Markevich v. Canada, [2003] 1 S.C.R. 94, 2003 SCC 9
Her Majesty The Queen Appellant
v.
Joe Markevich Respondent
and
Teck Cominco Metals Ltd. Intervener
Indexed as: Markevich v. Canada
Neutral citation: 2003 SCC 9.
File No.: 28717.
2002: December 4; 2003: March 6.
Present: McLachlin C.J. and Gonthier, Iacobucci, Major,
Bastarache, Binnie, Arbour, LeBel and Deschamps JJ.
on appeal from the federal court of appeal
Income tax — Collection — Limitation of actions —
Taxpayer failing to pay federal and provincial taxes for 1980 to 1985 taxation
years as assessed by Revenue Canada in 1986 — Revenue Canada taking no
collection action until 1998 — Whether federal and provincial limitation periods
bar Revenue Canada from collecting taxpayer’s federal and provincial tax debts
— Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, s. 32 —
Limitation Act, R.S.B.C. 1996, c. 266, ss. 1, 3(5).
Crown — Liability — Prescription and limitation —
Collection of federal tax debt — Whether term “proceedings” in federal
limitation provision encompasses collection procedures available under Income
Tax Act — Whether cause of action arose “otherwise than in a province” —
Whether Income Tax Act complete code excluding application of federal
limitation period to collection procedures — Crown Liability and Proceedings
Act, R.S.C. 1985, c. C‑50, s. 32 .
Limitation of actions — Collection of provincial
tax debt — Definition of action — Whether phrase “self help remedy” in
definition of ‘‘action” in provincial limitation legislation encompasses
collection procedures available under provincial Income Tax Act — Limitation
Act, R.S.B.C. 1996, c. 266, ss. 1, 3(5).
In 1986, the respondent, a resident of British
Columbia, received a Notice of Assessment from the Minister of National Revenue
that indicated a federal and provincial tax liability of $234,136 arising from
a series of assessments and unpaid taxes in respect of his 1980 to 1985
taxation years. The respondent did not challenge this assessment, and paid
nothing on the outstanding amount. From 1987 to 1998, Revenue Canada made no
effort to collect the debt, and statements issued to the respondent during that
period did not reflect the 1986 balance. In 1998, Revenue Canada sent a
statement of account to the respondent that indicated a balance of $770,583,
which included the amount owing as of 1986 and accrued interest. The
respondent applied to the Federal Court, Trial Division, for judicial review of
the 1998 claim, and sought a declaration that the Crown was prohibited from
taking any steps to collect his tax debts for 1990 and prior years. The
motions judge dismissed the application. The Federal Court of Appeal set aside
that decision and held that the Crown was, pursuant to s. 32 of the Crown
Liability and Proceedings Act (“CLPA ”) and s. 3(5) of the B.C.
Limitation Act, statute-barred from collecting the respondent’s federal
and provincial tax debt.
Held: The
appeal should be dismissed.
Per McLachlin C.J. and Iacobucci, Major,
Bastarache, Binnie, Arbour and LeBel JJ.: The six‑year
limitation period prescribed by s. 32 of the CLPA bars the Crown
from collecting the respondent’s federal tax debt. First, as a law of general application,
s. 32 presumptively applies on a residual basis to all Crown proceedings.
The breadth of the provision’s application can be narrowed only by an Act of
Parliament that has “otherwise provided”, either expressly or impliedly, for
limitation periods. The Income Tax Act (“ITA”) does not provide
for limitation periods within its collection provisions, and the legislative
silence with regard to prescription in these provisions, interpreted in
conjunction with the express language used in the ITA’s assessment
provisions, supports the finding that Parliament intended that limitation
provisions of general application apply to the Minister’s collection of tax
debts. A purposive interpretation of the ITA confirms this conclusion.
Furthermore, the certainty, evidentiary and diligence rationales for limitation
periods do not offend the principles of horizontal and vertical equity that
should in part govern the ITA and are directly applicable to the
collection of tax debts. Second, the ordinary meaning of the phrase
“proceedings...in respect of a cause of action” in s. 32 encompasses the
statutory collection procedures of the Minister. It would be incongruous to
find that s. 32 was intended to apply to the court action but not to the
statutory collection procedures that serve the identical purpose. The
rationales that support the application of limitation provisions to Crown
proceedings apply equally to both the court and non‑court proceedings at
issue here. To exclude s. 32 ’s application to proceedings that are
equivalent in purpose and effect to a court action would frustrate the object
and aim of the provision. The legislative history of s. 32 also supports
the inference that Parliament intended its application to extend beyond
proceedings in court. Third, on both a plain and purposive reading of
s. 32 , the cause of action in this case arose “otherwise than in a
province”. Tax debts created under the ITA arise pursuant to federal
legislation and create rights and duties between the federal Crown and residents
of Canada or those who have earned income within Canada. The debt may arise
from income earned in a combination of provinces or in a foreign jurisdiction.
The debt is owed to the federal Crown, which is not located in any particular
province and does not assume a provincial locale in its assessment of taxes.
The Minister, in its role as agent of the province of
British Columbia, is also barred by s. 3(5) of the B.C. Limitation Act
from collecting the respondent’s provincial tax debt arising under the British
Columbia Income Tax Act (“B.C. ITA”). Section 3(5) applies
a limitation period of six years to actions for which prescription is not
“specifically provided for” in another Act. Under s. 1 of the B.C. Limitation
Act, an action is defined as including “any proceeding in a court and any
exercise of a self help remedy”. The term “self help remedy” encompasses the
statutory collection procedures available under the B.C. ITA. A
statutory collection procedure is a self help mechanism by which the Minister
is able to effect a result that could otherwise be achieved only through an
action in court. As well, the B.C. ITA does not specifically provide
for limitation periods in its collection provisions. Since the province’s
collection rights are subject to expiry six years after the underlying
cause of action arose, so too are the collection rights of the federal Crown as
its agent.
Per Gonthier and
Deschamps JJ.: The conclusion that the cause of action arises “otherwise
than in a province” is inappropriate in two ways. First, it emphasizes the
residence of the creditor instead of relying on the connecting factors of the
cause of action. Second, it means that the federal government is not located
anywhere in Canada. Common sense dictates that the federal Crown is located in
every province. Since the federal government is, by virtue of its agreement
with all of the provinces (except Quebec), responsible for collecting all
provincial income taxes, it is sensible to bind its federal tax claim to the
limits available on the provincial one. Efficiency is thus preserved by
invoking one limitation for both the federal and provincial income tax debts
arising in each province other than Quebec. Here, all of the connecting
factors point to British Columbia. Consequently, the British Columbia six‑year
limitation period should apply.
Cases Cited
By Major J.
Referred to: Will-Kare
Paving & Contracting Ltd. v. Canada, [2000] 1 S.C.R. 915, 2000 SCC 36; 65302
British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804; Stubart
Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536; Friesen v. Canada,
[1995] 3 S.C.R. 103; M. (K.) v. M. (H.), [1992] 3 S.C.R. 6; Symes v.
Canada, [1993] 4 S.C.R. 695; Ross v. Canada, [2002] 2 C.T.C. 222,
2002 FCT 401; MacKinnon v. Canada, [2002] 4 C.T.C. 48, 2002 FCT 824;
Royce v. MacDonald (Municipality) (1909), 12 W.L.R. 347; Nowegijick v.
The Queen, [1983] 1 S.C.R. 29; Letang v. Cooper, [1964] 2 All E.R.
929; Domco Industries Ltd. v. Mannington Mills, Inc. (1990), 29 C.P.R.
(3d) 481; Berardinelli v. Ontario Housing Corp., [1979] 1 S.C.R. 275; E. H.
Price Ltd. v. The Queen, [1983] 2 F.C. 841.
By Deschamps J.
Referred to: Williams v. Canada, [1992] 1 S.C.R. 877.
Statutes and Regulations Cited
Crown
Liability and Proceedings Act, R.S.C. 1985, c.
C-50, s. 32 [rep. & sub. 1990, c. 8, s. 31].
Federal
Court Act, R.S.C. 1970, c. 10 (2nd Supp.), s.
38(2).
Federal Court Act, R.S.C. 1985, c. F-7, s. 39(3) [rep. 1990, c. 8, s. 10].
Income Tax Act, R.S.B.C. 1996, c. 215, ss. 1(7), 49, 69.
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 152(4) ,
152(4.2) , 159(3) , 160(2) , 160.1(3) , 160.2(3) , 160.3(2) ,
160.4(3) , 222 , 223(2) , (3) , (5) to (8) , 224(1) , 225(1) , 225.1(1) to
225.1(4) , 227(10.1) .
Interpretation Act, R.S.B.C. 1996, c. 238, s. 14(1).
Limitation Act, R.S.B.C. 1996, c. 266, ss. 1 “action”,
3(5), 9(1), (3).
Authors Cited
Black, Henry Campbell. Black’s
Law Dictionary, 6th ed. St. Paul, Minn.: West Publishing Co., 1990,
“cause of action”, “proceeding”.
Bouscaren, C., R. Greenstein et A.
Cordahi. Les bases du droit anglais. Paris: Ophrys, 1981.
Castel, Jean-Gabriel, and Janet
Walker. Canadian Conflict of Laws, 5th ed.
Toronto: Butterworths, 2002 (loose-leaf updated December 2002,
Issue 3).
Cornu, Gérard. Vocabulaire
juridique, 8e éd. Paris: Presses universitaires de
France, 2000, “poursuite”, “voie de droit”.
Driedger, Elmer A. Construction
of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Hogg, Peter W., Joanne E. Magee
and Ted Cook. Principles of Canadian Income Tax Law, 3rd ed.
Scarborough, Ont.: Carswell, 1999.
Hogg, Peter W., and Patrick J.
Monahan. Liability of the Crown, 3rd ed. Scarborough, Ont.:
Carswell, 2000.
Petit Larousse, 2003. Paris: Larousse, 2003, “poursuite”.
Reid, Hubert. Dictionnaire de
droit québécois et canadien avec table des abréviations et lexique
anglais-français, 2e éd. Montréal: Wilson &
Lafleur, 2001, “poursuite”.
Reynolds, F. M. B. Bowstead
and Reynolds on Agency, 16th ed. London: Sweet &
Maxwell, 1996.
Sgayias, David, et al. The
Annotated Crown Liability and Proceedings Act 1995. Scarborough,
Ont.: Carswell, 1994.
APPEAL from a judgment of the Federal Court of Appeal,
[2001] 3 F.C. 449, 199 D.L.R. (4th) 255, 270 N.R. 275, 2001 D.T.C. 5305,
[2001] 3 C.T.C. 39, [2001] F.C.J. No. 696 (QL), 2001 FCA 144, reversing a
judgment of the Trial Division, [1999] 3 F.C. 28, 163 F.T.R. 209, 172 D.L.R.
(4th) 164, 99 D.T.C. 5136, [1999] 2 C.T.C. 104, [1999] F.C.J. No. 250
(QL). Appeal dismissed.
Graham R. Garton, Q.C.,
and Carl Januszczak, for the appellant.
Ian Worland, for the
respondent.
Edwin G. Kroft, and Geoffrey
T. Loomer, for the intervener.
The judgment of McLachlin C.J. and Iacobucci, Major,
Bastarache, Binnie, Arbour and LeBel JJ. was delivered by
1
Major J. — The issue in
this appeal is narrow and easily stated: that is, whether federal and
provincial limitation periods when exceeded apply to the Crown’s ability to
exercise its statutory powers to collect tax debts. I have concluded that the
limitation period prescribed by s. 32 of the Crown Liability and Proceedings
Act, R.S.C. 1985, c. C-50 (“CLPA ”), bars the Crown from collecting
the respondent’s federal tax debt, and that s. 3(5) of the British Columbia
Limitation Act, R.S.B.C. 1996, c. 266 (“B.C. Limitation Act”) bars
the Crown from collecting the respondent’s provincial tax debt.
I. Factual
Background
2
The respondent was a resident of British Columbia at all times relevant
to this appeal. He received a Notice of Assessment from the Minister of
National Revenue (the “Minister”) dated June 17, 1986, that indicated a federal
and provincial tax liability of $234,136.04 arising from a series of
assessments and unpaid taxes in respect of his 1980 to 1985 taxation years.
The respondent did not challenge this assessment, and paid nothing on the
outstanding amount after 1986. In 1987, while of no consequence to this
appeal, the indebtedness was internally written off by Revenue Canada, but was
not extinguished or forgiven. From 1987 to 1998, Revenue Canada made no effort
to collect the debt, and statements issued to the respondent during that period
did not reflect the 1986 balance. However, on January 15, 1998, approximately
12 years after the Notice of Assessment, Revenue Canada, for the first time
during this period, sent a statement of account to the respondent that
indicated a balance of $770,583.42, which included the amount owing as of June
17, 1986, and accrued interest.
3
The respondent applied to the Trial Division of the Federal Court for
judicial review of the January 15, 1998 claim, and sought a declaration that
the Crown was prohibited from taking any steps to collect his tax debts for
1990 and prior years. The motions judge dismissed the application. The
Federal Court of Appeal allowed the appeal from that decision, and held that
the Crown was statute-barred from collecting the respondent’s tax debt
reflected in the 1986 Notice of Assessment. The Crown appeals from that
decision.
II. Relevant
Statutory Provisions
4
The following statutory provisions are relevant:
Income Tax
Act, R.S.C. 1985, c. 1 (5th Supp .)
222. All taxes, interest, penalties, costs
and other amounts payable under this Act are debts due to Her Majesty and
recoverable as such in the Federal Court or any other court of competent
jurisdiction or in any other manner provided by this Act.
223. . . .
(2) An amount payable by a person (in this section
referred to as a “debtor”) that has not been paid or any part of an amount
payable by the debtor that has not been paid may be certified by the Minister
as an amount payable by the debtor.
(3) On production to the Federal Court, a
certificate made under subsection (2) in respect of a debtor shall be
registered in the Court and when so registered has the same effect, and all
proceedings may be taken thereon, as if the certificate were a judgment
obtained in the Court against the debtor for a debt in the amount certified
plus interest thereon to the day of payment as provided by the statute or
statutes referred to in subsection (1) under which the amount is payable and,
for the purpose of any such proceedings, the certificate shall be deemed to be
a judgment of the Court against the debtor for a debt due to Her Majesty,
enforceable in the amount certified plus interest thereon to the day of payment
as provided by that statute or statutes.
224. (1) Where the Minister has knowledge
or suspects that a person is, or will be within one year, liable to make a
payment to another person who is liable to make a payment under this Act (in
this subsection and subsections (1.1) and (3) referred to as the “tax debtor”),
the Minister may in writing require the person to pay forthwith, where the
moneys are immediately payable, and in any other case as and when the moneys
become payable, the moneys otherwise payable to the tax debtor in whole or in
part to the Receiver General on account of the tax debtor’s liability under
this Act.
225. (1) Where a person has failed to pay
an amount as required by this Act, the Minister may give 30 days notice to the
person by registered mail addressed to the person’s latest known address of the
Minister’s intention to direct that the person’s goods and chattels be seized
and sold, and, if the person fails to make the payment before the expiration of
the 30 days, the Minister may issue a certificate of the failure and direct
that the person’s goods and chattels be seized.
225.1 (1) Where a taxpayer is liable for the
payment of an amount assessed under this Act, other than an amount assessed
under subsection 152(4.2), 169(3) or 220(3.1), the Minister shall not, for the
purpose of collecting the amount, [take any collection action] until after the
day that is 90 days after the day of the mailing of the notice of assessment.
Crown
Liability and Proceedings Act, R.S.C. 1985, c. C-50
32. Except as otherwise provided in this
Act or in any other Act of Parliament, the laws relating to prescription and
the limitation of actions in force in a province between subject and subject
apply to any proceedings by or against the Crown in respect of any cause of
action arising in that province, and proceedings by or against the Crown in
respect of a cause of action arising otherwise than in a province shall be
taken within six years after the cause of action arose.
British
Columbia Limitation Act, R.S.B.C. 1996, c. 266
1 . . .
“action” includes any proceeding in a court
and any exercise of a self help remedy;
3 . . .
(5) Any other action not specifically provided
for in this Act or any other Act may not be brought after the expiration of 6
years after the date on which the right to do so arose.
9 (1) On the expiration of a
limitation period set by this Act for a cause of action to recover any debt,
damages or other money, or for an accounting in respect of any matter, the
right and title of the person formerly having the cause of action and of a
person claiming through the person in respect of that matter is, as against the
person against whom the cause of action formerly lay and as against the
person’s successors, extinguished.
.
. .
(3) A cause of action, whenever arising, to
recover costs on a judgment or to recover arrears of interest on principal
money is extinguished by the expiration of the limitation period set by this
Act for an action between the same parties on the judgment or to recover the
principal money.
III. Judicial
History
5
At the Federal Court, Trial Division ([1999] 3 F.C. 28), the motions
judge held that s. 32 of the CLPA does not apply to the statutory
collection procedures authorized by the Income Tax Act, R.S.C. 1985, c.
1 (5th Supp .) (“ITA ”). He found both that the collection procedures do
not qualify under s. 32 as proceedings in respect of a cause of action, and
that the ITA is a complete code in itself that excludes the application
of s. 32 . The motions judge also held that the B.C. Limitation Act does
not apply to the Crown’s collection of the provincial tax debt under the
British Columbia Income Tax Act, R.S.B.C. 1996, c. 215 (“B.C. ITA”).
As a result, his conclusion was that neither the Crown’s collection of the
federal nor the provincial tax debt was subject to the limitation periods.
6
The Federal Court of Appeal disagreed and allowed the appeal ([2001] 3
F.C. 449, 2001 FCA 144). Rothstein J.A. decided that the ITA is not a
complete code that excludes the application of s. 32 of the CLPA , and
that the statutory collection procedures qualify as proceedings in respect of a
cause of action under s. 32 . Consequently, the limitation period prescribed by
s. 32 applies to the statutory collection procedures in the ITA . He
held that the relevant limitation provision was s. 3(5) of the B.C. Limitation
Act. Section 3(5) includes both court proceedings and self help remedies,
and so applies to both court and statutory collection procedures under the ITA .
Owing to this provision, the Minister was barred from collecting the federal
tax debt six years after the right to do so arose. Rothstein J.A. also
concluded that s. 3(5) bars the Crown, in its role as collection agent for
British Columbia under the B.C. ITA, from pursuing the taxpayer’s
provincial debt.
IV. Issues
7
The appeal raises the following issues:
1. (a) Are statutory collection
proceedings under the ITA subject to a limitation period pursuant to s.
32 of the CLPA ? This requires the determination of:
(i) Does the ITA provide for limitation
periods for the collection of tax debts, or otherwise exclude the operation of
s. 32 of the CLPA ?
(ii) Is the exercise of a statutory collection
power a “proceeding . . . in respect of any cause of action” under s. 32 ?
(b) If s. 32 is found to apply to the statutory collection
proceedings, does the cause of action arise in a province or otherwise than in
a province?
2. Does the B.C. Limitation Act
apply to statutory collection proceedings undertaken by the Crown acting as
collection agent for the Province of British Columbia pursuant to the B.C. ITA?
V. Analysis
A. The
Federal Tax Debt
(1) Is the Federal Tax Debt Subject to
Section 32 of the CLPA ?
8
Prior to an analysis of the problem, it is useful to describe the broad
collection powers available under the ITA . The Minister is authorized
to collect tax debts by means of either a court action or statutory collection
procedures. Section 222 of the ITA provides:
All taxes, interest, penalties, costs and other
amounts payable under this Act are debts due to Her Majesty and recoverable as
such in the Federal Court or any other court of competent jurisdiction or in
any other manner provided by this Act.
The various
collection mechanisms enumerated in the ITA provide the Minister with an
extensive range of remedies to recover debts. The Minister may certify an
unpaid tax amount (s. 223(2) ) and register the certificate in the Federal Court
(s. 223(3)), at which point the certificate is deemed to be a judgment of that
court. The Federal Court can then issue a certificate, notification, or writ
evidencing the s. 223(2) certificate, which can be used by the Minister to
create a charge, lien, priority, or other interest on property in any province
(ss. 223(5) to 223(8) ). Under the garnishment provision of s. 224(1) , the
Minister may require a third party who is indebted to the taxpayer to make
payments directly to the Minister. The Minister may also order the seizure and
sale of the taxpayer’s goods and chattels under s. 225(1) . These collection
powers cannot be exercised until 90 days after the later of the mailing of a
notice of assessment or the mailing of a confirmation or variation of the
assessment, or until the taxpayer’s appeal has been finally determined by the
Tax Court of Canada (ss. 225.1(1) to 225.1(4)).
9
The outcome of this appeal narrows to whether the exercise of these
collection powers is subject to prescription under s. 32 of the CLPA .
Section 32 applies limitation periods to proceedings brought by or against the
Crown in all cases unless Parliament has otherwise provided. The section
states:
Except as otherwise provided in this Act or
in any other Act of Parliament, the laws relating to prescription and the
limitation of actions in force in a province between subject and subject apply
to any proceedings by or against the Crown in respect of any cause of action
arising in that province, and proceedings by or against the Crown in respect of
a cause of action arising otherwise than in a province shall be taken within
six years after the cause of action arose. [Emphasis added.]
The section
applies to the statutory collection procedures if two criteria are met. First,
the ITA must not otherwise provide for limitation periods with respect
to the collection of tax debts. Second, the statutory collection procedures
must qualify under s. 32 as “proceedings . . . in respect of a cause of
action”.
10
I agree with the reasons of the Federal Court of Appeal that each of the
two criteria is met in this case, and that s. 32 must apply to the Crown’s
exercise of statutory collection powers.
(a) Does the ITA Otherwise Provide for
Prescription?
11
As a law of general application, s. 32 of the CLPA presumptively
applies on a residual basis to all Crown proceedings. The breadth of the
provision’s application can be narrowed only by an Act of Parliament that has
“otherwise provided”, either expressly or impliedly, for limitation periods.
It is evident that the ITA does not provide for limitation periods
within its collection provisions.
12
The noted author E. A. Driedger in Construction of Statutes (2nd
ed. 1983), at p. 87, stated that the modern approach to statutory
interpretation requires the words of an Act “to be read in their entire context
and in their grammatical and ordinary sense harmoniously with the scheme of the
Act, the object of the Act, and the intention of Parliament”. These principles
have frequently been adopted by this Court both generally and in the
construction of taxation legislation: see Will-Kare Paving &
Contracting Ltd. v. Canada, [2000] 1 S.C.R. 915, 2000 SCC 36, at para. 32; 65302
British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804, both in the majority
and minority concurring reasons, and Stubart Investments Ltd. v. The Queen,
[1984] 1 S.C.R. 536, at p. 578.
13
The assessment provisions of the ITA are clearly stated on
prescription. By contrast, the collection provisions of the ITA are
silent with respect to prescription. There is no reference in s. 222 or its
accompanying provisions to either the absence or presence of a limitation
period. Nonetheless, the appellant submits that the ITA has “otherwise
provided” for prescription. In the appellant’s submission, the ITA
constitutes a complete statutory scheme for the collection of taxes, and so
silence in the legislation indicates Parliament’s intent to avoid fettering the
Crown’s collection powers with limitation periods.
14
There is no authority to support the proposition that the ITA is
a complete code that cannot be informed by laws of general application. The ITA
does not operate in a legislative vacuum: see Will-Kare, supra,
at para. 31. See also P. W. Hogg, J. E. Magee and T. Cook, Principles of
Canadian Income Tax Law (3rd ed. 1999), at p. 2, where the authors note
that the “Income Tax Act relies implicitly on the general law”. Accordingly,
whether a statute or legal principle affects the operation of the ITA
must be decided by an analysis of the specific provisions involved.
15
Absent legislation or judicial support, the appellant nonetheless
requests the Court to interpret s. 222 of the ITA as if it permits the
collection of tax debts “at any time”. It is “a basic principle of statutory
interpretation that the court should not accept an interpretation which
requires the insertion of extra wording where there is another acceptable
interpretation which does not require any additional wording”: see Friesen
v. Canada, [1995] 3 S.C.R. 103, at para. 27. This principle weighs against
accepting the appellant’s interpretation. The provision does not include the
words “at any time”, and is capable of a reasonable construction without that
insertion. The legislative silence with regard to prescription gives rise to
the logical inference that Parliament intended for limitation provisions of
general application to apply to the Minister’s collection powers.
16
This conclusion is supported by the explicit manner in which the ITA
addresses limitation periods in its assessment provisions. The Court held in Friesen,
supra, at para. 27, that “[r]eading extra words into a statutory
definition is even less acceptable when the phrases which must be read in appear
in several other definitions in the same statute”. Numerous provisions in the ITA
expressly stipulate that the Minister may make an assessment “at any
time”: see ss. 152(4) , 152(4.2) , 159(3) , 160(2) , 160.1(3) , 160.2(3) , 160.3(2) ,
160.4(3) , and 227(10.1) . Parliament has demonstrated a clear willingness to
address the issue of limitation periods in the ITA where it sees fit to
do so. As Rothstein J.A. noted at para. 22, “Parliament has put its mind to
the limitation question in the Income Tax Act and when it intends there
to be no limitation period, it has so stated.” Accordingly, the unescapable
conclusion is that the plain language used in the collection provisions does
not support the inference that Parliament intended to exclude the application
of limitation provisions to the Minister’s collection powers.
17
In finding that the collection provisions implicitly exclude s. 32 , the
learned motions judge appeared to rely predominantly on s. 225.1 of the ITA ,
which prevents the Minister from initiating collection procedures pending
objection or appeal of an assessment by the taxpayer. With respect, I do not
agree that s. 225.1 lends any weight to the appellant’s argument. The
statutory stay prescribed by s. 225.1 is directed towards protecting the
taxpayer from collection action pending a final determination of the validity
of his or her assessment. Limitation periods, on the other hand, are meant to
promote certainty, avoid stale evidence, encourage diligence, and bring
repose: see M. (K.) v. M. (H.), [1992] 3 S.C.R. 6, at p. 29, per
La Forest J. The rationales outlined above for stays and limitation provisions
are entirely distinct. I agree with Rothstein J.A.’s conclusion at para. 21:
The enactment of a statutory stay which specifies when collection
action may commence, cannot logically support the inference that Parliament
considered that no limitation period should apply to that collection action.
18
A purposive analysis of the ITA confirms that the collection
provisions do not by implication exclude the operation of s. 32 . The
application of limitation periods to the collection of tax debts does not
offend the principles of horizontal and vertical equity that, as Iacobucci J.
noted in Symes v. Canada, [1993] 4 S.C.R. 695, at p. 738, should in part
govern the ITA . The appellant submits that applying laws of
prescription to tax collection would unfairly alleviate the tax burden of
individuals who experience fluctuations in income at the expense of those who
enjoy a steady stream of income. This apparent problem can be averted,
however, by the Minister’s reasonably diligent exercise of debt collection. If
a taxpayer does not have the ability to satisfy a tax debt prior to the expiration
of the limitation period, the Minister can choose from a variety of means to
extend the limitation period. In Ross v. Canada, [2002] 2 C.T.C. 222,
2002 FCT 401, the Federal Court, Trial Division, held that the registration of
a certificate with the Federal Court in accordance with s. 223(3) of the ITA
gives rise to a renewal of the limitation period. See also MacKinnon v.
Canada, [2002] 4 C.T.C. 48, 2002 FCT 824, where the court found that the
taxpayer’s acknowledgement of indebtedness by way of a hypothecation agreement
with the Minister, and his partial payment of the tax debt, each served to
renew the limitation period. There is no need to exhaustively set out the ways
in which the Minister can extend the limitation period, other than to note that
there are numerous avenues open to the Minister by which renewals may be
effected. There is no credible basis to support the submission that the laws
of prescription will undermine the equitable collection of taxes when minimum
diligence would have the opposite effect.
19
The appellant’s submission that the rationales for limitation periods
militate against their application to tax collection cannot be correct. As
noted above, limitation provisions are based upon what have been described as
the certainty, evidentiary, and diligence rationales: see M. (K.), supra,
at p. 29. The certainty rationale recognizes that, with the passage of time,
an individual “should be secure in his reasonable expectation that he will not
be held to account for ancient obligations”: M. (K.), supra, at
p. 29. The evidentiary rationale recognizes the desire to preclude claims
where the evidence used to support that claim has grown stale. The diligence
rationale encourages claimants “to act diligently and not ‘sleep on their rights’”:
M. (K.), supra, at p. 30.
20
Each of the rationales submitted as applicable to there being no
limitation periods affecting collection are in fact just the opposite and are
directly applicable to the Minister’s collection of tax debts. If the Minister
makes no effort to collect a tax debt for an extended period, at a certain
point a taxpayer may reasonably come to expect that he or she will not be
called to account for the liability, and may conduct his or her affairs in
reliance on that expectation. As well, a limitation period encourages the
Minister to act diligently in pursuing the collection of tax debts. In light
of the significant effect that collection of tax debts has upon the financial
security of Canadian citizens, it is contrary to the public interest for the
department to sleep on its rights in enforcing collection. It is evident that
the rationales which justify the existence of limitation periods apply to the
collection of tax debts.
21
The legislative silence with regard to prescription in these provisions,
interpreted in conjunction with the express language used in the ITA ’s
assessment provisions, supports the finding that Parliament intended that
limitation provisions of general application apply to the Minister’s collection
of tax debts. A purposive interpretation of the statute confirms this
conclusion. There was no evidence before the Court to lend any support to the
submission that laws of prescription would frustrate the equitable collection
of taxes. Finally, the rationales for limitation periods for the reasons given
apply directly to the collection of tax debts.
22
As a result, whether s. 32 of the CLPA applies to the Minister’s
statutory collection procedures depends entirely upon whether such procedures
qualify under s. 32 as “proceedings . . . in respect of a cause of action”.
(b) Do the Statutory Collection Procedures
Qualify as “Proceedings . . . in Respect of a Cause of Action”?
23
The application of s. 32 is limited to “proceedings by or against the
Crown in respect of a cause of action”.
24
Interpreted in their grammatical and ordinary sense, these words clearly
encompass the statutory collection procedures in the ITA . Although the
word “proceeding” is often used in the context of an action in court, its
definition is more expansive. The Manitoba Court of Appeal stated in Royce
v. MacDonald (Municipality) (1909), 12 W.L.R. 347, at p. 350, that the
“word ‘proceeding’ has a very wide meaning, and includes steps or measures
which are not in any way connected with actions or suits”. In Black’s Law
Dictionary (6th ed. 1990), at p. 1204, the definition of “proceeding”
includes, inter alia, “an act necessary to be done in order to obtain a
given end; a prescribed mode of action for carrying into effect a legal right”.
25
The statutory collection procedures closely resemble various proceedings
in court. The registration of a certificate in Federal Court is deemed by s.
223(3) to be a judgment of that court. As Rothstein J.A. notes at para. 35:
A requirement to pay under section 224 (as am. by S.C. 1994, c. 21, s.
101) is analogous to a garnishing order issued by a court. . . . Seizure and
sale of chattels under subsection 225(1) is a provision closely parallel to a
writ of execution issued by a court.
By granting
the power to effect the collection of tax debts in this manner, Parliament has
provided the Minister with an efficient and expeditious alternative to bringing
a court action. However, the court and non-court collection procedures are
identical in purpose. Both are mechanisms by which the Minister is able to
enforce the collection of tax debts and thereby carry into effect the legal
rights of the Crown. It is evident that both kinds of procedures are
appropriately characterized as legal proceedings.
26
The appellant’s submission turns on whether these proceedings are
undertaken “in respect of a cause of action”. The words “in respect of” have
been held by this Court to be words of the broadest scope that convey some link
between two subject matters. See Nowegijick v. The Queen, [1983] 1
S.C.R. 29, at p. 39, per Dickson J. (as he then was):
The words “in respect of” are, in my opinion, words
of the widest possible scope. They import such meanings as “in relation to”,
“with reference to” or “in connection with”. The phrase “in respect of” is
probably the widest of any expression intended to convey some connection
between two related subject matters.
In the context
of s. 32 , the words “in respect of” require only that the relevant proceedings
have some connection to a cause of action.
27
A “cause of action” is only a set of facts that provides the basis for
an action in court: see Letang v. Cooper, [1964] 2 All E.R. 929 (C.A.),
at p. 934; Domco Industries Ltd. v. Mannington Mills, Inc. (1990), 29
C.P.R. (3d) 481 (F.C.A.), per Iacobucci C.J. (as he then was), at p.
496; and Black’s Law Dictionary, supra, at p. 221. In this case,
s. 222 of the ITA provides that unpaid taxes constitute a debt
recoverable by means of a court action, subject to the stay of collection
action prescribed by s. 225.1 . As a result, as Rothstein J.A. notes at para.
37, the cause of action here involves “the existence of a tax debt and the
expiry of the delay period entitling the Minister to take collection action”.
28
In light of the above analysis, the ordinary meaning of the phrase
“proceedings . . . in respect of a cause of action” encompasses the statutory
collection procedures of the Minister. The exercise of the statutory
proceedings is entirely dependent upon a set of facts that would support action
by the Minister, i.e., the existence of a tax debt and the expiry of the delay
period prescribed by s. 225.1 .
29
I now turn to the French version of s. 32 , which states:
Sauf disposition contraire de la présente loi ou de
toute autre loi fédérale, les règles de droit en matière de prescription qui,
dans une province, régissent les rapports entre particuliers s'appliquent lors
des poursuites auxquelles l'État est partie pour tout fait générateur survenu
dans la province. Lorsque ce dernier survient ailleurs que dans une province,
la procédure se prescrit par six ans.
30
The words “poursuite”, “procédure” and “instance”
are all used to render the term “proceedings” in different contexts. “Procédure”
is even used to describe a cause of action, as demonstrated by the wording of
s. 32 of the CLPA . This can also be verified in some French
publications on the translation of English law (see for instance Bouscaren,
Greenstein & Cordahi, Les bases du droit anglais (1981)). It is
therefore difficult to consider the definition of a single expression to
determine the common meaning of the English and French versions of s. 32 .
Indeed, the legislative history of s. 32 , beginning with s. 38(2) (R.S.C. 1970,
c. 10 (2nd Supp.)) and later s. 39(3) (R.S.C. 1985, c. F-7 ) of the Federal
Court Act (“FCA ”), which as discussed below were its precursors,
also denotes both that context matters and that changes in terminology are not
necessarily meant to bring about a change in the substantive law.
31
If we were to confine our analysis to the word “poursuite”, we
would find that generally, in Canada, that word excludes non-court proceedings:
the term is defined in H. Reid, Dictionnaire de droit québécois et canadien
(2nd ed. 2001), in the following way, at p. 425:
[translation]
1. Court action brought by a person in order to
assert his right or obtain a sanction against the perpetrator of an offence.
E.g.: A creditor’s proceedings [poursuite] against his debtor.
But French
dictionaries, which are also used in Canada, ascribe a broader definition to “poursuite”.
G. Cornu, in Vocabulaire juridique (8th ed. 2000), at p. 654, writes:
[translation] Exercise of
a remedy [voie de droit] to compel someone to perform his obligations or
submit to the orders of the law or of the public authority.
Cornu further
defines “voie de droit” as follows (at p. 909):
[translation]
Means given by the law to citizens to have their rights recognized and
respected or to defend their interests; generic term encompassing court action,
means (jurisdictional) of redress, executions, administrative recourses; by
ext., any jurisdictional proceeding even initiated by the prosecution.
General
dictionaries such as Le Petit Larousse (2003) define “poursuite”
as a court proceeding, but also as [translation]
“[a]n action by the tax authorities to collect treasury debts”.
32
It would therefore be difficult to conclude definitively that “poursuite”
is more restrictive than “proceedings” and that this is determinative in the
context of s. 32 . It is then necessary, in this case, to conclude that the
common meaning of the English and French versions of the provision is unclear
and that resort to the other rules of statutory interpretation is necessary in
order to discern Parliament’s intent. Applying those rules, construing s. 32
in context, harmoniously with the purpose of the CLPA , I have concluded
that it was meant to include administrative mechanisms that enable the Crown to
achieve exactly the same result as it would through a formal action in court.
33
At common law, the Crown was not bound by limitation periods unless a
federal statute expressly provided otherwise. On the other hand, the Crown was
entitled to the benefit of a limitations defence in proceedings brought against
it: see D. Sgayias et al., The Annotated Crown Liability and Proceedings
Act 1995 (1994), at pp. 135-36, and P. W. Hogg and P. J. Monahan, Liability
of the Crown (3rd ed. 2000), at p. 71. The purpose of s. 32 is obviously,
in the search for equity, to extend the same benefit of laws of prescription to
subjects defending themselves against proceedings brought by the Crown.
34
A court action brought by the Minister to recover tax debt in this
appeal would be subject to the limitation provisions in s. 32 . It would be incongruous
to find that s. 32 of the CLPA was intended to apply to the court action
but not to the statutory collection procedures that serve the identical
purpose. The certainty, evidentiary and diligence rationales that support the
application of limitation provisions to Crown proceedings apply equally to both
the court and non-court proceedings at issue here. See Berardinelli v.
Ontario Housing Corp., [1979] 1 S.C.R. 275, per Estey J., at p. 284:
When one interpretation can be placed upon a statutory provision which
would bring about a more workable and practical result, such an interpretation
should be preferred if the words invoked by the Legislature can reasonably bear
it . . . .
There is no
reason to infer that Parliament intended for s. 32 ’s application to turn solely
upon the technicality of whether the relevant proceeding took place in court.
To exclude s. 32 ’s application to proceedings that are equivalent in purpose
and effect to a court action would frustrate the object and aim of the provision.
35
The legislative history of s. 32 of the CLPA supports the
inference that Parliament intended for its application to extend beyond
proceedings in court. Section 38 of the FCA was enacted in 1971
(R.S.C. 1970, c. 10 (2nd Supp.)), and later renumbered as s. 39 of R.S.C. 1985,
c. F-7 . Section 38(2) , which was succeeded by s. 39(3) , applied limitation
provisions to proceedings brought by or against the Crown. Section 39 of the FCA
stated:
39. (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 that province.
(2) A proceeding in the Court in respect of a
cause of action arising otherwise than in a province shall be taken within six
years after the cause of action arose.
(3) Except as expressly provided by any other Act,
the laws relating to prescription and the limitation of actions referred to in
subsections (1) and (2) apply to any proceedings brought by or against the
Crown.
Prior to 1992,
s. 32 of the CLPA (then entitled the Crown Liability Act),
applied only to tort actions against the Crown. By S.C. 1990, c. 8, ss. 10,
and 31, s. 39(3) of the FCA was repealed and s. 32 of the CLPA
was amended to apply to all proceedings in respect of a cause of action brought
both by and against the Crown.
36
It is readily apparent, as the Federal Court of Appeal notes at para.
49, that s. 38(2) and later s. 39(3) were the predecessors to the current s. 32
of the CLPA . In determining the legislative intent behind the current
wording in s. 32 , it is useful to examine the judicial interpretation given to
the provisions that came before it. In E. H. Price Ltd. v. The Queen,
[1983] 2 F.C. 841, the Federal Court of Appeal considered whether s. 38(2) of
the FCA applied to the Minister’s registration of a certificate under
the Excise Tax Act . In obiter, Clement D.J. held at pp. 847-48
that in the absence of the limiting words “in the Court” that were contained in
s. 38(1) , “proceedings” under s. 38(2) were not limited to court proceedings
and included the Minister’s registration of a certificate. In its subsequent
amendment of s. 32 of the CLPA , Parliament did not include the words “in
the court” or words of a similar limiting effect. As Rothstein J.A. found at
para. 50, “it is a fair inference that Parliament, not having done so, meant to
adopt the interpretation in E. H. Price so that ‘proceedings’ in section
32 include all legal processes in respect of a cause of action, whether court
or otherwise”. Although the words “in respect of a cause of action” were not
included in s. 39(3) , for the reasons I have outlined, the inclusion of these
words in s. 32 does not have the effect of limiting the provision’s application
to proceedings in court.
37
I conclude that the English version best reflects the intent of the
legislator. As a result, it should be determined which particular limitation
period provided by s. 32 applies to these proceedings. This depends upon
whether the cause of action on the federal tax debt arose in a province or
otherwise than in a province.
(2) Does the Cause of Action Arise in a
Province, or Otherwise than in a Province?
38
Section 32 applies provincial limitation laws to proceedings in respect
of a cause of action arising in a province, and a six-year limitation period to
those which arise otherwise than in a province. The motions judge, at
para. 59, would have found that the cause of action arose otherwise than in a
province. The Court of Appeal applied the provincial limitation provision and
so, implicitly at least, found that the cause of action arose in a province.
In this appeal, the matter is of no particular consequence, because in either
case the limitation period runs for six years from the date upon which the
cause of action arose. Nonetheless, I conclude that the appellant’s cause of
action arose otherwise than in a province, and hence that the six-year
limitation period provided by s. 32 applies.
39
Tax debts created under the ITA arise pursuant to federal
legislation and create rights and duties between the federal Crown and
residents of Canada or those who have earned income within Canada. The debt
may arise from income earned in a combination of provinces or in a foreign
jurisdiction. The debt is owed to the federal Crown, which is not located in
any particular province and does not assume a provincial locale in its
assessment of taxes. Consequently, on a plain reading of s. 32 , the cause of
action in this case arose “otherwise than in a province”.
40
A purposive reading of s. 32 supports this finding. If the cause of
action were found to arise in a province, the limitation period applicable to
the federal Crown’s collection of tax debts could vary considerably depending
upon the province in which the income was earned and its limitation periods.
In addition to the administrative difficulties that potentially arise from
having to determine the specific portions of tax debts that arise in different
provinces, the differential application of limitation periods to Canadian
taxpayers could impair the equitable collection of taxes. Disparities amongst
provincial limitation periods could foreseeably lead to more stringent tax
collection in some provinces and more lenient collection in others. The Court
can only presume that in providing for a limitation period of six years to
apply to proceedings in respect of a cause of action arising otherwise than in
a province, Parliament intended for limitation provisions to apply uniformly
throughout the country with regard to proceedings of the kind at issue in this
appeal.
41
I conclude that the collection proceedings under the ITA are
subject to prescription six years after the cause of action arose. As noted
above, the cause of action in this case comprised the respondent’s tax debt and
the expiry of the 90-day delay period after the mailing of the Notice of
Assessment dated June 17, 1986. As a result, the cause of action arose on
September 16, 1986. The Minister undertook no action in the six years after
that date to effect a renewal of the limitation period. Consequently, as of
September 16, 1992, s. 32 of the CLPA barred the Minister from
collecting the respondent’s 1986 federal tax debt. Limitation periods have
traditionally been understood to bar a creditor’s remedy but not his or her
right to the underlying debt. In my view, this is a distinction without a
difference. For all intents and purposes, the respondent’s federal tax debt is
extinguished.
B. The
Provincial Tax Debt
42
The final issue is whether the Minister, in his or her role as agent of
the province of British Columbia, is barred by the B.C. Limitation Act
from collecting tax debts arising under the B.C. ITA.
43
Section 49 of the B.C. ITA provides that s. 222 of the ITA
applies for the purposes of the B.C. ITA, subject, as per s.
1(7), to such modifications as the circumstances require to make it applicable
to British Columbia. Accordingly, tax debts arising under the B.C. ITA
are debts owed to the province.
44
Section 69 of the B.C. ITA authorizes British Columbia’s Minister
of Finance and Corporate Relations to enter into a collection agreement whereby
the federal government agrees to collect taxes payable under the B.C. ITA
and remit those taxes to the provincial government. A collection agreement of
this kind between British Columbia and the Government of Canada has been in
place since 1962: Memorandum of Agreement, January 28, 1962. Subsection 1(1)
of this agreement states as follows:
Canada, as agent of the Province, will
collect for and on behalf of the Province the income taxes imposed under the
[B.C. ITA] . . . . [Emphasis added.]
45
As a result, the provincial government, as principal, has delegated its
right to collect tax debts to the federal government, its agent. It has long
been accepted that the authority, express or implied, of every agent is
confined within the limits of the powers of his or her principal: see F. M. B.
Reynolds, Bowstead and Reynolds on Agency (16th ed. 1996), at p. 110.
Accordingly, in order to determine the collection rights that are delegated to
the federal government, it is necessary to determine the collection rights of
the province.
46
The B.C. Limitation Act governs the law on limitations of actions
within British Columbia. Section 14(1) of the British Columbia
Interpretation Act, R.S.B.C. 1996, c. 238, states that unless an enactment
specifically provides otherwise it is binding on the Government of British
Columbia. The B.C. Limitation Act does not provide otherwise, and so
its provisions apply to proceedings brought by and against the provincial
government.
47
Section 3(5) of the B.C. Limitation Act applies a limitation
period of six years to actions for which prescription is not “specifically
provided for” in another Act. Under s. 1 of the B.C. Limitation Act,
an action is defined as including “any proceeding in a court and any exercise
of a self help remedy”. I agree with both the motions judge and the Court of
Appeal that the term “self help remedy” encompasses the statutory collection
procedures available under the B.C. ITA. A statutory collection
procedure is a self help mechanism by which the Minister is able to effect a
result that could otherwise be achieved only through an action in court. As
well, the B.C. ITA does not specifically provide for limitation periods
in its collection provisions.
48
Consequently, the province’s right to pursue collection proceedings
under the B.C. ITA is subject to the limitation period set out in s.
3(5) of the B.C. Limitation Act. Moreover, pursuant to s. 9(1) of the
B.C. Limitation Act, on the expiration of the limitation period, the
province’s right and title to the tax debt is extinguished, and pursuant to s.
9(3), the province’s right and title to interest on the tax debt is extinguished.
49
As noted above, the federal Crown’s right to collect provincial taxes in
this case is no greater than the right delegated to it by the province. Since
the province’s collection rights are subject to expiry six years after the
underlying cause of action arose, so too are the collection rights of the
federal Crown as its agent.
50
The cause of action here consisted of the tax debt and the expiry of the
delay period allowing collection action to be taken on September 16, 1986. The
Minister undertook no action in the six years after that date to effect a
renewal of the limitation period. Consequently, as of September 16, 1992, the
federal Crown became statute-barred from collecting the provincial tax debt.
As well, the right and title of any claimant to the respondent’s provincial tax
debt, and its accrued interest, were extinguished on that date.
VI. Conclusion
51
For the foregoing reasons, I would dismiss the appeal with costs.
The reasons of Gonthier and Deschamps JJ. were delivered by
52
Deschamps J. — I agree
with the reasons of my colleague, Justice Major, except on one point.
53
In determining where the cause of action arises under s. 32 of the Crown
Liability and Proceedings Act, R.S.C. 1985, c. C-50 , Major J. focusses on
the location of the federal government. The conclusion that the cause of
action arises “otherwise than in a province” is, in my view, inappropriate in
two ways. First, it emphasizes the residence of the creditor instead of
relying on the connecting factors of the cause of action and second, it means
that the federal government is not located anywhere in Canada or, as the French
version of s. 32 reads, the federal government would be located “ailleurs
que dans une province”. Common sense, rather, would dictate that the
federal Crown is located in every province and not “otherwise than in a
province”.
54
The cause of action concept is more readily understood in negligence
cases. Here, however, the claim has a statutory foundation. It may be
characterized as a right in personam, i.e. the right of the Crown
against the taxpayer. This Court, in Williams v. Canada, [1992] 1
S.C.R. 877, dealt with a similar problem in a case concerned with a tax
exemption. Although the residence criterion was modified in favour of a test
encompassing all connecting factors, the situs analysis was upheld to
determine the location of the debt. This concept is also used in private
international law in order to determine where enforcement of a claim can be
pursued: J.-G. Castel and J. Walker, Canadian Conflict of Laws (5th ed.
(loose-leaf)), at para. 22.2.
55
Applying the connecting factors test used in Williams, the
factors would be the respondent’s residence, his place of employment and the
place where his income was received. All of these factors point to British
Columbia. The British Columbia six-year limitation period should apply.
56
Since the federal government is, by virtue of its agreement with all of
the provinces (except Quebec), responsible for collecting all provincial income
taxes, it is sensible to bind its federal tax claim to the limits available on
the provincial one. Efficiency is thus preserved by invoking one limitation
for both the federal and provincial income tax debts arising in each province,
other than Quebec.
Appeal dismissed with costs.
Solicitor for the appellant: Department of Justice,
Vancouver.
Solicitors for the respondent: Legacy Tax & Trust
Lawyers, Vancouver.
Solicitors for the intervener: McCarthy Tétrault,
Vancouver.
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