Canada v. Insurance Corp. of British Columbia, 2002 FCA 104

                                                                                                                                            Date: 20020314

                                                                                                                                        Docket: A-658-00

                                                                                                                Neutral citation: 2002 FCA 104

CORAM:        STRAYER J.A.

SEXTON J.A.

SHARLOW J.A.

BETWEEN:

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                       Applicant

                                                                                 and

                                                  THE INSURANCE CORPORATION

                                                           OF BRITISH COLUMBIA

                                                                                                                                                   Respondent

                                                                                 and

                                                                        RYAN LAKE

                                                                                                                                                   Respondent

Heard at Vancouver, British Columbia on Wednesday, January 30, 2002

JUDGMENT delivered at Ottawa, Ontario on Thursday, March 14, 2002

REASONS FOR JUDGMENT BY:                                                                                   STRAYER J.A.

CONCURRED IN BY:                                                                                                         SEXTON J.A.

                                                                                                                                            SHARLOW J.A.

                                                                                                                                            Date: 20020314

                                                                                                                                        Docket: A-658-00

                                                                                                                 Neutral citation: 2002 FCA104

CORAM:        STRAYER J.A.

SEXTON J.A.

SHARLOW J.A.

BETWEEN:

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                       Applicant

                                                                                 and

                                                  THE INSURANCE CORPORATION

                                                           OF BRITISH COLUMBIA

                                                                                                                                                   Respondent

                                                                                 and

                                                                        RYAN LAKE

                                                                                                                                                   Respondent

                                                        REASONS FOR JUDGMENT

STRAYER J.A.

[1]                 This is an application for judicial review of a decision of the Tax Court of Canada of September 18, 2000, in which that Court held that the Respondent, Insurance Corporation of British Columbia ("ICBC") was not responsible under the Insurable Earnings and Collection of Premium Regulations ("the Regulations") (made under the Employment Insurance Act, S.C. 1996, c. 23 paragraphs 108(1)(a) and (f)) for withholding employment insurance premiums from amounts it transmitted to a home care attendant.

[2]                 A Mr. Ryan Lake, a person insured by ICBC against damage for motor vehicle accidents, was injured in such an accident on May 3, 1997. He made a claim against ICBC in respect of his injuries. While he was suffering from his injuries he hired one Shannie Harvey to assist him "with general day-to-day functions". It was agreed between Lake, ICBC, and Harvey that ICBC would compensate Harvey on the basis of records of hours of employment actually served, such records to be signed by Lake and Harvey. It is agreed by the parties that in these circumstances Lake, not ICBC, was the employer of Harvey.

[3]                 Disbursements were made as required, but ICBC did not withhold employment insurance premiums from the amounts transmitted by it to Harvey. Revenue Canada notified ICBC on August 27, 1999 of its decision that, as Harvey was "paid by the Insurance Corporation of British Columbia" it was deemed to be the employer for purposes of being required to collect and remit employment insurance premiums. It relied on section 10 of the Regulations which provides as follows.

[4]                 ICBC appealed this decision to the Tax Court of Canada. The learned Tax Court Judge allowed the appeal. He rejected ICBC's argument that as an agent of the provincial Crown it was immune from this federal regulation. However, he concluded that ICBC did not come within section 10 because it could not be said to have "paid" Harvey. He reached this conclusion in the belief that the term "paid" as it appears in section 10 can only apply where the money which is transferred is legally owed by the transferor to the transferee.

[5]                 I am of the view that the learned Trial Judge gave an unnecessarily narrow construction to the word "paid" in section 10 of the Regulations. As a result he wrongly concluded that when ICBC transferred to Harvey the amount of salary as agreed upon by Lake and Harvey, it was not "paying" an insured person as defined in the Employment Insurance Act. In reaching this conclusion he relied on textbook and dictionary definitions of the verb "to pay", as well as a decision of this Court in A.G.C. v. Théorêt ((1988), 61 D.L.R. (4^th) 289). He interpreted the word to mean that one only "pays" when one has a legal obligation owed specifically to the payee.

[6]                 I would first observe that the Théorêt decision, while it did specifically involve a predecessor to present section 10 of the Regulations, focussed on different issues. The Court there was divided on whether the person assessed as payor was a "mandatary" of the person providing the funds and whether that fact would be determinative of whether such assessed person could be said to have "paid" within the meaning of the then regulation. This involved issues of interpretation of article 1715 of the Civil Code of Lower Canada. I do not find this case helpful because: first, there was no majority decision on the crucial issue; secondly, it did not focus on the meaning of the regulation itself; and thirdly, it involved an alleged agent paying, not on behalf of the real employer, but on behalf of a lender to that employer, all facts which are not found in the present case.

[7]                 Nor are general textbook or dictionary definitions of "pay" or "paid" helpful in the interpretation of "paid" as it appears in the context of section 10 of the Regulations.

[8]                 The purpose of the Regulations and the statute which authorizes them is in part to facilitate collection of employment insurance premiums, an activity which is essential to the scheme as it now exists. The Act clearly authorizes the kind of provision which has been adopted by the Governor in Council in section 10 of the Regulations. In examining section 10 one sees that it is to apply inter alia where an employed insured person is being "paid by a person other than [his or her] actual employer". In such case that "other person" must maintain records of employment and calculate, deduct, and remit the appropriate premiums. The proposition is simple enough and its purpose clear: premiums are to be deducted at the source where salary or wages are calculated and administered, and where checks or pay-packets are issued. The term "paid" ought to be interpreted in context, and it is not necessary to examine technical sources in order to attribute to it a meaning that would defeat the clear purpose of the section. It would be equally possible, if one were to dwell on abstract legal concepts, to hold that a person can be an "actual employer" only if that person is paying the "employee" from his or her own resources and not at the expense of another. But that would also defeat the purpose of the section by precluding its application to any situation where a third party was actually providing and administering the wages or salary.

[9]                 I am reinforced in this opinion by several decisions of the Tax Court of Canada which are consistent with the conclusion that the "other person" can be considered to have "paid" someone else's employee without having a legal obligation to that employee to do so (See Kern Hill Co-op Ltd. v. Canada [1989] T.C.J. No. 702; Gateway Building and Supply Ltd. v. Canada [1991] T.C.J. No. 521; Commission de la Construction du Québec v. Canada [1993] T.C.J. No 650; Danks v.Canada [1995] T.C.J. No. 948; and Ferme Riomil Inc. v. Canada [1998] T.C.J. No. 203).

[10]            Before us the Applicant made an alternative argument that even if the term "paid" applies only where the transferor of funds has a legal obligation to make the transfer, that obligation can be owed to some one other than the transferee. The Applicant argues that in the present case the Respondent admitted that once it had exercised its discretion to pay for home care as part of meeting the claims of its insured, Mr. Lake, it had a legal obligation to him to make these payments to Harvey on his behalf. (See examination for discovery of Mr. Caux at IV Applicant's Application Record 964-5). We allowed this argument to be made, although it was not made before the Tax Court, as the relevant evidence appeared in the record and the argument had been signalled in the Applicant's Memorandum of Fact and Law. While I agree with the Applicant that the Respondent was engaged in meeting a legal obligation to its insured by making payments for the insured's benefit, I do not think it is necessary to rely on this fact. Consistently with what I have said earlier, I do not believe the word "paid" has to be limited to situations when there is a legal obligation to transmit wages or salary to the employee of another.

[11]            As I would therefore reverse the finding of the Tax Court on this point by holding that ICBC would for the purposes of section 10 of the Regulations be deemed to have been the employer, it is necessary to consider whether that corporation is bound by the Regulations. I am of the view that the learned judge erred in finding ICBC to be subject to the Regulations.

[12]            It is first important to note that the Insurance Corporation Act of British Columbia (R.S.B.C. 1996 c.228) provides in section 13 that:

13(1) All property and money acquired or administered by the corporation is deemed to be the property of the government for all purposes, including exemption from taxation.

(2) The corporation is an agent of the government.

[13]            It is common ground that references to "the government" are to the Crown in right of British Columbia. (See Interpretation Act, R.S.B.C. 1996, c. 238, s. 29). Therefore, ICBC, which has been created to carry on a form of insurance business, does so on behalf of the Crown and its property is Crown property. Of course ordinary contractual liabilities apply to the Respondent in the conduct of its business unless otherwise provided by statute. But it is a common law principle, which is codified in Canada, that statutes do not bind the Crown federal or provincial unless they state so specifically. This is set out in respect of the application of federal laws in section 17 of the Interpretation Act (R.S.C. 1985, c. I-21) which provides:

17. No enactment is binding on Her Majesty or affects Her Majesty or Her Majesty's rights or prerogatives in any manner, except as mentioned or referred to in the enactment.

[14]            As the Regulations in question do not mention or refer to their application to the Crown provincial, they cannot apply to Her Majesty in right of British Columbia.

[15]            The learned Tax Court Judge concluded, however, that the Respondent was not acting as an agent of Her Majesty in transferring money from its funds to Shannie Harvey. He was of the view that the Insurance Corporation Act would have to make the Respondent an agent of the government "for all purposes" to achieve this result.

[16]            With respect, I believe that the cases on which he relied do not support a blanket requirement that a governmental entity be labelled an agent "for all purposes" to be entitled to rely on section 17 of the Interpretation Act. (See R. v. Eldorado Nuclear Limited et al. (1983) 4 D.L.R. (4^th) 193 and cases referred to therein). In the cases referred to, where the importance of such language was suggested, there was an issue of whether the Crown corporation activity in question was part of its mandate as an agent. (See a general discussion of the principles in Hogg and Monahan, Liability of the Crown (3^rd ed., 2000) at 337-40). In the present case no one has suggested that the Respondent, in transferring money to Harvey in these circumstances in order to provide effective compensation for its insured (a compensation it was obliged by law to provide) was in any way acting outside its mandate. Indeed, it was doing one of the very things it was established to do. (See the Insurance Corporation Act, s. 7). In doing this it must be taken to be an agent of the government as described in subsection 13(2) of thatAct and the funds it administered in paying Harvey (and failed to withhold for employment insurance premiums) must be taken to be property of the provincial government as provided in subsection 13(1) thereof which declares its property and money to be "the property of the government for all purposes". Therefore these federal Regulations cannot be applied so as to bind a provincial Crown agent, ICBC, to collect and pay out of provincial Crown funds the employment insurance premiums in respect of Harvey.

[17]            It would have been a simple matter for Parliament to have extended, or authorized the Governor in Council to extend, the application of section 10 of the Regulations to such provincial government agencies but it did not. In the circumstances section 17 of the Interpretation Act is determinative and section 10 of the Regulations cannot be taken to bind ICBC.

[18]            After the hearing of this appeal, counsel for the Respondent ICBC brought to the attention of the Court a very recent decision of the Tax Court of Canada, Nova Scotia Power Inc. v. H.M. the Queen (File 2001-347 (IT) G, January 25, 2002) not available to the Court when the appeal was heard. The Tax Court in that case held Nova Scotia Power Inc. not to have been acting as a Crown agent, but the Respondent drew from the rationale certain support for its position in the present case. The Applicant was given time to respond to this further submission, and the Respondent submitted a reply to that response. I am satisfied however that the Nova Scotia Power case does not affect the conclusion which this Court should reach in the present matter. The language of the Insurance Corporation Act is sufficiently clear to support my conclusions and I will refrain from commenting on the Nova Scotia case which I understand is now under appeal.

[19]            The result, if not the reasons, in the Tax Court should therefore be affirmed and this application should be dismissed with costs to the Respondent ICBC.

                                                                                      (s) "B.L. Strayer"          

J.A.

I agree

J. Edgar Sexton J.A.

I agree

K. Sharlow J.A.