Reference Re Goods and Services Tax

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Supreme Court (Canada)
• Judge: Lamer, C.J.C., La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci, JJ.
• Citation: (1992), 138 N.R. 247 (SCC),34 ACWS (3d) 602,94 DLR (4th) 51,20 WAC 161,JE 92-944,[1992] SCJ No 62 (QL),1992 CanLII 69 (SCC),[1992] 2 SCR 445,138 NR 247,127 AR 161,2 Alta LR (3d) 289,[1992] 4 WWR 673
• Date: 25 June 1992

Ref. Re Goods and Services Tax (1992), 138 N.R. 247 (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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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.

(Nos. 22635, 22664)

Indexed As: Reference Re Goods and Services Tax

Supreme Court of Canada

Lamer, C.J.C., La Forest, L'Heureux-Dubé,  Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci, JJ.

June 25, 1992.

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, in a judgment reported 117 A.R. 321, 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. The Attor­ney General for Alberta appealed the answers to questions 1, 2, 3, 4 and 6. The Attorney General of Canada appealed the answers to questions 1, 3, 4 and 5. The appeals were heard together.

The Supreme Court of Canada allowed the appeal of the Attorney General of Canada and dismissed the appeal of the Attorney General for Alberta. The court agreed with the answers of the Court of Appeal to ques­tions 1, 2, 4 and 6. The court held that suppliers were not entitled to charge and collect from the Consolidated Revenue Fund all costs, charges and expenses incidental to collecting and paying a G.S.T. remittance. The court also held that the province, where operating as a commercial entity, was bound to use revenue to collect or pay a remittance.

Editor's Note: Stevenson, J., did not par­ticipate in the judgment.

Agency - Topic 3251

Relations between principal and agent - Agent's remuneration - General - The Supreme Court of Canada stated that "[t]he duty to remunerate the agent for costs incurred in the course of the agency does not, therefore, arise automatically. It only arises in cases in which the principal and the agent contract, expressly or by impli­cation, for such remuneration to be paid." - See paragraph 44.

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 the 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." - The Supreme Court of Canada stated that "outside of contract a common law duty to recover remuneration does not exist." - See para­graphs 44 to 46.

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. where the province acted commercially as a supplier - The Alberta Court of Appeal held that the federal Crown breached s. 125 - The Supreme Court of Canada stated that "[s]ince the obligation of a province to collect and remit the G.S.T. when it acts as supplier does not amount to taxation of the province's property, s. 125 of the Constitution Act, 1867 has no application in these situations" - Accord­ingly, the province, when acting in a com­mercial capacity, was bound to collect and remit the G.S.T. - See paragraphs 52 to 61.

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 Supreme Court of Canada affirmed that the G.S.T. provisions that did not have the effect of raising money impinged upon the provincial power re property and civil rights, but were necessarily incidental to the G.S.T. taxation scheme and within federal jurisdiction - See paragraphs 27 to 36.

Constitutional Law - Topic 5766

Federal jurisdiction (s. 91) - Taxation - Consolidated Revenue Fund - [See Sales and Service Taxes - Topic 5223 ].

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 - The Supreme Court of Canada affirmed the decision - See paragraphs 69 to 71.

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 - The Supreme Court of Canada affirmed the decision - See paragraphs 72 to 77.

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 - The Supreme Court of Canada affirmed the decision - See paragraphs 27 to 36.

Sales and Service Taxes - Topic 5222

Goods and Services Tax - Collection and enforcement - Persons obligated to collect - Provinces - [See 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." - The Supreme Court of Canada held that the province, when acting as a commercial supplier, was bound by the G.S.T. provi­sions - See paragraphs 52 to 61.

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 Supreme Court of Canada stated that there was no right of reimbursement out of the Consolidated Revenue Fund under s. 103, the common law or the G.S.T. legislation itself - See paragraphs 37 to 51.

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. 12].

Reference Re Employment and Social Insurance Act, [1936] S.C.R. 427, dist. [para. 31].

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. 33].

R. v. Waterous Engine Works Co. (1893), 3 Que. Q.B. 222, refd to. [para. 42].

Manitoba Fisheries Ltd. v. Canada, [1979] 1 S.C.R. 101; 23 N.R. 159, dist. [para. 43].

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384; 117 D.L.R.(3d) 257, refd to. [para. 48].

Zaidan Group Ltd. v. London (City), [1991] 3 S.C.R. 593; 129 N.R. 227; 50 O.A.C. 1, affing. 36 O.A.C. 384; 71 O.R.(3d) 65 (C.A.), refd to. [para. 50].

Phillips v. City of Sault Ste. Marie, [1954] S.C.R. 404, refd to. [para. 59].

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, dist. [para. 62].

Peel (Regional Municipality) v. Mac­Kenzie and Attorney General of Canada et al., [1982] 2 S.C.R. 9; 42 N.R. 572, dist. [para. 62].

Attorney General for Quebec v. Nipissing Central Railway Co., [1926] A.C. 715 (P.C.), refd to. [para. 66].

Valin v. Langlois (1879), 3 S.C.R. 1, refd to. [para. 66].

Coughlin v. Ontario Highway Transport Board, [1968] S.C.R. 569, refd to. [para. 67].

Court of Unified Criminal Jurisdiction, Re; McEvoy v. Attorney General of New Brunswick and Attorney General of Canada, [1983] 1 S.C.R. 704; 48 N.R. 228; 46 N.B.R.(2d) 219; 121 A.P.R. 219, refd to. [para. 71].

Reference Re Education System in Montreal, [1926] S.C.R. 246, refd to. [para. 71].

Reference Re Waters and Water-Powers, [1929] S.C.R. 200, refd to. [para. 71].

Reference Re Angliers Railway Crossing, [1937] S.C.R. 451, refd to. [para. 71].

Reference Re the British North America Act and the Federal Senate, [1980] 1 S.C.R. 54; 30 N.R. 271, refd to. [para. 71].

Agricultural Products Marketing Act, Re, [1978] 2 S.C.R. 1198; 19 N.R. 361; 84 D.L.R.(3d) 257, refd to. [para. 75].

Friends of the Oldman River Society v. Canada (Minister of Transport and Min­ister of Fisheries and Oceans), [1992] 1 S.C.R. 3; 132 N.R. 321, refd to. [para. 80].

Whitbread v. Walley et al., [1990] 3 S.C.R. 1273; 120 N.R. 109, refd to. [para. 80].

Attorney General for Canada v. Attorney General for Ontario, [1937] A.C. 355, refd to. [para. 81].

Anti-Inflation Act, Re, [1976] 2 S.C.R. 373; 9 N.R. 541, refd to. [para. 82].

Bank of Montreal v. Hall, [1990] 1 S.C.R. 121; 104 N.R. 110; 82 Sask.R. 120; [1990] 2 W.W.R. 194, refd to. [para. 84].

Statutes Noticed:

Constitution Act, 1867, sect. 91(3) [para. 27]; sect. 91(27) [para. 64]; sect. 92(13) [para. 28]; sect. 102 [para. 40]; sect. 103 [para. 38]; sect. 104, sect. 106 [para. 40]; sect. 125 [para. 52]; sect. 126 [para. 62].

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 123 [para. 38]; sect. 221(1), sect. 222(1) [para. 13]; sect. 240 [para. 38]; sect. 313(1) [para. 16].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 153, sect. 227(4) [para. 39].

Judicature Act, R.S.A. 1980, c. J-1, sect. 27 [para. 5].

Authors and Works Noticed:

Fridman, G.H.L., The Law of Agency (5th Ed. 1983), p. 164 [para.44].

Counsel:

T.B. Smith, Q.C., James M. Mabbutt, Q.C., and James N. Shaw, for the appel­lant/respondent;

James C. MacPherson, Peter J. McIntyre and Gina A. Ross, for the respond­ent/appellant;

Janet E. Minor, Peter Landmann and John Terry, for the intervenor, the Attorney General for Ontario;

Hunter W. Gordon, for the intervenor, the Attorney General of British Columbia;

Graeme G. Mitchell, for the intervenor, the Attorney General for Saskatchewan;

F.J.C. Newbould, Q.C., and Freya Krist­janson, for the intervenor, the Canadian Federation of Independent Business.

Solicitors of Record:

Stikeman, Elliott, Ottawa, Ontario, for the appellant/respondent;

Burnet Duckworth & Palmer, Calgary, Alberta, for the respondent/appellant;

Ministry of the Attorney General for Ontario, Toronto, Ontario, for the intervenor, the Attorney General for Ontario;

Deputy Attorney General of British Col­umbia, Victoria, British Columbia, for the intervenor, the Attorney General of British Columbia;

Deputy Attorney General of Saskatchewan, Regina, Saskatchewan, for the intervenor, the Attorney General for Saskatchewan;

Borden & Elliot, Toronto, Ontario, for the intervenor, the Canadian Federation of Independent Business.

This appeal was heard on February 24-25, 1992, before Lamer, C.J.C., La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci, JJ., of the Supreme Court of Canada.

On June 25, 1992, the judgment of the Supreme Court of Canada was delivered in both official languages and the following opinions were filed:

Lamer, C.J.C. (Sopinka, Gonthier, Cory, McLachlin and Iacobucci, JJ., concur­ring) - see paragraphs 1 to 78;

La Forest, J. (L'Heureux-Dubé, J., con­curring) - see paragraphs 79 to 95.

Stevenson, J., did not participate in the judgment.