T-4673-73
The Queen (Plaintiff)
v.
Perry J. Rhine (Defendant)
Trial Division, Cattanach J.—Ottawa, May 10,
1977.
Jurisdiction — Application pursuant to Rule 324 for
default judgment — Defendant's debt owing under Prairie
Grain Advance Payments Act — Whether the Court has
jurisdiction to entertain the application — Prairie Grain
Advance Payments Act, R.S.C. 1970, c. P-18, ss. 14, 21 —
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 17(4) —
Federal Court Rule 324.
The defendant owed the Crown a debt under the Prairie
Grain Advance Payments Act. The Crown brought an action
and pursuant to Rule 324, applied for judgment against the
defendant in default of defence. The Court questioned its
jurisdiction to hear the case in view of the Supreme Court of
Canada's decision in McNamara Construction (Western) Lim
ited v. The Queen.
Held, the application is dismissed. The question to be decid
ed is whether the Crown's action herein "is founded on existing
federal law". It is not enough that liability arises in conse
quence of a statute. While the Prairie Grain Advance Pay
ments Act authorizes the making of advances and prescribes
the conditions on which these advances may be made by the
Board as an agency of the Queen in the right of Canada it does
not, in itself, impose a liability and there is no liability except
that undertaken by the borrower which liability flows not from
the statute but from the borrower's contractual promise to
repay. The liability is based on the "undertaking" required by
the statute to be given and not from any liability imposed by
the statute itself as is the case under the Income Tax Act.
McNamara Construction (Western) Limited v. The Queen
[1977] 2 S.C.R. 654, applied.
APPLICATION.
COUNSEL:
W. Thiessen for plaintiff.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
The following are the reasons for judgment
rendered in English by
CATTANACH J.: This is an application by the
plaintiff, pursuant to Rule 324, for judgment
against the defendant in default of defence.
This matter arises as a consequence of payments
made by The Canadian Wheat Board, as agent for
Her Majesty in the right of Canada, to farmers, as
an advance on initial payments for threshed grain
in storage prior to delivery to the Board and these
advances are made pursuant to authority to do so
under the Prairie Grain Advance Payments Act,
R.S.C. 1970, c. P-18.
The statements of claim in these matters follow
a uniform pattern, (in fact they appear to have
been run off in numbers by some mechanical
means with blank spaces left for the appropriate
insertions) and I reproduce the statement of claim
in this present action:
To the Honourable the Federal Court of Canada:
Her Majesty's Deputy Attorney General of Canada, on
behalf of Her Majesty, sheweth as follows:
1. The Defendant resides at or near Carnwood in the Prov
ince of Alberta and was at all material times a producer
within the meaning of the Prairie Grain Advance Payments
Act, 1957-58, c. 2, s. 1., as amended.
2. The Canadian Wheat Board is a body corporate, incorpo
rated under the provisions of the Canadian Wheat Board
Act, R.S., c. 44, s. 1., as amended, and is for all purposes an
agent of Her Majesty the Queen in right of Canada.
3. Pursuant to the provisions of the said Prairie Grain
Advance Payments Act, the Defendant applied in writing to
the Canadian Wheat Board for an advance payment on the
date and in the amount set forth in section 1 of the Schedule
of Particulars attached to this Statement of Claim.
4. The said Application was in the form prescribed by the
said Act; and in the said Application the Defendant gave an
undertaking whereby he covenanted and agreed for consider
ation to repay the advance payment referred to therein by
the deduction of one-half of the initial payment on wheat,
oats or barley to be delivered by him to The Canadian Wheat
Board or at his option by the payment of cash or both.
5. In the said Application the Defendant also agreed that in
the event of default he would repay any balance of the
advance payment referred to in the said Application unrepaid
at the date of default to the Canadian Wheat Board with
interest at the rate of 6 per cent per annum after the date of
default.
6. Pursuant to the said Act The Canadian Wheat Board, on
or after receipt of the Application, paid to the Defendant the
sum set forth as an advance payment in section 1 of the
Schedule of Particulars.
7. Pursuant to the said undertaking, but prior to default, the
Defendant delivered wheat, oats or barley or paid cash to
The Canadian Wheat Board, in respect whereof the Canadi-
an Wheat Board credited the Defendant with the sum of
money set out in subsection (a) of section 2 of the Schedule
of Particulars.
8. The Defendant failed to discharge his said undertaking
and accordingly was on the date set forth in subsection (b) of
section 2 of the Schedule deemed to be in default pursuant to
subsection (1) of section 13 of the Act.
9. On the date of default the Defendant became indebted to
The Canadian Wheat Board in the amount set out in subsec
tion (b) of section 2 of the Schedule; and became liable to
pay interest on the said balance at the rate of 6 per cent per
annum until payment.
10. After the date of default The Canadian Wheat Board
received from and credited to the Defendant the sums set out
in subsection (c) of section 2 of the Schedule on or about the
dates referred to therein.
11. The Defendant is indebted to the Plaintiff for the princi
pal sum of $417.00 and accrued interest.
12. The Canadian Wheat Board on behalf of the Plaintiff
has demanded payment of the said indebtedness but the
Defendant has refused or neglected and continues to refuse
or neglect to pay the sum or any part thereof.
Claim
The Deputy Attorney General, on behalf of Her Majesty
claims as follows:
(a) The sum of $417.00;
(b) Interest from the date of default on the sum of money in
default or so much thereof as from time to time remains
unpaid at the rate of 6 per cent per annum until payment or
judgment;
(c) The costs of this action; and
(d) Such further and other relief as to this Honourable
Court may seem meet.
I accept as premises that the Prairie Grain
Advance Payments Act and legislation in pari
materia is intra vires the Parliament of Canada
and that regulations made by the Governor in
Council under section 21 of the Prairie Grain
Advance Payments Act are also infra vires.
The object and purpose of the statute is abun
dantly clear from its terms. It is simply that
Parliament has designated The Canadian Wheat
Board as an agency of Her Majesty the Queen to
make advance payments to producers of grain
prior to the delivery of that grain to the Board.
The authority to do so is contained in section 3
of the Act upon a producer making application
therefor and meeting prescribed requirements.
By section 4 the form and content of such an
application is prescribed.
By section 5 an applicant for an advance pay
ment before an advance is made is required to
execute an undertaking in favour of the Board that
he will deliver grain to the Board and that upon his
default to do so that he will repay to the Board the
amount in default with interest at the prescribed
rate after default.
Allegations bringing the defendant within the
precise statutory terms are recited in paragraphs 3
to 9 of the statement of claim.
Paragraph 10 alleges that certain amounts were
received from and credited to the defendant.
Paragraph 11 alleges that the defendant is indebt
ed to the Board in the amount therein specified
and in paragraph 12 it is alleged that demand has
been made for the payment of the defendant's
indebtedness but that the defendant has not dis
charged that indebtedness.
Her Majesty seeks judgment accordingly.
The provisions of the statute and the allegations
in the statement of claim make it abundantly clear
that the basis of the Board's claim for recovery is
the undertaking entered into by the defendant in
favour of the Board and the defendant's failure to
comply with the terms of that undertaking.
When this matter first came before me I direct
ed the Registry to invite written representations
from counsel for the plaintiff as to whether this
Court has jurisdiction to entertain this matter in
view of the decision of the Supreme Court of
Canada in McNamara Construction (Western)
Limited v. The Queen [1977] 2 S.C.R. 654 pro
nounced on January 25, 1977.
In response to that invitation, counsel for the
plaintiff by letter dated April 15, 1977 replied as
follows:
We are of the opinion that our actions are maintainable in
the Federal Court of Canada in view of the fact that we are an
agent of Her Majesty the Queen in Right of Canada and that
we issue suits pursuant to and by virtue of the Prairie Grain
Advance Payments Act. Section 13 of the said Act sets out the
conditions when an account is deemed to be in default.
Section 15 of the Prairie Grain Advance Payments Regulations
states "where a recipient is in default in respect of his under
taking, the Board or Her Majesty may effect collection of the
amount in default and any interest thereon by instituting
proceedings in the Federal Court of Canada."
In section 4(2) of the Canadian Wheat Board
Act, R.S.C. 1970, c. C-12, it is provided that the
Board is, for all purposes, an agent for Her Majes
ty in the right of Canada and its powers may be
exercised only as agent for Her Majesty.
Section 14 of the Prairie Grain Advance Pay
ments Act provides:
14. Where a producer is in default, all proceedings against
him to enforce his undertaking may be taken in the name of the
Board or in the name of Her Majesty.
I fail to follow how either such provision confers
jurisdiction in this matter on this Court.
In the first provision the Board is constituted an
agency of Her Majesty and the second provision is
that proceedings to enforce a defaulting producer's
undertaking may be taken either in the name of
the Board itself or in the name of Her Majesty. It
does not follow from either provision that jurisdic
tion is conferred on this Court.
It is significant to note that by section 14 the
proceedings may be taken either in the name of
the Board or in the name of Her Majesty to
enforce the producer's "undertaking" required of
him as a condition precedent to obtaining an
advance by section 4 of the Prairie Grain Advance
Payments Act. It seems to me that the "undertak-
ing" is exacted as a consequence of the statute and
it is that liability of the defendant which the
plaintiff seeks to enforce.
By section 21 of the Prairie Grain Advance
Payments Act the Governor in Council may make
regulations:
21....
(b) prescribing the steps to be taken to effect collection of
any amount in default in connection with advance payments;
Pursuant to that authority the counsel for the
plaintiff states in his letter that section 15 of the
regulations provides:
15. Where a recipient is in default in respect of his undertak
ing the Board or Her Majesty may effect collection of the
amount in default and any interest thereon by instituting
proceedings in the Federal Court of Canada.
The mere fact that the regulation provides that,
in default of the "undertaking", the Board or Her
Majesty may collect on a default thereof by
instituting proceedings in the Federal Court of
Canada cannot have the effect of bestowing juris-
diction on the Federal Court of Canada if that
jurisdiction does not otherwise exist.
I cannot refrain from pointing out that by sec
tion 10 of the Prairie Grain Advance Payments
Act the Board is given a lien for the amount of an
advance payment on the grain in respect of which
the advance payment was made. Here it is not the
lien which is sought to be enforced but the under
taking of the defendant to repay. The grain has
most likely disappeared and with its disappearance
so too has the lien. Rather the action is based on a
breach of contract.
In the McNamara case the Crown in the right
of Canada entered into a contract with the defend
ant for the construction of a penal institution in
Drumheller, Alberta and, in accordance with sec
tion 16(1) of the Public Works Act, R.S.C. 1970,
c. P-38, the Minister exacted of the defendant the
deposit of a bond to secure the due performance of
the work. Such a surety bond was given by Fidelity
Insurance Company of Canada in respect of the
defendant McNamara's obligation under the
contract.
The Crown brought action in the Federal Court
of Canada to enforce a claim for damages for
breach of contract by the defendant, McNamara,
and to enforce a claim against Fidelity on the
surety bond.
Section 17(4) of the Federal Court Act was the
foundation for the assertion of jurisdiction in the
Federal Court at the suit of the Crown therein.
Section 17(4) reads:
17....
(4) The Trial Division has concurrent original jurisdiction
(a) in proceedings of a civil nature in which the Crown or
the Attorney General of Canada claims relief; and
(b) in proceedings in which relief is sought against any
person for anything done or omitted to be done in the
performance of his duties as an officer or servant of the
Crown.
One issue in the McNamara case is whether the
Federal Court may be invested with jurisdiction
over a subject at the suit of the Crown in the right
of Canada seeking to enforce in this Court a claim
for damages for breach of contract.
The Chief Justice, speaking for the entire Court,
said [at page 658]:
The basis for the conferring of any such jurisdiction must be
found in s. 101 of the British North America Act which, inter
alia, confers upon Parliament legislative power to establish
courts "for the better administration of the laws of Canada". In
Quebec North Shore Paper Company v. Canadian Pacific
Limited ([1977] 2 S.C.R. 1054), (a decision which came after
the judgments of the Federal Court of Appeal in the present
appeals), this Court held that the quoted provisions of s. 101,
make it a prerequisite to the exercise of jurisdiction by the
Federal Court that there be existing and applicable federal law
which can be invoked to support any proceedings before it. It is
not enough that the Parliament of Canada have legislative
jurisdiction in respect of some matter which is the subject of
litigation in the Federal Court. As this Court indicated in the
Quebec North Shore Paper Company case, judicial jurisdiction
contemplated by s. 101 is not co-extensive with federal legisla
tive jurisdiction.
The predecessor of section 17(4) of the Federal
Court Act was section 29(d) of the Exchequer
Court Act, R.S.C. 1952, c. 98.
In this respect the Chief Justice continued to say
[at pages 659-660]:
A comparable predecessor provision was s. 29(d) of the Ex
chequer Court Act, R.S.C. 1952, c. 98 which gave jurisdiction
to the Exchequer Court
in all other actions and suits of a civil nature at common law
or equity in which the Crown is plaintiff or petitioner.
In the Quebec North Shore Paper Company case, this Court
observed, referring to this provision, that the Crown in right of
Canada in seeking to bring persons into the Exchequer Court as
defendants must have founded its action on some existing
federal law, whether statute or regulation or common law.
What must be decided in the present appeals, therefore, is
not whether the Crown's action is in respect of matters that are
within federal legislative jurisdiction but whether it is founded
on existing federal law. I do not think that s. 17(4), read
literally, is valid federal legislation under s. 101 of the British
North America Act in purporting to give jurisdiction to the
Federal Court to entertain any type of civil action simply
because the Crown in right of Canada asserts a claim as
plaintiff.
The Chief Justice later said [at page 662]:
What remains for consideration here on the question of
jurisdiction is whether there is applicable federal law involved
in the cases in appeal to support the competence of the Federal
Court to entertain the Crown's action, both with respect to the
claim for damages and the claim on the surety bond.
He goes on to say [at page 662]:
... it is enough that the Crown is a party to a contract, on
which it is suing as a plaintiff, to satisfy the requirement of
applicable federal law.
With respect to the Crown's action based on the
surety bond, the Chief Justice had this to say [at
page 663]:
I take the same view of the Crown's claim on the bond as I
do of its claim against McNamara for damages. It was urged
that a difference existed because (1) s. 16(1) of the Public
Works Act, now R.S.C. 1970, c. P-38 obliges the responsible
Minister to obtain sufficient security for the due performance
of a contract for a public work and (2) Consolidated Distiller
ies v. The King, supra, stands as an authority in support of the
Crown's right to invoke the jurisdiction of the Federal Court
where it sues on a bond. Neither of these contentions improves
the Crown's position. Section 16(1) of the Public Works Act
stipulates an executive or administrative requirement that a
bond be taken but prescribes nothing as to the law governing
the enforcement of the bond.
It was concluded that the challenge to the juris
diction of the Federal Court must succeed.
Accordingly, the first consideration in this
present matter is to ascertain if there is federal law
in existence covering the subject matter of the suit.
The position of counsel for the plaintiff as set
forth in his letter of April 15, 1977 quoted above,
undoubtedly is that such federal law exists in the
Prairie Grain Advance Payments Act and regula
tion 15 enacted pursuant thereto.
The question to be decided, as put by the Chief
Justice, is whether the Crown's action herein "is
founded on existing federal law".
My appreciation of the decision in the
McNamara case as it applies to the present matter
may be succinctly stated.
It is not enough that the liability arises in
consequence of a statute.
In the present instance while the Prairie Grain
Advance Payments Act authorizes the making of
advances and prescribes the conditions on which
these advances may be made by the Board as an
agency of Her Majesty the Queen in the right of
Canada it does not, in itself, impose a liability and
there is no liability except that undertaken by the
borrower which liability flows not from the statute
but from the borrower's contractual promise to
repay. The liability is based on the "undertaking"
required by the statute to be given and not from
any liability imposed by the statute itself as is the
case under the Income Tax Act, federal legislation
respecting customs and excise and like legislation.
As I appreciate the present matter it is com
pletely analogous to the Crown's claim on the
surety bond in the McNamara case. The undertak
ing required of the farmer as a condition precedent
to the Board making the advances stands on pre
cisely the same footing as the bond in the
McNamara case. Just as the Public Works Act
requires that a surety bond be given so too does the
Prairie Grain Advance Payments Act require that
an applicant for an advance shall enter into an
"undertaking". Like the Public Works Act requir
ing a bond, the Prairie Grain Advance Payments
Act requires an undertaking by the borrower and
as the Public Works Act prescribes nothing as to
the law governing the enforcement of the bond
neither does the Prairie Grain Advance Payments
Act prescribe anything as to the law governing the
enforcement of the undertaking.
I do not think that the existence of regulation 15
to which counsel for the plaintiff referred improves
the Crown's position in this matter any more than
the existence of section 17(4) of the Federal Court
Act improved the position of the Crown as plaintiff
in the McNamara case.
Furthermore, it seems to me that the self-same
elements which are present in this matter were also
present in the McNamara case.
The Supreme Court unanimously concluded
that there was no statutory basis for the Crown's
suit either for breach of contract or on the surety
bond.
Similarly, for the reasons expressed, I conclude
that there is no statutory basis for the Crown's suit
in the present matter and accordingly the applica-
tion for judgment against the defendant in default
of defence must be refused because, as I appreciate
the decision in the McNamara case, there is no
jurisdiction in this Court to entertain the state
ment of claim.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.