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Constitutional law — Determination of validity of tax legislation pending — Enactment prohibiting pro­ceedings against Crown in respect of anything done or omitted under ultra vires legislation — Enactment invalid in so far as it purports to bar recovery of taxes paid under ultra vires legislation — The Mineral Tax­ation Act, R.S.S. 1965, c. 64, ss. 25A, 28A [enacted 1973-74, c. 65] — The Proceedings against the Crown Act, R.S.S. 1965, c. 87, s. 5 (7) — The Potash Reserve Tax Regulations, 1974.

Practice — Moneys paid under protest pending determination of validity of taxing enactment — Application for preservation of money paid not within ambit of Saskatchewan Rules of Court — Queen's Bench Rules 387, 390.

The plaintiff companies, producers of potash in Sas­katchewan, commenced an action against the Government of Saskatchewan for a declaration that ss. 25A and 28A of The Mineral Taxation Act, R.S.S. 1965, c. 64 (enacted by 1973-74, c. 65) and The Potash Reserve Tax Regulations, 1974, made pursuant to s. 25A, are ultra vires the Province of Saskatchewan and for the repayment of all moneys which may be paid by the plaintiffs on account of a tax imposed by the Regula­tions. The defendant maintained that the impugned

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legislation is intra vires the Legislature of Saskatchewan and further averred that the statement of claim disclosed no cause of action against the defendant by virtue of The Proceedings against the Crown Act, R.S.S. 1965, c. 87, and in particular s. 5(7) thereof. It was the defendant's position that s. 5(7) would act as an effec­tive bar to the recovery of moneys paid to the Government in the event the potash reserve tax legislation was held to be ultra vires; with this position the plaintiffs did not agree.

In an attempt to avoid the possible consequences of s. 5(7) the plaintiffs moved in the Court of Queen's Bench for an order, pursuant to the provisions of Rules 387 to 390 of the Rules of Practice and Procedure, for the preservation until trial or other disposition of the action, of the sums paid from time to time pursuant to the potash reserve tax legislation. The motion was dismissed by the Chambers judge and an appeal from his decision to the Court of Appeal was also dismissed. On a further appeal, with leave, to this Court the question as to the constitutionality of s. 5(7) was raised.

Held: The appeal should be allowed. Section 5(7) of The Proceedings against the Crown Act, R.S.S. 1965, c. 87, is ultra vires the Legislature of Saskatchewan, in so far as it purports to bar recovery of taxes paid under a statute or statutory provision which is beyond the legis­lative jurisdiction of the Legislature of Saskatchewan.

The motion for an order for interim preservation of property should be denied.

The validity of ss. 25A and 28A remained to be litigated and nothing was said about the merits of that legislation. It was only ex hypothesi that reference was made to the possible invalidity of the impugned sections and to the rights of the parties in that eventuality. If a statute is found to be ultra vires the legislature which enacted it, legislation which would have the effect of attaching legal consequences to acts done pursuant to that invalid law must equally be ultra vires because it relates to the same subject-matter as that which was involved in the prior legislation. If a state cannot take by unconstitutional means it cannot retain by unconstitu­tional means.

As to the matter of an interim order, s. 17(2) of The Proceedings against the Crown Act, which provides that "where, in proceedings against the Crown, any relief is sought that might, in proceedings between persons, be granted by way of injunction or specific performance, the Court shall not, as against the Crown, grant an

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injunction or make an order for specific performance, but may in lieu thereof make an order declaratory of the rights of the parties", was not applicable here. Neither the determination of constitutional validity of s. 5(7) of The Proceedings against the Crown Act nor an order for preservation of assets is in the nature of relief by way of injunction, or specific performance, or an interim decla­ration of the rights of the parties on the merits in the main action.

Nor was the application for preservation one which came within the ambit of the Saskatchewan Rules of Court. Rules 387 and 390 were never intended for a case such as this where moneys are being paid under duress and protest to a taxing authority pending determination of the validity of a taxing enactment. Rules 387 and 390 pertain to the preservation of property which might be transferred or destroyed or spirited away thereby caus­ing irreparable harm while litigation is in progress.

Antill Ranger and Co. Proprietary Ltd. v. Commis­sioner for Motor Transport (1955), 93 C.L.R. 83, aff'd. [1956] A.C. 527, applied; Cairns Construction Ltd. v. Government of Saskatchewan (1958), 16 D.L.R. (2d) 465, aff'd. [1960] S.C.R. 619; Attorney General of Alberta v. Attorney General of Canada, [1943] A.C. 356; British Columbia Power Corporation, Ltd. v. Brit­ish Columbia Electric Co. Ltd., [1962] S.C.R. 642, referred to; Trustees of the Roman Catholic Separate Schools v. The Quebec Bank, [1920] A.C. 230; Vancou­ver Growers Ltd. v. McLenan et al., [1937] 3 W.W.R. 119; Canadian Industrial Gas and Oil Ltd. v. Government of Saskatchewan, [1974] 4 W.W.R. 557; Underhill v. Ministry of Food, [1950] 1 All E.R. 591; Internation­al General Electric Co. of New York v. Commissioners of Customs and Excise, [1962] Ch. 784, distinguished.

APPEAL from a judgment of the Court of Appeal for Saskatchewan[1], dismissing an appeal from a judgment of Johnson J., dismissing an application for an interim order for preservation of moneys paid by the appellants pursuant to certain tax legislation. Appeal allowed.

J. J. Robinette, Q.C., and W. M. Elliott, Q.C., for the plaintiffs, appellants.

G. W. Ainslie, Q.C., and H. L. Molot, for the intervenant, the Attorney General of Canada.

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G. J. D. Taylor, Q.C., R. S. Meldrum, Q.C., and G. V. Peacock, for the defendant, respondent.

W. Henkel, Q.C., for the intervenant, the Attor­ney General of Alberta.

The judgment of the Court was delivered by

DICKSON J.—This appeal, pursuant to leave granted by this Court, raises the following consti­tutional question: Is s. 5(7) of The Proceedings against the Crown Act, R.S.S. 1965, c. 87 intra vires the Legislature of Saskatchewan, in so far as it purports to bar recovery of taxes paid under a statute or statutory provision which is beyond the legislative jurisdiction of the Legislature of Saskatchewan.

The appellants are producers of potash in Sas­katchewan. They mine from Crown, leasehold and freehold lands and sell in interprovincial and international markets in excess of 98 per cent of the potash recovered.

In 1974, the Legislature of Sasktachewan passed An Act to amend The Mineral Taxation Act, 1973-74 (Sask.), c. 65, amending R.S.S. 1965, c. 64, to provide for taxation of "the potash ore reserves, mine and refining plant" of all persons having the right to mine potash. The amend­ing Act contained the following sections 25A and 28A:

25A. (1) Notwithstanding anything in this Act, every person who has the right to mine the mineral potash in a producing tract shall pay to the minister a tax computed on the value of the potash ore reserves, mine and refining plant with respect to which such person has the right to mine potash ore at such rate as the Lieutenant Governor in Council may from time to time by order prescribe.

(2) An order made under subsection (1) shall be in force and effect for the quarter of the year specified in the order and for each subsequent quarter; provided that the Lieutenant Governor in Council may amend, alter, vary or rescind the order or make another order in substitution therefor but no order altering the rate of a tax payable pursuant to an order made under subsection (1) shall be made after the first month of the quarter in which the tax is payable.

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(3) The value of the potash ore reserves, mine and refining plant shall be determined annually by the min­ister in such manner as the Lieutenant Governor in Council may by order prescribe.

(4) The tax payable pursuant to an order made under this section shall be paid in such manner and at such time or times in each quarter as the Lieutenant Gover­nor in Council may by order prescribe.

(5) The tax payable pursuant to an order made under this section shall be in addition to and not in substitution for the taxes imposed by sections 3, 4 and 25.

(6) Where a tax in respect of the mineral potash in a producing tract is payable pursuant to an order made under this section no tax shall be payable under section 7 or 23 in respect of the same mineral in that tract.

(7) In this section "year" means the period between the first day of July in one calendar year and the last day of June in the next calendar year, both dates inclusive.

(8) All orders made under this section shall be pub­lished in The Saskatchewan Gazette.

28A. The Lieutenant Governor in Council may by order require all or any portion of any tax payable under this Act to be paid in kind and on such order being made the taxpayer to whom the order applies shall deliver at a time and place and in a manner specified from time to time by the minister such quantity of the mineral or of the refined product of the mineral as the minister determines will yield when sold the amount of the tax and penalties outstanding.

Pursuant to s. 25A, the Lieutenant-Governor in Council of Saskatchewan made The Potash Reserve Tax Regulations, 1974, (Order in Council 1756/74, dated November 12, 1974), which were later amended by Order in Council 801/75, dated June 2, 1975. The Regulations impose a quarterly tax on potash reserves, mine and refining plant, the value of which is to be determined annually by the Minister in the following manner: "annual capacity times the scale factor times the ore grade factor times forty dollars times twenty divided by the capital investment factor". The mill rate is determined in accordance with Table 1 of the Regulations and increases as the average selling price per ton of potash increases.

[Page 581]

The appellants were minded to challenge the validity of the tax and to that end issued a statement of claim against the Government of Sas­katchewan. The statement of claim alleges that s. 25A of The Mineral Taxation Act and the Regu­lations thereunder purport to impose a tax which is in substance an indirect tax and therefore beyond the powers of the Province. Reference is made in the statement of claim to the announcement on or about April 29, 1974, by the Saskatchewan Gov­ernment of a new policy whereby the Province would (i) participate in the potash industry, (ii) market, through a new government corporation, potash produced by it or on its behalf, (iii) take in kind and market royalties, fees, taxes, and surcharges and (iv) introduce a reserves tax with respect to potash. It is further alleged in the statement of claim that s. 25A and the Regulations were not passed to raise revenue for provincial purposes but rather, pursuant to announced Gov­ernment policy, to engage in the production and sale of potash for export from Saskatchewan. It is also contended that ss. 25A and 28A and the Regulations constitute a colourable attempt to regulate trade and commerce, a power conferred on the Parliament of Canada by s. 91(2) of The British North America Act, I867 and are therefore beyond the powers of Saskatchewan. The plaintiffs in the statement of claim ask for a declaration that ss. 25A and 28A and the Regula­tions are ultra vires the Province of Saskatchewan and for the repayment of all moneys which may be paid by the plaintiffs on account of the tax. The statement of defence, in brief, maintains that the impugned legislation is intra vires the Legislature of Saskatchewan and further avers that the statement of claim discloses no cause of action against the defendant Government by virtue of The Pro­ceedings against the Crown Act, R.S.S. 1965, c. 87, and in particular s. 5(7) thereof. The Act referred to, the general scheme of which is to be found in enactments of all Canadian provinces, provides that, inter alia, subject to the Act, (i) in proceedings against the Crown the rights of the parties are as nearly as possible the same as in a suit between person and person and (ii) a claim against the Crown that, if the Act had not been passed, might be enforced by petition of right,

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subject to the grant of a fiat by the Lieutenant-Governor, may be enforced as of right by proceedings against the Crown in accordance with the Act without the grant of a fiat. Section 5(7) of the Act, at issue in the present appeal, is unique among provincial Crown liability Acts and purports to limit liability in respect of things done or omitted in the exercise of power or authority under an ultra vires enactment. The section reads:

5.(7) No proceedings lie against the Crown under this or any other section of the Act in respect of anything heretofore or hereafter done or omitted and purporting to have been done or omitted in the exercise of a power or authority under a statute or a statutory provision purporting to confer or to have conferred on the Crown such power or authority, which statute or statutory provision is or was or may be beyond the legislative jurisdiction of the Legislature; and no action shall be brought against any person for any act or thing heretofore or hereafter done or omitted by him under the supposed authority of such statute or statutory provision, or of any proclamation, order in council or regulation made thereunder, provided such action would not lie against him if the said statute, statutory provi­sion, proclamation, order in council or regulation is or had been or may be within the jurisdiction of the Legislature enacting or the Lieutenant Governor making the same.

We are concerned in this appeal only with the portion of the section preceding the semi-colon.

In reply to the statement of defence the plaintiffs said that ifs. 5(7) of The Proceedings against the Crown Act is or may be construed as a bar to the claim of the plaintiffs, then the section is to that extent ultra vires and beyond the powers conferred on the defendant by the Constitution of Canada. In short, the position of the Government of Saskatchewan is that s. 5(7) would not act as an effective bar to the recovery of moneys paid to the Government in the event the reserve tax legislation is held to be ultra vires; the appellants do not agree.

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Before considering the validity of the contention advanced on behalf of the Province, reference must be made to certain letters which passed between the Minister of Natural Resources of Saskatche­wan and the several plaintiffs. The following corre­spondence between the Minister and the President of the International Minerals & Chemical Corpo­ration (Canada) Limited may be taken as typical. The first letter, dated August 7, 1975, from the Minister to the company, reads:

Re: Potash Reserve Tax

This is to advise that your company is in arrears of the potash reserve tax in the sum of $10,980,864.63 for the quarter ending June 30, 1975, which was payable to the Department of Mineral Resources on or before June 2.0, 1975.

We, therefore, hereby demand the payment of the tax with penalties as provided for in the regulations by August 15, 1975.

In the event of your failure to comply with this demand, our Department will exercise all such remedies as are available to it for the collection of the tax and penalties and will take all such appropriate action as may be necessary under the circumstances.

The reply, on behalf of the company, dated August 15, 1975, reads:

This will refer to your letter addressed to us under date of August 7, 1975, demanding payment of the Potash Reserve Tax for the quarter ending June 30, 1975 in the sum of $10,980,864.63 together with penalties and stating that if we failed to make such payment we would be subject to unspecified action on the part of your Department.

We are a plaintiff in an action brought by several potash producers against the Government of Saskatche­wan, which is now pending in the Queen's Bench Judi­cial Centre of Regina, in which proceeding the legality of the potash reserve tax is in issue.

It is not our wish to cause to yourself or your Government any more difficulties than arc absolutely necessary during the period of time that it will take for the questions of the constitutional validity of the mineral tax legislation and regulations to be determined. We have indicated that we are quite prepared to pay the proper amount of tax demanded under the impugned legislation so long as we have the assurance of the Government or of yourself as Minister of the Department concerned

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that such monies as are paid under such legislation will be returned forthwith together with interest by the Government in the event the pending action is success­ful, and the legislation is determined to be ultra vires. I am sure you can appreciate that the sums being demanded involve a substantial amount, and it would only be reasonable for us to require this protection under such an understanding before making payment.

In view of the implications inherent in your letter of August 7, 1975, however, and feeling that there is an urgent and compelling, immediate practical necessity, to protect our interests in mine and mine assets, as well as other valuable rights, against the possibility of loss which might result from failure to make the payment demanded, we are enclosing herewith our cheque in the amount of $11,280,182.00 covering the amount of payment demanded and penalties. We continue to assert that the tax reported to be imposed by Section 25A of the Mineral Taxation Act and the Potash Reserve Tax Regulations of 1974, together with all determinations thereunder made by the Department of Mineral Resources; are invalid as beyond the constitutional powers of the Province and make such payment only under compulsion, without prejudice and under protest, and reserve all rights to the return of such monies should the Act and the Regulations or either of them be held to be beyond the powers of the Province of Saskatchewan.

The question of future payments, however, will be largely dependent upon the willingness of the Government to provide clear and unequivocal assurances that the monies heretofore paid, hereafter paid, and paid herewith, together with interest, will be returned by the Government in the event the legislation is determined to be ultra vires in the pending action.

I am sure you can appreciate the reasonableness of our position and would not expect that the Government of Saskatchewan, or yourself as Minister, would attempt to take the position that such sums as are paid under the impugned legislation should not be returned and should be kept by the Government notwithstanding that the legislation is ultimately declared to be ultra vires.

May we have your early reply setting forth your position and the position of the Government of Sas­katchewan with respect to such assurances.

A cheque in the amount of $11,280,I82 accom­panied the letter. The third, and final, letter in the exchange, from the Minister to the company, dated August 19, 1975, reads:

This is to acknowledge the receipt of your cheque in the amount of $11,280,182.00.

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Your company is one of the plaintiffs in an action in the Queen's Bench Court in which the legality of the potash reserve tax is an issue and the statement of claim in that case claims, among other things, "a declaration that the plaintiffs are entitled to be repaid all monies paid by them to the Government of Saskatchewan on account of the tax purported to be imposed by section 25A of the Mineral Taxation Act and the Potash Reserve Tax Regulations, 1974, with interest and, if necessary, an accounting and judgment therefor."

Under the circumstances, therefore, it would be improper and irresponsible and contrary to the public interest for me to provide assurances on a matter that is now before the Court.

The plaintiffs, confronted with the provisions of The Mineral Taxation Act, the validity of which they wished to test in a court of law, and uncertain as to the full implications of the final paragraph of the Minister's letter of August 7, paid under protest the tax then demanded. We were informed that, with the exception of one, the plaintiff com­panies have since continued to pay the tax, which the Chambers judge noted could amount to $120,-000,000 annually. The question which has been raised is whether s. 5(7) of The Proceedings against the Crown Act is a bar to recovery of moneys so paid in the event it is ultimately determined that ss. 25 A and 28 A of The Mineral Taxation Act are ultra vires the Province.

In an attempt to avoid the possible consequences of s. 5(7) of The Proceedings against the Crown Act the plaintiffs moved in the Court of Queen's Bench for an order, pursuant to the provisions of Rules 387 to 390 of the Rules of Practice and Procedure, for the preservation until trial or other disposition of the action, of the sums paid from time to time pursuant to the reserves tax legisla­tion, on the following terms:

(a) that any such sums as are paid from time to time by the Plaintiffs be paid to the Defendant pursuant to and by virtue of the Order and not pursuant to and by virtue of the aforesaid legislation;

(b) that so long as such sums are paid by a Plaintiff pursuant to this Order each Plaintiff having so paid shall be deemed not to be in default under any of the provisions of the aforesaid legislation;

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(c) that such sums as are paid by a Plaintiff pursuant to the Order be repaid by the Defendant to such Plaintiff in the event that such legislation is declared ultra vires by the Judgment ultimately delivered herein on the final disposition of this action following the trial thereof together with interest at such Plaintiff's borrowing rate from time to time, such rate to be determined by a reference to be directed thereafter if necessary.

The motion was dismissed by Johnson J. who wrote:

As I understand the reasoning of the plaintiffs for seeking this relief it is that if the sums levied against them are paid to the defendant pursuant to Court order they are of the opinion that they will not be precluded from taking action to recover from the Crown if section 25A and 28A of The Mineral Taxation Act and the regulations aforesaid are found to be ultra vires the Province of Saskatchewan. In brief, the plaintiffs seek to have the sums paid to the defendant pursuant to Court order and not pursuant to the legislation. I have given this matter careful and serious consideration and have concluded that I am unable to grant the plaintiffs the relief they seek. Briefly stated, the Court is unable to support any attempt by the plaintiffs to not comply with the clear provision of the statute, and the regulations, nor can it amend or repeal those provisions. It may be that the Province of Saskatchewan this year will collect taxes under a statute which is found invalid by the Courts next year and then claim immunity from recov­ery of the sums paid by the taxpayers by virtue of The Proceedings against the Crown Act but if that is the law in Saskatchewan the Courts can say nothing about the "wisdom or expediency or policy" of that legislation.

An appeal was then taken by the plaintiffs to the Court of Appeal for Saskatchewan. Chief Jus­tice Culliton, in reasons for judgment of the Court of Appeal dismissing the appeal, was of opinion that s. 5(7) of The Proceedings against the Crown Act precluded the recovery of taxes paid pursuant to the legislation or regulations even if the legisla­tion or regulations should be found invalid. Dismissal of the appeal was supported on the further basis comprehended in two extracts from the reasons for judgment:

An application for the preservation of property under the Rules of Court must be to preserve property which is bona fide the subject of the action. Here it is not the

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money which is the subject matter of the action; the issue is simply whether there is any legal obligation to pay the tax imposed, the answer to which depends upon the validity of the legislation and regulations.

If the appellants are successful in the action, they are not deprived of the fruits of victory because the taxes have not been held in trust, either by a government or a receiver. If they are successful in the action, any depri­vation of the fruits of victory results from the specific legislation which denies the rights of recovery of taxes paid under a statute which may subsequently be held to be invalid.

The learned Chief Justice observed in the following passage that, for the purpose of the applica­tion, the Court of Appeal must consider s. 5(7) of The Proceedings against the Crown Act to be valid:

The present application by the plaintiffs is not an application for the preservation of property as contem­plated by the Rules. It is an attempt to use the Rules respecting the preservation of property to defeat the clear words of the legislation-legislation which, for the purposes of this application, the Court must consider to be valid.

On a further appeal to this Court, the question as to the constitutionality of s. 5(7) of The Pro­ceedings against the Crown Act was framed; in response to the notice required by the Rules of this Court to be given to the Attorney General of Canada and to the Attorneys General of the Prov­inces, the Attorney General of Canada and the Attorney General of Alberta intervened in the appeal to this Court. The Attorney General of Canada says that the constitutional question, if it arises, should be answered in the negative; the Attorney General of Alberta says that it should be answered in the affirmative.

It should be emphasized in limine that the present proceedings are interlocutory in nature. The validity of ss. 25A and 28A of The Mineral Taxation Act remains to be litigated and I say nothing about the merits of that litigation. It is only ex hypothesi that reference is made to the possible invalidity of the impugned sections and to the rights of the parties in that eventuality.

[Page 588]

There are essentially three questions to be decid­ed in this appeal: (i) whether a constitutional issue arises at all with respect to s. 5(7) of The Proceedings against the Crown Act; (ii) if so, whether s. 5(7) is intra vires in so far as it purports to bar recovery of taxes paid under the circumstances stated in the constitutional question which has been presented; (iii) whether an order for interim relief and interim preservation of property should be issued.

The Attorney General of Canada in his factum asserts that there is no need to deal with the issue of the constitutional validity of s. 5(7) of The Proceedings against the Crown Act. He argues that declaratory actions fall traditionally under s. 44(17) of The Queen's Bench Act R.S.S. 1965, c. 73, and thus the Court need never reach s. 4 of The Proceedings against the Crown Act which removes the need for a fiat in order to sue the Crown. Section 44(17) of the Queen's Bench Act provides:

No action or proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether any consequential relief is or can be claimed or not.

The submission rests on the proposition that s. 44(17) eliminates the need for a fiat. Section 44(17) merely removes objection to an action on the ground that it is a declaratory action; it does not remove all procedural requisites such as the necessity for a fiat before proceeding against the Crown. That imperative is removed by s. 4 of The Proceedings against the Crown Act. That act also embodies many rules affecting actions against the Crown, such as jurisdiction of the courts, appeals, and service. I am satisfied that the main action should properly be regarded as a proceeding under The Proceedings against the Crown Act.

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The Attorney General of Canada in his factum argues in the alternative that even if the action is under the Act, the issue here is not within s. 5(7), for it is an action framed in respect of moneys paid under compulsion or mistake of fact and not in respect of anything done "in the exercise of a power or authority under a statute" (s. 5(7)). The proposition is somewhat tenuous for it can well be said that the money was paid because the Government asserted statutory power to collect it. I agree with the views expressed in the Saskatchewan Courts that s. 5(7) of The Proceedings against the Crown Act applies if one concludes that the section is intra vires.

The respondent Government of Saskatchewan submits that s. 5(7) is valid under head 1 of s. 92 of The British North America Act, I867, i.e. amendment from time to time of the Constitution of the Province and that it draws authority from heads (13), (14) and (16) of s. 92. The question of validity of s. 5(7) is characterized as one turning on a Legislature's authority to legislate with respect to Crown immunity. It is argued that a provincial Legislature can expand or contract the scope of litigation against the Crown and that s. 5(7) is only a limitation on actions against the Crown. Reliance is placed on the interpretation given to s. 5(7) by Gordon J.A. in Cairns Con­struction Ltd. v. Government of Saskatchewan[2], where it was said at p. 487:

So far as I can see, the Province had full authority to state what actions might be brought against the Crown in the right of the Province and if the above amendment of 1956 had been included in the original Act, I cannot see that there would be any objection to it.

Gordon J.A. was in dissent in the case, and he was the only member of the Court of Appeal to address the issue. With deference, I think one must be cautious about adopting the interpretation placed upon s. 5(7) by Mr. Justice Gordon.

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A state, it is said, is sovereign and it is not for the Courts to pass upon the policy or wisdom of legislative will. As a broad statement of principle that is undoubtedly correct, but the general princi­ple must yield to the requisites of the constitution in a federal state. By it the bounds of sovereignty are defined and supremacy circumscribed. The Courts will not question the wisdom of enactments which, by the terms of the Canadian Constitution are within the competence of the Legislatures, but it is the high duty of this Court to insure that the Legislatures do not transgress the limits of their constitutional mandate and engage in the illegal exercise of power. Both Saskatchewan and Alberta inform the Court that justice and equity are irrele­vant in this case. If injustice results, it is the electorate which must administer a rebuke, and not the Courts. The two Provinces apparently find nothing inconsistent or repellent in the contention that a subject can be barred from recovery of sums paid to the Crown under protest, in response to the compulsion of the legislation later found to be ultra vires.

Section 5(7) of The Proceedings against the Crown Act, in my opinion, has much broader implications than mere Crown immunity. In the present context, it directly concerns the right to tax. It affects, therefore, the division of powers under The British North America Act, 1867. It also brings into question the right of a Province, or the federal Parliament for that matter, to act in violation of the Canadian Constitution. Since it is manifest that if either the federal Parliament or a provincial Legislature can tax beyond the limit of its powers, and by prior or ex post facto legislation give itself immunity from such illegal act, it could readily place itself in the same position as if the act had been done within proper constitutional limits. To allow moneys collected under compul­sion, pursuant to an ultra vires statute, to be retained would be tantamount to allowing the provincial Legislature to do indirectly what it could not do directly, and by covert means to impose illegal burdens.

[Page 591]

There are no Canadian constitutional law prece­dents addressed directly to the present issue but an analogy can be drawn to the inability of the Prov­inces to limit judicial review of constitutionality (Attorney General of Alberta v. Attorney General of Canada[3]), and some authority can be drawn from the case of British Columbia Power Corpo­ration, Ltd. v. British Columbia Electric Co. Ltd.[4], where Kerwin C.J. said, in appointing a receiver to preserve the assets of British Columbia Electric Company Limited pending determination of ownership of assets, at p. 644:

In a federal system, where legislative authority is divid­ed, as are also the prerogatives of the Crown, as between the Dominion and the Provinces, it is my view that it is not open to the Crown, either in right of Canada or of a Province, to claim a Crown immunity based upon an interest in certain property, where its very interest in that property depends completely and solely on the validity of the legislation which it has itself passed, if there is a reasonable doubt as to whether such legisla­tion is constitutionally valid. To permit it to do so would be to enable it, by the assertion of rights claimed under legislation which is beyond its powers, to achieve the same results as if the legislation were valid. In a federal system it appears to me that, in such circumstances, the Court has the same jurisdiction to preserve assets whose title is dependent on the validity of the legislation as it has to determine the validity of the legislation itself.

It is true that the issue in the British Columbia Electric case was not taxation nor the constitution­ality of a provision such as s. 5(7) but rather the Crown's immunity from a judicial order. The present case, however, would seem to be governed by the very considerations which led to the deci­sion in the earlier case. In each case, the concern is with the preservation of the Constitution which is paramount.

A cause bearing marked similarity to the one at bar is Antill Ranger and Company Proprietary Ltd. v. Commissioner for Motor Transport[5], decided by the High Court of Australia and

[Page 592]

affirmed by the Privy Council sub nom. Commissioner for Motor Transport v. Antill Ranger and Company[6]. In that case, the State of New South Wales enacted special legislation to bar claims arising out of the Privy Council's decision that a licensing statute, the State Transport (Coordina­tion) Act, 1931-1951 (N.S.W.), was ultra vires. The High Court held, and the Privy Council agreed, that such a "barring" statute was ultra vires, for otherwise the constitutional provisions would be undermined. In oral argument before us, the respondent sought to distinguish the Antill case on the basis of s. 78 of the Australian Consti­tution. That section was not the determining con­sideration in the decision of either the Australian High Court or the Privy Council. The section is merely a procedural provision to enable the federal Parliament of Australia to enact legislation allow­ing suit against the federal and state governments in specified courts.

The principle governing this appeal can be shortly and simply expressed in these terms: if a statute is found to be ultra vires the legislature which enacted it, legislation which would have the effect of attaching legal consequences to acts done pursuant to that invalid law must equally be ultra vires because it relates to the same subject-matter as that which was involved in the prior legislation. If a state cannot take by unconstitutional means it cannot retain by unconstitutional means. The same thought found expression in the headnote to the Antill case, supra, in these words:

.. _the immunity accorded by that Act (the Barring Act of 1954) to the unlawful exactions was as offensive to the Constitution as the unlawful exactions themselves.. .

Counsel for respondent placed great reliance upon Trustees of the Roman Catholic Separate Schools v. The Quebec Bank[7], but on examination the decision will be found to give no support to respondent's arguments. In that case the appel­lants, the Trustees for the Roman Catholic Separate

[Page 593]

Schools of Ottawa, refused to conduct the schools in accordance with regulations made by the Department of Education for the Province. The Legislature of Ontario thereupon passed an Act purporting to authorize the appointment of Commissioners to take over the management of the schools. Although the Legislature exclusively, under the Constitution, could make laws in rela­tion to education, the Privy Council held that the Act was ultra vires under s. 93(l) of The British North America Act, 1867 which provided that nothing in such laws should prejudicially affect any right or privilege with respect to denomina­tional schools which any class of persons had by law in the Province at the Union. During the period from the appointment of the Commissioners in July 1915 until the statute was declared invalid in November 1916, the Commissioners drew and expended moneys standing to the credit of the appellants with bankers and incurred liabilities to bankers. By statute, the Legislature of Ontario enacted that the expenditure was to be deemed to have been made for, and at the request of the appellants, and that the liabilities were to be liabilities of the appellants. It was conceded that the money spent and the liability incurred was spent and incurred in the carrying on of the schools in a proper manner. The appellants could not say that the money, if they had had it, would not have been spent on the same purposes. If the contentions of the appellants, who attacked the later legislation, were given effect the result, Lord Dunedin said, would have been that the schools would have been carried on by funds provided gratuitously by the banks or by the individual Commissioners and the appellants would be in possession of funds which would form a gratuitous bonus in their hands. Their Lordships held that the later Act was not ultra vires. Apart altogether from the striking difference in the factual position, that case was not concerned with federal-provin­cial division of powers nor with the assertion by a Province of a right to retain moneys exacted ille­gally and under protest. For the same reason, I do not find Vancouver Growers Ltd. v. McLenan and B.C. Coast Vegetable Marketing Board[8] cited by

[Page 594]

respondent, to be helpful.

For the foregoing reasons, I have concluded that s. 5(7) of The Proceedings against the Crown Act is ultra vires the Province of Saskatchewan in so far as it purports to bar the recovery of taxes paid under a statute or statutory provision which is beyond the legislative jurisdiction of the Legisla­ture of Saskatchewan.

The next question concerns the matter of an interim order. The respondent argues that an order for interim preservation of property is unnecessary if s. 5(7) of The Proceedings against the Crown Act is ultra vires. The appellants request an order for the preservation of the sums paid from time to time by the appellants pursuant to the tax purported to be imposed by s. 25A of The Mineral Taxation Act and the Regulations, until the trial or other disposition of the action, on the terms (a), (b) and (c) set out in the notice of motion, which for ease of reference I now repeat:

(a) that any such sums as are paid from time to time by the Plaintiffs be paid to the Defendant pursuant to and by virtue of the Order and not pursuant to and by virtue of the aforesaid legislation;

(b) that so long as such sums are paid by a Plaintiff pursuant to this Order each Plaintiff having so paid shall be deemed not to be in default under any of the provisions of the aforesaid legislation;

(c) that such sums as are paid by a Plaintiff pursuant to the Order be repaid by the Defendant to such Plaintiff in the event that such legislation is declared ultra vires by the Judgment ultimately delivered herein on the final disposition of this action following the trial thereof together with interest at such Plaintiff's borrowing rate from time to time, such rate to be determined by a reference to be directed thereafter if necessary.

Counsel for appellants concedes that, pending the outcome of the main action, the respondent should have the use of any tax moneys paid by appellants to the respondent.

If, as I deem, a negative answer should be given to the constitutional question which has been raised, then (a) and (b) of the terms recited in the notice of motion would not seem to be necessary

[Page 595]

and the only question would be whether an order should go for preservation of the sums paid, sub­ject to term (c).

Rules 387 and 390 of the Queen's Bench Rules of Saskatchewan read:

387. Subject to the provisions of The Queen's Bench Act, interim orders for mandamus or an injunction or the appointment of a receiver or for the interim preser­vation of property may be made by the court on a ex parte application or upon notice as the court may direct.

390. The court may upon the application of any party to a cause or matter and upon such terms as may be just take an order for the detention or preservation of any property or thing, being the subject of such cause or matter, or which may be evidence on any issue arising therein and may make an order for the inspection of any such property by either of the parties or their respective agents, and may permit the same to be photographed; and for all or any of the purposes aforesaid may author­ize any person or persons to enter upon or into any land or building in the possession of any party to such cause or matter and for all or any of the purposes aforesaid may authorize any samples to be taken or any observa­tions to be made or experiment to be tried, which may be necessary or expedient for the purpose of obtain­ing full information or evidence. Provided that no order shall be made for the detention or preservation of any property or any part thereof which shall prejudice any party in his business, profession, trade or calling, unless full compensation is paid by the applicant before such order is issued.

The learned Chief Justice of Saskatchewan, relied upon Johnson J. in Canadian Industrial Gas and Oil Ltd. v. Government of Saskatchewan and Attorney General for Saskatchewan[9] (adopting Romer J. in Underhill v. Ministry of Food[10] and the English Court of Appeal in International Gen­eral Electric Company of New York Ltd. v. Com­missioners of Customs and Excise[11]) in holding that under s. 17(2) of The Proceedings against the Crown Act of Saskatchewan the Court had no jurisdiction to make an interim declaratory order

[Page 596]

in interlocutory proceedings. The Chief Justice referred to s. 17(4) but this would appear to have been inadvertent. Section 17(2) reads:

(2) Where, in proceedings against the Crown, any relief is sought that might, in proceedings between persons, be granted by way of injunction or specific performance, the court shall not, as against the Crown, grant an injunction or make an order for specific performance, but may in lieu thereof make an order declaratory of the rights of the parties.

In Underhill the plaintiff, a manufacturer of unra­tioned sweets, by motion sought an order that the Ministry of Food might be restrained until the trial of the action or further order from putting into effect a proposal to bring within the rationing system sweets made from unallocated ingredients not previously subject to the controls of the ration­ing system. It was conceded at the hearing that the plaintiffs could not be granted an interlocutory injunction. Romer J. held that the reference in the Crown Proceedings Act, I947, s. 21(1) (a) (from which s. 17(2) of The Proceedings against the Crown Act, I947 was obviously derived), to a declaration of the rights of the parties in lieu of an .injunction, related to a final declaration and had no application where interlocutory relief was sought; therefore the Court had no jurisdiction to make the order. In Underhill what was in fact being asked for was an interim injunction and to that end an interim declaration on the merits of the underlying issues. In the present proceedings, counsel for the appellants assured the Court that he was not asking for injunctive relief in form or in substance.

In the International General Electric case, supra, the English subsidiary of the American parent company had for many years been import­ing a variety of goods, mainly concerned with the electrical industry, under a device mark which had the initials "GE" enclosed in a circle with a device round it. In March 1962, certain consignments

[Page 597]

were stopped by the Commissioners of Customs and Excise on the ground that the importation into England infringed the Merchandise Marks Act because it was said that the goods infringed the mark "GEC" alleged to be the trade mark of General Electric Co. Ltd., a large English com­pany. The plaintiff then moved for an interim declaration that, inter alia, the defendants were not entitled to detain merchandise of the plaintiffs marketed in relation to a device mark containing the letters "GE". The Court held that the declara­tory order sought would declare finally the rights of the parties and therefore the Court had no jurisdiction under the Crown Proceedings Act to make the order. As in Underhill what was in effect being sought was an interim injunction and an interim declaratory order ostensibly intended to preserve the status quo but in truth declaring the rights of the parties. And so it was in the Canadian Industrial Gas & Oil case which came before Johnson J. The plaintiffs there sought to have The Oil and Gas Conservation, Stabilization and De­velopment Act, 1973, which made provision for certain levies, declared ultra vires the Province of Saskatchewan. After the action was instituted and because the plaintiff refused to make payment of the sums levied by the legislation, the Saskatche­wan Government advised the plaintiff that it intended forthwith to cancel all the Crown petroleum and natural gas leases held by the plaintiff and which were in default with respect to the sums payable under the impugned legislation. Johnson J. held that he had no power to make an interim declaration restraining the Saskatchewan Government. With great respect, I do not think that s. 17(2) of The Proceedings against the Crown Act or any of the three cases cited by the learned Chief Justice touches the question now before us. Neither the determination of constitu­tional validity of s. 5(7) of The Proceedings against the Crown Act nor an order for preserva­tion of assets is in the nature of relief by way of injunction, or specific performance, or an interim declaration of the rights of the parties on the

[Page 598]

merits in the main action.

The learned Chief Justice concluded also, however, that the application for preservation was not one which came within the ambit of the Saskatch­ewan Rules of Court and, with respect, 1 agree. I cannot conceive that Rules 387 and 390 were ever intended for a case such as this where moneys are being paid under duress and protest to a taxing authority pending determination of the validity of a taxing enactment. Rules 387 and 390 pertain to the preservation of property which might be trans­ferred or destroyed or spirited away thereby caus­ing irreparable harm while litigation is in progress. The reference in Rule 390 to inspection of the property, permission to photograph, entry upon land and the taking of samples are clearly out of place when one is speaking of money. "Money" is in no way unique so as to require preservation. The dollars which the appellants pay to the respondent will not be the same dollars which the appellants will get back if they are successful. In the meantime, the respondent will have the use of the dollars. All of this is inapposite to the preservation of property with which Rules 387 and 390 are concerned.

I do not think that Rules 387 and 390 apply. Apart from the Rules this Court has the discretion to make an order as requested by appellants direct­ing the Province of Saskatchewan to hold, as stakeholder, such sums as are paid by the appellants pursuant to the impugned legislation but with the right to use such sums in the interim for Provincial purposes, and with the obligation to repay them with interest in the event the legisla­tion is ultimately held to be ultra vires. Such an order, however, would be novel, in giving the stakeholder the right to spend the moneys at stake, and I cannot see that it would serve any practical purpose. In any event, it would not seem to me to be appropriate to decide in interlocutory proceedings, and without argument on the point, whether, if the appellants become entitled to repayment of moneys paid to the Minister pursuant to The Mineral Taxation Act, such moneys should bear

[Page 599]

interest, amounting to millions of dollars, at the from time to time bank rate or at some other rate.

I would allow the appeal with costs throughout and answer in the following manner the constitu­tional question:

Section 5(7) of The Proceedings against the Crown Act R.S.S. 1965, c. 87 is ultra vires the Legislature of Saskatchewan, in so far as it purports to bar recovery of taxes paid under a statute or statutory provision which is beyond the legislative jurisdiction of the Legislature of Saskatchewan.

I would deny the motion for an order for interim preservation of property.

Appeal allowed with costs.

Solicitors for the plaintiffs, appellants: MacPherson, Leslie & Tyerman, Regina.

Solicitors for the defendant, respondent: Goldenberg, Taylor & Tallis, Saskatoon.



[1] [1976] 1 W.W.R. 569, 65 D.L.R. (3d) 159.

[2] (1958), 16 D.L.R. (2d) 465, aff'd. [1960] S.C.R. 619.

[3] [1943] A.C. 356.

[4] [1962] S.C.R. 642.

[5] (1955), 93 C.L.R. 83.

[6] [1956] A.C. 527 (RC.).

[7] [1920] A.C. 230.

[8] [1937] 3 W.W.R. 119.

[9] (1974] 4 W.W.R. 557.

[10] [1950] 1 All E.R. 591.

[11] [1962] Ch. 784.

 

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