Air Canada and Pacific Western Airlines Ltd. v. British Columbia, (1989) 95 N.R. 1 (SCC)

• Judge: Beetz, McIntyre, Lamer, Wilson, Le Dain, La Forest and L'Heureux-Dubé, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 04, 1989
• Jurisdiction: Canada (Federal)
• Citations: (1989), 95 N.R. 1 (SCC);41 CRR 308;95 NR 1;[1989] SCJ No 44 (QL);EYB 1989-66982;[1989] 4 WWR 97;JE 89-785;59 DLR (4th) 161;1989 CanLII 95 (SCC);36 BCLR (2d) 145;[1989] 1 SCR 1161

Air Can. v. B.C. (1989), 95 N.R. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Air Canada and Pacific Western Airlines Ltd. v. Her Majesty the Queen in Right of the Province of British Columbia, the Attorney General of British Columbia and the Attorney General for Ontario, the Attorney General of Quebec, the Attorney General of Nova Scotia, the Attorney General for New Brunswick, the Attorney General of Manitoba, the Attorney General for Saskatchewan, the Attorney General for Alberta and the Attorney General of Newfoundland

Her Majesty the Queen in Right of the Province of British Columbia, the Attorney General of British Columbia v. Air Canada, Pacific Western Airlines Ltd. and Canadian Pacific Airlines Ltd. and the Attorney General for Saskatchewan

(20079, 20082, 20085)

Indexed As: Air Canada and Pacific Western Airlines Ltd. v. British Columbia

Supreme Court of Canada

Beetz, McIntyre, Lamer, Wilson, Le Dain, La Forest and L'Heureux-Dubé, JJ.

May 4, 1989.

Summary:

The 1974 British Columbia Gasoline Tax Act required airlines to pay a "gasoline tax" on gas purchased in British Columbia. The Act was ultra vires the province as an indirect tax contrary to s. 92(2) of the Constitution Act. In 1976 the Act was amended by redefining the "purchaser" subject to tax in an attempt to make the tax a direct tax. In 1981 legislation was passed to make the 1976 amendment retroactive to 1974; and to provide that taxes collected under the ultra vires 1974 Act were "conclusively deemed to have been confiscated by the government without compensation". Air Canada, Pacific Western and Canadian Pacific brought an action for declarations that the Act, as it stood in 1974 and as amended in 1976 and 1981, was ultra vires the province as it imposed an indirect tax contrary to s. 92(2) of the Constitution Act, 1867. The province conceded that the 1974 Act was ultra vires. The airlines claimed that even if the 1976 amendment imposed an intra vires direct tax, the 1981 attempt to make the 1976 tax retroactive was invalid, therefore the airlines were entitled to recover taxes paid between 1974 and 1976.

The British Columbia Supreme Court, in a judgment reported 51 B.C.L.R. 175, held that the 1976 amendment rendered the gasoline tax a "direct" tax and therefore intra vires the province from 1976 on; that the 1981 amendment, insofar as it imposed a fresh tax between 1974 and 1976, was intra vires (ss. 25 (1) to 25(4)), but that s. 25(5) (the deemed confiscation clause) was ultra vires. The court held that the airlines were therefore entitled to recover taxes paid between 1974 and 1976, but not thereafter. Air Canada and Pacific Western appealed on the issue of their post 1976 liability for taxes. The province cross-appealed on the issue of liability to refund 1974 to 1976 taxes.

The British Columbia Court of Appeal, Esson, J.A., dissenting, in a judgment reported 4 B.C.L.R.(2d) 356, dismissed the airlines' appeal and the province's cross-appeal. The court agreed that the tax, after 1976, was intra vires as a "direct" tax. The parties appealed to the Supreme Court of Canada on the same issues raised in the British Columbia Court of Appeal and two further issues were raised: (1) whether the Act as it existed in 1974 was constitutionally valid and (2) whether its application violated s. 7 of the Charter of Rights and Freedoms. The following constitutional questions were stated:

"(1) Is the Gasoline Tax Act, 1948, R.S.B.C. 1960, c. 162, as amended by S.B.C. 1976, c. 32 and as subsequently amended, ultra vires in its application or otherwise constitutionally inapplicable to Air Canada in the circumstances of this case?

"(2) Does the application of the Gasoline Tax Act to Air Canada in the circumstances of this case violate s. 7 of the Canadian Charter of Rights and Freedoms?

"(3) If so, is its application justified on the basis of s. 1 of the Canadian Charter of Rights and Freedoms?"

The Supreme Court of Canada, Wilson, J., dissenting in part, held as follows: (1) The Gasoline Tax Act as it existed in 1974 was ultra vires the province as imposing an indirect tax, but the 1976 and 1981 amendments were constitutionally valid and the gasoline taxes imposed subsequent to 1976 were intra vires. The court held that the Act did not contravene s. 7 of the Charter and, accordingly, the third stated question need not be answered. The court held that the airlines were not entitled to a return of taxes paid between 1974 and 1976.

Civil Rights - Topic 8546

Canadian Charter of Rights and Freedoms - Interpretation - Life, liberty and security of the person - Three airlines argued that the Gasoline Tax Act, R.S.B.C. 1960, c. 32, as amended in 1976 by the Miscellaneous Statutes Amendment Act, which imposed a direct tax on all purchasers of gasoline in British Columbia, was tantamount to an expropriation and violated the airlines' s. 7 Charter rights - The Supreme Court of Canada stated that "I fail to see, however, how the 'life, liberty or security of the person' of the airlines is involved (assuming the provision can otherwise apply to them in circumstances like these) by being required to pay taxes in the same way as other persons who purchase gasoline within the province. It is simply not accurate to equate an ordinary tax like the one at issue in this case with expropriation" - See paragraphs 40 to 41.

Constitutional Law - Topic 5664

Federal jurisdiction (s. 91) - Regulation of trade and commerce - Valid interference by provincial legislation - Airlines submitted that the 1976 British Columbia Gasoline Tax Act, in its application to fuel consumed by the airlines, was invalid as violating ss. 91(2) (trade and commerce) and 92(10)(a) (interprovincial undertaking) of the Constitution Act, 1867, and the federal aeronautics power - The Supreme Court of Canada rejected the arguments - The court held that the tax was a general tax on all gasoline purchasers and while it may incidentally affect interprovincial or international trade, the burden was no greater than that imposed on intraprovincial trade - The court also held that the airlines, as federal undertakings, operated within provincial legislative environments and must pay provincial taxes imposed within the provinces - The court stated that the tax was not a colourable attempt to regulate a federal undertaking - See paragraphs 42 to 45.

Constitutional Law - Topic 6660

Federal jurisdiction (s. 91) - Interprovincial works and undertakings - Provincial laws of general application - [See Constitutional Law - Topic 5664 above].

Constitutional Law - Topic 6824

Provincial jurisdiction (s. 92) - Direct taxation within the province - Direct tax - What constitutes - The British Columbia Gasoline Tax Act, as it stood in 1974, imposed a tax on the purchaser of gasoline when it was sold for the first time after its manufacture in or importation into the province - The Supreme Court of Canada held that the tax was "indirect" and ultra vires the province, whose taxing powers under s. 92(2) of the Constitution Act, 1867, were limited to direct taxation - The court stated that the tax was indirect because it was capable of being passed on to subsequent purchasers - See paragraphs 30 to 31.

Constitutional Law - Topic 6824

Provincial jurisdiction (s. 92) - Direct taxation within the province - Direct tax - What constitutes - The Supreme Court of Canada accepted the following definition of a "direct" tax: "a direct tax is one which is demanded from the very person who it is intended or desired should pay it".

Constitutional Law - Topic 6824

Provincial jurisdiction (s. 92) - Direct taxation within the province - Direct tax - What constitutes - The British Columbia Gasoline Tax Act, as it stood in 1974, was ultra vires because the definition of the "purchaser" liable to pay the tax made the tax indirect - A 1976 amendment redefined "purchaser" to impose the tax on the ultimate consumer - The Supreme Court of Canada held that the tax, since 1976, was an intra vires "direct" tax - The tax was imposed within the province, was not a consumption tax and was imposed on all gasoline purchases in British Columbia regardless of where consumption took place.

Constitutional Law - Topic 6824

Provincial jurisdiction (s. 92) - Direct taxation within the province - Direct tax - What constitutes - The tax imposed under the British Columbia Gasoline Tax Act, as it stood between 1974 and 1976, was ultra vires the province as an indirect tax - In 1976 the Act was amended to make the tax an intra vires direct tax - In 1981 the province enacted the Finance Statutes Amendment Act, which by ss. 25(1) to 25(4) retroactively imposed a tax on purchasers - The new tax was conveniently equal to the ultra vires tax already paid - Section 25(5) provided that the ultra vires taxes collected between 1974 and 1976 "shall ... be conclusively deemed to have been confiscated by the government without compensation" - The Supreme Court of Canada held that the retroactive direct tax imposed under ss. 25(1) to 25(4) was intra vires and s. 25(5) was merely the vehicle for collecting the retroactive tax - See paragraphs 46 to 51.

Constitutional Law - Topic 6827

Provincial jurisdiction (s. 92) - Direct taxation within the province - Retroactive direct tax - [See fourth Constitutional Law - Topic 6824 above].

Mistake - Topic 1701

Recovery of money paid under mistake - Mistake of law - General - La Forest, J. (Lamer and L'Heureux-Dubé, JJ., concurring), of the Supreme Court of Canada, opined that the distinction between mistake of fact and mistake of law, in the law of restitution, should be abolished; both should be treated as factors in determining whether the defendant was unjustly enriched at the plaintiff's expense - If the defendant paid money to settle an honest claim or was prejudiced by the enrichment, then restitution would be denied - La Forest, J., stated that a public body could be unjustly enriched, but where unconstitutional levies were involved special considerations applied - A province was enriched by imposing and collecting an ultra vires tax on all gasoline purchasers, including airlines - La Forest, J., denied the airlines recovery of the tax because the airlines suffered no loss where the tax was passed on and recovery would give the airlines a windfall - Alternatively, La Forest, J., stated that "the rule should be against recovery of ultra vires taxes, at least in the case of unconstitutional statutes", but that the rule was inapplicable to a tax paid upon a misapplication of an intra vires statute - Wilson, J., agreed that the traditional rule of irrecoverability of monies paid under mistake of law should be abolished, but stated that the airlines were entitled to a return of the ultra vires taxes paid - Beetz and McIntyre, JJ., found it unnecessary to express an opinion on mistake of law or a taxpayer's right to recover an unconstitutional tax - See paragraphs 52 to 78.

Mistake - Topic 1706

Recovery of money paid under mistake - Mistake of law - Money paid under invalid legislation [See Mistake - Topic 1701 above].

Restitution - Topic 69

Unjust enrichment - Money paid under invalid law - [See Mistake - Topic 1701 above].

Restitution - Topic 70

Unjust enrichment - Money paid under mistake of law - [See Mistake - Topic 1701 above].

Sales and Service Taxes - Topic 2605

Gasoline and motive fuel tax - General - Validity of taxing statute - [See first, third and fourth Constitutional Law - Topic 6824 above].

Words and Phrases

Direct tax - The Supreme Court of Canada accepted the following definition of a "direct" tax: "a direct tax is one which is demanded from the very person who it is intended or desired should pay it".

Cases Noticed:

Air Canada v. British Columbia (Attorney General), [1986] 2 S.C.R. 539; 72 N.R. 135, refd to. [para. 3].

Attorney General for British Columbia v. Canadian Pacific Railway Co., [1927] A.C. 934, refd to. [para. 5].

Attorney General for British Columbia v. Kingcome Navigation Co., [1934] A.C. 45, refd to. [para. 5].

Amax Potash Ltd. v. Province of Saskatchewan, [1977] 2 S.C.R. 576; 11 N.R. 222, dist. [para. 12].

Marine Petrobulk Ltd. v. R. in Right of B.C. (1985), 64 B.C.L.R. 17, refd to. [para. 16].

Nepean Hydro Electric Commission v. Ontario Hydro, [1982] 1 S.C.R. 347; 41 N.R. 1, appld. [para. 22].

Bank of Toronto v. Lambe (1887), 12 App. Cas. 575, refd to. [para. 33].

Manitoba, Province of v. Air Canada and Attorney General of Canada et al., [1980] 2 S.C.R. 303; 32 N.R. 244, dist. [para. 35].

Atlantic Smoke Shops Ltd. v. Conlon, [1941] S.C.R. 670, refd to. [para. 35].

Braniff Airways, Inc. v. Nebraska State Board of Equalization and Assessment (1954), 347 U.S. 590, dist. [para. 37].

Reference re The Employment and Social Insurance Act, [1936] S.C.R. 427, refd to. [para. 38].

Attorney General for Canada v. Attorney General for Ontario, [1937] A.C. 355, refd to. [para. 38].

United Air Lines, Inc. v. Mahin (1973), 410 U.S. 623, refd to. [para. 42].

Edelman v. Boeing Air Transport, Inc. (1933), 289 U.S. 249, refd to. [para. 42].

Delta Air Lines, Inc. v. Department of Revenue (1984), 455 So.2d 317, cert. denied (1985), 474 U.S. 892, refd to. [para. 42].

Upper Churchill Water Rights Reversion Act 1980, Re, [1984] 1 S.C.R. 297; 53 N.R. 268; 47 Nfld. & P.E.I.R. 125; 139 A.P.R. 125, refd to. [para. 43].

Campbell-Bennett Ltd. v. Comstock Midwestern Ltd., [1954] S.C.R. 207, refd to. [para. 43].

Commissioner for Motor Transport v. Antill Ranger & Co., [1956] A.C. 527 (P.C.), refd to. [para. 50].

Norton v. Shelby County (1886), 118 U.S. 425, refd to. [para. 52].

Canadian Industrial Gas & Oil Ltd. v. Province of Saskatchewan, [1978] 2 S.C.R. 545; 23 N.R. 257, refd to. [para. 52].

Manitoba Language Rights Reference, [1985] 1 S.C.R. 721; 59 N.R. 321; 35 Man.R.(2d) 83, refd to. [para. 53].

Mercure v. Saskatchewan, [1988] 1 S.C.R. 234; 83 N.R. 81; 65 Sask.R. 1, refd to. [para. 53].

Vancouver Growers Ltd. v. G.H. Snow Ltd., [1937] 3 W.W.R. 121, refd to. [para. 53].

Glidurray Holdings Ltd. v. Qualicum Beach (1981), 32 B.C.L.R. 82 (C.A.), refd to. [para. 53].

The King v. National Trust Co., [1933] S.C.R. 670, refd to. [para. 57].

R. v. Williams, [1942] A.C. 541, refd to. [para. 57].

Lovitt v. The King (1910), 43 S.C.R. 106, refd to. [para. 57].

Bilbie v. Lumley and Others (1802), 2 East 469; 102 E.R. 448, refd to. [para. 59].

Coleman v. Inland Gas Corp. (1929), 231 Ky. 637; 21 S.W. 2d 1030, refd to. [para. 68].

Mercury Machine Importing Corp. v. City of New York (1957), 144 N.E.2d 400, refd to. [para. 68].

United States v. Butler (1936), 297 U.S. 1, refd to. [para. 69].

Kiriri Cotton Co. Ltd. v. Dewoni, [1960] A.C. 192, refd to. [para. 76].

A.J. Seversen Inc. v. Village of Qualicum Beach (1982), 135 D.L.R. 122 (B.C.C.A.), refd to. [para. 77].

Maskell v. Horner, [1915] 3 K.B. 106, refd to. [para. 78].

Lynden Transport Inc. v. R. in Right of British Columbia (1985), 62 B.C.L.R. 314, refd to. [para. 78].

Statutes Noticed:

Canadian Charter of Rights and Freedoms, 1982, sect. 7.

Constitution Act, 1867, sect. 91(2), sect. 92(2), sect. 92(10)(a).

Finance Statutes Amendment Act, S.B.C. 1981, c. 5, sect. 20, sect. 62(5) [para. 6].

Fuel-Oil Tax Act, R.S.B.C. 1924, c. 251, generally [para. 5].

Gasoline Tax Act, R.S.B.C. 1960, c. 162, sect. 2 [para. 4]; sect. 25(1), sect. 25(2), sect. 25(3), sect. 25(4), sect. 25(5) [para. 6].

Miscellaneous Statutes Amendment Act, S.B.C. 1976, c. 32, sect. 7 [para. 5].

Social Service Tax Act, R.S.B.C. 1979, c. 388, generally [para. 1].

Authors and Works Noticed:

Birks, Peter, Introduction to the Law of Restitution, p. 294 [para. 72].

British Columbia Law Reform Commission, Report on Benefits Conferred Under a Mistake of Law (1981) [para. 75].

Corbin on Contracts (1960), vol. 3, para. 617, p. 756 [para. 59].

Goff and Jones, The Law of Restitution (3rd Ed.), p. 117 [para. 59].

Hogg, Peter W., Constitutional Law of Canada (2nd Ed. 1985), pp. 349, 373 [para. 94].

Kennedy and Well, The Law of the Taxing Power in Canada, p. 61 [para. 33].

McCamus, John D., Restitutionary Recovery of Money Paid to Public Authority Under a Mistake of Law: Ignorantia Juris in the Supreme Court of Canada (1983), 17 U.B.C. Law Rev. 233 [para. 71].

Palmer, George C., The Law of Restitution (1986 Supplement), p. 254 [para. 65].

Palmer, George C., The Law of Restitution, vol. 3, p. 247 [para. 74]; 248 [para. 67].

Pannam, Clifford L., The Recovery of Unconstitutional Taxes in Australia and in the United States (1964), 42 Texas Law Rev. 779 [para. 67].

Counsel:

Wendy G. Baker and Peter G. Voith, for Pacific Western Airlines Ltd. and Canadian Pacific Airlines Ltd.;

E. Robert A. Edwards, Q.C., and Joseph J. Arvay, Q.C., for the Province of British Columbia, the Attorney General of British Columbia;

Elizabeth Goldberg and Gerry Sholtack, for the Attorney General for Ontario;

Michel Jolin, for the Attorney General of Quebec;

Reinhold M. Endres, for the Attorney General of Nova Scotia;

Richard P. Burns, for the Attorney General for New Brunswick;

Dirk Blevins and Stewart J. Pierce, for the Attorney General of Manitoba;

Robert G. Richards, for the Attorney General for Saskatchewan;

Howard Kushner, for the Attorney General for Alberta;

F. Greig Crockett, for the Attorney General of Newfoundland.

Solicitors of Record:

Russel & DuMoulin, Vancouver, B.C., for the appellant Air Canada;

Davis & Company, Vancouver, B.C., for the appellants Pacific Western Airlines Ltd. and Canadian Pacific Airlines Ltd.;

Attorney General of British Columbia, Victoria, B.C., for the respondents the Province of British Columbia et al.;

Attorney General for Ontario, Toronto, Ont., for the intervener the Attorney General for Ontario;

Attorney General of Quebec, Ste-Foy, Que., for the intervener the Attorney General of Quebec;

Attorney General of Nova Scotia, Halifax, N.S., for the intervener Attorney General of Nova Scotia;

Attorney General for New Brunswick, Fredericton, N.B., for the intervener the Attorney General for New Brunswick;

Attorney General of Manitoba, Winnipeg, Man., for the intervener the Attorney General of Manitoba;

Brian Barrington-Foote, Regina, Sask., for the intervener the Attorney General for Saskatchewan;

Attorney General for Alberta, Edmonton, Alta., for the intervener the Attorney General for Alberta.

These appeals were heard on June 8 to 10, 1988, before Beetz, McIntyre, Lamer, Wilson, Le Dain, La Forest and L'Heureux-Dubé, JJ., of the Supreme Court of Canada.

On May 4, 1989, the judgment of the Supreme Court of Canada was delivered in both official languages and the following opinions were filed:

La Forest, J. (Lamer and L'Heureux-Dubé, JJ., concurring) - see paragraphs 1 to 80;

Beetz, J. - see paragraphs 81 to 83;

McIntyre, J. - see paragraph 84;

Wilson, J., dissenting in part - see paragraphs 85 to 96.

Le Dain, J., did not participate in the judgment.