Supreme Court of Canada
Reference as to the Validity of Section 31 of the Municipal District Act Amendment Act, 1941, Alta., c. 53, [1943] S.C.R. 295
Date: 1943-04-02
In The Matter of A Reference as to the Validity of Section 31 of the Municipal District Act Amendment Act, 1941, Being Chapter 53 of the Statutes of Alberta, 1941, and as to the Operation Thereof.
1942: October 9, 12, 13; 1943: April 2.
Present: Duff C.J. and Rinfret, Davis, Kerwin, Hudson and Taschereau JJ.
Constitutional law—Provincial legislation—Taxes on land declared to be special lien or charge upon crops until paid—Priority over all other claims, liens, privileges or encumbrances on crops—Whether intra vires the legislature—Direct or indirect taxation—Municipal taxation—Conflict with Dominion legislation—Adjustment of priorities—Preferential lien granted to a bank for seed grain advances—Whether persons or corporations outside province affected—The Municipal District Act, Alta., 1926, c. 41—The Municipal District Act Amendment Act, Alta., 1941, c. 53, s. 31—The Bank Act, R.S.C. 1927, c. 12, s. 88 (10)—Sections 91 and 92 B.N.A. Act.
Section 31 of the Alberta Municipal District Act Amendment Act, 1941, amending the Municipal District Act by adding new sections 354a and 354b, enacts, inter alia, that "all arrears of taxes outstanding as at the date of the coming into force of the Act" (and also the taxes in any year thereafter) "in respect of land in any municipality, shall be a special lien or charge upon all crops grown or to be grown on the said land until the said taxes are paid, and such lien or charge shall have priority over all other claims, liens, privileges, or encumbrances on such crops except as set out in The Crop Liens Priorities Act."
Held that section 31 is intra vires the legislature of the province of Alberta: the enactment making the land tax a first lien upon the crops until paid is an enactment strictly within the ambit of section 92 (2) B.N.A. Act.
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Per the Chief Justice and Davis, Kerwin and Hudson JJ.—The legislation enacted by section 31 is a legitimate exercise of the power of the legislature in relation to direct taxation and matters merely local and private, the matter of the legislation being strictly provincial and the aim of the legislation obviously being to place obstacles in the way of persons seeking to avoid payment of the land tax. Under the system of municipal assessment and taxation provided by the Municipal District Act, the tax is a land tax, and the means authorized for enforcing payment are generally of the same type as those which have been employed by the provinces for that purpose for over fifty years. The liability of the owner, or of a purchaser or a mortgagor with even an economic interest of the slightest, to pay taxes on the assessed value of the land is a liability which has in a pecuniary sense no necessary relation to the value or nature of the taxpayer's interest in the land. Furthermore, the special lien which is created by section 354 is enforceable by the statutory proceedings under which the interest of everybody in the land, excepting the interests specified in the enactment, is extinguished by the sale; subject to a recognition of these interests, the land, irrespective of the persons who may have legal interests in it, is treated as an economic thing upon which a contribution by way of a tax is levied and which may, if necessary, be sold for the purpose of obtaining payment of that contribution. A provincial legislature cannot delegate to a municipality authority to levy a tax which it cannot levy directly: Attorney-General for Ontario v. Attorney-General for the Dominion ([1896] A.C. 348, per Lord Watson at 364). But there is no ground upon which it can be affirmed that a direct tax upon land, or in relation to land, loses its character as a direct tax by reason of the fact that moneys due in respect of it are declared to be a lien upon the crops grown upon the land both before and after severance, as provided by section 31. As to the point raised that the personal liability to pay imposed by section 354 (a) (4) is in effect an indirect tax because the taxpayer will seek to recoup himself from the persons directly liable to pay the tax, it must be observed that the tax is a single tax which when once paid is extinguished and until paid is a lien on the crop. A purchaser of the crop takes it cum onere. Furthermore, the persons affected are prohibited from receiving, or accepting any such crop or any part of the proceeds of the sale of such crop, until the tax has been paid. Also, if certain provisions of the Bank Act and other Dominion statutes conflict with section 31, it may be that, to that extent, this section will be overborne by such Dominion legislation in particular cases in which a conflict arises. Assuming the primacy of the first-mentioned legislation, and that the provincial legislation would be displaced in case of such a conflict, it does not follow that the provincial legislation is ultra vires; the provisions of the Tax Act have full effect in all cases in which the facts do not bring the Dominion legislation into play. Attorney-General for Ontario v. Reciprocal Insurers ([1924] A.C. 328, at 345, 346); McColl v. Canadian Pacific Railway Co. ([1923] A.C. 126, at 135). As to section 88 of the Bank Act and especially subsections dealing with seed grain, fertilizer and binder twine, it must be observed that, while the Dominion Parliament has exclusive jurisdiction in relation to banks and banking, it does not follow that banks are taken out of the province. They remain within the province and subject to validly enacted provincial laws: they and their property are subject to taxes imposed by a province in the lawful
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exercise of its authority in relation to direct taxation. Canadian Pacific Railway Co. v. Parish of Notre Dame de Bonsecours ([1889] A.C. 367). But the question whether a lien arising under these provisions of the Bank Act possesses priority over a tax lien as the one in this case, ought to be reserved for decision in a concrete case between a bank and the taxing authority. The effect of the provisions of section 31 is not to impose a liability upon persons and corporations outside the province. Attorney-General for Ontario v. Reciprocal Insurers ([1924] A.C. 328, at 345).
Per Rinfret and Taschereau JJ.—The legislation enacted by section 31 is nothing else than legislation in municipal matters imposing a municipal tax and providing security to assist in the collection of that tax. Such legislation was meant to be confined to local transactions, and it must be so construed; it is legitimate taxation within the province in the exercise of the powers devolved upon provincial legislation in relation to municipal institutions in the province, within the provisions of section 92 B.N.A. Act. If, in a sense, such legislation affects subject-matters reserved to the Dominion Parliament, it does so only collaterally and in no wise so as to entail unconstitutionality or, as a consequence, invalidity. Charges or imposts, authorized by provincial legislation, acting within its sphere, ought not to be declared unconstitutional upon the ground of an apparent conflict or a dispute, as to the priority, between a lien, such as the one enacted in section 31, and liens created by Dominion legislation. In such case, it would be purely a matter for the courts to decide and to adjudge the respective priorities enacted by Dominion and provincial legislation: Silver Brothers Ltd. v. Hart ([1932] A.C. 514; [1929] S.C.R. 557). Also, section 31 is not directed to trade and commerce as understood under the decided cases, not to any of the specific heads of section 91 B.N.A. Act; and if it affects any of the matters under that section, it is only "as a necesary incident to the lawful powers of good government within the province." Ladore v. Bennett ([1939] A.C. 468, at 482). The tax imposed by section 31 (if it is a tax, as, in reality, it is the same tax enacted in the main Act, for which a new debtor is made liable) is not an indirect tax or an indirect method of recovering the tax on the ground that the general tendency would be for the purchaser to pass the tax on to the owner of the land. Such tax is a tax on land, a municipal tax and is not, as to its incidence, to be regarded in the same aspect as taxes upon commodities to which Mill's formula concerning taxation is generally applied. City of Halifax v. Fairbanks Estate ([1928] A.C. 117, per Viscount Cave, L.C. at 125).
REFERENCE by His Excellency the Governor General in Council to the Supreme Court of Canada in the exercise of the powers conferred by section 55 of the Supreme Court Act (R.S.C. 1927, c. 35) of the following question: Is section 31 of The Municipal District Act Amendment Act, 1941, ultra vires the legislature of Alberta, either in whole or in part, and if so, in what particular or particulars, or to what extent?
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The Order in Council referring this question to the Court is as follows:—
Whereas section 31 of The Municipal District Act Amendment Act, 1941, being chapter 53 of the statutes of Alberta, 1941, amends The Municipal District Act, being chapter 41 of the statutes of Alberta, 1936, by adding immediately after section 354 thereof new sections numbered sections 354a and 354b;
And whereas the Minister of Justice submits that, inasmuch as those sections provide for a first and preferential lien on crops and affect the proceeds of the sale thereof, apparently they are in conflict with subsection 10 of section 88 of the Bank Act which provides for a first and preferential lien on crops in connection with seed grain advances and moreover will injuriously affect trade and commerce inasmuch as the proceeds aforesaid, whether in the form of Canadian currency or otherwise, can no longer be freely exchanged or circulated; and
That he is of opinion that the questions as to the validity and operation of the said provisions are important questions of law touching upon the constitutionality and interpretation of this provincial legislation.
Therefore, His Excellency the Governor General in Council on the recommendation of the Minister of Justice, and pursuant to the authority of section 55 of the Supreme Court Act, is pleased to refer and doth hereby refer the following questions to the Supreme Court of Canada for hearing and consideration, namely,—
Is section 31 of The. Municipal District Act Amendment Act, 1941, ultra vires the legislature of Alberta, either in whole or in part, and if so, in what particular or particulars or to what extent?
(Sgd.) A. D. P. Heeney,
Clerk of the Privy Council.
The respective Attorneys General of the provinces of Manitoba, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, Quebec and Saskatchewan, and the Canadian Bankers' Association and the Dominion Mortgage and Investments Association were, pursuant to order of the Chief Justice of Canada, notified of the hearing of the Reference.
F. P. Varcoe K.C., and D. W. Mundell for the Attorney-General of Canada.
Thomas Vien K.C., for the Attorney-General of Quebec.
R. L. Maitland K.C., for the Attorney-General of British Columbia.
W. S. Gray K.C., and H. J. Wilson K.C., for the Attorney-General of Alberta.
J. W. Estey K.C., and R. S. Meldrum for the Attorney-General of Saskatchewan.
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Aimé Geoffrion K.C., and L. G. Goodenough for the Dominion Mortgage and Investments Association.
Aimé Geoffrion K.C., R. C. McMichael K.C., and E. Coté for the Canadian Bankers' Association.
The judgment of The Chief Justice and of Davis, Kerwin and Hudson JJ. was delivered by:
The Chief Justice.—The enactments under consideration are found in section 31 of The Municipal District Act Amendment Act, 1941, of Alberta. That section amends Part VII of The Municipal District Act which deals with the subject of municipal assessment and taxation. Broadly, that part of The Municipal District Act provides for the assessment and the levying of taxes in respect of lands, mineral and timber where the mineral and timber are assessed as separate parcels. With these latter we are not concerned. The statute provides that lands shall be assessed at their fair actual value, exclusive of the value of buildings and improvements and minerals, subject to certain exemptions which are not material. The assessment roll gives the name of the owner of every parcel of land liable to assessment; and the statute requires the council to authorize, by resolution, the secretary-treasurer to levy, for ordinary municipal purposes upon the assessed value of all lands, a uniform rate on the dollar to be determined as the statute prescribes, not exceeding two per cent. There are provisions for special rates as well. The secretary-treasurer is required on or before the first of September in each year to enter in the assessment roll for the year a statement of all taxes against each parcel assessed upon the roll, and each statement must show inter alia the amount of taxes upon the land, exclusive of improvements, and the rate of taxation.
The Act (section 346) provides:—
Every owner, purchaser * * * of assessed land, shall, whether his name appears on the assessment roll or not, pay taxes upon the assessed value thereof at the rates lawfully imposed thereon, irrespective of the amount or nature of his interest in such property.
"Owner" is defined in section 2 as any person who is registered under The Land Titles Act as the owner of a freehold estate in possession of land. "Purchaser" means any person who has purchased or otherwise acquired land
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within the district whether he has purchased or otherwise acquired the land direct from the owner thereof or from another purchaser, and has not become the owner thereof.
By chapter 82 of the statutes of 1938, provision is made for the sale of land and the application of the proceeds of the sale in payment of arrears of taxes and costs. Where such a sale has taken place and payment has been made, the municipality transfers the parcel sold to the purchaser. At the expiration of a period of thirty days, during which the interested persons have an opportunity of redeeming the land, if it is not redeemed the existing certificate of title is cancelled and a new duplicate certificate of title is issued in the name of the transferee. This duplicate certificate of title, to quote from the statute, section 22, subsection 6
shall give to the person or municipality to whom it is issued an estate in fee simple in the parcel named therein, free from all encumbrances save those arising from claims of the Crown in the right of the Dominion of Canada, and save irrigation or drainage debentures, and registered easements.
It is obvious that the liability of the owner, or purchaser to pay taxes on the assessed value of the land is a liability which has in a pecuniary sense no necessary relation to the value or nature of the taxpayer's interest in the land. The land may be subject to mortgage and the mortgagor's interest derisory. He is, nevertheless, personally liable to pay at the uniform rate upon the assessed value of the land, not of his interest in it.
So as regards a purchaser: his economic interest may be of the slightest, he is nevertheless bound to pay the whole of the taxes due in respect of the land; and by section 354 the taxes may be recovered from him as a debt due to the Municipal District.
Furthermore, the special lien which is created by section 354 is enforceable by the statutory proceedings under which, as we have seen, the interest of everybody in the land, excepting the interests specified in the enactment quoted above, is extinguished by the sale; subject to a recognition of these interests, the land, irrespective of the persons who may have legal interests in it, is treated as an economic thing upon which a contribution by way of a tax is levied and which may, if necessary, be sold for the purpose of obtaining payment of that contribution.
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There are supplementary provisions relating to the recovery of taxes which ought to be mentioned. If there is a lease, the secretary-treasurer may require the lessee to pay the rent to him up to the amount of any unpaid taxes, and he is invested with the same authority as that of a landlord to collect such rent by distress or "otherwise". If the tenant, under the constraint of such proceedings, or the threat of them, pays the taxes, he is given the right to deduct them from the rent. The purchaser who is also called upon to pay the taxes may deduct them from any money due to his vendor. Again, the secretary-treasurer is given a right to levy unpaid taxes with costs by distress upon inter alia goods or chattels wherever found within the province belonging to the owner, purchaser, or to any occupier of the land. This right of distress is apparently extended to any goods, or chattels, on the land where title to them is claimed by
purchase, gift, transfer or assignment from a taxable person or occupier, whether absolute or in trust, or by way of mortgage or otherwise.
It seems indisputable under this system the tax is a land tax; and the means authorized for enforcing payment are generally of the same type as those which have been employed by the provinces for that purpose for over half a century.
To come now to the amendments of 1941. I must say that I am entirely in agreement with the argument that the legislature cannot delegate to a municipality authority to levy a tax which it cannot levy directly. There was a most elaborate argument on the scope of sub-section 8 of section 92, Municipal Institutions, in the Local Option Reference, and the principle is laid down in unmistakable terms by Lord Watson, speaking for the Judicial Committee in Attorney-General for Ontario v. Attorney-General for the Dominion. There is nothing in the judgment delivered by Lord Atkin in Ladore v. Bennett, which detracts from the authority of these observations.
I have been unable to perceive any solid ground upon which it can be affirmed that a direct tax upon land, or in relation to land, loses its character as a direct tax by reason of the fact that moneys due in respect of it are declared to be a lien upon the crops grown upon the land both before and after severance.
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Mr. Geoffrion's first point is that the personal liability to pay imposed by section 354 (A) (4) is in effect an indirect tax because the taxpayer will seek to recoup himself from the persons directly liable to pay the tax. We are concerned with a single tax which when once paid is extinguished and until paid is a lien on the crop. A purchaser of the crop takes it cum onere. Furthermore, the persons affected are prohibited from receiving, or accepting any such crop, or any part of the proceeds of the sale of such crop, until the tax has been paid.
It is reasonable to suppose that the effect anticipated by the legislature is that the statutory prohibition will be observed; the liability fastened by the statute upon persons receiving or accepting the crop when the taxes are not paid might reasonably be regarded and no doubt was regarded by the legislature as a deterrent operating on the minds of persons thinking of dealing with the owner.
The aim of the legislature obviously is to place obstacles in the way of persons seeking to avoid payment of the land tax. The legislation, in my opinion, is a legitimate exercise of the power of the legislature in relation to direct taxation and matters merely local or private. The matter of the legislation is strictly provincial.
It was contended that the effect of subsections 3, 4 and 5 is to impose a liability upon persons and corporations outside the province. The answer to that is to be found in a sentence in the judgment in Attorney-General for Ontario v. Reciprocal Insurers.
The words are:—
The terms of the statute as a whole are, in their Lordships' judgment, capable of receiving a meaning according to which its provisions * * * apply only to persons and acts within the territorial jurisdiction of the Province. In their opinion it ought to be interpreted in consonance with the presumption which imputes to the Legislature an intention of limiting the direct operation of its enactments to such persons and acts.
It is argued that certain provisions of The Bank Act and other Dominion statutes conflict with this legislation. If so, to that extent, it may be overborne by such Dominion legislation in particular cases in which a conflict arises. Assuming the primacy of the legislation relied upon by Mr. Geoffrion, and that the provincial legislation would be displaced in case of such a conflict, it does not follow that the provincial legislation is ultra vires; the provisions of the
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Tax Act have full effect in all cases in which the facts do not bring the Dominion legislation into play. Attorney-General for Ontario v. Reciprocal Insurers; McColl v. Canadian Pacific Railway Co..
As regards section 88 of The Bank Act, and especially as regards the subsections dealing with seed grain, fertilizer and binder twine, it is advisable to make one observation. While the Dominion Parlinament has exclusive jurisdiction in relation to banks and banking, it does not follow that banks are taken out of the province. They remain, as Lord Watson pointed out in Canadian Pacific Railway Company v. Corporation of The Parish of Notre Dame de Bonsecours, within the province and subject to validly enacted provincial laws. They and their property are subject to taxes imposed by a province in the lawful exercise of its authority in relation to direct taxation. It was not argued that the Dominion, in exercise of its powers under section 91, could exempt a bank, or the property of á bank, from such taxes; and that is a consideration which must not be overlooked when the rights of a bank, acquired under section 88, subsection 8 et seq, come into competition with the rights of a province under validly enacted laws in relation to direct taxation.
The enactment making the land tax a first lien upon the crops until paid is, in my opinion, an enactment strictly within the ambit of section 92 (2). That there might be competent Dominion legislation overbearing and displacing it may be conceded: for example, a Dominion taxing statute creating a first lien on the same subjects in respect of a Dominion tax. Attorney-General for Quebec v. Attorney-General for Canada. But whether a lien arising under these provisions of The Bank Act possesses priority over the tax lien under consideration is a question which I think ought to be reserved for decision in a concrete case between a bank and the taxing authority.
Mr. Geoffrion contended also that the amendments of 1941 are repugnant in their operation to certain other Dominion statutes. As regards this, it appears to me sufficient to say that these enactments of the amendments of 1941 are not "legislation strictly so-called", to use the phrase of Lord Watson's judgment in the Canadian Pacific
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Railway Company v. Corporation of The Parish of Notre Dame de Bonsecours, in relation to matters falling within any of the subjects enumerated in section 91 in (1) The Regulation of Trade and Commerce, (2) Currency and Coinage, (15) Banking, (1) Savings Banks, (20) Legal Tender; nor is it "Railway Legislation strictly so-called", nor "legislation strictly so-called" in relation to Dominion elevators, or elevators falling within the exclusive jurisdiction of the Dominion Parliament under (29) of section 91; and the issue raised by the allegation of repugnancy may be left for determination in some litigation in which it arises directly between parties interested.
The question referred should be answered in the negative.
The judgment of Rinfret and Taschereau JJ. was delivered by
Rinfret J.—His Excellency the Governor General in Council, on the recommendation of the Minister of Justice and pursuant to the authority of section 55 of the Supreme Court Act, was pleased to refer to this Court for hearing and consideration the following question:
Is section 31 of the Municipal District Act Amendment Act, 1941, ultra vires the legislature of Alberta, either in whole or in part, and if so, in what particular or particulars, or to what extent?
Section 31 of the Municipal District Act Amendment Act, 1941, being chapter 53 of the statutes of Alberta, 1941, amends the Municipal District Act, being chapter 41 of the statutes of Alberta, 1936, by adding, immediately after section 354, the new sections nos 354a and 354b.
The new section 354a is as follows:
354a.—(1) Notwithstanding anything contained in any Statute or in the Common Law, all arrears of taxes outstanding as at the date of the coming into force of this Act, in respect of land in any municipality shall be a special lien or charge upon all crops grown or to be grown on the said land until the said taxes are paid, and such lien or charge shall have priority over all other claims, liens, privileges or encumbrances on such crops except as set out in The Crop Liens Priorities Act.
(2) Notwithstanding anything contained in any Statute or in the Common Law, the taxes levied in any year upon or in respect of land in the municipality shall be a special lien or charge upon all crops grown on the land in the year in which the taxes are levied and upon all crops grown on the land in every year thereafter, until the said taxes are paid, and such lien or charge shall have priority over all other claims, liens, privileges or encumbrances on such crops except as set out in The Crop Liens Priorities Act.
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(3) No person or corporation other than a country elevator as defined in The Canada Grain Act or the holder of a lien which, pursuant to the provisions of The Crop Liens Priorities Act, is prior to the lien created by this section, shall receive or accept any or any part or share of any crop grown on land in any municipal district or any part of the proceeds of the sale of any such crop, until all taxes owing in respect of such land have been paid.
(4) Any person or corporation other than a country elevator who takes, receives or accepts any or any part or share of any crop or any part of the proceeds of any such crop other than as permitted by this section, shall be liable to the municipal district for the payment of the taxes owing in respect of the land on which the crop was grown to the extent of the part or share, of the crop or of the proceeds of the crop so taken, received or accepted.
(5) The taxes due in respect of any land from any person by reason of his taking, receiving or accepting any or any part or share of any crop or any part of the proceeds of any such crop other than in accordance with the priorities established by The Crop Liens Priorities Act may be recovered with interest and costs as a debt due to the municipal district from such person.
For the purposes of this reference, it is unnecessary to set out section 354b, as it is generally agreed that the section simply provides machinery for giving effect to section 354a. The sole object of the section is to enable the municipality to ascertain who has received the crop referred to in the previous section. It is merely ancillary and, standing alone, it is of no effect.
The reason for the reference is explained in the order-in-council, where it is submitted that, inasmuch as those sections provide for a first and preferential lien on crops and affect the proceeds of the sale thereof, apparently they are in conflict with subsection 10 of section 88 of the Bank Act which provides for a first and preferential lien on crops in connection with seed grain advances and moreover will injuriously affect trade and commerce inasmuch as the proceeds aforesaid, whether in the form of Canadian currency or otherwise, can no longer be freely exchanged or circulated.
Being an amendment of the Municipal District Act, section 354a must, of course, be read in connection with the main Act. The amendment finds its place in Part VIII of that Act, which is entitled "Rates and Taxes" and, in that part, comes under the heading "Collection of taxes".
A few sections of the Municipal District Act, as it stood before the amendment, may be usefully referred to.
Persons liable to pay taxes, under section 346, are the owner, the purchaser and the conditional owner of assessed
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land, whether their names appear on the assessment roll or not. Their liability depends upon the assessed value of the land at the rates lawfully imposed thereon
irrespective of the amount or nature of their interest in such property.
By force of section 354, the tax due in respect of any land, mineral, or timber, or business, with costs, may be recovered with interest as a debt due to the municipal district from any person who was the owner, conditional owner or purchaser of the land or the mineral or the timber licensee of the timber, at the time of its assessment, or who subsequently became the owner, conditional owner, purchaser or timber licensee of the whole or any part thereof, saving his recourse against any other person. Such tax shall be a special lien on the land, mineral or timber, if not exempt from taxation by the province, in priority to every claim, privilege, lien or encumbrance of any person except the Crown; and the lien and its priority shall not be lost or impaired by any neglect, omission or error.
Further, under section 355,
where taxes are due in respect of any land occupied by a tenant, the secretary-treasurer may give such tenant notice in writing requiring him to pay to him the rent of the premises as it becomes due from time to time to the amount of the taxes due and unpaid and costs; and the secretary-treasurer shall have the same authority as the landlord of the premises would have to collect such rent by distress or otherwise to the amount of such unpaid taxes and costs; but nothing in this section contained shall prevent or impair any other remedy for the recovery of the taxes or any portion thereof from such tenant or from any other person liable therefor.
As a consequence, under section 356,
Any tenant or purchaser may deduct from this rent or moneys payable under his contract of purchase, any taxes paid by him which as between him and his landlord or vendor (as the case may be) the latter ought to pay.
It should be added that, by the interpretation clause (section 2 (k) of the Municipal District Act), the word "land"
shall mean lands, tenements and hereditaments and any estate or interest therein, and shall, but not so as to restrict the generality of the foregoing words, include minerals and growing timber.
Such was the state of the law when section 354a was introduced.
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The effect of the amendment was to make it clear that all arrears of taxes outstanding in respect of land, in addition to being a special lien on the land, mineral or timber, shall also
be a special lien or charge upon all crops grown or to be grown on the said lands until the said taxes are paid.
The special lien on the land, mineral or timber was already stated to be
in priority to every claim, privilege, lien or incumbrance of every person.
The special lien on crops grown or to be grown is expressed to
have priority over all other claims, liens, privileges or incumbrances on such crops except as set out in The Crops Lien Prorities Act.
Likewise, the taxes levied in any year upon or in respect of land
shall be a special lien or charge upon all crops grown on the land in the year in which the taxes are levied and upon all crops grown on the land in every year thereafter, until the said taxes are paid, and such lien or charge shall have priority
in the same manner as that prescribed in connection with arrears of taxes.
Subsection 3 of section 354a is apparently a formal prohibition to any person or corporation to
receive or accept any or any part or share of any crop grown on land in any municipal district or any part of the proceeds of the sale of any such crop, until all taxes owing in respect of such land have been paid.
The only exceptions to that prohibition are
a country elevator as defined in The Canada Grain Act or the holder of a lien which, pursuant to the provisions of The Crop Liens Priorities Act, is prior to the lien created by this section.
Should any person or corporation receive or accept any part or share of any crop, contrary to the prohibition just mentioned, he
shall be liable to the municipal district for the payment of the taxes owing in respect of the land on which the crop was grown to the extent of the part or share of the crop or of the proceeds of the crop so taken, received or accepted.
In such a case, the taxes due
may be recovered with interest and costs as a debt due to the municipal district from such person.
Under The Crop Liens Priorities Act, which is chapter 46 of the Statutes of Alberta 1941, the following liens and
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charges on crops shall, in the order mentioned, have priority over all other claims, liens, privileges or encumbrances on such crops:
(a) The threshers' lien under The Threshers' Lien Act for threshing the crops;
(b) Liens and charges under The Harvesting Liens Act for harvesting advances as defined in the said Act;
(c) Liens and charges for the amount payable to the Alberta Hail Insurance Board in respect of any application for insurance under The Alberta Hail Insurance Act;
(d) Liens and charges created by section 32 of The Bills of Sales Act for or in respect of necessaries within the meaning of the said section;
(e) Liens and charges for taxes created by section 354a of the Municipal District Act and section 40a of the Improvement Districts Act and for irrigation rates created by section 145a of the Irrigation Districts Act;
(f) Liens and charges for seed under section 32 of the Bills of Sales Act and liens and charges created by the Seed Grain and Other Advances Security Act, 1936, the Agricultural Relief Advances Act, 1936, the Agricultural Relief Advances Act, 1938, and section 170 of the Municipal District Act for or in respect of supplies, seed grain, or other commodities;
(g) Liens and charges created by the Alberta Co-operative Rural Credit Act.
It will be noticed that the liens and charges for taxes created by section 354 (a) come within (e) and, therefore, take fifth rank in the order of priorities established by the Alberta statute. Accordingly, if the statute is to be applied literally, the first and preferential lien on crops in connection with seed grain advances provided for by subsection 10 of section 88 of the Bank Act, a federal statute, and also, amongst others, the rights of the loan and insurance companies incorporated by the Dominion of Canada and associated under the name of the Dominion Mortgage and Investment Association are, by the Alberta amendment, made subsidiary and posterior to the lien or charge created by section 354a.
For the above reason, and because it is claimed that, under those circumstances, the Alberta amendment is in conflict with valid Dominion statutes, it was represented that section 354a is ultra vires the legislature of Alberta.
It was further contended that section 354a is not within the powers conferred on a province by section 92 of the British North America Act, but that it constitutes legislation on currency, coinage, banks and savings banks, bills of exchange and promissory notes, legal tender, bankruptcy and insolvency, all subjects reserved exclusively to the Dominion Parliament for legislation purposes; that it is
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repugnant to the provisions of valid Acts of the Dominion Parliament, viz, The Bank Act, The Canada Grain Act, The Canadian Wheat Board Act, 1935, and The Currency Act; that it is also an invasion of the powers of the Dominion Parliament relating to the regulation of trade and commerce; and that, for all those reasons, the question referred to the Court should be answered in the affirmative.
In order to answer the question, it is, of course, essential to agree on the correct interpretation to be put on section 354a.
The section evidently deals with the matter of a municipal tax. It does not create a new tax, in the sense that it does not constitute a new levy of money. In that sense, the tax itself is already provided for by section 354 of the main Act. It is that same tax which heretofore affected the land, the mineral or the timber, and which will hereafter affect the crops grown, or to be grown, on the said lands.
In so far as the crops may be said to have formed part of the land, the amendment does not introduce any new feature. It does so only from the moment that crops are envisaged as property distinct and separate from the land itself. Even so envisaged, these crops are undoubtedly property in the province of Alberta, and consequently subject to the municipal taxes which the Legislature (sovereign in this respect) deems it advisable to impose upon them. And, of course, the Legislature may also provide that these taxes should be a special lien or charge upon the property in question, with such priority as the Legislature should decide to give to it.
It cannot be suggested that legislation providing security to assist in the collection of municipal taxes does not come within section 92 of the British North America Act and that it comes within any of the sub-heads of section 91. That is legitimate taxation within the province in the exercise of the powers devolved upon provincial legislation in relation to municipal institutions in the province. It would be difficult to find anything more local and provincial than the imposition and collection of municipal taxes and the machinery supplied for such purpose.
So far as subsections 1 and 2 of section 354a are concerned, it would appear, therefore, that, while the question of validity thereof has been referred to the Court, the real point involved is rather one of priority as between claims
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under divers sections of Dominion Acts and the claim of the municipality under the amending Alberta Act, for it would undoubtedly be a novel idea to contend that legislation providing for a municipal tax may be unconstitutional because it provides for a lien or charge allegedly in conflict with the liens or charges existing in virtue of federal legislation.
Literally interpreted, this submission may amount to a plea that any provincial legislation, acting within its constitutional authority and creating a lien that would affect, v.g. banking or trade and commerce, would, on that account, be ultra vires.
The right of a municipal district to create a lien to secure the payment of a municipal tax on certain personal property within the province cannot be denied, on the ground of lack of constitutional powers, merely because there may be, in terms, a conflict, or a dispute, as to the priority between such a lien and the liens created by Dominion legislation.
In my view, that would be purely a matter for the courts to decide and to adjudge the respective priorities, as was done, for example, in the case of Silver Brothers Limited v. Hart.
I think we can take judicial notice that there are, in the several provinces, quite a number of statutes providing for liens—liens which are declared to "have priority over all other claims, liens, privileges or encumbrances". Literally speaking, these liens would be in conflict with other liens expressed in similar terms in the Federal legislation. This would naturally call for adjustments by the courts, but it cannot mean that charges or imposts authorized by provincial legislation, acting within its sphere, are, upon the ground of apparent conflict, to be declared unconstitutional.
To the so-called conflict, we could, no doubt, apply, mutatis mutandis, the words of Viscount Dunedin, in the Silver Brothers case:
The two taxations, Dominion and provincial, can stand side by side without interfering with each other, but as soon as you come to the concomitant privileges of absolute priority, they cannot stand side by side and must clash; consequently the Dominion must prevail.
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In the Silver case, it was held that the Dominion and the provincial claims should rank pari passu. In other cases where a somewhat similar situation occurs; it may be that the Dominion legislation prevails; but, under all circumstances, there can be no question of the constitutionality and the validity of the provincial enactment. It is nothing else than a matter of mere adjustment.
In particular, on the question of the priority to be established between a tax imposed under provincial legislation and the provisions of section 88 of the Bank Act, this Court has already passed in the case of The Royal Bank of Canada v. Workmen's Compensation Board of Nova Scotia.
Any question which is a pure question of priority between claims under Dominion and provincial legislation should be disposed of along the same principles.
The conflict, if any, of that character with the Bank Act or the Canadian Wheat Board Act, etc. does not raise any question of the validity and constitutionality of the provincial legislation. That point is entirely different from that which was decided in Attorney General for Alberta and Winstanley v. Atlas Lumber Company Limited, or in the Reference as to the validity of The Debt Adjustment Act, 1937, Statutes of Alberta. In both those cases, the provincial legislature attempted to interfere completely with the laws of the Dominion Parliament and to impede their power and normal application and working out.
Passing now to subsections 3, 4 and 5 of section 354a, counsel opposing the validity of the legislation laid great stress on the words "receive or accept", which are to be found in each of the subsections and which, taken literally, so it was contended, would have the effect of imposing liability on any person or corporation other than those expressly excepted, whether within or without the province, taking, receiving or accepting delivery of any or any part or share of any crop or any part of the proceeds of such crop.
As to this, Mr. Gray, on behalf of the Attorney General for Alberta, stated that the true interpretation of these words was to limit their meaning to the receiving or acceptance in Alberta, and that there was no intention of extending their application outside the province.
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I think the statement made on behalf of the Attorney General should be accepted as correct. The legislature of Alberta cannot be assumed to have attempted to legislate upon matters and transactions occurring outside the territory of the province. Moreover, such a construction of the words is the only one consistent with validity and should accordingly be preferred to the other construction suggested by the opponents of the legislation.
It is seriously to be doubted whether, in any event, these words in subsections 3, 4 and 5 could be construed to apply to any transaction, receiving or accepting from any other than the owner of the land upon which the crops have grown. I think they are meant to cover only the receiving or acceptance immediately from the owner of the land. Section 354a must be read in connection with the whole of the Municipal District Act and, more particularly, with sections 346, 354, 355 and 356, to which reference has already been made. Under those sections, the persons liable to pay tax are the owner, the purchaser, the conditional owner of assessed land and the tenant. Section 354a, in my view, should be interpreted as extending the liability no further than to the person or corporation receiving or accepting the crop immediately from the owner of the land. It cannot enter into my mind that the Alberta legislature meant to follow the crops in the hands of any and all the other persons or corporations who might happen to handle the crops in the manifold transactions through which they may proceed after the initial transaction with the owner of the land.
The statute was intended only for local application; and that is indicated by the exception of the "country elevator". In its very nature, the lien can subsist only so long as the crop preserves its identity. Moreover, in view of the statutory lien on the crop for taxes, whoever purchases the crop from the owner of the land would be put upon inquiry and would be presumed to know of the possibility that the lien might exist and extend to the proceeds of the crop in the hands of the purchaser from the farmer; but these subsections cannot be construed as seeking to extend the liability to persons who receive the crops or the proceeds, without knowledge of their origin or of their connection with any land in particular, and without any normal or
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ordinary means of knowing. The lien cannot subsist when the subject-matter of it has ceased to be earmarked and has lost its identity.
If for no other reason, I think that the above reasoning should dispose of the contention that the impugned legislation constitutes an invasion of the Dominion legislation fields on currency and coinage, or on bills of exchange and promissory notes, or on legal tender.
We were told at bar that the normal method of marketing wheat in Alberta is through the country elevator; that, in practice, the sales are made to the country elevator and that the other transactions of a similar nature are negligible. This would show that the legislation was meant to be confined to local transactions and should be so construed (see: Duff C.J., in Worthington v. Attorney-General for Manitoba, Forbes v. Attorney-General for Manitoba, citing MacLeod v. Attorney-General for New South Wales. See also: Forbes v. Attorney-General for Manitoba).
Still a further attack is made upon the amending legislation on the ground that it provides for indirect taxation.
Subsection 4 of section 354a enacts that any person or corporation who receives or accepts the crops, or the proceeds thereof,
shall be liable to the municipal district for the payment of the taxes owing in respect of the land on which the crop was grown, etc.
Then subsection 5 enacts that the tax
may be recovered with interest and costs as a debt due to the municipal district from such person.
It is claimed that this constitutes indirect taxation and is, therefore, invalid.
Of course, counsel for Alberta contended that no tax was imposed; that the legislation in question is merely machinery to assist a municipality in collecting the tax; and that there is no connection between the amount or value of the crop and the liability imposed on the purchaser. But this answer does not appear to me either sufficient or, indeed, accurate. It seems to me that the liability imposed on any person by subsections 4 and 5 of section 354a is, in pith and substance, taxation. It is compulsorily imposed for public purposes and it is recoverable
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at law. (Lawson v. Interior Tree Fruit and Vegetable Committee of Direction; Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd..
No doubt, it is not a new tax. It is the same tax, for which a new debtor is made liable; but even that would probably be not sufficient to render it valid, if we are to refer to the Cotton case, or to the Erie Beach case.
And, if it is a tax, it is contended that it is an indirect tax, because the general tendency would be for the purchaser to pass that tax on to the owner of the land. There, no intention is indicated that the person paying the tax may not recoup himself. In fact, the legislature appears to have been indifferent as to who would pay the tax. A liability is placed upon persons and corporations other than those who it is intended shall ultimately bear the burden. This, it is claimed, is an indirect method of recovering the taxes. Persons are required to pay who ought to be indemnified by those primarily liable.
It is even to be expected that the purchaser would recoup himself in advance by reducing the sale price by the amount of the tax.
The Attorney-General of Alberta attempted to meet the objection by pretending that the liability imposed on the purchaser, or on the person who received or accepted the crop, was to be looked at as a penalty—a penalty, that is to say, shouldered on the purchaser, the receiver, or the acceptor, for taking any part of the crop grown on the land in disregard of subsection 3 of section 354a, which is of a prohibitory character, and might even be taken to mean that the sale from the farmer to the purchaser is void, unless all taxes owing in respect of the land have previously been paid.
I do not think, however, that such a contention can be upheld. By it, an attempt is apparently made to take advantage of the decision of the Privy Council in Erie Beach Company Limited v. Attorney-General for Ontario (4). But no comparison can be made between that case and the present one, both on account of the different nature of the tax or duty charged or imposed and also
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because, under the Alberta amendment, once the amount of the tax is paid by the purchaser, the tax is thereby extinguished and no longer subsists against the land owner. In the Erie Beach case, a succession duty was imposed on property in Ontario passing on the death. There was a statutory prohibition against the transfer of the property before the duty was paid or secured. To enforce the prohibition, a penalty (as it was held) was imposed on any person giving assistance to any transfer that might defeat the duty. The penalty equalled the duty, but was not the duty and did not discharge it.
Lord Merrivale, delivering the judgment of the Privy Council, said, at page 169:
It is in truth this—Is the intention of s. 10, sub-s. 2, that when a corporation allows property of deceased person to foe transferred without provision previously made for succession duty, the corporation shall incur a liability beginning and ending with itself and answerable so far as liability goes out of its corporate funds alone, or does the section intend that the corporation shall pay the succession duty on behalf of the persons Concerned, and by so doing become entitled to recover from such persons the amount paid?
To that question, the answer of the Privy Council was that the statute made no provision for the reimbursement from any quarter and no such provision could be implied. The breach of the statutory prohibition was prima facie a misdemeanour and the person convicted of the misdemeanour was penalized without being entitled to recover the penalty from the beneficiary.
No such situation exists here. Payment pursuant to subsection 4 discharges pro tanto the lien against the crop and the tax on the land. The taxes are discharged through the payment made by the purchaser as effectively as if the payment had been made by the owner of the land.
But if it is a tax, it is a tax on land, and not a tax on a commodity. The language of section 354a is clear: the lien or charge created upon the crops grown is to secure taxes upon or in respect of land. The lie nonly affects the crops; and that must mean: the crops after they have been separated from the land, because up to that time they form part of the land and the question does not arise.
It is not to be forgotten that under the Municipal District Act, as we have already seen,
every owner, purchaser and conditional owner of assessed land
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is liable to pay the taxes upon the assessed value thereof. The purchaser of the crops as forming part of the land was, therefore, already liable to the extent mentioned. But, further, at the same time as it is a land tax, it is a municipal tax; and a tax such as this, as to its incidence, is not to be regarded in the same aspect as taxes upon commodities, to which Mill's formula concerning taxation is generally applied
as affording a guide to the application of section 92, head 2.
In City of Halifax v. Fairbanks' Estate, Viscount Cave, L.C., asked the question (p. 125): "What then is the effect to be given to Mill's formula above quoted?" The noble Lord went on:
No doubt it is valuable as providing a logical basis for the distinction already established between direct and indirect taxes, and perhaps also as a guide for determining as to any new or unfamiliar tax which may be imposed in which of the two categories it is to be placed; but it cannot have the effect of disturbing the established classification of the old and well known species of taxation, and making it necessary to apply a new test to every particular member of those species. The imposition of taxes on property and income, of death duties and of municipal and local rates is, according to the common understanding of the term, direct taxation, just as the exaction of a customs or excise duty on commodities or of a percentage duty on services would ordinarily be regarded as indirect taxation; and although new forms of taxation may from time to time be added to one category or the other in accordance with Mill's formula, it would be wrong to use that formula as a ground for transferring a tax universally recognized as belonging to one class to a different class of taxation.
If this be the true view, then the reasoning of the Supreme Court of Canada requires reconsideration. It may be true to say of a particular tax on property, such as that imposed on owners by s. 394 of the Halifax charter, that the taxpayer would very probably seek to pass it on to others; but it may none the less be a tax on property and remain within the category of direct taxes.
And further, on page 126:
The authorities cited by Newcombe J. show the use made by this Board of Mill's definition in determining whether a new or special tax, such as a stamp duty, a licence duty or a percentage on turnover, should be classed as direct or indirect; but, with the possible exception of Cotton v. The King, which seems to have turned on its own facts, they do not afford any instance in which a tax otherwise recognized as direct has been held to be indirect for the purposes of the British North America Act by reason of any theory as to its ultimate incidence.
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And the case of City of Montreal v. Attorney-General of Canada (1), was referred to as being directly in point and supporting the above contention.
It will be noticed that, in the enumeration made by Viscount Cave of taxes which, according to the common understanding of the term, constitute direct taxation, taxes on property and municipal and local rates are specifically mentioned.
In truth, in the present instance, the Alberta legislation is nothing else than legislation in municipal matters imposing a municipal tax and the sections impugned are really no more than collection processes. It is legislation relating to municipal taxation and municipal matters; and if, in a sense, it affects subject-matters reserved to the Dominion Parliament, it does so only collaterally and in nowise so as to entail unconstitutionality or, as a consequence, invalidity. The statute is not directed to trade and commerce as understood under the decided cases, nor to any of the specific heads of sec. 91 of the British North America Act. To use the language of Lord Atkin, in Ladore v. Bennett (2), if they affect any of the matters under section 91, it is only "as a necessary incident to the lawful powers of good government within the province."
For the above reasons, I would answer the question referred to the Court in the negative and would say that section 31 of the Municipal District Act Amendment Act, 1941, is not ultra vires the legislature of Alberta either in whole or in part.
Question answered in the negative.
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