Transgas Limited v. Mid-Plains Contractors Ltd., Et Al., [1992] 1 CTC 151, 92 DTC 6074

MacPherson, C.J.Q.B.:—This case raises the important question as to both the constitutionality and the Charter implications of subsection 224(1.2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63), as amended (the "ITA") which purports to empower Revenue Canada to seize funds which would be owing to a tax debtor were it not for provincial law stating that such funds belong to someone else. The funds in question have been paid into Court and the Attorney-General of Canada, representing the Minister of National Revenue (herein"Revenue Canada") now applies for a determination as to the entitlement to those funds (“trust money") and maintains that it has priority pursuant to the aforesaid section of the ITA.

While it is not completely clear from Revenue Canada's notice of motion, it was common ground during the lengthy argument that took place before me that the other claims, or otherwise, to the trust money are:

1. A large number of lienholders who filed liens under the provisions of the Builders' Lien Act, S.S. 1984-85-86, c. B-7.1 (the"BLA"). There are two classes of these lienholders, labour lienholders and non-labour lienholders, who claim priority over Revenue Canada, and other claimants.

2. Her Majesty the Queen in the right of the Province of Saskatchewan represented by the Minister of Human Resources, Labour and Employment (herein"Saskatchewan Labour"). Should subsection 224(1.2) be unenforceable, it is claimed that under sections 53 and 56 of the Labour Standards Act, R.S.S. 1978, c. L-1, the labour lienholders have first entitlement to the trust money in Court in preference to the non-labour lienholders under the Builders' Lien Act.

3. Her Majesty the Queen in the Right of the Province of Saskatchewan as represented by the Workers' Compensation Board (herein "W.C.B."), which claims $169,928.62 against TransGas pursuant to provisions of the Workers' Compensation Act, being the unpaid payments by Mid-Plains under that Act and for which TransGas becomes responsible.

4. TransGas Limited (herein "TransGas") the applicant in the original notice of motion which commenced these proceedings leading ultimately to the present notice of motion by Revenue Canada. TransGas denies the W.C.B. claim set out in the preceding paragraph.

5. The claims under certain garnishees against TransGas by Tennaco Canada Inc. and G. Ungar Construction Co. Ltd., together with the claim of the Bank of Nova Scotia, have been abandoned or withdrawn. The claim of the Sas- katchewan Minister of Finance has been restricted to any surplus remaining in the trust money after payment to lienholders; since there will be no surplus, this claim is academic.

Facts

The facts are set out in some detail in my fiat of February 15, 1991, but it is worthwhile to briefly summarize them:

1. TransGas is a Crown agency which constructs, owns and operates a natural gas distribution system. In the summer of 1990 it entered into contracts with the respondent, Mid-Plains Contractors Limited, ("Mid-Plains") for the construction of certain pipelines in Saskatchewan.

2. On November 15, 1990, Mid-Plains abandoned the contracts at which time TransGas held approximately $526,000 as "holdback" money pursuant to the provisions of the BLA and a further approximate $473,000 ("the trust money") which is trust money under subsections 6(2) and 7(1) of that Act. The BLA provides that both amounts are trust funds for the benefit of the lienholders. None of the interested parties (other than the lienholders) made any claim against the holdback amount and consequently that amount has now all been paid out to the lienholders. The dispute that I must deal with relates only to the trust money, and the competing claimants to that money.

3. Following Mid-Plains abandonment of the contract:

(a) Liens, valid under the BLA were filed totalling in excess of 1.5 million dollars with the labour lienholders' claims being approximately $550,000 of that amount. A number of these liens were filed prior to November 2, 1990.

(b) On November 2, 1990, Revenue Canada served a “Requirement to Pay” pursuant to the said subsection 224(1.2) on TransGas requiring TransGas to pay to Revenue Canada the sum of $231,392.42, being Revenue Canada's claim of Mid-Plains’ liability to Revenue Canada under subsection 227(10.1) of the ITA or similar provisions of the Canada Pension Plan or the Unemployment Insurance Act, S.C. 1970-71-72, c. 48, section 1. On December 10, 1990, Revenue Canada served a second "Requirement to Pay” on TransGas in which the demand was increased to $473,780.04. It is really this second "Requirement to Pay” under which Revenue Canada claims its priority.

(c) (i) According to the affidavit of Betty Lou Felsing filed in support of Revenue Canada's motion, the aforesaid $473,780.04 is made up of "assessments raised" against Mid-Plains as follows:

Unpaid payroll deductions pursuant to I.T.A., Canada Pension Plan, Unemployment Insurance Act $372,772.09

Penalties and interest 119,496.92

$492,269.01;

(ii) Although the affidavit is unclear, I assume the first of the above figures is made up of deductions from Mid-Plains' employees working on the above contracts consisting of $211,841.80 together with such deductions from MidPlains employees working on an “El Paso” contract consisting of $160,930.29, these two figures totalling $372,772.09.

4. Pursuant to my fiat of 15 February 1991, all of the holdback money and trust was paid into court by TransGas, and as noted above, the holdback portion has been paid out to the lienholders.

Questions To Consider

The competing claims and arguments which have been presented to me give rise to the following questions which I must answer:

1. Absent constitutional and Charter implications, on the proper interpretation of subsection 224(1.2), as it now reads, has Revenue Canada effectively attached or "garnisheed" the trust money?

2. In the circumstances of this case, is subsection 224(1.2) intra vires the constitutional powers of Parliament under subsection 91(3) of the Constitution Act, 1867, or is it ultra vires as constituting an impermissible intrusion into exclusive provincial powers under subsections 92(13) or (16) of that Act?

3. Does the action of Revenue Canada in acting under subsection 224(1.2) constitute an unreasonable seizure which impinges on section 8 of the Charter, and if so, is it justified under section 1 of the Charter?

If the answers to the above questions are such that Revenue Canada has no valid claim to the trust money, then:

4. Under the Labour Standards Act are the labour liens arising from work done by Mid-Plains employees on its contracts with SaskPower and SaskTel entitled to full payment from the trust money prior to any of that money being applied in payment of the unpaid portions of the aforesaid non-labour liens filed under the BLA?

5. Do the provisions of section 75 of the BLA apply so that the trust money must be paid out in accordance with that section, but only to those liens in respect of work performed on the contracts between TransGas and Mid-Plains?

6. Assuming the trust money is paid out to either lienholders or to Revenue Canada, is TransGas still liable to pay the claim of the W.C.B. made under section 133 of the Workers' Compensation Act?

Analysis & Conclusions

I Absent constitutional and Charter implications, on the proper interpretation

of subsection 224(11.2), as it now reads, has Revenue Canada effectively attached or "garnisheed" the moneys in question held in the hands of TransGas?

I must first consider the decision of our Court of Appeal in Royal Bank of Canada v. Saskatchewan Power Corporation, [1991] 1 W.W.R. 1, 73 D.L.R. (4th) 145, which is binding on me if applicable to this fact situation, and which upheld the judgment of Wright, J., of this Court, [1990] 2 W.W.R. 655, 9 P.P.S.A.C. 244, 82 Sask. R. 173. Each of these decisions deals with the enforceability by Revenue Canada of the same subsection of the ITA as against a claim by the Royal Bank under the Bank's security interest pursuant to Saskatchewan's Personal Property Security Act, S.S. 1979-80, c. P-6.1. In that case Revenue Canada served a requirement to pay on SaskPower which owed money to the tax debtor, but prior to the service of the requirement to pay, SaskPower had been notified by the bank of the security interest granted to the bank by the tax debtor. The Court of Appeal upheld the decision of Wright, J. and held at page 15:

An examination of the sections clearly supports the position that there is no ambiguity. Section 224(1.2) empowers the minister, by letter, to require a person (the Saskatchewan Power Corporation) to pay moneys otherwise payable to the secured creditor (the Royal Bank) to the Receiver General on account of the tax debtor's liability (Linnvale)

The Court of Appeal then quoted favourably from page 164 of the decision of McDonald, J. of Alberta's Court of Queen's Bench in Lloyds Bank Canada v. Int. Warranty Co., [1989] 3 W.W.R. 152, 72 C.B.R. (N.S.) 88.

I am aware that each of the above decisions of our courts was made prior to the amendment of June 17, 1990 to subsection 224(1.2), but I think it is plain the amendment simply strengthens the findings in these two decisions.

It is important to note, however, that each decision specifically excludes a lien claim under the BLA from its findings, and each states that the claims of the lienholders are yet to be determined. The case before me is subject to subsection 224(1.2) as amended in 1990, and to subsection 224(1.3), which read:

(1.2) —Notwithstanding any other provision of this Act, the Bankruptcy Act, any other enactment of Canada, any enactment of a province or any law, where the Minister has knowledge or suspects that a particular person is or will become, within 90 days, liable to make a payment

(a) to another person (in this subsection referred to as the "tax debtor") who is liable to pay an amount assessed under subsection 227(10.1) or a similar provision, or

(b) to a secured creditor who has a right to receive the payment that, but for a security interest in favour of the secured creditor, would be payable to the tax debtor,

the Minister may, by registered letter or by a letter served personally, require the particular person to pay forthwith, where the moneys are immediately payable, and in any other case, as and when the moneys become payable, the moneys otherwise payable to the tax debtor or the secured creditor in whole or in part to the Receiver General on account of the tax debtor's liability under subsection 227(10.1) or a similar provision, and on receipt of that letter by the particular person, the amount of those moneys that is required by that letter to be paid to the Receiver General shall, notwithstanding any security interest in those moneys, become the property of Her Majesty and shall be paid to the Receiver General in priority to any such security interest.

(1.3) —In subsection (1.2),

“secured creditor" means a person who has a security interest in the property of another person or who acts for or on behalf of that person with respect to the security interest and includes a trustee appointed under a trust deed relating to a security interest, a receiver or receiver-manager appointed by a secured creditor or by a court on the application of a secured creditor, a sequestrator, or any other person performing a similar function;

"security interest" means any interest in property that secures payment or performance of an obligation and includes an interest created by or arising out of a debenture, mortgage, hypothec, lien, pledge, charge, deemed or actual trust, assignment or encumbrance of any kind whatever, however, or whatever arising, created, deemed to arise or otherwise provided for;

“similar provision” means a provision, similar to subsection 227(10.1), of any Act of a province that imposes a tax similar to the tax imposed under this Act, where the province has entered into an agreement with the Minister of Finance for the collection of the taxes payable to the province under that Act.

At this point I think it is worth repeating the opening words, which I will refer to as "the notwithstanding clause”:

Notwithstanding any other provision of this Act, the Bankruptcy Act, or any other enactment of Canada, any enactment of a province or any law

The decision of Wright, J. referred to above does not comment on this clause.

The above decision of the Saskatchewan Court of Appeal, at 14 of the Western Weekly Report, states:

. . . It [subsection 224.(1.2)] gives primacy to the provisions of the Income Tax Act and clearly takes precedence over all other laws. Thus the Act takes precedence over the assignment sections in the Bankruptcy Act which state that attachments do not have primacy over the rights of a secured creditor. ....

I agree that Parliament has full power to provide in one Act, such as the Income Tax Act, that its provisions will have primacy over provisions in another Act of Parliament, such as the Bankruptcy Act. However, I do not think, nor do I believe that our Court of Appeal intended to say, that Parliament can expand its constitutional powers by simply stating that provincial laws will have no effect under certain circumstances. Consequently, I cannot read the notwithstanding clause, by itself, as giving Parliament any powers in respect of valid provincial legislation which Parliament would not otherwise have. (It could be otherwise if the Income Tax Act were an Act genuinely made "for the Peace, Order, and good Government of Canada. . .” as specified in section 91 of the Constitution Act, 1867.)

Turning to the specific application of subsection 224(1.2), counsel for Revenue Canada argued that the claims of the lienholders are a secured interest as defined in (1.3), based on the Saskatchewan Court of Appeal decision in Royal Bank, supra, and because the word “lien” and "deemed or actual trust" appears in the definition of security interest in (1.3).

On the other hand, counsel for the lien claimants argue that the trust money does not fall under either (a) or (b) of (1.2) as those moneys were not payable to Mid-Plains and were not payable to the lien claimants by reason of any security interest in the moneys, but rather by reason of the statutory payment scheme provided for in the BLA counsel point out that in Royal Bank, supra, the question which our Appeal Court considered was set forth as follows at page 6 of the Western Weekly Report:

The simple issue is whether the power granted to the Minister of National Revenue under section 224(1) of the Income Tax Act to require payment of a debt owed to a taxpayer to the Minister of National Revenue takes priority over a prior perfected security interest and deprives the secured creditor of the secured position.

It is argued that the position of the lienholders is different in that they are beneficial owners of the money and not secured creditors within the meaning of subsections 224(1.2) or (1.3), and that consequently these subsections do not apply to them.

Arguments were filed and heard from two counsel representing lienholders — Mr. Sawatsky representing the non-labour lienholders and Mr. Hodson representing six specifically named non-labour lienholders. I will not attempt to separate or distinguish as between these two arguments, and will treat them as one for the purposes of this judgment.

The arguments point out that the lienholders are the beneficial owners of the trust money by virtue of the trust created by section 7 of the BLA, and since some liens were validly filed prior to Revenue Canada having served its notices of requirement to pay, the priorities provided by sections 15 and 70 of the BLA are applicable. They argue that the trust and the priorities were triggered by the filing of liens and that consequently the lienholders were beneficial owners prior to any steps being taken by Revenue Canada, and that being the case, they are not secured creditors with the right to receive the money “but for a security interest in favour of the secured creditor" under paragraph 224(1.2)(b). Nor is it a situation, they argue, where under subsection 224(1.2) the" moneys are immediately payable” or will become payable at some future time. They argue that while the definition of "security interest" found in (1.3) refers to a "deemed or actual trust” this definition can have no application because at the time of the filing of the notices of requirement to pay by Revenue Canada, lienholders were already legally the beneficial owners and the "but for" provision of paragraph 224(1.2)(b) can have no application. The situation had crystallized as of the filing of the first liens so as to take the moneys out of the ambit of subsections 224(1.2) and (1.3).

While the arguments of the lien claimants' counsel are persuasive, I have difficulty with what seems to me to be the plain wording and meaning of (1.2)(b) together with the definitions in (1.3). At the time that the requirement to pay was served on TransGas by Revenue Canada, TransGas was still holding the money and was doing so subject to the trust provisions in the BLA. At that time, TransGas was subject to a "deemed or actual trust” within the meaning of the definition in (1.3). I think it is clear, however, that as stated in (1.2)(b) "but for" that trust, TransGas would have been liable to pay the money to MidPlains.

I recognize that the definition of "secured creditor" in (1.3) states that it means a person having a security interest "in the property of another person”, and that because of the provisions of the BLA, at the time the requirement to pay was served, the money was not "property of another person", but was property of which the lien claimant was the beneficial owner. Again however, and “but for" those trust provisions, TransGas would have been liable to pay the money to Mid-Plains.

They argue as well that for there be a "security interest” within the definition of (1.3), there must be an interest in the money which secures payment" of an obligation”. The argument states: "Quite simply the money belongs to the beneficiaries of the trust and is not merely an interest to secure payment or performance of an obligation.” I have been unable to find any cases dealing with the word “ obligation” where it is used in the context of a statutory duty. However, it seems to me that TransGas has a statutory duty under the BLA to hold the money in trust and pay it to the lien claimants, and where that duty exists, in my view, that duty creates an obligation, and at the risk of being repetitive, “ but for'' that obligation, the money would be payable by TransGas to Mid-Plains.

I have reviewed the authorities referred to by the lien claimants' counsel, but in view of the findings of our Appeal Court and what I consider to be the plain meaning of (1.2) as it now reads, I cannot rely on those authorities. Since argument was heard in our case, the Manitoba Court of Appeal has issued its judgment in Pembina on the Red v. Triman Industries, 85 D.L.R. (4th) 29, in which the majority reaches an opposite conclusion. While I must follow our Court of Appeal in any event, I expect that the Manitoba Court of Appeal, if it had been interpreting subsection 224(1.2) as amended in 1990, would have reached a different conclusion. This Manitoba decision also deals with the constitutionality of subsection 224(1.2), and I will refer further to that case in Part Il of my judgment.

For the foregoing reasons, I must answer this first question in the affirmative.

In my study of the material herein and the provisions of the ITA, a question occurred to me which unfortunately was not argued and which I therefore will not attempt to answer. However, I will briefly outline the reasons for this question arising. The form of requirement to pay exhibited to the affidavit of Betty Lou Felsing filed on behalf of Revenue Canada, states at the outset that TransGas is required to pay to the Receiver General on account of Mid-Plains’ “liability under subsection 227(10.1)" of the ITA.

Subsection 227(10.1) permits the Minister to make an assessment against Mid-Plains for the kinds of deductions set out in Exhibit A of the Felsing affidavit and goes on to say that where the Minister "sends a notice of assessment to that person" (Mid-Plains), certain provisions are applicable. I then turn again to the Felsing affidavit and although it states in paragraphs (2), (3) and (4) that there have been "assessments raised” against Mid-Plains, nowhere does the affidavit state that notices of assessment have been sent to Mid-Plains in respect of the amounts claimed in the requirement to pay.

The question which arises is whether, in the absence of evidence as to notices of assessment having been sent to Mid-Plains, the two forms of requirement to pay can be of any effect. As I indicated, I refrain from answering this question because it was not argued by counsel, and further, because of the decision I have arrived at below in Part II, there is no need for an answer.

Il In the circumstances of this case, is subsection 224(1.2) intra vires the

constitutional powers of Parliament under subsection 91(3) of the Constitution Act, 1867, or is it ultra vires as constituting an impermissible intrusion into exclusive provincial powers under subsections 92(13) or (16) of the said Act?

The above sections read:

91.(3) The raising of Money by any Mode or System of Taxation.

92.1(13) Property and Civil Rights in the Province.

(16) Generally all Matters of a merely local or private Nature in the Province.

There are numerous decisions both of our Supreme Court and of the Privy Council which state quite clearly that where provincial and federal laws conflict, and each is constitutionally valid, then the federal legislation must prevail. In our case, there is clearly a conflict between the provisions of the BLA and subsections 224(1.2) and (1.3). In my view, it must be accepted that the provisions of the BLA are, indeed, constitutionally valid under the provisions of subsections 92(13) or (16) of the Constitution Act, 1867, and the only question I must decide is whether subsection 224(1.2) is constitutionally valid under the provisions of subsection 9(13) of the Constitution Act, 1867. There can be no question that the impugned section does encroach on provincial powers both specifically as to the ownership of money in accordance with the provisions of the BLA, and generally as to the ownership of property within the provincial legislature's exclusive power to make laws in relation to "property and civil rights in the province" or as to a matter "of a merely local or private nature in the province."

If the impugned section, in pith and substance, relates to "the raising of money by any mode or system of taxation", then it is constitutionally valid and must prevail over any conflicting provision of provincial legislation, including the BLA. Further, the impugned section can be constitutionally valid if it has a “rational and functional connection" or is necessarily incidental or ancillary to the federal power under subsection 91(3).

It is pointed out in General Motors v. City National Leasing, [1989] 1 S.C.R. 641, 58 D.L.R. (4th) 255, at pages 668 and 689 (to save needless repetition, all underlinings hereafter in this judgment, have been done by me for the purpose of adding emphasis):

. . . In arriving at the correct standard the court must consider the degree to which the provision intrudes on provincial powers. The case law, to which I turn below, shows that in certain circumstances a stricter requirement is in order, while in others, a looser test is acceptable. For example, if the impugned provision only encroaches marginally on provincial powers, then a“ functional” relationship may be sufficient to justify the provision. Alternatively, if the impugned provision is highly intrusive vis-a-vis provincial powers then a stricter test is appropriate. A careful case by case assessment of the proper test is the best approach.

In determining the proper test it should be remembered that in a federal system it is inevitable that, in pursuing valid objectives, the legislation of each level of government will impact occasionally on the sphere of power of the other level of government; overlap of legislation is to be expected and accommodated in a federal state. Thus a certain degree of judicial restraint in proposing strict tests which will result in striking down such legislation is appropriate.

And at page 671:

. . As the seriousness of the encroachment of provincial powers varies, so does the test required to ensure that an appropriate constitutional balance is maintained.

And at pages 672-73:

. . .The creation of civil actions is generally a matter within provincial jurisdiction under s. 92(13) of the Constitutional Act, 1867. This provincial power over civil rights is a significant power and one that is not lightly encroached upon. . .

Finally, in dealing with the challenge to the section under the Combines Investigation Act, R.S.C. 1970, c. C-23, the following is found at page 674:

In sum, the impugned provision encroaches on an important provincial power; however, the provision is a remedial one; federal encroachment in this manner is not unprecedented and, in this case; encroachment has been limited by the restrictions of the Act.

What then is the nature of 224(1.2) of the ITA? It is certainly not remedial from the aspect of the citizen who, by valid provincial law, is legally entitled to certain moneys only to find that these moneys are seized by Revenue Canada under the authority of this section. Not only is it seized, but the seizure is implemented without warning, without notice, without any right of appeal, without any right to a hearing, and without any remedy which gives him any opportunity to recover the moneys otherwise rightfully his under provincial law. Further, adding insult to injury, in our case about 25 per cent of the amount seized consists of penalties and interest imposed against Mid-Plains because of its sins, and for which the beneficial owners under provincial law had absolutely no responsibility—still further, the labour lienholders in our case must look at a portion of Mid-Plains debt to Revenue Canada being made up of their wage deductions made by Mid-Plains—in effect they are paying twice. It is doubtful if there can be any example of a more serious and obvious encroachment on a provincial power. And I should add, that under section 241 of the ITA, the confidentiality requirements appear to permit no method by which a person can attempt to protect himself by inquiring of Revenue Canada officials as to whether there is any danger of such a seizure being made.

Counsel who oppose the position of Revenue Canada have pointed out quite forcefully that if a lien claimant or contractor or owner cannot be reasonably assured of the integrity of the construction system established under provincial legislation, the entire construction system would be put into disarray, thus the implications of the validity of subsection 224(1.2) go well beyond the conflicting claims in this particular case. (In effect, this is a restatement of what the Supreme Court said in Clark v. Canadian National Railway Co., [1988] 2 S.C.R. 680 at 709, where it held that certain railway legislation was ultra vires, because, inter alia, it would "massively disrupt and interfere” with valid provincial legislation. Later, I will refer again to this case). If Revenue Canada can proceed with impunity to invoke the provisions of subsection 224(1.2) then no workman can take a job in the construction industry in any province with confidence that he has the wage protection provided by the BLA—and no subcontractor will be able to enter into a construction contract with that same confidence. It would seem a strange thing if a single section in the ITA can permit Revenue Canada to create a major disruption in the integrity and operation of provincial legislation dealing with anything as important as the construction industry within a province.

There can be no doubt that the ITA, generally, is within the exclusive legislative authority of Parliament pursuant to subsection 91(3) of the Constitution Act, 1867. The ITA is directed to a specific form of taxation, namely, income tax. At the outset of this Act, section 2 provides:

An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year.

Similarly, there can be no doubt that a taxation statute would be of little value if it could not include enforcement provisions whereby taxes which have been imposed can be recovered.

A question arises whether money seized under a requirement to pay can be properly described as "taxes". Under Parliament's subsection 91(3) taxation powers, Parliament is not empowered to identify something as a tax when in fact it is not a tax. There is no assessment under the provisions of the ITA against the persons subject, directly or indirectly, to a requirement to pay. The affidavit of Betty Lou Felsing filed by Revenue Canada in support of its notice of motion, states that Revenue Canada's claim is pursuant to an assessment against Mid-Plains "in respect of unpaid payroll deductions, together with penalties and interest, pursuant to the Income Tax Act, the Canada Pension Plan and the Unemployment Insurance Act.” (Presumably, where the affidavit uses the word unpaid”, it should properly have used the word unremitted".) What must have happened was that Mid-Plains deducted from the wages due to its employees the amounts required to be deducted by the aforesaid Acts, but then failed to remit those moneys to Revenue Canada. The amounts so deducted together with penalties and interest, were due and owing, and by the terms of the ITA, were required to be remitted, to Revenue Canada. When Mid-Plains failed to remit as required, Revenue Canada then sought to recover the amount of Mid-Plain's indebtedness by proceeding against TransGas under subsection 224(1.2). At this point, there was no tax owing or assessed against either TransGas or the lien claimants. There was only a debt due in respect of taxes from Mid-Plains to Revenue Canada, and Revenue Canada simply proceeded to use the mechanism of subsection 224(1.2) to "make-up" the money which Mid-Plains owed to Revenue Canada, and which Revenue Canada was unable to recover from Mid-Plains.

It is interesting that the ITA does not attempt to classify the money being seized as a tax, even assuming it had the power to do so, which I would question. As mentioned above it neither assesses, nor sends a notice of assessment to, the “ particular person" to whom the requirement to pay is sent, and the ITA does not make it an offence if the particular person" fails to pay, as it does in cases where the failure follows a notice of assessment. Subsection 224(4) simply provides that failure to pay by the "particular person" makes him “liable to pay" to Revenue Canada the amount claimed in the requirement to pay. So there would seem to be an implicit acknowledgment in this taxation statute that the money purporting to be seized under subsection 224(1.2) is not a tax or tax money.

As mentioned above, the ITA, as its name states and section 2 provides, is an act requiring the payment of "income tax". In Canadian Industrial Gas & Oil Ltd. v. Gov't of Saskatchewan, [1978] 2 S.C.R. 545, 80 D.L.R. (70) 449, Dickson, J. (as he then was) in his dissenting judgment, but not in dissent as to the following quotation, said at page 586:

. . .The so-called “mineral income tax” is not an income tax in any generally recognized sense of the term. A true income tax means, for taxation purposes, a levy on gains and profits: . . . The evidence of Professor Barber in the case at bar confirms that view. He defined income tax as being, according to generally accepted accounting principles and business practice, a tax imposed on net income and in determining such net income any expenses incurred in earning that income are inherently deductible.

If Revenue Canada is successful in its seizure, then the result is that innocent persons who are the beneficial owners of the seized money under provincial law, and who have not in any way transgressed the provisions of the ITA and who owe nothing to Revenue Canada under the provisions of that Act, lose their right to receive that money. So far as persons are concerned under these circumstances, subsection 224(1.2) is not remedial in nature, it is confiscatory in nature.

In In re the Insurance Act of Canada, [1932] A.C. 41, Viscount Dunedin delivered the judgment of the Privy Council and at page 53 stated:

Their Lordships cannot do better than quote and then paraphrase a portion of the words of Duff J. in the Reciprocal Insurers’ case. He says: "In accordance with the principle inherent in these decisions their Lordships think it is no longer open to dispute that the Parliament of Canada cannot, by purporting to create penal sanctions under s. 91, head 27, appropriate to itself exclusively a field of jurisdiction in which, apart from such a procedure, it could exert no legal authority, and that if, when examined as a whole, legislation in form criminal is found, in aspects and for purposes exclusively within the Provincial sphere, to deal with matters committed to the Provinces, it cannot be upheld as valid.” If instead of the words "create penal sanctions under s. 91, head 27" you substitute the words exercise taxation powers under s. 91, head 3,” and for the word "criminal" substitute "taxing," the sentence expresses precisely their Lordships views.

If the above quoted portion is paraphrased as directed by the Privy Council, then it reads:

. . .their Lordships’ think it is no longer open to dispute that the Parliament of Canada cannot, by purporting to exercise taxation powers under s. 91, head 3, appropriate to itself exclusively a field of jurisdiction which, apart from such a procedure, it could exert no legal authority, and if, when examined as a whole, legislation in form taxing is found, in aspects and for purposes exclusively within the Provincial’s sphere, to deal with matters committed to the provinces, it cannot be upheld as valid.

Earlier, at page 52, Lord Dunedin stated:

Now as to the power of the Dominion Parliament to impose taxation there is no doubt. But if the tax as imposed is linked up with an object which is illegal the tax for that purpose must fall. . . . a Dominion license so far as authorizing transactions of insurance business in a Province is concerned, is an idle piece of paper conferring no rights which the party transacting in accordance with Provincial legislation has not already got, if he has complied with Provincial requirements. It is really the same old attempt in another way.

In Amax Potash Ltd. v. Saskatchewan, [1977] 2 S.C.R. 576; 71 D.L.R. (3d) 1, at page 590, Dickson, J. (as he then was) in delivering the judgment of the full Court, stated:

The Courts will not question the wisdom of enactments which, by the terms of the Canadian Constitution are within the competence of the Legislatures, but it is the high duty of this Court to insure that the Legislatures do not transgress the limits of their constitutional mandate and engage the illegal exercise of power.

In Attorney-General Canada v. Attorney-General Ontario, [1937] A.C. 355, the Privy Council dealt with the Federal Employment and Social Insurance Act, 1935. In delivering the judgment of the Privy Council, Lord Atkin held that in pith and substance this Act was an insurance act affecting the civil rights of employers and employees in each province and was accordingly within the exclusive competence of the provinces under subsection 92(13). At page 367:

. . Dominion legislation, even though it deals with Dominion property, may yet be so framed as to invade civil rights within the Province, or encroach upon the classes of subjects which are reserved to Provincial competence. It is not necessary that it should be a colourable device, or a pretence. If on the true view of the legislation it is found that in reality in pith and substance the legislation invades civil rights within the Province, or in respect of other classes of subjects otherwise encroaches upon the provincial field, the legislation will be invalid. To hold otherwise would afford the Dominion an easy passage into the Provincial domain.

It seems undeniable that if under guise of its taxation powers, Parliament can, in effect, confiscate moneys from an individual when, by provincial law, the individual is the beneficial owner thereof, and when that individual is in no respect in breach of the provisions of the ITA, then through those same taxation powers, Parliament has "an easy passage” to confiscate virtually any property which a person owns under provincial law.

In Proprietary Articles Trade Association v. Attorney-General Canada, [1931] A.C. 310, the Privy Council was dealing with the Combines Investigation Act and, inter alia, there was a challenge that a particular section permitting federal officials to reduce Customs duties was ultra vires federal power. At page 317, Lord Atkin stated:

. . .Their Lordships entertain no doubt that time alone will not validate an Act which when challenged is found to be ultra vires; not will a history of a gradual series of advances till this boundary is finally crossed avail to protect the ultimate encroachment. But one of the questions to be considered is always whether in substance the legislation falls within an enumerated class of subject, or whether on the contrary in the guise of an enumerated class it is an encroachment on an excluded class.

And at pages 324-25:

. . .The contrast is with matters which are merely attempts to interfere with Provincial rights, and are sought to be justified under the head of "criminal law” colourably and merely in aid of what is in substance an encroachment. .. . . but if the main object be intra vires, the enforcement of orders genuinely authorized and genuinely made to secure that object are not open to attack.

And then at page 326 Lord Atkin concluded that the impugned section was “reasonably ancillary to the powers given" under subsection 91(3).

In Regional Municipality of Peel v. MacKenzie and the Attorney General of Canada, [1982] 2 S.C.R. 9, a section of the Juvenile Delinquents Act, R.C.S. 1970, c. J-3, was impugned as constituting a unwarranted intrusion into provincial rights under subsection 92(13) in that it purported to authorize a court to order a municipality to which a delinquent child belongs to contribute to the child’s support. The Crown contended that the section could be sustained as being ancillary to a valid exercise of Parliament's legislative authority over criminal law. The appellant did not contest that the true nature and character of the Act was legislation in relation to criminal law, but contended that the impugned section so far as it related to municipalities was not criminal law legislation. At pages 19-20, Martland, J. in delivering the judgment of the Court stated :

The respondent has not demonstrated that it is essential to the operation of the legislative scheme provided in the Juvenile Delinquents Act that the cost of supporting juvenile delinquents must be borne by the municipalities. Nor has the respondent submitted any authority to support the proposition that, as incidental to the exercise of its legislative powers. Parliament can impose a financial burden upon an institution, such as a municipality, which is the creature of the Provincial Legislature, and whose powers, including the power to spend money, are defined solely by provincial legislation.

And at page 22:

. . .This is not legislation in relation to criminal law or criminal procedure, and it was not truly necessary for the effective exercise of Parliament's legislative authority in these fields.

Martland, J. concluded by holding that the impugned section could be deleted without affecting the substance of the remainder of the Act and that this was a proper case for severance. Applying the same rationale, it is most difficult to conclude that our impugned section is legislation in relation to "taxation", and more particularly in relation to income tax legislation.

In Attorney-General Canada v. Attorney General British Columbia (the Fisheries Case), [1930] A.C. 111, the Privy Council dealt with the federal Fisheries Act, 1914 which required that anyone operating a commercial fish cannery must be licensed by the federal Minister. The Crown argued that the provision fell under subsection 91(12), "seacoast and inland fisheries”. At page 120:

. . .The appellant, however, seeks for the word “fisheries” in the latter Act a definition of such amplitude that it will include the operations carried out upon the fish when caught for the purpose of converting them into some form of marketable commodity.

In our case, Revenue Canada seeks for the word "tax", or the phrase "income tax”, a definition of such amplitude that it will include money which, by valid provincial legislation, is owned by persons who owe no tax to Revenue Canada, and who are innocent of any breach of the ITA. And then at pages 121-22 of the Fisheries Case:

. . .In their Lordships’ judgment, trade processes by which fish when caught are converted into a commodity suitable to be placed upon the market cannot upon any reasonable principle of construction be brought within the scope of the subject expressed by the words "sea coast and inland fisheries."

The second point made by the appellant is that the licensing of fish canning and curing establishments is necessarily incidental to effective legislation under the subject "sea coasts and inland fisheries.”

. . .the necessity for applying to such establishments any such licensing system as is embodied in the sections in question does not follow. It is not obvious that any licensing system is necessarily incidental to effective fishery legislation, and no material has been placed before the Supreme Court or their Lordships’ Board establishing the necessary connection between the two subject matters. In their Lordships' view, therefore, the appellant's second contention is not well founded.

The impugned sections confer powers upon the Minister in relation to matters which in their Lordships' judgment prima facie fall under the subject "property and civil rights in the province,” included in s. 92 of the British North America Act, 1867. As already indicated, these matters are not in their Lordships' opinion covered directly or incidentally by any of the subjects enumerated in s. 91. /t is not suggested that they are of national importance and have attained such dimensions as to affect the body politic of the Dominion.

In their Lordships’ judgment, therefore, the impugned sections deal with matters not within the legislative competence of the Parliament of the Dominion and cannot be supported.

See also MacDonald v. Vapor Canada Ltd., [1977] 2 S.C.R. 134, 66 D.L.R. (3d) 1 at 165 and at 167 where reference is made to substituting "nomenclature for analysis”. And see Carnation Company Ltd. v. Quebec Agricultural Marketing Board, [1968] S.C.R. 238, 67 D.L.R. (2d) 1, which looked at the validity of certain provincial legislation, and where the Court held at 254 that if the most that could be said of the provincial law is that it has "some effect" on a federal area of jurisdiction, “ that, by itself, is not sufficient” to make it invalid.

Applying the foregoing decisions, I have serious reservations as to whether subsection 224(1.2) of the ITA is, in pith and substance, dealing with the subject of a "system of taxation”. It seems to me that to treat the money as taxes is to "confuse nomenclature with analysis". The obvious aim of the section is to provide a method whereby Revenue Canada can collect money in lieu of tax money where Revenue Canada has been unable to recover from a company such as Mid-Plains the wage deductions which Mid-Plains deducted from its employees, plus penalties and interest. I would be inclined to categorize the impugned section as a unique form of debt recovery legislation falling under subsection 92(13) of the Constitution Act, 1867, rather than taxation legislation falling under subsection 91(3). To paraphrase the statement of the unanimous decision of the Supreme Court of Canada in A.G. British Columbia v. Smith, [1967] S.C.R. 702, 65 D.L.R. (2d) 82 at 713, the impugned section is not genuine legislation in relation to subsection 91(3) in its comprehensive case.

More important to the question I must answer, and this time to paraphrase from the Fisheries case, supra, at 121-22, it is obvious that subsection 224(1.2) is not necessarily incidental to effective income tax legislation, and no material has been placed before me establishing the necessary connection. Subsection 224(1.2) is not covered directly or incidentally by subsection 91(3) of the Constitution Act, 1867, for the reasons stated in the Fisheries case, supra, at 122, nor has it been suggested that subsection 224(1.2) is of “ national importance" and has "attained such dimensions as to affect the body politic" of Canada. Similarly, as to the requirements set out in Regional Municipality of Peel, supra, Revenue Canada "has not demonstrated that it is essential to the operation of the legislative scheme" of the ITA that Revenue Canada be permitted to intrude on provincial ownership laws through the mechanism of subsection 224(1.2). Revenue Canada has not shown, or tried to show, that subsection 224(1.2) is “truly necessary for the effective exercise of Parliament's legislative authority" under subsection 91(3) of the Constitution Act, 1867.

Finally, in this area, I am impressed with the findings in Clark v. Canadian National Railway Co., supra, where the Court was dealing with a section in the Railway Act which purported to impose a two-year limitation for actions against a railway arising out of its alleged negligence. The question for the Court was whether the section was constitutionally ultra vires as invading the area of provincial jurisdiction. The unanimous judgment of the Court held at pages 708-709:

While section 342(1) of the Railway Act is plainly legislation in relation to railways, a limitation provision relating to an action for personal injury caused by a railway cannot be said to be an integral part of federal jurisdiction. The core federal responsibility regarding railways is to plan, establish, supervise and maintain the construction and operation of rail lines, railroad companies, and related operations. The establishment of general limitation periods which affect those injured by the negligence of the railway is not, to our mind, part of that core federal responsibility or of any penumbra sufficiently proximate to satisfy the test articulated in the cases just referred to. Such limitation periods are not an integral part of jurisdiction over railways, but rather,. . ."an attempt to reframe for the benefit of railway undertakings the general legal environment of property and civil rights in which these undertakings function in common with other individuals and enterprises". . .There can be no doubt that such undertakings fall within federal competence pursuant to s. 92(10), yet it would seem extraordinary to suggest that Parliament could impose a special limitation period to govern actions for injuries caused by undertakings and thereby massively disrupt and interfere with the course of personal injury litigation within the province where an accident occurred.

I am guided as well by the Privy Council judgment in Board of Commerce Act, [1922] 1 A.C. 191, in which Viscount Haldane delivered the judgment of the Court, and stated at pages 220-21:

. . .In the case before them, however important it may seem to the Parliament of Canada that some such policy as that adopted in the two Acts in question should be made general throughout Canada, their Lordships do not find any evidence that the standard of necessity referred to has been reached, or that the attainment of the end sought is practicable, in view of the distribution of legislative powers enacted by the Constitution Act, without the co-operation of the Provincial Legislatures.

The factors considered and conclusions reached in this case seem particularly apposite to ours. This case was favourably referred by Stevenson, J. in delivering the judgment of the Supreme Court of Canada in R. v. Furtney (unreported), September 26, 1991 at page 20 although he did not find the principle applicable to the case before him.

In my view, the core federal responsibility under subsection 91(3) is to raise money by a system of taxation, and raising money in lieu of taxes cannot fall within "any penumbra sufficiently proximate to satisfy the test. . .".

Earlier in this judgment I referred to the recent decision of the Manitoba Court of Appeal in Pembina on the Red, 85 D.L.R. (4th) 29, and in that case the constitutionality of subsection 224(1.2) was considered and found to be intra vires. While not binding on me, that decision is persuasive, but with the greatest respect, I must disagree with that conclusion.

I, therefore, declare subsection 224(1.2) of the Income Tax Act to be ultra vires to the extent that it impinges on provincial laws relating to ownership of property pursuant to subsection 92(13) of the Constitution Act, 1867, and I specifically declare that the said section is ultra vires and has no application in respect of the trust money which has been paid into court in this matter.

III Does the action of Revenue Canada in acting under subsection 224(1.2)

constitute an unreasonable seizure which impinges on section 8 of the Charter, and if so, is it justified under section 1 or the Charter?

If my finding in Part II is correct, then there is no need to answer this third question. However should I be wrong in respect tothe second question, I think it is necessary to consider the arguments presented relating to section 8 of the Charter, which is remarkable both for its brevity and simplicity. It is so plain and straightforward one would think that interpreting it as to any seizure would be an elementary process, and all a court need do is ask whether the seizure was “ unreasonable”. The Supreme Court, however, has taught us that this is not the case, and that interpreting the section is a complex process. Section 8 reads:

8. Everyone has the right to be secure against unreasonable search or seizure.

Revenue Canada Position

Counsel for Revenue Canada refers to Royal Bank v. SaskPower, supra, in which our Appeal Court held that the language of subsection 224(1.2) is clear and unambiguous and gives to Revenue Canada priority over secured creditors. Unfortunately, as it appears from the Court of Appeal's decision, the possibility of subsection 224(1.2) violating section 8 of the Charter was neither raised nor argued; however, both sides of this question were argued before me in detailed and forceful fashion.

Counsel for Revenue Canada argues that property rights" are not protected by section 8 of the Charter, and she relies primarily on Re B.C. Motor Vehicle Act, [1985] 2 S.C.R. 486 to support her argument. This case implicitly adopts the finding in Irwin Toy Ltd. v. Quebec (Attorney General) 1, [1989] 2 S.C.R. 927, 58 D.L.R. (4th) 577, which held that the intentional exclusion from section 7 of the Charter of property rights means that economic rights are not protected by the section 7. In delivering the majority judgment of the Court in B.C. Motor Vehicle Act, supra, Lamer, J. (as he then was), said at page 502:

Sections 8 to 14 are illustrative of deprivations of those rights to life, liberty and security of the person in breach of the principles of fundamental justice. . .

And he went on to say at pages 502-503:

. . .To put matters in a different way, ss.7 to 14 could have been fused into one section, with inserted between the words of s. 7 and the rest of those sections the oft utilised provision in our statutes, “and, without limiting the generality of the foregoing (s.7) the following shall be deemed to be in violation of a person's rights under this section”.

An earlier case, Hunter v. Southam Inc., [1984] 2 S.C.R. 145,11 D.L.R. (4th) 641, dealt directly with section 8 of the Charter and held that this section guaranteed a right to be secure from unreasonable searches and seizures and that the right extended at least so far as to protect the right of privacy from unjustified state intrusion. This decision, however, seemed to leave open the possibility of the section 8 protection extending beyond the right of privacy, perhaps even including some aspects of property.

Revenue Canada, however, argues that the logical conclusion to draw from these cases is that the right to be secure against seizure does not extend to seizure of property unless the seizure involved an invasion of the person's right to privacy, and she emphasized that in our case, no question of privacy arises.

Lien Claimants’ Position

Counsel for the lien claimants argues, as he must, that the absence of a right to property under section 7 does not affect the right in section 8 to be secure from unreasonable seizure of property. If the Charter had intended sections 7 to 14 to be treated as being "fused into one section”, it would have done so—but it did not. The argument points out that while the Supreme Court of Canada has held that section 7 does not apply to corporations, it has held as well that section 8 does apply to corporations. And it is noted that each of these sections purports to apply to Everyone".

Counsel argues as well that the words "search or seizure” in section 8 must be read disjunctively, and I think that proposition is now well-accepted.

He presented a sophisticated and comprehensive argument to the effect that the seizure of the money by Revenue Canada was unreasonable, perhaps in the extreme, and I have no difficulty in agreeing with this proposition. Then, in a careful fashion, he applies the tests set forth in R. v. Oakes, [1986] 1 S.C.R. 103, 26 D.L.R. (4th) 200, to show that the seizure could not be saved by section 1 of the Charter. The argument was persuasive, and even convincing, with one exception — he could not overcome the finding of the Supreme Court of Canada that under section 8, unless the search or seizure invaded the privacy of the person subject thereto, that person was not secure from either search or seizure.

While I have reservations as to the validity of the reasons for importing into section 8 the limitations respecting property rights that logically apply under section 7,1 am nevertheless bound by what the Supreme Court of Canada has determined. While in Southam, supra, Dickson, J. (as he then was), speaking for the full Court, at 159 seemed to leave an open door whereby "the right to be secure against unreasonable search and seizure might protect interests beyond the right of privacy. . .”, that door, in my view, was effectively closed by B.C. Motor Vehicle, supra, and also by Thomson Newspapers Ltd. v. Canada, [1990] 1 S.C.R. 425, 67 D.L.R. (4th) 161 where, in each of the five judgments, there appears to be a recognition of privacy being an essential element (see Laforest, J. at 505-506 and 519, Lamer, J. (as he then was) at 446, Wilson, J. at 492 493, L'Heureux-Dubé, J. at 589, 593 and 595 and Sopinka, J. at 597 and 615). More recently we have the Supreme Court decision in R. v. Kokesch, [1990] 3 S.C.R. 3, where Sopinka, J. in delivering the majority judgment, said at page 29:

From the point of view of individual privacy, which is the essential value protected by s. 8 of the Charter, this illegal intrusion onto private property must be seen as far from trivial or minimal

It might be argued that B.C. Motor Vehicle, supra, and Kokesch, supra, were concerned primarily with "search" and not "seizure", and that therefore less restrictive limitations should be applied in determining the rights secured by an unreasonable seizure. However, the broad sweep of the language used in Kokesch, supra, is to my mind sufficiently compelling to overcome any such argument.

It is also tempting to suggest that since Kokesch, supra, was dealing with search and not seizure, and that since the instances of seizure involving an element of privacy would be rare, it would put an extremely limited interpretation on“ "seizure" to restrict the right to be secure against unreasonable seizure only to those instances which also invade the subject's privacy. Indeed, it could be argued that this interpretation could only be arrived at by adding words to section 8, and further, that such interpretation seems to go against the plain words of the section.

Conclusion

Although I may be otherwise inclined, I cannot yield to that temptation, and I must hold that section 8 applies only to a seizure which invades the privacy of the person from whom the seizure was made, and that since, in our case, the seizure of the trust money does not give rise to an incursion into the privacy of either the lienholders or TransGas, the impugned section does not violate section 8 of the Charter in these circumstances.

IV If Revenue Canada has no valid claim to the trust money, then:

(a) Under Saskatchewan's Labour Standards Act, RSS 1978, c. L-1, are the labour liens arising from work done by Mid-Plains employees on contracts with Sas Power and SaskTel entitled to full payment from the trust money prior to any of that money being applied in payment of the unpaid portions of the aforesaid non-labour liens filed under the BLA?

(b) Do the provisions of section 75 of the BLA apply so that the trust money must be paid out in accordance with that section, but only to those liens in respect of work performed on the contracts between TransGas and Mid-Plains?

The first matter I must consider is the claim of Saskatchewan Labour made on behalf of 81 employees of Mid-Plains to the effect that these 81 employees, pursuant to the provisions of sections 53 and 56 of the Labour Standards Act, are entitled to full payment of their wage claims against Mid-Plains in priority to the claims of the non-labour lienholders under the provisions of the BLA. Saskatchewan Labour further claims on behalf of labour lienholders employed by Mid-Plains on its contracts with SaskPower and SaskTel, who are included in the above 81, that they are entitled to full payment of wages from the trust money prior to any payment therefrom to the non-labour lienholders employed by Mid-Plains who worked on TransGas contracts.

The relevant portions of the Labour Standards Act are:

2. In this Act:

(e)"employer" means any person that employs one or more employees and includes every agent, manager, representative, contractor, subcontractor or principal and every other person who either:

(i) has control or direction of one or more employees; or

(ii) is responsible, directly or indirectly, in whole or in part, for the payment

of wages to, or the receipt of wages by, one or more employees.

53. Where an employer or a contractor contracts with any other person for the performance of the employer's or contractor's work, or any part thereof, the employer or contractor shall provide by the contract that the employees of that other person shall be paid the wages to which they are entitled according to law, and if that other person fails to pay such wages to his employees, the employer or contractor, as the case may be, is liable to the employees to the extent of the work performed under the contract as if the employees were employed by the employer or contractor.

56.-(1.1) Notwithstanding any other Act, every employer shall hold all wages accruing due or due to an employee in trust for the employee for the payment of those wages in the manner and at the time provided under this Act and the regulations, and, in the event that such wages are not held in trust, the employer is deemed to hold an amount equal to the amount of wages in trust for the employee.

(1.2) Wages accruing due or due to an employee are deemed to be secured by a security interest upon the property and assets of the employer or his estate, whether or not such property or assets are subject to other security interests, and the security interest for wages is payable in priority to any other claim or right in the property or assets, including any claim or right of the Crown in right of Saskatchewan, and, without limiting the generality of the foregoing, that priority extends over every security interest, lien, charge, encumbrance, mortgage, assignment, including an assignment of book debts, debenture or other security, whether perfected within the meaning of the Personal Property Security Act or not, made or given, accepted or issued before or after the wages accrued due, without registration or other perfection of the deemed security interest for wages.

(2) Notwithstanding subsections (1.1) to (1.3), an employee is entitled to recover from his employer all wages owing and not paid to the employee by pursuing any lawful remedy provided for the recovery of wages and no employer shall, in an action, suit or other proceeding brought against him by an employee for the recovery of wages, set off any amount against, or claim any reduction of, the employee's demand by reason of the delivery to him of goods, wares or merchandise on account of wages.

The relevant provisions of the BLA are:

7(1) All amounts:

(a) owing to a contractor, whether or not due or payable;

or

(b) received by a contractor;

on account of the contract price of an improvement constitute a trust fund for the benefit of:

(c) subcontractors who have subcontracted with the contractor and other persons who have provided materials or services to the contractor for the purpose of performing a contract; and

(d) labourers who have been employed by the contractor for the purpose of performing the contract.

(2) The contractor is the trustee of the trust fund created by subsection (1) and he shall not appropriate or convert any part of the trust fund to his own use or to any use inconsistent with the trust until all persons for whose benefit the trust is constituted are paid all amounts related to the improvement owed to them by the contractor.

70(1) The liens arising from an improvement have priority over all judgments, executions, attachments, garnishments and receiving orders except those executed or recovered on before the first lien arose in respect of the improvement.

75(1) The lien of a labourer has priority over the lien of any other person providing services or materials to the improvement, other than for wages, to the extent determined pursuant to subsection (2), without a claim of lien being registered for the lien and without proof that all of the wages were earned on the land on which a lien claimed if the labourer provided services on the land and was employed by the owner, contractor or subcontractor.

(2) The priority of a labourer under subsection (1) shall be determined by calculating the amount which the labourer would earn in one ordinary working day, exclusive of overtime and multiplying that amount by 40.

(3) Every device to defeat the priority given to labourers by this section is void.

(4) Where a labourer is owed an amount greater than to the extent to which his lien has priority under this section, he is entitled:

(a) to be paid the additional amount out of any sum actually coming to the

owner, contractor or subcontractor who has employed the labourer, and

(b) to share pro rata With any other lien claimant.

(5) This section applies notwithstanding anything in the Labour Standards Act.

(6) Except as modified by this section, this Act applies to the lien of a labourer.

It is apparent to me that the Labour Standards Act is an Act of a general nature applying to virtually all employees in Saskatchewan, while the BLA is in the nature of a special Act, which to the extent that it applies to employees, applies only to those employees in Saskatchewan employed in the construction industry. This being the case, and in the absence of special statutory provisions to the contrary, the maxim generalia specialibus non derogant applies—that is where provisions in two acts are inconsistent, with one act being special and the other general in nature, the provisions of the special act must prevail as being exceptions to the inconsistent provisions of the general act (see Construction of Statutes by Driedger, 2nd edition, at page 227).

While it seems from the Canadian authorities that it no longer makes a difference as to which of the inconsistent acts was first enacted, it is perhaps worth noting that the BLA was enacted subsequent to above provisions of the Labour Standards Act, and it would seem at least strange that the legislature would, either before or after the Labour Standards Act, enact the BLA with very specific provisions as to priorities relating to the trust money, only to have such provisions of no effect or limited effect because of the Labour Standards Act.

In Maxwell On Interpretation of Statutes, 12th edition, at 196 the author refers to the said maxim and then quotes from Viscount Haldane who stated that the special statute prevails unless the legislature has "specially declared" that it should be otherwise. I note that the opening words of subsection 56(1.1) of the Labour Standards Act are: Notwithstanding any other acts. . .”. In view of the wording of subsections 75(5) and (6) of the BLA, which I will refer to below, I question whether these words are sufficient to constitute a special declaration.

Subsection 56(1.1) goes on to say that the employer shall hold wages due in trust for the employee, and if he does not do so, he "is deemed to hold an amount equal to the amount of wages in trust for the employee.” Even if, because of the definition of "employer" in subsection 2(2) of the Labour Standards Act, TransGas is indirectly responsible for the payment of wages to the Mid-Plains employees, I cannot interpret subsection 56(1.1) as meaning that both TransGas and Mid-Plains must hold wages in trust for the Mid-Plains employees. I can only interpret this subsection as applying to the employer from whom the wages are accruing or due, namely Mid-Plains, and not to TransGas. In any event, this subsection does not identify any specific moneys which are to be held in trust even if it does apply to TransGas—it only requires that an amount equal to the wages shall be held in trust, and there is no evidence before me as to whether TransGas is, or is not, holding such money in trust. On the other hand, the BLA specifies particular moneys which are to be held in trust, for whom such moneys are to be held and how they are to be paid out. In effect, it seems that TransGas, under the two Acts, is subject to two separate and distinct trusts, but even if the Labour Standards Act were held to take priority over the BLA, I could not hold that the Labour Standards Act trust may encroach on the BLA trust to the detriment of lineholders who would otherwise benefit from the BLA trust.

In my view, section 53 of the Labour Standards Act clearly applies to TransGas, but all that it does is create a liability for which Transgas is responsible, and it seems that liability, if it does exist (a question I need not answer), exists regardless of the provisions of the BLA and should not interfere with the application of the provision of the BLA. Although it is not for me to decide, subsection 56(2) seems to give the labour lienholders a claim against TransGas should their wage claims not be fully met from the trust money, and so long as TransGas can meet such claims (and there has been no suggestion to the contrary), the labour lineholders will be well-protected for any shortfall in their wage payments from the trust money.

Subsection 56(1.2) of the Labour Standards Act creates a security interest respecting unpaid wages “upon the property and assets of the employer”. I cannot find that this has any application to the question I must answer because it is clear that under the BLA, the trust money is neither the property or an asset of TransGas.

I find it very difficult, even impossible, to conclude that when the legislature enacted the BLA, creating a special trust for all lienholders, with carefully designed provision as to priorities between the labour and non-labour lienholders, that it intended those provisions to be subject to the provisions of the Labour Standards Act which, if applicable, would wreck the carefully designed terms and priorities in the BLA.

Another factor which strengthens my view that the BLA must prevail is the subsections 75(5) and (6) of that Act. Subsection (5) has the effect of excluding the Labour Standards Act from all of the provisions of section 75, and, therefore, that exclusion must be read into subsection (6), so that the BLA "applies to the lien of a lienholder" notwithstanding the Labour Standards Act.

Consequently, my answers to the two questions in this part IV are:

(a) That the BLA takes precedence over the Labour Standards Act, and that the trust money must therefore be applied firstly in payment only of the lien claimants in respect of the contracts between TransGas and Mid-Plains in accordance with the BLA. Since there will be no surplus after so applying the trust money, I need not deal with the question of employees of Mid-Plains who worked on other contracts being performed by Mid-Plains, such as those with SaskPower and SaskTel.

(b) I hold that the trust money must be paid out in accordance with the provisions of section 75 and other terms of the BLA, and in the circumstances of this case, only to those lienholders in respect of work performed or material supplied on the contracts between TransGas and Mid-Plains.

V Assuming the trust money is paid out in full to either lienholders or to

Revenue Canada, is TransGas still liable to pay the claim of the Workers’ Compensation Board pursuant to section 133 of the Workers’ Compensation Act?

The amount of the said Board's claim is $169,928.62. My function in this case is to determine the manner in which the trust money which has been paid into court is to be distributed, and in the findings I have made above I have fulfilled that function and have also found, on the facts before me, that the distribution to the lienholders will eat up the entire amount of the trust money, leaving no surplus. I cannot read section 133 of the Workers’ Compensation Act as being in conflict with my findings. These two Saskatchewan Crown corporations do not contest that the trust money, absent the claim of Revenue Canada, should first be paid out to the lienholders, and it is only any remaining surplus to which the Workers' Compensation Board lays claim. Since there will be no surplus, the question is academic. The remaining dispute between these corporations is whether TransGas continues to be responsible under section 133 to pay the Board's claim of $169,928.62; this question is not properly before me and I refrain from offering an answer. Parenthetically, I would hope these Crown corporations can resolve the dispute without resort to the courts.

Order

As a consequence of all the foregoing, I hereby order and declare as follows:

I. Absent constitutional and Charter implications, the requirement to pay under subsection 224(1.2) of the ITA, Revenue Canada has effectively attached or "garnisheed" the trust money held by TransGas, and paid into court, pursuant to the provisions of the BLA. This finding, however, is negated by my finding in paragraph Il.

ll. That subsection 224(1.2) of the ITA is ultra vires the Parliament of Canada to the extent that it impinges on valid provincial laws relating to the property and civil rights pursuant to subsection 92(13) of the Constitution Act, 1867, and has no application in respect of the trust money paid into court in this matter.

III. The purported seizure of the said trust money by Revenue Canada does not violate section 8 of the Charter because such seizure does not give rise to an incursion into the privacy of either the lienholders or TransGas.

IV. (a) The BLA takes precedence over the Labour Standards Act, and where any term or provision of the latter is inconsistent with the former, the former prevails.

(b) The trust money referred to herein shall be paid out in accordance with the provisions of the BLA to the labour lienholders and the non-labour lienholders in respect of the contracts between TransGas and Mid-Plains.

Costs may be spoken to.

Order accordingly.