Nitikman,
DJ:—In
the
within
action,
the
following
paragraphs
of
plaintiffs’
Statement
of
claim
are
admitted,
namely:
1.
The
plaintiff
Hooper
is
a
bookkeeper
and
resides
at
the
City
of
Brandon,
in
Manitoba.
The
plaintiff
Robinson
is
a
realtor
and
resides
at
the
Rural
Municipality
of
Portage
la
Prairie,
in
the
Province
of
Manitoba.
2.
At
all
material
times
the
plaintiffs
carried
on
business
as
Income
Tax
consultants
and
discounters
under
the
provisions
of
the
Tax
Rebate
Discounting
Act,
Statutes
of
Canada,
1977,
c
25
and
under
the
Income
Tax
Act
(Manitoba)
c
110
Statutes
of
Manitoba,
1970,
and
amendments
thereto.
4.
In
the
month
of
January,
1979,
the
plaintiffs
advised
the
defendant
of
their
intention
to
commence
business
as
discounters
and
were
advised
by
the
defendant
as
to
the
steps
required
for
such
purpose.
On
the
15th
day
of
January,
1979,
the
plaintiffs
advised
the
defendant
in
writing
of
such
intention
and
requested
a
copy
of
the
Tax
Rebate
Discounting
Act
and
any
related
material
required
to
perform
the
intended
service
and
as
a
result
of
such
communication,
the
defendant
furnished
to
the
plaintiffs
a
copy
of
the
said
Act,
explanatory
brochures
of
information
required
for
the
completion
of
the
necessary
forms
and
a
supply
of
forms
required
for
the
operation
of
a
discounting
business.
5.
On
the
eighteenth
day
of
January,
1979,
the
plaintiffs
made
application
for
registration
as
discounters
pursuant
to
the
provisions
of
the
Income
Tax
Act
(Manitoba)
and
received
a
Certificate
of
Registration
dated
February
12th,
1979
pursuant
to
the
provisions
of
the
Income
Tax
Act
(Manitoba)
together
with
a
copy
of
the
Manitoba
Act
and
Regulation
239/78
and
of
the
forms
required
to
comply
with
the
provisions
of
the
Income
Tax
Act
(Manitoba).
6.
On
or
about
the
twenty-first
day
of
February,
1979,
the
plaintiffs
commenced
the
operation
of
a
tax
rebate
discounting
business
at
the
City
of
Portage
la
Prairie
aforesaid.
8.
The
plaitiffs
in
the
case
of
each
of
the
said
clients,
either
prepared
for
them
an
Income
Tax
Return
or
obtained
from
the
client
a
copy
of
their
Income
Tax
Return
if
prepared
elsewhere
and
then
in
each
case
prepared
a
statement
of
discounting
transaction
on
form
CCA1714
being
schedule
1
and
a
form
of
Power
of
Attorney
supplied
by
the
defendant
and
forms
1
and
2
being
Tax
Rebate
Discounting
Reports
supplied
by
the
Province
of
Manitoba.
9.
A
copy
of
the
client’s
Income
Tax
Return,
a
copy
of
the
Power
of
Attorney,
and
a
copy
of
the
said
schedule
1
(form
CCA1714)
was
in
each
case
forwarded
forthwith
upon
completion
to
the
Defendant
and
copies
as
required
were
furnished
to
each
of
the
Plaintiffs’
clients.
The
Tax
Rebate
Discounting
Act
(the
Act)
was
assented
to
April
20,
1978.
Sections
2,
3,
4(1)
and
(2),
and
(5),
and
Schedule
1
referred
to
in
s
4(1
)(b),
and
Schedule
2,
referred
to
in
s
5,
are
respectively
as
follows:
2.
(1)
In
this
Act,
“discounter”
means
a
person
who
acquires,
for
a
consideration,
a
right
to
a
refund
of
tax
from
a
person
entitled
thereto;
“refund
of
tax”
means
the
amount
of
(a)
an
overpayment
of
tax
paid
under
the
Income
Tax
Act
or
collected
pursuant
to
an
agreement
entered
into
under
section
7
of
the
Federal-Provincial
Fiscal
Arrangements
and
Established
Programs
Financing
Act,
1977,
and
any
interest
paid
on
any
such
overpayment
or
payment.
(2)
For
the
purposes
of
this
Act,
a
person
acquires
a
right
to
a
refund
of
tax
where
that
person,
as
between
himself
and
another
person,
acquires
a
right
to
a
refund
of
tax
or
to
an
amount
equal
to
the
amount
of
a
refund
of
tax,
notwithstanding
that,
by
virtue
of
section
80
of
the
Financial
Administration
Act
or
any
provision
of
any
other
Act
of
Parliament
or
of
the
legislature
of
a
province,
the
refund
of
tax
is
not
assignable.
3.
(1)
Any
discounter
who
acquires
a
right
to
a
refund
of
tax
from
the
person
entitled
to
the
refund
for
a
consideration
that
is
less
than
eighty-five
per
cent
of
the
refund
of
tax
is
guilty
of
an
offence.
(2)
In
determining
for
the
purposes
of
this
Act
the
consideraton
paid
or
provided
by
a
discounter
for
the
acquisition
of
a
right
to
a
refund
of
tax
from
the
person
entitled
to
the
refund,
there
shall
be
deducted
from
the
consideration
as
otherwise
determined
the
amount
of
any
fee
or
charge
levied
or
made
by
or
on
behalf
of
the
discounter
for
the
service
of
preparing
that
person’s
return
of
income
pursuant
to
subsection
150(1)
of
the
Income
Tax
Act
or
for
any
other
service
directly
related
to
the
discounting
transaction.
(3)
Subsection
(1)
does
not
apply
where
the
discounter
who
acquires
the
right
to
the
refund
of
tax
pays
to
the
person
otherwise
entitled
to
the
refund
a
consideration
therefor
that
is
at
least
equal
to
eighty-five
per
cent
of
the
amount
estimated
to
be
the
refund
of
tax
at
the
time
the
amount
is
paid
and
who,
if
the
actual
refund
of
tax
exceeds
the
estimated
refund
by
more
than
one
dollar,
forthwith
after
receipt
of
the
refund,
pays
or
makes
every
reasonable
effort
to
pay
that
excess
to
the
person
otherwise
entitled
to
the
refund
and,
in
the
event
that
the
excess
is
not
so
paid
within
thirty
days,
remits
the
excess
to
the
Receiver
General
to
be
held
on
account
of
any
future
tax
liability
of
the
person
otherwise
entitled
to
the
refund.
4.
(1)
Any
discounter
who
acquires
a
right
to
a
refund
of
tax
from
the
person
entitled
to
the
refund
for
a
consideration
without,
at
or
before
the
time
the
right
is
acquired,
(a)
paying
by
cash
or
by
a
cheque
that
is
negotiable
at
the
time
it
is
given
the
full
amount
of
the
consideration
based
on
the
estimated
refund
of
tax,
(b)
providing
the
person
from
whom
the
right
is
acquired
with
a
statement
in
the
form
and
containing
the
information
set
out
in
Schedule
I,
and
(c)
obtaining
from
the
person
from
whom
the
right
is
acquired
an
address
of
record
for
the
purposes
of
section
5,
is
guilty
of
an
offence.
(2)
Any
discounter
who
(a)
acquires
a
right
to
a
refund
of
tax
from
the
person
entitled
thereto,
and
(b)
files
on
behalf
of
the
person
from
whom
the
right
is
acquired
a
return
of
his
income
pursuant
to
subsection
150(1)
of
the
Income
Tax
Act
without
including
therewith
a
true
copy
of
the
form
set
out
in
Schedule
I
as
provided
to
that
person
and
signed
by
that
person
to
acknowledge
receipt
of
a
copy
thereof,
is
guilty
of
an
offence.
5.
Any
discounter
who
acquires
a
refund
of
tax
the
right
to
which
was
obtained
for
a
consideration
from
the
person
entitled
thereto
and
who
fails
to
give
notice
forthwith
to
that
person
of
the
actual
amount
of
the
refund
of
tax
by
notice
in
writing,
in
the
form
and
containing
the
information
set
out
in
Schedule
II
and
sent
to
the
person
at
the
address
of
record
obtained
from
that
person
as
described
in
paragraph
4(1
)(c),
is
guilty
of
an
offence.
It
is
common
ground
that
the
defendant
and
the
Province
of
Manitoba
have
an
arrangement
with
respect
to
the
collection
and
refunds
of
income
tax
in
Manitoba
and
with
respect
to
regulation
of
private
tax
discounting
measures
in
Manitoba.
The
provisions
of
“Tax
Rebate
Discounting”,
Part
IV,
of
the
Income
Tax
Act
(Manitoba)
in
its
pertinent
parts,
in
so
far
as
the
within
action
is
concerned,
including
Schedule
“A”,
Forms
1
and
2,
headed
“Tax
Rebate
Discounting
Report”,
are
similar
to
those
in
the
Act,
save
that
subsection
61(1)
of
the
Tax
Rebate
Discounting
Act
provides:
No
person
shall
carry
on
business
as
a
discounter
unless
he
first
registers
with
the
minister.
(The
Minister
of
Finance
for
Manitoba.)
The
Act
does
not
require
registration.
As
well,
at
the
risk
of
redundancy,
I
quote
the
definitions
section
60
of
the
Tax
Rebate
Discounting
Act,
which
reads
in
part:
60.
In
this
Part
(a)
“discounter”
means
any
person
or
any
servant
or
agent
of
the
person
who,
acting
in
the
course
of
his
business,
and
for
profit
or
gain,
in
any
manner
(i)
acquires
from
a
taxpayer,
the
taxpayer’s
right
to
any
refund
of
tax,
or
(ii)
Obtains
or
acquires
from
the
taxpayer
a
power
of
attorney
authorizing
the
person
or
his
servant
or
agent
to
receive
for
and
on
behalf
of
the
taxpayer
any
refund
of
tax
to
which
the
taxpayer
is
entitled;
The
evidence
makes
clear
that
in
all
matters
relating
to
the
filing
of
income
tax
returns
on
behalf
of
their
clients
and
the
filing
of
tax
discounting
transactions
and
the
powers
of
attorney,
save
in
one
instance
where
the
power
of
attorney
was
not
included,
plaintiffs
followed
the
advice,
directions
and
requirements
of
defendant
and
the
Province
of
Manitoba
and
that
in
each
case
plaintiffs
paid
to
their
taxpayer
clients
the
amount
of
the
expected
refund,
as
such
amounts
were
shown
on
the
individual
schedules
aforementioned.
In
the
course
of
their
discounting
operations
during
the
period
in
question,
plaintiffs
completed
and
filed
approximately
375
discounting
agreements.
The
first
intimation
of
anything
amiss
came
to
plaintiffs’
attention
when
a
taxpayer,
whose
refund
was
discounted,
came
to
plaintiffs’
premises
with
his
refund
cheque
and
turned
same
over
to
plaintiffs.
Plaintiffs
immediately
communicated
with
Revenue
Canada
and
spoke
to
one
Cy
Roberts,
who
plaintiff
Robinson
(who
gave
evidence
on
behalf
of
plaintiffs)
believes
was
head
of
Income
Tax
Canada
dealing
with
income
tax
returns.
Roberts
indicated
that
although
all
discounting
forms
had
been
filled
out,
unless
the
address
of
the
taxpayer
on
the
front
of
the
T1
Return
had
been
changed
to
that
of
the
discounter,
a
refund
cheque
would
be
forwarded
to
the
address
shown
thereon,
namely
the
taxpayer’s
address.
Plaintiffs’
position
was
that
plaintiffs
had
received
no
information,
the
address
of
the
taxpayer
should
be
changed
to
that
of
the
discounters.
In
fact
the
converse
was
the
case.
In
an
information
bulletin
from
Consumer
and
Corporate
Affairs
Canada,
entitled
“Technical
Bulletin
to
Income
Tax
Discounters
in
Canada”
(Ex
4),
and
which
reads
in
part:
TAX
REBATE
DISCOUNTING
ACT
Explanation
of
Information
Required
for
the
Completion
of
Schedule
I
Schedule
I
is
to
be
completed
by
the
discounter
in
three
copies.
The
original
is
to
be
attached
to
the
taxpayer’s
T(1)
form
being
submitted
to
Revenue
Canada,
one
copy
is
to
be
given
to
the
taxpayer,
and
one
copy
is
to
be
retained
in
the
discounter’s
files.
items
1,
7
and
10
read:
1.
Name
of
Discounter
Insert
the
full
legal
name
of
a
corporation
or
partnership,
the
firm
name
of
a
sole
proprietorship,
or
the
personal
name
of
a
private
individual
carrying
on
business
in
his
name.
7.
Name
of
Taxpayer
Insert
the
name
exactly
as
it
appears
on
the
taxpayer’s
T(1)
form
being
submitted
to
Revenue
Canada.
10.
Address
of
Taxpayer
Insert
the
full
address,
including
the
suite
or
apartment
number
if
applicable,
of
the
residence
of
the
taxpayer,
and
the
mailing
address
if
different
from
the
residence.
In
neither
case
shall
the
address
be
that
of
the
discounter.
(Italics
mine)
I
shall
make
further
reference
to
item
10
later.
At
Roberts’
request,
plaintiffs
furnished
his
office
with
the
names,
addresses
and
social
insurance
numbers
of
the
individual
taxpayers
whose
refunds
plaintiff
has
discounted.
Roberts
then
said
an
intercept
would
be
attempted
for
the
forms
already
sent
in
and
“if
this
was
successful,
the
address
of
the
taxpayer
would
be
changed
to
have
the
cheques
payable
to
taxpayer
and
mailed
to
plaintiffs
(discounters).
At
about
this
time
one
Glen
Houston,
who
identified
himself
as
being
with
the
Federal
Department
of
Consumer
and
Corporate
Affairs
with
the
position
of
Chief
Investigator
responsible
for
the
Federal
Discounting
Act,
accompanied
by
another
individual
whose
name
Robinson
does
not
remember,
but
whom
he
referred
to
as
Provincial
head
of
criminal
investigation,
attended
at
plaintiffs’
place
of
business
re
possible
fraud
proceedings.
They
intimated
several
forms
filed
had
not
contained
the
necessary
documentation
required
under
the
Act
and
requested
examinations
of
plaintiffs’
files.
Robinson
indicated
the
returns
had
included
all
necessary
forms
and
opened
the
files
willingly
to
them.
The
examination
proved
all
proceedings
in
order
and
on
Houston’s
return,
some
65
cheques
were
forwarded
to
plaintiffs
and
thereafter,
from
time
to
time,
further
cheques
were
remitted
to
them,
but
73
cheques
were
forwarded
directly
to
the
taxpayers
and
these
were
never
turned
over
to
the
plaintiffs,
although
they
wrote
and
demanded
the
cheques
or
proceeds
of
them
from
the
taxpayers,
even
threatening
legal
proceedings,
but
in
each
case
with
negative
results.
Robinson
deposed
plaintiffs
obtained
a
copy
of
the
Memorandum
of
Agreement
between
the
Government
of
Canada
and
the
Government
of
Manitoba
(Ex
10)
and
states
plaintiffs
performed
the
procedures
outlined
therein
as
it
affected
discounters.
Robinson
further
said
the
Power
of
Attorney
forms
for
discounting
were
requested
by
plaintiffs
from
Revenue
Canada
and
these
were
duly
received
and
used.
He
stated,
as
well,
that
in
respect
of
each
T1
return,
after
checking
same,
including
the
expected
refund,
all
forms
under
both
the
Federal
and
Provincial
Act
were
completed
as
prescribed,
including
the
Power
of
Attorney
required
under
the
Act.
A
cheque
was
then
issued
in
favour
of
taxpayer
for
85%
of
the
expected
refund
and
handed
to
him.
A
completed
copy
of
the
Provincial
discounting
form
(Ex
8),
the
Federal
discounting
form
(Ex
5)
and
the
Power
of
Attorney
were
then
stapled
to
taxpayer’s
T1
income
tax
return,
all
were
enclosed
in
the
envelope
which
came
from
the
Federal
Government
to
the
taxpayer,
the
envelope
was
sealed,
stamped
and
mailed
that
same
day.
Defendant
called
as
its
only
witness
Douglas
Murray
Smith,
a
taxation
officer
with
the
Department
of
National
Revenue
in
the
Taxation
Division
for
23
years.
In
1975
he
was
working
as
an
internal
or
management
consultant
and
approximately
two
and
one-half
years
ago,
he
moved
into
the
policies
and
systems
area
of
the
tax
roll.
He
described
the
tax
roll
as
the
section
responsible
for
storing
returns,
obtaining
the
returns
from
taxpayers
and
“matching
information
to
third
party
information
(sic)
to
the
taxpayer’s
return,
and
so
forth”,
also
the
refunds
area
as
far
as
the
issuance
and
tracing
of
tax
returns.
Smith
is
not
an
auditor.
He
also
said
the
section
deals,
as
well,
with
the
flow
of
information
and
flow
of
paper.
In
1978,
according
to
his
evidence,
there
was
only
one
regional
centre,
the
Winnipeg
Taxation
Centre.
All
other
returns
were
processed
in
the
Ottawa
Taxation
Centre.
On
the
filing
of
an
income
tax
return,
it
is
recorded
on
the
taxpayer
master
card,
which
is
stored
on
a
computer
disc.
Once
a
year,
in
October,
those
files
will
be
run
and
there
will
be
produced
a
label
similar
to
what
is
on
the
return
for
every
taxpayer
who
has
filed
an
income
tax
return
in
the
previous
year,
except
“deceased
and
emigrants
and
discounters”.
The
label
shows
the
taxpayer’s
account
number,
social
insurance
number,
name
and
address.
In
December
of
each
year,
one
of
the
defendant’s
employees
supervises
at
the
printers
and
these
labels
are
placed
on
the
return
and
those
returns
are
mailed
out
to
the
taxpayer
in
a
window
envelope
with
a
tax
form.
Witness
further
agreed
it
is
common
knowledge
that
in
due
course
the
taxpayer
with
a
taxable
income
will
have
to
comply
with
the
law
and
prepare,
or
have
prepared,
the
return.
After
the
return
has
been
filed,
all
its
information
has
to
be
processed
on
the
taxayer’s
master.
If
there
are
no
changes,
that
is
what
produces
the
assessment
notice.
If
there
are
no
changes,
the
refund
cheque
will
go
to
the
address
shown
on
the
income
tax
return.
If
there
are
changes
after
the
return
is
filed
or
before
assessing,
when
that
additional
information
comes
in
it
is
given
a
number
and
that
number
is
also
recorded
into
the
computer
system.
There
is
a
facility
within
the
computer
to
input
what
the
Department
calls
a
flag,
being
a
code
number
in
the
system
which
indicates
there
is
a
change
of
some
sort
to
be
made.
When
this
return
has
the
data
keyed
in,
whether
just
basic
data
or
full
information,
it
will
at
this
point
stop
the
assessment
and
give
a
print-out.
The
additional
information
is
put
in
an
envelope
with
the
number
recorded
in
the
computer
system
and
that
is
held
until
the
return
comes
along
to
be
processed
and
that
is
when
the
print-out
comes
in.
The
computer
prints
out
a
print-out
and
the
additional
information.
It
indicates
the
return
is
coming
through.
The
three
of
these,
the
return,
the
print-out
and
the
envelope
containing
whatever
change
there
may
be,
are
matched
up
together.
It
could
be
a
change
of
address,
an
additional
T4
slip,
or
any
information
that
might
change
the
assessment
or
the
return.
Then
they
look
at
this,
making
changes
in
the
print-out.
The
print-out
is
put
back
through
the
keying
operation
and
then
the
proper
assessment
is
made
and
a
cheque
is
issued
if
a
refund
is
due.
It
becomes
clear
from
Smith’s
evidence
that
the
refund
cheque
is
always
made
payable
to
the
taxpayer,
but
I
believe
it
to
be
a
fact
that
if
the
information
had
been
keyed
into
the
computer,
indicating
the
cheque
should
be
mailed
to
the
discounter
at
the
address
shown
in
the
form
annexed
to
the
return,
the
cheque
would
have
been
so
mailed.
I
referred
earlier
to
intercepts
having
been
made
after
Roberts
became
apprised
of
the
fact
the
cheques
were
going
to
the
taxpayer
despite
the
discount
provisions.
Following
his
meeting
with
Robinson,
he
arranged
for
an
intercept
to
be
made
in
respect
of
all
tax
returns
that
had
been
listed
with
him
by
Robinson
that
had
not
yet
been
processed.
As
a
result,
a
considéra-
ble
number
of
cheques
reached
plaintiffs
and
were
duly
cashed
by
reason
of
the
Powers
of
Attorney
held
by
said
plaintiffs,
as
discounters.
In
cross-examination,
Smith
explained
what
happens
to
a
return
when
it
comes
into
the
Winnipeg
Office:
The
mail
is
opened
in
the
mail
room
and
all
the
documents
are
placed
in
a
certain
order
on
the
Income
Tax
Return
and,
if
there
is
a
schedule,
that
is
removed.
If
there
is
a
payment
the
payment
is
put
on
the
front
of
the
return.
In
fact,
all
the
discount
material,
all
discount
documents
annexed
to
the
return,
were
removed
by
mail
clerks,
some
of
whom
were
part
time
help
not
particularly
trained
in
the
Act,
and
the
removed
documents
were
sent
to
the
Department
of
Consumer
and
Corporate
Affairs
in
another
building
and
there
fed
into
a
computer
by
Consumer
and
Corporate
Affairs,
not
the
same
computer
used
for
T1
returns.
No
reason
has
been
advanced
by
defendant
for
the
removal
of
the
discount
documents
from
the
income
tax
returns,
despite
the
fact
that
the
discounter
is
required
by
the
Act
to
file
on
behalf
of
the
taxpayer
with
his
income
tax
return
a
true
copy
of
Schedule
I,
as
provided
to
that
person
and
signed
by
that
person,
to
acknowledge
receipt
of
a
copy
thereof.
A
discounter
failing
to
do
so
is
guilty
of
an
offence
(subsection
4(3)
of
the
Act
already
mentioned).
As
well,
the
technical
bulletin
to
income
tax
discounters
informs
that
Schedule
I
is
to
be
completed
by
the
discounter,
and
three
copies,
the
original
to
be
attached
to
the
taxpayer’s
T1
form
being
submitted
to
Revenue
Canada.
The
following
is
part
of
the
cross-examination
of
Smith:
Q
.
.
.
So
that
some
unknowledgeable
individual
in
the
mail
room
office
takes
the
discount
material
and
shoots
it
over
to
Consumer
and
Corporate
Affairs,
and
then
the
Income
Tax
Department
processes
the
T-1?
A
That
is
correct.
Q
Now,
as
far
as
the
Income
Tax
computer
is
concerned,
there
is
no
record
of
the
discount
transaction
put
on
the
computer?
A
That
is
not
correct.
Q
What
record
was
put
on
with
respect
to
any
of
these
files
we
are
dealing
with?
A
Okay;
I
will
continue
on
stating
what
happens
when
it
first
comes
in.
When
the
schedule
is
removed
there
is
a
note
put
on
the
Income
Tax
return.
This
indicates
there
was
a
schedule
1
attached
and
this
was
a
discounted
transaction.
Q
Yes?
A
And
when
it
goes
into
the
computer
that
code
is
picked
up
and
that
signals
it
was
a
discount.
Q
Was
the
discounter’s
name
and
address
put
on
the
coding?
A
That
is
not
done,
no.
Q
The
answer
is
“no”?
A
No.
Q
In
the
documentation
that
has
been
produced
to
the
Court,
or
any
other
documentation
you
know
of,
was
there
any
written
direction
to
the
Portage
Tax
Services
before
they
embarked
on
their
activity
in
1979,
directing
them
to
change
the
address
of
the
taxpayer
on
the
T-1
form
to
that
of
their
own
office?
A
No.
Plaintiffs’
position
is
that
having
complied
in
all
respects
with
the
requirements
of
the
Act
and
Tax
Rebate
Discounting,
the
Income
Tax
Act
(Manitoba),
they
acquired
a
right
to
a
refund
of
the
tax
of
those
taxpayers
of
whom
the
plaintiffs
were
discounters
and
that
the
cheques
representing
such
refunds,
made
payable
to
the
respective
taxpayers,
should
have
been
sent
to
the
plaintiffs,
instead
of
the
taxpayers.
That
defendant,
by
accepting
the
filing
of
the
necessary
documentation,
undertook,
or
should
be
taken
to
have
undertaken,
to
forward
said
refund
cheques,
payable
to
the
taxpayers,
to
the
plaintiffs
and
that
the
failure
of
defendant
to
do
so
and
wrongfully
sending
the
cheques
to
the
taxpayers,
with
the
exception
of
those
cheques
which
were,
after
intercept,
sent
to
plaintiffs,
were
the
result
of
the
negligence
and/or
breach
of
duty
on
the
part
of
defendant,
or
her
servants
or
agents,
and
by
reason
thereof
plaintiffs
suffered
damages
claimed
in
the
statement
of
claim
of
$37,154.74,
but
which
amount,
without
defendant
admitting
liability,
has
been
agreed
to
by
the
parties
as
being
$25,708.25,
subject
to
certain
minor
adjustments
that
will
be
dealt
with
later
in
this
judgment.
It
is
reasonable
to
assume
that
defendant,
in
passing
the
Act,
by
its
provisions
intended
to
safeguard
the
rights
of
the
taxpayers
against
usurious
rates
which
had,
at
earlier
dates,
been
charged
by
discounters,
particularly
in
the
case
of
impecunious
taxpayers
who
might
be
attracted
by
an
immediate
cash
payment,
instead
of
having
to
wait
for
a
refund
cheque
which
would
arrive
at
a
later
date.
Accordingly,
the
maximum
discount
rate
was
set
and
completion
was
required
of
the
schedules,
as
provided
under
the
Act,
as
well
as
under
Tax
Rebate
Discounting,
the
Income
Tax
Act
(Manitoba),
including
the
name
and
business
address
of
the
discounter
or
proprietor,
and
of
the
taxpayer.
But,
as
well,
the
Act
also
provided
assurance
that
the
discounter,
subject
to
his
compliance
with
the
provisions
of
the
Act
and
the
Tax
Rebate
Discounting,
would
in
due
course
receive
the
cheque
for
the
refund
he
had
discounted.
Thus,
subsection
2(1)
reads:
In
this
Act,
“discounter
means
a
person
who
acquires,
for
a
consideration,
a
right
to
a
refund
of
tax
from
a
person
entitled
thereto;
(italics
mine)
And
the
same
words
“acquires,
for
a
consideration,
a
right
to
a
refund
of
tax
from
a
person
entitled
thereto,
read
in
the
context
of
the
respective
sections
or
subsections,
appear
in
subsections
2(2),
3(1),
3(3),
4(1)
and
section
5,
as
earlier
set
out.
And
to
further
assure
the
discounter
who
acquires,
for
a
consideration,
a
right
to
a
refund
of
the
tax
from
a
person
entitled
thereto,
the
defendant
caused
to
be
sent
to
the
discounter
forms
of
Power
of
Attorney,
three
copies
of
each
Power
of
Attorney
to
be
completed
by
the
discounter
and
signed
by
the
taxpayer.
Smith’s
evidence
was
that
the
reason
the
refund
cheques
were
not
mailed
to
plaintiffs
was
because
plaintiffs’
address
did
not
appear
on
the
T1
return
as
the
address
of
the
taxpayer.
I
referred
earlier
to
items
7
and
10
of
Technical
Bulletin
to
Income
Tax
Discounters
in
Canada
(Ex
4).
Item
7,
it
will
be
remembered,
stated
the
name
of
the
taxpayer
should
be
the
same
as
it
appears
on
the
taxpayer’s
T1
form
being
submitted
to
Revenue
Canada,
and
item
10,
dealing
with
the
address
of
taxpayer,
after
stating
the
full
address
of
taxpayer’s
residence
and
the
mailing
address,
if
different
from
the
residence,
should
be
inserted
continued
in
the
next
sentence:
“In
neither
case
shall
the
address
be
that
of
the
discounter.”
(Italics
mine)
I
recognize
that
the
items
referred
to
completion
of
Schedule
I
of
the
Act,
but
just
as
item
7
refers
to
the
name
being
exactly
as
it
appears
on
the
T1
form,
so
also,
in
my
opinion,
by
analogy
it
follows
that
“the
address
shall
not
be
that
of
the
discounter”
refers
as
well
to
the
address
shown
on
the
T1
form.
The
1978
Income
Tax
Guide,
prepared
exclusively
for
residents
of
the
Province
of
Manitoba
(Ex
25),
in
Step
2,
headed
“Identifying
yourself”,
reads
in
part:
If
you
received
your
return
in
the
mail,
your
name
and
address
will
already
appear
on
it,
but
check
to
see
if
it
is
correct
and
that
your
given
name
and
at
least
one
initial
are
included.
(emphasis
added)
And
the
1978
Combined
Federal
and
Provincial
Income
Tax
Return,
guide
and
tables
for
residents
of
Canada
—
Revenue
Canada
Taxation
—
(Ex
26)
in
step
2,
headed
“Identifying
yourself’,
reads
in
part:
Please
complete
all
the
boxes
in
the
identification
area
of
your
return
that
apply
to
you.
Make
sure
that
you
show
your
current
address
so
that
your
assessment
notice
(and
refund,
if
applicable)
will
not
be
misdirected
.
.
.
Under
“General
Information”,
item
number
58,
under
the
heading
of
“Penalty”,
after
dealing
with
penalties
for
late
filing
and
attempts
at
tax
evasion,
failing
to
file
a
return
as
required,
there
follows
the
sentence,
“There
are
even
more
severe
penalties
for
filing
a
false
return.”
I
am
of
the
view
that
showing
the
discounter’s
address
as
that
of
the
taxpayer
would
result
in
the
filing
of
a
false
return.
I
believe
that
one
of
the
purposes
in
requiring
a
discounter
to
include
Schedule
I
with
the
T1
return
of
the
taxpayer,
whose
right
to
a
tax
refund
was
being
discounted,
was
to
assure
that
the
refund
cheque,
while
payable
to
the
taxpayer,
would
be
mailed
to
the
discounter.
That
information
would
have
become
readily
known
had
the
discounting
forms
been
left
attached
to
the
T1
forms
for
input
into
the
computer.
There
would
have
been
no
problem.
The
cheques
would
have
been
forwarded
to
the
plaintiffs
(discounters).
The
removal
by
defendant’s
employees
from
the
T1
return
of
the
completed
discounting
material,
and
particularly
Schedule
I,
for
a
totally
unexplained
reason
was
an
act
of
negligence
for
which
defendant
is
liable.
In
addition,
Smith’s
evidence
was
that
a
flag
was
fed
into
the
computer
to
Signify
the
return
was
a
discounted
return.
That
surely
should
have
alerted
defendant’s
employees
to
the
necessity
of
an
intercept
so
the
computer
could
be
fed
the
necessary
information
to
assure
the
refund
cheque
would
be
mailed
to
the
discounter.
The
failure
of
defendant’s
employees
to
do
so
further
compounded
the
original
acts
of
negligence.
Plaintiffs
having
complied
with
the
requirements
of
the
Act
in
every
respect
and
followed
fully
the
advice
and
direction
and
requirements
of
defendant
and
of
the
Province
of
Manitoba,
there
was
a
duty
and
an
obligation
on
the
defendant
to
cause
to
be
forwarded
to
plaintiffs
at
their
place
of
business,
as
shown
in
Schedule
I
of
the
Act,
the
refund
cheques
payable
to
the
respective
taxpayers.
Plaintiffs
having
under
the
Act
acquired
a
right
to
such
refunds
could
have
negotiated
said
cheques
to
their
own
credit
by
reason
of
the
Powers
of
Attorney
they
held.
Defendant
failed
to
carry
out
that
duty.
That
constituted
negligence
by
defendant.
Further,
when
the
respective
taxpayers,
parties
to
the
refund
transactions,
signed
Schedule
I,
they
authorized
defendant
to
make
out
refund
cheques
in
the
name
of
the
taxpayers,
but
to
send
said
cheques
to
the
plaintiffs.
These
were
authorizations
from
the
taxpayers
and
that
is
what
defendant
was
duly
bound
to
carry
out
pursuant
to
the
Act.
Failure
by
the
defendant
to
carry
out
its
duty,
as
already
said,
constituted
negligence
and
defendant
is
liable
to
plaintiffs
for
the
resulting
damages.
The
executed
Powers
of
Attorney
forming
part
of
the
discount
documents
attached
to
the
T1
forms
clearly
signified
the
refund
cheques
should
be
made
payable
to
the
taxpayer.
Otherwise
there
would
be
no
necessity
for
the
Powers
of
Attorney
and
I
am
in
no
doubt
that
was
envisaged
by
the
Act.
The
cheques
would
be
made
payable
to
the
taxpayers
and
mailed
to
the
discounters.
For
all
of
the
above
reasons,
plaintiffs’
action
succeeds.
I
stated
earlier
the
parties
had
agreed
that
if
there
is
judgment
in
favour
of
plaintiffs,
the
amount
should
be
in
the
sum
of
$25,708.25,
subject
to
minor
adjustments.
These
related
to
assignments
in
bankruptcy
made
by
some
of
the
taxpayers,
whose
refunds
had
been
discounted.
The
evidence
discloses
that
only
two
assignments
were
made
prior
to
the
completion
of
the
discount
transactions.
These
were
the
case
of
Lynn
Pashe
(#33
on
Ex
1)
and
Barry
Pashe
(#32
on
Ex
1).
Cheque
sent
by
the
Trustee
in
Bankruptcy
re
Lynn
Pashe
was
for
$69.
No
evidence
was
led
of
the
amount
of
the
cheque
from
the
Trustee
in
the
Barry
Pashe
case,
but
the
amount
of
his
respective
refund
was
about
one-half
of
that
of
Lynn
Pashe
and
I
calculate
the
amount
of
his
cheque
would
have
been
approximately
$35,
making
a
total
of
$104.
Deducting
this
amount
from
$25,708.25
leaves
$25,604.25,
and
plaintiffs
are
entitled
to
judgment
against
defendant
for
this
amount.
I
have
considered
the
question
of
interest
on
the
amount
due
the
plaintiffs.
Section
35
of
the
Federal
Court
Act,
RSC
1970
(2d
Supp),
c
10,
provides:
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.
(emphasis
added)
Subsection
164(3)
of
the
Income
Tax
Act
is
to
the
following
effect:
Where
an
amount
in
respect
of
an
overpayment
is
refunded,
or
applied
under
this
section
on
other
liability,
interest
at
a
prescribed
rate
per
annum
shall
be
paid
or
applied
thereon
for
the
period
commencing
with
the
latest
of
(a)
the
day
when
the
overpayment
arose,
(b)
the
day
on
or
before
which
the
return
of
the
income
in
respect
of
which
the
tax
was
paid
was
required
to
be
filed,
and
(c)
the
day
when
the
return
of
income
was
actually
filed,
and
ending
with
the
day
of
refunding
or
application
aforesaid,
unless
the
amount
of
the
interest
so
calculated
is
less
than
$1,
in
which
event
no
interest
shall
be
paid
or
applied
under
this
subsection.
Under
this
section
defendant
is
obligated
to
pay
interest
on
any
refunds
due
to
the
taxpayer
and
comes
within
the
exception
in
the
Federal
Court
Act
“in
the
absence
of
.
.
.
a
statute
providing
in
such
a
case
for
the
payment
of
interest
by
the
Crown.”
Under
the
provisions
of
the
Act,
the
discounter
became
entitled
to
the
refund
due
to
the
taxpayer
and
just
as
interest
would
be
payable
to
the
taxpayer
on
a
refund,
so
also
is
it
payable
to
the
discounter
as
a
person
entitled
to
the
refund.
In
the
result,
I
hold
interest
is
payable
to
the
plaintiffs
on
the
amount
of
the
judgment.
As
will
be
noted
from
subsection
164(3),
interest
at
a
prescribed
rate
per
annum
on
the
refund
due
is
to
be
paid
or
applied
on
the
latest
of
subsections
(a),
(b)
or
(c)
thereof.
It
would
appear
to
me
the
latest
period
of
(a),
(b)
and
(c)
in
the
within
case
would
be
(b),
the
day
when
the
return
was
required
to
be
filed.
As
April
30,
1979
was
the
last
day
for
filing
returns
for
the
year
in
question,
I
accept
that
date
as
the
date
referred
to
in
subsection
(b).
Regulation
4300(4)
under
the
Income
Tax
Act
sets
out
the
prescribed
income
tax
rate
for
the
purposes
of
subsection
164(3)
of
that
Act,
and
reads
in
part:
(d)
9%
per
annum
in
respect
of
that
portion
of
the
period
that
is
after
December
31,
1978
and
before
January
1,
1980;
(e)
11%
per
annum
in
respect
of
that
portion
of
the
period
that
is
after
December
31,
1979
and
before
January
1,
1981;
and
(f)
12%
per
annum
in
respect
of
that
portion
of
the
period
that
is
after
December
31,
1980.
Plaintiffs
claimed
interest
at
10%
per
annum.
I
incline
to
the
view
that
4300(4)(d)
(9%
per
annum)
is
the
governing
rate
applicable
in
the
within
case.
There
will
accordingly
be
judgment
for
the
plaintiffs
against
the
defendant
in
the
amount
of
$25,604.75
and
interest
thereon
at
the
rate
of
9%
per
annum,
calculated
from
May
1,
1979,
together
with
costs.