HOPE J.:—In this action the plaintiff sues on behalf of the Crown in the right of the Dominion, to recover from the defendants the sum of $51,487.43 alleged to have been collected for and on behalf of the Crown from June 1st, 1934 to May 30th, 1940, under the provisions of The Special War Revenue Act, R.S.C. 1927, cap. 179 and amendments thereto, and regulations passed thereunder as a stamp duty imposed on the transfer or sale of unlisted securities effected by the defendants, either as vendors or as brokers for other vendors.
The defendants are a partnership of stockbrokers with head office in the City of Toronto, and having a seat upon the Toronto Stock Exchange.
The provisions of The Special War Revenue Act as amended and pertinent to the matters in issue herein, are found in sections 58(2), 60, 62, 99, 100, 101, 102 and 108(1).
Under and by virtue of the statutory authority contained in section 60 aforesaid, regulations have from time to time been established by the Governor-in-Council. Those regulations which are applicable are as follows: Firstly: those passed with effect from the 26th of May, 1932, and reading as follows:
"2. Sales of Securities by Stockbrokers—Not Executed on Stock Exchanges.
That where any stockbroker, acting either as principal or agent, effects the sale of a taxable security by means of a transaction which is not executed on a stock exchange in Canada, the tax exigible on the transaction is to be paid to the Crown by the vendor stockbroker affixing excise tax stamps of the requisite value to the duplicate of the memorandum of sale retained on file in his office. ‘ ‘
(12. Sales Records Required to be kept by Stockbrokers, Banks, Trust Companies and Bond Dealers.
That where any stockbroker, bank, trust company, or bond dealer, acting either as principal, or agent, effects the sale of a taxable security, such stockbroker, bank, trust company, or bond dealer be required in all instances where the transaction is not executed on a stock exchange in Canada :—
(a) to prepare a memorandum in duplicate of the sale;
(b) to deliver the original of such memorandum of sale to the purchaser ;
(c) to retain the duplicate of such memorandum of sale on file in their office until such time as official permission is given for its destruction.”
15. Affixing and Cancellation of Excise Tax Stamps by Stockbrokers, Banks, Trust Companies and Bond Dealers.
That all stockbrokers, banks, trust companies, and bond dealers upon whom is imposed the duty of affixing excise tax stamps in accordance with the provisions of The Special War Revenue Act and the regulations thereunder established shall be and are hereby required :
(a) to affix the said stamps securely to the proper documents, memoranda, books, ete.:
(b) to cancel the said stamps by means of a perforator which shall perforate six holes of at least one-eighth of an inch in diameter through each stamp and the document to which same is affixed, or, in the alternative the perforator may form the word “cancelled’ or the initials of the company, regardless of the dimensions of the perforations:
(c) to provide an instrument for making such perforations.”
These regulations were subsequently rescinded with effect from 1st June, 1937, by the order of the Governor-in-Couneil and the following regulations substituted therefor :—
" " 2. Sales by Stock Brokers.
Every stock broker who effects the sale of any bond or share shall compute the tax payable and account therefor as follows:
(a) if the sale is effected upon a stock exchange pay the tax to the exchange and the exchange shall pay the Receiver General, as hereinafter provided, or
(b) if the sale is effected otherwise than on a stock exchange, pay the tax forthwith by affixing excise stamps of the requisite value to a memorandum of the sale to be kept in his office. ’ ’
"9. Sales Records to be Kept by Banks, Bond Dealers, Stock Brokers and Trust Companies
Every bank, bond dealer, stock broker or trust company which sells a bond or share, either as principal or agent, shall :—
(a) prepare a memorandum in duplicate of the sale;
(b) deliver one copy of such memorandum to the purchaser ; (c) retain one copy on file until such time as official permission is given for its destruction. ’ ‘
(12. Affixing and Cancellation of Stamps by Banks, Bond Dealers, Stock Brokers and Trust Companies
Banks, bond dealers, stock dealers, stock brokers and trust companies charged with the duty of affixing excise tax stamps in accordance with these regulations shall,
(a) affix the said stamps securely to the proper documents, memoranda, books, etc. ;
(b) cancel the said stamps by means of a perforator which shall perforate six holes of at least one-eighth of an inch in diameter through each stamp and the document to which the same is affixed, or in the alternative, the perforator may form the word ‘cancelled’ or the initials of the company’s name, regardless of the dimensions of the perforations;
(ce) provide an instrument for making such perforations.”
The general scheme of this legislation is to impose, levy and collect an excise tax upon every change of ownership consequent upon the sale, transfer or assignment of any bond or of any share. The tax is payable by the vendor, transferor or assignor of the bond or share. The computation of the amount of such tax in accordance with the table of taxation is to be made by the stock broker. The tax is to be collected for and on behalf of the Crown by the stock broker. The tax is to be payable in excise stamps, which are purchasable from stamp vendors duly authorized to sell excise stamps on behalf of the Crown. The stamps when so purchased by the vendor, transferor or assignor of the security are to be delivered to the stock broker who had computed the amount of tax exigible and who by statute is charged with the collection of the tax for and on behalf of the Crown. The regulations then require that the stamps be affixed by the broker to a duplicate memorandum of the sale which is required to be prepared and kept by the broker, after he has delivered one copy of such memorandum to the purchaser. The copy with the stamp or stamps affixed, is to be retained by the broker until such time as official permission is given by the proper Crown officer for its destruction. Such records are to be open for inspection by the Crown officers for audit. Thus it will be seen that a complete system is set up for payment, computation, collection, and accounting to the Crown of the tax collected by preparation of records, affixing and cancellation of excise stamps and retention of such records for subsequent audit by the Crown auditors.
It is admitted in the proceedings that the defendants are stock brokers within the requirements of the Act and that the defendants did, over the period in question, transact many sales of securities either directly as vendors or as the agents for vefdor customers of the defendants. For the purposes of this action, it makes little or no difference by whom the tax was payable—as the action is based on the duty of the defendants to collect for and account to the Crown.
It is also clear on the evidence, that transactions on which there was excise tax for the net amount claimed in the pleadings, after crediting an acknowledged payment of $1986.91, have been effected through the defendants’ brokerage office. In some of these transactions the defendants were the actual vendors, but in the majority of instances they were acting on behalf of customers. The defendants maintained duplicate memoranda of sales.
It is claimed by the defendants, and I so accept on the evidence, that the defendants duly purchased stamps in the aggregate value of the amount now claimed but it is clearly apparent on the evidence that the defendants did not comply with the regulations which required that the stamps be affixed to each particular duplicate memorandum of the individual sale and cancelled in manner prescribed and in the time provided by the regulations. In fact, I can find no suggestion that stamps were affixed by the defendants to any document which approaches in description a duplicate of the memorandum of the sale as furnished to the purchaser, or even a cumulative duplicate of the memoranda of successive sales to various purchasers. Instead of so doing, it is given in evidence tendered on behalf of the defendants that the stamps in question were, from time to time and at varying intervals, oftentimes of considerable duration, purchased by the defendants with funds charged to the vendor of the security, that such stamps were then affixed to an ordinary sheet of letter paper bearing the letter head of the defendant partnership, with a notation that the stamps so affixed to the said sheet were for sales of unlisted securities during the certain period thereon named, and further that such stamps were then cancelled by a clerk drawing a pen through the same or initialling the same. From the evidence it appears that no data identifying the stamps so alleged to have been affixed to sheets of the defendants’ letter paper with any particular sale or transfer of a security was recorded on such sheets, other than the date of a day on or period within which the sale or sales were alleged to have been made.
Various employees of the defendants testified that a folder or file containing such sheets with stamps affixed had been maintained and that it had been seen by them from time to time in the office of the defendants until approximately a week before the visit of the auditors for the Crown, in the early part of July, 1940. This file could not then be produced or accounted for and later, by a letter, exhibit 13, dated the 29th of July, 1940, the defendants advised the Commissioner of Excise, as follows:
‘Within the past several weeks the file, in which we carry Dominion stock transfer tax stamps purchased, has mysteriously disappeared. We have made a complete search of our premises and cannot locate the file.
"‘We feel now, justifiably, that they have been either maliciously removed, or taken with intent to resell.”
At this point, it might be noted that the defendants in this letter referred not to stamps collected, affixed and cancelled as one might expect in view of their duty under the statute and regulations, but to stamps "‘purchased.'' This fact in conjunction with the defendants’ expressed fear that the stamps "‘Have been taken with intent to resell’’ may be significant in evaluating the evidence of employees of the defendants as to the cancellation of all stamps.
The loss of this file was not, apparently, observed or brought to the attention of any partner in the defendant firm or any senior official thereof, until the Crown auditors first attended at the premises of the defendants in early July, 1940, to effect a customary audit.
By registered letter, (ex. 5) dated September 9th, 1941, the Commissioner of Excise by virtue of the powers delegated to him by the Minister of National Revenue under sec. 99 of the Act (vide ex. 7) demanded that the defendants carry out the statutory duty imposed upon them by accounting for the tax collected by them for and on behalf of His Majesty in the total now sought to be recovered.
The defendants called witnesses and produced records of other brokerage firms in the City of Toronto, for the purpose, no doubt, of indicating that the Crown auditors had accepted cancellation of excise stamps in a manner other than that prescribed by the regulations. Nevertheless it was inescapably noticeable that in such records of other brokerage firms, the stamps had invariably been attached to the actual duplicate memorandum of the sale. True it is that such duplicate memorandum in some instances had been kept in cumulative form on large binder sheets, and that the stamps had been affixed, not for each individual transaction, but at the conclusion of all transactions for a day or a week as the case might be, on any particular binder sheet.
I have no difficulty whatsoever in finding that the defendants have utterly failed to comply with the regulations prescribing the mode of affixing excise stamps and retaining them until given permission for their destruction so that a proper accounting could be given to the Crown of the stamps thus collected by the defendants.
The plaintiff therefore asks under the provision of section 108 of the Act, for a judgment for the amount of such tax so collected by the defendant as a debt due to the Crown. In the alternaive, the plaintiff has also asked for an order directing the defendants to affix excise stamps to the memoranda of sales in accordance with the statute and regulations, and to cancel them in compliance with the regulations. The plaintiff also asks for a declaration that the plaintiff is entitled to an order in the nature of a prerogative writ of mandamus directing the defendants to fulfil the duty imposed upon them as aforesaid, and further for damages in the amount claimed for breach of the duty imposed by statute and regulations for failure to perform or negligence in performing the duty imposed upon the defendants.
By way of defence, the defendants set up that the regulations hereinbefore referred to as having been enacted under and by virtue of section 60 of the statute are ultra vires the terms of the said statute.
May I therefore examine the effect of section 60. Let it first be noted that by the terms of section 58(2) an excise tax is imposed, levied and collected upon every change of ownership of certain securities, at a rate of taxation therein described. This tax is definitely and clearly payable by the vendor, transferor or assignor of such security as provided in section 60, and is payable in a fixed type of currency, namely, in excise tax stamps.
As I understand the principles established by earlier decisions, the validity of an order-in-council is dependent on whether or not its provisions be repugnant to or beyond the reasonable contemplation and purview of the terms of the statute from which it emanates (vide In re Price Bros. & Co. V. Board of Commerce of Canada (1920), 60 S.C.R. 265). Nor am I unmindful of the principle that in a case of any ambiguity in taking legislation, the Courts resolve the same in favour of the subject. But the action at bar does not raise any question which could possibly impose a hardship upon or be detrimental to the subject from whom the tax is levied, viz., upon the vendor of the security.
Giving to the language of this first clause of section 60 its normal meaning, it can only imply that the vendor of the security is presumed to physically deliver to the person by whom the tax is collected for and on behalf of the Crown, excise stamps of the correct amount. There is no duty imposed by statute or regulation upon the stock broker to "purchase’’ the stamps with reference to transactions .passing through his hands as broker. No doubt as a service to its customers the broker has assumed the task of purchasing the stamps as a matter of convenience for the broker’s customers. In so purchasing the stamps from the authorized stamp vendor, the defendants were not performing any statutory duty placed upon them. They were acting solely as the agent for their customers. Therefore the evidence of purchase of excise stamps by the defendants is not necessarily probative of a fulfilment of the defendants’ duty to collect.
The second clause of section 60, gives to the Governor-in- Council the power to make regulations, prescribing the manner in which and the persons by whom the amount of tax when computed shall be collected for and on behalf of His Majesty.
Can it be said that the regulations hereinbefore recited in part, enacted by the Governor-in-Council by virtue of this statutory authority, exceeded in any manner or degree the scope of the statutory authority? It must not be overlooked that the authority given is to name the person by whom the tax shall be collected, and that the collection is for and on behalf of the Crown.
I fail to appreciate how it can be argued successfully that the regulations exceed such statutory terms in their provisions. The regulations impose the duty of collection upon the broker and clearly indicate that the stamps which are payable by the vendor of the security are to be received by the broker at the time of the sale, and affixed by him to the duplicate memorandum of the sale, are to be cancelled by the broker and retained by the broker in the manner and form aforesaid until inspected by the Crown auditors and until such times as official authority is given for their destruction. These regulations are, in my opinion, clearly as to "‘the manner in which the tax shall be collected,’’ i.e. the mode of dealing with the collection. Hence the regulations are within the scope of the language of section 60.
There is no suggestion that any official authority for destruction of the cancelled stamps on the memoranda of sales was given in this instance.
While defendants’ counsel has argued that the word “collect” implies only a demand and obtaining of payment, yet it must not be overlooked that the statutory authority describes the collection as being for and on behalf of the Crown. Thus there is implied the trusteeship of the broker for the Crown, and there would be, at Common Law, the resulting implication that the broker must account for the moneys had and received on behalf of the Crown. His method of accounting therefor is in full contemplation in the terms of the regulations hereinbefore referred to. Thus I must conclude that since by statute, sec. 60, the duty is payable by the vendor of the " " security ’ ’ in excise stamps, it must be assumed that the stamps were purchased by the defendants as voluntary agents of the vendors and thus that the stamps originally came into possession of the defendants as agents of the vendors of the securities. This being so can it be reasonably argued that the defendants have even collected the stamps for and on behalf of the Crown until the defendants have dealt with them in the manner prescribed by the regulations in question ?
Moreover it should not be overlooked that even though it might successfully be contended that the power conferred by section 60 on the Governor-in-Council is only to make regulations to compute and collect the tax, yet there is a statutory duty imposed by the statute itself (section 62) which imposes a liability on the defendants as persons liable to collect the tax to keep records and books of account adequate for the purposes of Part VII of the Act. Hence, aside from the regulations established by the Governor-in-Council, there is to be found within the terms of the statute itself (section 62) the undoubted implication of a duty to account by the collector.
I must find that the defendants have failed in their statutory duty to collect for and on behalf of the Crown and account therefor, and therefore that the plaintiff is entitled to recover under the terms of section 108 of the Act, the sums payable under the Act as and from the time the same ouyht to have been accounted for by the defendants.
In resisting liability counsel for the defendants cited the case of The King v. Crabbs, [1934] S.C.R. 523, but I fail to see how this decision has any bearing upon the facts of this case. In the Crabbs case, it was sought to fix liability on the broker who had effected a sale of a security as agent, and had failed to affix the revenue stamp to the security in question. It was there sought to attach to the broker an obligation for payment of the tax. In the action at law, there is no suggestion that the tax should be paid in the first instance by the broker. The present defendants are only called upon to account for revenue collected for and on behalf of the Crown, and failure to account for collection in the manner prescribed, in my opinion, renders the defendants liable for the amount in question. If, on a proper construction of the statute, the defendant in a proceeding by the Crown is liable as I consider these defendants are, the Court has nothing to do with the hardship of the case. Rex v. Robitaille (1909), 12 Exch. C.R. 264.
The defendants further set up by way of defence to the claim for an accounting in the terms of the regulations, that the action of the Crown officials has estopped the Crown from insisting upon a strict compliance with the regulations. Although it was rather nebulous as to time and place and identity of persons, it was given in evidence on behalf of the defendants that some years prior to 1940 auditors on behalf of the plaintiff had called at the defendants’ office in Toronto, and had been acquainted with the method of affixing, cancelling and retaining tax stamps only in a file of letter stationery as hereinbefore described and that the auditors had taken no objection to such irregular procedure. The defendants therefore now plead the waiver by the plaintiff, through its agent, of the necessity of strict compliance with the regulations.
Records from other brokerage houses were submitted in evidence in support of the contention that the Crown agents had as a matter of custom waived strict compliance with the regulations as to the method of cancelling tax stamps. However such records of other brokers indicated an effort on behalf of such other brokers to follow the regulations with respect to affixing tax stamps to the required recards, even if there had been an acceptance of methods of cancellation of stamps which effect, however, was not strictly in compliance with regulations.
Counsel for the defendants relied upon The King v. C.P.R., [1930] Exch. C.R. 26 in support of this contention as to estoppel. The only effect of this decision is that while affirming the well- established doctrine that estoppel does not apply against the Crown, it was held that in a proper case the Crown may be held liable for acts or conduct of its responsible officers, which if occurring between subject and subject would amount to an estoppel in pais. But the conduct under review in that case involved the physical erection and maintenance of telegraph poles by the railway company on certain lands over a period of some forty years. I cannot hold that the facts there present and in the present case can be even suggested to be comparable.
The facts on which the defendant relies herein to support an estoppel are very similar to those in Rex V. Disappearing Propeller Boat Co. Ltd., 55 O.L.R. 545 where Logie J. held that statements alleged to have been made by a Crown departmental official even though admitted, could not bind the Crown.
It is well established that the defence of estoppel cannot be invoked against the Crown, nor can the acts of the Crown’s servants or agents bind it by estoppel. The interests of the Crown are certain and permanent and they must not suffer by the misconduct or negligence of its servants, vide R. v. Capital Brewing Co., [1933] S.C.R. 226; The Queen v. Bank of Nova Scotia, 11 S.C.R. 10 ; Bank of Montreal v. The King, 38 S.C.R. 258, affirmed 11 O.L.R. 595 and Western Vinegars v. Minister of Inland Revenue, [1938] Ex. C.R. 39. The defendants must therefore fail on this defence.
So far as the further defence as to at least part of the claim is concerned, viz., that such claim is barred by the Statute of Limitations—again the defendants must fail. By virtue of sec. 108 of The Special War Revenue Act the present action is a debt due under a statute and is therefore of the nature of a specialty debt in which event the period of limitation is twenty years.
Reference to Carlyle v. County of Oxford, 30 O.L.S. 413; Meagher v. London Loan, 64 O.L.R. 221.
The defendants further contended that assuming for the moment they had failed in their duty to affix, cancel and retain the collected stamps as required by statute and the regulations thereunder, it has been demonstrated conclusively that stamps of the necessary aggregate claimed were in fact purchased from the Crown’s authorized stamp vendor and hence there was no loss of revenue sustained by the Crown. But this seems to me to be aside from the point and certainly not the only rational conclusion. In fact in the defendants’ letter, (ex. 13), the defendants themselves offer an explanation which would undoubtedly be a matter of loss to the Crown, viz., the re-sale of the stamps in question. Excise stamps which are uncancelled and unaccounted for are obviously negotiable. To argue that proof of the purchase of excise stamps of an amount leviable on any one transaction or series of transactions is probative of the payment or collection of the tax exigible with respect to such transaction or transactions seems to me to be wholly untenable. To acquiesce in such an argument strikes one as being as reasonable as to claim that a man has paid his income tax by purchasing Dominion of Canada Victory Bonds for the appropriate amount and then without delivering the bonds to the Collector of Income Tax for cancellation in satisfaction of his debt to the Crown, set up a contention that his income tax was paid because the Crown had received the money which he had appropriated for such payment.
Again the defendants plead that by reason of the fact that The Special War Revenue Act provides a penalty for failure to comply with sec. 62, thereof, the Crown is precluded from taking the present action. As I appreciate the rule of law in that respect, it has been clearly held that the imposition of specific penalties or the provision of specific remedies by a statute for a breach thereof does not abrogate any Common Law remedy heretofore open to a claimant. Quite apart from the right of action contained in sec. 108, in my opinion the plaintiff is clearly entitled to the Common Law right of action against the defendants as trustees of moneys or the equivalent of moneys had and received for and on behalf of the Crown. As is said by Logie J. in Rex v. Disappearing Propeller Boat Co. Ltd (supra) "The scheme of this legislation (re sales tax) was to make the vendor the agent of the Government to collect this tax , . . It is admitted that under this head the defendants collected from customers the sum of They are trustees of this amount for the plaintiff and must pay it over to the Government. ’ ’
However, in any event, I believe it is abundantly clear that the Crown has the right to recover the claim herein as a debt due under sec. 108(1) quite independently of the recovery of penalties under sec. 108(2)—vide The King v. Noxzema Chemical Co. of Canada Ltd., [1942] S.C.R. 178.
That being so, I can see no necessity for considering the plaintiff’s claim for a mandatory order or for the issue of the prerogative writ of mandamus. But if the alternative remedy is deemed advisable, counsel may again attend and speak to the same.
There shall be judgment for the plaintiff for the sum claimed with the costs of this action.