Sunbeam Corporation (Canada) Limited v. Her Majesty the Queen, [1994] 1 CTC 294

MacKay, J.:—In this action the plaintiff, Sunbeam Corporation (Canada) Ltd. ("Sunbeam"), a Canadian corporation, claims against the defendant an amount it had paid as federal sales taxes which the plaintiff claims were overpaid during the period September 1, 1982 to March 31, 1986.

The plaintiff's claim to recover alleged overpayments is based on three grounds. It submits, first, that it is entitled to restitution of overpayments made since the defendant has been unjustly enriched through its actions at the expense of the plaintiff. Second, it says the defendant should be estopped from denying its claim since the plaintiff, to its detriment, relied upon the representations of the defendant which resulted in an overpayment of federal sales taxes. Third, it submits that it is entitled to recover under the Excise Tax Act (the "Act) [1] . At the time of trial the plaintiff's claim was modified to include an amount alleged as an overpayment for four years prior to May 26, 1987, the date on which it had submitted a refund claim to the Excise Branch of the Department of National Revenue ("Excise"). Further, the parties were agreed that if the plaintiff's claim is allowed the matter should be referred back to the Minister for reassessment under the Excise Tax Act.

At trial the parties submitted an agreed statement of facts which, omitting only the references to pleadings or to discovery evidence on which these facts are based, provides as follows:

1. The plaintiff Sunbeam Corporation (Canada) Ltd. is a corporation incorporated under the laws of Canada and during the relevant time was a manufacturer of small household appliances including electrical appliances, barbecues and garden equipment.

2. In late 1987, the plaintiff ceased manufacturing small appliances in Canada. The plaintiff, until March, 1986, sold small electrical household appliances to retail and wholesale customers. During the period from 1965 through March, 1986, the plaintiff accounted for federal sales tax based on the sale price of small electrical household appliances manufactured and sold by it in Canada.

3. In or about 1965, the Excise Branch of the Department of National Revenue ("Excise") adopted the policy of allowing various manufacturers of floor care products and small electrical household appliances to account for federal sales tax using the “determined value method” being either the highest regular established single unit tax included price to retailers less an all-inclusive discount of 25 per cent or the "best average price to dealers” less an all-inclusive discount of 20 per cent, with tax calculated on the remainder. At various times thereafter, Hoover Company Ltd., General Signal and Appliances Ltd. and Black & Decker Ltd. accounted for federal sales tax on small electrical appliances based on such determined values, which were requested by the above-mentioned companies and were authorized by Excise. However, as a result of an industry-wide survey, Excise determined that there was no longer a wholesale situation in the small electrical household appliances industry (except for floor products), consequently, Excise cancelled all the previous individual company determined values as of December 31, 1985. The plaintiff’s request to use this method was received after the above-noted cancellations.

4. In June, 1981, Excise published its Excise News No. 34 which made reference to an upcoming Excise communiqué

A comprehensive listing of the discounts authorized for sales to retailers and users for specific commodities

In July, 1981, Excise issued its Excise Communiqué 57/TI which read, in part, as follows:

Further to an article published in the June 1981 edition of the “Excise News" this communiqué has been prepared to provide a comprehensive listing of the discounts authorized for sales to retailers and users for specific commodities. A reference to the existing authority is provided for the currently authorized determined values for the majority of the commodities.

At no place in either one of these publications was information relating to the determined value method of valuation, or the all-inclusive discount of 20 to 25 per cent, which was made available to some of the plaintiff's competitors, upon their request, disclosed.

It is the defendant's position that the discounts offered to the plaintiff's competitors were company specific and as such there was no way they could be published.

5. The only method by which a manufacturer of small appliances could make itself aware of a determined value discount being offered to its competitors was to contact Excise.

6. An individual company’s specific determined value is a determined value and any accompanying discount made available to that company by Excise was based on administrative policy and discretion.

7. The difference between a determined value that is published in the Excise Communiqué and a determined value such as those that existed in the current situation in the small appliance industry, is that industry-wide determined values are published and specific determined values are not.

8. In 1985, officials of Excise conducted a sales tax audit of the records of the plaintiff. The sales tax auditor calculated federal sales tax on the plaintiff's sale price to retailers.

9. On September 28, 1986, an agent wrote to Excise on behalf of the plaintiff requesting an authorized determined value discount and a refund for taxes overpaid during the last four years. After two letters from Excise dated November 4, 1986 and February 23, 1987, assuring the plaintiff that the matter was being looked into, the defendant wrote the plaintiff on June 5, 1987 and denied its request. On May 26, 1987, the plaintiff submitted a refund claim to Excise in the amount of $1,477,175.00 for federal sales taxes overpaid on the sale of small electrical appliances during the period September 1, 1982 and March 31, 1986. By letter dated June 5, 1987, the defendant advised the plaintiff that all previously authorized determined values for individual companies had been cancelled as of December 31, 1985, when, in fact, lona Appliance Inc. (formerly called General Signal Ltd.) was allowed to continue calculating tax based on its authorized determined value until February 28, 1986.

10. During the relevant time period four competitors of the plaintiff; Proctor Silex Canada Inc., West Bend of Canada, Toastess Inc. and Unireco Industries Inc., accounted for federal sales tax based on the sale price of the small electrical household appliances manufactured and sold by them in Canada. There is no evidence that the four companies were informed by the Crown of the availability of the determined value nor is there any evidence that they were aware of its availability.

11. By notice of determination dated July 24, 1987, Excise cancelled the plaintiff's refund claim of May 26,1987 due to its position that a determined value might not be applied retroactively to adjust amounts of tax and computed on sale price.

12. The plaintiff objected to the notice of determination and its objection was acknowledged by Excise in a letter dated November 5, 1987. By notice of decision dated March 3, 1989, Excise denied the objection of the plaintiff. Excise, in its notice of decision, stated:

Retroactive application of "determined values" is not accepted as creating a right to recovery of any portion of taxes paid, in the first instance, on the basis of “sale price". The company, having based on the "sale price” which is the statutory basis, has not overpaid tax or paid tax in error. Accordingly, none of the refunding provisions of the Excise Tax Act are authority for acceptance in payment of the application submitted.

13. In a letter dated August 6, 1986, from Elmer MacKay to Mr. W.G. Birdsall, Vice- President, Finance, General Signal Ltd., Excise allowed the retroactive application of a determined value to General Signal Ltd.. General Signal Ltd. originally requested a determined value on September 24, 1982, and it was granted April 12, 1983 commencing October 1, 1982. In the letter dated April 6, 1986, the determined value was retroactively applied as of January 1, 1979.

14. The plaintiff and defendant disagree as to the relevance in law of the tax treatment of other taxpayers who are not parties to this action.

15. The plaintiff and Defendant are agreed that the remedy sought herein by the plaintiff is that its application for refund should be referred back to the Minister under section 81.38 of the Excise Tax Act.

16. The plaintiff accepts that if the matter is referred back to the Minister as set out in paragraph 15 above, any refund will be calculated back four years from May 26, 1987.

For the sake of clarity I also note that the parties were agreed, as confirmed by counsel at the hearing of this matter, that for the period in question Sunbeam had paid federal sales tax on the basis set by then section 27 (later section 50 of R.S.C. 1985, c. E-15) of the Excise Tax Act, as it then applied. That section then provided, insofar as it is here relevant, "There shall be imposed, levied and collected a consumption or sales tax at the rate*prescribed [by the statute] on the sale price or the volume sold of all goods produced or manufactured in Canada

The only additional evidence is a series of documents admitted by agreement at trial, and the testimony of two witnesses called by the plaintiff, Mr. Robert Trude and Mr. Melville Hanna.

Mr. Trude, since 1990 the financial analyst for Sunbeam, joined the company in 1969 as a cost accountant, served from 1978 in general accounting functions and from 1981 as supervisor of cost accounting. In the latter capacity, he was involved, with the company’s controller, in dealing with auditors from Excise. His first experience in working with an Excise auditor was in 1983, when one was present at the company for some ten weeks commencing in September, auditing records relating to sales tax payments for the period from December 1980 to August 1983. Throughout the course of the auditor’s work, Mr. Trude met with him on a number of occasions to clarify matters, and at the conclusion of the audit he and the controller met with the auditor. He did the same thing in the fall of 1985 with a succeeding auditor, who was concerned with the period from August 1983 to July 1985. In his meetings with the Excise auditors no reference had been made to any method of calculating federal sales tax payable other than in relation to the sale prices of the products manufactured.

There were in evidence three letters, one written annually in 1983, 1984 and 1985, which were letters of advice to Sunbeam from the Excise auditor in the Toronto region setting out a basis on which federal sales tax should be computed for the following year. That basis took account of Sunbeam's sales practices which included transportation costs and a cash discount for substantial buyers. The tax and the technical services branch of Excise annually provided a combined deduction rate for computation of the tax taking these factors into account. In each of those letters, the statement is made:

In applying this deduction, your monthly total of taxable sales of the goods of your manufacture will be compiled valued at tax included selling prices; taxable "sales" of parts to the SASCO sub-division will then be deducted (except for the parts and clocks which are marginally manufactured by SASCO); the 1.7 per cent combined transportation and cash discount allowance computed on the taxable values will then be deducted and sales tax calculated as included in the remainder.

Note: the percentage figure in the fifth line of this statement is from the 1983 letter and it was varied in an identical paragraph in succeeding letters, 1.6 per cent for 1984 and 2.3 per cent for 1985.

That statement seems clearly to indicate that sales tax was to be computed in relation to the sales prices of the goods manufactured by Sunbeam which were sold at a price including tax.

It was Mr. Trude's evidence that Sunbeam paid its taxes based on the sale price of its products and that it was not aware of any other method for calculating the tax. As earlier noted, no mention by Excise auditors of any alternative basis for calculating the tax had ever been made when he was involved with the auditors during the years in issue. It was only after Sunbeam retained the services of a tax consultant in late 1985 that it learned that some of its competitors paid federal sales tax on a different basis, described as the determined value method, as set out in paragraph 3 of the agreed statement of facts of the parties.

Mr. Trude also identified three.documents published by Excise, as documents which he believes would have been received by the controller of Sunbeam, who was the person formally responsible for relations with Excise on behalf of the company. Those documents were Memorandum ET202 dated December 1, 1975, Excise News No. 34 of June 1981, and Excise Communiqué, 57/TTI, July 1, 1981. Memorandum ET202 sets out, in Part Il, arrangements for determined values for tax for specific goods. Those, it is provided, may be determined at the wholesaler or at the retailer level where it is customary for manufacturers to sell the goods to wholesalers or to retailers and it provides in considerable detail for tax to be computed on the determined value when authorized for specific goods. The Excise News No. 34 does include reference to "authorized values” for tax for use by manufacturers selling to more than one class of customer and it announces that a comprehensive listing of the discounts authorized for sales to retailers and users would be published in an excise communiqué, to be available on July 1, 1981. The document then refers to the ET202 series of memoranda and includes a list of commodities by specific industry. The final document, the Excise Communiqué, provides a published "comprehensive listing of the discounts authorized values for sales to retailers and users for specific commodities", as a follow-up to the June 1981‘ Excise News. That list includes "household appliances industry" and lists certain products, of which the smallest are sewing machines and parts, and vacuum Cleaners, floor polishers, without reference to any other small electrical appliances.

Finally, it was Mr. Trude's estimate that the overpayments of federal sales tax by Sunbeam in the years in question would have been the equivalent of about 1 per cent to 1.5 per cent of after-tax profits.

The second witness called on behalf of the plaintiff was Mr. Melville C. Hanna, now a tax specialist consultant, who formerly served for 35 years in various capacities in Revenue Canada, Customs and Excise. In 1980 he was a senior manager in Excise and until 1985 was Assistant Director, Tax Application, effectively acting as director of federal sales tax interpretation for Canada. The plaintiff sought his admission as an expert witness in relation to the administration of the Excise Tax Act, a status to which the respondent objected. After hearing counsel for the parties on the matter, I ruled that Mr. Hanna was accepted as an expert in relation to the administration of the Act within the Department for the years in which he served in a senior capacity, from 1980 to 1985.

Mr. Hanna's evidence, as set out in the statement filed in accord with Rule 482 of the Federal Court Rules, was essentially that because the incidence of the federal sales tax was uneven among taxpayers, over many years administrative practices were adopted to seek to “level the playing field between competitors in a particular industry". As an illustration he referred to Memorandum ET202 which provides for “established values" and "determined values". He described the administration of the tax system as based on the principle of voluntary compliance. In the belief that if taxpayers were fully informed they would voluntarily remit the correct amount of tax, Excise sought to provide advice to taxpayers, through consultations with auditors, particularly for new taxpayers, and through publications.

As examples of publications, Mr. Hanna referred to the documents discussed in testimony of Mr. Trude. He indicated that the June 1981 issue of Excise News No. 34 and the Excise Communiqué 57/TT1 appeared to set out a comprehensive listing of the discounts authorized for sale to retailers and users for specific commodities, but in fact other discounts provided to taxpayers particularly so- called "company specific” discounts were not provided for in Memorandum ET202 and were not referred to in the Excise News or the communiqué. He stated that it was the practice of Excise to send their documents to all taxpayers paying tax under the Excise Tax Act.

It was Mr. Hanna's view that "determined values” to be applied on an industry wide basis or for a specific company should only have been applied after an audit or survey of the industry. So far as he was aware no such survey was done in relation to the small electrical appliance industry before 1984. In his view the determined values approved on a company specific basis could hardly be described as "company specific" since the practice applied to more than one company. In Mr. Hanna's opinion a determined value should have been established on an industry-wide basis since several manufacturers were in competition. Nevertheless, I note it was apparent, as acknowledged in the agreed facts, that only certain companies in the industry were authorized to calculate sales taxes on a determined value basis. In Mr. Hanna's view, the plaintiff would have qualified to use the determined value method, as used by those other companies, and in the circumstances it was unfair not to make the determined value available as a basis for calculation of the tax to all competitors in the industry, including the plaintiff.

On one other aspect of the administration of the Act, Mr. Hanna’s views appeared different from the policy or practice of Excise. In Memorandum ET202, where reference is made to use of determined values (Part Il, paragraph 3), it is provided:

3. Computation of tax on a determined value becomes effective only from the date the use of this value is commenced. A determined value may not be applied retroactively to adjust amounts of tax paid computed on the sale price.

Mr. Hanna testified that the consistent practice of Excise was to refuse the retroactive application of a determined value because it was perceived this could result in a "windfall" return of tax paid. He did not agree with the concept of a perceived windfall since in his view that concept ignored the effect of the tax on market prices, and he considered the tax paid in excess of that calculated on the determined value would merely be a recovery of foregone profits.

In the course of cross-examination, Mr. Hanna was queried about evidence from discovery of a representative of the defendant, an Excise auditor who had audited Sunbeam's sales tax calculation process in the mid-1980s, who was not called at trial. That evidence, not objected to by the plaintiff and admitted for purposes of trial, was that the representative was not aware of any determined value basis for calculation of the tax in the small electrical appliance industry, to which Mr. Hanna expressed some surprise, and further evidence, that no officer in the Toronto office of Excise was aware of any such basis in the industry, Mr. Hanna described as "incredible".

The issues

The parties were not agreed about the issues said to be raised. I propose to treat their arguments and submissions, in turn, under the following topics:

1. the claim to reduce tax liability under the Act, with reference to the tax treatment afforded to others;

2. the claim for restitution, for alleged overpayment of tax, on the ground of unjust enrichment;

3, the claim for a refund of alleged overpayment of tax, based upon the doctrine of legitimate expectations; and

4. the claim to a refund of alleged overpayments under the Act.

The claim to reduce tax liability under the act with reference to the tax treatment of others

The defendant submits that since Sunbeam paid tax in accord with section 27 (later section 50) of the Act it is not entitled to any relief or refund in relation to the taxes paid. If that were a sufficient answer that would be the end of the matter. It does not, however, fully address the plaintiff's case, in my view.

The defendant refers to the well established principle that in an appeal from a tax assessment, the Court is concerned with the correct tax liability of the taxpayer and not with the reasons assigned or the basis of the assessment (see M.N.R. v. Minden, [1962] C.T.C. 79, 62 D.T.C. 1044 (Ex. Ct.), at page 89 (D.T.C. 1050)). Since this is not, strictly speaking, an appeal from assessments of tax, even though the parties appear to treat it as such and in a general sense its objective may be similar to such an appeal, that principle, in my opinion is not here directly applicable. It is urged that even where a servant of the Crown provides incorrect information and that advice is relied upon to his detriment by a citizen or taxpayer, there can be no avoidance of the application of the legislation as enacted by Parliament (see Granger v. Canada (Employment and Immigration Commission), [1986] 3 F.C. 70, 29 D.L.R. (4th) 501 (F.C.A.); appeal dismissed [1989] 1 S.C.R. 141, 91 N.R. 63). Thus, it is urged that even if the annual letters from Excise to the plaintiff about the method to be followed in calculating the tax and the publications of Excise are considered as representations of the tax to be applied, the plaintiff has no claim to recover where tax paid is in accord with the statute. Further, it is submitted that even if the administration of the statute gives rise to problems for the taxpayer (see Lavigne (Estate) v. M.N.R., [1990] 2 C.T.C. 2336, 90 D.T.C. 1229 (T.C.C.)), or if publications about a taxing statute are misleading (see Stickel v. M.N.R., [1972] C.T.C. 210, 72 D.T.C. 6178 (F.C.T.D.) [[1973] C.T.C. 202, 73 D.T.C. 5178; [1974] C.T.C. 416, 74 D.T.C. 6268]), or if there be an extra-legal arrangement, in the sense that it is not authorized by the statute, which is applied for a time or for some persons affected (see Jack Herdman Ltd. v. M.N.R., [1983] C.T.C. 272, 83 D.T.C. 5274 (F.C.A.)), those circumstances do not preclude the proper application of the statute or provide any basis for a claim that it should not be applied in accord with Parliament's expressed purpose and intent.

Underlying these submissions of the defendant is the assumption that the statute has a clear and precise meaning, in this case of the words "sale price" as used in section 27 (later section 50), and an implied but not expressed concession that the evolution of company specific determined values was not authorized b the Act. I do not believe that assumption fully answers the claims of the plaintiff for it is not suggested by Sunbeam that Excise was acting contrary to, or in a manner unauthorized by, the statute in its practice in relation to determined values. Rather, that practice is accepted as a valid exercise of discretionary authority in administration of the Act. The plaintiff's complaint is that it did not have the benefit of that discretion as some others said to oe in the same general position did.

Thus, it is not suggested by either party that Excise was acting in error, or in an unauthorized manner, in providing advice annually by letter to Sunbeam about a combined deduction rate to be applied in calculation of sales taxes which rate took account of prepaid transportation and cash discounts for volume purchases which were apparently included in Sunbeam's selling prices. That advice was no more than an effort to define the term “sale price" as used in section 27 (later section 50) to the particular selling practices of Sunbeam. Though there was no evidence before me concerning the manner in which declared prices were established for particular companies, it may well be that Excise decisions in relation to particular companies were related to their particular selling and pricing practices. In any event, it is agreed between the parties that certain companies accounted for federal sales tax on the basis of determined values and that certain other companies, including the plaintiff, calculated tax on the basis of sale prices, but there is no evidence before me that Excise acted beyond its administrative discretion under the Act in developing and applying a determined value method for calculating the tax.

If, as I find, it is not a sufficient answer to the plaintiff's action to say simply that Sunbeam paid tax in accord with section 27 (later section 50) and thus has no basis to claim a refund of taxes alleged to be overpaid, the defendant says that the tax treatment of others under the Act is not relevant to the plaintiff’s claim. That treatment lies at the base of the plaintiff's claim based upon doctrines of unjust enrichment and legitimate expectations. Counsel for the defendant submits there are no Canadian cases which support the relevance of treatment of other taxpayers in considering tax liability of a party. The taxpayer's liability is a matter between him or her and the tax collector in applying the taxing statute and they do not depend upon the treatment accorded to others.

I agree that as a general rule in considering the tax liability of A the treatment accorded to B under the same statute is irrelevant. This is the position taken by this Court in other cases when dealing with interlocutory proceedings. In Ford Motor Co. of Canada Ltd. v. M.N.R. (1991), 4 T.C.T. 6156 (F.C.T.D.), the decision of the prothonotary was upheld on appeal when he had dismissed an application to require attendance for examination for discovery to answer questions concerning the treatment of competitor companies under the Excise Tax Act. In that case the learned Associate Chief Justice said at pages 6158-59:

The activities of other automotive manufacturers and the defendant's treatment of those manufacturers is of no relevance to the plaintiff's action. No matter how similar the activities of the two businesses, if one company can frame its dispute in such a way as to make another company's affairs relevant, the result would be chaos. In each individual case the plaintiff must prove that it meets the requirements of the legislation. Here, if the plaintiff establishes that its manufacturing activities fall within the definition in paragraph 2(1)(f), then it will be entitled to the consideration provided in section 26.1 for “similar goods". That entitlement does not flow from the fact that other automotive manufacturers have received it but rather from the fact that the plaintiff meets the requirements in the legislation.

In my opinion, the treatment afforded to other taxpayers in authorizing some to apply a determined value method in calculating tax is not relevant to the question of whether the plaintiff is entitled to a refund; nor is it relevant that certain other taxpayers paid tax on the same basis as the plaintiff did. In the same manner, it is not relevant here that one of the plaintiff's competitors was apparently approved by decision of the Minister of the day to have a determined value authorized for calculation of its tax liability on a retroactive basis, contrary to the practice set out in Memorandum ET202, or that it was similarly permitted to continue to calculate tax on that basis for a time after the determined value basis for tax was said to have been terminated for products in the small electrical appliances industry.

Despite my conclusion on the relevancy of treatment of other taxpayers, in case I am wrong in that conclusion or it be perceived that in itself it does not fully respond to the plaintiff's claims, I consider the bases of the claims raised by the plaintiff in turn.

Restitution for alleged overpayment of tax on the ground of unjust enrichment

The requirements necessary to support a claim based on unjust enrichment are that the defendant has been enriched by receipt of a benefit at the expense or deprivation of the plaintiff in the absence of any juristic reason for the enrichment, and in circumstances where it would be unjust that the benefit be retained (see Pettkus v. Becker, [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257, at page 848 (D.L.R. 274), per Dickson, J. (as he then was)). Sunbeam here claims that the circumstances which warrant a finding of unjust enrichment and support an order of restitution are that money paid as tax in excess of what would have been payable under the determined value method, admittedly made available to some other manufacturers, was paid by mistake, or under compulsion, with no juristic or legal justification for it.

The plaintiff submits that whether the mistake was one of fact or of law is immaterial to its claim (see Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, 59 D.L.R. (4th) 161, at page 1201 (D.L.R. 192), per La Forest, J.). Here, on the basis of annual letters of advice from Excise about calculation of the tax, and in light of publications D Excise earlier referred to, the plaintiff was never informed of determined values applicable in the case of certain small electrical appliances. These, by administrative discretion of Excise, were available to certain other manufacturers. It is urged that over 70 years of Excise's administration of the Act, exercising discretion by administrative decisions, rulings and policies meant that for those taxpayers, those policies and rulings became the law. Sunbeam relied upon Excise representations that it was required to pay tax based on the selling price of its products, and it was never informed of determined values for its products or of the opportunity to use company specific determined values, even though the policy of Excise was to provide full information to taxpayers, through its auditors and publications, about methods of calculating the tax. Sunbeam was entitled to assume that Excise would treat similar taxpayers fairly. In the result, it is urged that since it could have paid tax based on the determined value method, as some others did, presumably at a lower rate, Sunbeam overpaid the taxes by mistake. Moreover, it is urged that the plaintiff made the overpayments under practical compulsion. Without their payment, as directed and assessed by Excise, Sunbeam would have been subject to sanctions and penalties under the Act.

Counsel for both parties made reference to Consumers Glass Co. v. Canada, [1989] 1 F.C. 120, [1988] 2 C.T.C. 141 (F.C.T.D.); rev'd (1990) 3 T.C.T. 5112, 107 N.R. 156 (F.C.A.). In that case, my colleague, Mr. Justice Cullen, recognized a circumstance of unjust enrichment and ordered restitution of all customs duties paid, including those paid more than two years before a claim was made despite statutory limitation of a claim to not more than two years, where the duties were paid DY mistake, for the goods in question were not subject to duty at any time. On appeal, the Court of Appeal reversed the decision precluding recovery of duties paid more than two years before the claim, on the ground that the statute, the Customs Act, clearly provided a process for dealing with mistakes made in tariff classification and appraisal and it limited any recovery to a two-year period. For the Court of Appeal, Mr. Justice Pratte said at page 5113 (N.R. 158):

Subsection 46(1) stated clearly that the tariff classification and appraisal made at the time of the entry were “final and conclusive” if they were not modified in accordance with those rules. If, therefore, as in this case, the tariff classification made at the time of entry of imported goods had not been modified within the time-limit prescribed, that tariff classification, whether correct or incorrect, became final and conclusive. Customs duties were payable on the basis of that classification even if, as was the case here, it was known to be wrong. In these circumstances, there was no unjust enrichment because there was a legal obligation to pay.

For the plaintiff, it is urged that the Consumers Glass case can be distinguished principally in relation to differences in the legislative provisions under the Customs Act in issue in that case, when comparée! with the Excise Act here in issue. I accept that there are differences, but those do not in themselves warrant a different conclusion from that of the Court of Appeal in relation to unjust enrichment.

On the facts in this case, I am not persuaded that the plaintiff has established the requirements to found a claim on unjust enrichment. It is not established that the Crown received any benefit other than tax paid in accord with the statute enacted by Parliament which imposed tax in relation to the sale price as defined in the Act, nor is it established that the selling prices of Sunbeam were not as provided in the Act. The treatment accorded to certain other taxpayers, in authorizing their tax to be calculated according to a determined value method, did not in any way displace the statutory provision for tax to be paid in relation to sales prices. That statutory provision was in fact applied, without determined values, in the cases of other taxpayers. In these circumstances, it is not possible, in my view, to conclude that the Crown received a benefit in the sense here sought to be established, as an amount in excess of that to which it was entitled under the Act.

Even if it could be considered that the Crown here received a benefit, that was not at the expense or deprivation of the plaintiff. Where the economic burden of the tax is shifted to others, for example where it is passed on to customers through sales prices, then the plaintiff does not establish that any gain to the Crown was at its expense (Air Canada, supra, note 10 per La Forest, J., at pages 1202-03 (D.L.R. 913-14)).

In these circumstances, the defendant urges that the taxes here paid were not paid on the basis of any mistake, either in fact or in law, and that there was no practical compulsion on the plaintiff to pay the tax which would provide a basis for restitution on the ground of unjust enrichment. I prefer to express my conclusion thus, that the plaintiff has failed to establish that there was any unjust enrichment of the defendant resulting from Sunbeam's payment of tax in accord with the Act and thus no basis for restitution is here established.

The doctrine of legitimate expectations and the plaintiff's claim for a refund of alleged overpayment of tax

The plaintiff claims that it had a legitimate expectation that it would be treated fairly or equitably with respect to other taxpayers in a similar position, and that it would not be misled by information published by the defendant through Excise. Moreover, it is said that it had a legitimate expectation, created through the publications, policies, practices and correspondence of Excise, that it would be made aware of any and all determined values by which it could account for federal sales tax. It relied on these legitimate expectations to its detriment and the defendant should be estopped from denying the retroactive application of determined values to Sunbeam and compel lea to refund the moneys which it is said the plaintiff has overpaid.

The plaintiff relies upon a number of authorities, including some English decisions in which the doctrine of legitimate expectations is discussed in relation to claims in regard to taxation [2] , and urges that the doctrine has application beyond its origins as a basis for relief in judicial review proceedings on grounds of procedural fairness. I am not persuaded, however, that any of the decisions referred to provide a basis to found a substantive claim for recovery of taxes allegedly overpaid.

In Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, 83 D.L.R. (4th) 297, the Supreme Court of Canada allowed an appeal from the British Columbia Court of Appeal which had found that, in relation to the Canada Assistance Plan, an agreement concluded with the Province of British Columbia, and the conduct of the Government of Canada pursuant to the agreement and the provisions of the plan itself, gave rise to a legitimate expectation that the Government of Canada would introduce no bill into Parliament to limit its obligations under the agreement or the plan without the consent of British Columbia. Speaking for the Supreme Court of Canada, Mr. Justice Sopinka said at page 557 (D.L.R. 319):

The doctrine of legitimate expectations was discussed in the reasons of the majority in Old St. Boniface Residents Assn. Inc. v. Winnipeg (City), [1990] 3 S.C.R. 1170, 75 D.L.R. (4th) 385. That judgment cites seven cases dealing with the doctrine, and then goes on at page 1204 (D.L.R. 414):

The principle developed in these cases is simply an extension of the rules of natural justice and procedural fairness. It affords a party affected by the decision of a public official an opportunity to make representations in circumstances in which there otherwise would be no such opportunity. The court supplies the omission where, based on the conduct of the public official, a party has been led to believe that his or her rights would not be affected without consultation.

It was held by the majority of the court below, and it was argued before us by the Attorney General of British Columbia, that the federal government acted illegally in invoking the power of Parliament to amend the plan without obtaining the consent of British Columbia . . . . If the doctrine of legitimate expectations required consent, and not merely consultation, then it would be the source of substantive rights; in this case, a substantive right to veto proposed federal legislation.

There is no support in Canadian or English cases for the position that the doctrine of legitimate expectations can create substantive rights. It is a part of the rules of procedural fairness which can govern administrative bodies. Where it is applicable, it can create a right to make representations or to be consulted. It does not fetter the decision following the representations or consultation.

Thus the doctrine of legitimate expectations, even if it were applicable in this case, does not create a substantive right to claim recovery or tax allegedly overpaid. Nor, in my view, can it create a right to have a determined value method apply retroactively to calculations of Sunbeam's federal sales tax so as to create an overpayment in regard to the tax paid.

Moreover, the doctrine of legitimate expectations generally requires some express representation by a public official upon which a claimant for judicial review can establish it relied upon to its detriment. In this case, no representation about the determined value method of calculating tax was made to Sunbeam; indeed, the absence of such representation is the basis of Sunbeam's complaint. Insofar as representations were made that its tax was to be calculated on the selling prices of its products, those were consistent with the Act's provisions, and it is not possible to conclude that payment of tax as provided by Parliament constitutes a detriment in any legal sense.

My conclusion is that the facts established do not support application of the doctrine of legitimate expectations, but even if they did, the doctrine provides no base to a substantive claim for recovery of taxes alleged to have been overpaid or any base to a substantive claim that Sunbeam is entitled to have its federal sales tax computed on a determined value basis. Having so concluded, it is unnecessary to determine the plaintiff's general claim that the defendant is estopped from denying Sunbeam's claim to retroactive application of a determined value basis for its federal sales tax liability.

Sunbeam also claims the defendant is estopped from denying its claim to retroactive application of the determined value method for calculation of federal sales tax specifically because Excise, through the Minister of the day, did authorize such an arrangement for a competitor company. The evidence of that authorization is clear, as is the evidence from Memorandum ET202 that "A determined value may not be applied retroactively to adjust amounts of tax paid computed on the sales price" (Part Il, paragraph 3), and the evidence of Mr. Hanna that in his years with Excise, the policy consistently followed was to refuse requests for retroactive application of determined values.

In my view, the one exception established to the consistent policy of Excise does not establish a base for the plaintiff's claim. It does not establish any general practice or policy on which Sunbeam relied at the time, nor is there evidence of any representation to Sunbeam by Excise, on which the former relied, of retroactive application of determined values granted by exception to a third party.

I am not persuaded that exceptional treatment of another party estops the defendant from denying retroactive application of determined values for calculation of tax by Sunbeam.

The claim to a refund of alleged overpayments under the Act

As set out in the agreed statement of facts, when Sunbeam, in May 1987, claimed a refund of taxes allegedly overpaid, Excise cancelled that claim on the ground that a determined value could not be applied retroactively to adjust amounts of tax computed on the basis of sales prices. When Sunbeam objected to that decision, in March 1989, Excise denied the objection, again denying retroactive application of determined values and stated in its Notice of Decision that since tax was paid on the sale price, the statutory basis, Sunbeam had not overpaid tax or paid tax in error.

The plaintiff claims it is entitled to a refund of taxes paid in error, pursuant to section 44 of the Act [3] as it then applied, which provided:

44(1) A deduction from or refund of, any of the taxes imposed by this act may be granted:

(a) where an overpayment has been made by the taxpayer;

(c) where the tax was paid in error;

(6) Subject to subsections (7) and (7.1), no refund of or deduction from any of the taxes imposed by this Act shall be granted, and no payment of an amount equal to tax paid shall be made under this section unless application in writing therefor is made to the Minister by the person entitled to the refund, deduction or amount within four years after the time the refund, deduction or amount first became payable under this section or the regulations.

Sunbeam's claim is that it paid taxes in error because it was unaware of its ability to calculate tax by the determined value method and unaware of the financial implications of that method as compared with the method it followed by calculating tax in relation to sales prices. In my view, the case is not comparable to the situation in Allan G. Cook Ltd. v. M.N.R., [1989] 1 T.S.T. 1221, 2 T.C.T. 1167 (C.I.T.T.), where two different methods of calculating tax were made available to all taxpayers. Here, that was not the case. The flaw in the plaintiff's argument is the assumption that it was entitled to calculate tax on the basis of determined values, because some others were. If industry-wide determined values had been determined, the plaintiff's assumption would be valid, but for both industry-wide and company-specific determined values, there can be no doubt that prior approval of Excise was necessary. In the absence of industry-wide determined values, the claimant’s assumption that it was entitled to use the determined value method for calculating tax is not borne out. It paid tax calculated in accord with the statute and in accord with the only method approved for the plaintiff for calculating tax. It did not do so in error and it did not overpay taxes as assessed under the Act.

It is my conclusion that the plaintiff’s claim for a refund of tax under then section 44 of the Act cannot be sustained. I base my conclusion, about the plaintiff's claim to a refund, upon my understanding from the evidence, despite paragraph 3 of the agreed statement of facts, that Excise did not have a general policy for the application of the determined value method of calculating tax in the small household electrical appliances industry, except that it did approve that method, upon application, for certain companies.

Conclusion

On the facts agreed to and as those were elaborated by testimony at trial, I have substantial sympathy for the plaintiff's position. The appearance of inequitable treatment by public authorities of those in apparently similar positions inevitably breeds contempt for those who exercise authority and mitigates against compliance by the public. Here, no evidence or argument was brought forth to counter the appearance of inequitable treatment by Excise of manufacturers in the same industry.

Despite my sympathy for the plaintiff’s position, I find for the reasons set out that there is no legal basis here raised on which to found Sunbeam's claim to recover a portion of federal sales taxes paid in relation to its sales prices in accordance with the Act in the years in question. Thus an order goes dismissing its action.

The defendant asked for costs. In the circumstances of this case, which arose because of Sunbeam’s perception that it was treated unfairly in light of treatment accorded to some of its competitors in the industry, a perception that is quite understandable and is not countered in this case, the order dismissing the action provides that each party shall bear its own costs.

Action dismissed.