Manitoba (Re the Queen in Right of) and Air Canada, 86 D.L.R. (3d) 631

  • Document:
  • Date: 2024



Manitoba Court of A ppeal,

Freedman, C.J.M., Monnin and Matas, JJ.A.

January  19 and February 16, 1978.



R. G. Carbert, D. D. Blevins and M. B. Nepon, for appellant.

H.B. Monk, Q.C., and G. E. myatt, for respondent.

January  19, 1978.


The judgment of the Court was delivered by

MONNIN, J.A.:-This is an appeal from a decision of Morse, J. [77

D.L.R. (3d) 68, [1977] 3 W.W.R. 129], wherein, amongst other things, he held that [at p. 83]:

… the airspace above the Province of Manitoba is not “within” the Province and that the Province has no legal right to assess or levy a tax under the Act in respect of aircraft, aircraft engines and parts consumed, and services, meals and liquor consumed or supplied to aircraft while in the airspace over the Prov­ ince of Manitoba.

Air Canada appealed a decision of the Minister of Finance by which he confirmed an amended assessment made pursuant to the Retail Sales Tax Act, R.S.M. 1970, c. R150 [formerly Revenue Tax Act, renamed by 1974, c. 57, s. 1], requiring Air Canada to pay re­ tail sales tax, penalties and interest totalling $1,375,387 for the pe­ riod of July 1, 1971 to June 30, 1974.

It is acknowledged by counsel that in respect to aircraft and re­ pair parts, the Minister was wrong in the period of assessment indicated since, prior to May 1, 1972, such aircraft and repair parts were exempt by virtue of s. 4(1)(r). Effective May 1, 1972, the Act was amended by 1972, c. 6, ands. 4(1)(r) was repealed [and substi­ tuted [1972, c. 6, ss. 6, 13; am. 1974, c. 57, s. 5]. Sections 3(14) and

4(6) were added [1972, c. 6, ss. 4, 13], and they are as follows:

3(14) For the purposes of this section, aircraft and repair parts therefor that have not been delivered to the normal place of business or residence of the pur­ chaser thereof prior to the first day of May, 1972, shall be deemed to have been purchased on or after the first day of May, 1972.


4(6) Notwithstanding section 3, where an aircraft is, in the opinion of the


minister, operated both within and without the province for the purposes of trade, the minister may estimate the proportion that the number of miles the aircraft is operated in Manitoba bears to the total number of miles the aircraft  is operated and may, for the purposes of this Act, fix the value of the aircraft and the repair parts and services therefor, as that  part of  the value  thereof  that bears the same proportion to the total value thereof as the proportion esti­ mated above; and tax is payable on that part of the value of the  aircraft and  the repair parts and services therefor so fixed.


The legislation  is entitled  “a  Retail  Sales  Tax  Act”  and  is  a  tax  en on all tangible personal property consumed or used in the Province,   6



except for those  items  specifically  excluded  by  the  Act.  The  pur-  o pose of the legislation is not to regulate or to control aviation or N aeronautics –  a field reserved  to the  Federal  Parliament  by Re  Ae-   N riai Navigation; A.-G. Can. v. A.-G. Ont et ai., [1932] 1 D.L.R. 58,  [1932] A.C. 54, [1931] 3 W.W.R.  625 [reversing [1931] 1   D.L.R. 13,                                                              ro

[1930] S.C.R. 663] – but is a tax levied in order to raise revenue for the  Province  of  Manitoba. The purpose of  the  legislation  is  not,

however, decisive of the question of taxability of aircraft using the ..­ airspace over the Province of Manitoba.

No Province has the right to make laws which are operative out­ side of its territory. A Province can only tax within its jurisdiction and not without.

The validity of the Act is not challenged. It is a  direct  tax  intra vires of the Province of Manitoba: see Cairns Construction Ltd. v. Government of Saskatchewan (1960), 24 D.L.R. (2d) 1, [1960] S.C.R.

619, 35 W.W.R. 241.                .

At the hearing before us counsel for the Province of Manitoba abandoned all claims to any tax on liquor sold and meals supplied  to passengers on aircraft flying into or out of the Province of Mani­ toba.

The gist of the question is, does Manitoba have legislative au­ thority over the airspace above it in order to levy a tax in connec­ tion with the operation of  aircraft  within  such  airspace  whether the aircraft lands in Manitoba or travels above Manitoba without ever landing? The implications of this question are of grave conse­ quence, since if Manitoba is found to have jurisdiction over its airs­ pace, so would have all the other Canadian Provinces over theirs, and national air-carriers and other carriers could some day  be  faced with multifarious assessments for the same aircraft  in vari­ ous Provinces.

The amended assessment was made in relation to the consump­ tion of all aircraft of Air Canada which either landed in Manitoba  or overflew th Province without landing in Manitoba. Air Canada has a fleet of some 125 aircraft. During the period in question, only 25  of  them  ever  came  into  Manitoba,  one  of  which,  valued at $25,883,682, for one appearance on Manitoba soil attracted a tax at the rate of 5%, namely, $129,418. Recent purchases of large aircraft are in the neighbourhood of $50,000,000 each. One shudders at the amount of retail sales tax involved.

After a lengthy study of the historical background, Morse, J., concluded that, prior to the entry of Manitoba into Confederation,  if there were proprietary interest in the airspace it belonged to the British Crown and that since Confederation no one, either the Brit­ ish Crown, the Federal Crown, or the Hudson’s Bay Company, has transferred to Manitoba jurisdiction in the airspace above it. I ac­ cept the soundness of that reasoning and the historical background set forth in th€ reasons of Morse, J., but I  would rather rest the  case on the basis that air and airspace are not the subject of owner­ ship by anyone, either State or individual, but fall in the category  of res onmium communis. Air or airspace is incapable of delinea­ tion or demarcation. Where does it start and where does it end? Does it start at one inch above ground level and end at a yet un­ known stratosphere? No one has yet devised any scientific method to define airspace, to contain it within boundar ies and to delineate it sufficiently for proper identification so that ownership can be firmly established if questioned.

Counsel for the Province of  Manitoba,  both  in  the  lower  Court and in this Court, relied on  the  maxim cujus est  solum ejus est us­  que ad coelum et ad infernos, which may be translated, though in­ adequately, by “ownership of the soil carries with  it  ownership  of what is above and below it”. The Latin phrase, much more  pictur­ esque than the English translation, speaks of  “up  to  heaven  and  down to hell”. In support of this claim, counsel for the Province of Manitoba relied on the approval of  the maxim  by  Newcombe, J., in Re Aerial Navigation, [1931] 1 D.L.R. 13 at p. 36, [1930] S.C.R. 663  at p. 701. First it is to be noted that of  the  seven  Supreme  Court Judges who heard that case, five, including Newcombe, J., gave reasons. Some of his colleagues agreed with portions of his reasons, but no one specifically agreed with his reference  to and approval  of the maxim. The decision of the Supreme Court was reversed by the Privy  Council [[1932] 1  D.L.R. 58, [1932] A.C. 54, [1931] 3 W.W.R. 625]. At that level it was argued by counsel for the Attorney-Gen­ eral of Canada that the maxim applied. Lord Justice Sankey, who wrote the speech for the Privy Council, did not make any reference to the maxim. I consider that I am not bound by the reasons of Newcombe, J., though I must treat them  with  respect, and I am  not bound by his acceptance of the maxim as a sound principle of law.

If one looks at the jurisprudence  over the last years and  reads the recent authorities, one finds that no one has accepted the  maxim as a sound pronouncement of the law. It has been called a “maxim of dubious origin”, “a fanciful notion”, “a fanciful  phrase”

–   such words are far from being words of approval.

In Commissioner for Railways et al. v. Valuer-General, [1973] 3 All E.R. 268 at pp. 277-8, Lord Wilberforce, in his speech on behalf of the Privy Council, had this to say about it:

It is in relation to this question that the Latin tag “usque ad coelum et ad infernos” has been introduced and given a prominent place in argument.

It is well known that this brocard cannot be traced in the Digest or else- ,-._ where  in  Roman law. The  first  recognised  appearance  is in  the  13th century  (<)( gloss of the Bolognese Accursius on Digest viii.2.1. It  appears there in the form    en “cuius  est  solum eius esse  debet  usque  ad  coelum”  (cf  in  the  law  of  Scotland 2:

Stair’s Institutions ii.7.7). In the form of a maxim it only has authority at com- ‘-‘ mon law insofar as it has been adopted  by decisions, or equivalent   authority.

The earliest recognition appears to be recorded  in Bury v Pope  (1588) Cro Eliz   N    at 118, sub nom Bowry and Pope’s Case (1588) 1 Leon 168, where reference is N made to its use temp Ed I in the  form “cujus est  solum, ejus est summitas  us-  :::i que ad coelum”,  but the context  of  this statement  in  the  reign  of  Edward  I  has not been identified. Coke on Littleton 4a contains an uncritical adoption of this () maxim, supported by some references (incorrect) to Year Books. He is followed co  by Blackstone:

“Land hath also, in its legal signification, an indefinite extent, upwards …­ as well as downwards. Cujus est solum, ejus est usque ad coelum …  there­ fore no  man  may erect  any  building,  or  the  like, to overhang  another’s land …    So that  the  word ‘land’ includes  not  only  the face of  the earth, but everything under it, or over it.”

There are a number of examples of its use in judgments of the 19th century, by which time mineral values had drawn attention  to downwards extent as  well as, or more than, extent upwards. But its use, whether with reference to mineral rights, or trespass in the airspace by projections, animals or wires, is imprecise and it is mainly serviceable as dispensing with analysis (cf Pickering v Rudd, Ellis v Loftus Iron Co. (1874) LR 10 CP 10, [1874-80] All ER Rep 232). In none of these cases is there an authoritative pronouncement that “land” means the whole of the space from the centre of the earth to the heavens: so sweeping, unscientific and unpractical a doctrine is unlikely to appeal to the common law mind. At most the maxim is used as a statement, imprecise enough, of the extent of the rights, prima facie, of owners of land: Bowen LJ was concerned with these rights when, in a case dealing with rights of support, he said: “Prima facie the owner of the land has everything under the sky down to the centre of the earth … ” (Poutney v Clayton (1883) 11 QED 820 at 838, [1881-85] All ER Rep 280 at 284).

(The italics are mine.)

In Lord Bernstein of Leigh v. Skyviews & General Ltd., [1977] 2 All E.R. 902 at page 907, Griffiths, J., after quoting with approval a portion of the above speech of Lord Wilberforce, had this to say:

I can find no support in authority for the view that a landowner’s rights in  the air space above his property extend to an unlimited height. In Wandsworth Board of Works v United Telephone Co (1884) 13 QED 904 Bowen LJ described the maxim, usque ad coelum, as a fanciful phrase, to which I would add that if applied literally it is a fanciful notion leading to the absurdity of a trespass at common law being committed by a satellite every time it passes over a subur­ ban garden. The academic writers speak with one voice in rejecting the uncriti­ cal and literal application of the maxim: see, by way of example only, Winfield and Jolowicz on Tort, Salmond on Tort, Shawcross and Beaumont on Air Law, McNair on the Law of the Air, and Halsbury’s Laws of England. I accept their collective approach as correct. The problem is to balance the rights of an owner to enjoy the use of his land against the rights of the general public to take ad­ vantage of all that science now offers in the use of air space. This balance is in my judgment best struck in our present society by restricting the rights of an owner in the air space above his land to such height as is necessary for the ordi­ nary use and enjoyment of his land and the structures on it, and declaring that above that height he has no greater rights in the air space than any other member of the public.

The maxim cannot go further than direct the owner or occupier  of land in his enjoyment of the land and also to prevent anyone else from acquiring any title or exclusive right to the space above such land so as to limit a person to whatever proper use he can make of his land. Further than that it cannot go. Academic writers and modern jurisprudence reject its literal application. So must I in this age of jet aircrafts, satellites, supersonic concordes, orbital travel and visits to the moon. The sooner the maxim is laid to rest, the better it will be.

So far as the power to impose taxation is concerned (as distinct from the power to deal with matters like air pollution, hunting of game birds, etc.), Manitoba has no property right or legislative ju­ risdiction in relation to airspace over its territory, either at com­ mon law or under any other law, and the right of the Province to levy taxes does not extend beyond its property rights within the Province. Therefore, it cannot tax that which is in the  airspace above it.

Having reached that conclusion, I need not deal with the alleged errors in the computation of the tax and the assessment of the Minister of Finance and whether value means “fair value” or “depreciated value” of the aircraft and parts. I must indicate to counsel for the Crown, with respect, that his argument to the effect that there is no right of appeal in the matter of determination  of value by the Minister under s. 4(6), is not sound. Under s. 16(1) and 16(2), the Minister may make an estimate of the amount of tax col­ lected by the vendor or may estimate the fair value of the tax. Sec­ tion 19(1) unequivocally sets out that if a person is dissatisfied with the decision of the Minister under s. 18, he may appeal  to  the Court. A decision of the Minister under s. 18 refers back to a dis­ pute concerning the amount of an estimate made either under s. 16 or to an assessment made under s. 17. Once an appeal is launched, the whole matter is up for a review, and to argue that the Court is powerless to look behind the assessment and into the method or methods used by the Minister or his officers to arrive at the calcula­ tion of assessment, is to negate the value and the right of appeal so clearly granted by statute. The entire matter  is subject  to review and scrutiny. Therefore, the assessment of the various values and the method used to fix these values by the Minister or his staff can be looked into by the tribunal.

[NOTE: The following paragraphs printed in italics were with­ drawn and replaced by the comments in the Addendum,  p. 644, post, following the release by the Supreme Court of Canada of rea­ sons for judgment in Simpsons-Sears Ltd. v. Provincial  Secretary of New Brunswick et al. (1978), 82 D.L.R. (3d) 321, 20 N.B.R. (2d) 478.J

The matter of inventory is also challenged. That raises little prob­ lem. Inventory situate within Manitoba  attracts  tax; inventory  sit­ uate outside of Manitoba is  not  subject to taxation by  Manitoba. In his assessment, the Minister of Finance  also  assessed  timeta­ bles distributed without charge by Air Canada to its clientele. This assessment was challenged, and Morse, J., found in favour of Air Canada in  the following words [at p. 90}:

Even though the Air Canada timetable might not come within the definition of “books” in this section of Reg. Rl 50-Rl, there is no provision in the Act or Regu­ lations which purports to exclude publications  such as the  Air  Canada  timeta­ ble from the meaning of the word “books”, and the dictionary meaning of “book” includes “anything from which one may learn”. In my view, therefore, the Air Canada timetables are not subject to tax.

I have reached the opposite conclusion. Section 4(1)(s) reads as follows:

4(1) Notwithstanding section 3, no tax is payable under this Act in respect of the consumption of the following classes of tangible personal property· (s)    Books, newS]Japers, and periodical publications.

Section 28(j) of the Act reads as follows:

28 For the purpose of carrying out the provisions of this Act according to their intent, the Lieutenant Governor in Council may make such regulations and orders as are ancillary thereto and are not inc onsistent therewith; and every regulation and order made under, and in accordance with the authority granted by, this section has the force of law; and, without restricting the gener­ ality of the foregoing, the Lieutenant Governor in Co·uncil may make such regu­ lations and orders, not inconsistent with any other provision of this Act,

(j)      describing any tangible personal property mentioned in section 4, or any service mentioned in section 5,for the purposes of clarifying the interpretation of those sections; Regulation  R150-R1, R.R.M. 1971, s. 1(3)(k), reads as follows:

1. For the purposes of the Act and this regulation

(3)    “books” includes but does not include

(k)     timetables, Normally, in common usage, “books” would cover timetables. But the Minister is empowered to make regulations describing the tangi­ ble personal property mentioned in ss. 4 and 5 or clarifying the in­ terpretation of those sections.

I am of the view that in stating that a timetable is not a book for tax purposes, he has not gone beyond his powers of description. I note that throughout the Regulations various items are listed and are said “to mean” or “to include” and even “does not include”. There is a scheme or a pattern in this regulation which makes use of such expressions and I am unable to find error in the method fol­ lowed. The Minister has the right to describe and in describing he has the right to state that which is not a book for purposes of taxes and he has stated that a timetable, not being a book, is not exempt.

Now to the matter of interest on the amounts to be repaid by the Minister of Finance. Sections 13(4) [rep. & sub. 1974, c. 57, s. 9] and 26(2) of the Retail Sales Tax Act are as follows:

13(4) From and after the date on which, under this Act or the regulations, any debt due to the government under this Act is to be paid or remitted.

(a)      by a vendor to minister; or

(b)     by a purchaser to Her Majesty in right of Manitoba;

the debt bears interest at a rate or rates prescribed in the regulations, but  where no rate or rates have been prescribed in the regulations, the debt bears interest at % of 1% for each fuII month after the date that the debt was due  and payable; and the interest accrued on any such debt from time to time is a debt due to Her Majesty in right of Mamtoba, and is recoverable as such in a court of competent jurisdiction.

26(2) Where a person

(a)      has paid an amount under this Act as tax that is not payable as tax under this Act; or

(b)     has paid an amount under this Act as tax that is in excess of the amount payable as tax under this Act; or

(c)      has remitted under this Act an amount that he is not required to  remit under this Act; or

(d)     has remitted under this Act an amount that is in excess  of  the amount that he is required to remit under this Act;

the minister shall repay to that person the amount wrongly paid or the amount of the excess if application for refund has been made within two years of the date the overpayment was received.

There are presently under advisement by this Court three cases under the same Act. In two of these cases counsel for the Crown have taken a firm stand that the Crown cannot  be called  upon to pay interest unles specifically told to do so by statute and that, in the instant case, the statute does not order it to pay interest on the amount of overpayment. A review of the entire situation must, therefore,  be made.



The assessment of tax  was in the sum of add:             Interest accrued  to date on the net  tax

payable calculated at the rate of% of 1% per month

add:       Penalty at 5% on all unpaid balances Total amount claimed




$  162,463.00

$     66,764.00



On May 5, 1975, Air Canada paid the above sum under protest with notice of its intent to appeal the assessment, which it did on June 5, 1975.

On  May  4,  1976,  the  Minister  reduced  the  assessment   to

$1,375,387  and  forwarded  a refund –                                                                  without  any  interest  –                                                                  in the amount of $26,676. On May 27, 1976, Air Canada requested in- ,-._ terest on this latter sum at  the  prime rate   of 10%.                                                                 c:§

On May 28, 1976, the  solicitor  for  the  Government  of  Manitoba en

responded to the claim for interest that he could find no section au- 6 thorizing the Province of Manitoba to remit interest in connection o with sums obtained via the Retail Sales Tax Act. Morse, J., ac- N cepted this view.

On March  9, 1977,  judgment  was entered.  On  April 1, 1977, the c!

amount of the assessment  was fixed  by the  Court at  $1,856 and the c’.3

amount  of  the  refund  was  also fixed –                                                         without  interest  –                                                                   at co

$1,432,181. Thus no interest has been allowed on the sums improp- erly obtained by way of tax between May 5, 1975 and the date of ..­ judgment, March 9, 1977. Since March 9, 1977, the judgment bears ordinary Court interest on the  judgment.

In support of his contention on the  subject of  interest,  counsel for the Province refers to three cases. The first of them is The King v. Roger Miller & Sons Ltd., [1930] 2 D.L.R. 751, [1930] S.C.R. 293.

It  dealt  with  the interpretation of  a  contract  for  the construction

of harbour works for the Crown and the dispute centered around  the amount payable to the contractor for rental of the plant and in­ terest for delayed payments. Smith, J., speaking for the Court, said at p. 755 D.L.R., pp. 298-9 S.C.R.:

The only other amount in question here is the item of $10,937.71 allowed by the learned trial Judge to the respondents for interest on moneys not paid  to the respondents at  the time stipulated  in the contract. The total sum claimed  by the respondents for interest was $28,700.16, of which $17,762.45 was allowed and paid by the appellant, voluntarily as appellant claims.

It was argued that the interest claimed should  be treated as part of  the  cost of the work, and therefore is payable under the terms of the contract, but this argument seems quite unsound. It is a mere case of moneys becoming due to respondents at certain times and being withheld beyond the due  dates, in  which case the Crown is not liable to pay interest during default except under special circumstances such as the existence of statutory provision or contrac­ tual obligation.

The second case relied upon is Hochelaga Shipping & Towing Co. Ltd. v. The King, [1944] S.C.R. 138. The action, brought by way of petition of right, was to recover  damages  against  the Crown  for the loss of the suppliant’s tow-boat. Rinfret, J., speaking for the Court, stated that the Crown is not liable to pay interest unless the statute or the contract provided for it. It is to be noted it dealt with damages payable by the Crown and not reimbursement of taxes improperly obtained.

The third case relied upon is The King and Royal Bank of Can­ ada v. Racette, [1948] S.C.R. 28, which relied upon Hochelaga Ship­ ping & Towing Co. Ltd. v. The King, supra, and held that interest at the rate of 51h% per annum represented by the coupons attached to the mislaid or lost war loan bonds could not be recovered from the Crown. A further ground for this decision was that the coupons being bearer coupons may have been cashed by anyone who found them and that the Crown should not be called upon to pay interest on the lost coupons, as it might be called upon to pay twice for the same coupons.

All these cases were decided prior to the Proceedings Against the Crown Act, first  enacted  in  Manitoba  in 1951 (Man.), c. 13, now R.S.M. 1970, c. P140. The 1951 statute, as a reference in the current legislation still indicates, was copied in large part from the Crown Proceedings Act, 1947 (U.K.), c. 44, first enacted by the Mother of Parliament in 1947. All corresponding provincial statutes, as well  as the federal one, have their origin in this 1947 statute.

Under the general rule of common law no proceeding, civil or criminal, was maintainable against the Sovereign in person for it was said that the Courts, being the King’s own Courts, could have no jurisdiction over him. By virtue of a legal fiction – namely, that the King could do no wrong – the Crown, either in the right of the Mother of Parliament, or in the right of Canada, or in the right of    a Province, enjoyed all the immunities and privileges of the Sover­ eign. The only method available to obtain regress against the  Crown in the Courts was through a petition-of-right with leave of the Crown. All this was substantially and remarkably changed by the Proceedings Against the Crown Act, supra.

By virtue of ss. 4 and 5 there now exists a right to sue without a fiat of the Crown. The Crown is liable in tort for the acts of its officers or agents for acts of officers performing duties legally re­ quired, and the law as to indemnity and contribution applies to the Crown.

Sections 17(1) and 18 are as follows:

17(1) Subject to this Act, in proceedings against the Crown the rights of the parties are as nearly as possible the same as in a suit between person and per­ son; and the court may make any order, including an order as to costs, that it may make in proceedings between persons, and may otherwise give such ap­ propriate relief  as the case may require.

18 A judgment debt due to or from the Crown bears interest in the same way as a judgment debt due from one person to another. Thus, in proceedings against the Crown, the rights of the parties and the Crown are as nearly as possible the same as in a suit be­ tween person and person. It is to be noted that s. 18 has its origin in 21- s. 24 of the aforesaid United Kingdom legislation which is as fol­ lows:

Interest on debts, dwrruiges and costs.

24(1) Section seventeen of the Judgments Act, 1838 (which provides that a judgment debt shall carry interest) shall apply to judgment debts due from or to the Crown.

(2)  Where any costs are awarded to or against the Crown in the High Court, interest shall be payable upon those costs unless the court otherwise orders, ()  and any interest so payable shall be at  the same rate as that at which   interest is payable upon judgment debts due from or to the Crown.


Section three of the Law Reform (Miscellaneous Provisions) Act, 1934 (which empowers courts of record to award interest on debts and damages) N shall apply to judgments given in proceedings by and against the Crown.

(4)  This section shall apply both in relation to proceedings pending at the commencement of this Act and in relation to proceedings instituted thereafter.  Cll


Halsbury’s  Laws  of  England,  3rd  ed.,  vol. 11,  p. 21, para. 33, 00


In general, the Crown is in the same position as a subject as regards inte rest ..­ on debts and damages, and on judgment debts and costs.

In Manitoba, since 1951, the Crown is in the same situation as any citizen of the realm except with respect to injunctions, specific performance or orders for recovery of land, such exceptions being dealt with by ss. 15, 17(2), 17(3) and (4) of the Act and they have no application in this case.

In my view, the pronouncements of the Supreme Court in The King v. Roger Miller & Sons Ltd., supra; Hochelaga Shipping & Towing Co. Ltd. v. The King supra, and The King and Royal Bank  of Canada v. Racette, supra, with respect to interest no longer have any application and I do not consider myself bound by them, as the law has been substantially changed  by statute.

This Court in Chambers v. Leech, [1976] 4 W.W.R. 568, has care­ fully reviewed the legislation and our rules pertaining to interest  and the principle upon which interest  is granted.  Interest  in that case was allowed from the date of commencement of the action.

In Prince Albert Pulp Co. Ltd. et al. v. Foundation Co. of Canada Ltd. (1976), 68 D.L.R. (3d) 283, [1977] 1 S.C.R. 200, [1976] 4 W.W.R.

586, the Supreme Court of Canada unanimously held that a Court may allow interest where payment of a just debt has been improp­ erly withheld and it is fair and equitable that  the debtor  should make compensation by payment of interest at such rate  as  the Court may see fit. Martland, J., speaking for  the Court, dealt   with

s. 46 of the Saskatchewan Queen’s Bench Act, (1965) R.S.S. 1965, c. 73, which is in identical language to s. 71 of the Manitoba Court of Queen’s Bench Act, R.S.M. 1970, c. C280, referred to by Matas, J.A., in Chambers v. Leech, supra. Martland, J., stated at p. 293 D.L.R., p. 597 W.W.R.:

In summary, on the particular facts of this case, in my opinion foundation has established the improper withholding by P & W Pulpmills of payment of a just debt, and the circumstances make it fair and equitable that Foundation be compensated by the payment of interest. In my opinion the rates of interest applicable should be equivalent to the bank borrowing rates of  Foundation over the period from November 1, 1968, to the date of the judgment of this Court. Such interest should be payable for that period.

In  A1’1’Utx Potash Ltd. et  al. v. Government  of  Saskatchewan (1976), 71 D.L.R. (3d) 1, [1977] 2  S.C.R. 576, [1976] 6 W.W.R.    61, Dickson, J., in delivering the judgment of the Supreme Court of Canada, wherein the constitutional validity of s. 5(7) of the Proceedings against the Crown Act was challenged, expressed the view that the Supreme Court had the discretion –  which it refused  to exercise in that case –  to make an order directing the  Province  of Saskatchewan to hold, as a stakeholder, such sums as were paid to the Government by the various appellants pursuant to the im­ pugned legislation, namely, the Saskatchewan Mineral Taxation Act, R.S.S. 1965, c. 64 [am. 1973-74, c. 65], but with the right to the Province to use the sums in the interim and with the obligation to repay the said sums with interest in the event that the legislation were ultimately declared to be ultra vires of the Legislature of Saskatchewan. The yearly assessment under the Mineral Taxation Act could total more than $120,000,000. Interest on such amount would, therefore, be substantial. Dickson, J ., did not hesitate, notwithstanding the aforesaid prior pronouncements of the Su­ preme  Court, to state that theamount  would  bear interest.

In Canadian Industrial Gas & Oil Ltd. v. Government of Saskat­ chewan  et al. (1977), 80  D.L.R. (3d) 449, [1977] 6 W.W.R. 607,   18 N.R. 107, Martland, J., delivering the judgment of the majority, dealt with the constitutional validity of the Oil and Gas Conserva­ tion, Stabilization and Development Act, 1973-74 (Sask.), c. 72. He dealt with the matter of interest, without making any referenee to the prior decisions of the Supreme Court, as follows, at p. 465 D.L.R., 627 W.W.R.:

In my opinion the appellant is entitled to judgment  against the Government for the recovery of the sums paid by way of mineral income tax and royalty surcharge , with interest thereon from the respective dates of payment up to the date of repayment.

(The italics are mine.)

This decision goes further than Prince Albert Pulp Co. Ltd. v. Foundation Co. of Canada Ltd., supra, where the same learned Judge ordered payment of interest to the date of judgment of the Supreme Court and not to the date of repayment  as in  the latter case.

A careful review, section by section, of the Saskatchewan Oil and Gas conservation, Stabilization and Development Act, 1973, discloses no specific section imposing a liability upon the Saskat­ chewan  Crown in the event of overpayment or illegal payment   of tax, to pay interest on the amount of the refund. Thus, in that re­ spect, the Saskatchewan statute is similar to the Manitoba ReW:il Sales Tax Act.

Nowadays, governments collect substantial amounts of tax from individuals and corporations, sometimes in the millions of dollars. Taxpayers often have to  borrow  at  current  prime rate of interest  ,…_ or  more in order to meet  these  tax  obligations.  In  the  instant  case, (3 the   Minister  of  Finance  collected  and  obtained  interest  on  the    en

amount of the  assessment at 9% per annum with, in addition, pen-   6 alties at 5%. In  the interval  between  the date of  payment into the  o Government  coffers and  the  repayment  by  the  Government,  the N Government has had the use of $1.5 million  for  nearly  three years, which moneys, I am certain, were soundly invested by the  Province  c! or  used for  provincial  purposes.  It  would  be grossly  unfair,  inequi- J table and a serious act of unjust enrichment if the Province were 00 allowed to collect taxes, charge interest and penalties and, later on, when ordered to repay the tax illegally collected, could then hide ..­ behind a legal fiction and say, since the  King can do no wrong, we, the Province, are not bound to pay interest on these sums which we have obtained from you, Mr. Taxpayer, unless a specific section in   the Act directs us to do so. In an age when the Crown is visibly en­ gaging in commerce,  the  theory that  the King can do no wrong is   an anachronism. Such an antiquated principle should not be called back to work in favour of  the  taxing authority.

What is good for the tax collector, should be good for the tax­ payer. If the tax collector can call for and obtain interest, elemen­ tary fairness asks that it reimburse the taxpayer for moneys ille­ gally collected, together with interest at the same rate as  it  collected, at least until the date of  judgment.

In the Prince Albert case, supra, Martland, J., ordered interest to be paid at bank prime rate. Mr. Monk, counsel for Air Canada, has requested interest at the rate of 10%. I am prepared to allow it at 9%, namely, the same rate charged by the Province, from the date of payment up to the date of judgment; thereafter the amount of judgment will bear interest at the usual rate.

The assessment is varied to include tax on the timetables; the judgment is varied to include interest as aforesaid; otherwise the appeal is dismissed with costs in this Court.

ADDENDUM February  16, 1978.

D. D. Blevins, for appellant.

H.B. Monk, Q.C., and G. E. myatt, for respondent.

The judgment of Court was delivered by MONNIN, J.A.:-Reasons for judgment were released in this mat­ ter on Thursday, January 19, 1978. In those reasons I dealt with the matter of tax on timetables delivered free of charge by Air Canada to its clients in Manitoba and also to certain competing airlines and large scale customers. I dealt with the matter from pp. 638-9, ante, [printed in italics] in my reasons for  judgment.

On the same date, the Supreme Court of Canada released its  rea­ sons for judgment  in  Simpsons-Sears  Ltd. v. Provincial  Secretary of  New  Brunswick   et  al.  [now  reported  82  D.L.R.  (3d)  321,  20 N.B.R. (2d) 478]. Those reasons came to my attention during the last week of January, whereupon I immediately had a copy of them forwarded to both counsel for Air Canada and counsel for the Province of Manitoba, and I also requested the Registrar of the Court not to enter the certificate of decision if it were presented to him, until the matter could be looked into  further.

The applicability of the decision of the Supreme Court to the in­ stant case was argued by both counsel on Monday, February 13th, in the presence and at the request of the same panel who originally heard the  appeal last October.

This Court is consequently reviewing its decision in so far as the matter of timetables is concerned. We were informed by counsel that the amount of tax in the Minister’s assessment is in the neigh­ bourhood of $900, since the total value of the timetables is approxi­ mately $19,310. (These figures are considerably lower than the figure mentioned at  the earlier hearing.)

In the Simpsons-Sears case, supra, a similar statute was exam­ ined by the Supreme Court of Canada, namely, the Social Services and Education Tax Act, R.S.N.B. 1973, c. S-10, and particularly ss. 4, 5(1) and 7(1) of that Act. The issue in that case was whether or not the free distribution of catalogues by Simpsons-Sears in New Brunswick constituted a consumption of those catalogues so as to attract tax under the Social Services and Education Tax Act of that Province. Ritchie, J., speaking for himself and three of his col­ leagues, held that the catalogues were not finally consumed by Simpsons-Sears, who distributed them in New Brunswick for the benefit of such of the recipients as eventually make retail pur­ chases from them. He held as follows [at p. 325]:

The catalogues in this case are not finally consumed by the appellant who distributes them for the benefit of such of the recipients as make retail pur­ chases from them. The distribution merely places the catalogues in the hands of potential customers for use by them in making purchases within the Prov­ ince, but it is the purchase of the goods and not the distribution or receipt of  the  catalogues  which attracts the tax.

He further went on to say that if he were wrong on that point, an­ other question had to be considered, namely whether the tax was a direct tax within provincial jurisdiction or an indirect tax. He re­ lied on the distinction between  direct and indirect taxation  found  in the recent case of Canadian Industrial Gas & Oil Ltd.  v. Government of Saskatchewan et al. (as yet unreported, but released on November  23,  1977  [since  reported  80  D.L.R.  (3d)  449,  [1977] 6 W.W.R. 607, 18 N.R. 107]). He concluded that it was an indirect tax. Laskin, C.J.C., concurred with him on the first point, as follows [at p. 322]:

I have had the advantage of  reading the  reasons of  my  brothers  Ritchie  and Pigeon, and I agree with my brother Ritchie’s primary conclusion that the Ian- en guage of the  New Brunswi ck Social Services and Education Tax Act, R.S.N.B.    E. in New Brunswick. This is enoug h to dispose of the appeal which I would   allow as proposed by my brother Ritchie . Pigeon,  J.,  writing for  the  minority  of  the  Court,  would have held otherwise and would have found that the catalogues attracted tax. ct­o

The Manitoba legislation, the Retail Sales Tax Act, R.S.M. 1970, c. R150, by virtue of s. 4(1)(s) states that no tax  is  payable  in  re- spect of books, newspapers and  periodical  publications.  Section 4(1)(s) of the Act and s. 1(3)(b) and (k) of Reg. Rl50-Rl,  R.R.M.  1971, read as follows:

4(1) Nothwithstanding section 3, no tax is payabl e under t his Act in respect of the consumption of the following classes of tangible personal property:

(s)  Books, newspapers, and periodical publications.

1. For the purposes of the Act and this regulation

(3)    “books” includes

(b) sales catalogues; but does not include

(k)   timetables;

Thus timetables, by virtue of the Manitoba Act and its regula­ tions, are not books and, therefore, are taxable, whereas a “sales catalogue” is included in the definition of books in s. 1(3)(b) of the Regulations and does not attract  tax.

On the other hand, in New Brunswick s. ll(gg) reads as follows:

11. A consumer shall not be liable to pay the tax in respect of  the  consump­ tion of the following goods:

(gg) books that are printed and  bound, and that are solely for education­ al, technical, cultural or literary purposes, but not in cluding directo­ ries, price lists, timetables, rate books, catalogues, periodic   reports, fashion books, albums, magazines, periodicals, books for writing or drawing  upon, or any  books of the same general classes;

Under the New Brunswick legislation no tax is payable in re­ spect of the consumption of a book, but a book does not include a catalogue or a timetable. It is in view of this legislation that Rit­ chie, J., ruled that the catalogues were not finally consumed by Simpsons-Sears who distributed them for the benefit of such of the recipients who made retail purchases from them.

The same reasoning is bound to apply to the Manitoba legisla­ tion, which I find very similar in words and in context, and I con­ clude that Air Canada timetables are not finally consumed by Air Canada, who distribute them to the public for the benefit of such of those who make use of them to purchase their tickets.

I am unable to find any valid distinction on this point between  the Manitoba and New Brunswick legislation. I am bound by the Supreme Court decision in Simpsons-Sears Ltd., supra, and must accordingly conclude that the timetables were not consumed by Air Canada  and, therefore,  attract  no tax.

My prior reasons, from p. 638, starting with the words “In his as­ sessment, the Minister of Finance” up to p. 639, ending with “that  a timetable, not being a book, is not exempt”, are hereby with­ drawn and the aforesaid comments are substituted in their   stead.

Otherwise the reasons for judgment delivered on January 19, 1978, are reaffirmed as of that date and counsel may take out the appropriate certificate of decision from the Registrar of this Court. In  view of  the  circumstances  which have led to this limited re­hearing, there shall be no costs to anyone on this rehearing.

Appeal allowed in part; judgment varied.