Royal Bank of Canada v. Samra, 2011 ABQB 556

Court of Queen ’ s Bench of Alberta Citation: Royal Bank of Canada v. Samra, 2011 ABQB 556 Date: 20110921 Docket: 0901 03784 Registry: Calgary Between: Royal Bank of Canada Plaintiff - and - Gurtej Samra, Bedaux Real Estate Inc., Khadim Hussain and Amtul Hussain Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice S.M. Bensler _______________________________________________________ Introduction [ 1 ] This is an appeal from the decision of the Honourable Master J.L. Mason at 2010 ABQB 699 (the “Master’s Decision”).

The Appellant is Her Majesty the Queen in Right of Canada, as represented by the Minister of National Revenue. The Respondents are Gurtej Samra, Bedaux Real Estate Inc., Khadim Hussain, Amtul Hussain, Liberty Mortgage Services Ltd. and DJ Will Holdings Limited. [ 2 ] The facts, briefly, are that a mortgagor defaulted on his mortgage and the mortgaged lands were sold in a foreclosure action. Several writs had been registered on title, including those of the Appellant and the Respondents.

The Appellant’s writ arises from unpaid taxes owing by the mortgagor pursuant to the Income Tax Act , R.S.C. 1985, c. 1 (5 th Supp.) (the “ ITA ”). After payment of the mortgage and costs, the remaining funds were paid into this Court. The Appellant, relying on the Crown prerogative of priority to payment among creditors of equal degree, applied for an order directing that the funds be paid to the Receiver General of Canada. The Respondents opposed that application and argued that the Crown must share pro rata with other writ holders pursuant to s. 99(3) (

g) of the Civil Enforcement Act , R.S.A. 2000, c. C-15 (the “ CEA ”).

The Master’s Decision [ 3 ] The Master set out the issues before her as follows at para. 4 of the Master’s Decision: 1. Does section 99(3)(

g) of the Civil Enforcement Act bind the federal Crown in these circumstances? 2. Does

section 223 of the Income Tax Act contemplate the application of section 99(3) (

g) of the Civil Enforcement Act to the federal Crown? 3. Has the Crown waived its prerogative in these circumstances? [ 4 ] In respect of those issues, the Master found at para. 5 of her decision: For the reasons that follow, I conclude that the [ CEA ] does not bind the federal Crown in these circumstances.

Section 223 of the [ ITA ] does not contemplate the application of priority provisions of the [ CEA ] to the federal Crown. Under the circumstances of this matter, however, the Crown has waived its prerogative. Accordingly, the Crown is not entitled to priority to the funds held by the clerk in this action. [ 5 ] The Appellant appeals the Master’s finding that the Crown had waived its prerogative. The Respondents, for their part, argue that the Master erred in her first two conclusions.

The Appellant takes the position that the Respondents’ arguments on the Master’s first two findings are not properly before the Court and that the Respondents should have cross-appealed on those issues. Given my conclusions as set out below, I need not consider that issue. The Standard of Review [ 6 ] As the proceeding before me is an appeal from the Master’s Decision, I must first consider the appropriate standard of review. The Respondents referred me to the decision of Macklin, J. of this Court in Janvier v. 834474 Alberta Ltd. , 2010 ABQB 800 .

In that case, Macklin, J. noted that, historically, an appeal from a master’s decisions was conducted as a hearing de novo , but that pursuant to Rule 6.14 of the new Rules of Court , such appeals are now on the record. The result is that decisions of masters are now accorded a greater degree of deference. [ 7 ] As Macklin, J. pointed out in Janvier , masters continue to be limited in their jurisdiction to determine questions of fact. Such findings, however, if made within the master’s jurisdiction, are entitled to deference and are not to be interfered with unless there is “palpable or overriding error”.

By contrast, review of masters’ decisions on questions of law is on a standard of correctness. The standard of review for questions of mixed law and fact depends upon the characterization of the question and of the error. Where the error is in identifying the legal standard, the standard is correctness and there is little deference.

Where the error arises in applying the correct legal standard to a given set of facts, the standard is reasonableness and the decision should not be interfered with unless there is palpable and overriding error. [ 8 ] In this case, the first two issues articulated by Master Mason were questions of law; the third was a question of mixed law and fact. Issue 1: Does s. 99(3)(

g) of the CEA bind the federal Crown? [ 9 ] Section 99(3) (

g) of the CEA requires pro rata sharing among creditors. Whether this regime binds the federal Crown is a question of law. In arriving at her conclusion, Master Mason considered the provisions of the CEA and of the

Interpretation Act , R.S.A. 2000, c. I-8. She also referred both to case law and to academic commentary, all of which satisfied her that “[t]he weight of authority ...

supports a constitutional immunity from provincial statutes for the federal Crown”: para. 13. [ 10 ] I am satisfied that Master Mason’s conclusion on this issue was correct. Absent waiver of the Crown’s prerogative, the Legislature of Alberta cannot compel the Crown to share rateably with other creditors. Had the Appellant chosen to avail itself of the remedies available to it outside the CEA , as discussed below, it would not have been subject to this regime. Issue 2: Does s. 223 of the ITA contemplate the application of s. 99(3) (

g) of the CEA to the federal Crown? [ 11 ] As Master Mason noted at para. 18 of the Master’s Decision, the Appellant’s writ was issued pursuant to s. 223 of the ITA . That provision permits the Minister of National Revenue to issue a certificate in respect of unpaid personal income tax. The certificate then may be registered with the Federal Court, giving it the same effect as a Federal Court judgment.

Section 223(6) of the ITA then provides that, once filed, registered or recorded against property in a province, the writ binds that property “in the same manner and to the same extent” as if it were a judgment of a superior court. [ 12 ] Master Mason then considered the meaning of the phrase “in the same manner and to the same extent” and reviewed some of the cases in which that term has been interpreted.

She concluded that while s. 223 of the ITA authorizes the federal Crown to access the enforcement procedures available in the superior courts, it does not, in and of itself, detract from the Crown’s prerogative of payment. Master Mason was of the view that this would require something more. [ 13 ] In my opinion, Master Mason reached the correct conclusion in respect of this issue. She rightly distinguished the cases cited by the Respondents. Therefore, the question is whether the “something more” required for the Crown to have waived its prerogative is present in this case.

Issue 3: Has the Crown waived its prerogative in these circumstances? [ 14 ] As Master Mason noted at para. 29 of her decision, the Respondents argue that the Crown waived its prerogative by filing its writ at Land Titles and at the Personal Property Registry, thus availing itself of the benefits enjoyed by writ holders under the CEA . [ 15 ] Master Mason reviewed the case law and considered both the “Crown as litigant” and the “benefit/burden” analyses.

She determined that the benefit that accrued to the Crown by virtue of its registration under the CEA was sufficiently related to the burden of pro rata sharing to warrant the conclusion that the Crown had waived its prerogative. This, as noted above, is a question of mixed law and fact. Further, this is not a situation in which the error, if any, is in identifying the correct legal test to be applied.

Therefore, in these circumstances, the appropriate standard of review is reasonableness and I should not interfere with Master Mason’s decision unless I find that there is palpable and overriding error. [ 16 ] I am not prepared to make that finding. Indeed, I find that Master Mason’s conclusion that the benefits and burdens under the CEA are linked to be entirely reasonable. I did have some concern that this conclusion would leave the Crown with no meaningful way to exercise its prerogative.

However, I note that the Crown has available to it other garnishment and seizure mechanisms, for example in s. 224 of the ITA . Accordingly, it is reasonable, in my view, to conclude, as Master Mason did, that when the Crown chooses to take advantage of the benefits afforded under the CEA , it must accept the concomitant burdens. Conclusion [ 17 ] In the result, the Crown’s appeal is dismissed. Costs may be spoken to. Heard on the 19 th day of May, 2011. Dated at the City of Calgary, Alberta this 21 st day of September, 2011.

S.M. Bensler J.C.Q.B.A. Appearances: Jill L. Medhurst-Tivadar Department of Justice Canada for the Appellant Her Majesty the Queen in Right of Canada as Represented by the Minister of National Revenue Inna Lazman Fleming LLP for the Respondents Liberty Mortgage Services Ltd. and DJ Will Holdings Limited