Clarkson Co. Ltd. v. The Queen, 79 DTC 5150, [1979] CTC 96 (FCA)

The Chief Justice:—This is an appeal from a judgment of the Trial Division dismissing an action brought by the appellant The Clarkson Company Limited (hereinafter referred to as “Clarkson”) against Her Majesty for a “duty drawback’’* [1] in the amount of $91,143.t [2]

The case has proceeded on the basis that one of the appellants is entitled to judgment for the drawback claimed unless Her Majesty is entitled to set off taxes owed to Her Majesty by Rapid Data Systems & Equipment Limited (hereinafter referred to as “Rapid Data”), which company was added as a plaintiff and an appellant by an order made by this Court.

The conclusion that I have reached, for the reasons hereinafter set forth, is that Her Majesty is entitled to such set-off. [3] t

The drawback claimed is in respect of duty and tax paid by Rapid Data on goods imported by it at a time when it had the independent direction of its own business.* [4] The right to such drawback, if there is such a right, [5] Tarose from the exportation or destruction of the goods so imported. If Rapid Data had still had the independent direction of its business at the time of such exportation and destruction, clearly, the drawback would have been vested in Rapid Data in its own right. If that had been the case, there would have existed the necessary “mutuality” so that Her Majesty would have had the right of set-off claimed [6] $ and this appeal would have to be dismissed.

However, after the importation, and before the exportation or destruction, under a “Debenture” whereby Rapid Data had created a “floating charge” in favour of the Bank, Clarkson was appointed by the Bank of Montreal “receiver” of Rapid Data’s undertaking and property, took control thereof and carried on Rapid Data’s business “in order to increase the realization to be obtained from . . . the security”. The question is whether, as a result, the right to drawback vested in Rapid Data subject to a “charge” in favour of the Bank that destroyed the mutuality of parties essential to the defence of set-off.

This is a case of appointment of a receiver by the creditor under a deed creating a “floating charge”. There is no statute that has been put forward as regulating the matter. The status of the “receiver” and the effect of the “charge” (equitable mortgage) depends, therefore, on the terms of the “Debenture” considered in the light of the equitable principles applicable where a debtor charges his property in favour of a creditor as security for a liability.§ [7]

The provisions of the Debenture to be considered would appear to be:

2. As security for payment of the principal and interest and all other moneys and liabilities from time to time hereby secured the Company charges in favour of the Bank, its successors and assigns, as and by way of a floating charge its undertaking and all its property and assets, real and personal, moveable or immoveable, of whatsoever nature and kind, both present and future. The Company shall not be at liberty to sell or dispose of the property or assets which are the subject of the floating charge created by this debenture otherwise than in the ordinary course of business and for the purpose of carrying on the same.

TO HAVE AND TO HOLD the assets hereby mortgaged and charged unto the Bank, its successors and assigns, forever but subject to the terms and conditions herein set forth.

4. The Company hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all and singular every such further acts, deeds, transfers, assignments and assurances as the holder of this debenture may reasonably require for the better assuring, mortgaging, charging, transferring, assigning and confirming unto the holder of this debenture the property and assets hereby mortgaged and charged or intended so to be or which the Company may hereafter become bound to mortgage, charge, transfer or assign in favour of such holder and for the better accomplishing and effectuating of this debenture.

6. The moneys hereby secured shall become payable and the security hereby constituted shall become enforceable in each and every of the events following:

8. Whenever the security hereby constituted shall have become enforceable, and so long as it shall remain enforceable, the Bank may proceed to realize the security hereby constituted and to enforce its rights by entry; or by the appointment by instrument in writing of a receiver or receivers of the subject matter of such security or any part thereof . . . or by proceedings in any court of competent jurisdiction for the appointment of a receiver or receivers or for sale of the subject matter of such security or any part thereof; . . . Any such receiver or receivers so appointed shall have power to take possession of the mortgaged property or any part thereof and to carry on the business of the Company, and to borrow money required for the maintenance, preservation or protection of the mortgaged property or any part thereof or the carrying on of the business of the Company and to further charge the mortgaged property in priority to the charge of this debenture as security for money so borrowed, and to sell, lease or otherwise dispose of the whole or any part of the mortgaged property on such terms and conditions and in such manner as he shall determine. In exercising any powers any such receiver or receivers shall act as agent or agents for the Company and the Bank shall not be responsible for his or their actions.

In addition the Bank may enter upon the lease or sell the whole or any part or parts of the property and assets charged . . . The term “receiver” as used in this debenture includes a receiver and manager.

What has to be decided is, in effect, whether the floating charge (which crystallized when the receiver was appointed) or the operations of the receiver under the debenture had the effect of making what would otherwise have been a simple right of Rapid Data to a drawback, which would have been subject to the set-off claimed, a right to a drawback so vested that it was not subject to the set-off claimed.* [8]

As I see it, there are four conceivable possibilities, v/z:

(a) the approved claims for drawback were made by Rapid Data-in the course of its business as carried on through the agency of Clarkson—as the importer of the goods on which import duty had been paid,

(b) the approved claims were made by Rapid Data—through the agency of Clarkson—as the owners or exporters of the goods on which import duty had been paid,

(c) the approved claims were made, through the agency of Clarkson, by the Bank as exporter, or as equitable owner by virtue of the mortgage, of the goods on which import duty had been paid (in which event the right to enforce payment would be in the Bank in its own name), or

(d) the approved claims were made by Clarkson, in its own right, as exporter or equitable owner of the goods on which import duty had been paid (in which event the right to enforce payment would be in Clarkson in its own name).

The third possibility is not consistent with the agreed Statement of Facts (because the claims were not made by, or on behalf of, the Bank) and would result in the appellant’s action being dismissed as the Bank is not a party to the action in the Trial Division.* [9] The fourth possibility is inconsistent with the express provision in the Debenture that “In exercising any powers” the receiver ‘‘shall act as agent . . . for the Company” (i.e. Rapid Data). Such possibilities may be ignored for present purposes.

If, on the other hand, the approved claims for drawback were made by Rapid Data as importer, exporter or owner of the goods, even though Rapid Data’s affairs were being carried on, at the time of the destruction or exportation and the making of the claims, by Clarkson as its agent, the drawback would be payable to Rapid Data (although, doubtless, the money once received would be in Clarkson’s control and would be used to satisfy the Bank’s claims against Rapid Data). However, if Her Majesty were an ordinary person, the charge on all future assets of Rapid Data created by the debenture would have fastened on the right to payment of the drawback as that right came into existence; and thus the right to the drawback would nave become, as it arose, “subject to the equitable charge (which amounted to an equitable assignment) to the bank as debenture holder”.t [10] If the same rule applies in the case of a claim against Her Majesty, I see no way of avoiding the conclusion that the defence by way of set-off was not available to Her Majesty.

I turn, therefore, to the relevant provisions of the Financial Administration Act, viz:

79. In this Part

“Crown debt’’ means any existing or future debt due or becoming due by the Crown, and any other chose in action in respect of which there is a right of recovery enforceable by action against the Crown;

80. Except as provided in this Act or any other Act of the Parliament of Canada,

(a) a Crown debt is not assignable, and

(b) no transaction purporting to be an assignment of a Crown debt is effective SO as to confer on any person any rights or remedies in respect of such debt.

81. (1) Any absolute assignment, in writing, under the hand of the assignor, not purporting to be by way of charge only, of a Crown debt of any following description, namely,

(a) a Crown debt that is an amount due or becoming due under a contract, or

(b) any other Crown debt of a class prescribed by regulation,

of which notice has been given to the Crown as provided in section 82, is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer from the date service of such notice is effected

(c) the legal right to the Crown debt,

(d) all legal and other remedies for the Crown debt, and

(e) the power to give a good discharge for the Crown debt without the concurrence of the assignor.

(2) An assignment made in accordance with this Part is subject to all conditions and restrictions in respect of the right of transfer that relate to the original Crown debt or that attach to or are contained in the original contract.

83. This Part does not apply

(a) to any negotiable instrument, or* [11]

Reading section 80 and subsection 81(1) in the light of the definition of “Corwn debt” in section 79, [12] Tit would seem clear

(1) that, by virtue of section 80, no “right of recovery enforceable by action against the Crown” is assignable, and no transaction by way of assignment has effect to confer on a third person a right enforceable by action against the Crown, unless specially provided for by statute, and

(2) that subsection 81(1) does not authorize any such assignment “purporting to be by way of charge only’’.

As I understand the “Debenture’’ here in question, read in the light of the decisions with reference to similar floating charges, it operates, in so far as a chose in action arising after the charge crystallizes is concerned, as an equitable assignment thereof “by way of charge only’’.* [13] It follows that it has, by virtue of section 80, at least between the assignee and Her Majesty, no validity, unless provision is made therefor by section 81 or some other statutory provision. Our attention has not been drawn to any other statutory provision for this assignment of the claim for drawback [14] t and provision is not made therefor by section 81 because section 81 applies only to an “absolute assignment . . . not purporting to be by way of charge’’.

There remains for consideration the question whether, while the result of section 80 is that, as between the Bank and Her Majesty, the equitable assignment of Rapid Data’s right to be paid drawback does not exist, it is, nevertheless, good as between Rapid Data and the Bank with the result that Rapid Data’s action Is as trustee for the Bank, and not in its own right and there did not exist, therefore, the mutuality essential for the defence of setoff. The answer to that question, in my mind, lies in the fact that the exception in section 81 of an assignment “by way of charge only’’ shows that section 80 applies to an assignment “by way of charge only’’. It follows that, in my view, it is not possible in the action against Her Majesty to rely on the assignment by way of charge only to show that Rapid Data (assignor) is not claiming in its own right but is claiming only as trustee.

My conclusion is, therefore, that there was the necessary mutuality for the set-off defence and, for that reason, even assuming that the appellant had a legal claim for drawback, the appeal should be dismissed, but, having regard to the circumstances that the respondent did not raise section 80 of the Financial Administration Act, upon which, in my view, the appeal turns, there should be no order for costs of the appeal.

For the above reason, I am of opinion that the appeal should be dismissed without costs.

APPENDIX “A”

The action was launched by a Statement of Claim bearing date January 20, 1976, and amended March 11, 1976, in which the plaintiff was described as “The Clarkson Company Limited, the Receiver and Manager of the property and undertaking of Rapid Data Systems & Equipment Limited’’. The allegations in the Statement of Claim, in so far as relevant for present purposes, may be summarized as follows:

a. Rapid Data Systems & Equipment Limited (hereinafter referred to as “Rapid Data’’) is “in the business of manufacturing electronic calculators’’.

b. By a debenture dated September 18, 1973, Rapid Data gave to the Bank of Montreal a floating charge on all its property and undertaking.

c. On March 1, 1974, the Bank appointed the plaintiff Receiver and Manager “of Rapid Data’’ pursuant to the debenture and the plaintiff thereupon “took control’’ of the assets and undertaking of Rapid Data and “carried on its business for the benefit of . .. the Bank”.

d. During the period from March 1 to September 1974, the plaintiff “in its capacity as Receiver and Manager of Rapid Data exported certain goods “for which the plaintiff is entitled to duty drawback” and destroyed certain goods “for which the plaintiff is entitled to duty drawback” in a total net amount of $91,143, all of such goods being goods that Rapid Data had imported and paid duty on before the plaintiff was appointed Receiver and Manager.

e. The plaintiff submitted its claims pursuant to section 44 of the Excise Tax Act claiming duty drawback and its claims were “duly approved by the defendant as represented by the Minister of National Revenue in the amount of $91,143.”

f. The defendant refused to pay the duty drawback to the plaintiff.

The statement of Defence admitted that Rapid Data was in the business of manufacturing electronic computers, that the floating charge was created, that the appointment of the plaintiff as Receiver and Manager of Rapid Data was made and that the goods that the plaintiff exported and destroyed were goods that Rapid Data had imported and paid duty on before the appointment of the plaintiff as Receiver and Manager but did “not admit” that, upon its appointment, the plaintiff took control of the assets and undertaking of Rapid Data and carried on its business for the benefit of the debenture holder. In effect, the statement of defence admits that the plaintiff, after it became Receiver and Manager, exported and destroyed goods that Rapid Data had previously imported and paid duty on and that duty drawback in the amount of $91,348.28 became payable as a result, but the Statement of Defence says that Rapid Data became entitled to such “duty drawback’’. Furthermore, the Statement of Defence says that the plaintiff submitted the claims therefor as agent for Rapid Data (under regulations made under the Customs Act and the Financial Administration Act) and that the defendant approved claims by Rapid Data for the period in question in a total net amount of $91,348.23. Finally, the Statement of Defence pleads that the duty drawback had been set off against indebtedness of Rapid Data under the Income Tax Act and the Excise Tax Act and expressly denies owing duty drawback to the plaintiff.

By its reply, the appellant alleged, inter alia, that the defendant was indebted to the plaintiff for the claims for drawback “in its capacity as the Receiver and Manager” of Rapid Data pursuant to the debenture and that the arrears of excise tax and income tax claimed by the defendant from Rapid Data could not be set off against them.

While there does not seem to be anything in the appeal book to show it, it is common ground (and the minutes of the trial show) that the action went to trial on the basis of an agreed statement of facts and issues that appears in the appeal book.

The agreed statement has attached to it a copy of the debenture. By that document, Rapid Data, as security for an indebtedness, “charges in favour of the Bank ..., as and by way of a floating charge its undertaking and all its property and assets . . . both present and future”. The document provides that “the security hereby constituted shall become enforceable” inter alia if Rapid Data makes any default and, when the security becomes enforceable, the Bank may realize the security and enforce its rights, inter alia, by the appointment of a “receiver . .. of the subject matter of such security or any part thereof”. It further provides that any receiver so appointed, inter alia, may take possession of the mortgaged property, may “carry on the business of the Company” and may “borrow money” for “the carrying on of the business of the Company” and that “In exercising any powers any such receiver . . . shall act as agent . . . for the Company” (ie, Rapid Data) “and the Bank shall not be responsible for his .. . actions”.

By the agreed statement, the parties agree inter alia on the following facts:

1. Rapid Data defaulted under the debenture and on March 1, 1974, the Bank appointed the plaintiff as “the receiver and manager of the undertaking, property, and assets of Rapid Data pursuant to the terms of the . .. debenture in order to realize its security”.

2. Upon its appointment the plaintiff “took control” of the undertaking, property and assets of Rapid Data and “carried on its business for the benefit of the debenture holder in order to increase the realization to be obtained from the enforcement of the security”.

3. When the plaintiff was appointed receiver, Rapid Data was indebted to the respondent for excise tax and income tax unrelated to “the money paid for customs duty and excise taxes which is the subject matter of this action”.

4. In September of 1974 the plaintiff submitted fifteen drawback claims (of which “representative copies” describing the capacity of the plaintiff to make such claims were attached to the agreed statement) and the said claims were approved “by the defendant” pursuant to the following regulations and orders:

The General Excise and Sales Tax Regulations, SOR/72-61, pursuant to the Excise Tax Act;

The Goods Imported and Exported Drawback Regulations, SOR/73-97, pursuant to sections 114 and 275 of the Customs Act and section 44 of the Excise Tax Act;

Obsolete or Surplus Goods Remission Order, SOR /65-174 and Obsolete or Surplus Goods Remission Order SI/74-34, pursuant to the Financial Administration Act.

in an amount of which $91,348.23 was payable “as a result of transactions” which took place after the appointment of the plaintiff as receiver.

The agreed statement concludes as follows:

10. The plaintiff claims that the amount of $91,348.23, being that part of the drawback claim relating to transactions between March 1,1974 and September of 1974 when the plaintiff was the Receiver and Manager of Rapid Data pursuant to the terms of the debenture referred to in paragraph 2, above, cannot be set off by the defendant against the indebtedness of Rapid Data to the defendant because the claims were submitted by the plaintiff with respect to transactions occurring during the receivership. The plaintiff therefore claims that the sum of $91,348.23 is payable by the defendant to the plaintiff.

11. The defendant’s position is that the set off referred to in paragraph 9 above is a proper set off pursuant to s 95(1) of the Financial Administration Act and that no part of the drawback claim referred to in paragraph 6 above is owing to the plaintiff by the defendant.* [15]

ISSUES:

The issue in this case is whether the defendant can set off against the plaintiff’s claim for drawbacks the unrelated indebtedness of Rapid Data for Income Tax and Excise Tax which arose prior to the appointment of the plaintiff.

Such was the state of the record in so far as relevant, as I appreciate it, on which the matter went to trial. The Trial Division dismissed the action with costs. The learned Trial Judge stated the issue involved as follows:

The issue to be determined in this case is whether the defendant can set off against the plaintiff’s claim for drawbacks the unrelated indebtedness of Rapid Data Systems & Equipment Limited for income tax and excise tax which arose prior to the appointment of plaintiff as receiver.

and his conclusion—after reviewing the authorities—as follows:

There existed before crystallization of the floating charge a right in Rapid Data to recoup the duties paid, predicated upon the return or destruction of the goods, and in the defendant a rightful claim against Rapid Data for taxes. There were two debts and there was mutuality of those debts. The fact that the right to be reimbursed was only exercised after the appointment of a receiver is not, in my view, a bar to the set off of the one debt against the other as between the two parties. The Situation would have been altogether different, of course, if all the transactions, namely the importation of the goods, the payment of the duties and the return or destruction of the goods, had taken place after crystallization.

The appellant appealed to this Court.

In this Court, by a consent order, Rapid Data was made an appellant and plaintiff and it was ordered

that, where reference is made in the pleadings and in the Agreed Statement of Facts in this action to the “Plaintiff”, such references be, and they are, hereby deemed to be references to the Plaintiff, The Clarkson Company Limited, the Receiver and Manager of the property and undertaking of Rapid Data Systems & Equipment Limited.

(This obviated the problem as to who should be the plaintiff where there is an equitable assignment.* [16] It does not obviate the problem of “mutuality”.)

At the conclusion of the argument in this Court, judgment was reserved and arrangements were worked out with counsel for further representations in writing, which arrangements were summarized as follows:

I. Counsel are given an opportunity to file memoranda for the assistance of the Court on the following questions:

1. Whether this Court can or should take into consideration in determining this appeal, certain provisions of the Financial Administration Act—not mentioned in the memoranda filed by Counsel or during argument—such provisions being s 80 et seq regarding assignment of claims against the Crown.

2. What application, if any, such provisions would have with regard to the application of the line of cases represented by the Robbie case [1963] 3 AER 613.

II. Whether the statutory provisions authorizing remissions, drawbacks and refunds of taxes (and the regulations made thereunder) give rise to legal obligations enforceable against the Crown, and, if so, upon the happening of what events.

III. The time worked out with Counsel for such representations are:

(a) for appellant’s memorandum: 4 weeks.

(b) for respondent’s memorandum: 4 weeks.

(c) for appellant’s reply: 1 week.

Memoranda have been filed in accordance with that arrangement.

APPENDIX “B”

It would appear that in September, 1974, Clarkson submitted a number of drawback claims in respect of goods imported by Rapid Data before Clarkson’s appointment as receiver, some of which were in respect of goods exported or destroyed before that time and some of which were in respect of goods exported or destroyed after that time. According to the agreed statement, the claims were “approved” by the defendant (ie, Her Majesty), in the total amount of $231,291.90, pursuant to

(a) the General Excise and Sales Tax Regulations, SOR/72-61, pursuant to the Excise Tax Act;

(b) the Goods Imported and Exported Drawback Regulations, SOR/73-97, pursuant to sections 114 and 275 of the Customs Act and section 44 of the Excise Tax Act; and

(c) the Obsolete or Surplus Goods Remission Order, SOR/65-174 and the Obsolete or Surplus Goods Remission Order, SI/74-34, pursuant to the Financial Administration Act.

Of that amount of $231,291.90, $91,348.23 was in respect of goods exported or destroyed after Clarkson’s appointment as receiver.

We therefore know that, of claims totalling the sum of $91,348.23, all or part is said to have been “approved” by Her Majesty under one or more of the Regulations or Orders enumerated. It becomes relevant to consider each of them in the light of its statutory authority with a view to appraising the legal results flowing from its application to the facts shown by the record.

The General Excise and Sales Tax Regulations purport to have been made by the Minister of National Revenue pursuant to sections 31, 35 and 40 of the Excise Tax Act on March 7, 1972, which is after the Revised Statutes of 1970 came into force. The only portion of those sections that would seem to be applicable in respect of the portion of the Regulations here in question is subsection 35(1), which authorizes the Minister to make such regulations as he deems necessary or advisable for carrying out the Act. It is presumably to be read with subsection 44(1), which reads in part:

44.(1) A deduction from, or refund of, any of the taxes imposed by this Act may be granted

(e) where goods are exported, under regulations prescribed by the Minister; or

The only portion of the General Excise and Sales Tax Regulations that would seem to be relevant is section 8, which reads:

8. Where goods on which sales tax or excise tax has been paid under the Act are exported without having been used in Canada, a refund of the taxes so paid or a deduction from future taxes payable may be granted,

(a) if evidence of payment of the tax on the purchase of the goods, in the case of domestic goods, or

(b) if evidence of payment of the tax on the importation of the goods in the form of a receipted copy of the original import entry, in the case of goods imported into Canada

is maintained on file by the exporter for examination by officers of the Department and evidence satisfactory to the Minister is produced to establish that the goods have been exported from Canada.

The Goods Imported and Exported Drawback Regulations purport to have been made by the Governor in Council under section 44 of the Excise Tax Act and sections 114 and 275 of the Customs Act. The reference to section 44, in the case of these regulations, would appear to be to subsection (8) thereof, which reads:

(8) A drawback of ninety-nine per cent of the taxes imposed by Parts III, IV and V and paid on or in respect of goods

(a) exported,

(b) supplied as ships’ stores,

(c) used for the equipment, repair or reconstruction of ships or aircraft, or

(d) delivered to telegraph cable ships proceeding on an ocean voyage for use in the laying or repairing of oceanic telegraph cables outside Canadian territorial waters,

may be granted under regulations of the Governor in Council; . ..

The only portion of the provisions referred to in the Customs Act that would appear to be relevant for present purposes is subsection 275(1), which reads, in part:

275.(1) The Governor in Council may, under regulations made by him for that purpose,

(a) allow, on the exportation of goods which have been imported into Canada and on which a duty of customs has been paid, a drawback equal to the duty so paid with such deduction therefrom as is provided in such regulations; and

The relevant part of the Goods Imported and Exported Drawback Regulations would appear to be:

3. Subject to these Regulations, the Minister shall authorize the payment to an exporter or importer of goods of a drawback of 99% of the Customs duty and excise taxes paid on imported goods that are exported and that have not

(a) been used in Canada for any purpose other than exclusively in the development or production of goods that are to be exported;

(b) been used as plant equipment; and

(c) been damaged prior to such export.

5. A claim for drawback shall

(a) be made in such form as the Minister may prescribe;

(b) be accompanied by

(i) waivers from any person, other than the claimant, who, pursuant to these Regulations, could be entitled to claim a drawback, and

(ii) such other evidence of entitlement to the drawback as is satisfactory to the Minister; and

(c) be filed at a Customs office within two years of the date of exportation shown on each export entry referred to in the claim.

6. No payment shall be made in respect of any claim for drawback unless the Customs duty and excise taxes on the goods in respect of which the claim referred to in section 5 is made were paid within the three-year period immediately preceding the date of exportation of the imported goods and have not been refunded.

The Obsolete or Surplus Goods Remission Order purports to have been made by the Governor in Council on April 29, 1965, under section 22 of the Financial Administration Act, which at that time was chapter 116 of RSC 1952. Section 22 then read, in part:

22.(1) The Governor in Council, on the recommendation of the Treasury Board, whenever he considers it in the public interest, may remit any tax, fee or penalty.

(2) A remission pursuant to this section may be total or partial, conditional or unconditional, and may be granted

(a) before, after or pending any suit or proceeding for the recovery of the tax, fee or penalty in respect of which it is granted,

(b) before or after any payment thereof has been made or enforced by process or execution, and

(c) in the case of a tax or fee, in any particular case or class of case and before the liability therefor arises.

(3) A remission pursuant to this section may be granted

(a) by forbearing to institute a suit or proceeding for the recovery of the tax, fee or penalty in respect of which the remission is granted,

(b) by delaying, staying or discontinuing any suit or proceeding already instituted,

(c) by forbearing to enforce, staying or abandoning any execution or process upon any judgment,

(d) by the entry of satisfaction upon any judgment, or

(e) by repaying any sum of money paid to or recovered by the Minister for the tax, fee or penalty.

(6) No tax paid to Her Majesty on any goods shall be remitted by reason only that after the payment of the tax and after release from the control of customs or excise officers, the goods were lost or destroyed.

(8) A statement of each remission of one thousand dollars or more granted under this section shall be reported to the House of Commons in the Public Accounts.

The Obsolete or Surplus Goods Remission Order read in part:

3. Subject to these Regulations, remission is hereby granted of 90% of the Customs duty and excise taxes paid on imported goods where

(a) the goods are obsolete or surplus to requirements in Canada;

(b) the goods have not been used in Canada for any purpose;

(c) the goods are

(i) exported to the country from which they were imported, or

(ii) destroyed in Canada at the expense of the owner under Customs supervision; and

(d) application for the remission in a form approved by the Minister has been filed with a Collector of Customs and Excise within two years from the date of payment of the customs duty and excise taxes on the goods.

6. An application for a remission shall be accompanied by such documentary evidence as the Minister may require respecting the quantity and identity of the goods, the amount of duty and taxes paid thereon and the validity of the claim.

7. A remission granted by this Order may be paid to the importer or the owner of the Imported goods.

The second Obsolete or Surplus Goods Remission Order referred to above purports to revoke the first one and to have been made on March 12, 1974, under section 17 of the Financial Administration Act, RSC 1970, c F-10, which reads, for present purposes, the same as section 22 of the 1952 Act. The second Obsolete or Surplus Goods Remission Order reads, in part:

3.(1) Subject to sections 6 and 7, remission is hereby granted of ninety-nine per cent of all customs duty and excise taxes paid or payable at time of entry on goods imported into Canada where the goods

(a) were not used in Canada for any purpose;

(b) were found by the importer or owner of the goods to be obsolete or surplus to requirements; and

(c) were destroyed under the direction of a customs officer and were not damaged prior to their destruction.

(2) The remission described in subsection (1) shall be granted to the importer or the owner of the goods referred to in that subsection.

4.(1) Subject to this section and sections 6 and 7, remission is hereby granted of ninety-nine per cent of the customs duty paid or payable on

(a) imported materials used in, wrought into or attached to goods, and

(b) imported materials, other than fuel or plant equipment, directly consumed in the manufacture or production of goods,

where such goods are found by the manufacturer, producer or owner of the goods to be obsolete or surplus to requirements and are destroyed under the direction of a customs officer.

(4) The remission described in subsection (1) shall be granted to the manufacturer, producer or owner of the goods referred to in that subsection.

6. A claim for remission shall be

(a) made in a form approved by the Minister;

(b) accompanied by

(i) waivers from any other person who, pursuant to this order, is entitled to claim a remission,

(ii) proof, satisfactory to the Minister, of the identification and description of the goods referred to in subsections 3(1) and 4(1), and

(iii) such other proof of entitlement to the remission satisfactory to the Minister, and

(c) filed at a customs office within two years of the date of the destruction of the goods referred to in subsections 3(1) and 4(1).

7. No payment shall be made with respect to any claim for remission unless the customs duty or excise taxes on the materials or goods with respect to which the claim is made were paid within the three-year period immediately preceding the date of the destruction of the goods and have not been refunded.

I raise here a question, which does not require to be answered, for purposes of this appeal, if my views with regard thereto are correct, viz:

(a) as to whether the Financial Administration Act authorizes a general remission order, which in effect amends the taxing Act, as opposed to the remission of specific tax liability (see, for example, subsection 17(8) of the Act, which requires a report to Parliament of “each remission of one thousand dollars or more’’),* [17]

(b) as to whether authority to repay, pay back, refund or “remit’’ a tax includes a power to pay to one person money received as tax from another or whether it is restricted to forgiving the debt or repaying the amount paid as tax to the person by whom it was paid, and

(c) as to whether, where there is authority to repay, etc, a time will ever arise where there is a cause of action to recover unpaid money.

Assuming, as I do in my reasons for dismissing the appeal, that the appellant had a good cause of action for the drawback claimed, it must be assumed that, under the above provisions, a time may arrive, after claims for drawback are made and before payment thereof, when a legal right thereto comes into existence and that the parties had, in effect, agreed that such time had arisen in this case when they agreed that the claims were approved by Her Majesty. On that assumption, and assuming that the Regulations and Orders referred to above are valid in all respects, the drawback claimed by the statement of claim was legally payable to somebody

(a) as importer of the goods subsequently exported or destroyed, or

(b) as owner or exporter of such goods.