British Columbia Ferry Corp. et al. v. Minister of National Revenue, (2001) 271 N.R. 345 (FCA)

• Judge: Strayer, Linden and Sexton, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: March 15, 2001
• Jurisdiction: Canada (Federal)
• Citations: (2001), 271 N.R. 345 (FCA);2001 FCA 146

B.C. Ferry Corp. v. MNR (2001), 271 N.R. 345 (FCA)

MLB headnote and full text

Temp. Cite: [2001] N.R. TBEd. MY.067

British Columbia Ferry Corporation and Chevron Canada Limited (appellants) v. Her Majesty the Queen in Right of Canada represented by The Minister of National Revenue and the said Minister of Finance (respondent)

(A-172-00)

Shell Canada Products Limited (appellant) v. Her Majesty the Queen in Right of Canada represented by The Minister of National Revenue and the said Minister of Finance (respondent)

(A-173-00)

British Columbia Ferry Corporation, Chevron Canada Limited, Imperial Oil Limited and Shell Canada Products Limited (appellants) v. Her Majesty the Queen in Right of Canada represented by The Minister of National Revenue and the said Minister of Finance (respondent)

(A-174-00)

Imperial Oil Limited (appellant) v. Her Majesty the Queen in Right of Canada represented by The Minister of National Revenue and the said Minister of Finance (respondent)

(A-175-00) (2001 FCA 146)

Indexed As: British Columbia Ferry Corp. et al. v. Minister of National Revenue

Federal Court of Appeal

Strayer, Linden and Sexton, JJ.A.

May 10, 2001.

Summary:

The appellant fuel companies supplied diesel fuel to the appellant British Columbia Ferry Corporation. They paid taxes on the fuel under the Excise Tax Act and passed them on to the Ferry Corporation. The Ferry Corporation asked its suppliers to apply for refunds and drawbacks under the Act in respect of taxes paid between September 1, 1990, and July 31, 1996, on the basis that the diesel fuel in question was within the definition of "ships' stores" in the Ships Stores Regulations made under the Act and was therefore exempted from tax. The Min­ister refused to refund the taxes. The appel­lants brought four actions. Three actions sought declarations as to the meaning and validity of the Regulations and appealed from the Minister's decision. The fourth action sought similar declarations and also sought a judgment for repayment of the taxes based on unjust enrichment.

The Federal Court of Canada, Trial Divi­sion, in a decision reported at 183 F.T.R. 117, dismissed the actions on the basis that the Regulations excluded the diesel fuel in question from the definition of "ships' stores". The court further held that the Reg­ulations were valid and that any claim to recovery for unjust enrichment was pre­cluded by the Act which provided a com­plete statutory code for the recovery of money paid as excise taxes. The appellants appealed.

The Federal Court of Appeal allowed the appeals in part. The court agreed that the Regulations excluded the diesel fuel in question from "ships' stores". However, the court held that the Regulations were not authorized by the relevant legislation and were invalid. The court held that the best remedy was to delay the effective date of the declaration of invalidity of the Regulations until October 1, 2001 to enable the Gov­ernor-in-Council to devise a scheme which was legally defensible given the terms of the regulation making authority under the Excise Tax Act.

Restitution - Topic 102

Unjust enrichment - Bars - Statutory code -Section 71 of the Excise Tax Act pro­vided that "[e]xcept as provided in this or any other Act of Parliament, no person has a right of action against Her Majesty for the recovery of any moneys paid to Her Ma­jesty that are taken into account by Her Majesty as taxes, penalties, interest or other sums under this Act" - The Federal Court of Appeal held that even if it had found that certain regulations under the Excise Tax Act should be retroactively invalidated and that the appellants in the appeal before it were wrongly excluded from an exemption under the Act, the appellants could not recover the taxes paid by a claim for unjust enrichment - Section 71 of the Act was sufficiently comprehen­sive to preclude any such common law or equitable remedy - See paragraphs 42 to 44.

Sales and Service Taxes - Topic 559.2

Sales tax - Exemptions - Particular clauses - Ships' stores (incl. fuel used on "inland waters ship") - British Columbia Ferry Corpor­ation oper­ated only in salt water between ports on the British Columbia mainland and other ports within British Columbia - At issue was whether diesel fuel supplied to the Ferry Corporation was within the definition of "ships' stores" in the regula­tions made under the Excise Tax Act and therefore exempted from tax - The rel­evant regula­tions were the Ships Stores Regula­tions of 1986, which were also amended in 1988 - Both the 1986 and 1988 Regula­tions included as "ships' stores" fuel used on an "inland waters ship" - The Federal Court of Appeal con­sidered the meaning of "inland waters ship" and "inland waters" with respect to the 1986 and 1988 Regula­tions and held that the fuel consumed by the Ferry Cor­poration was not tax exempt as "ships' stores" given the routes that it travelled - See paragraphs 12 to 18.

Sales and Service Taxes - Topic 559.2

Sales tax - Exemptions - Particular clauses - Ships' stores (incl. fuel used on "inland waters ship" - The Excise Tax Act exempted "ships' stores" from taxation - The Ships Stores Regulations of 1986, made jointly under the Excise Tax Act and the Customs Act, included as "ships' stores" fuel used on an "inland waters ship", which was defined as "a ship engaged in trade between ports on the inland waters of Canada" - Neither the Regulations nor the Excise Tax Act defined "inland waters of Canada" - How­ever, the Customs Act contained a defini­tion of "inland waters" - The Federal Court of Appeal held that by virtue of s. 16 of the Interpretation Act, the words used in the Regulations would be deemed to have the same meaning as in the Customs Act, one of the Acts under which the Regula­tions were made - Also, s. 15(2) of the Interpretation Act provided that where an enactment contained an interpretation section, it was to be read as being appli­cable to all other enactments relating to the same subject matter unless a contrary intention appeared - Therefore, the Cus­toms Act definition of "inland waters" was determinative of the same words used in the Regulations for Excise Tax Act pur­poses - See paragraphs 12 to 13.

Sales and Service Taxes - Topic 559.2

Sales tax - Exemptions - Particular clauses - Ships' stores (incl. fuel used on "inland waters ship" - The Excise Tax Act pro­vided an exemp­tion from tax for "ships' stores" - Section 59(3.2) of the Act pro­vided for the making of regulations desig­nating "certain classes of goods as ships' stores for use on board a conveyance within such class of convey­ances as may be prescribed in the regula­tions" - The Ships Stores Regula­tions of 1986 (amended 1988) included as "ships' stores", fuel used on an "inland waters ship" - The Federal Court of Appeal held that the Regulations were not author­ized by the relevant legislation and were invalid - The distinctions made by the Regulations based on the geographic area of voyages taken could not be sup­ported by s. 59(3.2) of the Act - The Regulations distinguished between those which were entitled to the exemption and those which were not on a basis unrelated to the pur­pose of the grant of regulation-making power - See para­graphs 19 to 29.

Sales and Service Taxes - Topic 941

Sales tax - Refunds - General - [See Resti­tution - Topic 102 ].

Statutes - Topic 4542

Operation and effect - Validity - Invalid­ity - Remedies - The Excise Tax Act provided an exemption from tax for "ships' stores" -The Ships Stores Regulations of 1986 (amended 1988) made under the Act included as ships' stores fuel used on an "inland waters ship" - The Federal Court of Appeal held that the Regulations were not authorized by the relevant legislation and were invalid - With respect to a rem­edy, the court stated that it could not, through selective nullification of the Reg­ulations, or by reading in exemptions, design a scheme which it could confidently pronounce as accurately implementing the intention of the Excise Tax Act in its conferral of the regulation making power - Nor was it appropriate to strike down the Regulations - The court held that the best remedy was to delay the effective date of the declaration of invalidity of the Regula­tions until October 1, 2001 to enable the Governor-in-Council to devise a scheme which was legally defensible given the terms of the regulation making authority under the Act - See paragraphs 35 to 41.

Statutes - Topic 5363

Operation and effect - Delegated legisla­tion - Regulations - Validity of - Scope of authority to make - [See third Sales and Service Taxes - Topic 559.2 ].

Statutes - Topic 5367

Operation and effect - Delegated legisla­tion - Regulations - Validity of - Ultra vires - Whether purpose authorized by empowering statute - [See third Sales and Service Taxes - Topic 559.2 ].

Statutes - Topic 5385

Operation and effect - Delegated legisla­tion - Regulations - Enactment of regula­tions - Requirement of publication of - At issue was whether fuel supplied to British Columbia Ferry Corporation was exempt from taxation under the Excise Tax Act as "ships' stores" - The Ships Stores Regula­tions of 1986 were made jointly under the Excise Tax Act and the Customs Act - The Regulations were amended in 1988 - An argument was made that the 1988 Regula­tions were invalid because they were not published for comment prior to being adopted, as required by the Customs Act - The Federal Court of Appeal stated that the Excise Tax Act had no such require­ment and that, whatever the effect of a failure to pre-publish might be, it would not affect the validity of the Regulations for the purposes of the Excise Tax which was the Act relevant to the taxation in question in this case - See paragraph 17.

Words and Phrases

Inland waters ship - The Federal Court of Appeal considered the meaning of the phrase "inland waters ship" in the Ships Stores Regulations of 1986, SOR/86-878 (amended SOR/88-425), made under the Excise Tax Act and the Customs Act - See paragraphs 12 to 16.

Cases Noticed:

Pacific Pilotage Authority v. Alaska Trainship Corp., Pacific Maritime Agencies Ltd. and Ship S.S. Alaska, [1981] 1 S.C.R. 261; 35 N.R. 271, refd to. [para. 21].

Canada v. St. Lawrence Cruise Lines Inc., [1997] 3 F.C. 899; 215 N.R. 278 (F.C.A.), refd to. [para. 21].

Irving Oil Ltd., Kent Lines Ltd. and Thorne's Hardware Ltd. v. National Harbours Board, [1983] 1 S.C.R. 106; 46 N.R. 91; 143 D.L.R.(3d) 577, refd to. [para. 21].

Canada (Attorney General) v. British Col­umbia (Attorney General) et al., [1984] 1 S.C.R. 388; 52 N.R. 335, refd to. [para. 25].

Ownership of the Bed of the Strait of Georgia, Re - see Canada (Attorney General) v. British Columbia (Attorney General) et al.

Pacific Pilotage Authority v. Alaska Trainship Corp., Pacific Maritime Agencies Ltd. and Ship S.S. Alaska, [1980] 2 F.C. 54; 28 N.R. 451 (F.C.A.), affd. [1981] 1 S.C.R. 261; 35 N.R. 271, refd to. [para. 32].

Reference Re Validity of Section 5(a) of Dairy Industry Act (Margarine Case), [1949] S.C.R. 1, refd to. [para. 32].

Schachter v. Canada, [1992] 2 S.C.R. 679; 139 N.R. 1; 93 D.L.R.(4th) 1, refd to. [para. 37].

Vriend et al. v. Alberta, [1998] 1 S.C.R. 493; 224 N.R. 1; 212 A.R. 237; 168 W.A.C. 237, refd to. [para. 37].

M. v. H., [1999] 2 S.C.R. 3; 238 N.R. 179; 121 O.A.C. 1, refd to. [para. 37].

Consumers Glass Co. v. Canada (1990), 107 N.R. 156 (F.C.A.), refd to. [para. 43].

Michelin Tires (Canada) Ltd. v. Minister of National Revenue (Customs and Excise) (1998), 158 F.T.R. 101 (T.D.), affd. (2001), 271 N.R. 183 (F.C.A.), refd to. [para. 43].

Federated Co-operatives Ltd. v. Minister of National Revenue (Customs and Excise) (2001), 268 N.R. 353 (F.C.A.), refd to. [para. 43].

Statutes Noticed:

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 59(3.2) [para. 4]; sect. 71 [para. 42].

Excise Tax Act Regulations (Can.), Ships Stores Regulations, SOR/86-878, gen­erally [para. 13].

Excise Tax Act Regulations (Can.), Ships Stores Regulations, SOR/88-425, gen­erally [para. 15].

Ships Stores Regulations - see Excise Tax Act Regulations (Can.).

Counsel:

Edward Chiasson, Q.C., for the appellant;

Christopher Rupar, for the respondent.

Solicitors of Record:

Borden Ladner Gervais, Vancouver, British Columbia, for the appellant;

Morris Rosenberg, Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the respondent.

These appeals were heard on March 15, 2001, at Vancouver, British Columbia, before Strayer, Linden and Sexton, JJ.A, of the Federal Court of Appeal. The following judgment of the Court of Appeal was delivered by Strayer, J.A., on May 10, 2001.