Judgments

Decision Information

The Queen v. Prytula

Collection	Judgments
Date	1979-03-08
Report citation	[1979] 2 F.C. 516
File numbers	A-406-77
Subjects	Jurisdiction

Decision Content

A-406-77

The Queen (Appellant) (Plaintiff) v.

Barbara Jean Prytula (formerly Barbara Jean Erickson) (Respondent) (Defendant)

Court of Appeal, Heald and Urie JJ. and MacKay D.J.—Toronto, January 9; Ottawa, March 8, 1979.

Jurisdiction — Debt owed under Canada Student Loans Act — Appeal from Trial Division's dismissal of application for default judgment — Whether or not Court has jurisdiction to entertain the action — Canada Student Loans Act, R.S.C. 1970, c. S-17, ss. 7, 13(j) — Canada Student Loans Regula tions, SOR/68-345, ss. 18, 21 — The British North America Act, 1867, 30 & 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix IIJ , ss. 91(15), 92(13), 101, 129.

This is an appeal from the Trial Judge's dismissal of appel lant's application for judgment against the respondent in default of defence in this action brought in respect of a guaranteed student loan received by the respondent. The respondent (defendant) had defaulted in the terms of the agreement signed pursuant to the Canada Student Loans Act. The Trial Judge, following McNamara, made his decision on the basis that there was no jurisdiction in the Federal Court to entertain appellant's action.

Held, the appeal is allowed. A contract whereby a banker makes a loan to a customer is a matter coming within the subject "banking". The concluding words of section 91 require that such a bank loan contract "shall not be deemed" to come within section 92(13) whether or not Parliament has enacted any law with regard thereto under section 91(15). A post- Confederation provincial law of general application does not alter law continued by section 129 in so far as it applies to a matter coming within the section 91 class of subjects. In so far as a law is applicable to a matter coming within "banking", it can only be "repealed, abolished or altered" by Parliament and it cannot be "repealed, abolished or altered" by a provincial legislature; it is, therefore, a "federal" law and not a "provin- cial" law for the purposes of section 101 of The British North America Act, 1867, even though it is part of a general law in relation to property and civil rights that was continued in the province by section 129.

McNamara Construction (Western) Ltd. v. The Queen [1977] 2 S.C.R. 654, discussed. Associated Metals & Minerals Corp. v. The "Evie W" [1978] 2 F.C. 710, discussed. Attorney General for Canada v. Attorney Gen eral for Quebec (Bank Deposits Case) [1947] A.C. 33, followed.

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. 198] wherein the learned Trial Judge dismissed the appellant's application for judgment against the respondent in default of defence in this action which is an action in respect of a guaranteed student loan received by the respondent. The application for judgment was based on the allegations in the statement of claim where it was alleged, inter alia, that:

(a) on November 19, 1969, the Royal Bank of Canada at Flin Flon, Manitoba, had loaned to the respondent the sum of $540 pursuant to a written agreement and in accordance with the provisions of the Canada Student Loans Act, R.S.C. 1970, c. S-17, (hereinafter the Act);

(b) the respondent failed to make any repay ments with respect to the loan;

' Section 7 of the Act reads as follows:

7. Subject to this Act, the Minister is liable to pay to a bank the amount of any loss sustained by it as a result of a student loan, if

(a) the loan was made pursuant to an application to a bank, signed by the borrower, stating

(i) that the borrower has not received any other loan pursuant to the certificate of eligibility referred to in paragraph (b), or pursuant to any other certificate of eligibility relating to the academic year specified in the certificate of eligibility referred to in paragraph (b), except any such loan the amount of which, when added to the amount of the loan applied for, did not exceed one thousand dollars, and

(ii) that the amount of the loan applied for, together with the amount of all guaranteed student loans previ- (Continued on next page)

Regulations 2 thereunder (Canada Student Loans Regulations, SOR/68-345) and the claim was paid by the Minister of Finance, and

(Continued from previous page)

ously made to the borrower, does not exceed five thou sand dollars;

(b) the loan was made to a borrower who filed with the bank making the loan a document that purported to be and was accepted by a responsible officer of that bank, in good faith, as a certificate of eligibility issued or caused to be issued by an appropriate authority relating to that borrow er for the academic year specified in the certificate;

(i) the amount set out in the certificate of eligibility, or

(ii) one thousand dollars, whichever is the lesser;

(d) no fee, service charge or charge of any kind other than simple interest at the rate prescribed as payable by the borrower, was by the terms of the loan payable in respect of the loan, except as provided in the regulations in any case where the borrower is in default;

(e) the loan was repayable in full by the terms thereof within a period of not less than five years and not more than ten years after the borrower ceased to be a full-time student, subject to alteration in any class of cases as provided in the regulations and subject to the borrower's having the right to repay at any time all or any part of the principal amount of the loan outstanding at that time and any interest then accrued; and

(/) the loan was made in accordance with an agreement in prescribed form between the borrower and the bank making the loan, containing provisions respecting payment of the principal amount of the loan and interest thereon by the borrower as described in sections 4 and 5 and such other provisions as may be prescribed.

2 Section 18 of the Regulations reads as follows:

18. (1) A claim for loss by a bank in respect of a guaran teed student loan may be made in the form satisfactory to the Minister,

(a) in the case of a claim made pursuant to section 8 of the Act and section 14 of these Regulations, at any time after the death of the borrower; and

(b) in the case of any other claim for loss, at any time after the guaranteed student loan has been in default for six months, unless in the opinion of the bank the circum stances are exceptional, in which case a claim may be submitted prior to the expiration of six months and such claim may be paid at the discretion of the Minister.

(2) The amount of loss sustained by a bank as a result of a guaranteed student loan for which a claim for loss may be submitted includes

(a) the unpaid principal amount of the loan;

(b) the uncollected earned interest on the loan calculated to

(d) by virtue of the above facts and by virtue of section 21 of the Regulations' made pursuant to

(i) the last day of the month in which the borrower died in the case of a claim made pursuant to section 8 of the Act and section 14 of these Regulations, or

(ii) the date the claim is approved for payment in the case of any other claim;

(d) legal fees, legal costs and legal disbursements, whether taxable or not, actually incurred by the bank, whether with or without litigation, in collecting or endeavouring to collect outstanding loans or in protecting the interests of the Minister, but only to the extent that the Deputy Minister of Justice taxes or allows; and

(e) other disbursements actually incurred by the bank in collecting or endeavouring to collect outstanding loans or in protecting the interests of the Minister, but only to the extent that the Minister allows.

(3) A claim for loss, if the loan and the claim are made in accordance with the Act and these Regulations, shall be approved for payment by the Minister within thirty days from the receipt thereof and shall thereupon be paid forthwith.

(4) Upon payment of the loss in respect of a guaranteed student loan being made by the Minister to a bank, the bank shall execute a receipt, in a form satisfactory to the Minister and shall post that receipt to the Minister together with such applications, agreements and other documents relating to the loan as the Minister requests.

(5) Any document purporting to be a receipt, in a form satisfactory to the Minister and purporting to be signed on behalf of a bank, shall be evidence of the payment by the Minister to the bank under the Act in respect of the loan therein mentioned and of the execution of the document on behalf of the bank.

3 Section 21 of the Regulations reads as follows:

21. Where, under the Act and these Regulations, the Minister has paid to a bank the amount of loss sustained by the bank as a result of a guaranteed student loan, Her Majesty is thereupon subrogated in and to all the rights of the bank in respect of the guaranteed student loan and, without limiting the generality of the foregoing, all rights and powers of the bank in respect of

(a) the guaranteed student loan,

(b) any Judgment obtained by the bank in respect of the loan, and

are thereupon vested in Her Majesty and Her Majesty is entitled to exercise all the rights, powers and privileges that the bank had or might exercise in respect of the loan, Judgment or security, including the right to commence or continue any action or proceeding, to execute any release, transfer, sale or assignment, or in any way collect, realize or enforce the loan, Judgment or security.

section 13 of the Act 4 , the appellant is subrogat- ed in and to all the rights of the Bank in respect of said guaranteed loan.

The refusal of the application for judgment in default of defence by the learned Trial Judge was on the basis that there was no jurisdiction in the Federal Court to entertain the appellant's action. The learned Trial Judge based his opinion on the McNamara decision in the Supreme Court of Canada'. After discussing the principles set out in the McNamara case (supra), the learned Trial Judge said [at pages 203-204]:

My appreciation of the decision in the McNamara case is that for the Federal Court to have jurisdiction there must be an existing and applicable federal law which can be invoked to support the proceedings and that the proceedings must be "founded" upon that law. It is not enough that the Crown is a party to a contract on which it sues as plaintiff.

The solicitor for the plaintiff in his letter dated April 13, 1977 submits that the plaintiff's action is founded upon the Canada Student Loans Act and Regulation 21(1) thereunder. While I accept without question that this is federal legislation, I do not accept the contention that the action is "founded" upon this legislation in the sense that the word "founded" is used by the Chief Justice in the McNamara case.

It is true that the Minister is subrogated to the rights of the bank on an unrepaid loan for which loss the Minister holds the bank harmless but that does not bestow upon the Minister any rights different from those of the bank in whose stead he stands.

It is clear from the statement of claim that what the plaintiff is suing upon is a breach of the agreement between the bank and the student to which agreement the plaintiff is subrogated.

It is not enough that the liability arises in consequence of the statute and regulations thereunder.

While the statute authorizes a bank to make a loan to a student and prescribes the conditions of that loan and that the bank is guaranteed against any loss by the Minister who, if he makes good any loss by the bank, is then subrogated to the rights of the bank, the statute does not, in itself, impose a liability and there is no liability except that of the borrower which flows not from the statute but from the borrower's

See particularly section 13(j) of the Act which reads as follows:

13. The Governor in Council may make regulations

(j) respecting the subrogation of Her Majesty to the rights of a bank with respect to a guaranteed student loan;

5 McNamara Construction (Western) Limited v. The Queen [1977] 2 S.C.R. 654.

contractual promise to repay the loan. The liability is based on the agreement and the action is founded upon a breach of the agreement, not upon a liability imposed by the statute as is the case under the Income Tax Act, customs and excise legislation and like federal legislation.

The same elements as are present in this matter were also present in the McNamara case and the Supreme Court unani mously held that there was no statutory basis for the Crown's suit for breach of contract.

In my view, the question to be decided in this appeal is, whether on these facts, the Court can be said to be administering a "federal" law or a "provincial" law 6 . No question has been raised concerning the existence in the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, of a provision conferring jurisdiction if the adjudicating on the claim constitutes "administration" of a "federal" law for the purposes of the application of section 101 of The British North America Act, 1867 [R.S,C. 1970, Appendix II, No. 5].

6 See: Associated Metals & Minerals Corp. v. The "Evie W" [1978] 2 F.C. 710 at pp. 712-714:

Prior to the decisions of the Supreme Court of Canada referred to above, there was a widely accepted view that Parliament could, by virtue of section 101, confer on a Court such as the Federal Court of Canada jurisdiction "in respect of matters that are within federal legislative jurisdiction". In the light of those cases, however, section 101 is to be read as authorizing Parliament to confer on such a court jurisdiction to administer "existing federal law, whether statute or regu lation or common law". (The italics are mine.) (Query whether the words "laws of Canada" in section 101 extend only to "federal" as opposed to "provincial" law or whether they include also the Constitution of Canada. Cf the recent decision of this Court in The Queen (Canada) v. The Queen (P.E.I.) [1978] 1 F.C. 533.) While not so said expressly, as I read the judgments in those cases, they stand, at the least, for the proposition that Parliament cannot confer on a section 101 court jurisdiction to administer "provincial" laws.

As it seems to me, in so far as the four original provinces are concerned, the key to the distinction so adumbrated between "federal" and "provincial" law is to be found in that part of section 129 of The British North America Act, 1867, which reads as follows:

129. Except as otherwise provided by this Act, all Laws in force in Canada, Nova Scotia, or New Brunswick at the Union, ... shall continue in Ontario, Quebec, Nova Scotia, and New Brunswick respectively, as if the Union had not been made; subject nevertheless (except with respect to such as are enacted by or exist under Acts of the Parlia ment of Great Britain ...) (This exception was removed by the Statute of Westminster, 1931, sections 2 and 7(2).) to be repealed, abolished, or altered by the Parliament of

(Continued on next page)

In effect, the scheme of the Canada Student Loans Act, in so far as relevant, is that, where a bank loan complies with certain conditions,

(a) by virtue of section 7 (supra), the Minister is liable to pay to the Bank any loss sustained by it as a result of that loan, and

(b) such loss having been paid, Her Majesty is subrogated to all rights of the Bank in respect of the loan (see Regulation 21 made pursuant to section 13(j) (supra)).

When, therefore, such a loan has been made and the Minister has paid the loss sustained by the Bank, Her Majesty has succeeded to the rights of the Bank as against the borrower'.

(Continued from previous page)

Canada, or by the Legislature of the respective Province, according to the Authority of the Parliament or of that Legislature under this Act. (In so far as the other prov inces are concerned, the same or a substantially similar result is achieved by the terms upon which they entered the Union or by a statute passed under The British North America Act, 1871.)

For the purpose of the limitation on the possible jurisdiction of a section 101 court indicated by the Supreme Court of Canada by its decisions of 1976 and 1977, I should have thought that a law continued by section 129 would be a "federal" law if it could "be repealed, abolished, or altered by the Parliament of Canada" whether its origin was

(a) the Common Law of England,

(b) a United Kingdom statute, or

and that the expression "federal" law would also include statutes enacted by the Parliament of Canada since 1867. (Query whether it extends to statutes enacted by the Parlia ment of Canada under The British North America Act, 1871, or introducing the laws of England into a territory before it became a Province.) Similarly, for that purpose, a law continued by section 129 would be a "provincial" law if it could "be repealed, abolished, or altered ... by the Legis lature of the respective Province" and the expression "provin- cial" law would include statutes enacted by a legislature of a province since 1867.

7 The Shorter Oxford English Dictionary defines "subroga- tion", inter alia, as: "the process by which a person who pays a debt for which another is liable succeeds to the rights of the creditor to whom he pays it".

The question is, therefore, whether adjudicating on the rights so conferred on Her Majesty as against the borrower is the administration of a "provincial" or a "federal" law.

Prima facie, when a person, whether Her Majesty or not, loans money to another, the right of the lender to enforce repayment depends on the proper law of contract that governs contractual relations between ordinary persons 8 ; and that law is a "provincial" law, which can only be changed, as such, by a provincial legislature.

Parliament, however, has exclusive legislative jurisdiction to make laws in relation to "banking" and a law, the purpose of which is to change the rights under a contract falling within that field, is within the legislative power of Parliament and not within the legislative power of a provincial legislature 9 . Any law so made would be a "fed- eral" law.

Moreover, if there was, at the time as of which sections 91 and 92 of The British North America Act, 1867 became applicable in relation to Manitoba, a body of law in relation to "banking" (separate from the ordinary law of contract) on which the Bank's right to recover from a borrower depended, such body of law would be "federal" law. Similarly, if Parliament has, since Confedera tion enacted such a law it is, of course, a federal law.

Here, assuming the validity of the Canada Stu dent Loans Act, it would seem clear that the law that makes Her Majesty the successor to the Bank in its claim against the borrower is "federal" law. However, unless that law impliedly creates a new statutory liability by the borrower to Her Majesty in an amount to be determined by reference to the loan contract, as opposed to merely conferring on the Crown the rights of the Bank under the con tract of loan, it is open to question as to whether that statute can be said to be the law that is being administered by a court when it is adjudicating on the claim by Her Majesty against the borrower

8 See: The Queen v. Murray [1967] S.C.R. 262, and Her Majesty in right of Alberta v. C.T.C. [1978] 1 S.C.R. 61, per Laskin C.J.C. at pp. 72-73.

9 See: Attorney General for Canada v. Attorney General for Quebec (Bank Deposits Case) [ 1947] A.C. 33.

from the Bank. In view of the conclusion which I reach subsequently herein, it is not necessary to answer that question in order to determine the issue raised in this appeal.

To be more specific, the question here is wheth er the law of contracts continued in Manitoba by section 129 is a "provincial" law or a "federal" law in so far as it related to "banking" contracts.

The relevant parts of sections 91 and 92 read as follows:

91. It shall be lawful for the Queen, by and with the Advice and Consent of the Senate and House of Commons, to make Laws for the Peace, Order, and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces; and for greater Certainty, but not so as to restrict the Generality of the foregoing Terms of this Section, it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next herein-after enumerated; that is to say,-

15. Banking, Incorporation of Banks, and the Issue of Paper Money.

And any Matter coming within any of the Classes of Subjects enumerated in this Section shall not be deemed to come within the Class of Matters of a local or private Nature comprised in the Enumeration of the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces.

92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next herein-after enumerated; that is to say,-

13. Property and Civil Rights in the Province.

It would seem to be clear that a contract where by a banker makes a loan to a customer is a matter coming within the subject "banking". If that is correct, the concluding words of section 91 require that such a bank loan contract "shall not be deemed" to come within section 92(13) whether or not Parliament has enacted any law with regard thereto under section 91(15). In such a case, if full play be given to the concluding words of section 91, a post-Confederation provincial law of general application does not alter law continued by section 129 in so far as it applies to a matter coming

10 See: Attorney General for Alberta v. Attorney General for Canada [1974] A.C. 503 (Alberta Bill of Rights case), per Viscount Simon at pp. 516, et seq.

within the section 91 class of subjects". In so far as a law is applicable to a matter coming within "banking", it can, therefore, only be "repealed, abolished or altered" by Parliament and it cannot be "repealed, abolished or altered" by a provincial legislature (section 129 of The British North America Act, 1867 12 ); and it is, therefore, a "fed- eral" law and not a "provincial" law for the pur poses of section 101 of The British North America Act, 1867, even though it is part of a general law in relation to property and civil rights that was continued in the province by section 129.

For the above reasons, I would allow the appeal, set aside the judgment of the Trial Division, and refer the matter back to that Division on the basis that it has jurisdiction in this case.

* * *

URIE J.: I agree.

* * *

MACKAY D.J.: I concur.

APPENDIX "A"

Ontario Fisheries Case [1898] A.C. 700, per Lord Herschell, at pages 714-716

The sections of the Ontario Act of 1892, intituled, "An Act for the Protection of the Provincial Fisheries," which are in question, consist almost exclusively of provisions relating to the manner of fishing in provincial waters. Regulations controlling the manner of fishing are undoubtedly within the competence of the Dominion Parliament. The question is whether they can

"See: Ontario Fisheries Case [1898] A.C. 700, per Lord Herschell, at pp. 714-716 (see APPENDIX "A"); Burrard Power Corp. Limited v. Rex [1910] A.C. 87, per Lord Mersey at p. 95; Reference re Saskatchewan Minimum Wage Act [1948] S.C.R. 248; and Commission du Salaire minimum v. Bell Telephone Co. of Canada [1966] S.C.R. 767. See also Faber v. The Queen [1976] 2 S.C.R. 9, per Pigeon J. (dissenting) at p. 18: "... the abstinence of the Federal Parliament from legislating to the full limit of its powers does not enlarge the field of provincial jurisdiction: Henry Birks & Sons Ltd. v. City of Montreal, ([1955] S.C.R. 799) (at p. 811)."

12 If it were otherwise, a provincial legislature could, by abolishing the law of contract (and substituting some new system of statutory relationships), abolish, or alter completely, the law regulating one of the main branches of "banking".

be the subject of provincial legislation also in so far as it is not inconsistent with the Dominion legislation.

By s. 91 of the British North America Act, the Parliament of the Dominion of Canada is empowered to make laws for the peace, order, and good government of Canada in relation to all matters not coming within the classes of subjects by that Act assigned exclusively to the legislatures of the provinces, "and for greater certainty, but not so as to restrict the generality of the foregoing terms of this section," it is declared that (not- withstanding anything in the Act) "the exclusive legislative authority of the Parliament of Canada extends to all matters coming within the classes of subjects next thereinafter enume rated." The 12th of them is "Sea-Coast and Inland Fisheries."

The earlier part of this section read in connection with the words beginning "and for greater certainty" appears to amount to a legislative declaration that any legislation falling strictly within any of the classes specially enumerated in s. 91 is not within the legislative competence of the Provincial Legislatures under s. 92. In any view the enactment is express that laws in relation to matters falling within any of the classes enumerated in s. 91 are within the "exclusive" legislative authority of the Dominion Parliament. Whenever, therefore, a matter is within one of these specified classes, legislation in relation to it by a Provincial Legislature is in their Lordships' opinion incompe tent. It has been suggested, and this view has been adopted by some of the judges of the Supreme Court, that although any Dominion legislation dealing with the subject would override provincial legislation, the latter is nevertheless valid, unless and until the Dominion Parliament so legislates. Their Lordships think that such a view does not give their due effect to the terms of s. 91, and in particular to the word "exclusively". It would authorize, for example, the enactment of a bankruptcy law or a copyright law in any of the provinces unless and until the Dominion Parliament passed enactments dealing with those subjects. Their Lordships do not think this is consistent with the language and manifest intention of the British North America Act.

It is true that this Board held in the case of Attorney-Gener al of Canada v. Attorney-General of Ontario [ 1894] A.C. 189 that a law passed by a Provincial Legislature which affected the assignments and property of insolvent persons was valid as falling within the heading "Property and Civil Rights," although it was of such a nature that it would be a suitable ancillary provision to a bankruptcy law. But the ground of this decision was that the law in question did not fall within the class "Bankruptcy and Insolvency" in the sense in which those words were used in s. 91.

For these reasons their Lordships feel constrained to hold that the enactment of fishery regulations and restrictions is within the exclusive competence of the Dominion Legislature, and is not within the legislative powers of Provincial Legislatures.

But whilst in their Lordships' opinion all restrictions or limitations by which public rights of fishing are sought to be limited or controlled can be the subject of Dominion legislation only, it does not follow that the legislation of Provincial Legis-

latures is incompetent merely because it may have relation to fisheries. For example, provisions prescribing the mode in which a private fishery is to be conveyed or otherwise disposed of, and the rights of succession in respect of it, would be properly treated as falling under the heading "Property and Civil Rights" within s. 92, and not as in the class "Fisheries" within the meaning of s. 91. So, too, the terms and conditions upon which the fisheries which are the property of the province may be granted, leased, or otherwise disposed of, and the rights which consistently with any general regulations respecting fish eries enacted by the Dominion Parliament may be conferred therein, appear proper subjects for provincial legislation, either under class 5 of s. 92, "The Management and Sale of Public Lands" or under the class "Property and Civil Rights." Such legislation deals directly with property, its disposal, and the rights to be enjoyed in respect of it, and was not in their Lordships' opinion intended to be within the scope of the class "Fisheries" as that word is used in s. 92.

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