Date: 19981126
Docket: T-871-93
BETWEEN:
MICHELIN TIRES (CANADA) LTD.
Plaintiff
- and -
HER MAJESTY THE QUEEN
Defendant
REASONS FOR JUDGMENT
REED, J.:
[1] The plaintiff, Michelin Tires, overpaid the federal sales taxes payable by it under the Excise Tax Act for the June 1, 1983 to June 30, 1987 period. The errors that led to these overpayments arose as a result of Michelin's: incorrect calculations of taxable sales, arithmetical errors, overstatements of value, understatements of deductions, and incorrect calculations of credits. These errors by Michelin were discovered by Revenue Canada when it conducted an audit of Michelin's tax liability in 1987-88. The audit disclosed that Michelin had overpaid its taxes in some instances and underpaid them in others, but the net result was an overpayment. The audit led to a Notice of Assessment, dated August 19, 1988. The Notice informed Michelin that it had overpaid $322,284.09 from August 20, 1984 to June 30, 1987. That amount was refunded.
[2] Michelin realized that similar errors had been made between June 1, 1983 and August 20, 1984; it realized that $63,324.00 had been overpaid during that period. Michelin, then, filed a Notice of Objection on November 16, 1988, stating that the August 20, 1988 Assessment should have included the 1983/84 overpayments. By Notice of Decision dated March 7, 1989, the Minister disallowed the Objection on the ground that the earlier overpayments did not qualify as amounts repayable because they had been made four years prior to the date of the Assessment.
The Unjust Enrichment Argument
[3] The Excise Tax Act, R.S.C. 1985, c. E-15, s. 68 as amended by R.S.C. 1985 (2nd Supp.) c. 7, states that where a person has paid any money in error it shall be repaid to the person if he applies for it within two years after the money was paid. Sections 81.1 and following provide for the assessment of a person's tax liability by the Minister. An assessment may determine that amounts are payable by the person to Revenue Canada, or repayable to the person by Revenue Canada. No assessment may be made (except in the case of fraud) more than four years after the taxes to which the assessment relates became payable under the Act. (Section 44 of the predecessor legislation, R.S.C. 1970, c. E-13 as amended by S.C. 1980-81, c. 68, s. 45(1), the provision in force when the 1983-84 overpayments were made, is also relevant and will be discussed later.) The issue is whether the above-noted provisions provide a complete code for the repayment of amounts paid in error, or whether there is room for an action for unjust enrichment to be brought to recover the overpayment.
[4] Both parties agree that in the absence of a statutory provision either express or implied to the contrary, an action for unjust enrichment is available to allow a taxpayer to reclaim taxes paid in error; see, for example, Air Canada v. British Columbia (1989), 59 D.L.R. (4th) 161 (S.C.C.), Canadian Pacific Airlines Ltd. v. British Columbia (1989), 59 D.L.R. (4th) 218 (S.C.C.), Air Canada v. Ontario (Liquor Control Board) (1997), 148 D.L.R. (4th) 193 (S.C.C.). It is also not disputed that a plaintiff seeking to recover moneys on the ground of unjust enrichment must prove: (1) enrichment of the defendant; (2) deprivation of the plaintiff; (3) no juridical reason for the enrichment. The argument before me then was whether the relevant sections of the Excise Tax Act impliedly circumscribe that right, and if so, the extent of such restriction.
[5] Two decisions were cited as directly relevant: Consumers Glass Ltd. v. Canada (1990), 107 N.R. 156 (F.C.A.), and Forest Oil Corp. v. Canada, [1997] 1 F.C. 624 (T.D.). In the former, the Federal Court of Appeal held that customs duties that had been paid in error could not be refunded because the redetermination of the incorrect tariff classification for the goods, on which the refund was based, could not occur outside the two-year time limit provided for by the Customs Act (R.S.C. 1970, c. C-40, s. 46):
| ... Section 46 prescribed the procedure to be followed for the redetermination of the tariff classification or appraisal of goods that had been wrongly classified or appraised at the time of their entry; it also set time-limits within which those redeterminations might be made. Section 46(1) stated clearly that the tariff classification and appraisal made at the time of the entry were "final and conclusive" if they were not modified in accordance with those rules. If, therefore, as in this case, the tariff classification made at the time of the entry of imported goods had not been modified within the time-limit prescribed, that tariff classification, whether correct or incorrect, became final and conclusive. Custom duties were payable on the basis of that classification even if, as was the case here, it was known to be wrong. In these circumstances, there was no unjust enrichment because there was a legal obligation to pay. [Page 158.] |
[6] In Forest Oil, Mr. Justice Gibson dealt with the repayment of money paid as instalments by the taxpayer in anticipation of its Petroleum and Gas Revenue Tax (PGRT) liability for the 1983 taxation year. As it turned out, no tax was payable by the taxpayer for that year, but the taxpayer did not file a return seeking a refund of the instalment payments until after the four-year period provided for in the statute for the assessment of tax liability. Mr. Justice Gibson held that despite the fact that the PGRT Act provided a complete code for the refund of monies paid in error, there was equitable jurisdiction, in the circumstances of that case, to find that the moneys were held by way of constructive trust. He held that unjust enrichment had occurred and the defendant was ordered to repay the amounts to which it had no right.
[7] In my view, both the Excise Tax Act, R.S.C. 1985 c. E-15, as amended, together with the Excise Tax Act, R.S.C. 1970, c. E-13, as amended, to the extent that the latter is relevant, contain a complete code applicable to the repayment of amounts paid in error in the circumstances of this case.
[8] At the time of the assessment, sections 68, 71, 81.1 and 81.11(2) of the Excise Tax Act, R.S.C. 1985, c. E-15 as amended by R.S.C. 1985 (2nd Supp.), c. 7, ss. 26, 34 and 38, provided for the refund of amounts paid in error upon application by the taxpayer or pursuant to assessment by the Minister. To be entitled to a refund, the taxpayer had to apply within two years after the overpayment was made. This is set out in section 68. Where, however, the overpayment was discovered pursuant to an assessment by the Minister, there is a four-year limitation period. This is found in sections 81.1 and following:
68. Where a person, otherwise than pursuant to an assessment, has paid any moneys in error, whether by reason of mistake of fact or law or otherwise, and the moneys have been taken into account as taxes, penalties, interest or other sums under this Act, an amount equal to the amount of those moneys shall, subject to this Part, be paid to that person if he applies therefor within two years after the payment of the moneys.
68. Lorsqu'une personne, sauf à la suite d'une cotisation, a versé des sommes d'argent par erreur de fait ou de droit ou autrement, et qu'il a été tenu compte des sommes d'argent à titre de taxes, de pénalités, d'intérêts ou d'autres sommes en vertu de la présente loi, un montant égal à celui de ces sommes doit, sous réserve des autres dispositions de la présente partie, être payé à cette personne, si elle en fait la demande dans les deux ans suivant le paiement de ces sommes.
81.1 (1) The Minister may, in respect of any matter, assess a person for any tax, penalty, interest or other sum payable by that person under this Act and may, notwithstanding any previous assessment covering, in whole or in part, the same matter, make such additional assessments as the circumstances require.
. . .
81.1 (1) Le ministre peut, à l'égard de toute matière, établir une cotisation pour une personne au titre de la taxe, de la pénalité, des intérêts ou d'une autre somme payable par cette personne sous le régime de la présente loi et peut, malgré toute cotisation antérieure portant, en totalité ou en partie, sur la même matière, établir des cotisations supplémentaires, selon les circonstances.
. . .
(5) In making an assessment, the Minister may determine whether an amount is payable to the person being assessed pursuant to any of sections 68 to 68.29.
(5) En établissant une cotisation, le ministre peut déterminer si un montant est payable à la personne faisant l'objet de la cotisation conformément aux articles 68 à 68.29.
(6) For the purposes of determining, in making an assessment, whether an amount is payable to the person being assessed pursuant to any of sections 68 to 68.29, the person is deemed to have duly made an application under the section on the day on which the notice of assessment is sent to him.
(6) En vue de déterminer, lors de l'établissement d'une cotisation, si un montant est payable à la personne faisant l'object de la cotisation conformément à l'un des articles 68 à 68.29, la personne est réputée avoir dûment fait une demande en vertu de l'article à la date d'envoi de l'avis de cotisation.
(7) In making an assessment, the Minister may determine whether a credit may be allowed to the person being assessed pursuant to subsections (8) to (10).
. . .
(7) En établissant une cotisation, le ministre peut déterminer si un crédit peut être accordé à la personne faisant l'objet de la cotisation conformément aux paragraphes (8) à (10).
| . . . |
81.11 (2) Subject to subsections (3) to (5), no assessment shall be made for any tax, penalty, interest or other sum more than four years after the tax, penalty, interest or sum became payable under this Act.
81.11 (2) Sous réserve des paragraphes (3) à (5), l'établissement des cotisations à l'égard d'une taxe, d'une penalité, d'intérêts ou d'une autre somme se prescrit par quatre ans après que la taxe, la pénalité, les intérêts ou la somme sont devenues exigibles en application de la présente loi.
(Emphasis added.)
[9] In addition, section 71 provides:
71. Except as provided in this or any other Act of Parliament, no person has a right of action against Her Majesty for the recovery of any moneys paid to Her Majesty that are taken into account by Her Majesty as taxes, penalties, interest or other sums under this Act.
71. Sauf cas prévus à la présente loi ou dans toute autre loi fédérale, nul n'a le droit d'intenter une action contre Sa Majesté pour le recouvrement de sommes payées à Sa Majesté, dont elle a tenu compte à titre de taxes, de pénalités, d'intérêts ou d'autres sommes en vertu de la présente loi.
[10] Section 44 of the Excise Tax Act, R.S.C. 1970, c. E-13, as amended, reads in part:
(1) A deduction from, or refund of, any of the taxes imposed by this Act may be granted
(1) Il peut être accordé une déduction ou remise de toute taxe imposée par la présente loi dans l'un ou l'autre des cas suivants:
| (a) where an overpayment has been made by the taxpayer; |
. . .
| (c) where the tax was paid in error; |
. . .
| a) le contribuable a effectué un paiement en trop; |
. . .
| c) la taxe a été payée par erreur; |
. . .
(7) No refund of or deduction from any of the taxes imposed by this Act shall be granted, and no payment of an amount equal to tax paid shall be made, under this section as a result of
(7) Nulle remise ou déduction des taxes imposées par la présente loi ne sera accordée, et nul paiment d'une montant égal à la taxe payée ne sera effectué en vertu du présent article par suite
| (a) a declaration under section 59, |
| a) d'une déclaration visée à l'article 59, |
| (b) an order or judgment of the Federal Court or any other court of competent jurisdicition, or |
| b) d'une ordonnance ou d'un jugement de la Cour fédérale ou d'un autre tribunal compétent, ou |
| (c) a decision of the minister or other duly authorized officer respecting the interpretation or application of this Act, |
| c) d'une décision du Ministre ou d'un fonctionnaire dûment autorisé portant sur l'interprétation ou l'application de la présente loi, |
in respect of taxes paid prior to such declaration, order, judgment, or decision unless application in writing therefor is made to the Minister by the person entitled to the refund, deduction or amount within twelve months after the later of the time the taxes became payable or the time the refund, deduction or amount first became payable under this section or the regulations.
à l'égard des taxes payées antérieurement à la déclaration, au jugement, à l'ordonnace ou à la décision, à moins que la personne ayant droit à la remise, à la déduction ou au montant, n'en fasse la demande par écrit au Ministre dans les douze mois, soit de la date à laquelle les taxes sont devenues exigibles, soit de la date à laquelle la remise, la déduction ou le montant sont devenus exigibles en vertu du présent article ou des règlements, la date la plus récente étant à retenir.
(7.1) Subject to subsection (7), no refund of moneys paid or overpaid in error, whether by reason of mistake of fact or law or otherwise, and taken into account as taxes imposed by this Act shall be granted under this section unless application in writing therefor is made to the Minister by the person entitled to the refund within four years after the time the moneys were paid or overpaid.
(7.1) Sous réserve du paragraphe (7), il ne peut être accordé en vertu du présent article aucune remise des deniers payés ou payés en trop par erreur, que ce soit en raison d'une erreur de fait ou de droit ou autrmeent, et dont il a été tenue compte à titre de taxes imposées par la présente loi, à moins que la personne y ayant droit n'en fasse la demande par écrit au ministre dans les quatre ans qui suivent la date à laquelle les deniers ont été payés ou payés en trop.
(Emphasis added.)
[11] I am prepared to assume that section 44 of E-13 governs if the Notice of Objection of November 16, 1988 is treated as an application in writing for refund of the amounts that had been overpaid. Counsel for the plaintiff argues that the words "no refund of moneys paid or overpaid in error ... shall be granted under this section unless application in writing therefor is made ..." (emphasis added) in section 44(7.1) leave room for an unjust enrichment action to compel repayment. Counsel argues that the words "under this section" signify an intention to allow actions reclaiming overpaid taxes other than pursuant to that section.
[12] I do not interpret the words in that fashion. The provision authorizing the repayment of amounts paid in error is found in section 44. Other sections provide for the payment of refunds in other circumstances in accordance with other conditions. Therefore, there is a legislative drafting reason for the qualification unrelated to the broad interpretation counsel for the plaintiff would put on it. The plaintiff's interpretation would render the limitation period set out in section 44 meaningless. The only purpose the section could serve would be to force a claimant to bring an action rather than allowing the Minister to settle a claim pursuant to an application in writing. Such a purpose makes no sense. Also, if such was intended it would surely have been more clearly expressed. The purpose of limitation provisions is to put an end to the revisiting of past errors, to limit uncertainty in the business and financial affairs of individuals. There is also a parallelism to the provision. The Minister cannot reclaim unpaid taxes after four years; the taxpayer cannot reclaim overpaid taxes after four years.
[13] There is a significant difference between this case and that with which Mr. Justice Gibson dealt in Forest Oil. The instalment payments made by the taxpayer in that case were based on the taxpayer's estimate of its year end liability; the instalments were required to be paid by law. Estimates by their nature are not precise; inexact estimates are not amounts paid in error. The error that occurred was the late filing by the taxpayer of its return for the relevant taxation year. This was a type of error, as Mr. Justice Gibson noted, that Parliament had not contemplated.
[14] In the present case, however, the facts are of the very type contemplated by Parliament in enacting section 44 of c. E-13 or section 68 of c. E-15: that is, amounts either underpaid or overpaid by a taxpayer as a result of accounting errors by the taxpayer in computing the tax payable. The situation is closer to that in Consumers Glass than in Forest Oil. The fact situation is one that is completely within the wording of the statute and the contemplation of Parliament. I cannot find that there is scope for an unjust enrichment action.
Deprivation And Juristic Reason
[15] The defendant argues that, in any event, even if an unjust enrichment claim were possible, the existence of deprivation of the plaintiff has not been proven on the evidence filed in this case. Counsel argues that it is reasonable to assume that the taxes paid by Michelin were not absorbed by it but were passed on to the consumers purchasing Michelin's tires. See, for example, Canadian Pacific Airlines Ltd. v. British Columbia (supra, page 234), and Air Canada v. British Columbia (supra, pages 193-4). I agree that the burden of proving the deprivation rests with Michelin and the evidence does not establish anything more than that Michelin paid the tax. I think counsel for the defendant's argument must succeed.
[16] Counsel for the defendant also asserts that there was a juristic reason for the enrichment (the operation of section 44(7.1) of the Excise Tax Act). This argument stands or falls depending upon the conclusion reached on whether an unjust enrichment action exists as an alternative to proceeding under section 44.
Other Limitation Provisions
[17] The defendant raises a number of other reasons as to why the plaintiff's claim cannot succeed. In order to understand them it is necessary to refer again to the procedural steps that occurred. As noted, the Minister issued the Notice of Assessment on August 19, 1988. On November 16, 1988, Michelin filed a Notice of Objection seeking repayment of the 1983-84 overpayment. On March 7, 1989, the Minister issued a Notice of Decision disallowing the Objection. On June 23, 1989, Michelin appealed this decision to the Canadian International Trade Tribunal. On November 13, 1991, that appeal was adjourned sine die. On April 14, 1993, the present action was commenced in this Court.
[18] The defendant argues that the plaintiff's action offends section 81.2(1) of the Excise Tax Act because an appeal to the Federal Court Trial Division is only appropriate in lieu of an appeal to the Canadian International Trade Tribunal, and the plaintiff chose to pursue the latter action. The Canadian International Trade Tribunal decision, once made, can be appealed to the Court. Sections 81.19 and 81.2 of the Excise Tax Act provide:
81.19 Any person who has served a notice of objection under section 81.15 or 81.17, other than a notice in respect of Part I, may, within ninety days after the day on which the notice of decision on the objection is sent to him, appeal the assessment or determination to the Board.
81.19 Toute personne qui a signifié un avis d'opposition en verty de l'article 81.15 ou 81.17, autre qu'un avis à l'égard de la partie I, peut, dans les quatre-ving-dix jours suivant la date d'envoi de l'avis de décision concernant l'opposition, appeler de la cotisation ou de la détermination à la Commission.
81.2 (1) Any person who has served a notice of objection under section 81.15 or 81.17, other than a notice in respect of Part I, may, in lieu of appealing to the Board under section 81.19, appeal the assessment or determination to the Federal Court " Trial Division at any time when, under section 81.19, that person could have appealed to the Board.
81.2 (1) Tout personne qui a signifié un avis d'opposition en vertu de l'article 81.15 ou 81.17, autre qu'un avis à l'égard de la partie I, peut, au lieu d'en appeler à la Commission en vertu de l'article 81.19, appeler de la cotisation ou de la détermination à la Section de premièere instance de la Cour fédérale pendant la période au cours de laquelle ell aurait pu, en vertu de cet article, en appeler à la Commission.
(2) Any person who has served a notice of objection under section 81.15 or 81.17 in respect of Part I may, within ninety days after the day on which the notice of decision on the objection is sent to him, appeal the assessment or determination to the Federal Court " Trial Division.
(2) Toute personne qui a signfié un avis d'opposition en verty de l'article 81.15 ou 81.17 à l'égard de la partie I peut, dans les quatre-vingt-dix jours suivant la date d'envoi de l'avis de décision concernant l'opposition, appeler de la cotisation ou de la détermination à la Section de première instance de la Cour fédérale.
(Emphasis added.)
[19] Counsel for the defendant also argues that the plaintiff's action for unjust enrichment (if allowed) would nevertheless be statute barred because it is beyond the six-year limitation period arising under section 32 of the Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50 as amended by S.C. 1990, c. 8, s. 31, and section 39 of the Federal Court Act, R.S.C. 1985, c. F-7 as amended by S.C. 1990, c. 8, s. 10 or section 45 of the Ontario Limitation Act, R.S.O. 1990, c. L.15.
[20] The relevant legislative provisions read:
(Crown Liability Act)
32. Except as otherwise provided in this Act or in any other Act of Parliament, the laws relating to prescription and the limitation of actions in force in a province between subject and subject apply to any proceedings by or against the Crown in respect of any cause of action arising in that province, and proceedings by or against the Crown in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.
(Loi sur la responsiblité de l'État)
32. Sauf disposition contraire de la présente loi ou de toute autre loi fédérale, les règles de droit en matière de prescription qui, dans une province, régissent les rapports entre particuliers s'appliquent lors des poursuites auxquelles l'État est partie pour tout fait générateur survenu dans la province. Lorsque ce dernier survient ailleurs que dans une province, la procédure se prescrit par six ans.
(Federal Court Act)
39. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.
(Loi sur la Cour fédérale)
39. (1) Sauf disposition contraire d'une autre loi, les règles de droit en matière de prescription qui, dans une province, régissent les rapports entre particuliers s'appliquent à toute instance devant la Cour dont le fait générateur est survenue dans cette province.
(2) A proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.
(2) Le délai de prescription est de six ans à compter du fait générateur lorsque celui-ci n'est pas survenu dans une province.
(Limitation Act) (Loi sur la prescription des actions)
45."(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned,
. . .
| (h) an action for a penalty, damages, or a sum of money given by any statute to the Crown or the party aggrieved, within two years after the cause of action arose; |
. . .
45 (1) Les actions suivantes se prescrivent par les délais respectifs indiqués ci-dessous:
. . .
| h) l'action en recouvrement d'une pénalité, des dommages-intérêts ou d'une somme d'argent accordée par une loi à la Couronne ou à la partie lésée se prescrit par deux ans, à compter de la naissance de la cause d'action: |
. . .
[21] I do not find it necessary to consider either the arguments based on sections 81.19 and 81.2 of the Excise Tax Act or those based on the federal and provincial limitation provisions, given the decision I have reached above, with respect to section 68 and its predecessor section 44, that an action for unjust enrichment does not lie in the circumstances of this case.
[22] For the reasons given the plaintiff's claim is dismissed.
"B. Reed"
Judge
TORONTO, ONTARIO
November 26, 1998
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-871-93
| STYLE OF CAUSE: MICHELIN TIRES (CANADA) LTD. |
- and -
| HER MAJESTY THE QUEEN |
DATE OF HEARING: WEDNESDAY, NOVEMBER 4, 1998
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT BY: REED, J.
DATED: THURSDAY, NOVEMBER 26, 1998
APPEARANCES: Mr. Dalton Albrecht
For the Plaintiff
Mr. Darryll Kloeze
For the Defendant
SOLICITORS OF RECORD: McMillan Binch
Barristers & Solicitors
Royal Bank Plaza
Suite 3800, South Tower
Toronto, Ontario
M5J 2J7
For the Plaintiff
Morris Rosenberg
Deputy Attorney General
of Canada
For the Defendant
FEDERAL COURT OF CANADA
Date: 19981126
Docket: T-871-93
Between:
| MICHELIN TIRES (CANADA) LTD. |
Plaintiff
- and -
| HER MAJESTY THE QUEEN |
Defendant
REASONS FOR JUDGMENT