Monarch Concrete Products Ltd. v. Her Majesty the Queen, [1991] 2 CTC 249

Décary, J.A. (Heald and Linden, JJ.A, concurring):—The appellant has been in the business of manufacturing pre-cast concrete septic tanks since June 1970. From the time it commencée! doing business, the appellant has had a dispute with the office of Revenue Canada, Customs & Excise, with respect to its liability for the payment of sales taxes on the septic tanks it was manufacturing. After being advised, in March 1973, that it was required by the Excise Tax Act R.S.C. 1970, c. E-13, (the 'Act") to pay sales tax until such time as "the Department determines that you are no longer engaged in manufacturing or producing taxable goods for sale”, the appellant paid to the Receiver General for Canada sales taxes in the amount of $127,799.68 for the period June 1970 to March 1978.

In 1978 the Supreme Court of Canada's decision in Superior Pre-Cast Septic Tanks Ltd. v. The Queen, [1978] 2 S.C.R. 612; [1978] C.T.C. 431; 78 D.T.C. 6263, ruled in favour of the manufacturer in essentially the same dispute. Upon receipt of the Supreme Court's decision, the appellant notified Revenue Canada, in May 1978, of its intention to make a claim for the refund. In September 1978, Revenue Canada informed the appellant that because it had not made an application in writing for a refund, within the time period prescribed by subsections 44(6) and 44(7) of the Act, in respect of taxes paid during the periods June 1970 to March 26, 1971 and March 26, 1973 to April 1, 1975, the sales tax remitted during those periods—in the amount of $73,993.34— would not be refunded.

The appellant claimed that amount in a statement of claim filed in August 1979. The case was not heard until May 18, 1988, at which time the Associate Chief Justice held that the appellants’ application met the requirements of the Act, gave judgment for the appellant and awarded interest at the rate prescribed by the Sales and Excise Tax Interest Rate Regulations, on the principal amount owing it from May 1, 1986 onwards.

The present appeal is limited to the very narrow issue of determining whether the appellant is entitled to interest from as early as May 25, 1973 until April 30, 1986.

The answer lies in the interpretation of subsection 47(7) of the Act which reads [1] :

(7) Where an amount is paid to an applicant pursuant to subsection (6), interest at the prescribed rate shall be paid, in respect of each day between the day that is sixty days after the day on which the application was received by the Minister and the day on which the payment is sent, and compounded monthly on the total amount of the payment and interest outstanding.

The Associate Chief Justice held that as this subsection came into force only on May 1, 1986, no interest could be paid with respect to any sum owing before that date.

It is common ground that in accordance with section 36 of the Federal Court Act [2] , this Court cannot allow interest against the Crown "in the absence of any contract stipulating for payment of that interest or of a statute providing in such a case for the payment of interest by the Crown". There is no contract here and were it not for the specific provisions in the Excise Tax Act, there would have been no statute the appellant could have relied on to claim interest.

Counsel for the appellant argued that section 36 of the Federal Court Act did not apply for it was absurd to expect Parliament to adopt a statute providing for a payment of interest by the Crown in cases where the Crown did unlawfully receive taxes from its citizens. He relied on The Queen v. Premier Mouton Products Inc., [1961] S.C.R. 361; [1961] C.T.C. 160; 61 D.T.C. 1105, which dealt with the refund of taxes, not of interest, and on Air Canada v. Her Majesty The Queen in Right of Province of Manitoba, [1978] 2 W.W.R. 694 at 708-709, Monnin, J.A., aff'd [1980] 2 S.C.R. 303 at 309 (where counsel for the government of Manitoba had "dropped any challenge to the award of interest by the Manitoba Court of Appeal"), which dealt with the payment of interest by the provincial Crown pursuant to section 18 of the Proceedings Against the Crown Act, R.S.M. 1970, c. P140, enacted by the legislature of Manitoba. With respect, absent any challenge to the validity of section 36, counsel's submissions have no merit in view of the clear wording of that section with respect to claims against the Federal Crown.

Both counsel debated extensively whether or not subsection 47(7) applied retrospectively. There is in my view very little to gain in trying to define the so- called presumption against retrospective effect for, in the case at bar, what we are looking at is a payment ordered to be made, and indeed having been made, after the coming into force of the 1986 Act, with respect to an application which had been filed prior to the coming into force of the Act but which was "deemed to have been made and filed in accordance with subsections 47(2) and (3) of the (1986) Act" (subsection 55(1) of the 1986 Act, a "transitional" provision). As it is the payment of the refund, and not the payment of the interest, which triggers the application of subsection 47(7), I have no difficulty in concluding that this is a case, not of retrospective operation but of immediate effect of a statute (see A.-G. (Que.) v. Expropriation Tribunal, [1986] 1 S.C.R. 732 at 744, Chouinard, J. and Venne v. Quebec (CPTA), [1989] 1 S.C.R. 880 at 913ff, Beetz, J.) and that subsection 47(7) simply means what it says, i.e., upon payment of a refund with respect to any application not yet disposed of, the taxpayer becomes entitled to interest whether the application was made after the coming into force of the Act or before it.

That is not, however, the end of the matter, for there exist in the 1985 Act to amend the Excise Tax Act, S.C. 1985, 33-34 Eliz. Il, c. 3 (the 1985 Act), two provisions that are relevant to the solution of the issue, namely subsection 22(1) which reads in part:

22.(1) Sections 49.1 and 49.2 of the said Act are repealed and the following substituted therefor:

49.02(1) Where a refund, payment of an amount equal to tax paid or rebate is granted or paid to a person pursuant to any of sections 44 to 49.01, interest at the prescribed rate shall be paid to that person, in respect of each day between the day that is sixty days after the day on which the application for the refund, payment or rebate was sent to that person, and compounded monthly on the total amount of the refund, payment or rebate, and interest, outstanding.

Subsection 49.02(1) has become subsection 75.2(1) in R.S.C. 1985 (1st Supp.), c. 15.

and subsection 43(2), a "transitional" provision, which reads:

Notwithstanding section 49.02 of the Excise Tax Act, as enacted by subsection 22(1) of this Act, no interest is payable pursuant to that section in respect of any day before the day on which this Act is assented to.

Subsection 43(2) has become subsection 52(2) in R.S.C. 1985 (1st Supp.), c. 15.

It is clear, therefore, that in 1985 Parliament provided for interest to be paid by the Crown but did not intend that interest be paid with respect to any period preceding the date of assent of the 1985 Act, which was February 26, 1985. We must ask ourselves what happened to these two provisions.

The 1986 Act contains no reference whatsoever to subsection 43(2) of the 1985 Act, but it has, in section 32, repealed subsection 49.02(1) of the 1985 Act and replaced it by the following:

49.02(1) Where a refund, a payment of an amount equal to tax paid or a portion of tax paid or a rebate is granted or paid to a person pursuant to any of sections 44 to 49.01, interest at the prescribed rate shall be paid to that person, in respect of each day between that day that is sixty days after the day on which the application for the refuna, payment or rebate was received by the Minister and the day on which the refund, payment or rebate was sent to that person, and compounded monthly on the total amount of the refund, payment or rebate, and interest, outstanding.

(2) Subsection (1) shall be deemed to have come into force on September 3, 1985.

Further, in subsection 34(1), the 1986 Act has repealed that very same subsection 49.02(1) and replaced it by subsection 47(7) which, pursuant to subsection 34(2), was to come into force on May 1, 1986, the first day of the second month following the month in which the 1986 Act was assented to.

In my view, subsection 43(2) of the 1985 Act has not been repealed and is still in force. The fact that it is qualified as being a "transitional" provision does not mean that it simply disappears when further amendments are made to the Act. The “transitional” provision enacted in 1985 will be in force until it has been repealed—which is not the case—or until it has become obsolete (see subsection 2(2) of the Interpretation Act, R.S.C. 1985, c. 1-21) — which will not be the case until all applications filed before the coming into force of the 1985 Act have been dealt with.

I am comforted in my view by the fact that subsection 47(7) of the 1986 Act has become subsection 72(7) of chapter E-15 of the 1985 Statutes of Canada updated to December 31, 1989, and by the fact that the transitional subsection 43(2) of the 1985 Act, which had become section 52 in R.S.C. 1985 (1st Supp.), c. 15, has found its way as "related provisions" in the same updated statute.

I therefore hold that pursuant to subsection 47(7) of the 1986 Act which was in force at the time of the trial of this case, interest is to be paid by the Crown with respect to the application made in 1973 by the appellant, but that such interest, because of subsection 43(2) of the 1985 Act, is restricted to that accrued since the 1985 Act was assented to, i.e., since February 26, 1985.

I would allow the appeal in part, with costs to the appellant in both divisions, and, proceeding to give judgment that the Trial Division should have given, I would grant the appellant judgment for $73,993.34 plus interest, at the rate prescribed by the Sales and Excise Tax Interest Rate Regulations, on the principal amount from February 26, 1985 onwards. Possibly, the parties will be able to agree to the amount of interest to be so added in that the record itself does not contain the necessary evidence. The appellant should, in accordance with Rule 337(2)(b) of the Federal Court Rules, prepare a draft of an appropriate judgment to implement this Court's conclusions and move for judgment accordingly.

Appeal allowed in part.