T-201-83
Irving Oil Limited (Applicant)
v.
The Queen (Respondent)
Trial Division, Walsh J.—Ottawa, April 20, 21
and June 3, 1983.
Energy — Agreement upon special case to determine ques
tions of law — Applicant's petroleum exports exceeding
imports — Respondent's guidelines silent concerning situation
— Applicant notifying respondent of intention to carry for
ward net volume of excess exported petroleum and apply it to
imported petroleum in subsequent months on applications for
import compensation — Energy Supplies Allocation Board not
objecting to method of allocation and paying compensation
claimed — Years later Board requiring application of export
deductions against imports in previous month and recovering
over-payment by set-off against application for compensation
— Applicant entitled to set off over-payments — Regulations
requiring deduction from petroleum in respect of which com
pensation payable, any portion "thereof" exported — Literal
interpretation requiring deductions carried back — Fluctuat
ing prices affecting compensation payable and requiring iden
tification of exports with oil already imported — Price fluc
tuations also making it impossible for applicant to have
adjusted affairs differently — Board not functus officio — S.
76 Petroleum Administration Act providing for recovery of
compensation to which person not entitled as debt due Crown
— Trial Division having jurisdiction to decide whether entitled
to set-off and whether decision relating to entitlement or to
amount payable — Board's decisions relating to amount of
compensation payable and administrative — Regulations
requiring Board to recover over-payments — Procedural
objection to set-off not sustained because resulting in duplica
tion of proceedings — Estoppel not applicable because public
interest requiring collection of over-payment resulting from
misinterpretation of Act — No unfairness in correctly applying
law — No evidence of inducement to use carry forward
method — No evidence of different treatment for different
companies — Petroleum Administration Act, S.C. 1974-75-
76, c. 47, s. 76, Part IV — Oil Import Compensation Regula
tions No. 1, 1975, SOR/75- 140, ss. 6(2), 10 — Petroleum
Import Cost Compensation Regulations, SOR/75-384, ss. 9(2),
10 — Financial Administration Act, R.S.C. 1970, c. F-10, s.
19 — Appropriation Act No. 5, 1974, S.C. 1974-75-76, c. 22,
Schedule, Vote 53c — Federal Court Act, R.S.C. 1970 (2nd
Supp.), c. 10, s. 17(3)(6).
This is an agreement upon a special case to determine certain
questions of law arising from the procedure adopted to deter-
mine the amount of compensation payable to importers and
refiners of petroleum under the Petroleum Products Compensa
tion Program. In the month of July in the years 1975 to 1978
inclusive the applicant exported more petroleum than it import
ed. The guidelines published by the respondent did not deal
with this situation. On its applications for import compensation
for these months, the applicant carried forward the net volume
of excess exported petroleum and applied it to the volume of
petroleum imported in subsequent months. The applicant
advised the Energy Supplies Allocation Board (now Petroleum
Compensation Board) of its method of allocating deductions
prior to adopting it in 1975. The Board did not object to this
method of carrying forward deductions and paid the compensa
tion claimed. In 1978 the Board advised the applicant that
effective October 1, 1978 export deductions were to be applied
against petroleum imported in the previous month, but that no
adjustment of compensation paid was required. In 1979 the
over-payment was recovered by set-off against the first applica
tion for import compensation. Each application for compensa
tion contained the applicant's undertaking to repay any amount
of import compensation to which the applicant was "not enti
tled". The applicant submits that: (1) the Board was functus
officio as it acted within its jurisdiction when it certified and
paid compensation upon the contested applications; (2) even if
there was an error in the first series of decisions, it was an
intra-jurisdictional error which the Board was permitted to
make without losing jurisdiction; (3) the Board had no statu
tory power to reconsider the initial series of decisions; (4) the
Board is estopped from retroactively enforcing its new
approach by its continued certification and payment of com
pensation; (5) the applicant could not carry back excess exports
since imports prior to the coming into effect of the scheme were
not compensated; (6) it is unfair to recover the over-payment
after the applicant relied on the Board's rulings and conducted
its affairs accordingly; (7) it is unfair for respondent to set off
its claim instead of instituting proceedings to recover its claim.
The respondent submits that the Crown had a right to recover
the over-payments at common law and by statute. The Regula
tions governing payment of import compensation speak of
deducting from the petroleum upon which compensation may
be made "any portion thereof ...". Since it is impossible to
export imported oil prior to its date of importation, export
volume deductions must be made from import volumes for a
period prior to the date of export. The respondent argues that
the Federal Court of Appeal in Shell Canada Limited v.
Minister of Energy, Mines and Resources et al. held that
entitlement to compensation flows from the Act and Regula
tions. The Board simply performs the administrative act of
satisfying itself as to the amount payable. Also, in Auckland
Harbour Board v. The King it was held that any payment out
of the consolidated fund made without Parliamentary authority
is illegal. It is also contended that the Crown is entitled to
recover by statute since section 76 of the Petroleum Adminis
tration Act provides that where a payment in respect of import
compensation exceeding the amount to which the person is
entitled is made, it may be recovered as a debt due to the
Crown. Also the applicant undertook to repay over-payments
on its applications for compensation. The respondent also con
tends that the doctrine of functus officio does not apply since
the Board does not exercise a decision-making power, and even
if it did, Parliament having conferred the power on the Board
to determine whether an importer has been paid an amount to
which he is not entitled, has barred operation of the doctrine.
Estoppel allegedly does not apply since the conduct of Crown
servants will not bar recovery by the Crown of payments made
out of the Consolidated Revenue Fund without the authority of
Parliament. Also estoppel will not operate to override the
provisions of a statute. Finally, the respondent alleges that
there is no evidence that the applicant was induced to act as it
did or that it suffered any detriment as a result of any
representation. As to administrative fairness, the respondent
alleges that since the Board's decision has no final effect upon
the rights of another, the doctrine of procedural fairness has no
application. The respondent argues that the decision to recover
over-payments does not affect the applicant's entitlement which
can only be determined by the Court. Also the applicant had
ample notice of the Board's intention to recover the
over-payment.
Held, the application is dismissed and the respondent is
entitled to set-off. The method of carrying back the deduction
for imported oil re-exported to imports in preceding months
where there are no imports calling for compensation payments
in a given month is the correct one upon a literal interpretation
of paragraph 9(2)(a) of the Regulations which speaks of
deducting from the quantity of petroleum "any portion there
of ...". Also, since the date of deduction, given the widely
fluctuating oil prices, affects the amount of compensation to be
paid, oil exports should be identified with oil already imported
as closely as possible, and if they cannot be deducted from oil
imported within any given month they should be deducted from
that imported in preceding months rather than in subsequent
months. The applicant's argument that it would have adjusted
its affairs accordingly fails because price fluctuations made it
impossible to foresee whether it should adjust its loadings for
import or delay its exports. The Board was not functus officio
as a result of having made the payments which it subsequently
decided had been calculated on an erroneous basis. The Trial
Division has jurisdiction to decide whether the set-off should
have been applied retroactively against prior shipments and
whether the decision relates to entitlement or merely to amount
of compensation which should be paid. Section 76 of the
Petroleum Administration Act gives the Court the right to find
that the excess payments resulting from an erroneous policy
can be recovered and retained out of any subsequent compensa
tion payable. The Board's decisions were administrative in that
they were based on the amount of compensation to which the
applicant was entitled and not on entitlement alone. The Board
was obliged to recover the over-payments by virtue of section
10 of the Oil Import Compensation Regulations No. 1, 1975
and section 10 of the Petroleum Import Cost Compensation
Regulations. Although there may be some merit in the argu
ment that the Board was not entitled to set off the amount of
the over-payment, to allow this application on a procedural
ground would lead to a duplication of proceedings as the
respondent would move to recover the amount owing. Estoppel
to prevent the recovery of over-payments cannot be applied
since the method of carrying the oil export deductions forward
to subsequent imports was a misinterpretation of the Act and it
is in the public interest to collect the over-payment. It is not
unfair to apply a law or regulation properly nor to correct an
erroneous interpretation which was made in the past. Nothing
indicates that the applicant was induced to use the carry-
forward method since the applicant itself suggested that this
method be adopted. There is nothing to indicate that other oil
companies have been treated differently from the applicant.
CASES JUDICIALLY CONSIDERED
APPLIED:
Shell Canada Limited v. Minister of Energy, Mines and
Resources et al., [1979] 2 F.C. 367 (C.A.); Greenwood v.
Martins Bank, Limited, [1933] A.C. 51 (H.L.).
DISTINGUISHED:
La Cité de Jonquière v. Munger et al., [1964] S.C.R. 45;
Employment and Immigration Commission of Canada v.
MacDonald Tobacco Inc., [1981] 1 S.C.R. 401; H.T.V.
Ltd. v. Price Commission, [1976] I.C.R. 170 (Eng.
C.A.); Robertson v. Minister of Pensions, [1949] 1 K.B.
227 (Eng. C.A.); Laker Airways Ltd. v. Department of
Trade, [1977] 1 Q.B. 643 (Eng. C.A.); Harel v. The
Deputy Minister of Revenue of the Province of Quebec,
[1978] 1 S.C.R. 851.
CONSIDERED:
Auckland Harbour Board v. The King, [1924] A.C. 318
(P.C.); Stickel v. Minister of National Revenue, [1972]
F.C. 672 (T.D.); Minister of National Revenue v. Inland
Industries Limited, [1974] S.C.R. 514; Lugano v. Minis
ter of Manpower and Immigration, [1977] 2 F.C. 605
(C.A.); Grillas v. The Minister of Manpower and Immi
gration, [1972] S.C.R. 577; Re Lornex Mining Corpora
tion Ltd. and Bukwa (1976), 69 D.L.R. (3d) 705
(B.C.S.C.); The Becker Milk Company Limited v. Min
ister of Revenue, [1978] CTC 744 (Ont. H.C.); Deputy
Minister of Revenue of Quebec v. Ciba-Geigy Canada
Ltd., judgment dated August 24, 1981, Que. (Montreal)
C.A. No. 500-09-001153-766 not reported; Maritime
Electric Company Limited v. General Dairies, Limited,
[1937] A.C. 610 (P.C.); Irving Oil Limited v. The Queen,
[1979] 2 F.C. 200 (T.D.).
REFERRED TO:
The Attorney General of Canada v. Inuit Tapirisat of
Canada et al., [1980] 2 S.C.R. 735; Martineau v. Mat-
squi Institution Disciplinary Board, [1980] 1 S.C.R. 602;
The Queen v. Randolph et al., [1966] S.C.R. 260;
Nicholson v. Haldimand-Norfolk Regional Board of
Commissioners' of Police, [1979] 1 S.C.R. 311.
COUNSEL:
Michel Côté, Q.C. and J. Drouin Knoppers
for applicant.
E. A. Bowie, Q.C. and D. P. F. Hermosa for
respondent.
SOLICITORS:
Clarkson, Tetrault, Montreal, for applicant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
rendered in English by
WALSH J.: This matter came on for hearing on
the basis of an agreement upon a special case
which reads as follows:
WHEREAS a dispute has arisen between Irving Oil Limited
and Her Majesty The Queen as to the legal consequences of
certain events and they therefore desire to have the questions of
law set out in Paragraph 43 hereunder determined by the
Federal Court pursuant to Clause 17(3)(b) of the Federal
Court Act, R.S.C. 1970, Ch. 10, 2nd Supp.;
NOW THEREFORE Irving Oil Limited and Her Majesty The
Queen hereby agree that the questions of law set out in
Paragraph 43 hereunder shall be determined by the Federal
Court and they further agree that the facts set out in para
graphs 1 to 42 hereunder, together with Exhibits 1 to 12
referred to therein, is a complete and accurate statement of the
facts necessary to the determination of those questions of law.
1. At all material times, Irving Oil Limited (hereinafter called
the "Applicant") was a company incorporated under the Laws
of the Province of New Brunswick with its Head Office in the
City of Saint John, New Brunswick.
2. By the promulgation of Appropriation Act No. 1, 1974,
effective on March 28th, 1974, the EMR Vote 11b therein
provided both the funds to operate the Oil Import Compensa
tion Program and the authority to enact the regulations neces
sary to administer it for the period January 1st 1974 to March
31st, 1974.
3. Pursuant to the said Appropriation Act, on April 10th, 1974,
the Imported Oil and Petroleum Products Compensation Regu
lations PC 1974-806: SOR/74-232, were registered thereby
providing regulations for the payment of compensation to cer
tain refiners and importers of petroleum for consumption in
Canada.
4. For the purpose of funding the Petroleum Products Compen
sation Program ("Program") as described in the aforesaid
Regulations the following Special Warrants were passed under
the authority of Section 23 of the Financial Administration Act
(R.S.C. Chapter F-10), PC 1974-1175 (d. 22 May 1974), PC
1974-1519 (d. 27 June 1974), PC 1974-1697 (d. 25 July 1974),
PC 1974-1943 (d. 28 August 1974), and PC 1974-1973 (d. 4
September 1974).
5. In July 1974, administrative guidelines for the operation of
the Program were issued by the Respondent entitled the Oil
Import Compensation Program Procedures Handbook (herein-
after called the "1974 (1) Handbook") wherein the Claims
Forms Section 3B under "Cargo Identification" the following
statements were made with respect to the deduction of
petroleum products derived from imported petroleum:
"Export product deduction should reflect as closely as possi
ble the proportions of products derived from Canadian and
imported crude oils where both are run.
EMR should be consulted in cases of doubt about estimating
procedures for deductions."
6. In accordance with the promulgation of Appropriation Act
No. 3, 1974, which was effective on October 30th, 1974, by
EMR Vote 52(a) the funds to administer the Program and the
authority to enact further Regulations for its administration
were provided for the period commencing from and after
November 1st, 1974.
7. Pursuant to the said Appropriation Act No. 3, 1974, on
November 8th, 1974 the Oil Import Compensation Regulations
PC 1974-2419: SOR/74-627 were registered thereby providing
new Regulations for the payment of import compensation from
and after November 1974.
8. Pursuant to the promulgation of Appropriation Act No. 5,
1974, effective on December 20th, 1974, further funds were
provided for the continuance of the Program.
9. To replace the 1974 (1) Handbook, a revised Oil Import
Compensation Program Procedures Handbook was issued in
December 1974 (hereinafter called the "1974 (2) Handbook").
10. Pursuant to vote 53 in the aforesaid Appropriation Act No.
5, 1974, the Oil Import Compensation Regulations No. 1,
1975, PC 1975-545, SOR/75-140, were registered on March
12th, 1975, and were effective until new Regulations became
effective on or about July 1st, 1975 pursuant to the promulga
tion of the Petroleum Administration Act ("PAA").
11. To replace the 1974 (2) Handbook a revised Oil Import
Compensation Program Procedures Handbook was issued in
March 1975 effective retroactively from January 1st, 1974
(hereinafter called the "1975 (1) Handbook").
12. Effective on the 8th day of April 1975, the Regulations (PC
1974-2419: SOR/74-627) registered on November 8th, 1974,
were amended for the purpose of limiting the period to which
they applied by changing the commencement of their effective
period "from and after November 1, 1974" to "during the
period beginning on the 1st of November 1974 and ending on
the day before the Oil Import Compensation Regulations No.
1, 1975, came into force."
13. On June 19th, 1975, the PAA was promulgated and under
the PAA the Program was continued, by the payment of import
compensation to certain importers for the cost of the importa
tion of petroleum into Canada.
14. Pursuant to the PAA, on July 4th, 1975, the Petroleum
Import Cost Compensation Regulations PC 1975-1487:
SOR/75-384 (hereinafter called the "Regulations") were regis
tered providing new Regulations respecting import compensa
tion for importers of petroleum into Canada.
15. Under the PAA and Regulations, the Program was admin
istered by the Energy Supplies Allocation Board ("ESAB") as
it then was the Board currently being called the Petroleum
Compensation Board ("Board") pursuant to an Act to Amend
the Petroleum Administration Act and the Energy Supplies
Emergency Act, S.C. 1978, Chapter 24 Section 7, effective on
April 20th, 1978.
16. For the purpose of determining under Section 9 of the
Regulations the amount of import compensation which may be
authorized by the Board to be paid to an eligible importer such
as the Applicant, both the rate of import compensation per
barrel of petroleum, other than a petroleum product, and the
volume of petroleum must be determined.
17. The rate of import compensation per barrel of petroleum as
fixed from time to time pursuant to the legislation in force for
the months of June, July and August from 1975 to 1978
inclusive was as set out in Exhibit 1 produced herewith to form
part hereof.
18. Clause 9(2)(a) of the Regulations reads as follows:
"9 (2) In determining the volume of petroleum in respect
of which import compensation may be authorized
there shall be deducted from the quantity of
petroleum
(a) any portion thereof, and the volume of any
petroleum product obtained therefrom, sold or
supplied for delivery outside Canada, or deliv
ered outside Canada;"
19. In such circumstances, where import compensation has
already been paid, since it was practically impossible to directly
identify the quantity of fully compensated petroleum from
which the exported petroleum products were derived, in order
to carry out the export deduction, the Board adopted an
administrative procedure for the purpose of matching imported
petroleum to the exported petroleum products derived
therefrom.
20. This administrative procedure was communicated to eli
gible importers, such as the Applicant, by issuing a new Hand
book (hereinafter called the "1975 (2) Handbook"), which
replaced the 1975 (1) Handbook. The 1975 (2) Handbook
applied to all loadings of petroleum on or after July 1st, 1975.
21. In the 1975 (2) Handbook, in the Claims Section: 3B at
"Cargo Identification", the following instructions were given
with respect to export deductions:
"—All deductions for each month should be deducted from
the first cargo claimed for the month. Where a month's
deductions exceed net bbls. unloaded for the first cargo,
then the excess should be carried over to the second
cargo claimed in the month. Claimants may use either
the first cargo loaded or unloaded for the month,
depending on their system of deductions as previously
established with ESAB.
—For provisional claims, claimants may use estimated
deductions, however, consistent estimation methods
must be applied for all months.
—Where deductions are petroleum products manufactured
from imported petroleum, volume should be grossed up
by refinery fuel and loss factor.
—Petroleum products deductions should reflect as closely
as possible the proportions of petroleum products
derived from Canadian and imported crude oil where
both are run.
—For further details with respect to deductions, see Sec
tion 3C."
22. In Section 3C, in the 1975 (2) Handbook in the Claims
Section 3C, under the heading "Deductions", the following
relevant administrative procedures were set out:
"Section 9, Paragraph (2) of the Regulations
(1) states that the following are to be excluded from
compensation;
A. Imported petroleum. sold or supplied for delivery
outside Canada, or delivered outside
Canada;
B. Petroleum products obtained from imported
petroleum which are sold or supplied for
delivery outside of Canada, or delivered
outside Canada.
(8) Commencing July 1, 1975, all deductions should be
deducted from the first cargo claim for each month.
Where the month's deductions exceed the net bbls.
unloaded for the first claim, then the excess should be
carried over to the second cargo claim for the month.
Claimants may use either the first cargo loaded or the
first cargo unloaded for each month, depending on their
system, of deductions as previously established with
ESAB. However, the cargo used (first loaded or first
unloaded) should be employed consistently for all
months.
(13) Deductions specified on final claims must be actual
rather than estimates which may have been used for
provisional claims. Final claims should be submitted in
groups, i.e. by month or quarter. However, where all the
data on a month's claims is already in final form, with
the exception of the deductions information, then only
the claim specifying deductions (i.e. the first cargo
loaded or unloaded in the month) need be resubmitted
for finalization. ESAB must be informed in writing that
the other claims for the month do not require revision
and are in final form."
23. The said 1975 (2) Handbook did not provide specifically for
the administrative procedure to be followed for the situation
where there was no quantity of petroleum imported in the
month for which an application for import compensation could
be made, but wherein a volume of petroleum products had been
exported or for the situation where the volume of petroleum
products exported exceeded the quantity of petroleum imported
for the month.
24. Pursuant to the Regulations, the Applicant submitted 13
applications for import compensation: Nos. IRV41, 42, 43, 45,
66, 70, 94, 098, 118, 119, 120, 123 and 124, photocopies of
which, together with any amendments or revisions thereof, are
produced herewith en liasse to form part hereof as Exhibit 2,
which applications were audited in October 1980. These
applications form the basis for the present action and for a
document entitled "Exports Deduction Carry-Over" a photo
copy of which is produced herewith to form part hereof as
Exhibit 3, Columns 1 to 6 of which indicate the following:
Column 1 "Month of Export"—shows the month in which a
volume of petroleum products exported by the
Applicant exceeded the volume of petroleum
imported by the Applicant;
Column 2 "Volume (Barrels)"—shows the net volume which
was carried forward and applied to a volume of
petroleum imported in a subsequent month or
months. It is this volume that the ESAB subse
quently adjusted and deducted from a quantity of
petroleum imported in previous months;
Column 3 "Rate of Compensation"—shows rate of import
compensation per barrel relevant to the particular
month;
Column 4 "Application Number"—shows the numbers of
the relevant Applications by the Applicant, with
respect to which the adjustments of import com
pensation were made;
Column 5 "Loaded/Unloaded"—shows month and year in
which a vessel was loaded at the exporting coun
try and the month and year in which the relevant
quantity of petroleum was unloaded and imported
into Canada;
Column 6 "Decrease (Increase) Compensation"—shows the
adjustment in Canadian Dollars made to each
application. A bracketed amount represents an
increase in the import compensation paid for the
Application and an unbracketed amount repre
sents a decrease in the import compensation paid.
The "Total Decreased Compensation" shows the
total amount of compensation adjusted by the
carry-back of the export deductions rather than
the carry-forward and represents the disputed
amount of import compensation in respect of
which a set-off was made.
25. Pursuant to the Regulations, the Applicant provided as part
of each application a written undertaking to repay the Receiver
General of Canada any amount paid as or on account of any
import compensation to which the Applicant was not entitled,
or that was not authorized, and a certification that all informa
tion submitted in the application form with respect to the
particular cargo of petroleum was correct as to fact and fair
and reasonable as to estimates.
26. During the month of July for the years 1975 through 1978
inclusively, the volume of petroleum products exported by the
Applicant exceeded the volume of petroleum imported for the
same month and, consequently, certain export deductions could
not be made by the Applicant against the quantity of imported
petroleum for that month.
27. The now contested applications of Applicant (Exhibit 2)
having received the approval of an authorized representative of
the ESAB and the Board in the form of a certification to the
effect that they met the requirements of the Act and Regula
tions and having been subsequently paid pursuant to such
approval and certification, were filed on the basis that during
the month of July for the years 1975 through 1978 respectively,
the Applicant imported fewer barrels of crude oil than it
exported of refined petroleum products for the same period.
28. The export deductions for the months in question were
carried forward and applied against the Applicant's subsequent
crude imports as Applicant had little or no import loadings of
crude oil during the month of July for the years 1975 through
1978 against which its export deductions could be made.
29. Prior to adopting the method of allocation of deductions
referred to above, the Applicant wrote to the ESAB its letter
dated October 31, 1975, which the Board received but did not
answer, a photocopy of which is produced herewith to form part
hereof as Exhibit 4.
30. Other than the Handbooks referred to above, the first
communication relating to deduction procedures originating
from ESAB and/or the Board and addressed to Applicant was
in the form of a telex dated August 17, 1978 and a photocopy
of which is produced herewith to form part hereof as Exhibit 5.
31. The Applicant's method of allocation of deductions regard
ing months where exports exceeded imports was followed con
sistently for the years 1975 through 1978 by the Applicant. On
June 2, 1980, the Comptroller of the Board wrote to Messrs.
Touche, Ross & Co., independent auditors, a letter which is
produced herewith to form part hereof as Exhibit 6. The
reference in the first paragraph thereof to the old system and
the new system of allocating exports has no reference to the
matters in issue in the present case.
32. At a meeting with the Board held on August 24, 1978, the
Applicant discussed the procedure of carrying forward the
export deductions and requested that its procedure not be
changed.
33. During the month of September 1978, a duly authorized
representative of the Board advised the Applicant that the
Board would not require a retroactive adjustment of the rele
vant applications for import compensation.
34. By a telex dated October 2, 1978, the Board advised the
Applicant that effective on or after October I, 1978, export
deductions were to be applied against the quantity of petroleum
imported in the previous month, by pro-rating the volume of
exports in a month over all petroleum importations in a previ
ous month and this was confirmed by a letter dated November
21, 1978, forwarded to the Applicant a photocopy of which
telex and letter is produced herewith en liasse to form part
hereof as Exhibit 7.
35. By letter dated October 3, 1978, a duly authorized repre
sentative of the Board advised the Applicant that an adjust
ment of the relevant applications (Exhibit 2) of the Applicant
would not be required and that a revised deductions procedure
for exports occurring on or after October 1, 1978, had been
established, a photocopy of which is produced herewith to form
part hereof as Exhibit 8.
36. To replace the previous 1975 (2) Handbook the Board
issued to the Applicant in December 1978 a revised Handbook
(hereinafter called the "1979 Handbook") setting out the
administrative procedures effective January 1, 1979.
37. Following some criticism expressed in the Auditor Gener
al's report for the year 1979, the Board informed the Applicant
of its intention to recover the alleged overpayment of compen
sation, as appears from a letter emanating from the Board
dated December 22, 1980 a photocopy of which is produced
herewith to form part hereof as Exhibit 9.
38. After a meeting between representatives of Applicant and
of Respondent, by letter dated February 4, 1981, the Chairman
of the Board, A. Digby Hunt, advised the Applicant that due to
the Applicant's method of carrying forward the export deduc
tions, prior import compensation paid from time to time to the
Applicant in a total amount of $3,700,928.00 was not author
ized by the PAA and Regulations, and that the amount was in
excess of the amount to which the Applicant was entitled, the
total amount being comprised of portions of compensation
payments made with respect to the 13 applications (Exhibit 2),
a photocopy of which letter is produced herewith to form part
hereof as Exhibit 10.
39. As appears from Exhibit 9, A. Digby Hunt also advised the
Applicant that the aforesaid total amount would be recovered
by way of set-off against the first application for import
compensation made by the Applicant after February 15, 1981.
40. The Board set off the sum of $3,700,928.00 against subse
quent import compensation payable to the Applicant under
application IRV 215, a photocopy of which is produced here
with to form part hereof as Exhibit 11.
41. The relevant portions of the relevant Handbooks are pro
duced herewith to form part hereof as Exhibit 12.
42. There is a genuine dispute between the parties as to the
right of the Board to claim and recover from the Applicant the
amount of $3,700,928.00 and set off, as it did, this amount
from subsequent compensation payments due to Applicant.
43. The question submitted to this Honourable Court for
determination is the following:
Whether Her Majesty the Queen was legally entitled to set
off the sum of $3,700,928.00, or any lesser amount, against the
total sums payable to Irving Oil Limited under application IRV
215?
If the answer be yes the action shall be dismissed without
costs and if the answer be no Irving Oil Limited shall be
entitled to judgment accordingly for $3,700,928.00, or such
lesser amount as the Court may determine, without costs.
DATED at Ottawa, Ontario this 12th day of January, 1983.
As indicated the point in issue is whether
respondent was legally entitled to set off the sum
of $3,700,928 or any lesser amount against the
total sums payable to Irving Oil Limited under
application IRV 215. Applicant submits various
arguments in support of this contention:
1. That the Energy Supplies Allocation Board
and the Petroleum Compensation Board acted
within their jurisdiction in their conclusions in
the first series of decisions when they approved
and certified the now contested applications of
applicant and paid the amount payable for
import compensation and that as these were
valid decisions the Board was functus officio so
its reconsiderations are null.
2. Even if there was an error of law in arriving
at the first series of decisions this was an intra-
jurisdictional error which the Boards were per
mitted to make without losing jurisdiction so the
decisions were valid and reconsiderations null.
3. That in any event the Board had no statutory
power to reconsider the initial series of
decisions.
4. Even if the Board had the statutory power to
reconsider its own decision this cannot prejudice
applicant relying upon continued acquiescence,
approval, certification and auditing of its
accounting procedures and payment of all
import compensation so that the Board is
estopped from enforcing retroactively its new
approach.
5. The carry-forward method of computation of
applicant not only made accounting simple but
took account of the fact that the oil import
compensation scheme affected a going concern.
It is contended that applicant could not carry
back excess exports, as imports prior to the
coming into effect of the scheme were not com
pensated and moreover that the said method was
consistent with the directions contained in
respondent's Compensation Procedures Hand
book.
6. That it is unfair to recover an alleged over-
payment for import compensation several years
after the fact when applicant is totally incapable
of taking measures it could have taken had it
been advised in due course that its deduction
procedures were unacceptable and that the duty
of fairness required that applicant was entitled
to rely on the Board's rulings and adapt the
conduct of its affairs accordingly.
7. It is unfair by simply withholding payment of
admittedly due debts, as a result of the approval
and certification by the Board of applicant's
application IRV 215, to thereby force the appli
cant into the position of instituting proceedings
to recover those debts, rather than for respond
ent to institute its own proceedings for the
recovery of the amounts which it claims are
refundable.
It was submitted on behalf of respondent that
the result of carrying deductions for the July
exports forward to later claims for compensation
rather than back to earlier claims in each of the
years 1975 to 1978 was to create over-payments in
each of those years which are recoverable by the
Crown both at common law and by statute, and
that the doctrine of functus officio and the doc
trine of estoppel do not operate to prevent recovery
by the Crown, and the doctrine of procedural
fairness has no application in the present case.
Respondent contends that no payment may be
made out of the Consolidated Revenue Fund
except as authorized by Parliament' and that the
authority of Parliament for the payment of the oil
import compensation in issue for the month of
June 1975 is found in Appropriation Act No. 5,
1974 2 which authorizes payments to be made "in
accordance with and subject to regulations made
by the Governor in Council ...". The Regulations
are the Oil Import Compensation Regulations No.
1, 1975 3 . Subsection 6(2) thereof provides that in
calculating the volume of petroleum upon which
compensation may be paid there shall be excluded
inter alia "any portion thereof ... sold or supplied
for export from Canada". [Emphasis added.]
' Financial Administration Act, R.S.C. 1970, c. F-10, s. 19.
2 S.C. 1974-75-76, c. 22, Schedule, Vote 53c.
3 SOR/75-140.
After July 1, 1975, authority for payment is
found in the Petroleum Administration Act 4
which authorizes payments to be made "in accord
ance with the regulations" and the regulation
made thereunder is the Petroleum Import Cost
Compensation Regulations.' Subsection 9(2)
thereof provides that in calculating the volume of
petroleum upon which compensation may be paid
"there shall be deducted from the quantity of
petroleum ... any portion thereof ... sold or
supplied for delivery outside Canada, or delivered
outside Canada". [Emphasis added.]
Respondent therefore argues that the export
volume deductions must be made from import
volumes for a period prior to the date of export
since it is not possible to export imported oil prior
to its date of importation so that applicant's
exports made during the month when it had no
imports must be derived from prior shipments and
in calculating its compensation entitlement its
export volumes must be carried back, not carried
forward.
Respondent further argues that the Federal
Court of Appeal held in Shell Canada Limited v.
Minister of Energy, Mines and Resources et a1. 6
that entitlement to compensation flows from the
Act and the Regulations made under it and not
from any decision made by the Board which does
not adjudicate the applicant's entitlement but
simply performs the administrative act of satisfy
ing itself as to the amount payable from time to
time and making the payment. In that judgment
Chief Justice Jackett for the majority stated at
page 378:
In other words, in my view, an applicant who satisfies the
conditions is entitled to an amount to be determined in accord
ance with the Regulations and, if the matter gets before the
courts in the event of a dispute as to the amount, the Court is
not bound by the Board's determination.
4 S.C. 1974-75-76, c. 47, Part IV.
5 SOR/75-384.
6 [1979] 2 F.C. 367 (C.A.).
and again at page 380:
For the above reasons, I am of the view that the Board had
no power to adjudicate the applicant's entitlement in respect of
the claim and that there was, therefore, no legal requirement
that its decision to re-calculate that entitlement be made on a
judicial or quasi-judicial basis.
In support of its contention that the over-pay
ments are recoverable by the Crown at common
law reliance is placed inter alia on the statement
of Viscount Haldane in Auckland Harbour Board
v. The King' where he said at page 327:
Any payment out of the consolidated fund made without
Parliamentary authority is simply illegal and ultra vires, and
may be recovered by the Government if it can, as here, be
traced.
It is contended that the Crown is also entitled to
recover by statute since section 76 of the
Petroleum Administration Act reads as follows:
76. Where a person has received a payment under this
Division as or on account of any import compensation to which
he is not entitled or in an amount in excess of the amount to
which he is entitled, the amount thereof or the excess amount,
as the case may be, may be recovered from that person at any
time as a debt due to Her Majesty in right of Canada or may
be retained in whole or in part out of any subsequent compen
sation payable to that importer under any provision of this Act.
Reference is also made to the fact that the relevant
Regulations required that the applicant undertake
to repay any over-payment made to it and the
applicant did so undertake on each of its applica
tions for compensation. The statutory provisions
relating to recovery of over-payments were dis
cussed in the dissenting judgment of Le Dain J.*
in the Shell Canada case (supra). The other mem
bers of the Court did not consider these provisions
in view of their conclusion that the Court had no
jurisdiction.
Respondent further contends that the doctrine
of functus officio has no application to this case.
This only applies to a person who exercises the
power of decision to make a judgment, order or
7 [1924] A.C. 318 (P.C.).
* [Editor's note: Le Dain J. concurred in the disposition of
the application, but differed in the reasons therefor.]
award. The Boards do not exercise a decision-mak
ing power. In support of this the Shell Canada
case is again referred to. It is further contended
that even if the Board were a body to which the
doctrine could apply its operation has been exclud
ed by Parliament. Reference is made in this con
nection to the dissenting judgment of Le Dain J. in
the Shell Canada case at page 386:
In my opinion it is a necessary implication of these provisions
of the Act and the Regulations that, as the statutory authority
which must determine the amount to be paid as compensation,
the Board has the power, after a payment has been authorized
and made, to determine that an importer has been paid an
amount to which he is not entitled.
(As applicant's counsel vigorously points out how
ever, respondent cannot rely on both the majority
judgment and the dissenting judgment in the Shell
Canada case.) I will deal with this argument more
fully later.
Respondent further contends that the doctrine
of estoppel has no application in the present case
since the conduct of Crown servants will not bar
the recovery by the Crown of payments made out
of the Consolidated Revenue Fund without the
authority of Parliament. In support of this reliance
is placed inter alia on the case of Auckland Har
bour Board v. The King (supra). It is contended
that in any event an estoppel cannot operate to
override the provisions of a statute. A good exam
ple of this is the case of Stickel v. Minister of
National Revenue 8 in which Cattanach J. held
that an Information Bulletin published by the
Minister which misstated the effects of Article
VIII A of the Canada-U.S. Reciprocal Tax Con
vention [S.C. 1943-44, c. 21] did not create an
estoppel against the Minister. In reaching his con
clusion he relied inter alia on the case of Minister
of National Revenue v. Inland Industries Limited 9
where at page 523 Pigeon J. in rendering the
judgment of the Court states "... it seems clear to
me that the Minister cannot be bound by an
approval given when the conditions prescribed by
the law were not met".
s [1972] F.C. 672 (T.D.).
9 [1974] S.C.R. 514.
Finally on the issue of estoppel respondent refers
to the House of Lords case of Greenwood v. Mar
tins Bank, Limited 10 in which Lord Tomlin states
at page 57:
The essential factors giving rise to an estoppel are I think:—
(1.) A representation or conduct amounting to a representa
tion intended to induce a course of conduct on the part of the
person to whom the representation is made.
(2.) An act or omission resulting from the representation,
whether actual or by conduct, by the person to whom the
representation is made.
(3.) Detriment to such person as a consequence of the act or
omission.
Applying this to the present case respondent con
tends that there is nothing to lead to a conclusion
that anybody induced applicant to act as it did or
that applicant as a result of any representation did
or failed to do anything to its detriment.
Finally, contending that the doctrine of proce
dural fairness had no application in this case, it is
submitted that both the leading case on this sub
ject of The Attorney General of Canada v. Inuit
Tapirisat of Canada et al." and Martineau v.
Matsqui Institution Disciplinary Board 12 refer to
bodies exercising a statutory power to make "deci-
sions" in the administrative law sense, being deci
sions which affect the rights or privilege of others
and that in the present case the decision is not one
having any final effect upon the rights of another,
as in the case of The Queen v. Randolph et al. 13
which dealt with an interim order made without
hearing prohibiting delivery of mail, but a hearing
was provided for before a final order could be
rendered.
While it might appear somewhat specious to
argue that the decision did not affect the rights of
applicant or have any final effect upon it, respond
ent relies again on the Shell Canada Limited case
as authority for concluding that the "decision" to
recover over-payments of import compensation by
set-off is not a decision which affects the appli
cant's entitlement which can only be determined
1° [1933] A.C. 51 (H.L.).
11 [1980] 2 S.C.R. 735.
12 [1980] 1 S.C.R. 602.
13 [1966] S.C.R. 260.
by the Court. Moreover on the issue of fairness it
was pointed out that the matter was under discus
sion between the applicant and the Board from
August 1978 onward, the applicant being given
ample notice of the Board's intention to recover
the over-payment, and having the opportunity to
meet with the Board personnel to present its argu
ments before the over-payment was recovered
from the February 1981 compensation payment.
Here again I think this argument begs the ques
tion since it is not the lack of hearing of its
contentions which applicant complains of, but
rather the change in interpretation by the Board of
its Regulations made long after a consistent con
duct had been accepted and approved, in order to
deal with the set-off deductions in a different
manner, to the considerable disadvantage of appli
cant, as it turns out.
The first question to be considered is whether
the method now adopted since 1978 of carrying
back the set-off for imported oil re-exported to
imports in preceding months where there are no
imports calling for compensation payments in any
given month, or whether alternatively the method
formerly adopted from 1975 to 1978 of carrying
such set-off deductions foward to oil imported in
subsequent months as applicant had already done
with full approval, is the proper method of dealing
with the situation in view of the silence of the
Regulations. As set out in paragraph 22 of the
agreement upon a special case section 9(1)B in the
1975 (2) Handbook provides that there shall be
excluded from compensation "Petroleum products
obtained from imported petroleum which are sold
or supplied for delivery outside of Canada, or
delivered outside Canada." Subsection (8) reads as
follows:
Commencing July 1, 1975, all deductions should be deducted
from the first cargo claim for each month. Where the month's
deductions exceed the net bbls. unloaded for the first claim,
then the excess should be carried over to the second cargo claim
for the month. Claimants may use either the first cargo loaded
or the first cargo unloaded for each month, depending on their
system, of deductions as previously established with ESAB.
However, the cargo used (first loaded or first unloaded) should
be employed consistently for all months.
Since unfortunately during the month of July for
the years 1975 through 1978 inclusive the volume
of petroleum products exported by the applicant
exceeded the volume of petroleum imported for the
same month such deductions could not be made
from the quantity imported for that month, from a
first cargo and/or subsequent cargoes claimed in
the month.
As set out in paragraph 18 of the agreement
upon a special case paragraph 9(2)(a) of the
Regulations reads as follows:
9....
(2) In determining the volume of petroleum in respect of
which import compensation may be authorized there shall be
deducted from the quantity of petroleum
(a) any portion thereof, and the volume of any petroleum
product obtained therefrom, sold or supplied for delivery
outside Canada, or delivered outside Canada;
Applicant contends that the words "thereof" and
"therefrom" should not be given a narrow restric
tive interpretation relating the export to any spe
cific shipment or shipments imported on which
compensation is claimed but should be based on
the quantity of petroleum imported less what is
subsequently used by the importer or exported
from Canada. Oil imported is of course mixed with
domestic oil for refining and it may be some
months before some portions of the oil from any
given import shipment come to be exported. There
is no dispute however as to the actual figures and
how the calculation was made. Applicant argues
that when the Regulation was first made an appli
cant could not carry back excess exports against
imports prior to the coming into effect of the
scheme which imports were not compensated;
therefore they would have to be carried forward
and applied against subsequent compensable
imports. This argument only might apply to the
initial stage and I do not consider it to be sufficient
justification for failing to give the words "thereof"
and "therefrom" their usual meaning even though
the identity of the oil from any specific shipment is
subsequently lost after import.
Quite aside from the conclusion reached by the
literal interpretation of the Regulations it appears
to me to be more logical and consistent with the
intention of the compensation program. If the
prices paid for imported oil did not fluctuate
widely there would be no issue before the Court
since it would not matter whether the set-off for
subsequent export was carried forward as was
done initially for four years or carried back as is
now done since 1978. However it happened in the
present case that carrying forward the exports in
July in each of the years in question to set off
against imports in subsequent months was more
advantageous for applicant than carrying them
back would have been. Claimants consistently
made their claims based on the date when the
shipments were loaded rather than unloaded and
this method is not objected to by respondent.
However if a set-off is to be made for oil exported
it appears to me that it should be calculated on the
compensation payable to applicant based on the
time of loading for import which sets the rate of
compensation to which it was entitled on any given
cargo, and not on prices paid for oil loaded subse
quently to the export by which time the price
might have fallen. While the quantities to be
deducted will be the same whether they are
deducted from previous or subsequent importa
tions it is evident that the date of the deduction
will affect the amount of compensation to be paid
in view of price variations affecting the rate of
compensations and that the oil exports should
therefore be identified with the oil already import
ed as closely as possible and if they cannot be
deducted from oil imported within any given
month they should be deducted from that imported
in preceding months rather than in subsequent
months, as the use of the words "thereof" and
"therefrom" indicates.
Applicant contends that if it had known that
this was the interpretation to be adopted it might
have adjusted the date of its loadings for import as
to ensure a cargo claim for July if this was to its
advantage, or perhaps delayed its exports to subse
quent months so that the set-off would be applied
against cargo claims for imports in those months.
It is trite law in income tax matters to state that
the taxpayer may so adjust his affairs within the
law as to attract the minimum of taxation, and the
same principle might no doubt be applied to
receipts of benefits under the Petroleum Products
Compensation Program, but this argument rests
on speculation, and as already indicated, the rela
tive advantages of claiming set-off against subse
quent imports instead of against previous imports
depended on price fluctuations, so that it was not
foreseeable which method would be more advanta
geous to applicant, so this argument cannot be
used in connection with the interpretation of the
Regulations which I find are now correctly
interpreted.
The facts disclose that applicant has consider
able justification for feeling aggrieved at the
changed interpretation. On October 31, 1975
Irving Oil wrote the Energy Supplies Allocation
Board enclosing three copies of Claim IRV 044
(apparently relating to July). The letter states
"You will note that there is no amount due as the
exports for the month exceeded our imports. We
are carrying forward an export deduction of
438,178 barrels which we will apply against
August liftings." There was no reply to this letter,
and while in law silence does not mean assent,
since there has been no meeting of the minds, the
letter at least is an indication of the policy which
Irving Oil Limited was going to adopt. No objec
tion was taken to it by way of reply to the letter or
in settlement of the subsequent claims made on
this basis right through to 1978. It was not until
1978 that any indication was given that the Board
intended to adopt a different policy. A telex on
August 17, 1978 to Irving Oil from A. J. Kealey,
Acting Manager of the Oil Incentive Compensa
tion Plan stated:
Several inquiries have been received as to the handling of
export deductions in cases where no claim for compensation
exists for the month in which the deduction would normally be
taken.
In such instances, the deduction should be taken against the
last previous loading or discharge, depending on one's accepted
procedure. Where a treatment other than this has been
employed in the past without OICP approval, appropriate
adjustment to relevant claims should be made.
After a number of discussions the Chairman of
the Board wrote the present applicant on Decem-
ber 22, 1980, stating that the Auditor General in
his last two reports had commented on the method
of deducting oil exports used by applicant during
the period between 1975 and 1978 whereby in a
month in which no import loadings had occurred
exports were deducted against oil loadings in the
subsequent months.
Where this method was used at the time of a domestic crude
price increase and corresponding compensation decrease, an
advantage was conferred on your company in the form of a
lower compensation repayment. It is the opinion of the Auditor
General that this practice resulted in the payment of excessive
compensation.
The letter adds that the Petroleum Compensation
Board is compelled to make recovery and the
Justice review concludes that the handling of
export deductions in the manner described is not
authorized by the Act and the Regulations.
Applicant contends that the Board was functus
officio and refers to a considerable body of author
ity in support of this. One such case is that of
Lugano v. Minister of Manpower and
Immigration" in which Chief Justice Jackett
stated at page 608:
Once an appeal has been terminated by a section 11(3)
decision, I am of opinion that it remains terminated until the
decision terminating it is set aside; and, in the absence of
express statutory authority, a tribunal cannot set aside its own
decisions.
In the case of La Cité de Jonquière v. Munger et
al. 15 it was held that a town council could interpret
an award it had made and correct a clerical error,
but not amend it, but it was not a clerical error, as
the terms of the agreement the award dealt with
were clear and unambiguous and plaintiff was
entitled to the amount which had been awarded to
him. Cartwright J. adopted the words of Mont-
gomery J. in the Quebec Court of Appeal where he
said [at page 48]:
14 [1977] 2 F.C. 605 (C.A.).
[1964] S.C.R. 45.
I am satisfied that the council had the right to interpret the
award but not to amend it. This does not mean, however, that it
did not have the right to correct a simple clerical error.
Anybody having quasi-judicial powers must have such a right,
otherwise the consequences of a simple slip in drafting an
award might be disastrous.
It should be noted however that Montgomery J.
refers to quasi-judicial powers and the Shell
Canada case has held that this is not the case with
the Petroleum Compensation Board.
In the case of Grillas v. The Minister of Man
power and Immigration 1 b Pigeon J. states at pages
592-593:
In my view, the decision of this Court in The City of
Jonquière v. Munger, is conclusive authority on the finality of
decisions made by a board established under a statute pertain
ing to the exercise of an administrative jurisdiction.
In the case of Re Lornex Mining Corporation
Ltd. and Bukwa" Justice Verchere of the British
Columbia Supreme Court stated at pages 708-709:
It seems clear, in my view, that the normal rule relating to
the jurisdiction of an administrative tribunal to rehear a matter
already heard and decided by it is that, in the absence of some
statutory power, such jurisdiction does not exist: see R. v.
Development Appeal Board, Ex p. Canadian Industries Ltd.
(1969) 9 D.L.R. (3d) 727, 71 W.W.R. 635. However, in
Grillas v. Minister of Manpower and Immigration (1971), 23
D.L.R. (3d) 1, [1972] S.C.R. 577, the Supreme Court of
Canada explained the basis for that rule and after distinguish
ing the application of it when, as here, there was no appellate
tribunal to which a person dissatisfied by the decision might
resort, held that the Immigration Appeal Board, from whose
order the Court found there was no appeal, had jurisdiction to
reopen a hearing to permit the presentation of additional
evidence. At p. 9 Martland, J. with whom Abbott, Judson and
Laskin, JJ., agreed, said:
At the outset of his argument before this Court, counsel
for the respondent contended that neither of these grounds
was valid in that the Board was without jurisdiction to
reopen the hearing having once issued its written order on
October 22, 1968. After the making of that order, he submit
ted that the Board was furious officio.
And then, after making reference to the judgment of Rinfret,
J., in Paper Machinery Ltd. et al. v. Ross Engineering Corp. et
al., [1934] 2 D.L.R. 239, [1934] S.C.R. 186, the learned Judge
continued, at p. 10:
16 [1972] S.C.R. 577.
" (1976), 69 D.L.R. (3d) 705 (B.C.S.C.).
The same reasoning does not apply to the decisions of the
Board, from which there is no appeal save on a question of
law. There is no appeal by way of a rehearing.
Reference was also made to the case of
Employment and Immigration Commission of
Canada v. MacDonald Tobacco Inc. 18 in which
Laskin C.J. stated at page 403:
It is not contested that the employer, strictly speaking, was
not entitled to premium reductions for the years 1974, 1975
and 1976. The question is, however, whether the scheme of the
Act, and especially of the relevant Regulations, allows an
officer of the Commission or, indeed, the Review Panel or the
Commission itself, to undo retroactively and suo motu what
had been done by way of allowing premium reductions for
previous years.
and again at pages 408-409:
It is not for the courts to supply a review of a decision
wrongfully made in favour of an employer when the Regula
tions do not do so and when they could so easily be amended to
that end. As it is, the fact that the officer may have erred in
law in granting reductions for the years 1974, 1975 and 1976
does not mean that he exceeded or failed to exercise his
jurisdiction. He was properly seized of the respective applica
tions for those years and his errors did not make his decisions
nullities.
Here again however, as respondent points out, this
was a quasi-judicial decision. At page 403 it is
pointed out—
On a section 28 application to the Federal Court of Appeal,
that Court held that the officer, charged to determine whether
or not to allow a premium reduction, exercised a quasi-judicial
function and, in the absence of express power to revoke previ
ous decisions, he had acted illegally in so doing. The case is
here on this issue.
so this case can be distinguished.
Applicant refers to a number of other cases
which can more properly be dealt with under the
headings of "estoppel" or the "duty of fairness".
Respondent in reply contends that since the
Court is not bound by the Board's decision, in any
event, the change in it has no legal effect.
It is pointed out that most of applicant's juris
prudence deals with quasi-judicial decisions, not
purely administrative ones, whereas in the present
18 [1981] 1 S.C.R. 401.
case they cannot be considered as final since it is
this Court which must determine the legal issue of
whether the Regulations should be so interpreted
as to provide for a carry-back rather than a carry-
forward of the deductions for exported oil.
Respondent argues that the doctrine of functus
officio would only apply if the Board makes a
judgment, order or award in the exercise of deci-
sion-making power and that the majority decision
in the Shell Canada Limited case already referred
to, in refusing to permit a section 28 appeal from
the decision held that the decision was an adminis
trative one rather than judicial or quasi-judicial. A
close reading of this case however indicates that it
does not help respondent on the issue of whether
the Board could change its earlier policy. At page
377 the judgment poses the question: "Did the
Board at the original payment stage have power to
adjudicate or was it only performing an adminis
trative function?" The judgment then states:
... if the Board, in the first instance, exercised a power to
adjudicate the applicant's entitlement, a subsequent action by
the Board whereby the amount thereof was varied, would
operate to change the applicant's entitlement ....
It points out that the use of the word "authoriz-
ing" in connection with payment, which would be
an administrative function, is ambiguous when
compared with the word "determined" used in
section 73 which provides that the amount
"authorized" shall be "determined" by the Board
in accordance with the Regulations, and therefore
suggests a statutory power of adjudicating the
amount of the payment.
At page 378 Chief Justice Jackett states:
... I am of the view that the Board has a responsibility, before
authorizing a payment, to satisfy itself concerning all condi
tions precedent to that payment and that what it is required to
"determine" under the Regulations is the amount of import
compensation that it can authorize to be paid and not the
amount of the applicant's entitlement to import compensation.
In other words, in my view, an applicant who satisfies the
conditions is entitled to an amount to be determined in accord
ance with the Regulations and, if the matter gets before the
courts in the event of a dispute as to the amount, the Court is
not bound by the Board's determination.
Discussing the purpose of section 76 of the Act
(supra) he concludes that the authority of the
Board to reconsider cannot be implied.
At pages 379-380 he states:
In my view, the provisions in question create a legal right to
compensation and define such right in detail. The general rule
is that disputes as to legal rights are decided by the courts.
Special tribunals are set up to adjudicate on matters that
cannot be made the subject of precise legal definition or that,
for some other reason, call for the exercise of a non-legal
judgment. I see no reason why this legal entitlement calls for a
special tribunal. Moreover, while the applicant would, if the
Board has adjudicative powers, have an extra basis for main
taining its entitlement at the higher level (because there would
be no authority to reduce it even if the Board's original decision
awarded an amount in excess of that provided for by the
Regulations), a claimant would have no remedy, if the Board
has such powers, where there is a grievance based on the
contention that the Board had authorized less than what was
authorized by the Regulations.
The issue here is not applicant's entitlement to
compensation but rather entitlement on the basis
in which it wishes it to be calculated by carrying
the set-offs forward as was done in the past. While
the distinction is a delicate one it appears that the
Board's decisions were based on the amount of
compensation to which applicant is entitled for the
periods in question, and this the Court has found
to be an administrative decision rather than an
adjudication.
While as applicant's counsel points out respond
ent can hardly place reliance at the same time on
the dissenting judgment of Justice Le Dain, it
must be remembered that his dissent was based on
the question of whether a section 28 application
could be brought to the Court of Appeal or not,
and, since the majority judgment found that it
should not, it was not obliged to examine the issue
of what the Board should have done had it been
exercising a judicial or quasi-judicial function. In
finding that it was, Justice Le Dain in the passages
already quoted (supra) finds that since the Board
must determine the amount to be paid as compen
sation it has the power to determine that an
importer has been paid an amount to which he is
not entitled. This is really therefore an alternative
argument on functus officio. What is clear is that
the Trial Division in the present application has
the jurisdiction to decide, as I have done, whether
the set-off should have been applied retroactively
against prior shipments or not, and that if so,
whether the decision is one relating to entitlement
or merely to amount of compensation which should
be paid. The Court also clearly has the right by
virtue of section 76 of the Act to find that the
excess payments for the years 1974 to 1978 result
ing from an erroneous policy applied during this
period can be recovered as a debt due to Her
Majesty in right of Canada and may be retained
out of any subsequent compensation payable to the
importer under the Act. This is precisely what
respondent did.
I do not conclude that the Board was functus
officio as a result of having made the payments,
duly approved and audited, which it subsequently
decided had been calculated on an erroneous basis
(with which decision the Court now agrees), and
as a corollary it follows that it was obliged to
recover the over-payments. Section 10 of the Oil
Import Compensation Regulations No. 1, 1975
reads in part as follows:
10. No payment shall be made under these Regulations to an
eligible importer unless he has
(a) undertaken in writing to the Board that
(ii) he will repay to the Receiver General
(A) any amount paid to the eligible importer as or on
account of any import compensation to which he was not
entitled or that is not authorized under these Regula
tions ....
and a similar provision is found in the Petroleum
Import Cost Compensation Regulations' section
10 with only a slight difference in wording. The
words "not entitled" are broad enough to cover the
present situation and are not limited merely to a
calculation of the actual amounts which should be
paid.
It may well be however that, as applicant con
tends, the Board took unto itself judicial powers
which would only vest in the Court, if the majority
judgment in the Shell Canada case is applied, by
setting off the amounts which it was entitled to
claim and which applicant was obligated to repay
against the subsequent valid claim of applicant
IRV 215. As a result applicant was forced to bring
the present proceedings to reclaim amounts which
it claims, though unsuccessfully, were illegally set
off against the amount due under that claim,
whereas the more appropriate procedure, accord
ing to applicant, would have been to pay the said
claim in full and then initiate proceedings against
applicant in this Court in order to recover the
amount of the over-payment.
While this argument may have some merit from
a strictly legal point of view it does not commend
itself to me when the practical consequences are
considered. The issue between the parties is not so
evenly balanced that the decision is in any way
dependent on questions of burden of proof. An
issue of costs might perhaps arise although it
would appear to make little difference whether
applicant loses as a result of dismissal of its
present originating notice of motion or whether
instead it has to repay the amounts over-paid by
judgment awarded against it as defendant in pro
ceedings brought against it. If the present applica
tion were maintained on a clearly procedural
ground, even though it has been found that appli
cant is not entitled to retain the amounts of the
over-payments, on the ground that respondent
should have brought proceedings to recover them,
rather than by way of set-off against another
claim, such decision would undoubtedly lead to
proceedings immediately being instituted by
respondent to recover the said amounts. Such a
duplication of litigation is neither useful nor desir
able and will not be countenanced by the Court.
In addition to raising the argument that the
Board was functus officio after agreeing to permit
the carry-forward from 1974 to 1978 as it
undoubtedly did and could not then change this
interpretation, applicant also raises the issue of
estoppel with respect to any reclaim of the over-
payments resulting from the new interpretation. It
has accepted the new interpretation and acted
thereon since 1978 but opposes the claim for
repayment. To some extent jurisprudence has tied
in the doctrine of estoppel with the duty to act
fairly which has now been consecrated even for
purely administrative tribunals as a result of the
Nicholson [v. Haldimand-Norfolk Regional
Board of Commissioners of Police, [1979] 1
S.C.R. 311] and Martineau cases. Several com
paratively recent decisions in England by Lord
Denning and others have dealt with this question.
In the case of H.T.V. Ltd. v. Price Commission 19 a
tax case in which the Price Commission had
repeatedly acknowledged that additional payments
were a part of costs or expenses of the company,
before subsequently deciding to treat them differ
ently, Lord Denning pointed out at page 185 that
the levy retained the same character both before
the change of interpretation and afterwards and
that he could see no justification for treating the
matter differently afterwards than before. At page
185 he states:
It is, in my opinion, the duty of the Price Commission to act
with fairness and consistency in their dealings with manufac
turers and traders. Allowing that it is primarily for them to
interpret and apply the code, nevertheless if they regularly
interpret the words of the code in a particular sense—or
regularly apply the code in a particular way—they should
continue to interpret it and apply it in the same way thereafter
unless there is good cause for departing from it. At any rate
they should not depart from it in any case where they have, by
their conduct, led the manufacturer or trader to believe that he
can safely act on that interpretation of the code or on that
method of applying it, and he does so act on it. It is not
permissible for them to depart from their previous interpreta
tion and application where it would not be fair or just to do so.
It has been often said, I know, that a public body, which is
entrusted by Parliament with the exercise of powers for the
public good, cannot fetter itself in the exercise of them. It
cannot be estopped from doing its public duty. But that is
subject to the qualification that it must not misuse its powers;
and it is a misuse of power for it to act unfairly or unjustly
towards a private citizen when there is no overriding public
interest to warrant it.
It should be noted however that it is stated
"Allowing that it is primarily for them to interpret
and apply the code" whereas in the present matter
the Shell Canada case has reached a different
conclusion. In the same case Scarman L.J. in
dealing with the duty to act fairly states at page
192:
The Commission has acted inconsistently and unfairly; and
on this ground, were it necessary I would think H.T.V. are also
entitled to declaratory relief.
19 [1976] I.C.R. 170 (Eng. C.A.).
In the case of Robertson v. Minister of Pensions 20
a war veteran relied on the assurance that his
disability was attributable to military service and
did not seek a separate medical opinion. Subse
quently the Minister of Pensions decided that his
disability was not attributable to military service.
At page 232 Lord Denning states:
In my opinion if a government department in its dealings with a
subject takes it upon itself to assume authority upon a matter
with which he is concerned, he is entitled to rely upon it having
the authority which it assumes. He does not know, and cannot
be expected to know, the limits of its authority. The department
itself is clearly bound, and as it is but an agent for the Crown,
it binds the Crown also; and as the Crown is bound, so are the
other departments, for they also are but agents of the Crown.
The War Office letter therefore binds the Crown, and, through
the Crown, it binds the Minister of Pensions. The function of
the Minister of Pensions is to administer the Royal Warrant
issued by the Crown, and he must so administer it as to honour
all assurances given by or on behalf of the Crown.
The facts in that case are substantially different
however in that it really dealt with the defence of
executive necessity.
In the case of Laker Airways Ltd. v. Depart
ment of Trade 21 at page 707 Lord Denning again
discusses the question of estoppel. He states:
The Attorney-General concedes that estoppel could in suitable
circumstances be raised against the Crown: but he contends
this was not a case for it. The law on this subject has developed
a good deal lately. The underlying principle is that the Crown
cannot be estopped from exercising its powers, whether given in
a statute or by common law, when it is doing so in the proper
exercise of its duty to act for the public good, even though this
may work some injustice or unfairness to a private individual:
see Maritime Electric Co. Ltd. v. General Dairies Ltd. [1937]
A.C. 610, where the Privy Council, unfortunately, I think,
reversed the Supreme Court of Canada [1935] S.C.R. 519. It
can, however, be estopped when it is not properly exercising its
powers, but is misusing them; and it does misuse them if it
exercises them in circumstances which work injustice or unfair
ness to the individual without any countervailing benefit for the
public: see Robertson v. Minister of Pensions [1949] 1 K.B.
227; Reg. v. Liverpool Corporation, Ex parte Liverpool Taxt
Fleet Operators' Association [1972] 2 Q.B. 299 and H.T.V.
Ltd. v. Price Commission [1976] I.C.R. 170, 185-186.
In the present case, if the Secretary of State did have a
prerogative to withdraw the designation, and properly exercised
20 [1949] 1 K.B. 227 (Eng. C.A.).
21 [1977] 1 Q.B. 643 (Eng. C.A.).
the prerogative, then there would be no case for estoppel. He
would be exercising the prerogative for the public good and
would be entitled to do it, even though it did work injustice to
some individuals. I would not, therefore, put the case upon
estoppel.
Here again the facts are quite different. As I have
now concluded that the current interpretation of
carrying the oil export deductions back to earlier
imports is the correct one it is certainly in the
public interest to correct an interpretation which
resulted in an over-payment of over $3,700,000 so
I do not believe that estoppel can be applied.
Applicant referred however to the Canadian
case of The Becker Milk Company Limited v.
Minister of Revenue 22 which dealt with a change
by the Minister of the formula used in calculating
the amount of sales tax, resulting in higher pay
ment which was applied. At pages 759-760 Estey
C.J. [as he then was] states:
As has been stated, the self-assessment procedure was the
subject of a meeting of the minds of the audit staff of the
Comptroller and Beckers and its auditors from the early
application of the Act and certainly well before the advent of
the first assessment period. Returns and remittances by Beckers
were, therefore, made throughout the first assessment period on
this basis and without any apparent reaction by the respondent.
After the respondent's audit staff proposed in late 1967 and
early 1968, some adjustments to the ratios of tax exempt sales,
the appellant modified the self-assessment procedure and
applied the modified procedure throughout the second assess
ment period. Again, the Beckers' returns and remittances
throughout the second period were on the basis of the arrange
ments reached with respect to self-assessment formulas arising
out of the first assessment period and no critical response was
received from the respondent until after the close of the second
assessment period. Factually, the evidence reveals the constitu
ents necessary for the application of the doctrine of estoppel.
Reference was made in it to the Robertson v.
Minister of Pensions case (supra).
In the case of Harel v. The Deputy Minister of
Revenue of the Province of Quebec. 23 At page 858
Justice de Grandpré states:
22 [1978] CTC 744 (Ont. H.C.).
23 [1978] 1 S.C.R. 851.
If I had the slightest doubt on this subject, I would neverthe
less conclude in favour of appellant on the basis of respondent's
administrative policy. Clearly, this policy could not be taken
into consideration if it were contrary to the provisions of the
Act. In the case at bar, however, taking into account the
historical development that I will review rapidly, this adminis
trative practice may validly be referred to since the best that
can be said from respondent's point of view is that the legisla
tion is ambiguous.
At page 859, however, he states:
Once again, I am not saying that the administrative interpre
tation could contradict a clear legislative text; but in a situation
such as I have just outlined, this interpretation has real weight
and, in case of doubt about the meaning of the legislation,
becomes an important factor.
It too can be distinguished from the facts since in
the present case there is little doubt as to the
correct interpretation of the Regulations in ques
tion, even though they were wrongly applied for a
period of time by the Board.
In yet another tax case that of Deputy Minister
of Revenue of Quebec v. Ciba-Geigy Canada Ltd.,
judgment dated August 24, 1981, Appeal Court,
Montreal, No. 500-09-001153-766, Judge Bisson
in rendering reasons for the judgment of the
Quebec Court of Appeal refers to the Harel case
specifically, and to the two passages which are
cited and concludes [at pages 8-9]:
[TRANSLATION] In the presence of the always increasing
power of administrative organizations of governments it is
important for a citizen to know he can rely on the permanence
of agreements which has been suggested to him by the adminis
tration in the course of application of law until it can be
foreseen that they are to be terminated.
Respondent refers to the House of Lords case of
Maritime Electric Company Limited v. General
Dairies, Limited. 24 The headnote reads in part:
Held, that the appellants were not estopped from recovering
the sum claimed. The duty imposed by the Public Utilities Act
on the appellants to charge, and on the respondents to pay, at
scheduled rates, for all the electric current supplied by the one
and used by the other could not be defeated or avoided by a
mere mistake in the computation of accounts. The relevant
sections of the Act were enacted for the benefit of a section of
the public, and in such a case where the statute imposed a duty
of a positive kind it was not open to the respondents to set up an
estoppel to prevent it.
24 [1937] A.C. 610 (P.C.).
Reference has already been made (supra) to the
Canadian case of Stickel v. Minister of National
Revenue holding that an Information Bulletin pub
lished by the Minister which had misstated the
effect of Article VIII A of the Canada-U.S. Recip
rocal Tax Convention did not bind the Minister. It
relied in part on the case of Minister of National
Revenue v. Inland Industries Limited. 25
Finally dealing with the question of fairness, it
cannot be concluded from the mere fact that appli
cant by the new interpretation is now found to be
entitled to less compensation for the years 1974 to
1978 than under the former interpretation, that it
has not been dealt with fairly. It is not unfair to
apply a law or regulation properly nor to correct
an erroneous interpretation which was made in the
past, and, except for the hypothetical argument by
applicant that it might have acted differently had
it known the law was going to be interpreted in
this manner, there is nothing to indicate that it
was induced to the use of the carrying-forward
method. It itself suggested that this method be
adopted, and respondent merely permitted appli
cant to proceed in this way some years before
reaching the conclusion that this was erroneous.
There is nothing in the agreed statement of facts
to indicate that other oil companies have been
treated differently from applicant in the applica
tion of the carry-back policy. The situation is quite
different from the Becker Milk, Ciba-Geigy
Canada, and other tax cases. Applicant contends
that the whole purpose of the subsidy program is
to benefit consumers by reducing the price which
would otherwise have to be charged in Eastern
Canada for petroleum products derived from
imported oil, and suggests that the oil companies
merely act as pipelines and pass these benefits
through to the consumer, and if it now has to pay
back over $3,700,000 benefits which have been
passed on to the consumer it is the consumers who
will ultimately suffer. I am not impressed by this
argument. Oil pricing being what it is, it is impos
sible to determine accurately to what extent these
oil subsidies were passed on. To put it quite simply
applicant is now merely being asked to repay by
way of compensation against its subsidy claim
IRV 215 money which it would not have received
25 [1974] S.C.R. 514.
in the first place had an erroneous policy not been
adopted. If it has suffered loss by now having to
repay sums which it has already passed on to
consumers by lower prices during the years in
question, the reduction of the IRV 215 claim will
merely mean that it has less subsidies to pass on
now. Before concluding reference should be made
to the case of Irving Oil Limited v. The Queen 26
which, although it dealt with an entirely different
issue, namely whether the quantities of petroleum
imported before March 12, 1975 and used as fuel
in ships not registered in Canada engaged in the
coastal trade of Canada should have been included
in the quantity of petroleum in respect of which
compensation was payable to plaintiff, neverthe
less, in dismissing plaintiff's action permitted the
Energy Supplies Allocation Board as a result of
the alleged over-payment to withhold the amount
of over $2,000,000 on later applications by the
plaintiff for import compensation to which it was
entitled. That is exactly the situation in the present
case. At pages 207-208 Cattanach J. states:
Because the decision that the amount of $2,005,073 which
was paid to the plaintiff was not properly payable in respect of
petroleum sold or supplied for use as fuel in ships not registered
in Canada under all legislation in effect prior to March 11,
1975 wherein no exception was made for ships authorized by
law to engage in the coasting trade in Canada, and that
therefore the amount was paid in error and was properly
recoverable by the Board, was a decision of a Federal Board, I
invited the representations of counsel as to whether the matter
was not the proper subject of an application to the Appeal
Division to review or set aside the decision of the Board in
accordance with section 28 of the Federal Court Act and if that
should be the proper course then the Trial Division would be
without jurisdiction to entertain the matter.
After hearing those representations I concluded that the
decision of the Board was an administrative one not made on a
quasi-judicial basis and so not within section 28 (supra).
No issue appears to have been raised in that case
that the Board instead of deducting amounts of
over-payments as a result of erroneous interpreta
tion of law from future compensation claims
should have paid these claims in full and the
defendant should then have sued the plaintiff for
26 [1979] 2 F.C. 200 (T.D.).
recovery of these amounts, which is the suggestion
applicant made today and I have dealt with. The
case is markedly similar however to the Shell
Canada Limited case in deciding that the Board's
decisions are of an administrative nature only.
In conclusion therefore I find that Her Majesty
the Queen is legally entitled to set off the sum of
$3,700,928 or any lesser amount against the total
sums payable to Irving Oil Limited under applica
tion IRV 215. Applicant's action will therefore be
dismissed without costs as agreed to in the agree
ment upon a special case. I may add that even if
there had been no such agreement with respect to
costs I would not have awarded costs to respondent
in any event since, although I have sustained
respondent's contentions, the controversy arose out
of erroneous policies adopted over a considerable
period of time by respondent in accepting appli
cant's method of calculating its compensation
claims by carrying forward the export deductions
to future months when there were no imports from
which they could be deducted in July for the years
in question instead of carrying them back to the
preceding months as should have been done. More
over there was some doubt as to whether compen
sating the over-payments against a future claim
was appropriate rather than the institution of pro
ceedings in this Court by respondent for the recov
ery of the over-payments to obtain a determination
of the legal issue of the correct interpretation of
the Regulations, even though the end result would
be the same.
Applicant therefore had some justification for
bringing the present proceedings and should not be
penalized with respect to costs.
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.