T-2408-74
Union Oil Company of Canada Limited (Plaintiff)
v.
The Queen in right of Canada (First Defendant)
and
The Queen in right of the Province of British
Columbia, and as owners of the ships of the
British Columbia Ferry Fleet (Second Defendant)
Trial Division, Collier J.—Vancouver, July 30
and August 7, 1974.
Jurisdiction—Excise tax on fuel—Vendor suing Crown in
right of Canada to recover tax—Vendor suing Crown in right
of Province of British Columbia to recover payment of tax
due from purchaser—Exemption - claimed by Provincial
Crown—No jurisdiction over action against Provincial
Crown—Excise Tax Act, R.S.C. 1970, c. E-13, ss. 27,
70(1)—Federal Court Act, ss. 17, 19, 22—Federal Courts
Jurisdiction Act, R.S.B.C. 1960, c. 141—Crown Procedure
Act, R.S.B.C. 1960, c. 89.
The plaintiff sold fuel oil to the Provincial Crown of
British Columbia for the ships in its ferry fleet, pursuant to
purchase orders "declaring" that the Provincial Crown was
exempt under section 44 of the Excise Tax Act, from the tax
normally passed on by the manufacturer or producer to the
purchaser or consumer. The plaintiff did not include the tax
in the selling price to the Provincial Crown, but, on the
insistence of the Crown in right of Canada, paid the latter
$81,869.22, for tax and penalty. The plaintiff sued to recov
er this amount against the defendants the Crown in right of
Canada and the Crown in right of the Province. A motion to
strike out the Provincial Crown as defendant was based on
the lack of jurisdiction in the Court.
Held, granting the motion to strike out the Provincial
Crown from the action, there was no jurisdiction over it in
the provisions of the Federal Court Act. Section 17 of the
Act gave jurisdiction over the federal, but not over the
Provincial, Crown. The fact that one defendant was properly
before the Court and another party may be a necessary or
desirable defendant, cannot confer jurisdiction. Section 19
might be invoked by Canada or a province to settle a dispute
between them; it was inapplicable to an action such as this,
commenced by a private party. The claim here, arising in
contract or quasi-contract and over the liability to tax was
outside the "Admiralty jurisdiction" in section 22 of the
Act.
The Martha Russ [1973] F.C. 394 (affirmed on other
grounds [1974] 1 F.C. 410) and The Ikaros [1973] F.C.
483 (reversed on other grounds [1974] 1 F.C. 327),
referred to.
MOTION.
COUNSEL:
R. W. Dickerson for plaintiff.
G. Eggertson for first defendant.
L. G. McKenzie and H. Prelypchan for
second defendant.
SOLICITORS:
Farris, Vaughan, Wills and Murphy, Van-
couver, for plaintiff.
Deputy Attorney General of Canada for
first defendant.
Harman and Company, Victoria, and
Deputy Attorney General of British
Columbia, Victoria, for second defendant.
The following are the reasons for judgment
delivered in English by
COLLIER J.: This is a motion on behalf of the
second defendant, Her Majesty The Queen in
right of the Province of British Columbia and as
owner of the ships of the British Columbia
Ferry Fleet. I shall refer to that defendant as the
Province of British Columbia, or the Provincial
Crown. The first defendant is Her Majesty The
Queen in right of Canada and I shall refer to
that defendant as the Federal Government or
the Federal Crown. The motion is to strike out
the Provincial Crown as a defendant in this
case.
A motion to that effect is going to be filed and
back-dated to the date of the hearing (July 30,
1974). The motion will allege there is no juris
diction in this Court to entertain this particular
action against that defendant. An affidavit in
support will be filed deposing that the plaintiff
has neither sought nor obtained from the Pro
vincial Crown a fiat or consent allowing it to be
sued in this action.
The filing of the back-dated motion and the
affidavit is by consent of all parties. It was
further agreed by all parties (for the purposes of
this motion only) as follows:
1. The facts alleged in the statement of claim are accepted
as true.
2. The facts deposed to in the affidavit of Brian S. Lowe
sworn July 26, 1974 are accepted as true.
3. The contents of the affidavit of George K. McIntosh
sworn July 17, 1974 and William James Hope-Ross sworn
July 19, 1974 are admitted or accepted to show or indicate
there is a difference of opinion existing between the Provin
cial Crown and the Federal Crown as to the exigibility of
Excise Tax in the circumstances of this case, and to indicate
to some degree the nature of that difference of opinion.
4. Based on all of the above, the motion by the Provincial
Crown is to be treated as a motion for determination of a
point of law pursuant to Rule 474 of the Rules of this Court.
The relevant facts, as I see them for the
purposes of this motion, now follow. The plain
tiff is a Canadian company, with a head office
and place of business in Calgary. Between June,
1969 and April, 1971 the plaintiff sold a quanti
ty of diesel oil to the Provincial Crown. The
purchasing was done through the Department of
Highways and the diesel oil was used as fuel for
the operation of the vessels in the British
Columbia Ferry Fleet. As of July 25, 1974 there
were 23 vessels in the Fleet and they were
owned by the Provincial Crown as represented
by the Minister of Highways. It is common
ground that during the years in question, most,
if not all the vessels described, were similarly
owned. The material discloses the vessels carry
paying passengers, serve meals for a price, and
that some of them travel in international waters
as well as in territorial waters. I think it fair to
say that some of these vessels might be said to
be, for some purposes, part of a work or under
taking extending beyond the limits of the Prov
ince of British Columbia. The diesel oil in ques
tion was sold pursuant to purchase orders
which, on the part of the Provincial Crown
"declared" that the Provincial Crown was
exempt from the tax imposed under the Excise
Tax Act, R.S.C. 1970, c. E-13 (and amend
ments) and that the fuel was for a purpose or
use rendering it exempt from tax. As I under-
stand it, the so called exempting provisions
relied upon by the Provincial Crown are found
in section 44 of the statute. The correspondence
referred to in the affidavit of George K. McIn-
tosh indicates that there was and is a serious
dispute or difference of opinion as to whether
the Provincial Crown was, under the circum
stances, entitled to an exemption.
There is no disagreement that the tax levied
pursuant to the Act is, if payable, one that is
normally passed on by a manufacturer or pro
ducer of the goods (in this case the plaintiff) to
the purchaser or consumer (in this case the
Provincial Crown). Because of the exemption
alleged by the Provincial Crown, the plaintiff
here did not add to or include in the selling price
of the fuel the tax on it, which might otherwise
have been payable. The Federal Government
however, insisted on payment to it of tax. By
virtue of the provisions of the statute, persons
in the position of the plaintiff, rather than con
sumers, are required to pay the tax (see section
27).
The plaintiff, under protest, paid the excise
tax to the Federal Crown. The amount paid
including a penalty imposed for delayed pay
ment was $81,869.22. The plaintiff claims from
the Federal Crown a return of that amount and
a declaration that it is entitled to be refunded
accordingly. The plaintiff claims against the
Provincial Crown the amount of the tax and
penalty paid to the Federal Crown, and a decla
ration that the purchases of diesel oil are tax
able and that the plaintiff is entitled to reim
bursement in the sum of $81,869.22.
The plaintiff has not sought to proceed
against the Provincial Crown pursuant to the
Crown Procedure Act, R.S.B.C. 1960, c. 89.
That statute provides that a petition of right
shall be left with the appropriate representative
of the Provincial Crown in order that the Lieu-
tenant-Governor, if he thinks fit, may grant his
fiat that right be done. If the fiat is obtained the
litigation (petition) then proceeds and is heard in
the Supreme Court of British Columbia. No fiat
was sought or granted in this case. Nor was any
consent, or fiat, obtained to take this action
against the Provincial Crown in this Court.
Plaintiff's counsel expressed his view that it was
unlikely that a fiat would be granted if a petition
of right were launched in the Supreme Court of
British Columbia or that any consent would be
given to suit in this Court. For the purposes of
this motion, I shall adopt counsel's view. Even
if proceedings had been launched in the
Supreme Court of British Columbia, the Federal
Crown could not have been joined in that
action. The plaintiff, therefore, brings its action
against both Crowns (or both Governments) in
this Court.
If there is no jurisdiction in the Federal Court
in respect of the claim advanced in this case
against the Province of British Columbia, and if
what was termed in argument "Crown immuni
ty" applies, then the result may be the plaintiff
has no remedy against the Provincial Crown in
any Court. It is obvious the plaintiff is, to a
large extent, the unhappy and unwilling victim
of a serious difference of legal opinion between
the two Governments as to th exigibility of a
tax. While I have every sympathy for the plain
tiff's position, I cannot let that influence the
result if the law is clearly, but unfortunately,
against it.
In support of its motion, the Provincial Crown
relied chiefly on what I have called the Crown
immunity argument. Briefly stated, it is this: at
common law the Provincial Crown could not be
sued by a subject; historically, encroachments
on that immunity have gradually been permitted
by statute; there is no authority, by provincial
or federal statute, or otherwise, permitting suit
to be brought against the Provincial Crown
(except with its consent) in the circumstances of
this case. In my view, that contention presup-
poses there may otherwise be jurisdiction in this
Court over the Provincial Crown. To my mind,
the first approach should be to put aside the
question of Crown immunity, and to ascertain
whether this Court has jurisdiction in the other
circumstances agreed to here.
The plaintiff asserts jurisdiction on a number
of different grounds. As I understand it, the
main source of jurisdiction relied upon is sec
tion 70(1) of the Excise Tax Act. It reads as
follows:
70. (1) Where a purchaser of goods from a wholesaler,
producer, manufacturer or importer has falsely represented
that the goods were intended for a use rendering them
exempt from tax under any provision of this Act, the
wholesaler, producer, manufacturer or importer, as the case
may be, is entitled to recover from the purchaser the taxes
paid by him under this Act in respect of those goods.
When one examines the statement of claim
and particularly the facts asserted against the
Provincial Crown, it is apparent the claim
against it is essentially based in contract. There
is in the pleading, no allegation in words or by
implication that there was any false representa
tion by the Provincial Crown that the fuel oil
purchased was intended for a use rendering the
diesel fuel exempt from tax. I do not think one
should, as a rule, scrutinize too finely the words
used in a statement of claim, but I conclude
here the plaintiff is not basing its case for recov
ery from the Provincial Crown, in any way,
upon a false representation. I am supported in
this view by examination of the correspondence
passing between the plaintiff and the two
Crowns (exhibited to Mr. Hope-Ross's affida
vit). Nowhere can I find any false representa
tion by the Provincial Government. All it did
was to seriously assert the legal view that the
goods were, in the circumstances, exempt from
tax. The plaintiff supplied them and did not
include in its price any amount in respect of tax.
It was not induced to do this, or to pay (as it
did) the tax demanded by the Federal Crown, by
any fraud or deceit on the part of the Provincial
Crown. In my view, for section 70 to be appli
cable, there must be elements of fraud. Those
elements are absent here.
Even assuming section 70 somehow confers
jurisdiction, I am not convinced the right there
given to recover from the purchaser is neces
sarily exercisable in this Court. It may well be
the right can only be enforced in the Provincial
Courts. In view of my conclusion that section
70 does not apply in the case before me, I need
not express any final opinion on this point.
The plaintiff then relies on section 17 of the
Federal Court Act as a source of jurisdiction
here. The "Crown" referred to in that section is
by definition Her Majesty in right of Canada. I
do not see how it follows that because there is
undoubtedly jurisdiction in respect of the Fed
eral Crown in this case, there is also, by virtue
of section 17, jurisdiction over the Provincial
Crown'.
It is further asserted this Court has jurisdic
tion by reason of section 19 of the Federal
Court Act. That section reads as follows:
19. Where the legislature of a province has passed an Act
agreeing that the Court, whether referred to in that Act by
its new name or by its former name, has jurisdiction in cases
of controversies,
(a) between Canada and such province or
(b) between such province and any other province or
provinces that have passed a like Act,
the Court has jurisdiction to determine such controversies
and the Trial Division shall deal with any such matter in the
first instance.
It is said there is a controversy in this case
between Canada and British Columbia; that the
Federal Courts Jurisdiction Act, R.S.B.C. 1960,
c. 141, in these circumstances confers jurisdic
tion on this Court.
' The fact that one defendant is properly before the
Court, and another party may be a necessary or desirable
defendant, does not confer jurisdiction. I have expressed my
views on this kind of submission in the The Martha Russ
[1973] F.C. 394 and The Ikaros [1973] F.C. 483. The
Martha Russ decision was affirmed on appeal [1974] 1 F.C.
410. The decision in The Ikaros was reversed [1974] 1 F.C.
327. The Appeal Division expressed no opinion, one way or
the other, on this particular point, in either case.
In my opinion section 19 has no application to
this case. There is no doubt there is a dispute or
disagreement between Canada and British
Columbia as to whether the diesel fuel was
exempt from tax. Assuming that dispute or disa
greement to be a "controversy", it seems to me
the jurisdiction of the Federal Court can only be
invoked by Canada or by the Province, and not
by the commencement of legal proceedings by a
private citizen.
Finally, the plaintiff contends jurisdiction can
be found in the so called "Admiralty jurisdic
tion" of the Federal Court. Reference is made
to various subsections and paragraphs of sec
tion 22 of the Federal Court Act. The supply of
diesel fuel to vessels and a claim arising there
from is (and I speak generally) a claim for
necessaries as that term is understood in mari
time law. The Federal Court has jurisdiction in
respect of such claims. The plaintiff's claim
against the Provincial Crown here, however, is
not a claim in respect of necessaries. Nor does
it arise by virtue of Canadian maritime law or
any other law of Canada relating to matters of
navigation and shipping. One must look at the
substance of the claim asserted, and the relief
sought, by the plaintiff. It arises out of contract
or quasi-contract and the liability or otherwise
to pay tax. The mere fact that the sale of diesel
fuel may in some circumstances give rise to a
claim over which this Court has jurisdiction,
does not convert what is fundamentally a dis
pute over tax into an Admiralty matter. I do not
think any part of section 22 is applicable.
I therefore conclude there is no jurisdiction in
this Court to entertain or hear the claim
advanced in this suit against the Provincial
Crown. As has been said before, this is a statu
tory Court and jurisdiction must be found in the
Federal Court Act or in some other statute or
law conferring jurisdiction. I can find no juris
diction in this case.
Because of this conclusion I have reached, it
is not necessary for me to express any opinion
on the question (earlier referred to) of Crown
immunity. I must record, however, my indebted
ness to Mr. Dickerson and Mr. McKenzie for
their detailed and comprehensive arguments on
that point.
The motion of the Provincial Crown is acced
ed to. There will be, as I indicated at the conclu
sion of argument, an order striking out the Pro
vincial Crown as a defendant in this case. The
Provincial Crown is entitled to its costs, from
the plaintiff, of entering a conditional appear
ance and of this motion. There will be no costs,
in the circumstances, to the Federal Crown.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.