E H Price Limited v. Her Majesty the Queen, [1982] CTC 355, [1982] DTC 6320

Smith, DJ:—This is an application by the defendant under paragraph 474(1 )(a) for the determination of three questions of law, which are stated in the notice of motion as follows:

(1) Is there a limitation period applicable to an action for collection of taxes and penalties under the Excise Tax Act, 1970, RSC c E-13;

(2) If the answer to (1 ) above is yes, what is the limitation period applicable; and

(3) If the answer to (1) above is yes, what was the date from which the limitation period commenced for the taxes and penalties claimed?

An agreed statement of facts signed by the solicitors for the parties has been filed in the court. With the exception of paragraph 9, which simply states the issues to be decided on this motion, already stated supra, the statement reads:

1. Representative of the Department of National Revenue, Customs and Excise, representing Her Majesty the Queen, as a result of an audit performed on the Plaintiff’s business operations, claimed that the Plaintiff was indebted to Her Majesty the Queen on an accumulating basis since February 1,1972, in the amount of $63,127.61.

2. Over the course of the last several years, the Plaintiff and Defendant have had numerous discussions with respect to the claimed outstanding taxes accrued and owing, and the Defendant has also sent several notices for payment by registered mail the last of which was sent on September 10, 1979. The Defendant continued to send periodic notices for payment to the Plaintiff by regular mail.

3. The Plaintiff has not acknowledged any liability to pay these taxes and/or penalties.

4. The total amount claimed by the Defendant due and owing as of January 31, 1980, is $95,116.06 sales tax and penalty together with additional penalty at the rate of two-thirds of one per cent per month on the sum of $63,127.61 from February, 1980.

5. On February 7, 1980, a Certificate dated January 31, 1980, was filed in this Honourable Court, pursuant to Section 52(4) of the Excise Tax [sic] certifying as due and owing and unpaid the following:

Sales Tax Due and Accruing for the Period from February 1, 1972,

to November 30, 1974	$63,127.61
Penalty Accrued to January 31, 1980	31,988.45
	$95,116.06
together with additional penalty at the rate of Two-Thirds of One
Per Cent per Month on the said sum of $63,127.61 from February
1, 1980, to date of payment.

6. The date of the relevant assessment of the Plaintiff, which was commenced by Officials of the Department of National Revenue, Customs and Excise, was July 25, 1975.

7. The accumulated amount of taxes and penalties charged within the six years preceding the date of the filing of the said Certificate in this Honourable Court and included in such Certificate is $17,343.16 and $7,689.22 respectively for a total of $25,032.38.

8. The Plaintiff by this Action raises the question of prescription concerning collection of these taxes and penalties by virtue of the Excise Tax Act, The Federal Court Act of Canada and the Limitations of Actions Act of Manitoba.

There is no doubt that the Parliament of Canada has the constitutional power to enact that proceedings for the collection of taxes under the Excise Tax Act or any other taxing Act of Parliament must be commenced within a time period established by Parliament.

Pursuant to this power under the Constitution of Canada Parliament has enacted the Federal Court Act, SC 1970-71-72, c 1, section 38 of which reads:

38. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in such province, and a proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within and not after six years after the cause of action arose.

(2) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions referred to in subsection (1) apply to any proceedings brought by or against the Crown.

In the present case the cause of action arose in Manitoba. Therefore, in accordance with section 38 of the Federal Court Act, the laws in force in Manitoba relating to limitation of actions apply to proceedings in this Court, between subject and subject, except as otherwise expressly provided in any other Act. Further, subject to the same exception, the laws of Manitoba relating to limitation of action apply to proceedings in this court brought by or against the Crown. The effect is that the general immunity of the Crown from the effect of any enactment, is taken away in respect of statutes of limitation by the express provisions of section 38 of the Federal Court Act.

The law of Manitoba relevant to this case is found in paragraph 3(1 )(g) of the Limitation of Actions Act, RSM, c 145, s 2, am SM 1966-67, c 32, s 1, which reads as follows:

3. (1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned:

(g) Actions for the recovery of money (except in respect of a debt charged upon land), whether recoverable as a debt or damages or otherwise, and whether a recognizance, bond, covenant, or other specialty, or on a simple contract, express or implied, and actions for an account or for not accounting, within six years after the cause of action arose.

From this provision it is clear that an action to recover money (in this case taxes) recoverable as a debt must be brought within six years after the cause of action arose.

I note also that by paragraph 2(a) of the same Act, “action” means any civil proceeding, and that by paragraph 2(h)

“proceedings” includes action, entry, taking of possession, distress, and sale proceedings under an order of a court or under a power of sale contained in a mortgage or conferred by statute.

Other legislative rules that require consideration are found in the Excise Tax Act, section 52. Subsection (1) of this section provides:

52. (1) All taxes or sums payable under this Act shall be recoverable at any time after the same ought to have been accounted for and paid, and all such taxes and sums shall be recoverable, and all rights of Her Majesty hereunder enforced, with full costs of suit, as a debt due to or as a right enforceable by Her Majesty, in the Exchequer Court of Canada or in any other court of competent jurisdiction.

And subsection (4) provides:

(4) Any amount payable in respect of taxes, interest and penalties under Part II or Parts III to VI, remaining unpaid whether in whole or in part after fifteen days from the date of the sending by registered mail of a notice of arrears addressed to the licensed air carrier or taxpayer, as the case may be, may be certified by the Deputy Minister of National Revenue for Customs and Excise and on the production to the Exchequer Court of Canada or a judge thereof or such officer as the Court or a judge thereof may direct, the certificate shall be registered in that Court and shall, from the date of such registration, be of the same force and effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in that Court for the recovery of a debt of the amount specified in the certificate, including penalties to date of payment as provided for in Part II or Parts III to VI, and entered upon the date of such registration and all reasonable costs and charges attendant upon the registration of such certificate are recoverable in like manner as if they were part of such judgment.

There are thus two procedural methods of recovering taxes or sums payable under the Excise Act. “Sums payable” include interest and penalties. Subsection (1) provides for recovery by action in the Exchequer Court of Canada or in any other court of competent jurisdiction. Subsection (4) provides a procedure without bringing an action in court. It enacts that after fifteen days from the sending by registered mail of a notice of arrears addressed to the taxpayer, any amount remaining unpaid may be certified by the Deputy Minister of National Revenue, Customs and Excise, and that on production of the certificate to the Exchequer Court of Canada or a judge or duly directed officer thereof, the certificate shall be registered in that Court and shall from the date of registration, be of the same force and effect as if it were a judgment obtained in that Court for the recovery of a debt of the amount specified in the certificate including penalties and all reasonable costs and charges of the registration. All proceedings may be taken on the certificate as if it were a judgment of that Court.

The provisions of subsection (4) do not mean that the certificate becomes a judgment. It remains a certificate of the Deputy Minister, but has the same effect and force and may be acted on as if it were a judgment.

The references to the Exchequer Court of Canada in section 52 and other sections of the Excise Tax Act now mean to the Federal Court of Canada, which on coming into existence, took over, inter alia, the functions and duties of the Exchequer Court of Canada.

The defendant (applicant on this motion) submits that the time limit of six years prescribed in subsections 38(1) and (2) of the Federal Court Act and paragraph 3(1 )(g) of the Limitation of Actions Act of Manitoba does not bind the Crown. This submission is based on the words: “Except as expressly provided by any other Act” at the beginning of subsection (2) of said section 38, and the words “recoverable at any time” in the second line of subsection 52(1) of the Excise Tax Act. Counsel for the applicant (Her Majesty The Queen) contends that the words “recoverable at any time” as applied to taxes or sums payable under the Excise Tax Act mean that there is no time period within which proceedings to recover taxes must be taken and therefore they accord with what is meant by the words “except as expressly provided by any other Act”.

The full expression about recoverability of taxes in subsection 52(1) of the Excise Tax Act is that “taxes or sums payable under this Act shall be recoverable at any time after the same ought to have been accounted for and paid”. Read simply in conjunction with the words “except as expressly provided by any other Act”, the words “recoverable at any time” are certainly susceptible of the above interpretation by Crown counsel.

Counsel for the respondent maintains that this interpretation is wrong. His first submission is that the words “at any time” do not amount to an express contrary provision as intended by the exception proviso in section 38 of the Federal Court Act. He thinks such an express contrary provision would be worded something like “notwithstanding any limitation of action provision otherwise applicable”. I do not agree that any particular form of words is required. Any words, which clearly mean that the limitation period does not apply are sufficient to satisfy the exception proviso. Nor is it necessary that a different limitation period be substituted for that indicated by the general limitation. Where the Crown is affected Parliament may intend that there will be no limitation period. Counsel then contends that the words “at any time” do not mean an unlimited period of time after the taxes or sums ought to have been accounted for and paid. He referred to section 20 of the Special War Revenue Act of 1915 as the origin of the provision: “All taxes or sums payable under this Act shall be recoverable at any time after the same ought to have been accounted for and paid.” At that date the Crown’s privileged position of not being bound by statutes of limitation had not been restricted by statute. There would therefore have been no point in stating that the taxes or sums were recoverable at any time in the future. Counsel concludes from these facts that the words “at any time” meant, in 1915, and still mean, immediately after the taxes or sums payable ought to have been accounted for and paid without waiting for any period of time to elapse and before judgment in the ordinary course. On this reasoning the words “at any time” in subsection 52(1) of the Excise Tax Act would not constitute an “exception expressly provided by any other Act” within the intention of those words as used in subsection 38(2) of the Federal Court Act, and the limitation period of six years established by section 38 of the Federal Court Act and paragraph 3(1)(g) of the Manitoba Limitation of Actions Act, read together, for actions by Her Majesty in right of Canada to recover taxes would not be affected by those words.

This argument is largely destroyed by the fact that the words “at any time” are found in subsection (1) of section 52 of the Excise Tax Act. That subsection deals only with recovery of taxes, with full costs of suit as a debt due to Her Majesty in the Federal Court of Canada or other court of competent jurisdiction. It says nothing about obtaining security or enforcing payment before judgment or about any shortcut to secure payment before judgment. The words “at any time” do not appear in subsection (4) of the section, which subsection provides a short procedure by filing a certificate which has the same force and effect as if the certificate were a judgment. The two procedures are quite distinct, only the procedure by court action is affected by the words “at any time”.

The great change that has taken place in the status of the Crown in relation to statutes of limitation may be stated succinctly, as follows. Under the earlier law the Crown, as stated in the Interpretation Acts of both Canada and Manitoba, was not bound by the terms of a statute except where it was expressly so stated by the statute, and this rule applied to statutes of limitation. Now, as provided by section 38 of the Federal Court Act the shoe is on the other foot; the Crown is bound by statutes of limitation except where it is otherwise expressly provided by statute.

It may be useful to state one obvious fact which has long been true. In modern times when we speak of the Crown as being bound or not bound by the terms of a statute we are not referring to the person of the Queen, but to the government, either as a whole or the appropriate Minister, or to an officer or employee of the government. The Queen acts only through her Ministers. In Canada this means her Canadian Ministers or the Ministers of a Province, many of whose functions are delegated to the appropriate Deputy Minister or some other officer or employee.

Another submission of the respondent’s counsel is that section 38 of the Federal Court Act was enacted in 1970, while the original provision “at any time” was enacted in 1915, and that if they conflict, the later enactment must prevail. Unfortunately for this argument there is no conflict between the two provisions. Section 38 provides for an exception and if the words “at any time” conform to the exception they are effective. The only question is whether they do conform to the exception.

Counsel’s final submission on this point is that “Section 38 of the Federal Court Act manifests a clear intention to make the Federal Crown subject to the same limitations that affect others, consistent with the erosion of ancient Crown prerogatives. . . . That clear intention is not to be thwarted by a statutory provision carried forward unchanged from 1915, from an era when Crown prerogative reigned unchallenged and no one dreamed of the Crown being affected by limitation periods.” He adds that “construing the words ‘at any time’ literally and out of context means the Crown could commence proceedings today to collect tax due on a transaction back in 1915 — clearly an unreasonable result.” In his view if a more reasonable interpretation of the words “at any time” is possible and would avoid such an unreasonable result, that interpretation should be adopted.

The first part of this argument is wrong in that it ignores the exception contained in section 38 of the Federal Court Act. That exception clearly means that the Crown’s privilege of not being subject to rules of limitation is preserved in cases where Parliament so provides. In such cases the Crown is not to be subject to the limitations that affect others. Once again the only question to be answered on this point is whether the words “at any time” conform to the exception.

There are many statutes which provide that in circumstances described therein money may be recovered at any time as a debt due to Her Majesty. The circumstances in which such a provision occurs seem generally to be of two types. One type is where money has been paid to a person by the government under the provisions of a statute and subsequently it becomes clear that he or she was not entitled to receive the money. The other type is where money becomes payable to the Crown by an individual, individuals, or corporation under the terms of a statute, and the money has not been paid as required by the statute.

Counsel for the defendant filed extracts from a number of Acts of Parliament where such a provision is found. These are:

1. The Adult Occupational Training Act, SC 1966-67, c 94, s 1, now found in RSC 1970 c A-2, section 14.

2. The Canada Pension Plan, SC 1964-65, c 51, s 1, now found in RSC 1970, C-5, section 65(2).

3. The Anti Dumping Act, SC 1968-69, c 10, s 1, now found in RSC 1970, c A-15, section 33(1) and (2).

4. The Industrial Research and Development Incentives Act, SC 1966-67, c 82, s 1, now found in RSC 1970 c 1-10, section 10(3).

5. The Old Age Security Act, RS, c 200, s 1, now found in RSC 1970, c 0-6, section 22(2).

6. The Petroleum Administration Act, (1975) 23-24 Elizabeth II, c 47, sections 76 and 86.

7. The War Veterans Allowance Act RSC 340, s 1, now found in RSC 1970, c W-5, section 19.

8. The Two-Price Wheat Act, (1975) 23-24 Elizabeth II, c 54, section 9.

In none of these Acts is there anything to suggest that the Crown’s right of recovery is subject to any limitation period. The frequency with which the provision for recovery of money at any time has occurred suggests to my mind that it is the policy of parliament that in circumstances of these types the Crown’s long time prerogative right of not being subject to rules of limitation should be and is intended to be preserved. In my view the liability of manufacturers and others to pay excise tax under the Excise Tax Act arises in circumstances similar to those in several of the cases cited supra. I have been unable to find anything in the words “at any time”, as used in all these statutes from which I could conclude that they are not intended to have their grammatical meaning.

Up to this point I have been referring to section 52 of the Excise Tax Act as it stood during the whole of the period relevant to this action. However, that section was amended by Parliament in the session of 1980-81, and in my opinion the amendments have some relevance to the point I have been discussing, particularly the amendments to subsection (1). As amended, subsection (1) reads:

52. (1) Subject to subsections (1.2) and (1.3), no proceedings to recover taxes or sums payable under this Act shall be commenced after four years from the time the taxes or sums first became payable.

(1.1) For the purposes of subsection (1), proceedings are deemed to be commenced within four years from the time taxes or sums first become payable under this Act, if, on or before the expiry of that period, an audit or inspection under section 57 of the records and books of account of the person required to pay or collect the taxes or sums is commenced or, at the request of such person, is deferred.

(1.2) All taxes or sums payable under Part I are recoverable at any time.

(1.3) All taxes or sums payable under this Act are recoverable at any time if payment thereof was avoided by reason of neglect, willful default or fraud.

The first point to notice about the new subsection 52(1) is that it provides a general limitation period of four years from the time the taxes or sums first became payable, for commencing any proceedings to recover taxes or sums payable under the Act. No provision of this kind existed in the Act prior to this amendment. No conclusion can be drawn from the amendment as to the state of the prior law. The wording is in any event equally susceptible of indicating an intent to create a limitation period where none existed before or to reduce an existing general period of six years under section 38 of the Federal Court Act to four years.

On the other hand subsections (1.2) and (1.3) are significant. Read in the context of a general four-year limitation in subsection 52(1), the provision in subsection (1.2) that all taxes or sums payable under Part I are recoverable at any time can only mean that there is no limitation on proceedings to recover those taxes or sums. Part I is concerned with a tax payable in respect of certain insurance premiums. Similarly the provision in subsection

(1.3) that all taxes or sums (which appears to mean all except those referred to in subsection (1.2)) payable under the Act are recoverable at any time if payment thereof was avoided by reason of neglect, wilful default or fraud can only mean that there is no limitation on proceedings to recover taxes or sums where the prescribed conditions exist. There was no provision of this kind in the Excise Tax Act prior to this amendment, nor is there such a provision in the Federal Court Act. There is a more limited provision in the Manitoba Limitation of Actions Act, paragraph 3(1)(h) of which provides that “Actions grounded on fraudulent misrepresentation” must be commenced “within six years from the discovery of the fraud.” No fraudulent representation has been alleged in this case.

The significance of subsections (1.2) and (1.3) for this case is that they show quite clearly that the words “at any time” are sometimes used, with reference to limitation of proceedings, to mean that no limitation applies. They show further that the trend toward assimilating the position of the Crown with that of other persons in respect of limitation of actions has not yet removed all the crown’s prerogative rights in this area, which rights have in fact been expressly preserved or possibly restored to some extent by such recent enactments as subsections 52(1.2) and (1.3) of the Excise Tax Act.

My final conclusion is that the answer to question 1 on this application is that during all the period relevant to the issues in this case there was no limitation period applicable to an action for the collection of taxes and penalties under the Excise Tax Act, 1970, RSC C E-13. I have come to this conclusion reluctantly, but in my view the law is clear and does not admit of a contrary decision.

In view of my decision on this question, questions 2 and 3 do not arise. I will simply say that if my answer had been yes to the first question, the answer to question 2 would have been six months [sic] (four months [sic] for cases arising after the amendments of 1980-81) and the answer to question 3 would have been the date when the taxes in question ought to have been paid.

The respondent is entitled to the costs of this application.