Rhine v. The Queen, [1980] 2 SCR 442

Supreme Court of Canada

Rhine v. The Queen, [1980] 2 S.C.R. 442

Date: 1980-12-02

Perry J. Rhine (Defendant) Appellant;

and

Her Majesty The Queen (Plaintiff) Respondent.

Barbara Jean Prytula (formerly Barbara Jean Erickson) (Defendant) Appellant;

and

Her Majesty The Queen (Plaintiff) Respondent.

1980: November 5, 6; 1980: December 2.

Present: Laskin C.J. and Martland, Ritchie, Dickson, Estey, Mclntyre and Chouinard JJ.

ON APPEAL FROM THE FEDERAL COURT OF APPEAL

Jurisdiction—Courts—Debts guaranteed by federal government through statutory scheme and paid by the government on default by each of the appellants—Whether or not Federal Court, Trial Division, had jurisdiction to entertain claim made by the Crown against the appellants for repayment—Prairie Grain Advance Payments Act, R.S.C. 1970, c. P-18, ss. 2, 4—Canada Student Loans Act, R.S.C. 1970, c. S-17, s. 13(j)—Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 17(4) (a).

These two appeals raised the single issue—whether or not there was jurisdiction in the Federal Court—Trial Division, to entertain the claim made in each case by the Crown in right of Canada. The claim in the Rhine case was to recover $417, allegedly an advance payment, made to the appellant under the Prairie Grain Advance Payments Act, which he had failed to repay. The claim in the Prytula case was to recover $540 and interest, alleged owed because of a loan made to the appellant pursuant to the Canada Student Loans Act, guaranteed by the Minister of Finance and repaid by the Crown on her failure to repay. The Crown claimed that amount by subrogation.

In both cases judgment was sought in the Federal Court because of default of defence. The Federal Court

[Page 443]

of Appeal allowed the Crown’s appeal from the decision at trial that the Court was without jurisdiction, and in effect held that the McNamara case did not govern either of the cases in appeal. The question to be determined was whether the source of the Crown’s claims was an existing federal law, or whether the claims arose out of agreements for the respective loans, merely giving rise to provincial common law actions no different from the situation in the McNamara case.

Held: The appeals should be dismissed.

Each of the statutes provided for the advancing of federal funds or federally guaranteed funds to eligible individuals, as defined in the respective statutes and regulations, and for repayment and for the means for enforcing repayment. This was all a matter of the administration of a federal statute and was within s. 101 of the British North America Act. The Federal Court—Trial Division therefore had jurisdiction under s. 17(4)(a) of the Federal Court Act.

In the Rhine case, although the claim was not for enforcement of a lien but rather for payment upon default in accordance with the undertaking, it was not simply the enforcement of an ordinary contractual obligation which owed nothing to its origin in statutory authorization to make the advance to the federal law. There was a detailed statutory framework under which advances for prospective grain deliveries were authorized as part—an important part—of an overall scheme for the marketing of grain produced in Canada. There was a contractual consequence of the application of the Act but that did not mean that the Act was left behind once the contract was made. At every turn, the Act had its impact on the contract, making it proper to say that existing and valid federal law governed the transaction. The transactions in the McNamara case were not contained in such a statutory shelter and were without a statutory base; the Crown’s suit there to enforce a surety bond was merely pursuant to an administrative requirement for the taking of the bond to secure contract obligations in favour of the Crown.

In the Prytula case, the Canada Student Loans Act and regulations governed every aspect of the relationship between the borrowing student, the lending bank and the guaranteeing government. Resort had to be made to the statute and regulations to support any legal claims whether by the bank or by the government, or to determine the liability of the borrowing student. Moreover,

[Page 444]

the subrogation of the Crown to the claim of the bank was expressly dealt with. There was existing and applicable federal law to underpin the jurisdiction of the Federal Court.

McNamara Construction (Western) Ltd. v. The Queen, [1977] 2 S.C.R. 654, distinguished; Murphy v. C.P.R., [1958] S.C.R. 626, referred to.

APPEALS from judgments of the Federal Court of Appeal[1], allowing appeals from judgments of Cattanach J. Appeals dismissed.

John J. Robinette, Q.C., for the appellants.

T.B. Smith, Q.C., and David T. Sgayias, for the respondent.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—These two appeals, which are here by leave of this Court and which were argued together, raise the same single issue, namely, whether there was jurisdiction in the Federal Court, Trial Division, to entertain the claim made in each case by the Crown in right of Canada. The clam in the Rhine case was to recover $417, alleged to be owing as an advance payment made to the appellant under the authority of the Prairie Grain Advance Payments Act, R.S.C. 1970, c. P-18, and which he failed to repay. The claim in the Prytula case was to recover $540 and interest, alleged to be owing by the appellant by reason of a loan made to her by a bank, pursuant to the Canada Student Loans Act, R.S.C. 1970, c. S‑17, a loan guaranteed by the Minister of Finance, and which, on the failure of the appellant to repay, was satisfied by the Crown which then claimed it from her by subrogation.

In both cases there was default of defence and judgment was sought on that basis in the Federal Court. Cattanach J., who heard the application for

[Page 445]

judgment in each case, concluded that by reason of the judgment of this Court in McNamara Construction (Western) Ltd. v. The Queen[2], he lacked jurisdiction. On appeal, the Federal Court of Appeal, speaking through Heald J. in each case, allowed the Crown’s appeal and directed that the case be returned to the Trial Division on the footing that there was jurisdiction. In short, the Federal Court of Appeal held that the McNamara case did not govern either of the two cases in appeal here.

It is common ground, especially in the light of the McNamara case, that s. 17(4)(a) of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, under which the two actions were brought, is not itself sufficient to support jurisdiction. The mere fact that the federal Crown is plaintiff does not entitle it to use the Federal Court as the forum in which to litigate its claims. Section 17(4)(a) reads that the Federal Court, Trial Division, has concurrent original jurisdiction “(a) in proceedings of a civil nature in which the Crown or the Attorney General of Canada claims relief”. The effect of the McNamara case, shortly put, is that there must be existing and applicable federal law to support the claims made in these cases by the Crown; otherwise there would not be conformity with the prescriptions of s. 101 of the British North America Act which, inter alia, provides for the establishment by Parliament of “additional Courts for the better Administration of the Laws of Canada”. The question in these two cases is, therefore, whether it can be said that the source of the claims by the Crown is in existing federal law or whether, as was strenuously argued by Mr. J.J. Robinette, Q.C., who appeared as amicus curiae on behalf of the appellant in each case (having been originally invited to do so by the Federal Court of Appeal), the claims arose out of agreements for the respective loans so as to give rise merely to provincial common law actions no different from what was found to be the situation in the McNamara case. Mr. Robinette relied also on a statement by Cattanach J., made in each of his judgments in these cases, that “it is not enough that the liability arises

[Page 446]

in consequence of a statute”.

I turn now to each of the cases and to an examination of the legislation in each case pursuant to which the advance in the one case and the loan in the other case were made. It is relevant to note here that no doubt is cast on the validity of the legislation; it is fully conceded that each of the two enactments and regulations made under them are within federal competence.

1. The Rhine Case

The Prairie Grain Advance Payments Act has, as its stated purpose, the making of advances to grain producers in respect of grain not yet delivered to the Canadian Wheat Board. It is part of a scheme for the regulation of the grain trade, as is evidenced by s. 2(2) of the Act which provides that “This Act shall be construed as one with the Canadian Wheat Board Act…”. The latter Act was the subject of an unsuccessful challenge to its validity in Murphy v. Canadian Pacific Railway Company[3].

Under the Prairie Grain Advance Payments Act, a producer may apply to the Canadian Wheat Board (which is an agent of the Crown) for an advance payment under a prescribed form. Various details of the applicant’s business or operations must be disclosed, as stipulated in s. 4. The applicant must give an undertaking in respect of delivery of grain or in respect of repayment if grain is not delivered, and upon default proceedings may be taken against him. The statute provides for a lien upon the grain in respect of which an advance is made and Mr. Robinette conceded that in this respect there would be valid federal law to support the jurisdiction of the Federal Court. However, since the claim here is not for enforcement of a lien but rather for repayment upon default in accordance with the undertaking, it is contended that there is simply the enforcement of an ordinary contractual obligation which owes nothing to fed-

[Page 447]

eral law other than its origin in the statutory authorization to make the advance.

I do not agree that the matter can be disposed of in such simple terms. What we have here is a detailed statutory framework under which advances for prospective grain deliveries are authorized as part of an overall scheme for the marketing of grain produced in Canada. An examination of the Prairie Grain Advance Payments Act itself lends emphasis to its place in the overall scheme. True, there is an undertaking or a contractual consequence of the application of the Act but that does not mean that the Act is left behind once the undertaking or contract is made. At every turn, the Act has its impact on the undertaking so as to make it proper to say that there is here existing and valid federal law to govern the transaction which became the subject of litigation in the Federal Court. It should hardly be necessary to add that “contract” or other legal institutions, such as “tort” cannot be invariably attributed to sole provincial legislative regulation or be deemed to be, as common law, solely matters of provincial law.

In the McNamara case, there was no such statutory shelter within which the transactions there were contained as there is in the present case. The contracts in the McNamara case had no statutory base and, in so far as the Crown was also suing there to enforce a surety bond, this was merely in pursuance of an administrative requirement for the taking of such a bond to secure contract obligations in favour of the Crown. I quote the following passages on these points from the reasons in the McNamara case, at pp. 662-663:

It was the contention of the Attorney-General of Canada on behalf of the Crown that the construction contract, being in relation to a public work or property, involved on that account federal law. What federal law was not indicated. Certainly there is no statutory basis for the Crown’s suit, nor is there any invocation by the Crown of some principle of law peculiar to it by which its claims against the appellants would be assessed or

[Page 448]

determined. Counsel for the Attorney-General was candid enough to say that his position had to be that jurisdiction existed in the Federal Court in respect of any contract claim asserted by the Crown. I have already indicated that this is untenable and, clearly, s. 17(4) would be ultra vires if that was its reach. It can be valid only in so far as its terms are limited in accordance with what s. 101 of the British North America Act prescribes.

I take the same view of the Crown’s claim on the bond as I do of its claim against McNamara for damages. It was urged that a difference existed because (1) s. 16(1) of the Public Works Act, now R.S.C. 1970, c. P-38 obliges the responsible Minister to obtain sufficient security for the due performance of a contract for a public work and, (2) Consolidated Distilleries v. The King, [[1930] S.C.R. 531], stands as an authority in support of the Crown’s right to invoke the jurisdiction of the Federal Court where it sues on a bond. Neither of these contentions improves the Crown’s position. Section 16(1) of the Public Works Act stipulates an executive or administrative requirement that a bond be taken but prescribes nothing as to the law governing the enforcement of the bond. The Consolidated Distilleries case involved an action on a bond given pursuant to the federal Inland Revenue Act and, as the Privy Council noted “the subject matter of the actions directly arose from legislation of Parliament in respect of excise”: see [1933] A.C. 508 at p. 521.

There is, therefore, a wide gulf between the situation in the Rhine case, now before this Court, and the situation in the McNamara case.

2. The Prytula Case

The legislation in the Prytula case, the Canada Student Loans Act, and the regulations thereunder provide for bank loans to students which carry a government guarantee of repayment to the lending bank upon the borrower’s default and also entitle the Crown to be subrogated to the bank’s rights against the defaulter. As in the case of the legislation in the Rhine case, so too here an agreement in a prescribed form must be executed, save that here the agreement is between the student borrower and the lending bank; the government is not a direct party to the agreement but is a guarantor under

[Page 449]

the statute and a subrogee of the bank under regulations authorized by s. 13(j) of the statute.

As is correctly pointed out by the respondent in its factum, the Canada Student Loans Act and the regulations thereunder govern every aspect of the relationship between the borrowing student, the lending bank and the guaranteeing government. Resort must necessarily be had to the statute and regulations to support any legal claims, whether by the bank or by the government, or to determine the liability of the borrowing student. Moreover, subrogation of the Crown to the claim of the bank is expressly dealt with. The prescribed form of agreement between the student and the bank emphasizes this by the student’s signed assertion that “I understand my obligations under this Act and the Regulations and… I shall repay my total indebtedness as required by the Act and Regulations”. Once it is accepted, as it is here, that the Act and regulations are valid, I do not see how it can be doubted that there is here existing and applicable federal law to underpin the jurisdiction of the Federal Court.

3. Conclusion

The short answer to the issues raised by the appellants in the two cases is that each of the statutes with which they are respectively concerned provides for the advancing of federal funds or federally guaranteed funds to eligible individuals, as defined in the respective statutes and regulations, and also for repayment and the means for enforcing repayment. This is all a matter of the administration of a federal statute and is, therefore, within s. 101 of the British North America Act. Consequently, it supports jurisdiction in the Federal Court under s. 17(4)(a) of the Federal Court Act.

I would dismiss these appeals. There will be no order as to costs.

Appeals dismissed.

Amicus curiae: John J. Robinette, Toronto.

Solicitor for the plaintiff, respondent: Roger Tassé, Ottawa.