Re Silver Brothers Ltd., Attorney General of Quebec v. Attorney General of Canada
Published in:  2 Dominion Law Reports 673
Judicial Committee of the Privy Council
Viscount Dunedin, Lords Blanesburgh, Merrivale,
Russell of Killowen and Sir Lancelot Sanderson
February 9, 1932
It was competent for the Dominion Parliament to enact s. 17 of the Special War Revenue Act, 1915 (Can.), c. 8, as amended by 1922, c. 47 (since repealed) which provided that notwithstanding the provisions of the Bank Act and the Bankruptcy Act or any other statute or law the liability to the Crown for excise taxes should be a first charge on assets in priority to the claims of the Crown in the right of a Province such legislation falling within the fourth proposition enunciated in Re Fisheries Act, 1914,  1 D.L.R. 194; but that provision must be read in conjunction with s. 16 of the Interpretation Act (Can.) enacting that "no provision or enactment in any Act shall affect, in any manner whatsoever, the rights of His Majesty ... unless it is expressly stated therein that His Majesty shall be bound thereby" (such reference to the Interpretation Act not being excluded, for the phrase "or any other statute or law" when construed ejusdem generis refers only to statutes dealing with preferences and not to a general Act such as the Interpretation Act) and the effect of reading them in conjunction is to add to s. 17 the proviso that the priority so conferred shall not operate against any right in the Crown in a Province where such right would be diminished by the priority being asserted against it, and, as there existed in the Province of Quebec legislation (art. 1357, R.S.Q. 1909) giving priority (after law costs) for all sums due to the Crown for certain taxes, therefore, the Province of Quebec, which had filed a claim in bankruptcy for such taxes, was entitled to priority therefor over a claim by the Dominion for taxes under s. 17; but since the Province requested merely a declaration that the two claims should rank pari passu it was so declared by restoring the judgment of the Court of King's Bench which had so held.
APPEAL by the Attorney-General for Quebec from the judgment of the Supreme Court of Canada,  1 D.L.R. 141, revg the judgment of the Quebec Court of King's Bench (appeal side),  1 D.L.R. 681, 43 Que. K.B. 234, which revd the judgment of the Superior Court in Bankruptcy (1925), 64 Que. S.C. 309. Reversed.
Aimé Geoffrion, K.C., Hon. G. Lawrence, K.C., and M. Alexander, for appellant.
W. N. Tilley, K.C., F. P. Varcoe, K.C., and C. P. Plaxton, for respondent.
The judgment of their Lordships was delivered by
VISCOUNT DUNEDIN:-- This is an appeal from a judgment of the Supreme Court of Canada pronounced on September 26, 1929 ( 1 D.L.R. 141) allowing an appeal from a judgment of the Court of King's Bench (Appeal Side) for the Province of Quebec, dated June 28, 1927 ( 1 D.L.R. 681).
On December 31, 1923, an order of the Superior Court of the Province of Quebec was made, declaring Messrs. Silver Brothers, Ltd., bankrupt.
The Government of the Dominion of Canada duly filed with the trustee in bankruptcy a claim in the sum of $3,707.07 for sales tax imposed in virtue of the Special War Revenue Act, 1915 (Can.), c. 8, the said tax having become due subsequent to June 28, 1922, the date on which a certain amendment to the Special War Revenue Act, 1915, namely 1922 (Can.), c. 47, came into force.
The Government of the Province of Quebec also duly filed with the trustee a claim in the sum of $527.42 for taxes due by the debtor for the years 1921, 1922 and 1923 under the provisions of arts. 1345 et seq. of R.S.Q. 1909, imposing a tax on commercial corporations.
The moneys realized from the sale of the assets of the insolvent estate, after the payment of costs and expenses of the trustee, amounted to $2,353.51, a sum insufficient to pay the two claims aforesaid.
The trustee in his final dividend sheet treated the claim of the Dominion as privileged, according to it the sum of $2,353.51 aforesaid in priority to the claim of the Province, and paid over to the Dominion $2,000 out of this sum.
The Attorney-General of Quebec filed in the Superior Court a petition disputing the dividend sheet and claiming that the debt due to the Province was privileged as a result of art. 1357 of R.S.Q. 1909, and that the claim of the Dominion was not privileged and that s. 17 of the Special War Revenue Act as enacted by 1922 (Can.), c. 47, was ultra vires, or that if the said section was intra vires that the claims of the respective Governments were equally privileged and should be paid concurrently.
Section 17 of the Special War Revenue Act aforesaid provides as follows:--
"Notwithstanding the provisions of The Bank Act and The Bankruptcy Act, or any other statute or law, the liability to the Crown of any person, firm or corporation for the payment of the excise taxes specified in The Special War Revenue Act, 1915, and amendments thereto, shall constitute a first charge on the assets of such person, firm or corporation, and shall rank for payment in priority to all other claims of whatsoever kind heretofore or hereafter arising save and except only the judicial costs, fees and lawful expenses of an assignee or other public officer charged with the administration or distribution of such assets."
This provision came into force on June 28, 1922, and remained in force until July 1, 1925, when it was repealed by 1925 (Can.), c. 26, s. 9.
Article 1357 of R.S.Q. aforesaid provides as follows:--
"All sums due to the Crown in virtue of this section shall constitute a privileged debt, ranking immediately after law costs;"
and came into force in 1906 (c. 10).
The petition of the Attorney-General of Quebec was dismissed by Panneton, J., on December 3, 1925 (64 Que. S.C. 309) on the ground that s. 17 of the Special War Revenue Act aforesaid accorded to the Dominion claim a priority over that of the Province.
The Attorney-General of Quebec appealed to the Court of King's Bench (Appeal Side), which Court (Guerin, J., dissenting) on June 28, 1927, ( 1 D.L.R. 681, 43 Que. K.B. 234) set aside the judgment of Panneton, J., and ordered that the claims of the two Governments should be treated in the dividend sheet as of the same rank and concurrently.
The Court further recommended that the Government of Canada should repay to the trustee whatever sum that would be required to make up the share of the Province of Quebec according to the revised dividend sheet.
The Attorney-General of Canada thereupon appealed to the Supreme Court of Canada and, on September 26, 1929, ( 1 D.L.R. 141) the Court, consisting of Anglin, C.J.C., Duff, Mignault, Newcombe, Rinfret, Lamont and Smith, JJ., allowed the appeal (Duff and Rinfret, JJ., dissenting) and set aside the judgment of the Court of King's Bench and restored the judgment of Panneton, J.
The appeal before their Lordships was argued upon two grounds. The first, and it is this which bulks almost exclusively in the judgments of the Courts below, was that on the proper construction of the well-known ss. 91 and 92 of the B.N.A. Act, 1867, c. 3, the Dominion had no power to enact s. 17 above quoted so as to prejudice the rights of the Government of the Province of Quebec. As to this question their Lordships have no hesitation in preferring the views of the majority of the Judges of the Supreme Court. It would be of no service to go over again the familiar ground of what may be called the competing claims of the two sections and to restate what has been so often stated. As lately as 1929 in the case of Re Fisheries Act, 1914; A.-G. Can. v. A.-G. B.C.,  1 D.L.R. 194, Lord Tomlin, delivering the judgment of the Board, laid down at p. 197 four propositions regarding the conflict of Dominion and provincial jurisdiction in terms which need not here at length be repeated. Now, looking at s. 17 and the way it speaks of the preference, it would not be difficult to hold that it was a rule only applicable in bankruptcy. If that is so, then the matter is ended for bankruptcy is head 21 of s. 91. But let it be assumed that it is rather a natural concomitant of taxation, then the case falls clearly under the fourth head laid down by Lord Tomlin. It runs thus:--
"There can be a domain in which provincial and Dominion legislation may overlap in which case neither legislation will be ultra vires if the field is clear, but if the field is not clear and the two legislations meet the Dominion legislation must prevail."
As a matter of fact, this is the textual reproduction of what had been said by Lord Dunedin as long ago as 1907, in the case of G.T.R. v. A.-G. Can.,  A.C. 65. Now, here so far as taxation itself is concerned, the field is clear. The two taxations, Dominion and provincial, can stand side by side without interfering with each other, but as soon as you come to the concomitant privileges of absolute priority they cannot stand side by side and must clash; consequently the Dominion must prevail.
There was, however, another ground of appeal clearly raised by the reasons of appeal and strenuously insisted upon before their Lordships, and that is based on the effect of s. 16 of the Interpretation Act, R.S.C. 1906, c. 1, a Dominion Act. This section reads as follows:--
"16. No provision or enactment in any Act shall affect, in any manner whatsoever, the rights of His Majesty, his heirs or successors, unless it is expressly stated therein that His Majesty shall be bound thereby."
Relying on that section, counsel for the Province says: Here is a debt due to His Majesty in Quebec. That debt is an asset of His Majesty, to be applied in Quebec for the purposes of Quebec according to the advice of the Quebec ministers. If the claim of the Dominion is upheld the money to satisfy this debt is swept away into the coffers of the Dominion. Therefore by this statute His Majesty is being bound to the detriment of one of his rights and there is no express statement in the statute that His Majesty is to be so bound. Unfortunately, this aspect of the case received but scant consideration in the judgments of the Courts below. It is not that it was overlooked. It was clearly stated in the factum for the Province. Duff, J., one of the dissenting Judges, says,  1 D.L.R., at p. 143:--
"Such debts are not mentioned in s. 17 and the result of what I have just said, having regard to the provisions of the Interpretation Act (now R.S.C. 1927, c. 1), is that other pecuniary claims of the Crown [by which he obviously means other than those created by the Dominion statute itself] are not prejudiced by the priority declared by that section."
Another dissenting Judge, Rinfret, J., says (p. 151):--
"But the intention to give the federal tax precedence over the provincial tax does not necessarily result from the text of s. 17 of the Special War Revenue Act, 1915. The intention 'to bind His Majesty thereby' is not therein 'formally expressed' (Interpretation Act, R.S.C. 1906, c. 1, s. 16). And it must be presumed that the federal legislator wished to comply with the restrictions contained in his own Interpretation Act.
It would result that article 17 of the Special War Revenue Act, 1915, does not 'affect the rights of His Majesty' as represented by the Province of Quebec, such as they are described in art. 1357 of the Revised Statutes of Quebec, 1909, and that each legislation must receive its full execution."
But assuredly the learned Judges who formed the majority did not deal with the argument in the serious way which it demanded if the plea were to be repelled. The same cannot be said of the argument before their Lordships, for Mr. Tilley for the Dominion strove most manfully against the conclusion which was sought to be forced upon him. Their Lordships will deal with some at least of his contentions.
His first point had been stated by the learned Chief Justice. Inasmuch as the Section says that it is to apply notwithstanding the provisions of the Bank Act and the Bankruptcy Act or "any other statute or law," he says it escapes the provision of the Interpretation Act. Now, first of all, the Interpretation Act is a general Act meant to apply to all future as well as to all present legislation, and their Lordships doubt whether it could be excluded except by special reference. But, apart from that, the Bank Act and the Bankruptcy Act both deal with preferences, and that is the reason why they are particularly mentioned; and it follows that "any other statute or law" must be ejusdem generis; that is to say, dealing with preferences. Their Lordships have accordingly no difficulty in rejecting this contention. It is perhaps right here to mention the method in which the learned trial Judge got rid of the effect of s. 16, though it was not adopted by any of the Judges who formed the majority in the Supreme Court. He says that s. 17 is in a later statute than s. 16, and, therefore, in view of the maxim posteriora prioribus derogant, s. 16 must give way. But this entirely misses the point that the maxim only applies when the two statutes cannot live together. There is no difficulty in the statute that enacts s. 17 living with the Interpretation Act. The clause of the Interpretation Act is, so to speak, written into every statute. Thus the later statute gives perfectly good priority against all and sundry, but says that this priority does not affect the Crown right in the province.
Next it was said that inasmuch as the Bank Act and Bankruptcy Act not only dealt with preferences but inter alia with Crown preferences, there is an "irresistible implication" that the Act was meant to deal with all Crown preferences. The simple answer to this is to fix one's eyes on s. 16, and it becomes apparent that it is a contradiction in terms to hold that an express statement can be found in an "irresistible implication."
The next point made was that the provisions of s. 16 do not apply when what is being done is not to affect the Crown prejudicially, but to give a benefit to the Crown, and along with this it is urged that there is only one Crown and reference is made to the case of A.-G. Que. v. Nipissing Central Ry. Co.,  3 D.L.R. 545, 32 C.R.C. 96. It is quite true that the section refers to cases where the Crown would be "bound," i.e., subjected to liability, and not to those where the Crown is benefited. But the fallacy lies in the application of this truth to the case in question. Quoad the Crown in the Dominion of Canada the Special War Revenue Act confers a benefit, but quoad the Crown in the Province of Quebec it proposes to bind the Crown to its disadvantage. It is true that there is only one Crown, but as regards Crown revenues and Crown property by legislation assented to by the Crown there is a distinction made between the revenues and property in the Province and the revenues and property in the Dominion. There are two separate statutory purses. In each the ingathering and expending authority is different. The Nipissing case, supra, is quite on all fours with this doctrine. What was decided there was that when a statute ex hypothesi intra vires had said that a railway with consent of the Governor-General could take on paying compensation Crown lands, that meant Crown lands in the Province as well as in the Dominion. It will be at once observed that the point raised here could not be raised there. There was no doubt as to the mention of the Crown, and the only question was one of interpretation. Did the term "Crown lands" mean Crown lands everywhere or only in the Dominion? There was no reason for limiting the interpretation. Crown lands in the Province were just as much Crown lands as Crown lands in the Dominion. The Crown in the Province was not prejudiced. The compensation money would be paid to the provincial exchequer except in the cases where there was a special purpose or trust under which the lands were vested in the Crown, and in that case there was a special direction under s-s. 4.
Upon the whole matter, therefore, their Lordships think that the plea of the appellant is good. The effect of s. 16, is so to speak, to add to the words of s. 17, "but this priority shall not operate against any right in the Crown in a Province, where such right would be diminished by the priority being asserted against it." Whether the strict result of this view should be to give to the Province an overriding priority need not be discussed. Counsel for the Province did not ask for such relief; he was content that the two debts should rank pari passu.
Their Lordships will therefore humbly advise His Majesty to allow the appeal, recall the judgment of the Supreme Court, and revert to the judgment of the Court of King's Bench except so far as it provides for the payment of costs. As regards costs, although the decisive factor here has been the Interpretation Act, the judgments of the Courts below turned on a consideration of the respective legislative powers of Dominion and Province under the B.N.A. Act.
Their Lordships are of opinion that in these circumstances there ought to be no costs awarded as between the Dominion and the Province of the proceedings in any of the Courts in Canada or here; and that any costs already paid under any previous order should be repaid.
A COMMENTARY ON THIS CASE