Killeen, D.C.l.:—The applicant, Mary Constance Wright, seeks a declara- tion that the sum of $18,002.16 now in the hands of the sheriff of the County of Middlesex and arising from a seizure made pursuant to a writ of execution filed by the Federal Crown should be paid out to her in toto because of an alleged prior right to the fund.
The Background Facts
On December 5, 1980, Mrs. Wright obtained a trial judgment against her husband, John Wright, under which he was required to pay her $1,000 monthly as spousal support. Mr. Wright immediately went into default under this judgment and, in fact, has paid nothing towards this judgment up to the present time. The current arrears now stand at an amount in excess of $80,000.
In early 1981 Mrs. Wright obtained an injunction from Trainor, J. restraining her husband from dealing with four separate R.R.S.P. investments owned by him. Then, on October 9, 1981, Mrs. Wright obtained a charging order from Hollingworth, J. against each of the four plans, under section 146 of the Judicature Act, R.S.O. 1980, c. 223. This order also contained the earlier injunction order granted by Trainor, J. The exact terms of the relevant portions of Hollingworth J.’s order are as follows:
1. IT IS ORDERED that the Registered Retirement Savings Plans maintained in the name of the defendant with:
a. The Industrial Groups of Funds, MacKenzie Financial Corporation;
b. London Life Insurance Company;
c. Canada Trust Company; and
d. Canada Permanent Trust Company
be and the same are hereby charged with payment of arrears of support and expenses from time to time.
2. AND IT IS ORDERED that the injunction granted by order of The Honourable Mr. Justice Trainor dated the 4th day of March, 1981 restraining the defendant from transferring, terminating or in any way withdrawing or receiving monies from Registered Retirement Savings Plans maintained in his name with:
a. The Industrial Group of Funds, MacKenzie Financial Corporation;
b. London Life Insurance Company;
c. Canada Trust Company; and
d. Canada Permanent Trust Company
be and it is hereby continued until the funds on deposit to the credit of the defendant in the R.R.S.P.’s as aforesaid are exhausted, or until a further order of this Court.
Later, on December 15, 1982, Mrs. Wright filed a writ of execution with the Sheriff of the County of Middlesex claiming the then arrears under the support judgment of $39,655.12.
In the meantime, Mr. Wright had also incurred tax liabilities with Revenue Canada for the 1981 calendar year which led to Revenue Canada filing a writ of execution with the Sheriff for $24,169.19 on September 16, 1983. This writ of execution was, I might add, issued out of the Federal Court of Canada on the Revenue Canada tax claim.
The last acts in this economic drama of obduracy, wits and almost chesslike moves occurred in the 1984-86 period: first, in October 1984, Mr. Wright authorized the London Life Insurance Company to collapse one of the R.R.S.P.’s subject to the order of Hollingworth, J. in an apparent effort to satisfy the tax claim of Revenue Canada; second, the Sheriff of Middlesex issued a notice of seizure, dated November 23, 1984, purporting to seize the $18,002.16 proceeds of the R.R.S.P. under the Revenue Canada writ of execution; third, on July 9, 1986, the Sheriff issued a “scheme of distribution” under the Creditors Relief Act, R.S.O. 1980, c. 103, proposing that the seized moneys be paid to Revenue Canada; fourth, Mrs. Wright then filed a “notice of objection" to the proposed distribution scheme and launched the instant application.
Mr. Cudmore, for the applicant, challenges the proposed distribution scheme propounded by the Sheriff on three bases:
(1) that the charging order issued by Hollingworth, J. created a special form of charge on any proceeds of the London Life and other R.R.S.P. investments prior in status to the rights of Revenue Canada under its writ of execution such that the Sheriff is obliged to pay out the $18,002.16 in full to Mrs. Wright;
(2) alternatively, that Mrs. Wright’s claim under her charging order and consequential writ of execution puts her in a prior or preferred position to the amount of $12,000 under new section 4a of the Creditor's Relief Act, proclaimed on July 12, 1985, because her judgment is for arrears under a support judgment;
(3) alternatively, that the Crown priority asserted under the doctrine of the Crown prerogative powers offends Mrs. Wright’s equality rights under section 15 of the Charter of Rights and Freedoms thereby putting the competing claims in an equal position, entitling each to a rateable share of the fund under the Act.
Each of these positions is challenged by Crown counsel, Mr. Vita, who argues that the Crown prerogative powers preempt the field, as it were, and entitle the Federal Crown, through Revenue Canada, to take all of the fund in the hands of the Sheriff.
I will deal with Mr. Cudmore's submissions in the order in which they have been outlined above.
(1) The “Prior Charge" Argument
Mr. Cudmore's first submission goes this way. He starts this argument by asking a question: What was the Sheriff able to seize under the notice of seizure issued by him under the Revenue Canada writ of execution? His answer is that the Sheriff could only seize any “interest" that the judgment debtor had in the London Life R.R.S.P. as of November 23, 1984. But, he argues, the judgment debtor had no interest, or, at best, an inferior interest in the $18,002.16 fund on that date because the charging order of Holling- worth, J., made on October 9, 1981, created a prior form of floating charge or security interest in the fund in favour of Mrs. Wright with the result that, at the time of the Sheriff's seizure in 1984, Revenue Canada must necessarily be in a subordinate position to that of Mrs. Wright quoad the fund; that is, Revenue Canada’s position can be no higher than that of Mr. Wright.
The central issue under this submission is, of course, as to what is the true legal effect of the charging order itself: does it create a real security interest in the fund analogous to a true mortgage or, alternatively, does it delineate the judgment debtor's interest in the fund in a manner which prevents Revenue Canada’s interest under its writ and seizure from achieving a status equal to that of Mrs. Wright?
Mr. Vita’s answer to this submission is found in the ratio decidendi of four cases: Re Overseas Aviation Engineering (G.B.) Ltd., (1962) 3 All E.R. 12 (Eng. C.A.); Re a Debtor (No. 39 of 1974) (1977), 3 AIT E.R. 489 (Eng. Ch. D.); Re Bright (1981), 33 O.R. (2d) 219 (Ont. H.C.); and Re Chastco (1985), 58 C.B.R. (N.S.) 184 (Man. Q.B.).
In the Overseas case, a judgment creditor obtained a charging order against the leasehold interest of the debtor under a new procedure laid down in sections 34 to 36 of the Administration of Justice Act, 1956. Subsection 35(3) of that statute provided that the charge imposed by the charging order had “. .. the like effect ... as an equitable charge created by the debtor by writing under his hand". After the charge had been obtained but before a recovery or seizure was made under it the debtor company went into voluntary liquidation and the question arose as to whether the judgment creditor was entitled to rank as a secured creditor in the insolvency proceedings.
Notwithstanding that subsection 35(3) stated that the order created an "equitable charge” on the property of the debtor and permitted registration by way of caution on title, Lord Denning concluded that until recovery or actual seizure of the property interest of the debtor, the charging order was a mere form of execution, that is, a means of enforcing the judgment. Thus, since recovery had not been achieved, the charging order created no secured interest in the lands and was no better than an unrealized-upon writ of execution. As he said at page 17 of the judgment:
Seeing therefore, that the judgment charge is a form of “execution”, it follows that the judgment creditor is not entitled to retain “the benefit” of the charge unless he has completed the execution before the commencement of the winding-up.
Most clearly, the charging order provision of section 146 of the Ontario Judicature Act is less expansive than that set out in subsection 35(3) of the English statute. In principle, therefore, that reasoning of Lord Denning is highly persuasive and, in my view, should control the outcome of the instant case. The other cases relied upon by Mr. Vita, as cited above, all follow the same line of reasoning as adopted by Lord Denning and, as I view them, form an insurmountable hurdle for the applicant's first submission. It is therefore rejected.
(2) Support order Priority: new section 4a
Mr. Cudmore relies, alternatively on new section 4a of the Creditor’s Relief Act, proclaimed on July 12, 1985, and reading as follows:
4a.—(1) Arrears of payment under a support or maintenance order have priority over other judgment debts and rank equally with arrears under another support or maintenance order, regardless of when an enforcement process is issued or served,
(a) if the order is for periodic payments, in an amount not exceeding one year's support or maintenance at the rate current at the time of seizure or attachment; and
(b) if the order is for a lump sum payment, in the amount of the lump sum.
(2) Process for the enforcement of a support or maintenance order shall be identified on its face as being for support or maintenance.
(3) Subsection (1) binds the Crown in right of Ontario.
Under this section, Mr. Cudmore argues that his client should have priority for one year’s support in accordance with the section's express terms.
The major difficulty with Mr. Cudmore's argument is that subsection (3) of the section provides that the priority rule only “. . . binds the Crown in right of Ontario". Since the Crown claim in this case is asserted by the federal Crown, and not the provincial Crown, it is clear that, on its plain terms, the section cannot apply. One need look no further than the federal and provincial Interpretation Acts to find that the Crown — federal or provincial — cannot be bound by legislation unless such legislation expressly names the Crown as a bound party: see section 11 of the Interpretation Act, R.S.O. 1980, C. 219; section 16 of the Interpretation Act, R.S.C. 1970, c. 1-23; and Re Marten; Royal Bank v. The Queen (1981), 34 O.R. (2d) 399; 130 D.L.R. (3d) 607 (Ont. Div. Ct.) per Catzman, J. at 404 (D.L.R. 612).
There is, as well, another problem with this submission. On any objective view of its provisions, section 4a affects — and affects seriously — the substantive rights of potential judgment creditors who are in competition with a spousal judgment creditor of otherwise equal degree. To me, such a provision can only speak prospectively and retrospectively, absent very specific language within the section itself making it clear that the section should reach into the past.
On the facts of the instant case, the matured positions of the parties under the Creditor’s Relief Act, and generally, existed as from November 23, 1984, when the Sheriff seized under his notice of seizure. In these circumstances, I do not believe that section 4a can affect the outcome of this case at all. As was said by Duff, J. in Upper Canada College v. F. J. Smith (1920), 61 S.C.R. 413 at 416; 57 D.L.R. 648 at 649:
The principle which in my judgment governs this appeal can be stated in the language of Willes J. delivering the judgment of the Exchequer Chamber and speaking on behalf of a court of six in Phillips v. Eyre in 1870(1). The passage is as follows:
Retrospective laws are, no doubt, prima facie a questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law. “Leges et constitutiones futuris certum est dare formam negotiis non ad facta praeterita revocari; nisi nomina- tum et de praeterito et de praeterito tempore et adhuc pendentibus negotiis caulum sit." Accordingly, the court will not ascribe retrospective force to new laws affecting rights, unless by express words or necessary implication it appears that such was the intention of the legislature.
To the same effect is the more recent judgment of the Ontario Court of Appeal in Merrill v. Fisher (1976), 11 O.R. (2d) 551; 66 D.L.R. (3d) 615.
(3) The effect of section 15 of the Charter
Mr. Cudmore presents a most provocative and challenging argument here. His submission is that the Crown prerogative, under which the Crown may assert priority when its financial claim is of equal degree with that of another creditor violates his client's equality rights under subsection 15(1) of the Charter of Rights and Freedoms and cannot be saved under section 1 thereof. Mr. Vita, on the other hand, grounds his answer to this submission on two key points: first, he argues that the Crown is not named in section 15 as a bound party and, therefore, cannot be affected by its terms; second, he argues that, in any event, that the law relating to Crown privilege, and its component, Crown priority, is not contrary to subsection 15(1) or, if it is, it is saved by section 1 of the Charter as a “reasonable limit” which can be demonstrably justified in a free and democratic society.
I reproduce subsection 15(1) and section 1 as a starting point for my analysis of the conflicting submissions of counsel:
15. (1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
1. The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.
Mr. Cudmore's position under these sections is simplicity itself. He submits that, putting his client’s rights under her judgment and writ of execution at their lowest ebb, they are of “equal degree” with those of the federal Crown; that to allow the federal Crown to assert the doctrine of Crown prerogative would be a prima facie breach of her subsection 15(1) rights because she would then be denied . . the equal protection and benefit of the law without discrimination .. . .”; and that the Crown priority cannot be saved by section 1 because the Crown cannot meet the stringent test propounded for reasonable limits’ laws in the case of Regina v. Oakes, [1986] 1 S.C.R. 103; 24 C.C.C. (3d) 321.
The first question for consideration here must be the absence in subsection 15(1), or, indeed, anywhere else in the Charter, of any specific mention of the Crown. Does this omission spell immediate doom for the applicant's submission?
In my view, the answer to this question must be “no" because the statutory rules set out in the Interpretation Acts, already referred to, and their common law forbears cannot control the interpretation of the Charter. As was said by Chief Justice Dickson in Regina v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295 at 344; 18 C.C.C. (3d) 385 at 423-24:
This Court has already, in some measure, set out the basic approach to be taken in interpreting the Charter. In Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145, this Court expressed the view that the proper approach to the definition of the rights and freedoms guaranteed by the Charter was a purposive one. The meaning of a right or freedom guaranteed by the Charter was to be ascertained by an analysis of the purpose of such a guarantee; it was to be understood, in other words, in the light of the interests it was meant to protect.
In my view, this analysis is to be undertaken, and the purpose of the right or freedom in question is to be sought by reference to the character and the larger objects of the Charter itself, to the language chosen to articulate the specific right or freedom, to the historical origins of the concepts enshrined, and where applicable, to the meaning and purpose of the other specific rights and freedoms with which it is associated within the text of the Charter. The interpretation should be, as the judgment in Southam emphasizes, a generous rather than a legalistic one, aimed at fulfilling the purpose of the guarantee and securing for individuals the full benefit of the Charter's protection. At the same time it is important not to overshoot the actual purpose of the right or freedom in question, but to recall that the Charter was not enacted in a vacuum, and must therefore, as this Court’s decision in Law Society of Upper Canada v. Skapinker, [1984] 1 S.C.R. 357, illustrates, be placed in its proper linguistic, philosophic and historical contexts.
Mr. Vita has argued that another indicator of the non-applicability of section 15 to the Crown arises from the use of the word “individual” in the first line of the section. I think this argument falls wide of the mark. While the use of the word “individual” may mean that limited companies cannot take the benefit of the bundle of rights recognized under the section, surely a purposive and liberal interpretation of the section does not lead to the necessary conclusion that the Crown — whether federal or provincial
— is not bound by the burdens of the section when Crown law or action collides with an individual's rights under the section. The answer, I would have thought to the seeming conundrum is provided by section 32 of the Charter:
32. (1) This Charter applies
(a) to the Parliament and government of Canada in respect of all matters within the authority of Parliament including all matters relating to the Yukon Territory and Northwest Territories; and
(b) to the legislature and government of each province in respect of all matters within the authority of the legislature of each province.
(2) Notwithstanding subsection (1), section 15 shall not have effect until three years after this section comes into force.
This section provides that the Charter — all of the Charter — applies, inter alia, to both federal and provincial governments. Essentially, then, the Charter applies to “state action” in the broadest sense and along lines similar to the state action doctrine developed by the U.S. Supreme Court for cases under the U.S. Bill of Rights. Since the concept of the Crown itself and the Crown prerogative are both simply part and parcel of the constitutional arrangements and conventions which define the activities and legal spheres of our federal and provincial governments I can only conclude that the Crown — here representing and symbolizing the federal executive arm of government — is bound by subsection 15(1).
This conclusion is anticipated and supported by some of the comments of the late Chief Justice Laskin in Her Majesty In Right of Alberta v. C.T.C., [1978] 1 S.C.R. 61; 75 D.L.R. (3d) 257. In this case, the Alberta Government successfully asserted the Crown prerogative in its favour, arguing that the C.T.C. regulations did not specifically mention the Crown in the right of Alberta and, accordingly, did not require it to seek C.T.C. approval for its purchase of Pacific Western Airlines. The Court agreed, and Chief Justice Laskin made it clear that the Crown prerogative was part of the legal powers of the provincial government. As he said at 76 (D.L.R. 268):
. . . if the Crown in right of a Province was unable to rely on its immunity, unless bound expressly or by necessary implication, automatic subordination of a provincial Government to federal legislation would result, and this would offend the mutually independent positions of the Crown in right of Canada and in right of a Province which obtain under our constitutional arrangements in the absence of valid legislation to the contrary. Second, the common law rule as part of what I may call Crown law is an historic principle that was part of the law of this country from its beginning; and it remained part of our law under the federal structure brought into force in 1867, both for the advantage of the Crown in right of Canada and of the Crown in right of a Province. In my view, the Alberta Government, if not entitled to the shelter provided by s. 16 of the federal Interpretation Act, is entitled to rely on the common law expressed in the Bombay case. In either case, I hold it not to be bound by ss. 19 and 20 of the Air Carrier Regulations.
In the light of this decision, it seems inescapable but to conclude that an assertion of Crown prerogative powers — such as the Crown priority here
— constitutes federal state action within section 32 of the Charter which must be tested where there is an allegation that such state action collides with the equality rights of the subject under subsection 15(1).
Mr. Vita’s next response to the subsection 15(1) argument arises from a sophisticated interpretation of the subsection generally. Mr. Vita’s position is that one should take a two-tier approach to the protected equality rights under subsection 15(1). If the form of discrimination which is challenged falls within the enumerated classes referred to in the subsection — i.e., race, origin, colour, religion, etc., — then a prima facie showing will immediately implicate section 1 and cast a burden on the Crown to establish that the state action can be saved as a reasonable limit on the subject's right. If, on the other hand, the discrimination falls outside the enumerated classes, then the subject must show not only a discriminatory effect but, also, “unreasonable” discrimination. Here, on the facts, he submits that the form of discrimination present — an assertion of Crown priority where there are otherwise equal financial claims on a debtor’s property — does not fall within the enumerated classes; therefore, the applicant carries a burden of persuasion to show that the discriminatory effect is unreasonable, something she has not done.
This interpretative approach is taken, in part at least, from the judgment of McLaughlin, J.A. in Andrews v. Law Society (B.C.) (1986), 4. W.W.R. 242 (B.C.C.A.). There, McLaughlin, J.A. justified the importation of a “reasonableness or fairness” standard into subsection 15(1) in the following language at 251:
I turn next to the alternative approach of viewing discrimination as involving a pejorative connotation. On this approach the reasonableness or fairness of the impugned legislative distinction having regard to the purposes and the effect on the complainant is determined initially under s. 15. This approach is consistent with the emphasis in R. v. Oakes of determining basic rights under the specific sections of the Charter rather than using s. 1 as a tool of interpretation. It also accords full meaning to the word “discrimination” — a meaning which is generally in accordance with the way that word has been used in many enactments, conventions and treaties . . . Finally, it avoids the problem of s. 15 overwhelming the other rights specifically guaranteed by the Charter.
With respect, I have some grave reservations about importing a judge- made “rule of unreasonableness” into the language of subsection 15(1). The specific inclusion of such a standard of construction into subsection 15(1) would lead, I fear, to a watering down of the rights guaranteed by the section. If it should be imported into subsecion 15(1), I would ask, why should it not be equally imported into all of the other sections of the Charter purporting to protect and guarantee fundamental rights and freedoms of Canadians? And if it so imported, whether selectively or across-the- board, where does that leave section 1 under which the persuasive burden is clearly placed on the government to justify incursions on the rights and freedoms of the subject under the “reasonable limits” standard?
Numerous American commentators have noted that the U.S. Supreme Court has allowed itself to fall into a quagmire of dubious verbal doctrines in an effort to deal with equal protection issues. One central reason for this is that the U.S. Bill of Rights lacks an equivalent of our section 1 under which a reasonable limits’ burden is cast upon governments. I think we should be wary building a rule of unreasonableness into the subsection 15(1) inquiry — especially where it casts an evidentiary burden on the sub- ject — when the Charter itself expressly commands in section 1 that the government must bear the burden of justification under the reasonable limits' criterion.
In conclusion, here, I hold that the applicant has shown a clear prima facie breach of her equality rights under subsection 15(1). The Crown priority claim has an inevitable and drastic discriminatory effect on the applicant's rights and, if it is to be saved, the Crown must justify it under section 1.
Mr. Vita has argued, as his final option, that the Crown priority can be justified because its purpose is a strong and compelling public-interest one. His position is that the priority is aimed at guaranteeing the integrity of its system of revenue-collecting powers under the federal revenue statutes. In a very real sense, he says, the federal government is representing and protecting the Canadian public at large when it asserts the priority and puts the recovered tax arrears in the public coffers.
Section 1 justification is now controlled by the criteria set out in the judgment of Chief Justice Dickson in Regina v. Oakes, supra. There, the Chief Justice constructs a preliminary evidentiary presumption to the effect that the right and freedoms of the Charter are guaranteed unless the party invoking section 1 — invariably the government — can bring itself within what he calls the “exceptional criteria’ which can justify their limitation; and the standard of proof for justification is the civil standard of proof on a preponderance of probability. Chief Justice Dickson clarifies the weight and depth of the civil standard in Charter cases by adding this important qualification at 138 (C.C.C. 347):
Having regard to the fact that s. 1 is being invoked for the purpose of justifying a violation of the constitutional rights and freedoms the Charter was designed to protect, a very high degree of probability will be, in the words of Lord Denning, “commensurate with the occasion”. Where evidence is required in order to prove the constituent elements of as. 1 inquiry, and this will generally be the case, it should be cogent and persuasive and make clear to the court the consequences of imposing or not imposing the limit:. . ..
He then moves on, at 348, to develop two “central criteria" for the justificatory process. I summarize these criteria and their component parts thus:
1. The objective of the government action or measure must be of sufficient importance to warrant overriding a constitutionally protected right or freedom; such objective must relate to concerns which are “pressing and substantial”.
2. If such an objective is identified, the means chosen must satisfy a “proportionality test” having three components:
(a) the measure chosen must be carefully designed to achieve the objective in the sense that “it must not be arbitrary, unfair or based on irrational considerations”, i.e., it must be rationally connected to the objective;
(b) the measure chosen should impair as little as possible the right or freedom in question;
(c) there must be proportionality between the effects of the measure and the objective identified as being of sufficient importance.
In applying these criteria to the instant case, I note, preliminarily, that Crown counsel elected to tender no socio-economic evidence before me to demonstrate that the objective of the Crown priority related to concerns of a “pressing and substantial” character. Mr. Vita simply based his position on logical argumentation and reasoning that the priority buttressed the integrity of federal tax-collecting procedures and was in the public interest.
To me, the Crown argument smacks of an invitation to accept the Crown priority as an act of faith. It must be remembered, I believe, that the doctrine of Crown prerogative developed in a feudal society when the King was monarch in fact as well as theory. While the doctrine was carried over into later eras when constitutionalism and democratic government displaced a pure monarchial system, I cannot conclude that an ancient doctrine, or any of its aspects, can be any longer justified against the commands of the Charter by reference to a vague argument that the integrity of our federal tax-collecting system is vitally at stake. In support of arguments like that I would like to see some concrete evidence showing the past importance of the Crown priority within the tax-collection structure of the federal government and, as well, why, in the current era, the federal government could not enact more narrowly tailored and less intrusive statutory provisions which could achieve the same objective as the Crown priority but which would be much more rational, less arbitrary and infinitely fairer.
In short, I am unpersuaded on Mr. Vita’s argument that the Crown priority raises a legitimate state concern of the “pressing and substantial" kind delineated under Chief Justice Dickson's first criterion.
Equally, I conclude that it cannot meet the rigorous demands within the three-aspect second criterion. The Crown prerogative, and its priority component, can hardly be called a “carefully designed" measure. It is rather, a common-law rule which flowed from the autocratic powers of the monarchy. Even assuming, arguendo that this priority claim is rationally related to the objective identified by the Crown, it clearly is not crafted to impair “as little as possible" the right or freedom in question. And, finally, I see no proportionality between the “effects" of the priority and the alleged “sufficiently important" objective.
In the event, an order will go:
(1) declaring that the asserted claim of the Crown for priority is of no force and effect;
(2) ordering the Sheriff of the County of Middlesex to distribute the seized moneys in his hands, rateably amongst the applicant, the Crown in the right of Canada and the other execution creditors;
(3) ordering costs of this application against the Crown on the party and party scale.
I may be spoken to if any further ancillary orders are required.
Order accordingly.