[2001] 3 F.C. 449
A-174-99
2001 FCA 144
Joe Markevich (Appellant)
v.
Her Majesty the Queen in Right of Canada (Respondent)
Indexed as: Markevich v. Canada (C.A.)
Court of Appeal, Décary, Rothstein and Malone JJ.A. —Vancouver, February 26; Ottawa, May 7, 2001.
Income tax — Practice — Limitation periods — Income Tax Act not complete code concerning limitation periods for tax debts — Crown Liability and Procedures Act, s. 32 applicable to collection of unpaid tax for which taxpayer assessed.
Practice — Limitation of actions — Collection of unpaid income tax — Income Tax Act not complete code concerning limitation periods for tax debts — Crown Liability and Procedures Act, s. 32 applicable to collection of unpaid tax for which taxpayer assessed — Relevant limitation provision herein B.C. Limitation Act, s. 3(5), covering self help remedies, applying to both court and statutory collection procedures under ITA.
Crown — Practice — Collection of unpaid income tax — Income Tax Act not complete code concerning limitation periods for tax debts — Crown Liability and Procedures Act, s. 32 applicable to collection of unpaid tax for which taxpayer assessed.
As of June 1986, the appellant, a resident of British Columbia, had a total liability for federal and provincial income tax, interest and penalties, of $234,136.04. Nothing was paid on this outstanding amount after 1986. In 1987, by “internal bookkeeping action”, the indebtedness was written off by Revenue Canada. This did not, however, forgive the tax debt or release the appellant. Nonetheless, from 1987 to 1998, Revenue Canada did not try to collect the written-off indebtedness. It was not until January 1998 that the appellant was advised that the Minister intended to take collection action for the full amount of his indebtedness.
The appellant was of the view that the collection procedures for the amount assessed as of June 1986 were statute-barred by the combined application of section 32 of the Crown Liability and Proceedings Act and subsection 3(5) of the British Columbia Limitation Act. The appellant made an application for judicial review to the Federal Court for a declaration that he was not indebted to the Minister in respect of his 1990 and preceding taxation years and prohibiting the Minister from taking any steps to collect tax debts for 1990 and prior years.
The Motions Judge held that there was no limitation period that applied to collection of tax payable under the Income Tax Act. This was an appeal from that decision.
Held, the appeal should be allowed.
The Income Tax Act is not a complete code with respect to limitation provisions pertaining to tax debts, and the statutory collection procedures under the Income Tax Act are “proceedings” within the meaning of that term in section 32 of the Crown Liability and Proceedings Act (CLPA). It follows that the limitation provisions provided in section 32 are applicable to court and statutory collection procedures. In this case, the relevant limitation provision is subsection 3(5) of the British Columbia Limitation Act. As it covers self help remedies, it applies to both court and statutory collection procedures under the Income Tax Act. As a result, the Minister was statute-barred from enforcing collection of the appellant’s 1986 tax debt.
In a statute where limitations periods are expressly addressed in some situations and not others, the correct inference is that Parliament intended the question of limitations to be governed by laws of general application, such as section 32 of the CLPA.
The legislative history of section 32 of the CLPA and relevant case law suggest that the term “proceedings” as used in section 32 applies to the non-court or statutory collection procedures under the Income Tax Act. Furthermore, such interpretation is consistent with the words and the object and purpose of section 32.
With respect to the appellant’s liability for provincial income tax arising under the British Columbia Income Tax Act, it is subject to subsection 3(5) (providing for a six-year limitation period) of the British Columbia Limitation Act. While it may be that the provincial debt is acquired by the federal Crown and that the federal Minister may take steps to collect the tax debt under provisions of the federal Income Tax Act, in taking collection action, the federal Minister is subject to any defences the appellant has under the British Columbia Income Tax Act and Limitation Act.
The appeal should therefore be allowed and a declaration issue that the Minister of National Revenue is prohibited from taking court action or statutory collection procedures to collect the tax debt of the appellant that is statute-barred, having regard to these reasons.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Crown Liability and Proceedings Act, R.S.C., 1985, c. C-50 (as am. by S.C. 1990, c. 8, s. 21), s. 32 (as am. idem, s. 31).
Excise Tax Act, R.S.C. 1970, c. E-13.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 38.
Federal Court Act, R.S.C., 1985, c. F-7, ss. 18.1 (as enacted by S.C. 1990, c. 8, s. 5), 39 (as am. idem, s. 10), 50(1)(b).
Income Tax Act, R.S.B.C. 1996, c. 215.
Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 152(4) (as am. by S.C. 1998, c. 19, s. 181), 159(3) (as am. idem, s. 185), 222, 223(7)(b) (as am. idem, s. 224), 224 (as am. by S.C. 1994, c. 21, s. 101), 225(1),(5), 225.1 (as am. by S.C. 1994, c. 7, Sch. VIII, s. 131; 1998, c. 19, s. 225), 227(10) (as am. by S.C. 1998, c. 19, s. 226).
Interpretation Act, R.S.B.C. 1996, c. 238, s. 14.
Interpretation Act, R.S.C., 1985, c. I-21, s. 17.
Limitation Act, R.S.B.C. 1996, c. 266, ss. 1 “action”, 3(5), 9(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
M. (K.) v. M. (H.), [1992] 3 S.C.R. 6; (1992), 96 D.L.R. (4th) 289; 14 C.C.L.T. (2d) 1; 142 N.R. 321; 57 O.A.C. 321; Slattery (Trustee of) v. Slattery, [1993] 3 S.C.R. 430; (1993), 139 N.B.R. (2d) 246; 106 D.L.R. (4th) 212; 21 C.B.R. (3d) 161; [1993] 2 C.T.C. 243; 93 DTC 5443; 158 N.R. 341; Nowegijick v. The Queen, [1983] 1 S.C.R. 29; (1983), 144 D.L.R. (3d) 193; [1983] 2 C.N.L.R. 89; [1983] CTC 20; 83 DTC 5041; 46 N.R. 41; E.H. Price Limited v. The Queen, [1983] 2 F.C. 841 (1983), 147 D.L.R. (3d) 657; [1983] 6 W.W.R. 167; [1983] C.T.C. 289; 83 DTC 5288; 47 N.R. 312 (C.A.); Berardinelli v. Ontario Housing Corpn. et al., [1979] 1 S.C.R. 275; (1978), 90 D.L.R. (3d) 481; 8 C.P.C. 100; 23 N.R. 298; Twinriver Timber Ltd. v. R. in Right of British Columbia (1980), 15 B.C.L.R. 38 (S.C.).
DISTINGUISHED:
Mark v. Canada (Minister of Fisheries and Oceans) (1991), 50 F.T.R. 157 (F.C.T.D.).
REFERRED TO:
Backman v. Canada, [2001] 1 S.C.R. 367; (2001), 196 D.L.R. (4th) 193; 2001 DTC 5149; Continental Bank Leasing Corp. v. Canada, [1998] 2 S.C.R. 298; (1998), 163 D.L.R. (4th) 385; [1998] 4 C.T.C. 119; 98 DTC 6505; 229 N.R. 58; Domco Industries Ltd. v. Mannington Mills Inc. (1990), 29 C.P.R. (3d) 481; 107 N.R. 198 (F.C.A.); Willion v. Berkley (1561), 1 Plowd. 223; 75 E.R. 339.
AUTHORS CITED
Mew, Graeme. The Law of Limitations, Toronto: Butterworths, 1991.
Sgayias, David et al. The Annotated 1995 Crown Liability and Proceedings Act, Scarborough, Ont.: Carswell, 1994.
Shorter Oxford English Dictionary, Vol. II, 3rd ed. Oxford: Clarendon Press, 1990 “proceeding”.
Sullivan, Ruth. Driedger on the Construction of Statutes, 3rd ed. Toronto: Butterworths, 1994
Williams, Jeremy S. Limitation of Actions in Canada, 2nd ed. Toronto: Butterworths, 1980.
APPEAL from the Trial Division decision (Markevich v. Canada, [1999] 3 F.C. 28 (1999), 172 D.L.R. (4th) 164; 163 F.T.R. 209; 99 DTC 5136) dismissing the appellant’s application for judicial review. Appeal allowed.
APPEARANCES:
Ian Worland for appellant.
Judith A. Bowers, Q.C. and Carl C. Januszczak for respondent.
SOLICITORS OF RECORD:
Douglas Symes & Brissenden, Vancouver, for appellant.
Deputy Attorney General of Canada for respondent.
The following are the reasons for judgment rendered in English by
Rothstein J.A.:
INTRODUCTION
[1] This is an appeal from a February 18, 1999 decision of the Trial Division (Markevich v. Canada, [1999] 3 F.C. 28 which denied the appellant’s application for judicial review. The issue is whether provincial limitation laws may preclude the Crown from collecting a tax debt under the Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1.
[2] The Motions Judge held that there was no limitation period that applied to the collection of tax payable under the Income Tax Act.
FACTS
[3] The appellant was at all times relevant to this appeal a resident of British Columbia. As of June 17, 1986, the appellant’s total liability for federal and provincial income tax, interest and penalties, was $234,136.04 arising from assessments in respect of his 1980-1985 taxation years. (The figure of $234,136.04 appears on a June 17, 1986 notice of assessment and the parties both refer to this amount. The Motions Judge found that the appellant was assessed as owing $267,437.61. This figure appears to be the amount owing as of June 9, 1997 excluding accrued interest.) Nothing was paid on this outstanding amount after 1986. In 1987, by “internal bookkeeping action” the indebtedness was written-off by Revenue Canada. The internal write-off did not forgive the tax debt or release the appellant. Nonetheless, from 1987 to 1998, Revenue Canada did not try to collect the written-off indebtedness. In years subsequent to 1986, on statements issued by Revenue Canada to the appellant, there was no indebtedness shown reflecting the 1986 balance.
[4] In August, 1996, a Revenue Canada collections officer who was assigned responsibility for the appellant’s tax account revived the appellant’s written-off tax debt. On January 9, 1998, the appellant was advised that the Minister intended to take collection action for the full amount of his indebtedness.
[5] On January 15, 1998, Revenue Canada sent the appellant a letter attaching a statement of account with a balance as at January 13, 1998 of $770,583.42, reflecting the amount owing as at June 17, 1986, assessments and reassessments for subsequent years, and accrued interest, less payments made by the appellant. It is not disputed that the payments made were not referable to the amount owing as at June 17, 1986 and accrued interest on that amount.
[6] The appellant was of the view that the collection procedures for the amount assessed as of June 17, 1986 (and indeed, up to 1990) were statute-barred. On February 17, 1998, he made an application to the Federal Court for judicial review of the January 15, 1998 letter (which the parties agree is a decision for the purposes of section 18.1 [as enacted by S.C. 1990, c. 8, s. 5] of the Federal Court Act, R.S.C., 1985, c. F-7), seeking a declaration that he was not indebted to the Minister in respect of his 1990 and preceding taxation years and prohibiting the Minister from taking any steps to collect tax debts for 1990 and prior years. It was that judicial review that was dismissed by the Trial Division Judge. It is an appeal from his dismissal of that judicial review which is now before this Court.
RATIONALES FOR LIMITATION LEGISLATION
[7] Statutes of limitations have been enacted by Parliament and all provincial legislatures. They are widespread and pervasive in all common law countries. In M. (K.) v. M. (H.), [1992] 3 S.C.R. 6, at page 29, La Forest J. examines the underlying rationales for limitation legislation. The three rationales are: certainty, evidentiary and diligence. As to certainty, after a period of time, a new state of affairs comes to be recognized as the status quo. According to J. S. Williams, Limitation of Actions in Canada, 2nd ed. (Toronto: Butterworths, 1980), at page 4, after some time period, allowing a claim to be brought will create a fresh injury rather than redress the old injury. The second rationale concerns the problem of stale evidence. Witnesses may become forgetful or die. Documents may be lost or destroyed. Finally, statutes of limitations are an incentive for plaintiffs to act diligently and not sleep on their rights.
[8] A few other aspects of limitation legislation might be usefully mentioned here. First, limitations are creatures of statute. Unless provided for by statute, no limitation will apply. (However, laches, a delay that is unreasonable and prejudicial to a defendant, may deprive a plaintiff of success in an equitable claim.) Second, some limitation statutes contain a default provision which imposes a limitation period in cases not otherwise specified in the statute. Third, while, historically, the Crown was not bound by statutes of limitations, in modern times, legislatures have made limitation acts binding on the Crown. Fourth, subject to specific provisions of the relevant limitation statutes, an acknowledgment of an indebtedness or part payment starts time running afresh. Therefore, only truly dormant claims will likely be caught by limitation legislation. Fifth, statutes of limitations apply to judgments. If the limitation period applicable to judgments expires, collection action to enforce the judgment is barred. The same reason for limitation periods applicable to the commencement of actions applies to collection action on judgments, i.e. certainty, not reviving old judgments after a new status quo has been recognized, stale evidence, for example, old evidence of amounts that have or have not been paid and what balance is outstanding, and diligence, that is, taking collection action on the judgment in a timely fashion.
[9] I bear in mind these considerations in addressing the issues in this appeal.
SUMMARY OF THE APPELLANT’S CASE
[10] The appellant relies on section 222 of the Income Tax Act and section 32 of the Crown Liability and Proceedings Act, R.S.C., 1985, c. C-50 [as amended by S.C. 1990, c. 8, ss. 21, 31], and the Limitation Act, R.S.B.C. 1996, c. 266. The relevant provisions read as follows:
[11] Section 222 of the Income Tax Act provides:
222. All taxes, interest, penalties, costs and other amounts payable under this Act are debts due to Her Majesty and recoverable as such in the Federal Court or any other court of competent jurisdiction or in any other manner provided by this Act. [Underlining added.]
Subsection 225.1(1) [as am. by S.C. 1994, c. 7, Sch. VIII, s. 131; 1998, c. 19, s. 225] states in relevant part:
225.1 (1) Where a taxpayer is liable for the payment of an amount assessed under this Act other than … the Minister shall not, for the purpose of collecting the amount until after the day that is 90 days after the day of the mailing of the notice of assessment.
Section 32 of the Crown Liability and Proceedings Act provides:
32. Except as otherwise provided in this Act or in any other Act of Parliament, the laws relating to prescription and the limitation of actions in force in a province between subject and subject apply to any proceedings by or against the Crown in respect of any cause of action arising in that province, and proceedings by or against the Crown in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose. [Underlining added.]
Section 1 of the British Columbia Limitation Act defines action as:
1 …
“action” includes any proceeding in a court and any exercise of a self help remedy;
Subsection 3(5) of the Limitation Act provides:
3 (1) …
(5) Any other action not specifically provided for in this Act or any other Act may not be brought after the expiration of 6 years after the date on which the right to do so arose.
[12] Under section 222, accounts payable under the Income Tax Act are debts due to Her Majesty. The appellant says that under subsection 225.1(1), the Minister’s right to collect the amount assessed as of June 17, 1986 commenced on September 16, 1986, the day after the day that is 90 days after the mailing of the appellant’s June 17, 1986 notice of assessment. By the combined application of section 32 of the Crown Liability and Proceedings Act and subsection 3(5) of the British Columbia Limitation Act, the appellant says the Minister was statute-barred after September 16, 1992 from enforcing collection of the tax debt.
DECISION OF THE MOTIONS JUDGE
[13] The Motions Judge found that section 32 of the Crown Liability and Proceedings Act did not apply to statutory collection procedures under the Income Tax Act, i.e. non-court procedures such as a requirement to pay or a seizure and sale of chattels: first, because proceedings under section 32 do not include statutory collection procedures; and second, even if proceedings in section 32 included statutory collection procedures, the Income Tax Act is a complete code which provides for no limitation periods in respect of any collection procedures.
THE CONCLUSION OF THIS COURT
[14] I must respectfully disagree with the Motions Judge on both considerations. In my view, the Income Tax Act is not a complete code with respect to limitation provisions pertaining to tax debts, and the statutory collection procedures under the Income Tax Act are “proceedings” within the meaning of that term in section 32 of the Crown Liability and Proceedings Act. It follows that the limitation provisions provided in section 32 are applicable to court and statutory collection procedures. In this case, the relevant limitation provision is subsection 3(5) of the British Columbia Limitation Act. As it covers self help remedies, it applies to both court and statutory collection procedures under the Income Tax Act. As a result, in 1998, the Minister was statute-barred from enforcing collection of the appellant’s 1986 tax debt.
THE COMPLETE CODE ARGUMENT
The Literal Approach
[15] There are no words excluding limitation periods in the collection provisions of the Income Tax Act. The learned Motions Judge found a complete code by inference. At paragraph 42, he stated:
I am satisfied that, given the complex and unique nature of the statutory scheme for the levying and collection of income tax, it is a clear inference from the statutory provisions to which I have referred that Parliament has “otherwise provided” for prescription, and that section 32 of the Crown Liability and Proceedings Act accordingly does not apply to the collection of a debt arising under section 222 of the Income Tax Act.
I am unable to draw the same inference as the Motions Judge.
[16] Parliament has dealt with limitation periods in the Income Tax Act in three ways. One is to explicitly provide for limitations. A second is to exclude the application of limitation periods by words such as “at any time”. A third is by silence as to limitation periods, as is the case with the collection provisions of the Act. In a statute where limitation periods are expressly addressed in some situations and not others, I think it is wrong in principle to infer from silence that no limitation period was intended. The correct inference is that Parliament intended the question of limitations to be governed by laws of general application.
[17] Section 32 of the Crown Liability and Proceedings Act is a law of general application. It applies unless its application would conflict with another Act of Parliament. The enactment of section 32 indicates that Parliament knew that many of its Acts did not provide for limitation periods internally. It appears that Parliament’s intention was that section 32 was to apply on a residual basis when Acts of Parliament were silent on the issue of limitations.
[18] There is no obvious reason why section 32 would not apply to the Income Tax Act in situations in which the Income Tax Act does not provide for its own limitation period. I therefore conclude that the Income Tax Act is not a complete code in so far as limitations are concerned and that section 32 applies when the Income Tax Act is silent on the issue.
[19] The extent to which section 32 applies will depend upon whether any specific collection procedures in the Income Tax Act are “proceedings by … the Crown in respect of any cause of action” as these words are used in section 32. I address this issue subsequently.
Difficulties with the Inferential Approach
[20] It has been suggested that one may infer from section 225.1 that Parliament intended no limitation period to apply to tax collection. I do not agree. Section 225.1 creates a statutory stay pending objection or appeal during which the Minister is prohibited from taking collection action. As with other statutes which provide for stays of execution of a judgment pending appeal, Parliament’s intention is to protect the individual from the adverse effects of the judgment until it is finally determined if the government’s position is well founded.
[21] On the other hand, limitations are justified by the rationales of certainty, timeliness of evidence, and diligence. In my opinion, these two issues are independent. The enactment of a statutory stay which specifies when collection action may commence, cannot logically support the inference that Parliament considered that no limitation period should apply to that collection action.
[22] On the contrary, when Parliament has intended that there be no limitation period applicable in the Income Tax Act, it has expressly used the term “at any time”. For example, under the circumstances contemplated by subsections 152(4) [as am. by S.C. 1998, c. 19, s. 181], 159(3) [as am. idem, s. 185] and 227(10) [as am. idem, s. 226], the Minister has the power to assess “at any time”. By contrast, the collection provisions do not include the words “at any time” or another word formula to similar effect. Parliament has put its mind to the limitation question in the Income Tax Act and when it intends there to be no limitation period, it has so stated. In view of the enactment of section 32 of the Crown Liability and Proceedings Act, Parliament’s omission of words such as “at any time” with respect to the collection provisions of the Income Tax Act indicates that Parliament did not intend that collection procedures could be taken indefinitely, but rather, that they be subject to section 32.
[23] At least with respect to the bringing of a court action, in the absence of words to the contrary, there is a presumption that limitation of actions legislation will apply.
[24] The Motions Judge found that the Income Tax Act is a complete code not subject to the imposition of general legal principles, rules or remedies.
[25] I agree with the Motions Judge to the extent that a taxing statute may exclude application of general legal principles, rules and remedies. However, I think for it to do so, there must be express language or a necessary implication to that effect. For example, the Income Tax Act does stipulate how a taxpayer is to challenge an assessment and specifies the procedures and time limits applicable to such challenges.
[26] On the other hand, assessments under the Income Tax Act often involve the application of the provisions of other statutes or common law principles. For example, the Supreme Court of Canada has written extensively on the principles of partnership law as they apply to assessments under the Income Tax Act. (See Backman v. Canada, [2001] 1 S.C.R. 367 and Continental Bank Leasing Corp. v. Canada, [1998] 2 S.C.R. 298.) And if the Minister takes court action to recover a tax debt, he is certainly subject to the applicable rules of Court. Under paragraph 223(7)(b) [as am. by S.C. 1998, c. 19, s. 224], the Income Tax Act provides for proceedings to be taken to retain the effectiveness of the filing, registration or other recording of a tax debt memorial in a provincial registry, thereby incorporating by reference, provincial laws in respect of the limitations applicable to such filings, registrations or recordings. I am therefore unable to agree with the learned Motions Judge that, in the absence of express language or a necessary implication, general legal principles, rules and regulations, and in particular section 32 of the Crown Liability and Proceedings Act, are not applicable to the collection procedures in the Income Tax Act.
[27] The Motions Judge observed that the appellant had some difficulty in proving any serious prejudice if a limitation period did not apply. I do not think proof of prejudice to the taxpayer is a relevant consideration in determining whether limitation periods apply. Limitation provisions either apply to the facts or they do not. Prejudice is not a relevant consideration unless the limitation statute so states.
[28] Finally, the Motions Judge also noted that importing general limitation periods would cause difficulties related to the fair and efficient collection of tax arrears. The record discloses no evidence on that point. Difficulties related to the fairness and efficiency of the collection of tax arrears by importing limitation provisions to the collection provisions of the Income Tax Act are not relevant. The question is whether the Crown may pursue collection of tax debts indefinitely. This is a matter of statutory interpretation. It has been and always is open to Parliament to expressly provide that no limitation period or a specified limitation period should apply to the collection provisions in the Income Tax Act if it thinks fairness and efficiency so require.
[29] The Minister argued that if the collection of tax debts was made subject to limitation periods, different limitation periods could apply in different provinces and to different elements of a taxpayer’s assessment depending upon whether they were appealed. I acknowledge the Minister’s concerns. It may even be that in some provinces, where the limitation statute does not provide for limitations for tax debts, either specifically or by a default provision such as subsection 3(5) of the British Columbia Limitation Act, there may be no limitation period applicable. Be that as it may, if administrative difficulties arise because of this, I can only reiterate that it is open to Parliament to amend the Income Tax Act to effect the result it considers appropriate.
[30] For these reasons, I conclude that the Income Tax Act does not constitute a complete code with respect to limitation periods. Accordingly, section 32 of the Crown Liability and Proceedings Act will apply if procedures to collect tax debts are “proceedings by … the Crown in respect of any cause of action …”.
ARE STATUTORY COLLECTION PROCEDURES “PROCEEDINGS BY … THE CROWN IN RESPECT OF ANY CAUSE OF ACTION”?
[31] Once the complete code theory is set aside, the parties and the learned Motions Judge all agree that court action by the Minister to collect a tax debt is subject to the applicable limitation period provided by section 32 of the Crown Liability and Proceedings Act. The only issue then is whether the term “proceedings” as used in section 32, applies to the non-court or statutory collection procedures under the Income Tax Act. If so, they will be subject to the same limitation provisions as court collection procedures.
[32] My analysis of this issue involves seven considerations:
1. the words of section 32;
2. prior interpretation of the term “proceedings”;
3. the legislative history of section 32;
4. incongruity of section 32 not applying to statutory collection procedures;
5. context of Part II of the Crown Liability and Proceedings Act;
6. the French version of section 32; and
7. pleading limitations as a defence in litigation.
The Words of Section 32
[33] The words at issue in section 32 are “proceedings by or against the Crown in respect of any cause of action”. I have no difficulty rejecting the appellant’s opening argument that the word “proceedings” is to be interpreted without regard to the words “in respect of any cause of action”. The word “proceedings” must be read together with the words that modify it.
[34] Nonetheless, I am not satisfied “proceedings … in respect of any cause of action” necessarily only refer to court proceedings.
[35] The term “proceedings” is one of broad scope. While in a legal context, the term “proceedings” will usually relate to a court action or steps taken under a court order, it may also include “any legal action or process” (Shorter Oxford Dictionary, Vol. II 3rd ed. Oxford: Clarendon Press, 1990). A requirement to pay under section 224 [as am. by S.C. 1994, c. 21, s. 101] is analogous to a garnishing order issued by a court. Failure to honour a requirement to pay may result in an assessment under the Income Tax Act. Seizure and sale of chattels under subsection 225(1) is a provision closely parallel to a writ of execution issued by a court. Parliament has empowered the Minister to take enforceable collection action without the necessity of first obtaining a judgment in Court. These procedures are legal processes.
[36] The words “in respect of” are words of the widest scope connecting two related subject matters. In Slattery (Trustee Of) v. Slattery, [1993] 3 S.C.R. 430, Iacobucci J., for the majority, refers to the words “in respect of” as they were previously considered by the Supreme Court in Nowegijick v. The Queen, [1983] 1 S.C.R. 29. He states at page 445:
The phrase “in respect of” was considered by this Court in Nowegijick v. The Queen, [1983] 1 S.C.R. 29, at p. 39:
The words “in respect of” are, in my opinion, words of the widest possible scope. They import such meanings as “in relation to”, “with reference to” or “in connection with”. The phrase “in respect of” is probably the widest of any expression intended to convey some connection between two related subject matters. [Emphasis in original.]
Thus, the words “proceedings … in respect of any cause of action” simply mean that the proceedings contemplated have some connection to a cause of action.
[37] A cause of action is a state of facts that would support the commencement of a court action. See Domco Industries Ltd. v. Mannington Mills Inc. (1990), 29 C.P.R. (3d) 481 (F.C.A.), at page 496. In this case, those facts are the existence of a tax debt and the expiry of the delay period entitling the Minister to take collection action.
[38] In summary:
1. “Proceedings” include a legal process that need not be a court process.
2. A cause of action is the existence of a state of facts that support the commencement of a court action under the Income Tax Act. The existence of a tax debt and the expiry of the delay period are the facts constituting the cause of action.
3. “Proceedings” in section 32 must have some connection to a cause of action. Whether they are court action or statutory collection procedures, they have some connection to a cause of action. The existence of a tax debt and the expiry of the delay period would support either court action or statutory collection procedures.
Accordingly, while “proceedings” in section 32 will most often refer to court proceedings, statutory collection procedures under the Income Tax Act are not excluded.
Prior Judicial Interpretation
[39] In E.H. Price Limited v. The Queen, [1983] 2 F.C. 841 (C.A.), it was determined that the term “proceedings”, as it was used in then subsection 38(2) of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, was not restricted to proceedings in court. In that case, this Court considered whether a certificate registered in the Federal Court under the Excise Tax Act [R.S.C. 1970, c. E-13] to collect taxes and penalties owing under that Act was subject to limitation provisions provided in section 38. In that case, the registration of the certificate was not considered to be a court proceeding. When E.H. Price was decided, section 38 read:
38. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect to any cause of action arising in such province ….
(2) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions referred to in subsection (1) apply to any proceedings brought by or against the Crown.
[40] Clement D.J. held that the registration of the certificate in the Federal Court, while not a proceeding in the Court under subsection 38(1), was a proceeding by the Crown for the purposes of subsection 38(2). In arriving at his conclusion, he stated at pages 847-848:
I have noted above that a proceeding to which subsection (1) of section 38 of the Federal Court Act refers, is equally a proceeding to which subsection (2) refers: so that a proceeding under subsection 52(4) of the Act comes within the phrase “any proceedings” used in both subsections. But subsection (1) limits the availability of the laws there described to “any proceedings in court”. No such limitation is expressed on their availability for the purposes of subsection (2), and I am of opinion that this clearly discloses the legislative intent of Parliament. Subsection (2) does not limit the nature of the proceedings in which such laws are made available, and specifically makes them available to any proceedings brought by or against the Crown. Subject to other considerations, such laws are, in my view, made as fully available to a taxpayer in respect of an amount certified by the Deputy Minister under subsection 52(4) of the Act as they are in proceedings in the Court.
The absence of the words “in the Court” was thus critical to Clement D.J.’s finding that the limitation provision in subsection 38(2) was applicable to non-court proceedings brought by the Crown.
[41] The Crown relies on E.H. Price to support its contention that the statutory collection procedures in the case at bar are not “proceedings … with respect to a cause of action” under section 32 of the Crown Liability and Proceedings Act. However, Clement D.J.’s finding in E.H. Price suggests the contrary. He clearly held that “proceedings” were limited to court proceedings only under subsection 38(1) where the provision explicitly referred to “proceedings in the court” and that under subsection 38(2) where the word “proceedings” was not so modified, it could include non-court proceedings.
[42] The Motions Judge found at paragraph 30 that E.H. Price was not “as damaging to the [appellant’s] case as the respondent contends”. I would say that E.H. Price supports the appellant’s case.
[43] The Minister refers to Mark v. Canada (Minister of Fisheries and Oceans) (1991), 50 F.T.R. 157 (F.C.T.D.) in which Cullen J. found that a “proceeding in any cause or matter” in paragraph 50(1)(b) of the Federal Court Act, did not include a decision of the Minister of Fisheries and Oceans to suspend a fishing licence since that term in paragraph 50(1)(b) could only refer to court proceedings. The interpretation of the term “proceedings” will be based on the context in which it is used. There is no suggestion of any contextual connection between paragraph 50(1)(b) of the Federal Court Act and section 32 of the Crown Liability and Proceedings Act. Further, with respect, I think Cullen J.’s reliance on E.H. Price, supra, in Mark may have been misplaced. Therefore, I do not think Mark is instructive in interpreting section 32 of the Crown Liability and Proceedings Act.
[44] I would conclude that prior judicial interpretation of the term “proceedings” in a provision similar to section 32 of the Crown Liability and Proceedings Act suggests that its use in section 32 is not limited to court proceedings.
The Legislative History of Section 32
[45] At common law, since the 15th century, it has been presumed that legislation is not intended to apply to the prejudice of the Crown unless the Crown is expressly mentioned. (See R. Sullivan, in Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994), at page 343, citing Willion v. Berkley (1561), 1 Plowd. 223; 75 E.R. 339.) The common law presumption has now been displaced, in the case of federal law, by section 17 of the Interpretation Act, R.S.C., 1985, c. I-21:
17. No enactment is binding on Her Majesty or affects Her Majesty or Her Majesty’s rights or prerogatives in any manner, except as mentioned or referred to in the enactment.
[46] No limitation period was stated to apply to collection procedures in the Income Tax Act. Historically, no other statute of limitations stated or implied that it was binding on the Crown in respect of collection procedures under the Income Tax Act. Therefore, at one time, it would seem that no limitation law applied to the collection procedures under the Income Tax Act.
[47] However, with the enactment of section 38 of the Federal Court Act in 1970, the limitation statutes of the provinces, or where they did not apply, a six-year limitation period, was stated to apply to proceedings brought by the federal Crown. See D. Sgayias et al., The Annotated 1995 Crown Liability and Proceedings Act (Scarborough: Carswell, 1994), at page 136. Section 38 thus was a statutory provision that was binding on the Crown. It was that provision that gave rise to the controversy in E.H. Price.
[48] By R.S.C., 1985, c. F-7, section 38 was repealed and was replaced by section 39 of the Federal Court Act which was to the same effect. Subsection 39(3) is, in substance, identical to the prior subsection 38(2).
39. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.
(2) A proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.
(3) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions referred to in subsections (1) and (2) apply to any proceedings brought by or against the Crown.
[49] Originally, section 32 of the Crown Liability and Proceedings Act applied only to actions against the Crown. By S.C. 1990, c. 8, sections 10 [and 31], subsection 39(3) of the Federal Court Act was repealed and section 32 of the Crown Liability and Proceedings Act was amended to include proceedings by the Crown, as well as proceedings against the Crown. It is obvious that subsection 38(2) and then subsection 39(3) were precursors to section 32 of the Crown Liability and Proceedings Act in so far as the application of limitation periods to proceedings brought by the Crown were concerned.
[50] Subsections 38(2), 39(3) of the Federal Court Act and the amended section 32 of the Crown Liability and Proceedings Act each deal with proceedings by and against the Crown. Subsection 38(2) had received judicial interpretation in E.H. Price, supra, that “proceedings” by the Crown were not limited to court proceedings. E.H. Price dealt squarely with a collection procedure under the Excise Tax Act that parallelled similar procedures in the Income Tax Act. When section 32 was amended, Parliament had the opportunity, if it had so chosen, to include the words “in the court” or some other word formula, to ensure that section 32 only provided for limitation periods in respect of proceedings in Court. I think it is a fair inference that Parliament, not having done so, meant to adopt the interpretation in E.H. Price so that “proceedings” in section 32 include all legal processes in respect of a cause of action, whether court or otherwise, and in particular, all collection procedures under the Excise Tax Act and the Income Tax Act unless otherwise provided in those statutes.
Incongruity of Section 32 not Applying to Statutory Collection Procedures
[51] Statutory collection procedures parallel court proceedings after a judgment is obtained. By enacting the statutory collection procedures under the Income Tax Act, Parliament gave the Minister direct access to enforceable collection procedures that would otherwise only be available after a court action and judgment. The issuance of a requirement to pay by the Minister has substantially the same effect as a garnishing order issued by the Court. It binds a third party debtor to pay to the Crown amounts to which the taxpayer is entitled from that third party. A direction to seize and sell chattels is analogous to a writ of execution issued by a court. In fact, subsection 225(5) provides that such goods and chattels that would be exempt from seizure under a writ of execution issued out of a superior court of the province in which the seizure is made are exempt from seizure by the Minister. To construe the term “proceedings” in section 32 as including these procedures, it seems to me, recognizes the substantial similarity between statutory and court collection procedures.
[52] On the other hand, to interpret section 32 as applying only to court procedures leads to the perplexing conclusion that while court proceedings are subject to provincial limitation laws, the statutory collection procedures are not and that as long as the Minister invokes the statutory procedures, he may do so at any time. The Income Tax Act may contain incongruous provisions or provisions that appear to be inconsistent. However, where it is possible to construe legislation according to its words, so as to avoid incongruity or inconsistency, such construction is to be preferred. See Berardinelli v. Ontario Housing Corpn. et al., [1979] 1 S.C.R. 275, at page 284.
[53] Applying section 32 to the statutory collection procedures under the Income Tax Act results in provincial limitation laws applying irrespective of the remedial steps chosen by the Minister to collect a tax debt. Such interpretation is consistent with the words and the object and purpose of section 32.
The Context of Part II of the Crown Liability and Proceedings Act
[54] The most persuasive argument made by the Minister is that while the term “proceedings” in section 32 may be one of broad scope, when read in the context of Part II of the Crown Liability and Proceedings Act, it refers only to “court proceedings”.
[55] Part II deals with procedural and substantive rules applying to litigation involving the Crown. The overall context of Part II is in relation to court litigation. Where the term “proceedings” appears in most of the provisions in Part II, it is expressly in relation to court proceedings. The word “court” appears in many of the same provisions. In those provisions, there is no doubt only court proceedings are contemplated.
[56] However, the words “court” or “in the court” do not appear in section 32 to modify the term “proceedings by or against the Crown in respect of any cause of action”. Does the context provided by the other sections of Part II necessarily imply that proceedings in section 32 can only mean court proceedings? I do not think so.
[57] First, section 32 is a free standing section. It is not dependent on any other section in Part II. It deals with an independent issue, namely limitation periods. While limitation periods will apply to the court litigation referred to in Part II, nothing suggests that they may not also apply to other proceedings by the Crown.
[58] Second, section 32 is linked to all other Acts of Parliament that do not otherwise provide for limitation periods. Section 32 is therefore intended to apply to proceedings authorized in other Acts of Parliament as well as proceedings in Part II of the Crown Liability and Proceedings Act.
[59] Third, the expiration of a limitation period results in the loss of a remedy to enforce a legal right. The purpose of section 32 is to deprive the Crown or the party adverse to the Crown of a remedy to enforce a legal right after expiry of the applicable limitation period. Legal rights and remedies are most commonly the subject of court proceedings. However, that is not invariably the case. The statutory collection procedures in the Income Tax Act are one exception.
[60] In relation to tax debts, a legal right arises in the Minister upon an assessment issuing and the elapsing of the relevant delay period under section 225.1. At that point, the Minister has a cause of action in relation to the taxpayer’s tax debt. The Minister may then take court action or may resort to the statutory collection procedures to enforce his legal right.
[61] Having regard to the purpose of limitation periods and therefore the purpose of section 32, to deprive the Crown, or the claimant against the Crown, of a remedy to enforce a legal right, it seems to me that it would be inconsistent with that purpose to interpret the term “proceedings” as applying only to court proceedings and excluding statutory collection procedures under the Income Tax Act. As I have already noted, Parliament could have included words restricting section 32 to court proceedings. It did not do so. That it chose not to do so, especially in light of this Court’s decision in E.H. Price, indicates that Parliament’s intention was not to so restrict section 32.
[62] For these reasons, I find that the context of Part II does not limit the term “proceedings” in section 32 to court proceedings, but that statutory collection procedures are also included.
The French Version of Section 32
[63] The Minister argued that the term “poursuites auxquelles l’État est partie” in the French version of section 32 refers only to court proceedings. Section 32 will normally apply to court proceedings and the French text reflects this likelihood. However, in view of the purpose of section 32 and the legislative and judicial history respecting the term “proceedings”, I am not prepared to say that the term “poursuites auxquelles l’État est partie” so narrows the scope of section 32 that proceedings that are as closely analogous to court proceedings as are the statutory collection procedures in the Income Tax Act are excluded from section 32.
Pleading Limitations as a Defence in Litigation
[64] Finally, I turn to the argument that unless a cause of action is invoked through court proceedings, there is no basis for a limitation defence. Put another way, there is an indication, at least in some jurisdictions, that a party seeking to rely on a limitation defence must plead that defence in the statement of defence (See G. Mew, The Law of Limitations (Toronto: Butterworths, 1991), at page 53). Of course, in the case of statutory collection procedures, there is no statement of defence and no opportunity for a tax debtor to invoke the limitation defence in that way. All he can do is to seek a declaration and prohibition as he has done in these proceedings. Clement D.J. dealt with this issue in E.H. Price at page 848:
The difference is that subsection 52(4) [of the Excise Tax Act] provides the taxpayer with no means of asserting [limitation] laws against the Crown: he is obliged to come to court to pray for relief as is done here. In analogous circumstances in Twinriver Timber Ltd. v. R. in Right of British Columbia (1980), 15 B.C.L.R. 38 (S.C.), Taylor J. approved such a course, and his opinion was affirmed by the British Columbia Court of Appeal in (1981), 25 B.C.L.R. 175 at (page) 180.
On this point, I am in agreement with the finding of Clement D.J. and the similar conclusion in Twinriver Timber Ltd. v. R. in Right of British Columbia (1980), 15 B.C.L.R. 38 (S.C.).
Conclusion as to the Scope of Section 32 and the Application of the Limitation Period
[65] I conclude therefore that proceedings brought by the Crown in respect of a cause of action in section 32 of the Crown Liability and Proceedings Act include both court and statutory collection procedures under the Income Tax Act. The applicable limitation provision is subsection 3(5) of the British Columbia Limitation Act. Under subsection 3(5), an action may not be brought after the expiration of six years after the date on which the right to do so arose. Action is defined as including a self help remedy. Its scope is obviously intended to be broad and not limited to a court action.
[66] The statutory collection procedures under the Income Tax Act are available to the Minister in his own right, exercisable by himself alone, without the necessity of court action. I have no difficulty concluding that statutory collection procedures under the Income Tax Act are self help remedies for purposes of subsection 3(5) of the British Columbia Limitation Act. In any event, by subsection 9(1) of the Limitation Act, after expiry of the relevant limitation period, the cause of action is extinguished. Subsection 9(1) provides:
9 (1) On the expiration of a limitation period set by this Act for a cause of action to recover any debt, damages or other money, or for an accounting in respect of any matter, the right and title of the person formerly having the cause of action and of a person claiming through the person in respect of that matter is, as against the person against whom the cause of action formerly lay and as against the person’s successors, extinguished.
In the result, after September 16, 1992, the Minister was statute-barred from enforcing collection of the appellant’s June 17, 1986 tax debt either through court action or statutory collection procedures.
APPLICATION OF LIMITATION PERIODS TO TAX DEBTS OWING UNDER THE BRITISH COLUMBIA INCOME TAX ACT [R.S.B.C. 1996, c. 215]
[67] The appellant argues that his indebtedness for provincial tax is extinguished under the British Columbia Limitation Act. I think that in so far as the Minister of National Revenue’s right to collect the appellant’s tax debt is concerned, this issue has been answered in favour of the appellant. However, for completeness, I will determine the question as raised by the appellant.
[68] At the outset, I would note that the Court was told that the provincial Crown was notified of these proceedings but chose not to seek leave to intervene or to participate in any way. The respondent says it is not acting in these proceedings as agent for the provincial Crown. I address this issue recognizing that the Crown in Right of British Columbia is not a party to these proceedings and that this Court has no jurisdiction over the Crown in Right of British Columbia.
[69] Nonetheless, in so far as the provincial tax is concerned, the appellant only seeks to prevent the federal Minister of National Revenue from taking collection action with respect to his June 17, 1986 provincial tax indebtedness. While the application of the British Columbia Limitation Act to a tax debt owing under the British Columbia Income Tax Act must be addressed, it is in the context of the right of the federal Minister to collect provincial income tax.
[70] The appellant’s argument may be briefly summarized. Provincial tax is, under the British Columbia Income Tax Act, a debt owing to Her Majesty in Right of British Columbia. The British Columbia Income Tax Act contains no express limitation period for collecting such a debt. However, by section 14 of the British Columbia Interpretation Act [R.S.B.C. 1996, c. 238], the British Columbia Limitation Act is binding on the provincial Crown. Subsection 3(5) of the British Columbia Limitation Act prescribes a six-year limitation period when the Limitation Act or any other Act of the Province does not specifically provide for a limitation period. That is the case for tax debts owed to the provincial Crown. Therefore, a six-year limitation period applies to the collection of provincial taxes when they became collectible, i.e. for taxes assessed as of June 17, 1986, September 16, 1992. When the limitation period has run out, no action (including a self-help remedy) may be brought for its recovery, and under subsection 9(1) the provincial tax debt is extinguished. As the federal Minister is acting as collection agent for the Province of British Columbia, he can have no greater power than his principal. As the provincial income tax debt is extinguished and cannot be collected by Her Majesty in Right of British Columbia, the federal Minister cannot collect it either.
[71] The Minister says that by reason of a number of collection provisions of the federal Income Tax Act having been incorporated by reference into the British Columbia Income Tax Act, the Minister’s collection action is not as an agent of British Columbia but is, rather, independent action pursuant to the express statutory right of collection given to him in the provincial Income Tax Act. As the British Columbia Limitation Act is not applicable to the federal Minister, there is no limitation as to the time when the federal Minister may take collection action.
[72] There was a suggestion during argument by counsel for the Minister that once collection action must be taken, the indebtedness may not remain a provincial debt but rather, may become a debt to Her Majesty in Right of Canada. Counsel seemed to be saying that under the Tax Collection Agreement between Canada and British Columbia dated January 28, 1962 as amended, Canada collects provincial tax and remits it to British Columbia on a current basis in 48 equal instalments over a twelve-month period. Canada’s agency role in respect of collection and remittance ceases at the end of the twelve-month period after which Canada, as a principal, takes collection action in respect of provincial taxes due under the same statutory authority in the federal Income Tax Act as it does with respect to any federal income tax debt.
[73] The Minister’s arguments and the Tax Collection Agreement are far from clear.
[74] As I see it, the appellant’s liability for provincial income tax arising under the British Columbia Income Tax Act is a debt owed to the Crown in Right of British Columbia. As such, it is subject to the British Columbia Limitation Act. No limitation is specifically provided with respect to actions to collect tax debts. Therefore, subsection 3(5) of the Limitation Act applies. It provides that actions may not be brought after the expiration of six years after the date on which the right to do so arose.
[75] Whatever the effect of the incorporation of provisions of the federal Income Tax Act into the British Columbia Income Tax Act or the Tax Collection Agreement between Canada and British Columbia, they cannot turn a debt owed by the appellant to the Crown in Right of British Columbia into an obligation by the appellant to someone else so as to limit his rights in respect of his tax debt to British Columbia.
[76] It may be that the provincial debt is acquired by the federal Crown and that the federal Minister may take steps to collect the tax debt under provisions of the federal Income Tax Act. Be that as it may, in taking collection action, the federal Minister is subject to any defences the appellant has under the British Columbia Income Tax Act and Limitation Act. Accordingly, after the applicable six-year limitation period, the federal Minister may not only not bring an action against the appellant for the British Columbia tax debt, but, by subsection 9(1) of the Limitation Act, the cause of action for the tax debt is extinguished. This provision which, as I understand it, is, in its generality, unique to British Columbia, makes it clear that in that province, after expiry of the six-year limitation period, no cause of action is left. As a result, the federal Minister is now statute-barred from taking any collection action, whether court or statutory, to collect the tax debt which was included in his June 17, 1986 assessment that may have been owing by the appellant under the British Columbia Income Tax Act.
CONCLUSION
[77] The appeal should be allowed with costs throughout, the order of the Trial Division set aside, the application for judicial review allowed, and a declaration issue that the Minister of National Revenue is prohibited from taking court action or statutory collection procedures to collect the tax debt of the appellant that is statute-barred, having regard to these reasons.
Décary J.A.: I agree.
Malone J.A.: I agree.