Prodor v. R., [1997] 3 C.T.C. 179, 97 D.T.C. 5472

Tremblay-Lamer J.:

1 This is an application, brought jointly by the Plaintiff, Mr. Joseph Prodor, and the Defendant, the Minister of National Revenue, pursuant to Rule 474 of the Federal Court Rules[FN1: <p>C.R.C.1978, c. 663, as amended.</p>] for a preliminary determination by the Court of a question of law.

Facts and Background

2 The Plaintiff resides in White Rock, British Columbia. He was reassessed pursuant to the provisions of the Income Tax Act in respect of his 1988, 1989, 1990 and 1991 taxation years. The amounts payable by him for income taxes, interest and penalties in respect of these taxation years were certified by the Minister of National Revenue pursuant to subsection 223(2) of the Income Tax Act and certificates were registered in the Federal Court of Canada pursuant to subsection 223(3) of the same Act which provides that, once registered, the certificates have the same force and effect as judgments. Accordingly, the certificates were registered in the New Westminster Land Title Office in the Province of British Columbia as judgments against the Plaintiff's interest as mortgagee in a particular mortgage registered in the said land title office under number Y56792 as follows:

• a) the certified amount of $249,729.88 was registered against the Mortgage on June 21, 1990 and renewed on May 12, 1992;

• b) the certified amount of $45,211.84 was registered against the Mortgage on May 12, 1992; and

• c) the certified amount of $137,191.48 was registered against the Mortgage on December 7, 1990 and renewed on November 5, 1992.

3 The Plaintiff was advised by officers of the Defendant, the Minister of National Revenue, that he owed a total amount of $533,566.28 as of March 9, 1993 in respect of the original amounts payable which were certified in the Federal Court of Canada plus interest which had accrued on the said amounts payable pursuant to section 223(3) of the Income Tax Act calculated in accordance with the rate prescribed pursuant to section 161 of the Income Tax Act. The Plaintiff, however, at all times claimed that the applicable rate of interest under subsection 223(3) of the Income Tax Act is the rate stipulated either in section 37 — together with the provisions of the British Columbia Court Order Interest Act[FN2: <p>R.S.B.C.1979, c. 76, as amended.</p>] — or in former section 41 of the Federal Court Act— together with section 3 of the Interest Act— and not the rate prescribed in section 161 of the Income Tax Act.

4 The Plaintiff paid the full amount of $533,566.28 to the Minister of National Revenue on the condition that he be allowed to bring an application to this Court for a declaration that the applicable rate of interest accruing on the amounts payable following registration of certificates in the Federal Court of Canada is the rate stipulated under the Federal Court Act. It is agreed that the difference between the interest calculated applying the 5% rate stipulated by the Federal Court Act and the rate calculated using the rate prescribed by section 161 of the Income Tax Act is $74,579.59. The latter amount was paid by the Plaintiff, pursuant to an agreement that if it should ultimately be decided by this Court that the applicable rate of interest is the rate stipulated by the Federal Court Act the $74,579.59 paid under protest will be treated as an overpayment of taxes by the Plaintiff and refunded to him.

5 On May 16, 1994, the Plaintiff commenced an action by filing a statement of claim seeking a declaration that the applicable rate of interest accruing on the amounts payable by him under the Income Tax Act following registration of Certificates of the amounts payable in the Federal Court of Canada pursuant to subsections 223(2) and 223(3) of the Income Tax Act is the rate stipulated under section 37 and former section 41 of the Federal Court Act and section 3 of the Interest Act and not the rate prescribed by section 161 of the Income Tax Act and costs. The Plaintiff made a motion, which was granted by Pinard J., on December 6, 1996 for an order that the question of law raised in his statement of claim be determined pursuant to rule 474(1)a) of the Federal Court Rules.

The Legislative History of Section 223

6 Subsection 223(2) initially referred to the “interest ... as provided for in this Act”, that is the Income Tax Act:[FN3: <p>S.C. 1970-71-72, c. 63</p>]

223. (2) Judgments— On production to the Federal Court of Canada, a certificate made under this section shall be registered in the Court and when registered has the same force and effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the said Court for a debt of the amount specified in the certificate plus interest to the day of payment as provided for in this Act. [emphasis added]

7 In 1988, the provision was renumbered as subsection 223(3) and amended[FN4: <p>S.C. 1988, c. 55, s. 168(1).</p>] . The words “interest ... as provided for in this Act” were replaced by “interest ... as provided by law”:

223(3) Registration— On production to the Federal Court of Canada, a certificate made under subsection (2) in respect of a debtor shall be registered in the Court and when so registered has the same effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the Court against the debtor for a debt in the amount certified plus interest thereon to the day of payment as provided by law and, for the purposes of any such proceedings, the certificate shall be deemed to be a judgment of the Court against the debtor for a debt due to Her Majesty enforceable in the amount certified plus interest thereon to the day of payment as provided by law. [emphasis added]

8 Subsection 223(1) was also amended to include amounts payable under the Unemployment Insurance Act[FN5: <p>R.S.C.1985, c. U-1.</p>] (“UIA”), Canada Pension Plan (“CPP”) and provincial tax statutes:

223. (1) Definition of amount payable— For the purposes of subsection (2), “an amount payable” by a person means any or all of

• (a) an amount payable under this Act by the person;

• (b) an amount payable under the Unemployment Insurance Act, 1971 by the person;

• (c) an amount payable under the Canada Pension Plan by the person; and

• (d) an amount payable by the person under an Act of a province with which the Minister of Finance has entered into an agreement for the collection of taxes payable to the province under that Act.

9 In 1994, subsection 223(3) was amended yet another time. The words “interest ... as provided by law” were changed to “interest ... as provided by the statute or statutes referred to in subsection (1) under which the amount is payable”:[FN6: <p>S.C.1994, c. 7, Schedule VIII, s. 129, effective on Royal Assent, May 12, 1994.</p>]

223. (3) Registration— On production to the Federal Court of Canada, a certificate made under subsection (2) in respect of a debtor shall be registered in the Court and when so registered has the same effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the Court against the debtor for a debt in the amount certified plus interest thereon on the day of payment as provided for by the statute or statutes referred to in subsection (1) under which the amount is payable and, for the purpose of any such proceedings, the certificate shall be deemed to be a judgment of the Court against the debtor for a debt due to Her Majesty, enforceable in the amount certified plus interest thereon to the day of payment as provided by the statute or statutes. [emphasis added]

Other Relevant Statutory Provisions

10 In this case, the Defendant calculated the payable interest applying the rate stipulated by section 161 of the Income Tax Act. The Plaintiff argues that the applicable rate is, on the contrary, that of either of section 37 of the Federal Court Act— together with the provisions of the Court Order Interest Act (B.C.) — or of former section 41 of the Federal Court Act— read in conjunction with section 3 of the Interest Act. Section 41 of the Federal Court Act, however, had been repealed at the time relevant to these proceedings. In any event, it was agreed that the interest rate under former section 41 — read in conjunction with section 3 of the Interest Act— is the equivalent of that stipulated under section 37 of the Federal Court Act and the provisions of the Court Order Interest Act (B.C.). It follows that the applicable rate of interest is either that of the Income Tax Act or the one stipulated in the Federal Court Act and the Court Order Interest Act (B.C.).

11 At all times relevant to these proceedings, section 37 of the Federal Court Act stipulated:

37.(1) Except as otherwise provided in any other Act of Parliament and subject to subsection (2), the laws relating to interest on judgments in causes of action between subject and subject that are in force in a province apply to judgments of the Court in respect of any cause of action arising in that province.

7.(1) In this section “interest rate” means an annual interest rate that is equal to the prime lending rate of the banker of the government.

9. (1) Interest under this Part shall be deemed to be included in the judgment for enforcement purposes.

12 On the other hand, section 161 of the Income Tax Act provided that:

161.(1) Where at any time after the day on or before which a taxpayer is required to pay the remainder of the taxpayer's tax payable under this Part for a taxation year (or would be so required if a remainder of such tax were payable),

• a) the total of the taxpayer's taxes payable under this Part and Parts 1.3, VI or VI.1 for the year

exceeds

• b) the total of all amounts each of which is an amount paid at or before that time on account of the taxpayer's tax payable and applied as at that time by the Minister against the taxpayer's liability for an amount payable under this Part or Parts I.3, VI or VI.1 for the year,

the taxpayer shall pay to the Receiver General interest at the prescribed rate on the excess, computed for the period during which that excess is outstanding. [emphasis added]

The Plaintiff's Submissions

13 The Plaintiff's submissions are twofold. His first submission is based on the wording of subsection 223(3) of the Income Tax Act. He also invokes the burdens/benefits theory as an exception to the rule that the Crown is not bound by statutes unless expressly named therein.

14 Prior to 1988, subsection 223(3) read “plus interest to the day of payment as provided for in this Act”. In 1988, it was amended to read “...as provided by law”. The replacement of the words “as provided by law” indicates a Parliamentary intention to change the law rather than merely “confirm” how the words in the pre-1988 provision should be interpreted. This is evidenced by the fact that there was a further amendment in 1994 to reintroduce the pre-1988 wording of the provision—i.e. “as provided by the statute or statutes referred to in subsection (1) under which the amount is payable”.

15 The addition in 1988 of the words, “shall be deemed to be a judgment of the Court” in subsection 223(3) further indicates an intent by Parliament to change the substance of the provision to deem that certificate to be a judgment for the purposes of collection of that judgment debt. Prior to the inclusion of the deeming words, the provision only stated that the certificate had the same force and effect as a judgment of the Federal Court of Canada. When an amount is deemed to be a judgment by a provision of a statute, it is decreed to be a judgment for the purpose identified. In this regard, the Plaintiff refers to the judgment of the Supreme Court of Canada in R. v. Verrette[FN8: <p>[1978] 2 S.C.R. 838 (S.C.C.).</p>] Pursuant to this authority, the certificate is a judgment of the Federal Court of Canada for the purpose of collecting on the judgment debt. Once registered, the certificate has the same effect as a judgment of this Court for the purpose of execution. In taking execution proceedings, once the certificate has been registered with the Court, one of the effects is that the applicable interest rate is that prescribed under the Federal Court Act, as provided by law.

16 The Plaintiff invites this Court to ignore the decision of the British Columbia Supreme Court in Canada (Attorney General) v. Vecchio,[FN9: <p>(1991), [1992] 2 C.T.C. 169 (B.C. S.C.).</p>] wherein MacDonald J.A. held that a registered certificate, such as the one in section 223 of the Income Tax Act, is deemed to be a judgment of the Court for a specific purpose only, that is to take proceedings against debts and not in the general sense.

17 The Plaintiff contends that the decision of the British Columbia Supreme Court is wrong in law. In particular, it is submitted that the Court, in Vecchio, failed to consider the burdens/benefits exception in reaching its conclusion. Pursuant to section 222 of the Income Tax Act, the Minister had the option of either collecting amounts payable under the collection provisions of the Income Tax Act, or relying on the Federal Court Act, or collecting under provincial collection laws in any other court of competent jurisdiction. As the Minister chose to avail himself of the laws which benefit Federal Court of Canada judgment creditors, it was subject to those laws in all respects. The Minister filed a certificate with the Federal Court of Canada thereby obtaining the benefit of being a Federal Court of Canada judgment creditor. The Minister must therefore bear the concomitant burdens of a Federal Court judgment creditor and accept that the judgment debt will bear interest according to the Federal Court Act. The burdens/benefits exception applies to the Minister even if the benefits — the Income Tax Act— and the burdens — the Federal Court Act which in turn refers to the Court Order Interest Act (B.C.) — have arisen under different statutes. In support of his position on this issue, the Plaintiff refers to the case of R. v. Murray.[FN10: <p>[1967] S.C.R. 262 (S.C.C.), at pp. 266-267.</p>]

The Defendant's Submissions

18 Section 37 of the Federal Court Act stipulates that the laws relating to interest on judgments which are in force in a province “apply to judgments” of the Federal Court. The section, in other words, is limited in its application to Federal Court judgments. Thus, the interest provision in the Federal Court Act cannot apply in the case at bar unless the registered certificates are judgments. It flows from the judgment of the Supreme Court of British Columbia in Vecchio, supra, that registered certificates are not judgments. The registered certificates are deemed to be judgments for a specific purpose only, that is to commence enforcement proceedings.

19 In a different vein, the Defendant submits that Parliament never intended to change the rate of interest for amounts payable under the Income Tax Act when section 223 was amended in 1988. These amendments, when considered as a whole, indicate that it was not Parliament's intention to effect a change in the interest calculation for certifications under the Income Tax Act. They allowed certificates to be registered against amounts payable under the Unemployment Insurance Act, the Canada Pension Plan, and various provincial statutes, in addition to the Income Tax Act. The insertion of the words “as provided by law” was designed to recognize that interest would be calculated according to the specific Act under which the debt arose. The most recent amendment of section 223 confirms specifically that the interest that is applicable is the rate provided for by the statute under which the amount certified is payable. The new provision, although explicitly worded, does not represent a change in the substantive law. This is evidenced by the technical note issued by the Department of Finance.

20 The Defendant finally submits that Parliament intended the provisions of the Income Tax Act to govern all substantive rights in relation to all matters relevant to the payment of income tax. This, it contends, must include interest on outstanding debts to the Receiver General arising under the Income Tax Act, a substantive right specifically provided for in section 161.

Analysis

Rules of Interpretation

21 The interpretation of tax statutes is no longer dependant on predetermined assumptions which favour either the taxpayer or the government. In Stubart Investments Ltd. v. R.,[FN11: <p>[1984] 1 S.C.R. 536 (S.C.C.), at 578.</p>] the Supreme Court of Canada stated that fiscal legislation is to be read in its entire context, having regard to the legislative purpose and scheme. Estey J., for the majority, held that:

...Gradually, the role of the tax statute in the community changed, as we have seen, and the application of strict construction to it receded. Courts today apply to this statute the plain meaning rule, but in a substantive sense so that if a taxpayer is within the spirit of the charge, he may be held liable.

22 In the same vein, there is authority to support the proposition that in cases where the plain meaning of the provision is unambiguous, courts should be reluctant and, in fact, should refrain from unduly expanding the scope of the Income Tax Act provisions beyond the plain meaning of the words used therein.[FN12: <p><em>Antosko v. Minister of National Revenue</em>, [1994] 2 S.C.R. 312 (S.C.C.).</p>] Thus, in Nova Corporation of Alberta,[FN13: <p><em>Nova Corp. of Albertav. R.</em>(1997), 97 D.T.C. 5229 (Fed. C.A.).</p>] MacDonald J.A., writing for the majority, stated that “in situations of ambiguity, a purposive approach may be instructive in interpreting a provision”.

23 While it is true that in situations of ambiguity a purposive approach may be useful, it flows from the jurisprudence of both the Supreme Court of Canada and the Federal Court of Appeal that the same can said about interpretation bulletins and technical notes. In Harel v. Quebec (Deputy Minister of Revenue),[FN14: <p>(1977), [1978] 1 S.C.R. 851 (S.C.C.).</p>] DeGrandpré J., delivering the judgment of the Court, held that:

Once again, I am not saying that the administrative interpretation could contradict a clear legislative text; but in a situation such as I have just outlined, this interpretation has real weight and, in case of doubt about the meaning of the legislation, becomes an important factor.[FN15: <p>This passage was cited with approval by Dickson J. (as he thenwas) in<em>Nowegijick v. R.</em>, [1983] 1 S.C.R. 29 (S.C.C.), at 37.</p>]

24 Thus, the use of extrinsic material can be helpful in inferring legislative purpose and, more importantly, to avoid a distorted interpretation. In this regard, Professor Sullivan notes:[FN17: <p>RuthSullivan,<em>Driedger on the Construction of Satutes</em>, 3rd ed. (Toronto: Butterworths, 1994) at 429.</p>]

Like evidence of external context, opinions about the purpose and meaning of legislation can be found anywhere, including the legislative history of an enactment. Until recently, the primary source of such opinion was case law. The courts were unwilling to look at the pronouncements of politicians involved in the legislative process and, except for the standard textbooks, scholarly opinion was largely ignored. The current tendency, however, is to look at any material that meets a minimal threshold of relevance and reliability. [emphasis added]

Application to the case at hand

25 In the present case, I am of the view that the plain wording of section 223 of the Income Tax Act is not unambiguous. It is incumbent upon this Court to determine the purpose of the section by reference to its context, that is, inter alia, the circumstances in which the section was amended, and in accordance with the well-established rule of interpretation that the words of a provision must be read in conjunction with those of the other provisions in the same statute.[FN18: <p>18Ruth Sullivan,<em>Op. cit.</em>, note 17, at 245<em>ff.</em></p>] In particular, the following question must be answered: did Parliament intend to change the rate of interest for amounts payable under the Income Tax Act with its 1988 amendment of s. 223?

26 In answering that question, one must not forget, in my view, that section 223 originally provided for “interest ... as provided for in this Act” — i.e. the Income Tax Act. As indicated, the provision was amended in 1988 to read “interest ... as provided by law”. Although it could be argued that Parliament thereby widened the scope of the provision, I am inclined to think otherwise. The 1988 amendment also purported to include reference for the first time to additional federal and provincial statutes, namely the UIA, the CPP and various provincial tax statutes. In these circumstances, I can only conclude that in amending the statute, Parliament intended that the interest be calculated according to the specific statute under which the debt arose.

27 I find further support for my conclusion in the technical note issued by the Department of Justice.

Subsection 223(3) is amended to clarify that the interest that is applicable is the rate provided for by the statute under which the amount certified is payable (for example, the Income Tax Act or the Canada Pension Plan) rather than interest as provided under the Federal Court Act.

28 To hold otherwise would, in my view, result in giving taxpayers which are the subjects of collection measures the benefit of interest rates lower than those applied to compliant taxpayers. Section 223 is aimed at facilitating the collection of amounts payable under the Income Tax Act and other statutes mentioned therein. It certainly did not purport to confer unjustified advantages upon non-compliant taxpayers.

29 The Plaintiff argued that the addition in 1988 of the words “shall be deemed” in subsection 223 further indicate the intent of Parliament to change the substance of the provision. With respect, I think his argument is ill-founded. In dealing with the effect of a deeming provision, Beetz J. for the Supreme Court stated in The Queen v. Verrette that:[FN19: <p>Supra note 8 at 845.</p>]

A deeming provision is a statutory fiction; as a rule it implicitly admits that a thing is not what it is deemed to be but decrees that for some particular purpose it shall be taken as if it were that thing although it is not or there is doubt as to whether it is. A deeming provision artificially imports into a word or an expression an additional meaning which they would not otherwise convey beside the normal meaning which they retain where they are used; it plays a function of enlargement analogous to the word “includes” in certain definitions; [...] [emphasis added]

30 I note from the foregoing passage that a word has an additional meaning for a particular or specific purpose only, not in the general sense. I fail to see how the judgment of McDonald J.A. in Vecchio, supra, can be said to be inconsistent with the authority of Verrette, supra. The words “shall be deemed” were added to give the registered certificates an additional meaning. It is understood, however, that pursuant to the words of Beetz J. in Verrette, supra, the additional meaning was for a specific purpose only, that is to take proceedings against debts on the certificate as if some were a judgment of the Federal Court.

31 The inclusion of the words “shall be deemed” was necessary because a New Brunswick Court of Appeal decision had cast doubt on whether New Brunswick enforcement of judgment legislations applied to such certificates. The technical note on the subject reveals that:

After a certificate is registered in the Federal Court, Revenue Canada generally requires the certificate or a document evidencing the certificate to be filed or registered against any land the taxpayer my own. The procedure for doing this varies from one province to another. In some provinces, the procedure is to have a memorial of the certificate registered under the province's land registry system. A recent New Brunswick Court of Appeal decision has cast doubt on whether New Brunswick's enforcement of judgement legislation applies to such a certificate, with the result that doubt is also cast on whether a memorial of the certificate is effective to bind the land in New Brunswick against which it is registered.

The Income Tax Act will be amended to provide that a certificate is to be treated under a province's enforcement of judgment and land registry legislation as if it were a judgment of the superior court of the province.

32 Thus, I have concluded that the interpretation proposed by the British Columbia Supreme Court in Vecchio, supra, is correct in law and that therefore a registered certificate cannot be considered a Federal Court judgment in the general sense.

33 Finally, the Plaintiff urges this Court to apply the burdens/benefits exception. He contends that the Minister, having decided to avail himself of the laws which benefit Federal Court of Canada judgment creditors, was subject to those laws in all respects. For the reasons that follow, I am of the view that the Plaintiff's argument must fail. First, as indicated above, a registered certificate cannot be considered a judgment in the usual sense. This being so, the Minister cannot be considered a Federal Court of Canada judgment creditor. Secondly, the Minister never availed himself of the Federal Court Act. The Minister commenced collection proceedings pursuant to the provisions of the Income Tax Act. Thus, if anything, the application of the burdens/benefits exception would favour the application of the provisions of the Income Tax Act.

34 For all these reasons, I conclude that the question of law must be answered as follows. The applicable rate of interest accruing on the amounts payable by the Plaintiff under the Income Tax Act following registration of certificates of the amounts payable in the Federal Court of Canada pursuant to subsection 223(2) and 223(3) of the Income Tax Act is the rate stipulated under section 161 of the Income Tax Act and not the rate provided for in section 37 of the Federal Court Act and the Court Order Interest Act (B.C.).