T-194-74
In the matter of the Canada Corporations Act
and Regulations thereunder
and
In the matter of an application by MacMillan
Bloedel Industries Limited and Harmac Pulp
Limited for a writ of certiorari directed to the
Honourable the Minister of Consumer and Cor
porate Affairs
Trial Division, Collier J.—Vancouver, January
21; Ottawa, April 8, 1974.
Mandamus—Corrected from "certiorari" in style of
cause—Corporations—Application for letters patent con
firming amalgamation agreement—Filing fee tendered on
basis of proposed capital of amalgamated company—Higher
fee demanded by Minister on basis of company's net worth—
Higher fee held valid and applicable—Canada Corporations
Act, R.S.C. 1970, c. C-32, ss. 5.4(1), 137, 151—Insider
Trading Regulations, P.C. 1971-539, SORl71-125, 105
Canada Gazette, Pt. II, p. 582, Regulations 22, 23 and Sch.
II, paragraph 1.
The corporate applicants for letters patent, confirming an
amalgamation agreement, sought certiorari (corrected to
read mandamus) directed to the Minister of Consumer and
Corporate Affairs, to accept the sum of $150 (fee on
application for continuing a corporation, under paragraph
1(f) of Sch. II of the Insider Trading Regulations) or, alter
natively, the sum of $8,975, calculated on the proposed
capital of the amalgamated company under Regulation 22
and paragraph 1(e) of Sch. II. The Minister's position was
that the fee must be calculated on the consolidated net
worth of the amalgamated companies, in the sum of
$96,225.
Held, dismissing the application, that the provision rele
vant to this situation was that under Regulation 23(3) where
by the fee was to be calculated on the proposed capital of
the amalgamated company or the consolidated worth of the
amalgamating companies, whichever was the greater. The
fee here fell under the consolidated net worth of the amal
gamating companies, representing the greater sum of
$96,225. The huge difference between that figure and the
sum of $8,975, applicable under Regulation 22, did not
render Regulation 23 ultra vires as imposing a tax for which
there was no authority in section 151 of the Canada Corpo
rations Act. While the draftsmen of Regulation 23 may not
have anticipated that such enormous fees would ever be
exacted, relief could not be given in this Court. The remedy
lay in the hands of Parliament or the Governor in Council.
The Queen v. Black and Decker Manufacturing Com
pany Limited (1974) 43 D.L.R. (3d) 393; The King v.
National Fish Company, Ltd. [1931] Ex.C.R. 75; Com-
pagnie de Publication La Presse Ltée v. Attorney Gener
al of Canada 63 DTC 1335, applied. Attorney-General
for Canada v. Registrar of Titles of Vancouver Land
Registration District [1934] 3 W.W.R. 165, agreed with.
APPLICATION for mandamus.
COUNSEL:
D. W. Shaw for applicants.
Norman D. Mullins for respondent.
SOLICITORS:
Davis & Company, Vancouver, for
applicants.
Deputy Attorney General of Canada for
respondent.
COLLIER J.—The applicants seek an order by
way of mandamus' directed to the Minister of
Consumer and Corporate Affairs.
The relief sought against the Minister is set
out in the notice of motion as follows:
... that you accept the sutn of $150.00, or alternatively, the
sum of $8,975.00 from MacMillan Bloedel Industries Lim
ited and Harmac Pulp Limited as the fee for the issuance of
Letters Patent for the amalgamated company MacMillan
Bloedel Industries Limited, and that you issue Letters
Patent for MacMillan Bloedel Industries Limited, or alterna
tively, that you exercise your discretion as to whether to
issue Letters Patent for MacMillan Bloedel Industries Lim
ited according to law, .. .
The problem here arises as follows. MacMil-
lan Bloedel Industries Limited is a company
incorporated under federal legislation on
December 31, 1964. The letters patent were
subsequently amended. The issued and out
standing common shares of that company are
beneficially owned by MacMillan Bloedel Lim
ited. The other applicant, Harmac Pulp Limited
was incorporated by letters patent under federal
legislation on December 9, 1968. There was also
a subsequent amendment to the letters patent.
The issued and outstanding common shares in
the capital stock of that company are beneficial-
The style of cause refers to a writ of certiorari. This was
corrected at the hearing to read "writ of mandamus".
ly owned by its co-applicant, MacMillan Bloedel
Industries Limited.
The two applicants agreed in writing to amal
gamate and to continue as one company under
the name MacMillan Bloedel Industries Limited.
In the latter part of December, 1973, an applica
tion, with supporting documents, was submitted
to the Department of Consumer and Corporate
Affairs requesting letters patent confirming the
amalgamation agreement and amalgamating the
two companies so they would continue as one
company under the name set out. All this was
done pursuant to section 137 of the Canada
Corporations Act, R.S.C. 1970, c. C-32. Speak
ing generally, that section provides that the Min
ister, on compliance by applicants with the
statutory provisions, "... may issue letters
patent confirming the agreement; ..." (subsec-
tion (11)). Upon the issue of the letters patent,
the amalgamation agreement then has full force
and effect, and the amalgamating companies are
amalgamated and continued as one company
.. under the name and having the authorized
capital and objects specified in the amalgama
tion agreement; ..." (paragraph 137(13)(a)).
Along with the application to the Department
of Consumer and Corporate Affairs, there were
delivered two letters, both dated December 31,
1973. One enclosed a cheque for $150 in pay
ment of fees, the other enclosed a cheque for
$8,975 in payment of fees. The Department
accepted the cheque for $150 on account
stating:
... we will accept this cheque on account of our fees,
however, we cannot at this time indicate what the final fee
will be since as you know the fee is based on the capital
structure or on the consolidated net worth as indicated in
the pro forma balance sheet of the proposed amalgamated
company.
In reply to the other letter enclosing a cheque
for $8,975, the Department wrote:
With respect to your second letter of December 31st, 1973,
enclosing a certified cheque for $8,975. and the following
instructions in this letter we cannot accept this cheque in
full payment of our fees for the reasons noted above 2 .
We have no alternative but to request the fee as required in
the Tariff of Fees outlined in the Canada Corporations Act
and letters patent of amalgamation cannot be granted until
such fee is, in fact, received.
It is convenient, at this juncture, to set out the
portions of the Canada Corporations Act deal
ing with fees payable under the statute:
151. (1) The Governor in Council may establish, alter and
regulate the tariff of fees to be paid on application for any
letters patent or supplementary letters patent under this
Part, on filing any document, on any certificate issued under
this Act, on making any return under this Act and on the
making of any search of the files of the Department respect
ing a company.
(2) The amount of any fee may be varied according to the
nature of the company, the amount of the capital stock of
the company, or other particulars, as the Governor in Coun
cil deems fit.
Pursuant to section 151, a tariff of fees was
established. It is found in the Insider Trading
Regulations, P.C. 1971-539 [SOR/71-125],
March 23, 1971. The relevant portions dealing
with fees are in Part V, Regulations 22 and 23,
and Schedule II which is the tariff proper. I
shall set out these Regulations and portions of
the Schedule in more detail later. At this stage it
is sufficient to say that the $150 cheque was
tendered by the applicants pursuant to para
graph 1(f) of the Schedule. The other amount of
$8,975 was calculated on the proposed capital
of the amalgamated company (see Regulation 22
and paragraphs 1(a) to (e) of Schedule II), and
tendered accordingly.
The Department took the position, as it did
before me, that the fee must be calculated
according to subsection 23(3) of the Regulations
on the proposed capital of the amalgamated
company or the consolidated net worth of the
amalgamating companies, whichever is the
greater.
There is no dispute here that the consolidated
net worth of the two applicants is the greater
and the fee required, before letters patent may
issue, according to the Department, is $96,225.
Counsel for the Minister stated the only issue
2 The "reasons noted above" were contained in the first
letter supra.
between the Department and the applicants was
the amount of the fee payable; in other words,
the Minister had no other reason for withhold
ing the issuance of the letters patent requested.
Before dealing with the arguments advanced
by counsel, I shall set out Regulations 22 and
23(1) and (3):
22. In this Part and in Schedule II, "proposed capital"
means the aggregate of the amounts computed as follows:
(a) in respect of shares with par value, the amount
obtained by multiplying the number of the shares by the
par value thereof or by 50 cents, whichever is the greater;
(b) in respect of shares without par value, where the
aggregate consideration exceeding which all the shares
may not be issued is set out in the letters patent, the
amount of the aggregate consideration or the amount
obtained by multiplying the number of shares by 50 cents,
whichever is greater;
(c) in respect of shares without par value, where the
consideration exceeding which each share may not be
issued is set out in the letters patent, the amount obtained
by multiplying the number of shares by the consideration
or by 50 cents, whichever is the greater; and
(d) in respect of issued shares without par value resulting
from a change of issued shares with par value or a
subdivision of issued shares without par value, the
amount of capital shown on the books of the company as
the paid-up capital represented by the issued shares with
out par value, the amount of capital shown on the books
of the company as the paid-up capital represented by the
issued shares without par value resulting from the change
or subdivision or the amount obtained by multiplying the
number of shares resulting from the change or subdivision
by 50 cents, whichever is the greater.
23. (1) The fee payable in respect of an application for
letters patent or supplementary letters patent, filing a docu
ment, issuing a certificate, making a return under the Act, or
searching a file as permitted by the Act shall be the fee set
out in Schedule II.
(3) In the case of an amalgamation, "proposed capital"
means proposed capital as defined in section 22 or the
consolidated net worth of the amalgamating companies as
certified by the auditors of those companies and by the
auditors of the amalgamated and continued company,
whichever is the greater.
The relevant portions of Schedule II are as
follows:
SCHEDULE 11
Fees Applicable to Companies Under Part / of the Act
Type of Fee Amount of Fee
1. On application for letters patent:
(a) where the proposed capital
is $50,000 or less $150.00
(b) where the proposed capital
is more than $50,000 but not
more than $200,000
(i) for the first $50,000 150.00
(ii) for each $1,000 or part
thereof over $50,000 1.50
(c) where the proposed capital
is more than $200,000 but
not more than $500,000
(i) for the first $200,000 375.00
(ii) for each $1,000 or part
thereof over $200,000 .75
(d) where the proposed capital
is more than $500,000
(i) for the first $500,000 600.00
(ii) for each $1,000 or part
thereof over $500,000 .25
(e) where the proposed capital
consists wholly or in part of
shares without nominal or
par value as provided by
section 12 [now s. 13] of the
Act . .. . . a fee calculated accord
ing to this Schedule and
in respect of shares with
out nominal or par value
on the basis of the
amount fixed by the
letters patent or sup
plementary letters patent
for which such shares
may be issued.
(f) where the letters patent are
to continue a company under
the Act . ..... $150.00
2. (I) Subject to subitem (2), on
application for supplementary
letters patent:
(a) confirming an increase of
capital . a fee calculated accord
ing to this Schedule on
the increase only (that is,
the fee shall be the same
as for incorporation with
a capital equal to the
increase).
Mr. Shaw, for the applicants, made two main
submissions:
1. The applicable fee is set out in paragraph
1W of Schedule II—$150; and
2. Subsection 23(3) of the Regulations creates
a sum so excessive as to be a tax, rather than a
fee. The statute (section 151) does not authorize
the imposition of a tax, therefore the subsection
is ultra vires or invalid.
In support of the first submission, Mr. Shaw
says the philosophy behind the tariff in
Schedule II appears to be that once an initial fee
for incorporation is paid, there is no intent to
have that fee paid, in whole or in part once
more, if subsequent changes, requiring new or
supplementary letters patent, are made in the
structure of a company. For an example of what
might be termed the "escalation" features of the
tariff, he points to paragraph 2(a) in respect of
supplementary letters patent increasing the capi
tal of a company: the fee is calculated on the
increase in capital only; there is no repetition of
the initial fee exacted on incorporation. It is
contended that the applicants, having paid the
required fees for their initial incorporation and
for their amending letters patent, the only fee
applicable, which does not involve duplication
of fees, or transgression of the basic philosophy
of no repetition of fees, is that set out in para
graph 1(f). It is said the letters patent sought
here, apart from confirming the amalgamation
agreement, will "... continue a company (Mac-
Millan Bloedel Industries Limited) ... under
the Act."
I am unable to accept this first submission for
two reasons. Firstly, to apply paragraph 10 is
to disregard completely the provisions of Regu
lation 23(3), and I am not prepared to do that.
Secondly, in my opinion paragraph 10 has no
application to the situation here. The letters
patent sought are not to "continue a company
under the Act" but are to confirm the amalga
mation agreement. Continuation of the two
applicants as one company, by statute, follows
on the issue of the letters patent. Paragraph 1(f),
in my view, has reference to letters patent
applied for under section 5.4(1) 3 of the Canada
Corporations Act. Provision is there made for
certain companies, already incorporated by a
special Federal statute, to apply "... for letters
patent continuing the company ... (under Part I
of the Act) ...". It seems logical to me the fee
payable in those circumstances should be the
minimum amount of $150 with no reference to
the capital structure of the existing corporation.
The use of the word "continue" in paragraph
1(f) is, to me, more consistent with the purpose
of the letters patent sought under section 5.4
than those sought under section 137 4 .
I turn now to Mr. Shaw's second submission.
Put shortly it is this: a sum calculated on the
consolidated net worth of the two companies
amounts in law to a tax. It is not a fee; a tax
does not come within the category of "tariff of
fees" as authorized by section 151 of the
statute.
Reliance was placed on two decisions. In The
5.4 (1) A company incorporated by Special Act of the
Parliament of Canada whose objects are or include
(a) the construction or operation of a pipeline extending
beyond the limits of a province for the transmission of oil
or gas or both as defined in the National Energy Board
Act,
(b) the construction or operation of a commodity pipeline,
as defined in the National Transportation Act, extending
beyond the limits of a province, or
(c) the business of a money lender within the meaning of
the Small Loans Act,
may apply to the Minister for letters patent continuing the
company under this Part if at the time of the application the
company is carrying on business and the application is
authorized by a resolution approved by three-fourths of the
votes cast at a special general meeting of the shareholders of
the company.
4 Reference was made to The Queen v. Black and Decker
Manufacturing Company Limited (1974) 43 D.L.R. (3d)
393, where the expression "continue" found in section 137
was considered. I do not think that decision is applicable in
determining the meaning of "continue" as used in paragraph
1(f).
King v. National Fish Company, Ltd. 5 , the
Crown brought action to recover monies
allegedly due as fees for a licence to fish. The
amount was calculated on the basis of one cent
per pound of fish caught. A number of defences
were raised. The action was dismissed on the
grounds that the regulations which purported to
lay down the conditions for a licence and the
charge for it went beyond the enabling sections
of the statute in question. Audette J., at pages
80-81 referred to the general principles dealing
with delegated authority and the rule that regu
lations made pursuant to such authority must
not exceed the powers given by Parliament in
the statute. The Judge made certain observa
tions in respect of a licence fee and a licence
tax. Those remarks were obiter. I quote from
page 84:
... A licence charge, however, may be either a licence fee
or a licence tax. When the licence is imposed to cover the
cost of regulation or to meet the outlay incurred for some
improvement of special advantage to the business, it may
truly be said that the licensee gets a special benefit from the
privilege, a special benefit measured by the cost. The charge
would then be a fee. When, however, the charge for the
licence is to carry on a business, which before the imposi
tion of the restrictive law was open to any one, is purposely
so high as to bring in a distinct net revenue to the Govern
ment above the cost of regulation, we can no longer proper
ly speak of special benefits to the licensee, since the special
benefit is converted into a special burden; the charge is then
no longer a licence fee, but a licence tax.
It appears obvious Audette J. thought the
amounts demanded in that case were in the
nature of a tax, and not a licence fee as author
ized by the statute.
The other decision is Compagnie de Publica
tion La Presse Ltée v. Attorney General of
Canada 6 . That case dealt with a claim as to
whether certain additional fees required of a
broadcasting station under the Radio Act were
properly payable. The petitioner alleged, on a
number of grounds, that a section of the Regula-
5 [1931] Ex.C.R. 75.
6 63 DTC 1335.
tions increasing the fees was ultra vires. One
ground was that the Regulation did not set a
licence fee (as authorized) but imposed a tax.
Dumoulin J. said at page 1338:
On the first matter, the petitioner asks the following
question on page 2 of its statement:
1. The new section 5 of the General Radio Regulations
does not set licence fees, but in fact and in law, imposes a
tax, without the authority of Parliament.
First of all, what does the Act which regulates this important
sector of commercial activity state? We are dealing with the
Radio Act, R.S.C. 1952, chapter 233, ss. 3(1)(a) and 4(1),
paragraphs (c) and (d):
3(1) The Governor in Council may:
(a) prescribe the tariff of fees to be paid for licences and
for examination for certificates of proficiency held and
issued under this Act;
4(1) The Minister may make regulations
(c) defining the different kinds of licences that may be
issued, their respective forms and the several periods for
which they shall continue in force;
(d) prescribing the conditions and restrictions to which the
several licences shall respectively be subject;
and again at page 1339:
The Corpus Juris (under the heading "Taxation", subtitle
"Licenses", p. 169, No. 7) suggests a rather simple analysis
for distinguishing between a licence and a tax, and I quote:
No. 7. Amount and use of funds as determining factors:
The amount imposed for the privilege of carrying on a
certain business is often an important factor in determin
ing whether it is a license fee proper or a tax for revenue
purposes. If the amount exacted does not exceed, and is
intended to cover the actual expense of issuing the license
and inspecting and controlling the occupation or business,
it is a license fee proper and not a tax, although the mere
fact that the fee demanded is in excess of such expenses
and therefore incidentally produces revenue is not suffi
cient to make a tax where the object of the imposition is
not to raise revenue, but to regulate or control the particu
lar business. (The italics are added.) When, however, the
amount exacted is greatly in excess of the probable
amount necessary to issue licenses and inspect and regu
late the business, it is generally regarded as a tax for
revenue and not a license tax.
Thus, if the amounts exacted by the State do not greatly
exceed the expenses incurred in the regulation and inspec
tion of the radio waves, the above quotation would not
perceive in this excess of revenue the distinct characteristics
of a tax.
The Court, however, found on the facts that
the so-called fee had not become a tax.
On other grounds the learned Judge went on
to hold the Regulation in question to be ultra
vires. On appeal to the Supreme Court of
Canada', the majority, while allowing the
appeal, agreed with the Trial Judge that the
Regulation in question was valid as imposing a
fee, rather than a tax.
I have concluded that subsection 23(3) of the
Regulations here is valid. In my opinion, it does
not purport to impose a tax rather than a fee.
There is nothing in section 151 of the Canada
Corporations Act indicating the fees established
by the tariff must cover merely the administra
tive costs involved in respect of the matters
referred to in subsection 151(1). Subsection
151(2) in fact specifically authorizes variations
in fees. The fact that in the particular circum
stances of this application the sum claimed by
the Department appears to be extremely high is
not sufficient to warrant concluding the Regula
tion setting out the basis of calculation imposes
a tax. The Regulation provides for alternative
methods of calculating fees where an amalgama
tion of companies is sought. Simply because one
method produces a sum of $8,975 and the other
$96,225 (although the difference is huge) does
not warrant the conclusion that the first figure is
a fee, the second a tax and the Regulation
therefore invalid. The substantial purpose, in
my opinion, of the Regulations and the Tariff of
Fees is to provide a revenue to defray the cost
of the Corporations Branch in dealing with cor
porate matters and rendering corollary services
under the Canada Corporations Act. Merely
because the revenue received may provide a
surplus does not necessarily change a fee into a
66 DTC 5492.
tax imposed for a public purpose 8 .
Paragraph 11 of the Affidavit filed in support
of this motion is as follows:
11. I verily believe that the aforesaid fees in the sums of
$96,225.00 and $8,975.00 are so excessive as to be well
beyond a reasonable payment towards the cost of adminis
tering the Corporations Branch and other costs and
expenses of the Branch, and that they would bring in a net
revenue to the Government of Canada over and above the
aforesaid costs and expenses of the Corporations Branch.
The opinion expressed may well be the case
but there is no evidence of any kind to support
the opinion. As I have said, the mere fact that
fees of the magnitude in question here might,
over a given period of time, result in a net
revenue does not convert the fees into taxes,
nor does it make the Regulation a taxing Regula
tion, and therefore beyond the powers con
ferred on the Governor in Council.
The second submission on behalf of the appli
cants is therefore rejected.
Counsel for the Crown, in addition to his
argument on the merits, contended that man-
damus proceedings are not the proper remedy in
this particular case. He suggested the applicants
ought to have paid the fees under protest and
then brought a declaratory action. In view of the
conclusion I have reached on the merits, I
express no opinion on this argument.
I cannot leave this matter without expressing
the view that the fee sought by the Department
here is, if not astounding, certainly breath-
catching. I suspect that the drafters of the Regu
lation in question did not anticipate that fees of
this enormity would ever be exacted. I have
concluded that relief cannot be given in this
Court. The remedy, it seems to me, lies else
where, in the hands of Parliament or the Gover
nor in Council.
The motion is dismissed with costs.
8 I find apt the remarks of Macdonald J.A. in Attorney-
General for Canada v. Registrar of Titles of Vancouver Land
Registration District [1934] 3 W.W.R. 165 at 176 and 177.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.