Canadian Surety Co. v. The King

THE

CANADIAN

SURETY

COM- PANY (DEFENDANT)

..................

AND

HIS MAJESTY THE KING, REPRE- SENTED BY THE ATTORNEY-GENERAL OF

CANADA (PLAINTIFF)

..................

AND

APPELLANT; RESPONDENT; THE SCOTIA IMPORT AND EXPORT

COMPANY, AND P.

RESPONDENTS. (THIRD PARTIES)

...................

J

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

DUFF J.-This appeal arises out of proceedings by way of information in the Exchequer Court taken by His Majesty the King to recover the sum of $41,500 under a (1) [19291 Ex. C.R. 216.

bond given pursuant to the provisions of section 101 of the Customs Act as amended by 12-13 Geo. V, c. 18, s. 6. We have had the advantage of an elaborate and rather pro- Sroy tracted argument, but the decisive considerations can be stated in comparatively few pages.

KiNa. Section 101, as so amended, is as follows:

Duff . Upon the entry outwards of any goods to be exported from a Customs warehouse, either by sea or by land or by inland navigation, as the case may be, the person entering the same for such purpose shall, by and upon the making of such entry, whether so expressed in such entry or not, become bound, when the entry aforesaid is for exportation by sea, to the actual exportation of the said goods, and, when the entry aforesaid is for exportation by land or inland navigation, to the actual landing or delivering of the goods at the place for which they are entered outwards, or, in either case, to otherwise account for the said goods to the satisfaction of the collector or other proper officer, and to produce, within a period to be named in such entry, such proof or certificate that such goods have been exported, landed or delivered or otherwise lawfully disposed of, as the case may be, as shall be required by any regulation of the Governor in Council, or by the collector or other proper officer. Provided, however, that upon the entry outwards of wines and spirituous liquors to be exported from a Customs Warehouse either by sea or by land or inland navigation-, as the case may be, the person entering the same for such purpose shall give security by bond of an incorporated guarantee company authorized to do business in Canada, and whose bonds are acceptable to the Dominion Government, such bond to be in form approved by the Minister, in double the duties of importation on such goods, that the same shall, when the entry aforesaid is for exportation by sea, be actually exported to the place provided for in said entry, and when the entry aforesaid is for exportation by land or inland navigation, shall be landed and delivered at the place for which they are entered outwards, unless in either case the said goods were after leaving Canada lost and destroyed, and that such proof or certificate that such goods have been so exported, landed or delivered, or lost and destroyed, as the case may be, as shall be required by any regulation of the Minister, shall be produced to the Collector or other proper officer within a period to be appointed in such bond.

*

* *

The goods in respect of which the security was given were certain liquors entered at Halifax, by the Scotia Import and Export Company Limited, for export to Georgetown, Grand Cayman, by the steamer Gemma.

The steamer reported outwards from Halifax, February 3, 1925, for Georgetown via St. John, which she reached on February 5, where additional liquors were taken on board for transport to Havana, Cuba. On the 25th February, she cleared at St. John for Georgetown; on the 3rd of March, she reported inwards at Shelburne in ballast, and, therefrom, she cleared for Halifax on the 10th of the same month. It is not contended that the liquors, or any part of them, entered for export at Halifax, reached Georgetown, or that the intended destination of the Gemma was in fact Georgetown.

At Shelburne, on reporting inwards, ' the master made a sworn statement before a customs offi- J.

cer that the goods with which the Gemma was laden on departure from St. John had been disposed of on the high seas, thirty miles off the coast of the United States, and transferred on board lighters.

On the 27th of February, two days after the ship had cleared from St. John for Georgetown, a written certificate was deposited with the Collector of Customs at Halifax, professing to be under the signature of L. A. R. Adams, and purporting to proceed from the office of Customs at the port of Georgetown, bearing date the 16th of February, certifying that the goods described in the Halifax export entry had been delivered over to the customs at Georgetown.

On this certificate the Collector at Halifax acted, believing it to be genuine (as the learned trial judge found), and, purporting to proceed under the authority given by section 102 of the Act, cancelled the bond, and surrendered it to the appellants.

The first question for consideration, is, whether the act of the Collector at Halifax in delivering up the bond with the intention of cancelling it, operated as a cancellation of that document. It is first necessary to notice a defect in the form of the bond as proved at the trial, by the production of a copy.

The form of bond approved by the Minister of Customs is as follows:

we.............. this.................

WHEREAS............................hath

................

to................by the..................... whereof....................is and which goods are now deposited in..............................

at............................, in the Port of......................... under the provisions of the "Customs Act" and Regulations thereunder. AND WHEREAS the Guarantee Company has agreed to guarantee that the said goods shall be duly exported, landed and delivered as required by the Customs Act and Regulations thereunder.

THE KINO. NOW THE CONDITION OF THE ABOVE WRITTEN OBLIGA- TION is such that if the said goods shall, when the entry aforesaid is for exportation by sea, be actually exported to the place provided for in said entry, and when the entry aforesaid is for exportation by land or inland navigation, shall be landed and delivered at the place for which they are entered outwards, unless in either case the said goods are after leaving Canada lost and destroyed, and if such proof or certificate that such goods have been so exported, landed or delivered, or lost and destroyed, as the case may be, as required by Regulations of the Minister of Customs and Excise, be produced to the Collector or other proper officer of Customs and Excise at the Port of....................

within............. days from the date hereof, then this obligation shall be void; but otherwise shall be and remain in full force and virtue.

IN WITNESS WHEREOF the Guarantee Company has hereunto affixed its Corporate Seal.

SEALED AND DELIVERED AND COUNTERSIGNED by....... of the Guarantee Company.

The bond, as proved at the trial, omits the words (following " Minister of Customs and Excise ") " be produced to the Collector or other proper officer of Customs and Excise." The point need not detain us. The recitals establish clearly that the bond was given under the Customs Act and Regulations, and it is therefore necessary to look at these before deciding that a substantive clause in the condition, in which, it is obvious, that the intention is not completely expressed, is entirely nugatory. The intention of the parties as to the form of the condition can be ascertained with certainty by reference to the Act and Regulations made under it, and this is one of those cases in which it is the duty of the court to supply the missing words, in order that the purpose of the document may not be defeated, and the document should therefore be read as of the form, prescribed by the Regulations, above set forth. It is argued that the bond must be regarded as cancelled, because in effect the condition was in fact complied with, and because the appellants, being mere sureties, are entitled to act, as they did act upon the apparent cancellation, the obligee is precluded from denying that this apparent cancellation was valid, and, in their favour, effective. -.

As to the first of these contentions, it is argued that the aim of the proviso in section 101, and the Regulations made thereunder, was to provide special precautions against the clandestine re-importation of wines and liquors into Canada, as to which there is (as is well known) a powerful inducement for smuggling, in the exceptionally high duties on such commodities.

It is said, moreover, that it was quite well known to the Customs officers that the goods in question were destined for the United States, and that the venture of the exporters proceeded in the usual course, and in conformity with the expectations of those officers. The learned trial judge has found that in fact the Collector at Halifax accepted the certificate produced as a genuine certificate, and acted in full belief in its genuineness. The document now proves to be, obviously, a concocted document, concocted for the purpose of defeating, and committing a fraud upon, the Customs law, and even if the Customs Collector had been a party to such a fraud, a purported cancellation based upon it could not, as between the Crown and persons implicated in the fraud, or persons bound by the acts of parties so implicated or civilly responsible for the non-observance of the law, have any effect as against the Crown. The authority and the duty of customs officials in respect of such matters is to be found in, or in instructions authorized by, the Statute or the Regulations; such officials possess no dispensing capacity unless a discretion is reposed in them by or under the authority of some enactment or regulation. Assuming that the principal object of the Statute and Regulations is that contended for, Parliament and the Minister under the authority of Parliament, have laid down rules which are deemed necessary in order to secure that object. A power is vested in the Governor-in-Council to deal with exceptional cases in which penalties have been incurred by remitting them in whole or in part. R.S.C. (1927) c. 178, s. 91. This would enable the Government to deal in a practical way with penalties incurred under section 235 in the special cases suggested in the appellants' factum (*). The Act does not apply to bonds, but that is not a reason for holding that sueY the bond and the regulations and the statute are not to take effect according to their plain meaning.

Now, as to the second contention, the appellants, dealing with Government officials, are presumed to know the statutes under which the officials act, and the limitations of their powers. But apart from this, assuming the delivery of the cancelled bond to the appellants to have misled them to their prejudice, there is a final answer to this contention, in the fact that it was a condition of the bond, as required by the proviso to section 101, that such proof or certificate of the export of the goods to the place named in the export entry should be furnished, as might be prescribed by the Regulations. It is not alleged that the certificate required by the Regulations was in fact produced, and it was, as the learned trial judge found, the production of the fraudulent certificate that led to the cancellation of the bond. The appellants can in these circumstances get no advantage from what the Collector did. The case, in principle, is covered by Mayor, etc., of Kingston-upon-Hull v. Harding (1).

Then, it is argued that the plaintiff can only recover such damages as have been proved. It is settled law, I think, that where a bond is given to secure the performance of the provisions of a revenue statute, the bond is forfeited if the condition is not performed, especially where the bond is required by the statute. The King v. Dixon (2); The King v. Canadian Northern Ry. Co. (3).

Two further contentions must be considered. It is argued that the object of the proviso to section 101 is to obtain a guarantee for the payment of the penalties exacted by section 235, and that the limitation clause of that section applies. I cannot agree. The proviso creates a substantive additional protection in the case of wines and liquors; it cannot be fairly read as subsidiary to section THINo. 235. Then the appellants rely on section 277, as showing J that the claim is statute-barred. I think that section 277 must be read with section 270, and this latter section shows that the words " prosecutions or suits for the recovery of penalties or forfeitures imposed by this Act " do not embrace a proceeding upon a bond required by the statute. I think they apply to penalties, seizures and forfeitures imposed directly by the Act rather than to guarantee bonds (*).

The appellants cannot therefore succeed except in respect of interest, which admittedly was not exigible prior to judgment.

Subject to a variation of the judgment below, disallowing interest prior to judgment, the appeal is dismissed with costs.

Appeal dismissed with costs (subject to variation disallowing claim for interest prior to date of judgment in Exchequer Court).