Boniferro Mill Works ULC v. Her Majesty the Queen in Right of Ontario [Indexed as: Boniferro Mill Works ULC v. Ontario]
97 O.R. (3d) 745
Court of Appeal for Ontario,
Winkler C.J.O., MacFarland and Epstein JJ.A.
January 28, 2009*
- This judgment was recently brought to the attention of the
editors.
Taxation -- Interpretation -- Residual Value Charge imposed on purchasers of Crown timber constituting legitimate component of price of timber -- RVC being proprietary charge within competence of Crown -- RVC not constituting tax for which there was no lawful authority.
The respondent purchased timber owned by the Crown, which it harvested from Crown land pursuant to a licence granted to it under the Crown Forest Sustainability Act, 1994, S.O. 1994, c. 25. The price for the timber consisted of two components: the minimum value component and the residual value component. The respondent brought an application for a declaration that the Residual Value Charge ("RVC") was a tax for which there was no lawful authority and for related remedies. The application was granted. The Crown appealed.
Held, the appeal should be allowed. [page746]
The application judge erred in applying a test which addresses the distinction between regulatory charges and taxes. The only issue he ought to have considered was whether, as owner of the land and timber in question, the Crown was entitled to set the price it did. Proprietary charges are different from regulatory charges or taxes. A necessary and important distinction must be made between a province's broad power to control the use and exploitation of natural resources located on lands owned by the Crown and the power possessed by the Crown as a legislative authority, which power is limited by the Constitution. When the Crown is disposing of its own property, it is not bound by limits on its legislative authority. The obligation to pay what amounts to a variable royalty is clearly set out in the licence granted to the licensee in addition to s. 31 of the Act. There is no obligation on anyone to purchase Crown timber. Mills are free to acquire timber from private sources, in which event there is no obligati on to pay anything to the Minister. The RVC allows the Crown to share in the profits when the market is strong. Proprietary charges may be determined by market forces. The RVC is merely part of the purchase cost of timber from the Crown.
APPEAL from the judgment of Tranmer J. (2008), 2008 2746 (ON SC), 89 O.R. (3d) 363, [2008] O.J. No. 306 (S.C.J.) granting an application for a declaration that the Residual Value Charge imposed on the purchasers of Crown timber is a tax for which there is no lawful authority and for related remedies.
Cases referred to 620 Connaught Ltd. v. Canada (Attorney General), [2008] 1 S.C.R. 131, [2008] S.C.J. No. 7, 2008 SCC 7, 290 D.L.R. (4th) 385, EYB 2008-130229, J.E. 2008-500, 371 N.R. 200, 74 Admin. L.R. (4th) 1, 164 A.C.W.S. (3d) 81, 2008 G.T.C. 1194; Canadian Industrial Gas & Oil Ltd. v. Saskatchewan, 1977 210 (SCC), [1978] 2 S.C.R. 545, [1977] S.C.J. No. 124, 80 D.L.R. (3d) 449, 18 N.R. 107, [1977] 6 W.W.R. 607, [1977] 2 A.C.W.S. 1114; Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, 1930 91 (SCC), [1931] S.C.R. 357, [1931] S.C.J. No. 84, [1931] 2 D.L.R. 193, consd Other cases referred to Eurig Estate (Re), 1998 801 (SCC), [1998] 2 S.C.R. 565, 40 O.R. (3d) 160, [1998] S.C.J. No. 72, 165 D.L.R. (4th) 1, 231 N.R. 55, J.E. 98-2121, 114 O.A.C. 55, [2000] 1 C.T.C. 284, 23 E.T.R. (2d) 1, 83 A.C.W.S. (3d) 146; Kingstreet Investments Ltd. v. New Brunswick (Finance), [2007] 1 S.C.R. 3, [2007] S.C.J. No. 1, 2007 SCC 1, 276 D.L.R. (4th) 342, 355 N.R. 336, J.E. 2007-115, 309 N.B.R. (2d) 255, 51 Admin. L.R. (4th) 184, 25 B.L.R. (4th) 1, 2007 D.T.C. 5029, 2007 D.T.C. 5041, 2007 G.T.C. 1399, 152 A.C.W.S. (3d) 1151, EYB 2006-112095; MacMillan Bloedel Ltd. v. British Columbia, 1985 313 (BC SC), [1985] B.C.J. No. 3015, 25 D.L.R. (4th) 337, 69 B.C.L.R. 11, 36 A.C.W.S. (2d) 213 (S.C.); Westbank First Nation v. British Columbia Hydro and Power Authority, 1999 655 (SCC), [1999] 3 S.C.R. 134, [1999] S.C.J. No. 38, 176 D.L.R. (4th) 276, 246 N.R. 201, [1999] 9 W.W.R. 517, J.E. 99-1801, 129 B.C.A.C. 1, 67 B.C.L.R. (3d) 1, [1999] 4 C.N.L.R. 277, 90 A.C.W.S. (3d) 816 Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43 Crown Forest Sustainability Act, 1994, S.O. 1994, c. 25, ss. 3 [as am.], 31, (1), 33, (1), 40, 49 [as am.], (1) [as am.], 51(5) [as am.] Crown Timber Act, R.S.O. 1990, c. C.51 [rep.], s. 51 Limitation of Actions Act, R.S.N.B. 1973, c. L-8, s. 9 Limitations Act, R.S.O. 1990, c. L.15 [rep.], s. 45(1) [rep.] Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 4, 5, 24(1), (2), (3), (4), (5) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194 Authorities referred to Hogg, Peter W., Constitutional Law of Canada, 5th ed. (looseleaf) (Scarborough, Ont.: Thompson Carswell, 2007) [page747]
Janet E. Minor and Michael S. Dunn, for appellant Her Majesty the Queen in Right of Ontario. David Hamer and Gillian Slaughter, for respondent Boniferro Mill Works ULC.
The judgment of the court was delivered by
[1] MACFARLAND J.A.: -- This is an appeal from the judgment dated January 21, 2008, where it was declared that: (i) the Residual Value Charge imposed upon Boniferro by Her Majesty the Queen purportedly under the authority of the Crown Forest Sustainability Act, 1994, S.O. 1994, c. 25 is a tax for which there is no lawful authority to impose and collect; (ii) Boniferro is entitled to an accounting by Her Majesty the Queen of all RVCs paid by Boniferro since March 13, 2003; (iii) Boniferro is entitled to a refund of all RVCs it paid to Her Majesty the Queen since March 13, 2003 with interest thereon in accordance with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and the Courts of Justice Act, R.S.O. 1990, c. C.43. Overview
[2] The respondent, Boniferro Mill Works ULC ("Boniferro") acquires timber, owned by the Crown, and which it harvests from Crown land pursuant to a licence granted to it under the Crown Forest Sustainability Act ("CFSA"). For this privilege, it pays certain fees to the Crown. Those fees include: (a) Forest Renewal Charge pursuant to s. 49 of the Act; (b) the Forestry Futures Charge pursuant to s. 51(5) of the Act; and, (c) the price for the timber consisting of two components: (i) the minimum value component; and, (ii) the residual value component. [page748]
[3] The respondent argued and the application judge accepted that a portion of these charges (the "Residual Value Component" or "RVC") was a tax for which there was no lawful authority. Ontario appeals from that judgment.
[4] The Crown asserts that the RVC forms part of the price paid by purchasers of Crown timber and which the respondent agreed to pay. The Crown, when disposing of its property, is in no different a position than any other property owner. It may choose whether to sell its property, and may set the price for such a sale as it sees fit. There is no entitlement to purchase Crown timber. The charge at issue is only paid by those who choose to purchase Crown timber.
[5] The respondent argues that in pith and substance, when the legislative structure and machinery are properly examined against the background of legislative history and jurisprudence, as they were by the application judge, the RVC is seen to have the hallmarks and characteristics of a tax as opposed to a price. The Facts
[6] The respondent operates a hardwood sawmill in Sault Ste. Marie, Ontario. It harvests timber and produces forest products, which are sold to end users for manufacture into hardwood flooring, kitchen cabinets, furniture, pallets, boxes and musical instruments.
[7] Boniferro acquired the sawmill on March 13, 2003, and at the same time acquired shares in the capital stock of Clergue Forest Management Inc. ("Clergue"). Clergue holds a licence, a Sustainable Forest Licence ("SFL") for the Algoma Forest Management Unit on behalf of Boniferro and five other partner companies. Crown forest resources are sold only to persons who are licensed to harvest forest resources pursuant to a SFL.
[8] Clergue harvests timber pursuant to its SFL and provides a supply of forest resources to the partner companies. Clergue is the respondent's main supplier of harvested timber. The respondent reimburses Clergue for all charges levied by the Minister against Clergue as part of the licensing regime under the CFSA.
[9] Clergue was issued Sustainable Forest Licence Number 542257 approved by Order-in-Council No. 2242/97 dated December 10, 1997, which permitted it to harvest all species of timber in the Licence Area (as specified in the licence) in the Algoma Forest. The terms and conditions of the licence are set out in that document and include: 2.2 The Company shall pay area charges and forestry future charges in accordance with sections 32(1) and 51(5) of the Crown Forest Sustainability Act. [page749] 2.4 The Company shall pay the prices determined by the Minister under section 31 of the Crown Forest Sustainability Act for forest resources harvested under this licence. . . . . . 10.1 The Company shall be involved by the Crown for the forest renewal charge to be paid by the licensee pursuant to the Crown Forest Sustainability Act. The Company shall pay the forest renewal charge to the trust.
[10] The licence was for a term of 20 years commencing April 1, 2002, subject to review by the Minister every five years to ensure compliance with the terms and conditions of the licence.
[11] Section 31 of the CFSA provides:
31(1) The Minister may determine from time to time the prices at which forest resources may be harvested or used for a designated purpose under a forest resource licence. And s. 40 requires that Crown charges in relation to forest resources, authorized to be harvested pursuant to a SFL, shall be paid by the licensee whether the resources are harvested by the licensee or someone else with or without the licensee's consent. Crown charges are defined in s. 3 of the Act to include all prices, charges, fees, penalties, costs, expenses, interest and fines. Section 33 of the Act provides:
33(1) Property in forest resources that may be harvested under a forest resource licence remains in the Crown until all Crown charges have been paid in respect of the resources.
[12] All licensees are required by the CFSA to pay the following charges:
49(1) The holder of a forest resource licence shall pay forest renewal charges to the Minister of Finance in the amounts and within the times required by the Minister of Natural Resources. . . . . .
51(5) The holder of a forest resource licence shall pay forestry futures charges to the Trust in the amounts and within the times required by the Minister. And in addition to these sums "the price" for timber pursuant to s. 31 of the Act quoted above.
[13] At all relevant times "the price" included two components described in the Crown's factum as:
The minimum value component, which is usually set annually and is an amount per cubic metre of timber. The minimum value component ensures a minimum level of revenue from the sale of the timber. The amount varies between species or species group and the type of mill to which the timber is delivered. [page750]
The residual value component, which is an amount per cubic metre of timber that is determined on a monthly basis. Like the minimum value, the residual value is a component of the price for timber pursuant to section 31 of the Act.
[14] The RVC permits the Crown to set a price for its timber that takes into account a strong market for its product. The RVC may be charged when the net price deemed to be received by a category of mill for representative product exceeds a certain threshold amount. As the market price for the product increases beyond the threshold amount, the RVC amount increases each month. Similarly, when the market price for representative product decreases, the RVC amount decreases each month. When the market price is below the set threshold amount, the RVC is zero.
[15] The RVC varies by species/species group, category or grade and the type of mill where the timber is processed. The RVC calculation attempts to assign a value to the timber harvested from Crown lands that reflects current market conditions. For example, timber of the same specie and grade going to the same types of but different mills will bear the same RVC -- irrespective of the profit or indeed lack thereof of the individual mills. Analysis
[16] The Crown submits that the application judge fundamentally erred in failing to undertake any analysis in relation to its position that the RVC was simply a component of the price charged for the sale of Crown resources. The Crown says the application judge embarked on an analysis comparing regulatory charges to taxes in circumstances here, where the Crown never argued that the RVC was a regulatory charge. The Crown's position has always been that this is a case of proprietary rights where the government as a property owner is dealing with its property as an owner and setting a price for the sale of its resources.
[17] It appears from his reasons that the application judge understood the Crown's position. At para. 51 of his reasons, he says:
It says that, as such, the price which it sets as property owner in selling its resources to a purchaser such as Boniferro are charges entirely distinct from a tax or a regulatory charge.
[18] However, after examining the decision of the Supreme Court of Canada in Canadian Industrial Gas & Oil Ltd. v. Saskatchewan, 1977 210 (SCC), [1978] 2 S.C.R. 545, [1977] S.C.J. No. 124 ("CIGOL") and noting the differences between that case and the one before him, he went on to note the two similarities between [page751] the RVC and the royalty surcharge which was the subject of the CIGOL case: -- that the RVC proceeds are paid into the provincial consolidated revenue fund; and, -- the legislation provides for significant remedies to the government for collection over and above a private lessor- lessee relationship.
[19] In CIGOL the court was concerned with a royalty surcharge, imposed not only on those producers who had existing leases with the Crown but also on those who were producing on private lands and whose rights in that regard were expropriated by the same legislation. The royalty surcharge did not take a share of the producer's profits but 100 per cent of them and was mandatory regardless of actual production or profit level:
. . . any person who is producing oil from lands in respect of which the Crown has expropriated the oil and gas rights has no right to elect not to produce oil which would become liable for payment of the royalty surcharge. He is compelled, by the imposition of a heavy penalty imposed for failure to comply, to continue the production of oil. [See Note 1 below]
[20] It is of note that in CIGOL there was never any doubt about the validity of the traditional royalties levied. The court differentiated between the "royalty surcharge" and the existing royalties which were described as "genuine".
[21] The application judge thereafter considered the analysis in three cases [See Note 2 below] -- all of which addressed the distinction between regulatory charges and taxes. In applying the test set out in those cases to the facts before him, he erred. The only issue he ought to have considered was whether, as owner of the land and timber in question, Ontario was entitled to set the price as it did.
[22] Instead, the application judge applied the Eurig [See Note 3 below] analysis to the case before him. This analysis was succinctly set out, at para. 15, in Eurig as follows: [page752]
Whether a levy is a tax or a fee was considered in Lawson, supra. Duff J. for the majority concluded that the levy in question was a tax because it was: (1) enforceable by law; (2) imposed under the authority of the legislature; (3) levied by a public body; and (4) intended for a public purpose. Using that analysis, the application judge concluded [at paras. 78-85]:
. . . that the RVC is enforceable by law. The sections of the Crown Forest Sustainability Act which I have quoted above provide broad enforcement measures, some of which have in fact been applied against Boniferro. The enforcement powers of the respondent reach far beyond those of a property owner and are specifically provided for in the legislation. Furthermore, payment of the RVC is compulsory in the same sense as the GST, for example.
I further find that the RVC is purported to be imposed under the authority of the legislature, and in particular, section 31 of the Crown Forest Sustainability Act. The enforcement provisions of the Act relate to "Crown charges" which are all prices, charges, fees, penalties, costs, expenses, interest and fines imposed under this Act or under a Forest Resource Licence. The Forest Resource Licence is a licence granted under the Act. Although the licence itself contains s. 2.4, whereby,
2.4 The company shall pay the prices determined by the Minister under Section 31 of the Crown Forest Sustainability Act for forest resources harvested under this licence. That section, in my view, does not stand alone as a term between a lessor and lessee, but rather, is in fact a term "imposed under the authority of the legislature."
I find that the true purported authority for the RVC is s. 31 of the Act, not the licence alone.
The RVC clearly is levied by a public body.
Furthermore, the RVC, unlike the other two trust provisions provided for in the Crown Forest Sustainability Act, is intended for a public purpose being entirely deposited into the general consolidated revenue fund for the province. Indeed the Crown concedes this point.
The court, in Eurig, also considered [at p. 11 D.L.R.]
another factor that generally distinguishes a fee from a tax is that a nexus must exist between the quantum charged and the cost of the service provided in order for a levy to be considered constitutionally valid.
There is no evidence whatsoever of any such nexus in relation to the RVC.
Justice Major, for the court, stated at para. 22,
The evidence in this appeal fails to disclose any correlation between the amount charged for grants of letters probate and the cost of providing that service. The Agreed Statement of Fact clearly shows that the procedures involved in granting letters probate do not vary with the value of the estate. Although the cost of granting letters probate bears no relation to the value of an estate, the probate levy varies directly with the value of the estate. The result is the absence of a nexus between the levy and the cost of the service, which indicates that the levy is a tax and not a fee. [page753]
On the basis of the foregoing analysis, I conclude that the Residual Value Charge is in fact a tax. It is in stark contrast to the Residual Value Rate which the Regulation to the Crown Timber Act authorized as one element of Crown charges and which was specifically identified in the Schedule 1.1 to the Regulations. It has no relationship to a regulatory scheme and bears no nexus to any cost of delivery of services by the respondent. It clearly fits the criteria set out in the Lawson case for determination of whether a levy is a fee or a tax. The RVC was not arrived at by a process of negotiation between free wills resulting in a meeting of minds, rather it is an obligation imposed by the respondent. As such, in my view, it is an obligation that arises at law and not pursuant to contract.
[23] He then went on to consider whether there was express legislative authority to authorize the imposition of a tax and concluded that s. 31 of the Act does not authorize the imposition of a tax.
[24] In his analysis, the application judge placed great reliance on the differences between the Act and the Crown Timber Act, R.S.O. 1990, c. C.51 which preceded it. He noted that the former Act provided for a Forest Renewal Trust and a Forest Futures Trust similar to the charges found in the Act.
[25] He also noted what he described as the "marked contrast" between s. 31 of the Act and s. 51 of the former Act that provided:
- Unless otherwise provided in the regulations, the Crown dues to be paid in respect of timber by a licensee or class of licensee are those Crown dues fixed or determined under the regulations in force at the time the timber is measured, even if the timber is cut before the regulations come into force.
[26] He noted that the Residual Value Rate was specifically referenced by name in the Regulations and was a fixed amount and placed reliance on that fact in concluding [at para. 90]:
. . . there is no legislative authority authorizing the Residual Value Charge tax.
[27] There can be no doubt that proprietary charges are different from regulatory charges or taxes. In 620 Connaught Ltd. v. Canada (Attorney General), [2008] 1 S.C.R. 131, [2008] S.C.J. No. 7, 2008 SCC 7, at para. 49, Rothstein J. observed:
I agree that proprietary charges for goods and services supplied in a commercial context are distinct from either regulatory charges or taxes and may be determined by market forces. As explained by Professor Hogg in Constitutional Law of Canada (5th ed. 2007) at pp. 870-71:
[Proprietary charges] are those levied by a province in the exercise of proprietary rights over its public property. Thus, a province may levy charges in the form of licence fees, rents or royalties as the price for the private exploitation of provincially-owned natural resources; and a province may charge for the sales of books, liquor, electricity, rail travel or other goods or services which it supplies in a commercial way. [page754]
[28] In 620 Connaught, the government did not argue that the licence fees that were the subject of that case were proprietary charges. The case instead was concerned with whether the charges were of a regulatory nature or a tax.
[29] A necessary and important distinction is to be made between a province's broad power to control the use and exploitation of natural resources located on lands owned by the Crown and the power possessed by the Crown as a legislative authority which power is limited by the Constitution.
[30] As Professor Hogg has noted:
The exploitation of a provincially-owned resource can be controlled by the province, either by the province directly producing and selling the resource, or by the province granting permits, leases or licences that authorize private firms to produce and sell the resource. Obviously, the rate of production, the degree of processing within the province and (subject to market conditions) the price at which it is to be sold can be controlled by the province as proprietor . . .
A province can profit from the exploitation of provincially- owned resources in a variety of ways: by direct sales or by licence fees, rents or royalties.
Peter W. Hogg, Constitutional Law of Canada, 5th ed. (looseleaf) (Scarborough: Thomson Carswell, 2007) at pp. 29-4 to 29-5.
[31] When the Crown is disposing of its own property, it is not bound by limits on its legislative authority. The use and disposition of Crown timber is a common example of the authority of the Crown to dispose of its property as it sees fit. Professor Hogg notes, at pp. 30-10 to 30-11:
Most forest lands are owned by the provinces . . . In each province, the provincially owned forests are not only subject to provincial legislative power under s. 92(5) and s. 92A, they are also subject to provincial executive power as proprietor: the province enjoys the same powers of disposition and management as a private proprietor. The provincially-owned forests are in fact harvested by private firms to whom the provincial Crown issues licences to cut timber. The process is controlled by the province through conditions attached to the licences . . .
The province can derive revenue from the production of timber on its own lands through sales of timber, rents, licence fees and stumpage fees (which are like royalties). When imposed as a proprietor, these charges are valid, even if they would be invalid if levied by legislation as taxes.
[32] As the Crown has noted, in para. 34 of its factum:
The difference between a proprietary charge and a tax can be illustrated in this case by the different treatment accorded Crown and private timber, harvested by the same company and milled at the same sawmill. Under the Act, the harvester of Crown wood must pay all of the charges discussed above. However, the harvester of private wood is liable to pay none of these charges -- that harvester must pay whatever fees are agreed to with the owner of the private land. [page755]
[33] In CIGOL, the invalid royalty surcharge was held to be a tax because: (1) It impacted on those who had no contractual relationship with the Crown. (2) The obligation to pay the surcharge arose pursuant to legislation and not by contract. (3) The legislation compelled producers to continue producing oil or pay a significant fine if they refused. (4) The surcharge was levied on the share of production to which, by the terms of the lease, the lessee was entitled to keep.
[34] None of these factors are present in this case. Here, only those who purchase timber from the Crown are required to pay the charge as part of the price for the timber. The obligation to pay what amounts to a variable royalty is clearly set out in the licence granted to the licensee in addition to s. 31 of the Act. There is no obligation on anyone to purchase Crown timber. Mills are free to acquire timber from private sources in which event there is no obligation to pay anything to the Minister. Finally, the RVC allows the Crown to share in the profits when the market is strong. At the risk of repetition, in relation to the latter point, the Supreme Court of Canada has said that proprietary charges may be determined by market forces: see 620 Connaught, supra, at para. 49.
[35] In concluding that the RVC was a tax, the application judge relied on Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, supra, wherein the Supreme Court of Canada defined the classic elements of a tax to be: (1) Is the levy enforceable by law? (2) Is the levy imposed under the authority of the legislature? (3) Is the levy imposed by a public body? (4) Is the levy imposed for a public purpose?
[36] The application judge concluded that the RVC met all four criteria and therefore was a tax. However, as the Supreme Court of Canada noted in 620 Connaught, supra, at para. 23:
[t]hese characters will likely apply to most government levies.
[37] In MacMillan Bloedel Ltd. v. British Columbia, 1985 313 (BC SC), [1985] B.C.J. No. 3015, 69 B.C.L.R. 11 (S.C.) Spencer J., at para. 7, [page756] commenting on the CIGOL decision which relied on the Lawson case definition of the four classic elements of tax, stated:
It was enforceable by law, it was imposed under the authority of the Legislature, it was imposed by a public body, and it was made for a public purpose. With great respect, although that case is authority for the proposition that an impost cannot be a tax unless it meets those criteria, I do not think the converse necessarily follows, that anything meeting those four criteria must be a tax. I do not of course dispute the ruling in that case that the royalty surcharge was a tax, but those four tests would apply to a ferry fare in British Columbia, although in my opinion that fare is not a tax but a fee for service imposed under statutory authority. I agree with and accept his reasoning. Although the levy may meet the four Lawson criteria, that alone is not sufficient to make the levy a tax.
[38] In my view, it is clear from all of the above that the RVC was merely part of the purchase cost of timber from the Crown. There was no obligation imposed on anyone to purchase timber from the Crown but if and when they did, it was clear from both the Act and the terms of their licence from the Crown that the price of that timber would vary according to market conditions and would be set by the Minister. In my view, the RVC is not a tax, and accordingly, the judgment declaring it to be such must be set aside. Limitation Defence
[39] In view of my conclusion that the RVC is not a tax but rather a valid part of the purchase price of timber, it follows that the respondent is not entitled to any refund of money paid to the Crown as RVC. It is therefore unnecessary to determine the second ground of appeal which relates to the limitation period, but I do so in the event this case goes further.
[40] The Crown says the application judge made two errors when he concluded (1) that the limitation period began to run from the date that the respondent first paid RVC and (2) that the relevant limitation period is six years.
[41] The Crown says the cause of action must be said to be complete when each payment was made in essence, a separate and distinct cause of action for each payment made. The effect causes two limitation periods to be relevant: s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, which provides a two-year limitation for the commencement of claims from the time a claim is discovered, as well as the former Limitations Act [Real Property Limitations Act], R.S.O. 1990, c. L.15, which provides for a six-year period after the cause of action arose.
[42] The Crown says the new Act applies to all causes of action discovered after January 1, 2004, and therefore the respondent [page757] would only be entitled to repayment from two years before the Notice of Application was filed, August 20, 2007. (The Crown's factum, at para. 59, erroneously states that the Notice of Application was filed August 20, 2005.)
[43] The old Act applies for claims based on acts or omissions that took place before January 1, 2004, and for this case that period is six years. Therefore, the Crown argues, payments made to December 31, 2003 are recoverable but those made after January 1, 2004 to August 20, 2005 are statute barred because only those payments made in the two years prior to the issuance of the Notice of Application are recoverable, i.e., in the period from August 20, 2005 to August 20, 2007, the latter being the date the Notice of Application was filed.
[44] The Crown relies on the transition provision contained in the new Act. Section 24(5) of the new Act provides:
24(5) If the former limitation period did not expire before the effective date and if a limitation period under the Act would apply were the claim based on an act or omission that took place on or after the effective date, the following rules apply: 1. If the claim was not discovered before the effective date, this Act applies as if the Act or omission had taken place on the effective date. 2. If the claim was discovered before the effective date, the former limitation period applies.
[45] Section 24(1) defines "effective date" to mean the date on which the new Act came into force, which was January 1, 2004. The difficulty here lies in the fact that James P. Boniferro, president and CEO of the respondent, in para. 10 of his affidavit sworn 20 August 2007, states:
- Until we at Boniferro realized in early summer, 2007 that the RVC was an unauthorized tax rather than simply a component price of Crown timber we had been disputing with the Minister the level at which the RVC was being charged.
[46] The application judge, relying on the decision of the Supreme Court of Canada in Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007 SCC 1, [2007] 1 S.C.R. 3, [2007] S.C.J. No. 1, found that the respondent's cause of action was complete "at the moment the Province illegally received the payment", which would have been sometime after March 2003. He concluded the applicable limitation period was six years under the former legislation. In Kingstreet, no issue of competing limitation periods arose and the language of the New Brunswick statute was in terms very similar to the former legislation in this province. Section 9 of the New Brunswick Limitation of Actions Act, R.S.N.B. 1973, c. L-8 provided: [page758]
- No other action shall be commenced but within six years after the cause of action arose.
[47] Section 45(1)(g) of the former Ontario legislation Limitations Act provides:
45(1) The following actions shall be commenced within and after the times respectively hereinafter mentioned, . . . . . (g) an action for trespass to goods or land, simple contract or debt grounded upon any lending contract without specialty, debt for arrears of rent, detinue, replevin or upon the case other than for slander,
within six years after the cause of action arose.
[48] Both statutes were based on the time when the cause of action arose while the new Ontario statute is based on discoverability of the cause of action.
[49] The respondent's claims are for payments made to the appellant both after January 1, 2004 and before that date. The uncontroverted evidence is that none of the claims were discovered before August 2007, and the appellant has not taken issue with this fact.
[50] The analysis must begin with considerations of the provisions of the new Act.
Payments made after January 1, 2004
[51] Section 4 of the new Act provides:
- Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
[52] The uncontroverted evidence is that the respondent did not discover that it had a claim in relation to the payments it had made until August 2007. Section 5 of the new Act provides:
5(1) A claim is discovered on the earlier of, (a) the day on which the person first knew (i) that the injury, loss or damage had occurred, (ii) that the injury, loss or damage was caused by or contributed to by an act or omission, (iii) that the act or omission was that of the person against whom the claim is made, and (iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and [page759] (b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
[53] In my view, there is nothing in s. 5 that would put the discovery of the claim at any point in time other than the time at which the respondent says the claim was discovered.
[54] In view of the very technical nature of the subject matter and specifically whether the payments were an unlawful tax or merely part of the cost of timber, it is my view that a reasonable person would not be aware that a proceeding would be an appropriate means to remedy the perceived wrong or that they even had a claim until they had received expert advice in relation thereto.
[55] While the respondent was aware that it was making payments to the appellant from the time it acquired its interest in Clerque, it was not aware that it may have had a claim for repayment of some of those moneys until "early summer, 2007".
[56] As the claims were discovered in August 2007, the respondent had two years from that date in which to commence proceedings. The Notice of Application was issued August 20, 2007, well within the two years permitted by the new Act.
[57] Consequently, claims for payments made after January 1, 2004 are all made within time in accordance with the provisions of the new Act.
Payments made before January 1, 2004
[58] Section 24(2) of the new Act provides:
24(2) This section applies to claims based on acts or omissions that took place before the effective date and in respect of which no proceeding has been commenced before the effective date.
[59] The claim for the payments made before January 1, 2004 falls within s. 24(2). They are claims based on acts or omissions that took place before the effective date and in respect of which no proceeding was commenced before the effective date. Once s. 24(2) of the new Act is met the consequence is that the transition provisions of this section apply.
[60] The former limitation period under the old Act was six years and had not expired before January 1, 2004 (the claims began March 2003), and hence, s. 24(3) is of no application.
[61] Similarly, s. 24(4) does not apply to the facts of this case. While the former limitation period did not expire before the effective date, a limitation period under the new Act would apply were the claim based on an act or omission that took place on or after the effective date (January 1, 2004). [page760]
[62] This brings us to s. 24(5), which I will repeat for ease of reference:
24(5) If the former limitation period did not expire before the effective date and if a limitation period under the Act would apply were the claim based on an act or omission that took place on or after the effective date, the following rules apply: 1. If the claim was not discovered before the effective date, this Act applies as if the act or omission had taken place on the effective date. 2. If the claim was discovered before the effective date, the former limitation period applies.
[63] In my view, the facts of this case meet the requirements of s. 24(5)1 of the new Act. The former limitation period (six years) did not expire before the effective date (January 1, 2004) and a limitation period under the new Act would apply if the claim were based on an act or omission that took place on or after the effective date; the claim was not discovered before the effective date accordingly -- the new Act applies as if the act or omission had taken place on the effective date, January 1, 2004.
[64] Consequently, the claims in relation to the payments made before January 1, 2004 are for the purpose of the new Act treated as though they had been made on January 1, 2004. The tolling of the limitation period in relation to those claims, however, does not begin until the claims are discovered, which, here, was August 2007 as it was for the claims in relation to the payments made after January 1, 2004.
[65] In these circumstances, had Boniferro succeeded it could have claimed in respect of all payments made from March 2003 to January 1, 2004 (all deemed to have occurred January 1, 2004 by s. 24(5)1 and subject to a two-year limitation from the discovery of the claim) and those from January 1, 2004 forward, on the basis of s. 4.
[66] However, having found that the RVC is a legitimate component of the price of timber and a proprietary charge within the competence of the Crown, it does not matter in this case.
[67] For these reasons, I would allow the appeal and set aside the judgment of Tranmer J. dated January 21, 2008, and in its place I would order that the application be dismissed with costs.
[68] If the parties are unable to agree on costs, the Crown may file brief written submissions within 15 days of the release of these reasons and the respondent may file responding submissions within 15 days thereafter.
Appeal allowed.
Notes
Note 1: CIGOL, supra, at p. 555 S.C.R.
Note 2: Westband First Nation v. British Columbia Hydro and Power Authority, 1999 655 (SCC), [1999] 3 S.C.R. 143, [1999] S.C.J. No. 38, 176 D.L.R. (4th) 276; Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, 1930 91 (SCC), [1931] S.C.R. 357, [1931] S.C.J. No. 84, [1931] 2 D.L.R. 193; Eurig Estate (Re), 1998 801 (SCC), [1998] 2 S.C.R. 565, 40 O.R. (3d) 160, [1998] 2 S.C.R. 565, [1998] S.C.J. No. 72, 165 D.L.R. (4th) 1.
Note 3: See Eurig, supra.