly that the words "at any time" are sometimes used, with reference to limitation of proceedings, to mean that no limitation applies. They show further that the trend toward assimilating the position of the Crown with that of other persons in respect of limitation of actions has not yet removed all the Crown's prerogative rights in this area, which rights . have in fact been expressly preserved or possibly restored to some extent by such recent enactments as subsections 52(1.2) and (1.3) of the Excise Tax Act.
My final conclusion is that the answer to Ques tion 1 on this application is that during all the period relevant to the issues in this case there was no limitation period applicable to an action for the collection of taxes and penalties under the Excise Tax Act, R.S.C. 1970, c. E-13. I have come to this conclusion reluctantly, but in my view the law is clear and does not admit of a contrary decision.
In view of my decision on this question, Ques tions 2 and 3 do not arise. I will simply say that if my answer had been "Yes" to the first question, the answer to Question 2 would have been six years (four years for cases arising after the amend ments of 1980-81), and the answer to Question 3 would have been the date when the taxes in ques tion ought to have been paid.
The applicant [defendant] is entitled to the costs of this application.
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