Reference Re Goods and Services Tax, (1991) 117 A.R. 321 (CA)

• Judge: Stratton and Côté, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: September 27, 1991
• Citations: (1991), 117 A.R. 321 (CA)

Ref. Re Goods and Services Tax (1991), 117 A.R. 321 (CA);

    2 W.A.C. 321

MLB headnote and full text

In The Matter Of s. 27 of the Judicature Act, R.S.A. 1980, c. J-1;

And In The Matter Of a Reference by the Lieutenant-Governor-in-Council to the Court of Appeal of Alberta for hearing and consideration of the questions set out in Order-in-Council O.C. 538/90 in respect of Bill C-62, an Act proposed by the House of Commons of Canada to amend the Excise Tax Act, the Criminal Code, the Customs Act, the Customs Tariff, the Excise Act, the Income Tax Act, the Statistics Act and the Tax Court of Canada Act.

(Appeal No. 12116)

Indexed As: Reference Re Goods and Services Tax

Alberta Court of Appeal

Laycraft, C.J.A., Kerans, Hetherington,

Stratton and Côté, JJ.A.

September 27, 1991.

Summary:

By Order-in-Council O.C. 538/90 the Lieutenant-Governor-in-Council, pursuant to s. 27 of the Judicature Act, R.S.A. 1980, c. J-1, referred several questions to the Court of Appeal respecting the validity and effect of the federal Goods and Services Tax (G.S.T.). The issues raised were as follows: (1) Was the G.S.T., in whole or in part ultra vires Parliament; (2) Was the collection procedure an infringement of the province's property and civil rights power (Constitution Act, s. 92(13)) and therefore ultra vires Parliament; (3) Were suppliers entitled, under the common law or s. 103 of the Constitution Act, 1867, to charge and collect from the Consolidated Revenue Fund of Canada all costs, charges and expenses incidental to collecting and paying a G.S.T. remittance; (4) Whether the obligation on the provinces to collect and remit the G.S.T. was ultra vires Parliament as infringing the tax immunity under s. 125 of the Constitution Act; (5) Was the requirement that the prov­ince use its own revenue to collect or pay a G.S.T. remittance ultra vires Parliament for infringing s. 126 of the Constitution Act; (6) Was the purchase of taxable supplies by provincial authorities or their agents exercis­ing a delegated provincial constitutional power, or by the Crown Purchase Agency, etc., exempt from the G.S.T.

The Alberta Court of Appeal, Côté, J.A., dissenting in part on question no. 4, answered the questions as follows: (1) The G.S.T. was not ultra vires, subject to the answer to question 5; (2) The collection procedure was intra vires Parliament; (3) Suppliers were entitled to charge and collect from the Consolidated Revenue Fund costs and expenses of collecting and remitting G.S.T. only to the extent that such costs, etc., were not salary, wages or remuneration for time and effort, and were incurred within the scope of the agency, and were reason­ably attributable to Canada's interest in the tax, and were incurred reasonably and with­out negligence or known illegality; (4) Canada was in breach of s. 125 of the Con­stitution Act by imposing on a province the obliga­tion to collect and remit the G.S.T.; (5) The requirement that the province use part of its revenue to collect or pay a remit­tance was not binding on the province; (6) The court declined to answer this question.

Agency - Topic 3251

Relations between principal and agent - Agent's remuneration - General - The Alberta Court of Appeal stated that "the principal is not obliged to pay the agent for the agent's time and effort unless there is a contract for remuneration. Such a contract need not be express; it may be implied from the circumstances ... The court must find a real intent to remuner­ate." - See paragraph 39.

Agency - Topic 3326

Relations between principal and agent - Agent's right to indemnity - General - The Alberta Court of Appeal stated that "[i]f an agent using due care reasonably incurs an expense in carrying out the proper terms of his agency, the principal must reimburse or indemnify his agent for such expenses or liability ... The author­ities do not require any contract to indem­nify the agent, not even an implied con­tract ... it takes a clear positive contract to exclude the duty to indemnify." - See paragraphs 44 to 48.

Constitutional Law - Topic 466

Powers of Parliament and legislatures - Limitations - Taxation of Crown property - Alberta submitted that interjurisdictional tax immunity (Constitution Act, s. 125) extended to the obligation imposed on the provinces by the federal government to collect and remit the federal G.S.T. - The Alberta Court of Appeal stated that the collection and remittance provisions did not impose a tax directly on provincial property - The court stated that "an attempt by Canada to oblige a province to expend valuable effort to collect the G.S.T. on taxable supplies by the province is an exaction in the nature of a tax and is caught by both s. 125 and s. 126 ... the provisions in the GST Act imposing these duties do not validly operate against a province. However, we would not declare them of no force and effect, because they do ... lawfully bind others." - See para­graphs 73 to 95.

Constitutional Law - Topic 466

Powers of Parliament and legislatures - Limitations - Taxation of Crown property - The G.S.T. applied whenever a province engaged in supplies in the nature of a commercial activity or where the supply fell within the definition of a deemed commercial activity - Alberta submitted that the G.S.T., in such cases, was a tax on provincial property offending s. 125 of the Constitution Act - The Alberta Court of Appeal stated that "Canada is in breach of s. 125 of the Constitution Act by imposing on a province the obligation to collect and remit the tax. But this tax by Canada on those who deal with a province does not trigger immunity merely because the tax has some adverse economic impact on a province. Because the facts before us do not require it, we do not decide whether immunity is triggered when the adverse impact is more than minimal." - See para­graphs 96 to 113.

Constitutional Law - Topic 1005

Interpretation of Constitution Act - Prin­ciple of flexibility - The Alberta Court of Appeal stated that "constitutional enact­ments should be interpreted flexibly and broadly in a manner to enhance values and preserve rights" - See paragraph 58.

Constitutional Law - Topic 5761

Federal jurisdiction (s. 91) - Taxation - General - The Goods and Services Tax (G.S.T.), imposed under Part IX of the Excise Tax Act, generally applied to sales of taxable goods, but was intended to be borne by the ultimate consumer - The G.S.T., when paid by suppliers who were not ultimate consumers, resulted in later refunds of the G.S.T. paid and no net revenue to the federal government - Alberta claimed such collection provisions were not within the federal taxing power - The Alberta Court of Appeal stated that the provisions of the G.S.T. legislation that did not have the effect of raising money were necessarily incidental to the scheme of the G.S.T. taxation system and were within federal jurisdiction - See para­graphs 16 to 20.

Constitutional Law - Topic 5766

Federal jurisdiction (s. 91) - Taxation - Consolidated Revenue Fund - Section 103 of the Constitution Act provided that "the Consolidated Revenue Fund of Canada shall be permanently charged with the costs, charges and expenses incident to the collection, management and receipt thereof [taxes] ..." - The Alberta Court of Appeal discussed the history and scope of s. 103 - Section 103 imposed no independent duty to compensate nongovernment employees for their time or effort in collecting or remitting revenue - The court stated that it was unnecessary to decide whether s. 103 created an independent duty to indemnify or reimburse persons with no other inde­pendent legal right - See paragraphs 52 to 69.

Practice - Topic 3787

References and inquiries - References by Lieutenant-Governor-in-Council to Court of Appeal - Duty to answer questions referred - A reference under s. 27 of the Judicature Act asked the court's opinion as to the degree to which municipalities, public colleges, universities, hospitals, etc., were subject to the Goods and Services Tax (G.S.T.) - The Alberta Court of Appeal declined to answer the question, because it was not feasible or desirable to do so - The court could not, in the cir­cumstances, offer a useful answer - See paragraphs 114 to 125.

Practice - Topic 3788

References and inquiries - References by Lieutenant-Governor-in-Council to Court of Appeal - Issues raised by intervenor - An intervenor in a reference by the Prov­ince of Alberta on the validity and effect of the Goods and Services Tax legislation submitted that the legislation was enacted under an invalid process - The intervenor claimed House of Commons Standing Orders 57 (closure) and 78(3) (the guillo­tine) were invalidly enacted by Resolution 75 years ago, when they should have been enacted by statute - The intervenor claimed any legislation adopted using that process, including the G.S.T. legislation, was invalidly enacted - The Alberta Court of Appeal stated that this question was not before the court and should not be answered - The matter was not specifi­cally referred to the court, in fact, the reference proceeded on the assumption that the legislation was validly enacted - See paragraphs 126 to 145.

Sales and Service Taxes - Topic 4902

Goods and Services Tax - Validity of taxing statute - [See Constitutional Law - Topic 5761 ].

Sales and Service Taxes - Topic 5222

Goods and Services Tax - Collection and enforcement - Persons obligated to collect - Provinces - The provisions of the G.S.T. legislation that did not raise money intruded substantially on the provincial property and civil rights power (Constitu­tion Act, s. 92(13)) - The issue was whether those provisions were sufficiently integrated with the scheme of the legisla­tion, considered as a whole, so as to be justified - The Alberta Court of Appeal stated that the impugned provisions were essential to achieve the object of the G.S.T. legislation - The provisions were sufficiently integrated into the scheme of the legislation to justify their inclusion - The collection system under the G.S.T. legislation was not ultra vires Parliament - See paragraphs 22 to 29.

Sales and Service Taxes - Topic 5222

Goods and Services Tax - Collection and enforcement - Persons obligated to collect - Provinces - [See both Constitutional Law - Topic 466 ].

Sales and Service Taxes - Topic 5222

Goods and Services Tax - Collection and enforcement - Persons obligated to collect - Provinces - The Alberta Court of Appeal stated that "the requirement under the Goods and Services Tax Act that the government of Alberta use part of its revenue for the purposes [of collecting or remittance or to pay a remittance prior to the receipt of the remittance from the recipient of a taxable supply] is not bind­ing on the Province of Alberta." - See paragraph 146.

Sales and Service Taxes - Topic 5223

Goods and Services Tax - Collection and enforcement - Persons obligated to collect - Remuneration and indemnification - Alberta submitted that suppliers obligated to collect the G.S.T. had a right under the common law or s. 103 of the Constitution Act to be reimbursed for the cost of ful­filling that duty - The Alberta Court of Appeal stated that "[s]uppliers are entitled to charge and collect from the Consoli­dated Revenue Fund of Canada costs, charges and expenses of collecting and paying a remittance under the GST Act only to the extent that such costs, expenses, and charges (a) are not salary, wages or remuneration for time or effort, and (b) are incurred within the scope of the agency, and (c) are reasonably attribut­able to Canada's interest in the tax, and (d) are incurred reasonably and without negli­gence or known illegality." - See para­graphs 30 to 69.

Sales and Service Taxes - Topic 5223

Goods and Services Tax - Collection and enforcement - Persons obligated to collect - Remuneration and indemnification - [See Constitutional Law - Topic 5766 ].

Statutes - Topic 5401

Operation and effect - Delegated legisla­tion - Standing orders and directives - [See Practice - Topic 3788 ].

Cases Noticed:

City National Leasing Ltd. v. General Motors of Canada Ltd., [1989] 1 S.C.R. 641; 93 N.R. 326; 32 O.A.C. 332, refd to. [para. 21].

Manitoba Fisheries Ltd. v. Canada, [1979] 1 S.C.R. 101; 23 N.R. 159, refd to. [para. 32].

Secretary of State v. Bank of India, [1938] 2 All E.R. 797 (P.C.), refd to. [para. 36].

Butler v. Murphy (1909), 41 S.C.R. 618, revsing. 18 Man. R. 111, refd to. [para. 44].

Thacker v. Hardy (1878), 4 Q.B.D. 685 (C.A.), refd to. [para. 44].

Bristow v. Whitmore (1861), 9 H.L.C. 391; 11 E.R. 781, refd to. [para. 44].

Williams v. Lister & Co. (1913), 109 L.T. 699 (C.A.), refd to. [para. 44].

Wallersteiner v. Moir (No. 2), [1975] 1 Q.B. 373 (C.A.), refd to. [para. 44].

Dugdale v. Lovering (1875), L.R. 10 C.P. 196, refd to. [para. 46].

Sheffield (City) v. Barclay, [1905] A.C. 382 (H.L.), refd to. [para. 46].

Guaranty Trust Co. v. James Richardson & Son Ltd. (1963), 39 D.L.R.(2d) 517 (Ont. H.C.), refd to. [para. 46].

Lacey v. Hill (1874), L.R. 18 Eq. 182, refd to. [para. 47].

Frixione v. Tagliaferro (1856), 10 Moo. P.C. 175; 14 E.R. 459 (P.C.), refd to. [para. 48].

Edwards v. Attorney General of Canada, [1930] A.C. 124 (P.C.), refd to. [para. 58].

R. v. Waterous Engine Works Co. (1893), 3 Que. Q.B. 222 (C.A.), refd to. [para. 66].

Alberta Natural Gas Tax Reference, [1982] 1 S.C.R. 1004; 42 N.R. 361; 37 A.R. 541; 136 D.L.R.(3d) 385, refd to. [para. 76].

Bank of Toronto v. Lambe (1887), 12 App. Cas. 575, refd to. [para. 77].

Reference as to the Liability of the Prov­ince of Nova Scotia for Expenses Incurred in Calling Out Troops in Aid of the Civil Power in Cape Breton, [1930] S.C.R. 554, refd to. [para. 78].

Peel (Regional Municipality) v. Mac­Kenzie and Attorney General of Canada et al., [1982] 2 S.C.R. 9; 42 N.R. 572, refd to. [para. 87].

Valin v. Langlois (1879), 3 S.C.R. 90, refd to. [para. 87].

Coughlin v. Ontario Highway Transport Board, [1968] S.C.R. 569, refd to. [para. 87].

Attorney General of British Columbia v. Attorney General of Canada, [1924] A.C. 222 (P.C.), refd to. [para. 87].

Phillips & Taylor v. Sault Ste. Marie, [1954] S.C.R. 404, refd to. [para. 101].

Smith v. Vermilion Hills, [1916] 2 A.C. 569 (P.C.), refd to. [para. 101].

Attorney General for Ontario v. Hamilton Street Railway, [1903] A.C. 524 (P.C.), refd to. [para. 121].

Attorney General for Ontario v. Attorney General for Canada, [1916] A.C. 598, refd to. [para. 122].

Cour de Magistrat de Québec, Re, [1965] S.C.R. 772, refd to. [para. 134].

Agricultural Products Marketing Act, Re, [1978] 2 S.C.R. 1198; 19 N.R. 361; 84 D.L.R.(3d) 257, refd to. [para. 134].

Lord's Day Alliance of Canada v. Attorney General of Manitoba, [1925] A.C. 384 (P.C.), refd to. [para. 142].

Bennett & White (Calgary) v. Sugar City (M.D.), [1951] A.C. 786 (P.C.), refd to. [para. 153].

R. v. Breton, [1967] S.C.R. 503, refd to. [para. 158].

Nowegijick v. Minister of National Rev­enue (1983), 46 N.R. 41; 144 D.L.R.(3d) 193 (S.C.C.), refd to. [para. 159].

South Alberta Land Co. v. McLean (R.M.) (1916), 53 S.C.R. 151, refd to. [para. 173].

Statutes Noticed:

Constitution Act, 1867, sect. 18 [para. 131]; sect. 53, sect. 54 [para. 143]; sect. 91(3) [para. 16]; sect. 92(13) [para. 19]; sect. 102 [para. 56]; sect. 103 [paras. 30, 55]; sect. 125, sect. 126 [para. 72].

Constitution Act, 1982, sect. 52(1), sect. 52(2) [para. 57].

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 122(a) [para. 82]; sect. 123 [para. 35]; sect. 146 [para. 82]; sect. 154 [para. 146]; sect. 221(1) [para. 35]; sect. 313(1) [para. 82].

House of Commons, Standing Orders 57 [para. 145]; 78(3) [para. 128].

Judicature Act, R.S.A. 1980, c. J-1, sect. 27(1) [para. 140].

Union Act of 1840, 3-4 Vict., c. 35, sect. 51 [para. 54].

Authors and Works Noticed:

Anson, Constitutional Law (3rd Ed. 1908), vol. 2, pp. 150-152 [para. 63].

Bowstead on Agency (15th Ed. 1985), pp. 210-211 [para. 39]; 246-248 [paras. 45, 47].

Fridman, The Law of Agency (5th Ed. 1983), p. 164 [para. 39].

Fridman and McLeod, Restitution (1982), c. 11 [para. 46].

Gibson, D., Interjurisdictional Immunity in Canadian Federalism (1969), 47 Can. Bar Rev. 40, p. 56 [para. 78].

Goff and Jones, Law of Restitution (3rd Ed. 1986), c. 14 [para. 46].

Halsbury's Laws of England (4th Ed. 1980), vol. 1, pp. 79-80 [para. 39]; 88-90 [para. 44].

Hogg, Peter W., Constitutional Law of Canada (2nd Ed. 1985), pp. 180-181 [para. 123]; 341 [para. 59].

La Forest, The Allocation of the Taxing Power under the Canadian Constitution (2nd Ed. 1981), pp. 182-183 [para. 155]; 184 [para. 159].

Powell on Agency (2nd Ed. 1961), pp. 329 [paras. 44, 47]; 332 [para. 39].

Scott, F.R., Essays on the Constitution: Aspects of Canadian Law and Politics (1977), p. 295 [para. 92].

Sharpe, Charter Litigation (1987), pp. 337-338 [para. 123].

Story on Agency (9th Ed. 1882), pp. 411-416 [para. 44].

Swinton, K., Federalism and Provincial Government Immunity (1979), 29 U.T.L.J. 1, p. 46 [para. 91].

Wade and Phillips, Constitutional and Administrative Law (9th Ed. 1977), pp. 272-273 [para. 63].

Counsel:

J. Rooke, Q.C., and P.J. McIntyre, for the Government of Alberta;

J. Cavarzan, T. Macklem and P. Landman, for the Government of Ontario;

E.L. Bunnell, Q.C., and T.R. Davis, for the Government of British Columbia;

T.B. Smith, Q.C., and J.N. Shaw, for the Government of Canada.

This reference was heard before Laycraft, C.J.A., Kerans, Hetherington, Stratton and Côté, JJ.A., of the Alberta Court of Appeal.

On September 27, 1991, the decision of the Court of Appeal was delivered and the following opinions were filed:

By the Court - see paragraphs 1 to 148;

Côté, J.A., dissenting respecting question no. 4 - see paragraphs 149 to 179.