Minister of Finance of Manitoba v. Air Canada, [1978] CTC 812

Monnin, JA (all concurring):—This is an appeal from a decision of Morse, J, wherein, amongst other things, he held that

. . . the airspace above the Province of Manitoba is not ‘‘within’’ the Province and that the Province has no legal right to assess or levy a tax under the Act in respect of aircraft, aircraft engines and parts consumed, and services, meals and liquor consumed or supplied to aircraft while in the airspace over the Province of Manitoba.

Air Canada appealed a decision of the Minister of Finance by which he confirmed an amended assessment made pursuant to the Retail Sales Tax Act, RSM 1970, c R150, requiring Air Canada to pay retail sales tax, penalties and interest totalling $1,375,387 for the period of July 1, 1971 to June 30, 1974.

It is acknowledged by counsel that in respect to aircraft and repair parts, the Minister was wrong in the period of assessment indicated since, prior to May 1, 1972, such aircraft and repair parts were exempt by virtue of clause 4(1 )(r). Effective May 1, 1972, the Act was amended by 1972, c 6, and clause 4(1)(r) was repealed. Subsections 3(14) and 4(6) were added and they are as follows:

3. (14) For the purposes of this section, aircraft and repair parts therefor that have not been delivered to the normal place of business or residence of the purchaser thereof prior to the first day of May, 1972, shall be deemed to have been purchased on or after the first day of May, 1972.

4. (6) Notwithstanding section 3, where an aircraft is, in the opinion of the minister, operated both within and without the province for the purposes of trade, the minister may estimate the proportion that the number of miles the aircraft is operated in Manitoba bears to the total number of miles the aircraft is operated and may, for the purposes of this Act, fix the value of the aircraft and the repair parts and services therefor, as that part of the value thereof that bears the same proportion to the total value thereof as the proportion estimated above; and tax is payable on that part of the value of the aircraft and the repair parts and services therefor so fixed.

The legislation is entitled “a Retail Sales Tax Act" and is a tax on all tangible personal property consumed or used in the Province, except for those items specifically excluded by the Act. The purpose of the legislation is not to regulate or to control aviation or aeronautics

—a field reserved to the Federal Parliament by Re Aerial Navigation; A-G Canada v A-G Ontario et al, [1932] 1 DLR 58, [1932] AC 54, [1931] 3 WWR 625—but is a tax levied in order to raise revenue for the Province of Manitoba. The purpose of the legislation is not; however, decisive of the question of taxability of aircraft using the airspace over the Province of Manitoba.

No province has the right to make laws which are operative outside of its territory. A province can only tax within its jurisdiction and not without.

The validity of the Act is not challenged. It is a direct tax intra vires of the Province of Manitoba: see Cairns Construction Ltd v Government of Saskatchewan (1960), 24 DLR (2d) 1, [1960] 1 SCR 619, 35 WWR 241.

At the hearing before us counsel for the Province of Manitoba abandoned all claims to any tax on liquor sold and meals supplied to passengers on aircraft flying into or out of the Province of Manitoba.

The gist of the question is, does Manitoba have legislative authority over the airspace above it in order to levy a tax in connection with the operation of aircraft within such airspace whether the aircraft lands in Manitoba or travels above Manitoba without ever landing? The implications of this question are of grave consequence, since if Manitoba is found to have jurisdiction over its airspace, so would have all the other Canadian Provinces over theirs, and national air-carriers and other carriers could some day be faced with multifarious assessments for the same aircraft in various Provinces.

The amended assessment was made in relation to the consumption of all aircraft of Air Canada which either landed in Manitoba or overflew the Province without landing in Manitoba. Air Canada has a fleet of some 125 aircraft. During the period in question, only 25 of them ever came into Manitoba, one of which, valued at $25,883,682, for one appearance on Manitoba soil attracted a tax at the rate of 5%, namely, $129,418. Recent purchases of large aircraft are in the neighbourhood of $50,000,000 each. One shudders at the amount of retail sales tax involved.

After a lengthy study of the historical background, Morse, J concluded that, prior to the entry of Manitoba into Confederation, if there were proprietary interest in the airspace it belonged to the British Crown and that since Confederation no one, either the British Crown, the Federal Crown, or the Hudson’s Bay Company, has transferred to Manitoba jurisdiction in the airspace above it. I accept the soundness of that reasoning and the historical background set .forth in the reasons of Morse, J, but I would rather rest the case on the basis that air and airspace are not subject of ownership by anyone, either State or individual, but fall in the category of res omnium communis. Air or airspace is incapable of delineation or demarcation. Where does it start and where does it end? Does it start at one inch above ground level and end at a yet unknown stratosphere? No one has yet devised any scientific method to define airspace, to contain it within boundaries and to delineate it sufficiently for proper identification so that ownership can be firmly established if questioned.

Counsel for the Province of Manitoba, both in the lower Court and in this Court, relied on the maxim cujus est solum ejus est usque ad coelum et ad infernos, which may be translated, though inadequately, by “ownership of the soil carries with it ownership of what is above and below it”. The Latin phrase, much more picturesque than the English translation, speaks of ‘‘up to heaven and down to hell”. In support of this claim, counsel for the Province of Manitoba relied on the approval of the maxim by Newcombe, J in Re Aerial Navigation, [1931] 1 DLR 13 at 36, [1930] SCR 663 at 701. First it is to be noted that of the seven Supreme Court judges who heard that case, five, including Newcombe, J, gave reasons. Some of his colleagues agreed with portions of his reasons, but no one specifically agreed with his reference to and approval of the maxim. The decision of the Supreme Court was reversed by the Privy Council. At that level it was argued by counsel for the Attorney-General of Canada that the maxim applied. Lord Justice Sankey, who wrote the speech for the Privy Council, did not make any reference to the maxim. I consider that I am not bound by the reasons of Newcombe, J, though I must treat them with respect, and I am not bound by his acceptance of the maxim as a sound principle of law.

If one looks at the jurisprudence . over the last years and reads the recent authorities, one finds that no one has accepted the maxim as a sound pronouncement of the law. It has been called a “maxim of dubious origin”, ‘‘a fanciful notion”, ‘‘a fanciful phrase”—such words are far from being words of approval.

In Commissioner for Railways et al v Valuer-General, [1973] 3 All ER 268 at 277-8, Lord Wilberforce, in his speech on behalf of the Privy Council, had this to say about it:

It is in relation to this question that the Latin tag “usque ad coelum et ad infernos” has been introduced and given a prominent place in argument.

It is well known that this brocard cannot be traced in the Digest or elsewhere in Roman law. The first recognised appearance is in the 13th century gloss of the Bolognese Accursius on Digest viii.2.l. It appears there in the form “cuius est solum eius esse debet usque ad coelum’’ (cf in the law of Scotland Stair’s Institutions ii.7.7). In the form of a maxim it only has authority at common law insofar as it has been adopted by decisions’, or equivalent authority. The earliest recognition appears to be recorded in Bury v Pope (1588) Cro Eliz at 118, sub nom Bowry and Pope’s Case (1588) 1 Leon: 168, where reference is made to its use temp Ed I in the form “cujus est solum,, ejus est summitas usque ad coelum”, but the context of this statement in the reign of Edward I has not been identified. Coke on Littleton 4a contains an uncritical adoption of this maxim, supported by some references (incorrect) to Year Books. He is followed by Blackstone:

“Land hath: also, in its legal signification, an indefinite extent, upwards as well as downwards. Cujus est solum, ejus est usque ad coelum . . . therefore no man may erect any building, or the like, to overhang another’s land . . . So that the word ‘land’ includes not only the face of the earth, but everything under it, or over it.”

There are a number of examples of its use in judgments of the 19th century, by which time mineral values had drawn attention to downwards extent as well as, or more than, extent upwards. But its use, whether with reference to mineral rights, or trespass in the airspace by projections, ani- mais or wires, is imprecise and it is mainly serviceable as dispensing with analysis. (cf Pickering v Rudd, Ellis v Loftus Iron Co (1874) LR 10 CP 10, [1874-80] All ER Rep 232). In none of these cases is there an authoritative pronouncement that “land” means the whole of the space from the centre of the earth to the heavens: so sweeping, unscientific and unpractical a doctrine is unlikely to appeal to the common law mind. At most the maxim is used as a statement, imprecise enough, of the extent of the rights, prima facie, of owners of land: Bowen LJ was concerned with these rights when, in a case dealing with rights of support, he said: “Prima facie the owner of the land has everything under the sky down to the centre of the earth . . .” (Poutney v Clayton (1883) 11 QBD 820 at 838, [1881-85] All ER Rep 280 at 284).

(The italics are mine.)

In Lord Bernstein of Leigh v Skyviews & General Ltd, [1977] 2 All ER 902 at 907, Griffiths, J, after quoting with approval a portion of the above speech of Lord Wilberforce, had this to say:

I can find no support in authority for the view that a landowner’s rights in the air space above his property extend to an unlimited height. In Wandsworth Board of Works v United Telephone Co (1884) 13 QBD 904 Bowen LJ described the maxim, usque ad coelum, as a fanciful phrase, to which I would add that if applied literally it is a fanciful notion leading to the absurdity of a trespass at common law being committed by a satellite every time it passes over a suburban garden. The academic writers speak with one voice in rejecting the uncritical and literal application of the maxim: see, by way of example only, Winfield and Jolowicz on Tort, Salmond on Tort, Shawcross and Beaumont on Air Law, McNair on the Law of the Air, and Halsbury’s Laws of England. I accept their collective approach as correct. The problem is to balance the rights of an owner to enjoy the use of his land against the rights of the general public to take advantage of all that science now offers in the use of air space. This balance is in my judgment best struck in our present society by restricting the rights of an owner in the air space above his land to such height as is necessary for the ordinary use and enjoyment of his land and the structures on it, and declaring that above that height he has no greater rights in the air space than any other member of the public.

The maxim cannot go further than direct the owner or occupier of land in his enjoyment of the land and also to prevent anyone else from acquiring any title or exclusive right to the space above such land so as to limit a person to whatever proper use he can make of his land. Further than that it cannot go. Academic writers and modern jurisprudence reject its literal application. So must I in this age of jet aircrafts, satellites, supersonic concordes, orbital travel and visits to the moon. The sooner the maxim is laid to rest, the better it will be.

So far as the power to impose taxation is concerned (as distinct from the power to deal with matters like air pollution, hunting of game birds, etc), Manitoba has no property right or legislative jurisdiction in relation to airspace over its territory, either at common law or under any other law, and. the right of the Province to levy taxes does not extend beyond its property rights within the Province. Therefore, it cannot tax that which is in the airspace above it.

Having reached that conclusion, I need not deal with the alleged errors in the computation of the tax and the assessment of the Minister of Finance and whether value means “fair value” or “depre- ciated value” of the aircraft and parts. I must indicate to counsel for the Crown, with respect, that his argument to the effect that there is no right of appeal in the matter of determination of value by the Minister under subsection 4(6), is not sound. Under subsections 16(1) and 16(2), the Minister may make an estimate of the amount of tax collected by the vendor or may estimate the fair value of the tax. Subsection 19(1) unequivocally sets out that if a person is dissatisfied with the decision of the Minister under section 18, he may appeal to the Court. A decision of the Minister under section 18 refers back to a dispute concerning the amount of an estimate made either under section 16 or to an assessment made under section 17. Once an appeal is launched, the whole matter is up for a review, and to argue that the Court is powerless to look behind the assessment and into the method or methods used by the Minister or his officers to arrive at the calculation of assessment, is to negate the value and the right of appeal so clearly granted by statute. The entire matter is subject to review and scrutiny. Therefore, the assessment of the various values and the method used to fix these values by the Minister or his staff can be looked into by the tribunal.

The matter of inventory is also challenged. That raises little problem. Inventory situate within Manitoba attracts tax; inventory situate outside of Manitoba is not subject to taxation by Manitoba.

*ln his assessment, the Minister of Finance also assessed timetables distributed without charge by Air Canada to its clientele. This assessment was challenged, and Morse, J found in favour of Air Canada in the following words:

Even though the Air Canada timetable might not come within the definition of “books” in this section of Reg R150-R1, there is no provision in the Act or Regulations which purports to exclude publications such as the Air Canada timetable from the meaning of the word “books”, and the dictionary meaning of “book” includes “anything from which one may learn”. In my view, therefore, the Air Canada timetables are not subject to tax.

*I have reached the opposite conclusion. Clause 4(1)(s) reads as follows:

4.(1) Notwithstanding section 3, no tax is payable under this Act in respect of the consumption of the following classes of tangible personal property:

(s) Books, newspapers, and periodical publications.

*Clause 28(j) of the Act reads as follows:

28. For the purpose of carrying out the provisions of this Act according to their intent, the Lieutenant Governor in Council may make such regulations and orders as are ancillary thereto and are not inconsistent therewith; and every regulation and order made under, and in accordance with the authority granted by, this section has the force of law; and, without restricting the generality of the foregoing, the Lieutenant Governor in Council may make such regulations and orders, not inconsistent with any other provision of this Act,

(j) describing any tangible personal property mentioned in section 4, or any service mentioned in section 5, for the purposes of clarifying the interpretation of those sections;

‘Regulation R150-R1, RRM 1971, s 1(3)(k), reads as follows:

1. For the purposes of the Act and this regulation

(3) "books” includes

but does not include

(k) timetables,

‘Normally, in common usage, “books” would cover timetables. But the Minister is empowered to make regulations describing the tangible personal property mentioned in sections 4 and 5 or clarifying the interpretation of those sections.

*l am of the view that in stating that a timetable is not a book for tax purposes, he has not gone beyond his powers of description. I note that throughout the Regulations various items are listed and are said ‘to mean” or “to include” and even “does not include”. There is a scheme or a pattern in this regulation which makes use of such expressions and I am unable to find error .in the method followed. The Minister has the right to describe and in describing he has the right to state that which is not a book for purposes of taxes and he has stated that a timetable, not being a book, is not exempt.

Now to the matter of interest on the amounts to be repaid by the Minister of Finance. Subsections 13(4) and 26(2) of the Retail Sales Tax Act are as follows:

13.(4) From and after the date on which, under this Act or the regulations, any debt due to the government under this Act is to be paid or remitted.

(a) by a vendor to minister; or

(b) by a purchaser to Her Majesty in right of Manitoba;

the debt bears interest at a rate or rates prescribed in the regulations, but where no rate or rates have been prescribed in the regulations, the debt bears interest at /4 of 1% for each full month after the date that the debt was due and payable; and the interest accrued on any such debt from time to time is a debt due to Her Majesty in right of Manitoba, and is recoverable as such in a court of competent jurisdiction.

26.(2) Where a person

(a) has paid an amount under this Act as tax that is not payable as tax under this Act; or

(b) has paid an amount under this Act as tax that is in excess of the amount payable as tax under this Act; or

(c) has remitted under this Act an amount that he is not required to remit under this Act; or

(d) has remitted under this Act an amount that is in excess of the amount that he is required to remit under this Act;

The minister shall repay to that person the amount wrongly paid or the amount of the excess if application for refund has been made within two years of the date the overpayment was received.

There are presently under advisement by this Court three cases under the same Act. In two of these cases counsel for the Crown have taken a firm stand that the Crown cannot be called upon to pay interest unless specifically told to do so by statute and that, in the instant case, the statute does not order it to pay interest on the amount of overpayment. A review of the entire situation must, therefore, be made.

On May 5, 1975, Air Canada paid the above sum under protest with notice of its intent to appeal the assessment, which it did on June 5, 1975.

On May 4, 1976, the Minister reduced the assessment to $1,375,387 and forwarded a refund—without any interest—in the amount of $26,676. On May 27, 1976, Air Canada requested interest on this latter Sum at the prime rate of 10%.

On May 28, 1976, the solicitor for the Government of Manitoba responded to the claim for interest that he could find no section authorizing the Province of Manitoba to remit interest in connection with sums obtained via the Retail Sales Tax Act. Morse, J accepted this view.

On March 9, 1977, judgment was entered. On April 1, 1977, the amount of the assessment was fixed by the court at $1,856 and the amount of the refund was also fixed—without interest—at $1,432,181. Thus no interest has been allowed on the sums improperly obtained by way of tax between May 5, 1975 and the date of judgment, March 9, 1977. Since March 9, 1977, the judgment bears ordinary court interest on the judgment.

In support of his contention on the subject of interest, counsel for the Province refers to three cases. The first of them is The King v Roger Miller & Sons Ltd, [1930] 2 DLR 751, [1930] SCR 293. It dealt with the interpretation of a contract for the construction of harbour works for the Crown and the dispute centered around the amount pay- able to the contractor for rental of the plant and interest for delayed payments. Smith, J, speaking for the Court, said at p 755 DLR, pp 298-9 SCR:

The only other amount in question here is the item of $10,937.71 allowed by the learned trial Judge to the respondents for interest on moneys not paid to the respondents at the time stipulated in the contract. The total sum claimed by the respondents for interest was $28,700.16, of which $17,762.45 was allowed and paid by the appellant, voluntarily as appellant claims.

It was argued that the interest claimed should be treated as part of the cost of the work, and therefore is payable under the terms of the contract, but his argument seems quite unsound. It is a mere case of moneys becoming due to respondents at certain times and being withheld beyond the due dates, in which case the Crown is not liable to pay interest during default except under special circumstances such as the existence of statutory provision or contractual obligations.

The second case relied upon is Hochelaga Shipping & Towing Co Ltd v The King, [1944] SCR 138. The action, brought by way of petition of right, was to recover damages against the Crown for the loss of the suppliant’s tow-boat. Rinfret, J, speaking for the Court, stated that the Crown is not liable to pay interest unless the statute or the contract provided for it. It is to be noted it dealt with damages payable by the Crown and not reimbursement of taxes improperly obtained.

The third case relied upon is The King and Royal Bank of Canada v Racette, [1948] SCR 28, which relied up Hochelaga Shipping & Towing Co Ltd v The King, supra, and held that interest at the rate of 51/2 % per annum represented by the coupons attached to the mislaid or lost war loan bonds could not be recovered from the Crown. A further ground for this decision was that the coupons being bearer coupons may have been cashed by anyone who found them and that the Crown should not be called upon to pay interest on the lost coupons, as it might be called upon to pay twice for the same coupons.

All these cases were decided prior to the Proceedings Against the Crown Act, first enacted in Manitoba in 1951 (Man), c 13, now RSM 1970, c P140. The 1951 statute, as a reference in the current legislation still indicates, was copied in large part from the Crown Proceedings Act, 1947 (UK), c 44, first enacted by the Mother of Parliament in 1947. All corresponding provincial statutes, as well as the federal one, have their origin in this 1947 statute.

Under the general rule of common law no proceeding, civil or criminal, was maintainable against the Sovereign in person for it was said that the courts, being the King’s own courts, could have no jurisdiction over him. By virtue of a legal fiction—namely, that the King could do no wrong—the Crown, either in the right of the Mother of Parliament, or in the right of Canada, or in the right of a province, enjoyed all the immunities and privileges of the Sovereign. The only method available to obtain regress against the Crown in the courts was through a petition-of-right with leave of the Crown. All this: was substantially and remarkably changed by the Proceedings Against the Crown Act, supra.

By virtue of sections 4 and 5 there now exists a right to sue without a fiat of the Crown. The Crown is liable in tort for the acts of its officers or agents for acts of officers performing duties legally required, and the law as to indemnity and contribution applies to the Crown.

Subsection 17(1) and section 18 are as follows:

17. (1) Subject to this Act, in proceedings against the Crown the rights of the parties are as nearly as possible the same as in a suit between person and person; and the court may make any order, including an order as to costs, that it may make in proceedings between persons, and may otherwise give such appropriate relief as the case may require.

18. A judgment debt due to or from the Crown bears interest in the same way as a judgment debt due from one person to another.

Thus, in proceedings against the Crown, the rights of the parties and the Crown are as nearly as possible the same as in a suit between person and person. It is to be noted that section 18 has its origin in section 24 of the aforesaid United Kingdom legislation which is as follows:

Interest on debts, damages and costs.

24.(1) Section seventeen of the Judgments Act, 1838 (which provides that a judgment debt shall carry interest) shall apply to judgment debts due from or to the Crown.

(2) Where any costs are awarded to or. against the Crown in the High Court, interest shall be payable upon those costs unless the court otherwise orders,, and any interest so payable shall be at the same rate as that at which interest is payable upon. judgment-debts due from or to the Crown.

(3) Section three of the Law Reform (Miscellaneous Provisions) Act, 1934 (which empowers courts of record to award interest on debts and damages) shall apply to judgments given in proceedings by and against the Crown.

(4) . This section shall apply both in relation to proceedings pending at the commencement of this Act and in relation to proceedings instituted thereafter.

Halsbury’s Laws of England, 3rd ed, vol 11, p 21, para 33, states:

In general, the Crown is in the same position as a subject as regards interest on debts and damages, and on judgment debts and costs.

In Manitoba, since 1951, the Crown is in the same situation as any

citizen of the realm except with respect to injunctions, specific performance or orders for recovery of land, such exceptions being dealt with by section 15 and subsections 17(2), 17(3) and (4) of the Act and they have no application in this case.

In my view, the pronouncements of the Supreme Court in The King v Roger Miller & Sons Ltd, supra; Hochelaga Shipping & Towing Co Ltd v The King, supra, and The King and Royal Bank of Canada v Racette, supra, with respect to interest no longer have any application and I do not consider myself bound by them, as the law has been substantially changed by statute.

This Court in Chambers v Leech, [1976] 4 WWR 568, has carefully reviewed the legislation and our rules pertaining to interest and the principle upon which interest is granted. Interest. in that case was allowed from the date of commencement of the action.

In Prince Albert Pulp Co Ltd et al v Foundation Co of Canada Ltd, (1976), 68 DLR (3d) 283; [1977] 1 SCR 200; [1976] 4 WWR 586, the Supreme Court of Canada unanimously held that a Court may allow interest where payment of a just debt has been improperly withheld and it is fair and equitable that the debtor should make compensation by payment of interest at such rate as the Court may see fit. Martland, J, speaking for the Court, dealt with section 46 of the Saskatchewan Queen's Bench Act, (1965) RSS 1965, c 73, which is in identical language to section 71 of the Manitoba Court of Queen’s Bench Act, RSM 1970, c C280, referred to by Matas, JA in Chambers v Leech, supra. Martland, J stated at p 293 DLR, p 597 WWR:

In summary, on the particular facts of this case, in my opinion foundation has established the improper withholding by P & W Pulpmills of payment of a just debt, and the circumstances make it fair and equitable that Foundation be compensated by the payment of interest. In my opinion the rates of interest applicable should be equivalent to the bank borrowing rates of Foundation over the period from November 1, 1968, to the date of the judgment of this Court. Such interest should be payable for that period.

In Amax Potash Ltd et al v Government of Saskatchewan (1976), 71 DLR (3d) 1; [1977] 2 SCR 576; [1976] 6 WWR 61, Dickson, J, in delivering the judgment of the Supreme Court of Canada, wherein the constitutional validity of subsection 5(7) of the Proceedings against the Crown Act. was challenged, expressed the view that the Supreme Court had the discretion—which it refused to exercise in that case— to make an order directing the Province of Saskatchewan to hold, as a stakeholder, such sums as were paid to the Government by the various appellants pursuant to the impugned legislation, namely, the Saskatchewan Mineral Taxation Act, RSS 1965, c 64, but with the right to the Province to use the sums in the interim and with the Obligation to repay the said sums with interest in the event that the legislation were ultimately declared to be ultra vires of the Legislature of Saskatchewan. The yearly assessment under the Mineral Taxation Act could total more than $120,000,000. Interest on such amount would, therefore, be substantial. Dickson, J did not hesitate, notwithstanding the aforesaid prior announcements of the Supreme Court, to state that the amount would bear interest.

In Canadian Industrial Gas & Oil Ltd v Government of Saskatchewan et al (1977), 80 DLR (3d) 449; [1977] 6 WWR 607; 18 NR 107, Martland, J, delivering the judgment of the majority, dealt with the constitutional validity of the Oil and Gas Conservation, Stabilization and Development Act, 1973-74 (Sask), c 72. He dealt with the matter of interest, without making any reference to the prior decisions of the Supreme Court, as follows, at p 465 DLR, 627 WWR:

In my opinion the appellant is entitled to judgment against the Government for the recovery of the sums paid by way of mineral income tax and royalty

surcharge, with interest thereon from the respective dates of payment up to the date of repayment.

(The italics are mine.)

This decision goes further than Prince Albert Pulp Co Ltd v Foundation Co of Canada Ltd, supra, where the same learned Judge ordered payment of interest to the date of judgment of the Supreme Court and not to the date of repayment as in the latter case.

A careful review, section by section, of the Saskatchewan Oil and Gas Conservation, Stabilization and Development Act, 1973, discloses no specific section imposing a liability upon the Saskatchewan Crown in the event of overpayment or illegal payment of tax, to pay interest on the amount of the refund. Thus, in that respect, the Saskatchewan statute is similar to the Manitoba Retail Sales Tax Act.

Nowadays, governments collect substantial amounts of tax from individuals and corporations, sometimes in the millions of dollars. Taxpayers often have to borrow at current prime rate of interest or more in order to meet these tax obligations. In the instant case, the Minister of Finance collected and obtained interest on the amount of the assessment at 9% per annum with, in addition, penalties at 5%. In the interval between the date of payment into the Government coffers and the repayment by the Government, the Government has had the use of $1.5 million for nearly three years, which moneys, I am certain, were soundly invested by the Province or used for provincial purposes. It would be grossly unfair, inequitable and a serious act of unjust enrichment if the Province were allowed to collect taxes, charge interest and penalties and, later on, when ordered to repay the tax illegally collected, could then hide behind a legal fiction and say, since the King can do no wrong, we, the Province, are not bound to pay interest on these sums which we have obtained from you, Mr Taxpayer, unless a specific section in the Act directs us to do so. In an age when the Crown is visibly engaging in commerce, the theory that the King can do no wrong is an anachronism. Such an antiquated principle should not be called back to work in favour of the taxing authority.

What is good for the tax collector, should be good for the taxpayer. If the tax collector can call for and obtain interest, elementary fairness asks that it reimburse the taxpayer for moneys illegally collected, together with interest at the same rate as it collected, at least .until the date of judgment.

In the Prince Albert case, supra, Martland, J ordered interest to be paid at bank prime rate. Mr Monk, counsel for Air Canada, has requested interest at the rate of 10%. I am prepared to allow it at 9%, namely, the same rate charged by the Province, from the date of payment up to the date of judgment; thereafter the amount of judgment will bear interest at the usual rate.

The assessment is varied to include tax on the timetables; the judgment is varied to include interest at aforesaid; otherwise the appeal is dismissed with costs in this Court.

ADDENDUM

February 16, 1978.

D D Blevins, for appellant.

H B Monk, QC and G E Ulyatt, for respondent.

Monnin, JA (all concurring):—Reasons for judgment were released in this matter on Thursday, January 19, 1978. In those reasons I dealt with the matter of tax on timetables delivered free of charge by Air Canada to its clients in Manitoba and also to certain competing airlines and large scale customers. I dealt with the matter from pp 812ff in my reasons for judgment.

On the same date, the Supreme Court of Canada released its reasons for judgment in Simpsons-Sears Ltd v Provincial Secretary of New Brunswick et al, 82 DLR (3d) 321; [1978] CTC 296; 78 DTC 6242; 20 NBR (2d) 478. Those reasons came to my attention during the last week of January, whereupon I immediately had a copy of them forwarded to both counsel for Air Canada and counsel for the Province of Manitoba, and I also requested the Registrar of the Court not to enter the certificate of decision if it were presented to him, until the matter could be looked into further.

The applicability of the decision of the Supreme Court to the instant case was argued by both counsel on Monday, February 13, in the presence and at the request of the same panel who originally heard the appeal last October.

This Court is consequently reviewing its decision in so far as the matter of timetables is concerned. We were informed by counsel that the amount of tax in the Minister’s assessment is in the neighbourhood of $900, since the total value of the timetables is approximately $19,310. (These figures are considerably lower than the figure mentioned at the earlier hearing.)

In the Simpsons-Sears case, supra, a similar statute was examined by the Supreme Court of Canada, namely, the Social Services and Education Tax Act, RSNB 1973, c S-10, and paritcularly section 4, subsections 5(1) and 7(1) of that Act. The issue in that case was whether or not the free distribution of catalogues by Simpsons-Sears New Brunswick constituted a consumption of those catalogues so as to attract tax under the Social Services and Education Tax Act of that Province. Ritchie, J, speaking for himself and. three of his colleagues, held that the catalogues were not finally consumed by Simpsons-Sears, who distributed them in New Brunswick for the benefit of such of the recipients as eventually make retail purchases from them. He held as follows:

The catalogues in this case are not finally consumed by the appellant who distributes them for the benefit of such of the recipients as make retail purchases from them. The distribution merely places the catalogues in the hands of potential customers for use by them in making purchases within the Province, but it is the purchase of the goods and not the distribution or receipt of the catalogues which attracts the tax.

He further went on to say that if he were wrong on that point, another question had to be considered, namely whether the tax was a direct tax within provincial jurisdiction or an indirect tax. He relied on the distinction between direct and indirect taxation found in the recent case of Canadian Industrial Gas & Oil Ltd v Government of Saskatchewan et al, 80 DLR (3d) 449; [1977] 6 WWR 607; 18 NR 107. He concluded that it was an indirect tax.

Laskin, CJC concurred with him on the first point, as follows:

I have had the advantage of reading the reasons of my brothers Ritchie and Pigeon, and I agree with my brother Ritchie’s primary conclusion that the language of the New Brunswick Social Services and Education Tax Act, RSNB 1973, c S-10, cannot be construed to convert a distributor into a taxable consumer of the catalogues which that distributor mails or delivers free to persons in New Brunswick. This is enough to dispose of the appeal which I would allow as proposed by my brother Ritchie.

Pigeon, J, writing for the minority of the Court, would have held otherwise and would have found that the catalogues attracted tax.

The Manitoba legislation, the Retail Sales Tax Act, RSM 1970, c R150, by virtue of clause 4(1 )(s) states that no tax is payable in respect of books, newspapers and periodical publications. Clause 4(1)(s) of the Act and clauses 1 (3)(b) and (k) of Reg R150-R1, RRM 1971, read as follows:

4.(1) Notwithstanding section 3, no tax is payable under this Act in respect of the consumption of the following classes of tangible personal property:

(s) Books, newspapers, and periodical publications.

1. For the purposes of the Act and this regulation

(3) “books” includes

(b) sales catalogues;

but does not include

(k) timetables;

Thus timetables, by virtue of the Manitoba Act and its regulations, are not books and, therefore, are taxable, whereas a “sales catalogue” is included in the definition of books in clause 1 (3)(b) of the Regulations and does not attract tax.

On the other hand, in New Brunswick clause 11 (gg) reads as follows:

11. A consumer shall not be liable to pay the tax in respect of the consumption of the following goods:

(gg) books that are printed and bound, and that are solely for educational, technical, cultural or literary purposes, but not including directories, price lists, timetables, rate books, catalogues, periodic reports, fashion books, albums, magazines, periodicals, books for writing or drawing upon, or any books of the same general classes;

Under the New Brunswick legislation no tax is payable in respect of the consumption of a book, but a book does not include a catalogue or a timetable. It is in view of this legislation that Ritchie, J ruled that the catalogues were not finally consumed by Simpsons-Sears who distributed them for the benefit of such of the recipients who made retail purchases from them.

The same reasoning is bound to apply to the Manitoba legislation, which I find very similar in words and in context,- and I conclude that Air Canada timetables are not finally consumed by Air Canada, who distribute them to the public for the benefit of such of those who make use of them to purchase their tickets.

I am unable to find any valid distinction on this point between the Manitoba and New Brunswick legislation. I am bound by the Supreme Court decision in Simpsons-Sears Ltd, supra, and must accordingly conclude that the timetables were not consumed by Air Canada and, therefore, attract no tax.

My reasons, from p 817, starting with the words “In his assessment, the Minister of Finance’’ up to p 818, ending with “that a timetable, not being a book, is not exempt’’, are hereby withdrawn and the aforesaid comments are substituted in their stead.

Otherwise the reasons for judgment delivered on January 19, 1978, are reaffirmed as of that date and counsel may take out the appropriate certificate of decision from the Registrar of this Court.

In view of the circumstances which have led to this limited rehearing, there shall be no costs to anyone on this rehearing.