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Lionel Smith
Tue, 25 Nov 1997 10:03:39
SCC Case from June


Greetings all. I managed to miss a Supreme Court of Canada case decided in June, Air Canada v. Ontario (Liquor Control Board). The Ont CA decision is at 126 DLR (4th) 301, [1996] RLR 85. Confirming the CA, the airlines had been properly charged "markups" by the provincial liquor monopoly, but not "gallonage" fees. But the Supreme Court of Canada made an important variation relating to fault. The defendant had not pleaded limitation and the trial court and CA held that gallonage fees had to be refunded from 1 Jan 84 which was when the defendant became aware that it might not be entitled to charge them. The Supreme Court of Canada held that the defendant had to refund all of the gallonage fees. The text of the case (which is reported at [1997] 2 SCR 581 and elsewhere) is at

http://www.droit.umontreal.ca/doc/csc-scc/en/ pub/1997/vol2/html/1997scr2_0581.html›;

if you would like access to other formats (eg WordPerfect file) go to

‹http://www.droit.umontreal.ca/doc/csc-scc/ en/pub/1997/vol2/index.html›.

The (short) relevant bit is below.



extract follows


D. Restitution

77 The respondents concede that the Court of Appeal did not err in ordering restitution of the gallonage fees paid by the airlines after January 1, 1984. And in the light of my conclusion that the provincial authorities were entitled to charge a markup on liquor purchased abroad and kept in Ontario awaiting eventual consumption in flight, no question arises about restitution of markups.

78 The only real issue about restitution is whether the provincial authorities should be made to disgorge only gallonage fees paid after January 1, 1984, or whether they should be liable as well for the fees paid before that date.

79 In my view, the restriction of restitution to gallonage fees paid after January 1, 1984 is arbitrary. The trial judge and the Court of Appeal justified their choice of that date on the ground that it was then that Wardair brought the matter of the licence to the attention of the provincial authorities. The courts below concluded that before January 1, 1984, the parties were in pari delicto, and perhaps even that the airlines were more "delictus" than the provincial authorities. Both the trial judge and the Court of Appeal seem to have thought that the burden was on the airlines to discover that Ontario's liquor licencing laws were inapplicable to them.

80 This "compromise" approach may seem to have a certain "equitable" appeal, but in truth it has little to recommend it. Essentially, the position of the trial judge and the Court of Appeal is that a governmental agency may never be liable for amounts collected under an inapplicable law unless it can be shown that the agency knew that the law was inapplicable and nevertheless continued to apply it. But Canadian law has never required a showing of bad faith as a precondition to the recovery of monies collected by a governmental agency under an inapplicable law. This Court has said that monies paid under such a law may be recovered even if it appears that the governmental agent responsible for collecting them did not know that the law was inapplicable:

In this case, the appellant, as a taxpayer and inhabitant of the defendant corporation, was dealing with the Clerk-treasurer of the corporation and that Clerk-treasurer was under a duty toward the appellant and other taxpayers of the municipality. When that Clerk-treasurer demands payment of a sum of money on the basis of an illegal by-law despite the fact that he does not know of its illegality, he is not in pari delicto to the taxpayer who is required to pay that sum. [Emphasis added.]

(Eadie v. Township of Brantford, [1967] S.C.R. 573, at p. 583).

81 In my view, the rule in Eadie is a sensible one. If the question is which of two parties should be responsible for guaranteeing the applicability of a law, and the choice is between the governmental agency charged with administering that law and the citizen who is subject to that law, surely the better choice is the governmental agency. I cannot see that it matters how sophisticated an actor the citizen is. Governments make laws and governments administer them. Citizens do not. The responsibility for taking care that the law is legal and applicable must rest with the party that makes and administers the law. And in any case, to make the apportionment of responsibility depend on the sophistication of the actors would be to introduce a vague idea into an area of the law that is otherwise clear.

82 Therefore, I conclude that the trial judge and the Court of Appeal erred in restricting restitution to the gallonage fees collected after January 1, 1984. The provincial authorities should be made to restore all the monies that they wrongfully took from the airlines.

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