Crown Liability and Proceedings Act

A post master breached the Public Money and Property Safeguards Regulations in cashing cheques made out to the Receiver General for Canada presented to him by the taxpayers' accountant, without the endorsement of the payee, and then issuing blank money orders to the accountant (who then appropriated the money orders to his personal use). In finding the Crown liable to the taxpayers in negligence, Dubé J. applied the principle that where a breach of a statutory obligation is established, there is a prima facie presumption of negligence.

The taxpayer was able to demonstrate that the unrelenting and overzealous collection activities of Collections officials in the Halifax office of Revenue Canada were actuated by malice and that those officials knew they did not possess the powers which they purported to exercise. The Crown accordingly was liable for the tort of misfeasance in public office.

A possibly negligent audit of the taxpayer was not the real and proximate cause of damages which the taxpayer later suffered as a result of attempts by the Department to collect the taxes which they erroneously assessed. The cause of his damages was instead his failure to file a notice of objection.

It is no defence to an action in trespass against the Crown for wrongful seizure of the taxpayer's chattels that the seizure of the chattels was made under the honest though mistaken belief that they belonged to a judgment debtor of the Crown rather than to the taxpayer which was not a judgment debtor of the Crown. (However, the claim foundered on the ground of estoppel by the taxpayer's conduct).

It was found that the seizure of the taxpayer's chattels on his premises under a writ of fi. fa. by a sheriff, while accompanied and under the instructions of servants of the Crown, could conceivably give rise to an action in trespass against the Crown. The relevant portion of the Statement of Claim accordingly was not struck out.

The Crown was liable for damages for the negligence of Revenue Canada employees in paying tax refunds to the taxpayers rather than the registered tax discounter who had acquired the taxpayers' rights to their refunds. (Crown Liability Act not referred to.)

S.3(a) refers only to liability in respect of a tort committed by "a servant of the Crown", and S.3(6) would accordingly appear to protect the Crown from any claim arising from the manner in which a Sheriff seized horses as a result of a judgment rendered pursuant to the Income Tax Act. Any negligence claim against the Crown would have to be founded on the instructions and directions which an employee of the Department gave to the Sheriff, and such a claim was not established here on the facts.

S.8 preserves the Crown's former immunity in respect of anything done or omitted in the exercise of a statutory power or authority. Accordingly, a Statement of Claim was struck out that sought relief or damages for errors or omissions by servants of the Crown in discharging their obligations or authority under the Income Tax Act.

In rejecting a submission that the Minister was statute barred from proceeding against the taxpayer because of the expiry of the two-year limitation period provided in the Limitations Act (Ontario), Nadon J.A.stated (at p. 6035) that "in The Queen v. Markevich, 2003 DTC 5185 the Supreme Court of Canada made it clear that tax debts created under the Income Tax Act were not subject to provincial limitation".

Section 32 of the Crown Liability and Proceedings Act applied to prohibit the taking of collection action against the taxpayer six years after a cause of action against him arose, namely, the expiry of the 90-day period after the mailing of a notice of assessment to him. There was no authority to support the proposition that the Income Tax Act was complete code that could not be informed by laws of general application such as s. 32, the ordinary meaning of the phrase "proceedings ... in respect of a cause of action" encompassed statutory collection procedures, and respecting arguments that the French word "poursuite" referred only to court proceedings, there was no reason to infer that Parliament intended for the application of section 32 to turn solely upon the technicality of whether the relevant proceedings took place in court.