Canada (Attorney General) v. Consolidated Canadian Contractors Inc., (1998) 231 N.R. 92 (FCA)

• Judge: Strayer, Robertson and McDonald, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: June 03, 1998
• Jurisdiction: Canada (Federal)
• Citations: (1998), 231 N.R. 92 (FCA)

Can. (A.G.) v. Consolidated Cdn. Cont. (1998), 231 N.R. 92 (FCA)

MLB headnote and full text

Temp. Cite: [1998] N.R. TBEd. OC.010

In The Matter of an application under Section 28 of the Federal Court Act

And In The Matter of a decision of the Tax Court of Canada made pursuant to the provisions of the Excise Tax Act

The Attorney General of Canada (appli­cant) v. Consolidated Canadian Con­tractors Inc. (respondent)

(A-445-97)

Indexed As: Canada (Attorney General) v. Consolidated Canadian Contractors Inc.

Federal Court of Appeal

Strayer, Robertson and McDonald, JJ.A.

September 29, 1998.

Summary:

A building contractor was involved in the construction of two schools and remitted goods and services (GST) to the Minister of National Revenue. The Minister determined that the contractor failed to calculate the correct amount of GST payable. The Minis­ter assessed additional tax, interest and imposed a penalty of 6% on the under­pay­ment as prescribed by s. 280 of the Excise Tax Act. The contractor challenged the assess­ment.

The Tax Court of Canada found that the contractor had miscalculated the GST due. However the court set aside the 6% penalty on the basis that the contractor had exercised due diligence in attempting to ascertain the correct amount of GST. The Attorney Gen­eral of Canada applied for judicial review, arguing that Excise Tax Act did not ex­pressly provide for the defence of due dili­gence and the court lacked jurisdic­tion to imply such a defence where adminis­trative penalties were concerned.

The Federal Court of Appeal dismissed the application.

Courts - Topic 2015.1

Jurisdiction - Re defence of due diligence -The Minister of National Revenue argued that pursuant to R. v. Sault Ste. Marie (S.C.C.), the court had jurisdiction to imply a due diligence defence only if it identified a public welfare or regulatory offence that qualified as a strict liability offence (i.e., not in cases involving admin­istrative penalties only) - The Federal Court of Appeal disagreed - The court stated that "... the true precedential signifi­cance of Sault Ste. Marie lies in the fact that it recognizes strict liability offences for which the defence of due diligence is available. It does not stand for the prop­osition that the defence of due diligence can be invoked only if a public welfare or regulatory offence is involved. That issue was not before the Supreme Court. Hence, ... it is open to this Court to determine whether the defence of due diligence may, as a matter of principle, be raised in the context of administrative penalties" - See paragraphs 11 to 20.

Courts - Topic 2015.1

Jurisdiction - Re defence of due diligence -The Federal Court of Appeal held that administrative penalties may be subject to a due diligence defence - The court set out the analytical framework to be applied in determining when a court could exercise its jurisdiction to read in the due diligence defence - See paragraphs 25 to 40.

Courts - Topic 2015.1

Jurisdiction - Re defence of due diligence -The Minister of National Revenue argued that no defence of due diligence could be implied in the case of an auto­matic ad­ministrative penalty imposed under the Excise Tax Act, s. 280 - The Federal Court of Appeal stated that there was no com­mon law rule that would disal­low a due dili­gence defence with respect to adminis­tra­tive penalties - Further there was no valid basis for maintaining absolute liabil­ity for all administrative penalties - The court stated that administrative pen­alties may give rise to either strict or absolute liability - In deciding whether a due dili­gence defence is available in any one case, the application of conventional interpreta­tive principles cannot be avoided - See para­graphs 21 to 24.

Sales and Service Taxes - Topic 5415

Goods and services tax - Offences and penalties - Defences - Due diligence - Section 280 of the Excise Tax Act imposed an 6% administrative penalty on underpayments of goods and service taxes (GST) - The Act did not expressly provide for a defence of due diligence - The Min­ister of National Revenue argued that no defence of due diligence could be implied because s. 280 was an administrative pen­alty as opposed to a regulatory offence - The Federal Court of Appeal held that the defence of due diligence could apply in the case of administrative penalties and in particular in the case of s. 280 - Section 280 did not give rise to absolute liability - The presumption in favour of strict liabil­ity was not rebutted - An implied due diligence defence was neither incompatible with the legislative scheme, nor did it frustrate or undermine the purposes under­lying that scheme.

Sales and Service Taxes - Topic 5415

Goods and services tax - Offences and penalties - Defences - Due diligence - A building contractor remitted goods and services (GST) to the Minister of National Rev­enue - The Minister deter­mined that the contractor failed to calcu­late the cor­rect amount of GST payable - The Minis­ter imposed a 6% penalty on the un­der­pay­ment (Excise Tax Act, s. 280) - The con­tractor chal­lenged the assess­ment - The Tax Court found that the con­tractor had miscalculated the GST due but set aside the 6% pen­alty where the con­tractor had exercised due dili­gence in attempting to ascertain the correct amount of GST - The Attorney Gen­eral of Canada applied for judicial review, arguing that Excise Tax Act did not ex­pressly provide for the defence of due dili­gence and the court lacked juris­dic­tion to imply such a defence where adminis­trative pen­alties were con­cerned - The Federal Court of Appeal dismissed the application.

Cases Noticed:

Pillar Oilfield Projects Ltd. v. R., [1993] 2 G.S.T.C. 1005 (T.C.C.), refd to. [para. 2].

R. v. Sault Ste. Marie (City), [1978] 2 S.C.R. 1299; 21 N.R. 295; 85 D.L.R.(3d) 161; 40 C.C.C.(2d) 353; 3 C.R.(3d) 30; 7 C.E.L.R. 53, refd to. [para. 2].

R. v. City of Sault Ste. Marie - see R. v. Sault Ste. Marie (City).

Locator of Missing Heirs Inc. v. Minister of National Revenue, [1997] G.S.T.C. 16; 212 N.R. 391 (F.C.A.), refd to. [para. 3].

Canada (Attorney General) v. 770373 Ontario Ltd., [1997] N.R. Uned. 9; [1997] G.S.T.C. 1 (F.C.A.), refd to. [para. 3].

R. v. Pontes (P.), [1995] 3 S.C.R. 44; 186 N.R. 81; 62 B.C.A.C. 241; 103 W.A.C. 241; 100 C.C.C.(3d) 353, refd to. [para. 23].

R. v. Nickel City Transport (Sudbury) Ltd. et al. (1993), 63 O.A.C. 289; 47 M.V.R.(2d) 20 (C.A.), refd to. [para. 23].

Abley v. Dale (1850), 138 E.R. 519 (C.P.), refd to. [para. 26].

Grey v. Pearson (1857), 10 E.R. 1216 (H.L.), refd to. [para. 27].

Estabrooks Pontiac Buick Ltd., Re; New Brunswick v. Estabrooks Pontiac Buick Ltd., Estabrooks and Wolfe (1982), 44 N.B.R.(2d) 201; 116 A.P.R. 201 (C.A.), refd to. [para. 30].

Gustavson Drilling (1964) Ltd. v. Minister of National Revenue, [1977] 1 S.C.R. 271; 7 N.R. 401, refd to. [para. 31].

Upper Canada College v. Smith (1920), 61 S.C.R. 413, refd to. [para. 31].

Apotex Inc. v. Merck & Co. and Merck Frosst Canada Inc., [1994] 1 F.C. 742; 162 N.R. 177 (F.C.A.), affd. [1994] 3 S.C.R. 1100; 176 N.R. 1, refd to. [para. 31].

Inland Revenue Commissioners v. West­minster (Duke), [1936] A.C. 1, refd to. [para. 32].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241; 84 D.T.C. 6305; [1984] C.T.C. 294, refd to. [para. 32].

Antosko v. Minister of National Revenue, [1994] 2 S.C.R. 312; 168 N.R. 16; [1994] 2 C.T.C. 25; 94 D.T.C. 6314, refd to. [para. 32].

Friesen v. Minister of National Revenue, [1995] 3 S.C.R. 103; 186 N.R. 243; 95 D.T.C. 5551, refd to. [para. 32].

Hickman Motors Ltd. v. Minister of National Revenue, [1997] 2 S.C.R. 336; 213 N.R. 81, refd to. [para. 32].

Minister of National Revenue v. Duha Printers (Western) Ltd., [1998] 1 S.C.R. 795; 225 N.R. 241, refd to. [para. 32].

Neuman v. Minister of National Revenue, [1998] 1 S.C.R. 770; 225 N.R. 190, refd to. [para. 32].

River Wear Commissioners v. Adamson (1877), 2 App. Cas. 743 (H.L.), refd to. [para. 33].

Great Western Railway Co. v. Ship S.S. Mostyn, [1928] A.C. 57 (H.L.), refd to. [para. 33].

Canadian Pacific Airlines Ltd. and Pacific Western Airlines Ltd. v. British Colum­bia, [1989] 1 S.C.R. 1133; 96 N.R. 1, refd to. [para. 38].

Canada v. Nassau Walnut Investment Inc., [1997] 2 F.C. 279; 206 N.R. 386 (F.C.A.), refd to. [para. 38].

Reference Re Section 94(2) of the Motor Vehicle Act (B.C.), [1985] 2 S.C.R. 486; 63 N.R. 266; [1986] 1 W.W.R. 481; 23 C.C.C.(3d) 289; 48 C.R.(3d) 289; 24 D.L.R.(4th) 536; 36 M.V.R. 240; 69 B.C.L.R.(2d) 145; 18 C.R.R. 30, refd to. [para. 41].

Metro Exteriors Ltd. v. Canada, [1995] T.C.J. No. 1302 (T.C.C.), refd to. [para. 55].

R. v. Docherty, [1989] 2 S.C.R. 941; 101 N.R. 161; 78 Nfld. & P.E.I.R. 315; 244 A.P.R. 315, refd to. [para. 57].

Statutes Noticed:

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 280 [para. 2].

Authors and Works Noticed:

Canada, Minister of National Revenue, GST Memorandum 500-3-2-1, Assess­ments and Penalties - Cancellation or Waiver of Penalties and Interest (March 14, 1994), Technical Information Bul­letin B-074 [para. 54].

Canada, Minister of National Revenue, Guidelines for the Reduction of Penalty and Interest in "Wash Transaction" Situ­ations (November 28, 1994), generally [para. 54].

Canada, Revenue Canada News Release (November 28, 1996), generally [para. 54].

Driedger, Elmer A., Construction of Stat­utes (2nd Ed. 1983), p. 87 [para. 36].

Driedger, Elmer A., Construction of Stat­utes (3rd Ed. 1994), pp. 25 [para. 29]; 85, 86 [para. 28]; 513 [para. 31].

Sherman, D.M., Canada G.S.T. Service (1998), pp. 280-105, 280-106, 280-107 [para. 4]; 280-108 [paras. 4, 48].

Willis, J., Statute Interpretation In A Nut­shell (1938), 16 Can. Bar Rev. 1, pp. 13 [para. 28]; 23 to 27 [para. 32].

Counsel:

Harry Erlichman and Kevin Diaz, for the appellant;

Nick Chitilian of Consolidated Canadian Contractors Inc., for the defendant.

Solicitors of Record:

Morris Rosenberg, Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the appellant;

Nick Chitilian of Consolidated Canadian Contractors Inc., for the defendant.

This application was heard in Toronto, Ontario, on June 3, 1998, before Strayer, Robertson and McDonald, JJ.A., of the Federal Court of Appeal. The judgment of the court was delivered by Robertson, J.A., on September 29, 1998.