Date: 20020322
Docket: A-116-01
Neutral citation: 2002 FCA 107
CORAM: DÉCARY J.A.
BETWEEN:
NELES CONTROLS LTD.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Heard at Ottawa, Ontario on February 20, 2002.
Judgment delivered at Ottawa, Ontario, on March 22, 2002.
REASONS FOR JUDGMENT BY: MALONE J.A.
CONCURRED IN BY: DÉCARY J.A.
SHARLOW J.A.
Date: 20020322
Docket: A-116-01
Neutral citation: 2002 FCA 107
CORAM: DÉCARY J.A.
BETWEEN:
NELES CONTROLS LTD.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
[1] In this appeal, Neles Controls Ltd ("Neles") seeks to set aside an order of Dawson J. ("the Motion Judge"), dated February 8, 2001 (reported at 2001 FCT 38, [2001] F.C.J. No. 192).The issues on appeal concern the operation of the List of Tariff-Free Machinery and Equipment (the "Minister's List"), promulgated by the Minister of National Revenue (the "Minister"), pursuant to section 75 of the Customs Tariff Act, R.S.C. 1985, c. 41 (3rd Supp.), (the "Customs Tariff") as it read in July 1990.
FACTS
[2] Items on the Minister's List are subject to duty relief upon importation into Canada. Either the duty is not payable at all upon importation (section 74 of the Customs Tariff), or duties paid may be remitted and refunded (sections 76 and 77 of the Customs Tariff). To be included on the Minister's List, goods must be classified under a tariff item enumerated in Schedule VI to the Customs Tariff, and the Minister must be satisfied that there is no Canadian source for the goods in question.
[3] The Minister's List consists of the tariff item number and a verbal description, which may or may not be identical to the language of the customs tariff relating to that number. The goods to be included in the Minister's List, and the language chosen to describe them, are entirely within the Minister's discretion. The List is continuously reviewed, with revisions published periodically in the Canada Gazette.
[4] Neles is in the business of importing, inter alia, valves and valve components of various kinds. The goods in issue in this case were imported between February, 1988 and October 1999. They were described in the importation documents as either butterfly valves or ball valves but, according to Neles, it would also have been correct to call them rotary valves.
[5] The rotary valves imported by Neles were classified at the time of importation under tariff items 8481.80.91, 8481.80.92, 8481.80.99, 8481.90.10 or 8481.90.40 as they read at that time, which required Neles to pay tariffs ranging from 5.4% to 10.2%, for a total of $398,977.80. "Rotary valves" were not included in the Minister's List as it read at the time of importation.
[6] On April 26, 1990, Schedule I to the Customs Tariff was amended to revoke the tariff items under which the rotary valves were initially classified, and to add various new tariff items including 8481.80.99 and 8481.90.10:
|
84.81 |
Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves |
|
|
8481.8 |
- - Other appliances |
|
|
8481.80.99 |
- - - Other |
|
|
10 |
- - - - - Solenoid valves |
|
|
20 |
- - - - - Ballcock mechanisms |
|
|
30 |
- - - - - Regulator valves, self operating, for controlling variables such as temperature, pressure, flow and liquid level |
|
|
41 49 |
- - - - - Other, electrically or electro-hydraulically actuated: - - - - - - Control valves designed for proportional operation by a signal from a control device - - - - - - Other |
|
|
5158 |
- - - - - Other, pneumatically actuated: - - - - - - Control valves designed for proportional operation by a signal from a control device - - - - - - Other |
|
|
60 |
- - - - - Other, hydraulically actuated |
|
|
70 |
- - - - - Other, thermostatically actuated |
|
|
90 |
- - - - - Other |
|
|
8481.90.10 |
- - Of the goods of tariff item No. 8481.10.99, 8481.20.00, 8281.30.90, 8481.40.99, 8481.80.20, or 8481.80.99 |
|
|
10 |
- - - - - Of tariff item No. 8481.20.00 |
|
|
20 |
- - - - - Of power-operated check valve |
|
|
30 |
- - - - - Other |
[7] These amendments were made retroactive so as to cover all imports to January 1, 1988. It is noted that the new tariff items do not expressly refer to rotary valves, but it is the contention of Neles that its rotary valves should in fact be classified under one of them.
[8] In July of 1990, the Minister's List was amended to include "rotary valves" of tariff item 8481.80.99, which was also a Schedule VI tariff item. The amendment to the Minister's List was made retroactive to cover all imports to January 1, 1988.
[9] Subsequent to the 1990 retroactive amendments, Neles applied to have the tariff classification of its rotary valves redetermined, thereby making the goods eligible for consideration for remission and/or refund. That redetermination application was granted, the rate of duty was reduced and Neles received a partial refund of duty.
[10] In 1991, Neles began submitting refund requests for imported goods using an assigned remission authority granted to another corporate entity pursuant to section 76 of the Customs Tariff. None of those requests were approved because the assignment of the authority was considered to be invalid.
[11] In December of 1992, Neles began submitting refund requests pursuant to section 100 of the Customs Tariff on the ground that the goods in issue were "rotary valves or parts," which were included on the Minister's List. One hundred and thirty-eight refund applications were submitted, all within five years of importation as required by the Customs Tariff. These claims were rejected by the Minister in the period of February, 1993 to July, 1993 on the basis that the term "rotary valves" as it appeared on the Minister's List did not include the goods in issue.
[12] Neles then launched an action for a declaration that it was entitled to a refund on account of customs duties paid on the goods in issue, alleging that the Crown had been unjustly enriched as a result of the payment of these customs duties. Neles brought a motion under Rule 220(1)(a) of the Federal Court Rules, 1998, upon agreed facts and documents, for a determination of four questions of law, two of which are the subject of this appeal.
ISSUES
[13] The two issues of law are as follows:
1. Is the Neles' claim barred, in whole or in part, by its failure to avail itself of the other remedies available to it?
2. In order to establish that it suffered a detriment, is it sufficient for Neles to show that its prices for the Subject Goods were established in a competitive environment against goods that were subject to lesser rates of duty than those that pertained to the Subject Goods?
ANALYSIS
Question 1: Is Neles' claim barred, in whole or in part, by its failure to avail itself of the other remedies available to it?
[14] The Motions Judge answered this question in the affirmative. Neles now argues that its claim is not barred by virtue of its failure to avail itself of all possible relief under the Customs Tariff as it read in 1990, and by way of judicial review under the Federal Court Act. According to Neles, equitable relief, absent an express exclusion by Parliament, may coexist with any statutory relief. Neles asserts that this statutory scheme does not "oust" the Court's equitable jurisdiction to grant relief from unjust enrichment and enumerates features of the Customs Tariff which it claims indicates Parliament's intent. These include a lengthy limitation period, the program's retroactive effect, the absence of a privative clause, and the alleged creation of a trust-like obligation for refunds imposed upon the Crown.
[15] In my view, Dawson J. correctly concluded that recourse to common law or equitable relief is precluded by a comprehensive statutory scheme for relief (see Glaxo Wellcome PLC v. MNR, [1998] 4 F.C. 439 at 467 (FCA); Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65 (Ont. C.A.), aff'd [1991] 3 S.C.R. 593). It is evident in reading sections 75 to 79 and 100 of the Customs Tariff that, as regards relief from customs duties, Parliament has enacted a comprehensive and exhaustive code. The scheme of the Customs Tariff demonstrates that the importer has an exhaustive list of remedies including remission of duties under section 76, inclusion of goods on the Minister's List, and refunds under section 100. In light of this scheme, resort to equitable principles of unjust enrichment or restitution is duplicative, especially given that judicial review would lie from a denial of any of these three forms of relief. Accordingly, in my analysis, this is a clear indication of Parliament's intention that sections 75 to 79 and 100 of the Customs Tariff occupy the whole field in terms of the relief available to an importer whose goods are subject to customs duties. A different conclusion may be warranted in situations where the legislation is silent, where its terms cannot apply, or where a gap in relief is apparent, but that is not the case here.
[16] For these reasons, I am of the view that Dawson J. was correct in answering this question as she did.
Question 2: In order for Neles to establish that it suffered a detriment, is it sufficient for it to show that its prices for the subject goods were established in a competitive environment against goods that were subject to lesser rates of duty than those that pertained to the subject goods?
[17] The Motions Judge answered this question in the negative. Neles now submits that it is sufficient to demonstrate detriment where it can be shown that its prices were set in the marketplace in competition with other importers whose goods are subject to lesser or zero rates of tax. Neles relies on two cases for this proposition: Allied Air Conditioning Inc. v. British Columbia (1994), 109 D.L.R. (4th) 463 (BCCA) and Cherubini Metal Works Ltd. v. Nova Scotia (Attorney General) (1995), 35 C.P.C. (3d) 302 (NSCA).
[18] The Minister asserts that Neles has not suffered any actual loss, since it has passed the "ultimate burden" to its customers. The Minister, like Dawson J., relies on the Supreme Court of Canada's words in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161 at 1202 where Justice Laforest for the majority wrote as follows:
The law of restitution is not intended to provide windfalls to appellants who have suffered no loss. Its function is to ensure that where a plaintiff has been deprived of wealth that is either in his possession or would have accrued for his benefit, it is restored to him.
[19] Justice Laforest then specifically noted that where the taxpayer has passed the burden of the tax on to its customers, it cannot be said to have suffered a loss or detriment which triggers the equitable principles behind unjust enrichment. Hence, it follows that Neles will not be able to recover on the basis of unjust enrichment unless it can prove that it bore the burden of the tax; if the tax was passed on to its customers, then recovery would constitute a windfall, and be precluded.
[20] Neles relies on obiter in Allied Air Conditioning, supra, which raised the possibility that setting prices in competition with competitors who pay less or no tax may constitute a deprivation sufficient to engage the restitutionary remedy. However, recovery was ultimately denied in that case on the basis that the burden of tax had been passed on to the consumer. As such, I cannot find Allied Air Conditioning to be of any assistance to Neles. It stands for the proposition that Neles must demonstrate an actual loss in order to trigger the equitable relief it seeks. The obiter cited by Neles is of little weight, and little relevance, in light of Air Canada, supra. It is clear that the only relevant inquiry is whether Neles did or did not pass on the burden of tax to the consumer. If the burden of tax was passed on, the inquiry ends and recovery is precluded. Likewise, in my analysis, Cherubini, supra, does not support Neles' position. In that case, the taxpayer mistakenly included non-payable taxes in calculating its bids during a tender process. The Court held that the taxpayer did not pass on the burden of overpaid taxes to its customers and therefore suffered a deprivation.
[21] In my opinion, the establishment of prices as among importers who do not pay the same tax is but one element in assessing whether the "tax burden" has been passed on to the customers. The authorities cited by Neles confirm that the core consideration in establishing detriment is not how or why prices are set, but rather, following Air Canada, supra, whether the loss was passed on to consumers. All that is relevant in this analysis is whether Neles will receive a windfall in the event of recovery from the Minister due to the shift of the ultimate financial burden to its customers.
[22] Given that many considerations energize the price setting process, and where, as here, there is no clear evidence that Neles set its prices to prevent loss of sales to other importers paying less or no tax, I can only conclude that this question must also be answered in the negative. Accordingly, in my analysis, Dawson J. was correct in answering this question as she did.
CONCLUSION
[23] The answers given by the Motions Judge to both questions of law are correct. I would dismiss the appeal with costs.
"B. Malone"
J.A.
"I agree
Robert Décary
J.A."
"I agree
K. Sharlow
J.A."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-116-01
STYLE OF CAUSE:
NELES CONTROLS LTD v. HER MAJESTY THE QUEEN
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: FEBRUARY 20, 2002
REASONS FOR JUDGMENT : MALONE J.A.
CONCURRED IN BY: DÉCARY J.A.
SHARLOW J.A.
DATED: MARCH 22, 2002
APPEARANCES:
Mr. Brian J. Barr
FOR THE APPELLANT
Ms. Anne Turley
FOR THE RESPONDENT
SOLICITORS OF RECORD:
Maclaren Corlett
Ottawa, Ontario
FOR THE APPELLANT
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Ontario
FOR THE RESPONDENT