Date: 19981204
Docket: T-72-87
BETWEEN:
HUSKY OIL LIMITED
Plaintiff
- and -
HER MAJESTY THE QUEEN
Defendant
REASONS FOR ORDER
DUBÉ J:
[1] This motion seeks an order pursuant to Rule 220(1) determining as a preliminary question of law:
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(a) Whether section 150 or subsection 158(2) of the Customs Act ("the Act")1, is the applicable limitation provision in the present proceeding; and |
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(b) If subsection 158(2) applies, whether it operates to bar the plaintiff's claim completely or only with respect to the proceeds of certain cheques. |
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[2] The grounds of the motion are that the amended defence filed in this action alleges, inter alia, that the plaintiff's claim is completely barred by subsection 158(2) of the Act.
1. Agreed Statement of Facts
[3] 1. The Plaintiff ("Husky") is a body corporate and through its Division known as Husky Marine Services operated the Canadian Flag supply vessels "GABARUS BAY", "MAHONE BAY", "CHIGNECTO BAY" and "TRINITY BAY" ("the Vessels") on Canada's east coast for several years in the 1980's.
2. The Defendant was represented in this proceeding by its employees in the Federal Department known as Revenue Canada, Customs & Excise ("Customs").
3. On February 19, 1986 Husky received Notices of Seizure and/or Ascertained Forfeiture from Customs relating to the Vessels, which had been under charter to Husky. The Notices alleged that the Vessels had been unlawfully used in Canadian waters contrary to "the Customs Act", R.S.C. 1970, c. C-40 (since repealed), hereinafter referred to as "the Customs Act" or "the Act".
4. In order to avoid seizure of the Vessels, Husky on or about February 19, 1986 caused to be deposited with Customs seven separate cheques (the "cheques") totalling $412,901.90. The dates and amounts of such cheques are as follows:
| February 19, 1986 $ 25,000.00 |
| August 19, 1986 64,650.32 |
5. By Notices dated October 21, 1986 the Chief of the Customs Adjudications Division notified of the following ministerial decisions under s. 163 of the Customs Act:
| CS 63884/AT-958 Chignecto Bay $127,651.44 to be forfeited |
| CS 63885/AT-959 Gabarus Bay $32,154.16 to be retained out of the balance and be forfeited; the balance of $31,654.16 to be returned to Husky |
| CS 63886/AT-960 The Mahone Bay $94,825.50 to be forfeited |
| CS 63887/AT-961 Trinity Bay $94,962.48 to be retained out of the deposit and be forfeited; the balance of $31,654.16 to be returned to Husky |
In all, $39,593.58 was forfeited and $63,308.32 was returned to Husky.
6. On October 28, 1986 Wylie Spicer, the solicitor for Husky, wrote to the Chief of the Customs Adjudications Division advising that, in accordance with s. 164 of the Act, Husky did not accept the Minister's decision as communicated in the various Notices of October 21, 1986, and requested that the Minister advise whether he was prepared to refer the seizures to the Federal Court.
7. Mr. Laycock replied to Mr. Spicer by letter dated November 4, 1986. Mr. Laycock advised that the Minister would not refer the matter of the seizure of the Vessels to the Federal Court but that Husky might, on its own initiative, have the matter brought before the Court. In that regard, Mr. Laycock specifically drew Mr. Spicer's attention to s. 150 of the Act.
8. By Statement of Claim dated January 9, 1987 Husky commenced this present action and requested that the deposit monies payable to Customs on behalf of Her Majesty be returned. A Defence was filed on March 11, 1987.
9. By letter dated June 19, 1990, the Defendant notified the Plaintiff that it wished to amend the Statement of Defence to plead the limitation period set out in s. 158(2) of the Act.
10. The Plaintiff refused to consent to the proposed amendment and the Defendant filed a Motion dated August 31, 1990 seeking leave to amend its Statement of Defence to plead the limitation period set out in s. 158(2) of the Act.
11. In a decision dated February 4, 1991 the Honourable Mr. Justice Denault dismissed the Defendant's application for leave to amend to plead the limitation period set out in s. 158(2) of the Act.
12. On February 6, 1991 the Defendant appealed against the refusal of the Court to grant leave to amend his Defence and on February 21, 1991 the Plaintiff cross-appealed on another point.
13. The appeal and cross-appeal were disposed of by judgment of the Court of Appeal on consent of the parties dated July 10, 1996 wherein the Court of Appeal granted the Defendant leave to plead s. 158(2) of the Customs Act.
14. Sections 150 and 158 of the Act read as follows:
S. 150
| (1) No action, suit or proceeding shall be commenced against the Crown, or against any officer or person employed for the prevention of smuggling, or against any person in possession of goods under the authority of an officer, for the recovery of the thing seized, until a decision has been first given either by the Minister or by a court of competent jurisdiction in relation to the condemnation of the thing seized. |
| (2) Every such action, suit or proceeding shall be brought within three months after such decision has been given. |
S. 158
| (1) Any sum of money deposited in accordance with section 157 shall, unless it is released as provided in section 157, become the property of Her Majesty for the public uses of Canada, subject to the provisions of this Act with respect to the distribution of the proceeds of forfeited goods. |
| (2) No proceedings against the Crown for the recovery of any such money shall be instituted, except within six months from the date of the deposit thereof. |
15. On August 6, 1996, the Defendant filed an Amended Statement of Defence specifically referencing s. 158(2) of the Act.
2. Limitation Provisions
[4] Section 150 of the Act stipulates that an action against the Crown for the recovery of the things seized must be brought within three months after the decision of the Minister. However, subsection 158(2) provides that proceedings against the Crown for the recovery of money deposited in accordance with section 157 shall be instituted within six months from the date of the deposit.
[5] Since the decision of the Minister was made on October 21, 1986, and the action was commenced on January 9, 1987, Husky claims that this action was commenced within three months of the Minister's decision under section 150 of the Act. On the other hand, the defendant ("the Minister") alleges that the money in question deposited in accordance with section 157 becomes the property of Her Majesty unless proceedings against the Crown for the recovery of such money were instituted within six months from the date of the deposit. Since the cheques were deposited on February 19, 1986, and the action was filed only on January 9, 1987, it was commenced more than six months from the date of the deposit and thus statute barred.
[6] In the alternative, Husky claims that if subsection 158(2) applies, the action was commenced within the time limitation of six months with reference to the proceeds of the last two post-dated cheques payable July 19, 1986, and August 19, 1986, respectively.
3. Analysis
[7] In Dome Petroleum Ltd. v. Canada2, my colleague Strayer J. (now with the Federal Court of Appeal) dealt with a similar situation. The Crown seized six vessels belonging to Dome Petroleum pursuant to the Act. Dome deposited a sum of over one million dollars with the Minister on April 28, 1986, and the ships were released. On November 21, 1986, Dome commenced an action against the federal Crown for the recovery of the deposit. The Crown argued that the action was barred by the six month limitation period under subsection 158(2) of the Act. The limitation period issue was referred to the Court. The learned judge held that Dome's action was barred by subsection 158(2) of the Act.
[8] The learned judge referred to a 1917 decision of the Exchequer Court, J.C. Groendyke Co. v. The King3 and to a more recent decision of the Federal Court of Appeal (PAC Stainless Ltd. v. Minister of National Revenue)4 and reviewed the situation as follows:
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...While, as I have indicated, these sections are not the model of clarity, I cannot escape the conclusion that the words "proceedings against the Crown for the recovery of any such money . . ." as found in s. 158(2) refer to an action in court. While I have noted carefully the authorities cited by counsel by the plaintiff with respect to possible meanings of the word "proceedings" I am satisfied that, in the context of this phrase, the word "proceedings" cannot be viewed in isolation. The phrase as quoted must be read as a whole and the plain meaning of that phrase is surely a reference to litigation. I might add that even if the steps taken pursuant to ss. 161-164 are "proceedings" they are not proceedings instituted by the taxpayer. These sections provide a means for the Department to review the assessment at different levels (PAC Stainless Ltd. v. Minister of National Revenue (1987), 80 N.R. 115 at p. 117 (F.C.A.)) with the aid of submissions from the taxpayer. They are "instituted" by the notice by the Deputy Minister under s. 161 and are optional: s. 161(1) provides that "The Deputy Minister may thereupon notify the owner [of the impending forfeiture] . . . and call upon him to furnish . . . such evidence . . . as he desires to furnish". If the Deputy Minister chooses not to notify the owner in this fashion, then the only recourse the owner of the money deposited has for its recovery is to commence action. |
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[10] I have had some difficulty in reaching this conclusion because it could result in considerable inconvenience. It means that even though the Deputy Minister or the Minister may be still considering the submissions of the taxpayer pursuant to ss. 162 and 163 prior to making a decision, if the time is approaching a lapse of six months from the date of the deposit the taxpayer to preserve his right under s. 158(2) must commence action for the recovery of the deposit. He would be put to this trouble and expense even if later the Minister decided in his favour. I am unable, however, to avoid the plain meaning of s. 158(2) notwithstanding this potential absurdity. It does underline the importance of the Deputy Minister and the Minister making a decision as quickly as possible and not, as was done in this case, finally advising the taxpayer three days after the expiration of the limitation period that the Minister would not refer the matter to court. |
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[11] At the same time I have come to the conclusion that s. 150 has nothing to do with this situation. Section 150 appears to me to refer only to actions for the recovery of articles seized and does not apply to the recovery of deposits. Therefore although it prohibits any action until the Minister has decided to condemn an article seized, it would not be applicable to preclude a taxpayer commencing action at any time after the making of a deposit for the recovery of the money deposited. While it is by no means apparent why different regimes, including different limitation periods, were prescribed for recovery of the article itself on the one hand, and the recovery of the deposit made in lieu of the seizure or continuation of the seizure of the article on the other, that appears to be what the Act provides. |
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[12] In reaching this conclusion I am following a virtually identical 1917 decision of the Exchequer Court of Canada in J.C. Groendyke Co. v. The King (1917), 16 Ex. Ct. 465. That decision dealt with the counterpart provisions in the Customs Act of that period. While the decision is over seventy years old I am unaware of any jurisprudence or statutory developments which suggest a different result. |
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[9] While I fully agree with counsel for Husky that judges of the same Court are not bound by decisions of their colleagues, still I would have to be convinced that my colleague was wrong in his decision (when dealing with a similar factual situation) before discarding it5.
[10] In his submissions counsel for Husky submits that in Dome the Court did not consider the Act in its entirety or its legislative history, with the result that its conclusion should not govern the Court in this present application. However, there is no evidence before me that Strayer J. did not consider the Act in its entirety or its legislative history. The paragraphs above referred to from his decision clearly indicate that he fully considered the relevant provisions of the Act. He did indicate that "these sections are not the model of clarity" but still he could not "escape the conclusion that the words "proceedings against the Crown for the recovery of any such money . . . "as found in subsection 158(2) refer to an action in court", which action had to be commenced within six months from the date of the deposit.
[11] Strayer J. "had some difficulty in reaching this conclusion because it could result in considerable inconvenience" to the taxpayer as the latter must commence his action for recovery under subsection 158(2) even if the Minister has not yet decided under subsection 150(1). That section applies only to actions for the recovery of articles seized and does not apply to the recovery of deposits. Strayer J. underlined the possible absurdity if, after having been put to the trouble and expenses of commencing an action, the taxpayer was then faced by a favourable decision of the Minister. His answer was that the Minister ought to make his decision as quickly as possible.
[12] Consequently, I am of the view that subsection 158(2) applies in the instant case.
4. Applicability of the Limitation Provision
[13] As mentioned earlier, Husky seeks an order claiming that the last two post-dated cheques payable July 19, 1986, and August 19, 1986, are within the six month time limitation under subsection 158(2). Again, the action was commenced on January 9, 1987, thus within six months from the dates of the last two cheques.
[14] The seven cheques were deposited with Customs by Husky on February 19, 1986, post-dated monthly from that date to August 19, 1986. While the cheques could not be cashed at the bank before their respective post-dates, they were all legally negotiable to third parties from February 19, 1986. Subsection 158(2) bars proceedings which are commenced more than six months after "the date of deposit" of the money sought to be recovered. The issue is whether the term "deposit" refers to the date the cheques were deposited in the hands of the Minister or the date they could actually be cashed at the bank.
[15] A cheque is a bill of exchange and it is not invalid by reason of its being post-dated6. A post-dated cheque may be negotiated at any time between the date of issue and the date of maturity and for a reasonable time thereafter7.
[16] Subsection 158(1) of the Act provides that the sum of money in question be deposited in accordance with section 157. That section stipulates that a Customs Officer may order the delivery of the things seized on the deposit of money of a sum equal at least to the full duty-paid value. Under subsection 157(3) any sum of money so deposited shall be immediately deposited in a bank, there to remain until forfeited in due course of law or released by order of the Minister.
[17] At the time the action was commenced, on January 9, 1987, all post-dated cheques had already become due and payable. Had Husky deposited a sum of money in full on February 19, 1986, the totality of the sum would have been deposited at the bank. Presumably it was to accommodate Husky that Customs accepted a series of post-dated cheques all deposited on that date with the Minister and negotiable by him at that time although not cashable immediately at the bank.
[18] In Hansen v. Randa8, the Court considered the application of the limitation period commencing either upon the deposit of the post-dated cheques or from their maturity dates. It adopted the first date. It followed the decision of the Court in the Bank of Montreal v. Reinhorn9. Counsel for Husky alleges that the latter could have countermanded any of his cheques before maturity. That is difficult to accept. In view of section 157, the Minister could immediately have pressed for a deposit of the equivalent sum of money. Thus, in my view, the "deposit" took place on the date the cheques were actually "deposited" in the hands of the Minister (or Customs Officer).
[19] Consequently, in answer to the second question, subsection 158(2) operates to bar the plaintiff's claim completely.
5. Determination
[20] Subsection 158(2) of the Act is the applicable limitation provision in the present proceeding;
[21] Subsection 158(2) of the Act operates to bar the plaintiff's claim completely.
OTTAWA, Ontario
December 4, 1998
Judge
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1 R.S.C. 1970, c. C-40 (since repealed).
2 T-2543-86, December 19, 1988.
3 (1917), 16 Ex. Ct. 465.
4 (1987), 80 N.R. 115 at p. 117 (F.C.A.).
5 The Queen v. Phoenix Assurance Co. Ltd., [1976] 2 F.C. 649 (T.D.); Regent Holdings Ltd. v. McKay (1972), 25 D.L.R. (3d) 615 (B.C.S.C.); R. v. Thompson, [1931] 1 W.W.R. 26 (Man. C.A.); Islands Protection Society v. British Columbia (1988), 32 Admin L.R. 37 (B.C.S.C.); Indalex Division of Indal v. United Metal Fabricators Ltd. (1986), 15 C.P.C. (2d) 19 (B.C.S.C.) and Re Hansard Spruce Mills Ltd. (1954), 13 W.W.R. 285 (B.C.S.C.).
6 Bills of Exchange Act, R.S.C. c. B-5, s. 26(d).
7 Crawford & Falconbridge, Banking and Bills of Exchange Vol. 2 (1986), 8th ed., at pp. 1741-42; Paget's Law of Banking (1996), 11th ed., at p. 242 and Hodgson & Lee Pty. Ltd. v. Mardonius Pty. Ltd. (1986), 5 NSWLR, 496 at pp. 498-99 (C.A.).
8 [1996] B.C.J. No. 1654 (July 9, 1996, Reg Nos. 959823, 959962, and 95-10153, B.S.S.C.) at para. 27.
9 (1925), 28 O.W.N. 476 (S.C.).
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