Les Constructions Du St-Laurent Limitée v. Her Majesty the Queen, [1984] CTC 119, 84 DTC 6166

Dubé, J [TRANSLATION]:—The object of this application is to strike out the statement of claim on the ground that it discloses no reasonable cause of action, under the provisions of Rule 419(l)(a) of the Federal Court of Canada.

The statement of claim of the plantiff asked that interest be paid at the legal rate on the amount of $238,426.76, representing the sales and excise tax which it paid to the defendant under protest on April 12, 1976, as a consequence of the purchase by the plaintiff of a King Air 200 Beechcraft airplane. The dispute was taken to the Tariff Board pursuant to section 59 of the Excise Tax Act. The Board allowed the claims of the plaintiff and the Federal Court of Appeal dismissed the defendant’s application for leave to appeal. In February 1981 the defendant repaid the aforesaid amount.

The plaintiff alleged that it was entitled to interest on this amount on the ground that the case at bar is subject, not only to the applicable federal statutes, but also the statutes of the province of Quebec, since the airplane was bought in connection with the development project at James Bay, Quebec. In its statement of claim the plaintiff submitted that Art 1077 of the Civil Code of the province of Quebec authorized the plaintiff to claim this interest.

However, the defendant relied on the provisions of section 35 of the Federal Court Act, which clearly provides that the Court shall not allow interest on any claim against the Crown, unless there is a contract or statute providing for such payment. This section reads as follows:

35. In adjudicating upon any claim against the Crown, the Court shall not allow interest on any sum of money that the Court considers to be due to the claimant, in the absence of any contract stipulating for payment of such interest or of a statute providing in such a case for the payment of interest by the Crown.

It is common ground that there was no contract in this case between the two parties, providing for the payment of interest. The Excise Tax Act, cited above, also does not provide for the payment of interest by the Crown when tax collected has been repaid. Counsel did not direct the attention of the Court to any other federal statute authorizing the payment of interest on such an amount. It must therefore be determined whether Art 1077 of the Civil Code of the province of Quebec provides for such a payment, and if so, whether the article must be considered “a statute providing in such a case for the payment of interest by the Crown”. The article reads as follows:

1077. The damages resulting from delay in the payment of money, to which the debtor is liable, consist only of interest at the rate legally agreed upon by the parties, or, in the absence of such agreement, at the rate fixed by law.

These damages are due without the creditor being obliged to prove any loss. They are due from the day of the default only, except in the case where by law they are due from the nature of the obligation.

This article does not affect the special rules applicable to bills of exchange and contracts of suretyship.

The first point that emerges from reading the article is that the damages claimed must result from a delay. In the circumstances, if there was a delay in the case at bar, this delay would not go back to payment of the amount in question by the plaintiff on April 12, 1976, but to the date of the obligation to repay the amount wrongly collected.

It should also be borne in mind that Art 1077 falls within section III of the Code, titled “Of the Damages Resulting from the Inexecution of Obligations”. The obligation of the Crown to repay was performed by the repayment in February 1981, and the only notice in the record is the statement of claim filed on January 20, 1982, nearly a year after the obligation was performed.

Even before the Federal Court Act, including section 35 cited above, came into effect in 1971, there had been a long and consistent line of authority holding that interest cannot be claimed from the Crown in right of Canada unless a contract or statute exists providing for such interest to be paid. Moreover, this line of authority is reviewed in a quite recent decision of my brother Collier, J in Guerin et al v The Queen, 127 DLR (3d) 170. In that case, where the Crown was held liable in damages in connection with a lease of a golf club in British Columbia, the judge dismissed the claim relating to interest under the provisions of the aforesaid section 35. (This decision has been appealed.)

The application of the law of Quebec to interest on money collected due to be repaid by the Crown was considered by the Exchequer Court in 1902, in James Ross and William McKenzie and His Majesty The King (1902), 7 Ex CR 287. The Court considered Arts 1077 and 1078 of the Civil Code then in effect and concluded that it was bound by these articles. However, the Court held that as the amounts wrongly collected had been returned to the plaintiff before the action was filed, there was no debt on which interest could be collected. This decision

was upheld by the Supreme Court of Canada: [1903] 32 SCR 532. At 536, the Chief Justice confirmed that this appeal had to be decided in accordance with the laws of the province of Quebec, as the taxes were collected at the Port of Montreal. He based his judgment entirely on the authority of Wilson et al and The City of Montreal (1880), 24 Lower Canada Jr 222. In that case, the Court of Queen’s Bench had held that as the Corporation of the City of Montreal had imposed the tax in good faith, it was not required to pay interest on the amount repaid.

However, in Nord-Deutsche Versicherungs-Gesellschaft et al v The Queen, [1969] 1 Ex CR 117, Noël, J of the Exchequer Court reviewed the Quebec authorities on interest that the Crown in right of Canada could be required to pay. He recognized that under the common law such interest is in general not payable except under a contract or statute. However, he noted that in several cases originating in the province of Quebec the courts had awarded interest against the Crown in right of Canada. He referred back to St-Louis v The Queen (1896), 25 SCR 649, in which the Court allowed a judgment with interest on the balance owed under a contract. He reviewed several other decisions, and concluded from this that apart from sections 47 and 53 of the Exchequer Court Act and section 18 of the Crown Liability Act, the Crown is in no better position as to interest than any other defendant, and would therefore, in the case before him, be in the same position as a defendant in the province of Quebec. [1] (The case before him was a collision between two vessels in the St Lawrence and the liability of the Department of Transport.)

The Supreme Court affirmed in part the decision of Noël, J, and allowed interest of five per cent from the date on which the petition of right was filed, in accordance with Art 1056c of the Civil Code of the province of Quebec. This article provides that the amount awarded by judgment for damages resulting from a delict or quasi-delict bears interest at the legal rate. Pigeon, J, dissenting in part, analysed the principles established by the Quebec courts regarding interest payable by the Crown in right of Canada. This passage is worth citing.

... It must, however, be noted that the damages were there claimed for breach of contract. Interest on such claims was allowed by this Court against the Crown as against subjects, in cases governed by the law of Quebec, in St-Louis v The Queen and Langlois v Canadian Commercial Corporation, cited by the learned trial judge. However, we were not referred to any case in this Court in which the decision of this Court in Pratt v Beaman was departed from, on the contrary, the principle therein appears to have been followed in the case of unliquidated delictual or quasi-delictual damages prior to the enactment of Art 1096c, see Grimaldi v Restaldi.

In a more recent case, Lapalme v The Queen, [2] Addy, J of this Court awarded damages and interest to the plaintiff company in a case involving a contract for the carriage of mail (the Crown appealed this decision with regard to the interest allowed).

In conclusion, the Court does not award interest against the Crown in right of Canada unless there is a contract providing for the payment of such interest, or a statute which so provides. There is no contract between the parties here on which such a claim for interest could be based, unlike several of the decisions cited above, in which the Court awarded interest as a result of the breach of a contract in the province of Quebec. The facts here also cannot be regarded as “a statute providing in such a case for the payment of interest by the Crown’’. The article applies only to delays in the performance of an obligation, and there was no such delay in the case at bar since the Crown, which had collected the tax in good faith, had already repaid the amount following the decision of the Federal Court of Appeal, before the proceedings at bar were filed. The statement of a claim accordingly discloses no reasonable cause of action, and the application at bar must be allowed.

ORDER

The application is allowed with costs and the statement of claim of the plaintiff is struck out.