A-405-77
The Queen (Appellant) (Plaintiff)
v.
Perry J. Rhine (Respondent) (Defendant)
Court of Appeal, Heald and Urie JJ. and MacKay
D.J.—Toronto, January 9; Ottawa, March 8,
1979.
Jurisdiction — Appeal from dismissal of application for
default judgment against respondent — Respondent allegedly
owing appellant for advance payment negotiated pursuant to
Prairie Grain Advance Payments Act — Whether or not Court
had jurisdiction to entertain appellant's action — Prairie
Grain Advance Payments Act, R.S.C. 1970, c. P-18, s. 13.
This is an appeal from a judgment of the Trial Division
dismissing appellant's application for judgment against the
respondent. That application was in default of defence in an
action by the appellant against the respondent in respect of a
prairie grain advance payment received by the respondent
pursuant to the Prairie Grain Advance Payments Act. The
Trial Judge denied the application for judgment on the basis
that there was no jurisdiction in the Federal Court to entertain
appellant's action.
Held, the appeal is allowed. The loan in question is not a
common law loan. The whole cause of action is a creature of
the statute and the Regulations which, in themselves, provide a
complete code to cover these very specialized transactions. This
is not a case where the claim is based on the general law of
property and civil rights prima facie applicable to everybody
but is rather a case where the claim is totally based on existing
federal legislation. The Act "is a special law enacted to deter
mine and govern the rights of the Crown and the liability of the
producer in relation to the advance made pursuant to the Act
and this special law is invoked by the Crown in order to recover
from the respondent in this action." The appellant's action is
clearly founded upon federal law and this Court therefore has
jurisdiction.
McNamara Construction (Western) Ltd. v. The Queen
[1977] 2 S.C.R. 654, distinguished. Associated Metals &
Minerals Corp. v. The "Evie W" [1978] 2 F.C. 710,
referred to.
APPEAL.
COUNSEL:
T. B. Smith, Q.C. and David Sgayias for
appellant (plaintiff).
No one appearing for respondent (defendant).
John J. Robinette, Q.C., amicus curiae.
SOLICITORS:
Deputy Attorney General of Canada for
appellant (plaintiff).
McCarthy & McCarthy, Toronto, amicus
curiae.
The following are the reasons for judgment
rendered in English by
HEALD J.: This is an appeal from a judgment of
the Trial Division [[1978] 1 F.C. 356] wherein the
appellant's application for judgment against the
respondent was denied. That application was in
default of defence in an action by the appellant
against the respondent in respect of a prairie grain
advance payment received by the respondent pur
suant to the provisions of the Prairie Grain
Advance Payments Act, R.S.C. 1970, c. P-18, as
amended (hereinafter referred to as the Act). The
statement of claim in that action alleged, inter alia
that:
1. the respondent had applied for an advance
payment pursuant to the Act;
2. in said application, the respondent agreed:
(a) to repay the advance payment by deduction
of one-half of the initial payment on grain to be
delivered by him to The Canadian Wheat
Board, and (b) in the event of default as
described in section 13 of the Act, to repay any
balance of the advance payment remaining
unpaid at the date of default, with interest
thereon after the date of default;
3. pursuant to the Act, on or after receipt of
the application, The Canadian Wheat Board
paid the advance payment to the respondent;
4. the respondent did not discharge the
undertakings referred to in 2 supra and was
deemed to be in default pursuant to section
13 (1) of the Act; and
5. the respondent failed to repay the advance
payment or any portion thereof.
The learned Trial Judge, in denying the applica
tion for judgment in default of defence, did so on
the basis that there was no jurisdiction in the
Federal Court to entertain the appellant's action.
His reasons for so concluding appear to be based
on his appreciation of the principles established in
the McNamara case' and his application of those
principles to the facts of the present case.
After quoting extensively from the judgment of
Laskin C.J. in the McNamara case (supra), the
learned Trial Judge said [at pages 363-365]:
The question to be decided, as put by the Chief Justice, is
whether the Crown's action herein "is founded on existing
federal law".
My appreciation of the decision in the McNamara case as it
applies to the present matter may be succinctly stated.
It is not enough that the liability arises in consequence of a
statute.
In the present instance while the Prairie Grain Advance
Payments Act authorizes the making of advances and pre
scribes the conditions on which these advances may be made by
the Board as an agency of Her Majesty the Queen in the right
of Canada it does not, in itself, impose a liability and there is no
liability except that undertaken by the borrower which liability
flows not from the statute but from the borrower's contractual
promise to repay. The liability is based on the "undertaking"
required by the statute to be given and not from any liability
imposed by the statute itself as is the case under the Income
Tax Act, federal legislation respecting customs and excise and
like legislation.
As I appreciate the present matter it is completely analogous
to the Crown's claim on the surety bond in the McNamara
case. The undertaking required of the farmer as a condition
precedent to the Board making the advances stands on precisely
the same footing as the bond in the McNamara case. Just as
the Public Works Act requires that a surety bond be given so
too does the Prairie Grain Advance Payments Act require that
an applicant for an advance shall enter into an "undertaking".
Like the Public Works Act requiring a bond, the Prairie Grain
Advance Payments Act requires an undertaking by the borrow
er and as the Public Works Act prescribes nothing as to the law
governing the enforcement of the bond neither does the Prairie
Grain Advance Payments Act prescribe anything as to the law
governing the enforcement of the undertaking.
I do not think that the existence of regulation 15 to which
counsel for the plaintiff referred improves the Crown's position
in this matter any more than the existence of section 17(4) of
the Federal Court Act improved the position of the Crown as
plaintiff in the McNamara case.
Furthermore, it seems to me that the self-same elements
which are present in this matter were also present in the
McNamara case.
' McNamara Construction (Western) Limited v. The Queen
[1977] 2 S.C.R. 654.
The Supreme Court unanimously concluded that there was
no statutory basis for the Crown's suit either for breach of
contract or on the surety bond.
Similarly, for the reasons expressed, I conclude that there is
no statutory basis for the Crown's suit in the present matter
and accordingly the application for judgment against the
defendant in default of defence must be refused because, as I
appreciate the decision in the McNamara case, there is no
jurisdiction in this Court to entertain the statement of claim.
In order to assess the correctness of the conclu
sion of the learned Trial Judge that there is no
statutory basis for the appellant's suit in the case
at bar, it is desirable, in my view, to examine the
scheme of the Act and the Regulations passed
thereunder, since, in the submission of the appel
lant, that is the applicable federal law which is
sufficient to support the competence of this Court
to entertain the Crown's action herein 2 .
In examining the Act, it is to be noted initially
that by section 2(2) of the Act, it "shall be con
strued as one with the Canadian Wheat Board
Act, and, unless a contrary intention appears, all
words and expressions in this Act have the same
meanings as they have in the Canadian Wheat
Board Act." That Act requires The Canadian
Wheat Board to buy all wheat, oats, barley ... and
such other grains as may be included from time to
time at the direction of the Governor in Council,
produced in the designated area (defined in the
Act as the three prairie provinces plus certain
designated areas in British Columbia and
Ontario). Under the Act and the Regulations
passed thereunder, no person shall deliver grain to
an elevator unless:
1. that person is the actual producer thereof or
one who is entitled, as a landlord, vendor or
mortgagee to a share thereof;
2. the person delivering the grain produces, at
the time of delivery, to the elevator manager, a
permit book issued by the Board under which he
is entitled to deliver the grain in the crop year
2 See: Associated Metals & Minerals Corp. v. The "Evie W"
[1978] 2 F.C. 710 at pp. 713 to 716, for an assessment by
Jackett C.J. of the effect of the Quebec North Shore and
McNamara cases on the jurisdiction of this Court pursuant to
section 101 of The British North America Act, 1867, and
wherein the Chief Justice observes that in both of those cases,
the claimant was unable to base its claim on any existing
federal law.
(August 1 to July 31 inclusive) in which delivery
is made;
3. the grain was produced in the crop year in
which delivery is made on the lands described in
the permit book or in any other crop year on any
lands whatsoever;
4. the grain is delivered at the delivery point
named in the permit book; and
5. the quantity of grain delivered, together with
all grain of the same kind delivered under that
permit book, does not exceed the quota estab
lished by the Board for such delivery point for
grain of the kind delivered at the time it is
delivered (see Canadian Wheat Board Act,
R.S.C. 1970, c. C-12, s. 17(1)).
Similar provisions, restrictions and conditions
are likewise imposed on the delivery of grain to
railway cars (see section 18 of the Act). The Board
is required to undertake the marketing of all the
grain delivered either to elevators or railway cars
and the producers receive their proportionate share
of the moneys realized from the sale of grain
delivered by them less their proportionate share of
the Board's operating expenses 3 . The Act also
specifically states that the Board was incorporated
with the object of marketing in an orderly manner,
in interprovincial and export trade, grain grown in
Canada 4 . The term "quota" is defined in the Act
as "the quantity of grain authorized to be deliv
ered from grain produced on land described in a
permit book as fixed from time to time by the
Board, whether expressed as a quantity that may
be delivered from a specified number of acres or
otherwise;" (see section 2(1)). "Quota acres" is
defined as "the acres specified with the approval of
the Board in relation to any grain as the basis for
the delivery of that grain under a permit book
referring to the land described in the permit
book".
3 This general description of the scheme of the Act is taken
from the judgment of Locke J. in Murphy v. C.P.R. [1958;
S.C.R. 626 at 630.
4 See Canadian Wheat Board Act (section 4(4)).
From the above, it will be seen that under the
system of orderly marketing of grain grown by
western grain producers, the amount of grain
which a prairie farmer can deliver in any given
crop year is strictly controlled and limited by the
quota system established by The Canadian Wheat
Board. The quotas set in any year by that Board
are, of course, directly related to the demand for
prairie grain, both domestic and foreign. It is
common knowledge that, from time to time, in
past years, prairie grain production has consider
ably exceeded the sale of those products by the
Board, resulting in substantial carryovers from
year to year. These grain reserves were held on
prairie farms, in prairie elevators and in terminal
elevators in Canada. It is also common knowledge
that, in some years past, the prairie farmers were
so restricted in their deliveries of grain under the
quota system that severe cash flow difficulties
were experienced resulting in considerable eco
nomic hardship not only to the prairie farmers but
to the prairie economy as a whole. It seems clear
that Parliament enacted the Prairie Grain
Advance Payments Act against that background
and in this context. Thus, in my view, the objective
of this legislation was to alleviate the hardships
and financial difficulties referred to supra by pro
viding for cash advances on farm-stored grain. It
is, in essence, a scheme or plan devised by Parlia
ment to meet a situation which arises from time to
time as a consequence of the orderly marketing
concept and the pooling of receipts concept estab
lished under the Canadian Wheat Board Act. In
my opinion, the Act under review must be con
sidered as an integral part of the larger scheme or
plan of the Canadian Wheat Board Act for mar
keting prairie grain. It is a special part of the total
plan devised to meet special circumstances but it is
a part of the entire scheme nevertheless.
In the context of the scheme of the Act as set
out supra, I now proceed to a detailed consider-
ation of the pertinent sections of the Act and
Regulations as they were at the date of this
advance.
Section 4 of the Act read as follows:
4. (1) An application for an advance payment shall be made
in prescribed form, shall be signed by the producer and shall
show
(a) the amount of the advance payment for which applica
tion is made;
(b) the kinds and quantities of threshed grain in storage at
the time of the application and in respect of which the
applicant is applying for the advance payment;
(c) the number of the permit book under which he is entitled
to deliver grain;
(d) whether he has received a previous advance payment,
and, if so, particulars thereof and the amount of undelivered
grain in respect of which the previous advance payment was
made;
(e) for the period from the beginning of the crop year in
which the application is made to the time of the application,
the kinds and quantities of grain that have been delivered by
the applicant to the Board under general acreage quotas and
his unit quota; and
(J) such other particulars as are prescribed.
(2) An application shall be verified by affidavit and shall
include an authorization by the applicant that one-half of the
initial payment for grain delivered to the Board under the
permit book specified in the application or any permit book
issued in substitution or extension thereof, may be deducted
and paid to the Board until the undertaking of the applicant
has been discharged.
Thus, by subsection (2) of that section, - the appel
lant authorized the Board to deduct one-half of the
initial payment for each quota delivered to the
elevator, and to apply same against the loan.
Section 5(1) read as follows:
5. (1) Before an advance payment is made to a producer, he
shall execute an undertaking in prescribed form in favour of the
Board to the effect that
(a) as soon as any quota or other permission given by the
Board enables him to do so, he will, in addition to any
deliveries described in subsection 11(2), deliver grain to the
Board until one-half of the initial payment therefor is equal
to the advance payment made to him; and
(b) upon default, he will repay to the Board the amount in
default, without interest prior to default but with interest at
six per cent per annum after default.
Section 5 provided, in essence, that a farmer
cannot obtain an advance on farm-stored grain
until he signs an undertaking to repay the advance
by delivery to the Board of one-half of each and
every quota authorized until such time as those
deliveries under the quota system have repaid the
advance payment in full.
Regulation 3(1) of the Regulations [SOR/71-
395] passed pursuant to the authority contained in
the Act reads as follows:
3. (1) An application for an advance payment made by an
applicant who has discharged his undertakings, if any, given in
relation to all advance payments made to him in prior years,
and has not received an advance payment in the current crop
year, shall be made in accordance with Form AR-A of the
Schedule.
That form contains as an integral part thereof, the
undertakings referred to supra. Therefore, in my
view, the method of repayment of the advance and
the respondent's promise to repay the advance are
stipulated in the Act and the Regulations there-
under. I cannot agree with the view of the learned
Trial Judge that the borrower's liability flows from
his contractual promise to repay. As I understand
the learned Trial Judge, it is his view that the
liability to repay is imposed by the undertaking
whereas, in my opinion, the liability to repay and
the method of repayment is imposed by the statute
and Regulations, and not by any contractual
promise. Further support for this view is, I believe,
to be found in section 14 of the Act which provides
that: "Where a producer is in default, all proceed
ings against him to enforce his undertaking may be
taken in the name of the Board or in the name of
Her Majesty." Likewise I do not accept the view
of the learned Trial Judge that the appellant's
claim is completely analogous to the Crown's
claim on the surety bond in McNamara (supra),
which opinion seems to be based on his belief that
the Act does not "prescribe anything as to the law
governing the enforcement of the undertaking."
[Page 364.] In my opinion, the Act does indeed
prescribe, with precision, the law governing the
enforcement of the undertaking. In addition to the
sections of the Act and Regulations described
supra, there is subsection 13 (1) of the Act which
sets out the circumstances in which a borrower is
deemed to be in default. That subsection reads as
follows.
13. (1) For the purposes of this Act, a recipient shall be
deemed to be in default if his undertaking has not been
discharged
(a) within ten days after the date on which the Board mails
or delivers or causes to be mailed or delivered a written
notice to him stating that he has, in the opinion of the Board,
had adequate opportunity to discharge his undertaking or
has, otherwise than by delivery to the Board, disposed of all
or part of the grain in respect of which the advance was
made, and requesting him to discharge his undertaking by
delivery of grain to the Board or otherwise;
(b) before the 15th day of September in the new crop year
immediately following the crop year in which the advance
payment was made, and he has not applied for a permit book
for such new crop year in substitution for the permit book
specified in his application; or
(c) before the 31st day of December in the new crop year
immediately following the crop year in which the advance
payment was made, or such later date as the Board may
authorize in special cases.
I am satisfied from a perusal of these sections of
the Act and Regulations that the loan in question
is not a loan which is repaid by the borrower in the
ordinary course of events. It is not, in my view, a
common law loan at all. The method of repayment
is created by the statute (section 4); the borrower's
promise to repay is created by the statute (section
5); the default itself is created by the statute
(section 13); and the right to recover is created by
the statute (section 14). The whole cause of action
is in its entirety a creature of the statute and
Regulations. The statute and Regulations provide,
in themselves, a complete code to cover these very
specialized transactions.
It is, accordingly, my view that this is not a case
(as was McNamara supra) where the claim is
based on the general law of property and civil
rights prima facie applicable to everybody but is
rather, a case where the claim is totally based on
existing federal legislation, i.e.,—the Act and
Regulations thereunder 5 . I agree with appellant's
counsel's statement in his memorandum that this
Act "... is a special law enacted to determine and
govern the rights of the Crown and the liability of
the producer in relation to the advance made
5 See: The Queen v. Saskatchewan Wheat Pool [ 1978] 2
F.C. 470, a judgment of the Trial Division of this Court
wherein it was held that the Court had jurisdiction to deter
mine the statutory liability to the Crown of an elevator operator
under the Canada Grain Act. At p. 482 thereof, Smith D.J.
said: "I emphasize that the issue in this case is the statutory
liability of an elevator operator under the Canada Grain Act. It
is not to be confused with a case where the issue is negligence
... nor ... with one where the issue is simply one of breach of
contract between persons."
pursuant to the Act and this special law is invoked
by the Crown in order to recover from the
respondent in this action." On this view of the
matter, the appellant's action is clearly founded
upon federal law and this Court therefore has
jurisdiction.
For all of the above reasons, I would allow the
appeal, set aside the judgment of the Trial Divi
sion and refer the matter back to the Trial Divi
sion for reconsideration on the basis that the Trial
Division has jurisdiction in this case.
* * *
URIE J.: I agree.
* * *
MACKAY D.J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.