Saint-Romuald (Town) v. Canada (Attorney General), docket T-1304-96

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docket T-1304-96

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^{Date: 19971114}

^{Docket: T-1304-96}

^{OTTAWA, ONTARIO, NOVEMBER 14, 1997}

^{Present: THE HONOURABLE MR. JUSTICE MARC NADON}

^Between:

^{TOWN OF SAINT-ROMUALD, a legal person established in the}

^{public interest having its head office and principal place of business at}

^{2175 Chemin du Fleuve in Saint-Romuald, district of}

^{Québec, G6W 7W9,}

^Plaintiff,

^{- AND -}

^{ATTORNEY GENERAL OF CANADA, Guy-Favreau}

^{Complex, East Tower, 200 René-Lévesque Boulevard}

^{West, 5th Floor, Montréal, H2Z 1X4,}

^Defendant.

^ORDER

^{The motion is allowed. The plaintiff}^?^{s statement of claim is struck out with costs to the defendant.}

^{MARC NADON}

^Judge

^{Certified true translation}

^{Stephen Balogh}

^{Date: 19971114}

^{Docket: T-1304-96}

^Between:

^{TOWN OF SAINT-ROMUALD, a legal person established in the}

^{public interest having its head office and principal place of business at}

^{2175 Chemin du Fleuve in Saint-Romuald, district of}

^{Québec, G6W 7W9,}

^Plaintiff,

^{- AND -}

^{ATTORNEY GENERAL OF CANADA, Guy-Favreau}

^{Complex, East Tower, 200 René-Lévesque Boulevard}

^{West, 5th Floor, Montréal, H2Z 1X4,}

^Defendant.

^{REASONS FOR ORDER}

^{NADON J.}

^[¹^{] The Attorney General of Canada (the Attorney General), acting on behalf of the federal Crown, seeks an order of this Court striking out the plaintiff}^?^{s statement of claim. In support of her motion, the Attorney General relies on Rule 419(1)(}^a^{) of the} ^{Federal Court Rules}^{, which reads as follows:}^{Rule 419. (1) The Court may at any stage of an action order any pleading or anything in any pleading to be struck out, with or without leave to amend, on the ground that}

⁽^a ^{) it discloses no reasonable cause of action or defence, as the case may be,}

^{. . .}

^{and may order the action to be stayed or dismissed or judgment to be entered accordingly.}

^[²^{] On June 3, 1996, the town of Saint-Romuald (the town) brought an action against the federal Crown for non-payment of a surtax on non-residential immovables in Saint-Romuald owned by the federal Crown.}

^[³^{] The plaintiff claims an amount of $20,119.97: $10,059.99 for 1994 and $10,059.98 for 1995.}

^[⁴^{] The plaintiff}^?^{s statement of claim reads as follows:}

^{[TRANSLATION]}

^{IN SUPPORT OF ITS ACTION, THE PLAINTIFF DOES STATE THE FOLLOWING:}

^{1. It is a legal person established in the public interest, lawfully incorporated pursuant to the} ^{Cities and Towns Act}^{, R.S.Q., c. C-19;}

^{2. Pursuant to section 244.11 of the} ^{Act respecting municipal taxation}^{, R.S.Q., c. F-2.1, the plaintiff adopted a by-law to impose the surtax on non-residential immovables;}

^{3. The defendant was the owner of the immovable located on lots 1-4 and 1-5 in 1994 and 1995;}

^{4. The above lots are not used for an agricultural operation registered in accordance with a regulation adopted under the} ^{Act respecting the Ministère de l}^?^{Agriculture, des Pêcheries et de l}^?^Alimentation^{, for the whole of which a certificate was issued under that Act, and does not consist only of vacant land, a body of water or both, as will be demonstrated at the hearing;}

^{5. Pursuant to the} ^{Municipal Grants Act, 1980}^{, R.S.C. 1985, c. M-13, the plaintiff received a grant in lieu of a portion of the real property tax owing in respect of the above-mentioned immovables for 1994 and 1995, but received no grant in lieu of the surtax on non-residential immovables for those same years;}

^{6. The plaintiff is accordingly entitled to claim payment of the surtax on non-residential immovables from the defendant for the said years;}

^{7. For 1994, the real property tax on the above-mentioned immovables was $17,004.34, whereas the surtax on non-residential immovables for the same immovables was $10,059.99;}

^{8. The plaintiff received a grant of $17,004.35, in two instalments; as a result, there are tax arrears for 1994 in the amount of $10,059.98, which corresponds to the amount owing in respect of the surtax on non-residential immovables;}

^{9. For 1995, the real property tax amounted to $17,186.40, while the surtax on non-residential immovables amounted to $10,059.98;}

^{10. On April 18, 1995, the plaintiff received a grant of $17,186.40, which corresponds to the real property tax amount owing for 1995; as a result, there remains a balance receivable of $10,059.99, which corresponds to the amount owing in respect of the surtax on non-residential immovables;}

^{11. The plaintiff is accordingly entitled to claim payment from the defendant of an amount of $20,119.97, which corresponds to the arrears for 1994 and 1995 in respect of the surtax on non-residential immovables;}

^{12. Although the amount owing has been duly claimed from the defendant, the defendant refuses to pay it;}

^{13. This action is well founded in fact and in law. . . .}

^[⁵^{] In summary, the plaintiff}^?^{s reasoning appears to be as follows. It adopted a by-law to impose a surtax on non-residential immovables situated within its territory. At all material times, the federal Crown was the owner of two non-residential immovables situated within the town}^?^{s territory. Pursuant to the} ^{Municipal Grants Act}^{, the federal Crown made the town a grant in lieu of the real property tax owing for 1994 and 1995 in respect of its non-residential immovables. The federal Crown made no grant to the town in lieu of the surtax on the said immovables. As a result, according to the plaintiff, the federal Crown, having made no grants to the town in lieu of the surtax, is liable to pay it the amounts owing for the surtax.}

^[⁶^{] This, in short, is the plaintiff}^?^{s position. As for the federal Crown, its position is as follows. It enjoys immunity from taxation and cannot accordingly be regarded as a mere taxpayer. Under the} ^{Municipal Grants Act}^{, the Minister of Public Works has an absolute discretion with respect to the making of grants to municipalities. The federal Crown submits that it cannot be sued as a mere taxpayer and that the plaintiff}^?^{s statement of claim accordingly discloses no reasonable cause of action. Thus, according to the federal Crown, the statement of claim must be struck out.}

^ISSUE:

^[⁷^{] Does the plaintiff}^?^{s statement of claim disclose a reasonable cause of action against the federal Crown?}

^{RELEVANT STATUTORY PROVISIONS:}

^[⁸^{] Section 244.11 of the}^{Act respecting municipal taxation}^{, R.S.Q., c. F-2.1, authorizes every municipality to adopt a by-law imposing a surtax on non-residential immovables:}^{244.11 Every local municipality may, by by-law, impose a surtax on units of assessment, entered on its real estate assessment roll, which are constituted of non-residential immovables or of residential immovables for which the operator is required to hold a permit issued under the Tourist Establishments Act (chapter E-15.1).}

^[⁹^{] The} ^{Municipal Grants Act}^{, R.S.C. 1985, c. M-13, authorizes the federal government to make a grant to a municipality, or any other} ^?^{taxing authority}^?^{, in lieu of a real property tax:}^{3. (1) The Minister may, on receipt of an application in a form provided or approved by the Minister, make a grant out of the Consolidated Revenue Fund to a taxing authority applying therefor}

⁽^a^{) in lieu of a real property tax for a taxation year, and}

⁽^b^{) in lieu of a frontage or area tax}

^{in respect of federal property situated within the area in which the taxing authority has the power to levy and collect the real property tax or the frontage or area tax.}

^{(2) Notwithstanding anything in this Act, where real property is prescribed to be included in the definition "federal property" pursuant to paragraph 9(1)(}^d^{) or (}^e^{), a grant may be made under this Act in respect of that property for the entire taxation year in which the prescription is made.}

^{(3) In respect of a corporation included in Schedule I, a grant may be made under this section only in respect of the real property of the corporation specified in that Schedule or prescribed by the Governor in Council.}

^[¹⁰^{] The following sections set out the amounts that can be paid:}^{4. (1) Subject to subsections (2) and (3) and 5(1) and (2), a grant referred to in paragraph 3(1)(a) shall not exceed the product of}

⁽^a^{) the effective rate in the taxation year applicable to the federal property in respect of which the grant may be made; and}

⁽^b^{) the property value in the taxation year of that federal property.}

^{(2) Where all or part of the real property tax levied by a taxing authority in a taxation year is for school purposes and is levied at different rates}

⁽^a^{) for taxpayers of different religious denominations, or}

⁽^b^{) for taxpayers of different religious denominations and for different classes of taxable property,}

^{there shall be substituted for the effective rate referred to in paragraph (1)(}^a^{) a rate equal to the rate calculated in accordance with subsection (3).}

^{(3) For the purposes of subsection (2), the rate substituted for the effective rate referred to in paragraph (1)(}^a^{) shall be a rate equal to the aggregate of that part of the effective rate in the taxation year that is used in determining the amount of the real property tax that is levied for purposes other than school purposes, and}

⁽^a^{) if paragraph (2)(}^a^{) applies, a rate for school purposes determined by dividing}

^{(i) the portion of the real property tax levied for school purposes by the taxing authority in the taxation year,}

^by

^{(ii) the assessed value of all taxable property under the jurisdiction of the taxing authority in respect of which such portion of the real property tax for school purposes is levied in the taxation year, or}

⁽^b^{) if paragraph (2)(}^b^{) applies, a rate for school purposes for each class of taxable property determined by dividing}

^{(i) the portion of the real property tax levied for school purposes by the taxing authority in respect of property of that class in the taxation year,}

^by

^{(ii) the assessed value of all taxable property of that class under the jurisdiction of the taxing authority in respect of which that portion of the real property tax for school purposes is levied in the taxation year.}

^{5. (1) Where, for any taxation year,}

⁽^a^{) a real property tax rate is established by a taxing authority without taking into account all federal property situated within the area in which the taxing authority has the power to levy and collect a real property tax, and}

⁽^b^{) the property value of the federal property not taken into account exceeds twenty-five per cent of the total assessed value of taxable property situated within the area in which the taxing authority has the power to levy and collect a real property tax,}

^{the Minister may, in determining the amount of any grant to that taxing authority, make an adjustment in the effective rate or in any portion thereof so that the grant will not exceed the amount described in subsection (2).}

^{(2) The amount referred to in subsection (1) is the amount that would have been determined by the Minister if the property value referred to in paragraph (1)(}^b^{) that is in excess of twenty-five per cent of the total assessed value of the taxable property situated within the area in which the taxing authority referred to in subsection (1) has the power to levy and collect a real property tax, had been taken into account by the taxing authority in establishing the real property tax rate for the taxation year.}

^{(3) Where one authority collects a real property tax that is established by another authority, the authority that collects the tax shall, for the purposes of subsections (1) and (2), be deemed to be the authority that establishes the real property tax rate.}

^{6. (1) A grant referred to in paragraph 3(1)(}^b^{) shall not exceed the product of}

⁽^a^{) the effective rate applicable to federal property in respect of which the grant may be made,}

^and

⁽^b^{) the property dimension of that federal property.}

^{(2) Where a frontage or area tax is payable over a period of more than one year, the Minister may make a grant in lieu of that tax in annual instalments together with interest or in a lump sum without interest.}

^{7. In determining the amount of a grant for a taxation year pursuant to paragraph 3(1)(}^a^{), there may be deducted}

⁽^a^{) an amount in respect of}

^{(i) an educational service, where there is in effect a special arrangement for the provision or financing of that service by Her Majesty in right of Canada, and}

^{(ii) any other service, where a taxing authority, or a body on behalf of which that authority collects a real property tax, is, in the opinion of the Minister, unable or unwilling to provide federal property with a service that it normally provides to taxable property, or where there is in effect a special arrangement for an alternative means of compensating that taxing authority or body for providing that service,}

^{equal to the product of}

^{(iii) the property value in the taxation year of the federal property in respect of which the service is not provided,}

^and

^{(iv) the portion of the effective rate in the taxation year for that federal property that, in the opinion of the Minister, applies to that service; and}

⁽^b^{) an amount that, in the opinion of the Minister, is equal to any cancellation, reduction or refund in respect of a real property tax that the Minister considers would be applicable to the taxation year in respect of federal property if it were taxable property.}

^{8. In determining the amount of a grant pursuant to paragraph 3(1)(}^b^{), there may be deducted an amount that, in the opinion of the Minister, does not exceed reasonable expenditures incurred or expected to be incurred by Her Majesty in right of Canada to provide federal property with the service or work to which the frontage or area tax is related.}

^[¹¹^{] Finally, section 15 provides that the} ^{Municipal Grants Act}^{confers no right to a grant:}^{15. No right to a grant is conferred by this Act.}

^ANALYSIS:

^[¹²^{] The case law on motions under Rule 419(1)(}^a^{) is well established. A statement of claim will be struck out if the Court is satisfied that the plaintiff}^?^{s action cannot succeed, that is,} ^?^that ^?^{the case is beyond doubt}^??^{. Dickson C.J. stated the following in} ^{Operation Dismantle v. The Queen}^{, [1985] 1 S.C.R. 441:}^{The respondents, by a motion pursuant to Rule 419(1)(}^a^{) of the} ^{Federal Court Rules}^{, moved for an order to strike out the appellants}^?^{statement of claim as disclosing no reasonable cause of action. Rule 419(1)(}^a^{) reads as follows:}

^{Rule 419. (1) The Court may at any stage of an action order any pleading to be struck out, with or without leave to amend, on the ground that}

⁽^a^{) it discloses no reasonable cause of action or defence, as the case may be, . . .}

^{The most recent and authoritative statement of the principle applicable to determine when a statement of claim may be struck out is that of Estey J. in} ^{Attorney General of Canada v. Inuit Tapirisat of Canada}^{, [1980] 2 S.C.R. 735">[1980] 2 S.C.R. 735, at p. 740:}

^{As I have said, all the facts pleaded in the statement of claim must be deemed to have been proven. On a motion such as this a court should, of course, dismiss the action or strike out any claim made by the plaintiff only in plain and obvious cases and where the court is satisfied that} ^?^{the case is beyond doubt}^?^: ^{Ross v. Scottish Union and National Insurance Co.}^{(1920), 47 O.L.R. 308 (App. Div.)}

^{Madam Justice Wilson in her reasons in the present case [at p. 486] summarized the relevant principles as follows:}

^{The law then would appear to be clear. The facts pleaded are to be taken as proved. When so taken, the question is do they disclose a reasonable cause of action,} ^i.e.^{a cause of action} ^?^{with some chance of success}^?⁽ ^{Drummond-Jackson v. British Medical Association}^{, [1970] 1 All E.R. 1094) or, as Le Dain J. put it in} ^{Dowson v. Government of Canada}^{(1981), 37 N.R. 127 (F.C.A.), at p. 138, is it} ^?^{plain and obvious that the action cannot succeed}^?^.

^{I agree with Madam Justice Wilson that, regardless of the basis upon which the appellants advance their claim for declaratory relief}^?^{whether it be s. 24(1) of the} ^Charter^{, s. 52 of the} ^{Constitution Act, 1982}^{, or the common law}^?^{they must at least be able to establish a threat of violation, if not an actual violation, of their rights under the} ^Charter^.

^{In short then, for the appellants to succeed on this appeal, they must show that they have some chance of proving that the action of the Canadian government has caused a violation or a threat of violation of their rights under the} ^Charter^.

^[¹³^{] In paragraph 11 of its statement of claim, the town claims $20,119.97 from the federal Crown; this corresponds to the amounts owing for the surtax on the federal Crown}^?^{s non-residential immovables for 1994 and 1995. There can be no doubt that, as written, the plaintiff}^?^{s statement of claim is directed at the federal Crown as if it were a mere taxpayer, which is not at all the case. Patrice Garant stated the following on this point in} ^{Droit Administratif}^{, 3rd ed., 1991, vol. 1: Structures, actes et contrôles, Éditions Yvon Blais Inc., at page 54:}

^{[TRANSLATION]}

^{Immunity from taxation is a privilege in the government}^?^{s favour that has increased in importance due to the federal nature of Canada and our administrative tradition that municipal government also has its share of the tax base.}

^{The royal prerogative according to which the Crown enjoys immunity from taxation in respect of its property, revenues and activities has been expressly stated in legislative provisions on a number of occasions. The most important such provision is section 125 of the Constitution, which reads as follows:} ^?^{No Lands or Property belonging to Canada or any Province shall be liable to Taxation}^?^{. This provision does not limit the Crown}^?^{s common law immunity from taxation, which applies not only to real property taxes but also to any other form of taxation, such as sales tax, business taxes and income tax, subject to certain restrictions established by the courts.}

^[¹⁴^{] It is clear that the federal Crown is not liable to pay real property taxes unless it agrees to do so. According to the principle of the Crown}^?^{s immunity from taxation, it is in my view incontestable that the federal Crown cannot be sued as a mere taxpayer under Quebec}^?^s ^{Act respecting municipal taxation}^{or any other taxing statute. The town does not disagree with this position, but submits that it is legally entitled to claim the amounts of the surtax for 1994 and 1995 in respect of the federal Crown}^?^{s non-residential immovables under the federal} ^{Municipal Grants Act}^{. According to counsel for the town, as soon as the grant was made in 1994 and 1995, the Minister no longer had discretion over the quantum of the grant, which is determined by the} ^{Municipal Grants Act}^.

^[¹⁵^{] Let us look briefly at that Act. Section 3(1) thereof states that the Minister may make a grant to a municipality to compensate for the loss of real property taxes in a given taxation year.}

^[¹⁶^{] Section 15 of the Act states that the Act confers no right to a grant on municipalities.}

^[¹⁷^{] Sections 4 to 7 set out the maximum amounts the Minister may pay under the Act.}

^[¹⁸^{] In my view, this Act merely confirms the principle of the Crown}^?^{s immunity from taxation in that the federal Crown agrees therein to make grants to municipalities in lieu of a real property tax in certain circumstances. The Act confers no right to a grant on municipalities. Rather, it gives the Minister a broad discretion when making grants to municipalities; the only limit on its discretion relates to the maximum amounts set out in sections 4 to 8.}

^[¹⁹^{] Since it is clear that the} ^{Municipal Grants Act}^{confers no right to a grant on municipalities, the town cannot in my view sue the federal Crown by way on an action for non-payment of the surtax on its non-residential immovables. This must be the case, since the federal Crown is under no legal obligation to pay the surtax. The amounts received by the town for 1994 and 1995 result from the exercise of the Minister}^?^{s discretion under the} ^{Municipal Grants Act}^.

^[²⁰^{] Did the Minister err in exercising his discretion under the} ^{Municipal Grants Act}^{by refusing to make grants to the town in lieu of the surtax? Did the Minister err in law in deciding to refuse to make a grant in relation to the surtax? While these questions are apposite, they fall instead within the sphere of judicial review. I obviously do not have to answer these questions, but it appears to me that if the town has a remedy, it is instead by way of an application for judicial review against the Minister}^?^{s refusal to make it a grant in lieu of the surtax for 1994 and 1995.}

^[²¹^{] In my view, the town}^?^{s action clearly cannot succeed. The federal Crown is not liable to pay the surtax on its non-residential immovables to the town for 1994 and 1995. The town is in effect contesting the Minister}^?^{s exercise of his discretion. A statement of claim like that filed by the town on June 3, 1996 is not the appropriate procedure in the circumstances.}

^[²²^{] For these reasons, the town}^?^{s statement of claim will be struck out with costs to the federal Crown.}

^{MARC NADON}

^Judge

^{Ottawa, Ontario}

^{November 14, 1997}

^{Certified true translation}

^{Stephen Balogh}

^{FEDERAL COURT OF CANADA}

^{TRIAL DIVISION}

^{NAMES OF COUNSEL AND SOLICITORS OF RECORD}

^{COURT NO.: T-1304-96}

^{STYLE OF CAUSE: TOWN OF SAINT-ROMUALD v.}

^{ATTORNEY GENERAL OF CANADA}

^{PLACE OF HEARING: QUÉBEC, QUEBEC}

^{DATE OF HEARING: OCTOBER 2, 1997}

^{REASONS FOR ORDER BY NADON J.}

^{DATED: NOVEMBER 14}

^APPEARANCES:

^{PIERRE DELISLE FOR THE PLAINTIFF}

^{ROSEMARIE MILLAR FOR THE DEFENDANT}

^{SOLICITORS OF RECORD:}

^{POTHIER, DELISLE & ASSOCIÉS FOR THE PLAINTIFF}

^{GEORGE THOMSON FOR THE DEFENDANT}

^{DEPUTY ATTORNEY GENERAL OF CANADA}

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Saint-Romuald (Town) v. Canada (Attorney General), docket T-1304-96

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