Canada v. Nova Scotia Power Inc.

Canada v. Nova Scotia Power Inc. Court (s) Database Federal Court of Appeal Decisions Date 2003-01-23 Neutral citation 2003 FCA 33 File numbers A-108-02 Notes Digest Decision Content Date: 20030123 Docket: A-108-02 Neutral citation: 2003 FCA 33 CORAM: STRAYER J.A. EVANS J.A. PELLETIER J.A. BETWEEN: HER MAJESTY THE QUEEN Appellant and NOVA SCOTIA POWER INC. Respondent Heard at Toronto, Ontario on November 25, 2002 Judgment delivered at Ottawa, Ontario, on January 23, 2003 REASONS FOR JUDGMENT BY: PELLETIER J.A. CONCURRED IN BY: STRAYER J.A. EVANS J.A. Date: 20030123 Docket: A-108-02 Neutral citation: 2003 FCA 33 CORAM: STRAYER J.A. EVANS J.A. PELLETIER J.A. BETWEEN: HER MAJESTY THE QUEEN Appellant and NOVA SCOTIA POWER INC. Respondent REASONS FOR JUDGMENT PELLETIER J.A. [1] This is an appeal by the Crown from the decision of Associate Chief Judge Bowman of the Tax Court of Canada, reported at [2002] DTC 1432 as Nova Scotia Power Inc v. The Queen, with respect to two questions stated pursuant to section 173 of the Income Tax Act. The questions which Judge Bowman was asked to answer were the following: [T]he questions for determination are, in the period up to 1992 when it disposed of its assets: (1) Did Nova Scotia Power Corporation conduct its principal income-earning activities as an agent of Her Majesty the Queen such that section 2 of the Income Tax Act (including ancillary provisions such as section 21 of the Act) did not apply to it? And (2) If the answer to (1) is no, was Nova Scotia Power Corporation an agent of Her Majesty the Queen with respect to the ownership of assets used in its business such that section 21 of the Income Tax Act did not apply to depreciable assets acquired by it? [2] Judge Bowman answered the first half of each question (up to the words "such that") in the negative and declined to deal with the second half of the questions for lack of a sufficient factual foundation. This appeal raises the following question: when does an agent of the Crown enjoy Crown immunity from the application of statute law? [3] The parties proceeded on an Agreed Statement of Facts which is reproduced below: 1. Prior to 1967, a system for producing and delivering electricity had evolved in Nova Scotia whereby the urban areas were serviced by private corporations, Eastern Light & Power Company Limited and Nova Scotia Light and Power Company Limited, while the rural areas were serviced by the Nova Scotia Power Commission (the "Commission"). A copy of the Power Commission Act, R.S.N.S. 1967, c. 233 is at Tab 1 of the Agreed Documents. 2. In 1967, the Commission acquired the shares of Eastern Light & Power Company Limited and in 1972 acquired 99.65% of the common shares and approximately 98% of the preferred shares of Nova Scotia Light & Power Company Limited. The balance of the shares were acquired in due course. 3. In 1973, the Government of Nova Scotia enacted amendments to the Power Commission Act, continued the Commission as the Nova Scotia Power Corporation (the "Corporation") and enacted many other changes. The amendment to the Power Commission Act, S.N.S. 1973, c. 47 is at Tab 2 of the Agreed Documents. A consolidated copy of the Power Corporation Act, R.S.N.S. 1989, c. 351 is at Tab 3 of the Agreed Documents. 4. After the enactment of the Power Corporation Act virtually all of the electricity in Nova Scotia was produced and delivered by the Corporation, all of the capital of which was owned by the Province. 5. Between 1973 and 1992, the Corporation made significant borrowings, at least some of which were used for the acquisition of depreciable property used for the acquisition of depreciable property used in the production and distribution of electricity. The borrowings in question were evidenced by debentures or savings bonds secured by the general credit of the Corporation and were guaranteed by the Province. Typical documents representing each type of borrowing are found at Tabs 12 and 13 respectively of the Agreed Documents. 6. In each year the financial affairs of the Corporation were reported in its financial statements. The comparative financial statements of the Corporation are found at Tab 6 of the Agreed Documents and show the financial affairs from 1980 to 1993 inclusive. 7. No tax was payable on the taxable income of the corporation under the Income Tax Act (the "Act") and the Corporation did not file income tax returns. In the result it did not deduct any amount in respect of capital cost allowance under paragraph 20(1)(a) of the Act, or as interest under any of paragraphs 20(1)(c), (d),(e), or (e.1) of the Act. 8. In 1992 the Province enacted the Nova Scotia Privatization Act, S.N.S., c. 8 (a copy of which is at Tab 4 of the Agreed Documents) pursuant to which Nova Scotia Power Incorporated (the "Appellant") purchased the assets and undertaking previously used by the Corporation in the production and distribution of electricity. As a result of the application of subsection 85(5.1) of the Act, the capital cost of depreciable property acquired by the Appellant was equal to the capital cost of such property to the Corporation. 9. In its original returns of income for the 1994, 1995 and 1996 taxation years the Appellant claimed capital cost allowance under paragraph 20(1)(a) of the Act on the Basis that a portion of the interest expense on borrowed money used by the Corporation to acquire depreciable property was properly included in the capital cost of that property acquired by the Appellant. 10. On May 29, 1998, the Corporation filed T2 corporation income tax returns for the taxation years ending March 31, 1980 to March 31, 1993 inclusive. In those returns of income the Corporation elected pursuant to subsection 21(1) and 21(3) of the Act, to add interest on money borrowed to acquire depreciable assets in the amount of $995,260,716 to the capital cost of those assets. (Copies of the returns including the elections are at Tab 5 of the Agreed Documents). 11. Also in May, 1998, the Appellant filed revised capital cost allowance schedules for its 1994, 1995 and 1996 taxation years claiming additional capital cost allowance in the amounts of $46,092,405, $41,774,007 and $21,574,289 respectively on the basis that the amount of interest reflected in the said elections was properly included in computing the capital cost of such property. 12. By Notices of Reassessment dated May 31, 1999, the Minister of National Revenue reassessed the Appellant for the 1994, 1995 and 1996 taxation years on the basis, inter alia, that in determining the undepreciated capital cost of depreciable property of the Appellant, the capital cost of the property acquired form the Corporation should be determined without including any amount in respect of interest on borrowed money used by the Corporation to acquire such property. 13. The Minister's reassessments were based, inter alia, on the assumption that throughout the period with respect to which the Corporation sought to apply subsections 21(1) an 21(3) of the Act, the Corporation was an agent of Her Majesty the Queen in right of Nova Scotia, with the consequence that the Act had no application to the Corporation pursuant to section 17 of the Interpretation Act (Canada). 14. By letter dated June 8, 1999 the Appellant sought a determination of law pursuant to subsection 152(1.1) of the Act. A notice of Loss Determination was issued on July 2, 1999 and by Notices of Objection filed on July 13, 1999 the Appellant objected to the Notices of Loss Determination for the years 1994, 1995 and 1996. [4] On these facts, the parties agreed that the issue of the taxation of the Nova Scotia Power Corporation (NSPC) turned on the application of section 17 of the Interpretation Act, R.S.C. 1985, c. I-21, which reads as follows: 17. No enactment is binding on Her Majesty or affects Her Majesty or Her Majesty's rights or prerogatives in any manner, except as mentioned or referred to in the enactment. 17. Sauf indication contraire y figurant, nul texte ne lie Sa Majesté ni n'a d'effet sur ses droits et prérogatives. [5] The taxation issue raised by these facts is whether NSPC can file an election under the Income Tax Act (the "Act") to have the interest costs associated with the purchase of its assets added to the capital cost of the assets, for the purpose of increasing the amount of the deduction which the purchaser of its assets, Nova Scotia Power Inc. ("Power Inc."), can claim in respect of capital cost allowance. Since Power Inc. is deemed to have acquired the assets at NSPC's capital cost, Power Inc.'s cost can only be increased if NSPC can elect to add the interest to the capital cost of the assets, as provided in subsections 21(1) and (3) of the Act. But that is only possible if NSPC is subject to the provisions of the Income Tax Act. Paradoxically, this puts the Crown in the position of arguing that the Income Tax Act does not apply to NSPC, while the respondent Power Inc. argues that it does. [6] A number of provisions of the Power Corporation Act, S.N.S. 1973 c. 47 are relevant to the issues and are reproduced below: 2. In this Act, (a) "Board" means the Board of Directors of the Corporation; (b) "Chairman" means Chairman of the Board; (c) "Commission" means the Nova Scotia Power Commission incorporated by the Power Commission Act, Revised Statutes of Nova Scotia 1967 Chapter 233 and amendments thereto; (d) "Corporation" means Nova Scotia Power Corporation; (e) " Director" means a director of the Corporation; (f) "President" means President of the Corporation. [...] 4. (1) The Commission shall continue as a body corporate and as agent of Her Majesty the Queen in the right of the Province under the name of "Nova Scotia Power Corporation" and shall consist of a Board of Directors comprised of a Chairman, President and not more than twelve other Directors. (2) The Chairman, President and other Directors shall be appointed by the Governor in Council each to hold office for such term as specified in the appointment. [...] (4) The President, subject to the control and direction of the Board, shall have charge of the conduct of the business of the Corporation 5. (1) The Corporation may appoint or employ such officers, employees, advisers and consultants as it considers necessary and may determine their remuneration and other terms and conditions of employment. (2) For all purposes of the Public Service Superannuation Act every person employed by the Corporation otherwise than temporarily shall be deemed to be a person employed in the public service of the Province and service in the employment of the Corporation shall be deemed to be public service. [...] 6. The object of the corporation is to develop for Nova Scotia the maximum use of power on an economic and efficient basis and for this purpose to engage in Nova Scotia and elsewhere in the development, generation, production, transmission, distribution, supply and use of electricity, water, steam, gas, oil or other products or things used or useful in the production of power. 7. (1) The powers of the Corporation include (a) power to acquire, lease, construct, maintain, operate, and use in Nova Scotia and elsewhere land, works, plant, buildings, structures, machinery, equipment, devices, pole lines, conduits, pipelines and any other property used or useful to carry out the objects of the Corporation; (b) the powers that the Commission had before the coming into force of this Act; (c) the powers conferred on the Corporation by and under this Act; (d) the powers of any company with which the Corporation hereafter amalgamates under Section 14 of this Act; (e) all the powers of a company incorporated under the Companies Act, except as otherwise provided in this Act; (f) all other powers that are incidental or conductive to the attainment of the objects of the Corporation. [...] 8. (1) Without limiting the generality or effect of Section 7 of this Act, the Corporation may exercise all borrowing powers that the Commission had before the coming into force of this Act, in addition to those otherwise conferred by and under this Section. (2) The Corporation may from time to time borrow money on the credit of the Corporation in or out of Canada and with the approval of the Governor in Council may (a) issue bond, debentures or other securities of the Corporation and pledge or sell the same; (b) secure any borrowing or liability of the Corporation by mortgage, charge or pledge of all or any currently owned or subsequently acquired property of the Corporation or its undertaking and rights. (3) The Governor in Council may from time to time (a) lend money to the Corporation and borrow money for such purpose; (b) guarantee the repayment by the Corporation of the principal, interest and premium of any bonds, debentures or other securities issued by the Corporation or repayment by the Corporation of any other indebtedness incurred by it or repayment of any indebtedness of a company subsidiary to the Corporation. 9. (1) The Corporation may expropriate any land which it deems necessary or useful for the attainment of its objects. [...] 12. (2) The Corporation shall, before the first day of August in each year, make an annual report to the Governor in Council containing clear and comprehensive statements disclosing and exhibiting (a) the total amount of receipts and expenditures in respect of the operations conducted by the Corporation during the last fiscal year; (b) the actual condition with respect to the amount and character of the assets and liabilities of the Corporation at the end of the last fiscal year; (c) such other matters as may appear to be of public interest in relation to the Corporation or the works of the Corporation or that the Governor in Council may prescribe. 15. (1) The Proceeding against the Crown Act shall apply to actions and proceedings against the Corporation, other than expropriation proceedings under Section 9 of this Act. (2) For the purposes of this Section, a reference in the Proceedings against the Crown Act (a) to the Crown shall be construed as a reference to the Corporation; (b) to the Minister of Finance shall be construed as a reference to the Treasurer of the Corporation; (c) to the Consolidated Fund shall be construed as a reference to the funds of the Corporation. (3) In the proceedings under this Section an action shall be brought against the Corporation in the name of the Corporation. (4) Where a document or notice must be served upon or given to the Corporation pursuant to this Section or the Proceedings against the Crown Act it shall be served by delivering a copy to the Office of the Attorney General or the Deputy Attorney General or any other barrister or solicitor employed in the Department of the Attorney General or by delivering a copy to a barrister or solicitor designated for that purpose by the Attorney General, and such service shall be and shall be deemed to be service upon the Corporation. [...] 16. (1) The Corporation and its property are exempt from taxation under or pursuant to any Act of the Legislature. (2) Where the Corporation owns not less than seventy-five per cent of the shares of any company, such company and its property and any subsidiary of such company and any property thereof are also exempt from taxation under or pursuant to any Act of the Legislature. [...] 29. (1) The Corporation may, and shall be deemed from its establishment to have had, capacity to contract from time to time with any other person, firm or corporation for the supply of electric power and energy by the Corporation, but where a contract provides for initial installed transformer capacity in excess of five hundred kilovolt amperes, the contract shall not be binding upon the parties to it until it has been approved by the Governor in Council. (2) Any net profit made by the Corporation in supplying electric power and energy pursuant to subsection (1), after making provision for the cost of supplying such electric power and energy in the same manner as provided in Section 25 for adjusting and fixing such cost, and agter retaining and setting apart such sums as may, in the opinion of the Corporation, be sufficient for the purposes mentioned in Section 14, as it existed immediately preceding the twenty-ninth day of March, 1973, with respect to any contract of contracts as provided in subsection (1), may, at the discretion of the Corporation, be applied to reduce the cost of supplying electric power and energy to any or all the undertakings of the Corporation as provided in this Act, or otherwise, as the Corporation may determine. R.S., c. 233, s. 61; 1969, c. 47, s. 2. [7] Judge Bowman undertook a careful analysis of the law of Crown agency and of the facts. His conclusion with respect to the first question was: [31] I accept that these facts demonstrate that a significant degree of control by the province was potentially or actually exercised over the affairs of NSPC. Nonetheless, it does not follow from the fact that a corporation's business activities are closely controlled by its sole shareholder that the business and undertaking of that corporation is that of its shareholder: Odhams Press, Ltd. v. Cook, [1938] 4 All E.R. 545 at p. 551 (per Sir Wilfrid Greene M.R., C.A.), aff'd [1940] 3 All E.R.15 (H.L.); Denison Mines (supra). [32] There is a significant distinction between a corporation's business being controlled by its shareholder and the corporation's business, undertaking and property being owned by the shareholder. [33] I do not think the facts support the conclusion that NSPC's business, income, undertaking and property were owned by the province of Nova Scotia. Such a conclusion would entail an assimilation of the corporation to the province. It is not a conclusion that I think is supportable in this case. The Power Corporation Act treated NSPC as owning its own property, carrying on its own business and owning its own property separate from the province. Under section 7 it had all of the powers of a company incorporated under the Companies Act except as otherwise provided. Under section 8 NSPC could borrow on its own credit and could issue bonds or debentures with the approval of the Governor-in-Council. The Governor-in-Council could lend money to the corporation and guarantee its debts. This last provision would be meaningless if the corporation were an agent or servant of the Crown in respect of its ownership and property and conduct of its business. Under section 10 the board had all of the usual powers of a board of directors of a corporation. [34] All of the foregoing is inconsistent with NSPC being an agent of Her Majesty in respect of its business and property. [35] There are, however, a number of provisions that are somewhat inconsistent with NSPC's not being an agent of the Crown in respect of its business and property. These include the treatment of the employees as public service employees for the purpose of the Public Service Superannuation Act (section5), the corporation's powers of expropriation in section 9 and the application of the Proceedings against the Crown Act under section 15. All of these factors must be weighed and given their proper importance in the Power Corporation Act as a whole. [36] In my view the factors within the statute itself supporting the conclusion that NSPC is an independent corporation and not an agent of the Crown in respect of its business and the ownership of its property outweigh the factors that point in the opposite direction. [8] Judge Bowman then reviewed a number of cases, including British Columbia Power Corporation v. Attorney General of British Columbia et al. (1962), 34 D.L.R. (2nd) 25 (B.C.C.A.), Regina v. Eldorado Nuclear Limited (1983), 4 D.L.R. (4th) 193 (S.C.C.), Metropolitan Meat Industry Board v.Sheedy, [1927] A.C. 899 (J.C.), Coomber v. Justices of Berks (1883), 9 App. Cas. 61. On the basis of this review, he concluded that "the words 'agent of Her Majesty the Queen' do not go so far as to make NSPC an agent for all purposes or make it an agent of Her Majesty the Queen so that it held its income, business, undertaking and property for and on behalf of Her Majesty the Queen." He noted a reluctance on the part of the courts to grant to Crown corporations the full range of Crown privileges and immunities simply because they were designated as agents of the Crown. [9] After a review of legislative provisions dealing with the vesting of the property of Crown corporations in the Crown, the learned judge concluded as follows: [50] It is apparent from these examples that where the legislature wished to create bodies that carried out their purposes and held property as agents of Her Majesty to the extent contended for by the respondent here it was capable of saying so. To find that a corporation is assimilated to the Crown so that its separate identity merged with the Crown and became an alter ego of the provincial Crown in carrying on the business for which it was created is a somewhat far-reaching conclusion. One of the purposes of a Crown corporation is to permit the corporation to carry out its purposes independently of the government. To conclude that in its activities, business and ownership of property it is an alter ego of the Crown would require both compelling evidence of a de facto assimilation of it, or of its business and property, to the Crown in right of Nova Scotia and a clear legal basis of a de jure assimilation to the Crown, such as specific legislation of the type set out in the examples cited above. I do not believe that we have either. [10] Counsel for the Crown, the appellant, conceded that, although the government of Nova Scotia exercised a high degree of control over the affairs of NSPC, it was not sufficient to make the latter an agent of the Crown at common law. However, NSPC is designated a Crown agent by the Power Corporation Act. That agency must have been created for some purpose, even if it was not "for all purposes" as it was in Eldorado Nuclear. The Crown argues that it is reasonable to assume that NSPC was made an agent of the Crown for the purpose of fulfilling its statutory object of developing producing and supplying electrical energy in the Province of Nova Scotia. In response to the argument that more explicit language is needed to assimilate NSPC to the Crown, counsel argued that the standard form of drafting in use in Nova Scotia statutes at the time the Power Corporation Act was enacted was the simple, unadorned agency clause used in this case. [11] The Crown further notes that the Nova Scotia government acted as though NSPC was an agent of the Crown in that the Minister of Finance exercised the power to approve its privatization, as well as ensuring that NSPC's debt was serviced. The courts of Nova Scotia also assumed that NSPC was not subject to having its lands encumbered by liens under the Mechanic's Lien Act because it was an agent of the Crown. See Union Construction Ltd., [1979] N.S.J. No. 45 (S.C.T.D.), Donald Developments Ltd v. Nova Scotia Power Corp., [1988] N.S.J. No 233 (N.S.S.C.T.D) aff'd [1989] (N.S.C.A.). Finally, the powers conferred on NSPC in the Power Corporation Act are all consistent with its being an agent of the Crown for the purpose of developing producing and supplying electric power to Nova Scotia. For example : - proceedings against NSPC were subject to the Proceedings against the Crown Act, and service upon the corporation was effected by service upon the Attorney General; - NSPC's employees were treated as members of the public service for some purposes such as superannuation. See section 5 of the Power Corporation Act. [12] The Crown notes that a perusal of the Act discloses other powers which support the conclusion that NSPC was an agent of the Crown. For example, it has the power of expropriation. It is exempt from provincial taxation, and its loans can be secured by a guarantee from the provincial government. In the end, the Crown argues, the conclusion that NSPC is an agent of the Crown in acquiring its assets and carrying on its business is inescapable. [13] The respondent Power Inc. does not see matters in the same light. It acknowledges and approves the Crown's admission that NSPC was not sufficiently under the control of the government to meet the common law test of agency. It follows from this that the sole possible source of agency status is NSPC'S constating statute. Power Inc. says that the fact that subsection 4(1) of the Power Corporation Act makes NSPC an agent of the Crown is essentially without effect unless the purposes for which it is made agent are delineated. The respondent's position is succinctly stated in this passage from its factum, which follows a discussion of the contractual creation of an agency relationship: Agencies arising by statutory declaration are no different. For such declaration to be dispositive it is necessary that the scope of the agency be delineated. That delineation may be effected either by adjectival phrases such as "for all purposes" or "for the purposes of this Act" or by words which specify that the income and property of the corporation beneficially belongs to the Crown, or both. [14] Since there are no descriptive phrases attached to NSPC's designation, the respondent looks to the whole of the Power Corporation Act with a view to determining the beneficial ownership of NSPC's income and assets. It finds that the following provisions are inconsistent with ownership of those assets by the Crown: a) NSPC has the right to sell power and to keep and retain the profits from such sales to be applied as it sees fit. Section 29. b) NSPC has the power to acquire assets and can borrow on its own undertaking to do so. Sections 7 and 8. c) NSPC can borrow money from the Government, and the Government is authorized to guarantee NSPC's borrowings. Neither of these is consistent with NSPC acting as agent of the Crown. Subsection 8(3). d) NSPC is exempt from provincial taxation. Section 16. If it were truly an agent of the Crown such a provision would be unnecessary. [15] Consequently, since the breadth of NSPC's agency is not set out explicitly, and since it owns its property as principal, it is clear that it cannot be an agent of the Crown for the purpose of owning property and running its undertaking. If it is not an agent of the Crown, section 17 of the Interpretation Act does not exempt it from the application of the Income Tax Act. Consequently, it can file the elections which it did, and so increase the capital cost of the assets transferred to Power Inc. which, in turn, may claim capital cost allowance based upon those higher costs. [16] The learned trial judge commented on the double-barrelled nature of the questions put to him. Both question ask whether NSPC undertook certain activities as agent for the Crown "such that section 2 of the Income Tax Act (including an ancillary provision such as section 21 of the Income Tax Act) did not apply to it?" The remaining question is whether the parties contemplated that an affirmative answer to the part of the question preceding "such that ..." necessarily implied an affirmative answer to the balance of the question. Judge Bowman held that it did not and that he was not prepared to decide the second half of the question on the basis of the information before him. Before us, the parties took the position that a decision on whether NSPC was an agent of the Crown was determinative of the issue so that Judge Bowman had effectively decided the issue when he decided that NSPC was not an agent of the Crown. [17] In my view, the premise upon which the questions were stated is false. While a finding that an entity is not an agent of the Crown makes the issue of Crown immunity redundant, a finding of Crown agency does not automatically lead to the conclusion that the entity enjoys Crown immunity. The latter point was decided by the Supreme Court of Canada in Canadian Broadcasting Corporation v. The Queen, [1983] 1 S.C.R. 339. [18] The C.B.C. claimed Crown immunity when it was charged under the Criminal Code with showing an obscene film. The Broadcasting Act provided that " ... the Corporation is, for all purposes of this Act, an agent of Her Majesty, and its powers under this Act may be exercised only as an agent of Her Majesty." In spite of this broad agency clause, the Supreme Court decided that the C.B.C. could not claim Crown immunity in respect of the charge because a regulation under the Broadcasting Act prohibited the corporation from broadcasting any "obscene, indecent or profane ... presentation". The Court held that if the corporation had indeed broadcast an obscene film, it was acting outside the purposes for which it had been made an agent of the Crown and therefore was not entitled to Crown immunity. As a result, a finding of Crown agency is not equivalent to a finding of Crown immunity. [19] Given the premise from which they began, it is not surprising that the parties devoted the whole of their argument to the question of whether NSPC was an agent of the Crown. The fact that this was considered to be the issue is somewhat surprising since section 4 of the Power Corporation Act specifically makes NSPC an agent of the Crown. If the Legislature confers Crown agency on a corporation which it creates, one would think that its status was not open to question in the courts. Once a corporation is found to be an agent of the Crown, the question of Crown immunity turns on the scope of the corporation's mandate and whether, on the facts, it was acting within that mandate. [20] In attacking NSPC's status as agent of the Crown, the respondent adopted as its position the following quotation from B & M Reader's Service Limited v. Anglo Canadian Publishers Limited, [1950] O.R. 159 (C.A): In order to ascertain whether the relationship of agency exists, the true nature of the agreement or the exact circumstances of the relationship between the alleged principal and agent will be regarded, and if it be found that such agreement in substance contemplates the alleged agent acting on his own behalf, and not on behalf of a principal, then, though the alleged agent may be described as an agent in the agreement, the relationship of agent will not have arisen. [21] In B & M Reader's Service, the Court was faced with a claim based on an oral agreement which one of the parties alleged was an agency agreement, while the other claimed it was a contract of sale. The Court had to characterize the agreement between the parties. In that context, there is nothing surprising in the statement that one must look to the substance of the agreement to determine its true character. The respondent in the case before us seeks to rely on that principle in a different context, that is, where the agency is created by the Legislature. The respondent's position, which was adopted by the learned Tax Court judge, is that even where there is a specific statutory designation that a corporation is the agent of the Crown, one must nonetheless look to the relationship between the Crown and the entity to determine if it is truly an agency relationship. With respect, this assumes that the Legislature knew not what it did when it used the expression "agent of the Crown". [22] There are cases in which a question does arise as to whether a corporation is an agent of the Crown. When a corporation is constituted by legislation for public purposes ("a public corporation"), but without a specific statutory designation as an agent of the Crown, it is legitimate to inquire if the corporation can be considered an agent of the Crown for purposes of Crown immunity. An example of this type of case is Tamlin v. Hannaford, [1949] 2 All E.R. 327 (C.A.) where the issue was whether the British Transport Commission was subject to the Rent Restrictions Act. Denning L.J. stated the issue as follows at p. 328: It is, of course, a settled rule that the Crown is not bound by a statute unless there can be gathered from it an intention that the Crown should be bound, and it has been held that, under this rule, the Crown and its servants and agents are not bound by the Rent Restrictions Acts ... In considering whether any subordinate body is entitled to this Crown privilege the question is not so much whether it is an "emanation of the Crown" ... but whether it is properly to be regarded as a servant or agent of the Crown: see International Ry. Co. v. Niagara Parks Commission (citation omitted) In the case of the British Transport Commission, this depends upon the true construction of the Transport Act, 1947. [23] The leading case on Crown immunity and public corporations is R. v. Eldorado Nuclear Limited, [1983] 2 S.C.R. 551. Eldorado Nuclear and Uranium Canada were charged with criminal contraventions of the Combines Investigation Act. They claimed Crown immunity from prosecution. Their application for prohibition was successful at first instance and was upheld by the Ontario Court of Appeal. The Crown appealed to the Supreme Court of Canada. The law of Crown immunity as it relates to agents of the Crown was summarized by the Court at pp. 565-566: Statutory bodies such as Uranium Canada and Eldorado are created for limited purposes. When a Crown agent acts within the scope of the public purposes it is statutorily empowered to pursue, it is entitled to Crown immunity from the operation of statutes, because it is acting on behalf of the Crown. When the agent steps outside the ambit Crown purposes, however, it acts personally, and not on behalf of the state, and cannot claim to be immune as an agent of the Crown. This follows from the fact that s. 16 [now 17] of the Interpretation Act works for the benefit of the state, not for the benefit of the agent personally. Only the Crown through its agents, and for its purposes, is immune from the Combines Investigation Act. (emphasis added) [24] The Court then went on to consider the circumstances of the two corporation, each of which was, "for all its purposes", designated an agent of the Crown. It found that Uranium Canada would meet the common law de jure test of control, and would therefore be considered an agent of the Crown at common law, because it could only exercise its powers with the consent of the Governor in Council or at the direction of the Minister of Energy Mines and Natural Resources. On the other hand, while Eldorado Nuclear enjoyed substantially more freedom from day to day control, the Court concluded that the question of de jure control was not determinative of the question of immunity: While Uranium Canada would easily meet the common law test of Crown agency, since it needs approval of the Governor in Council for what it does, I think it is clear that the common law would not recognize Eldorado as a Crown agent since it does not meet the de jure control test. I do not, however, think that this deprives Eldorado of the right of Crown immunity when acting within its corporate purposes. The position at common law is not that those under de jure control are entitled to Crown immunity, but rather that immunity extends to those acting on behalf of the Crown. In Metropolitan Meat Industry Board v. Sheedy, [1927] A.C. 899, the Privy Council found the Board not to be a Crown agent because "there is nothing in the statute which makes the acts of administration his [the Minister's] as distinguished from theirs" (p. 905). Sheedy is not an immunity case, rather, the question was whether Crown priority could be asserted in a liquidation. Nevertheless, it does indicate that the de jure test applies only in the absence of specific language indicating the body acts on behalf of or as an agent of the Crown. Eldorado Nuclear supra at p. 574 (emphasis added) [25] Consequently, the question of Crown immunity falls to be decided on a consideration of whether, in respect of the transaction in question, the Crown agent was acting within the purposes for which it was created. The question arising in this appeal is the significance of language such as agent of the Crown "for all its purposes" or agent of the Crown "for purposes of this Act". In expressing its conclusion inEldorado Nuclear, supra, the Supreme Court returned to this language and appeared to underscore its importance: The major difference between Uranium Canada and Eldorado is that while the former is closely controlled by government, the latter, at least on paper, is not. Yet the statutory provisions making both corporations Crown agents for all their purposes are identical. I do not think it is admissible, without rewriting the statutes, to interpret these identical provisions differently. The status of Crown agents "for all its purposes" gives each such agent the benefit of Crown immunity under s. 16 of the Interpretation Act. The draftsmen of the governing statutes of Uranium Canada and Eldorado may well have been thinking of immunity from taxing statutes rather than criminal statutes, but the result is that there is immunity from both as long as the corporations are acting within their respective authorized purposes Eldorado Nuclear supra p. 576. (emphasis added) [26] Is the result the same where the statute simply describes a corporation as an "agent of the Crown" without a more fulsome description of the extent of that agency? The language used by the Supreme Court to describe the field within which a Crown agent enjoys immunity is instructive. As can be seen in the passages which have been emphasized in the various citations from Eldorado Nuclear, immunity is available when a corporation "acts within the scope of the public purposes it is statutorily empowered to pursue", or "when acting within its corporate purposes" or when "acting within their respective authorized purposes". The availability of immunity is decided by reference to a corporation's authorized purposes. In Eldorado Nuclear, the Supreme Court's inquiry did not stop at "agent of the Crown" or "for all its purposes" but went on to consider the purposes for which the corporations were created. This suggests that so long as a Crown agent acts within its authorized purposes, it is entitled to immunity, without having to invoke a particular kind or breadth of agency relationship. [27] The truth of this proposition is demonstrated by the result in Canadian Broadcasting Corporation, supra, where the corporation was a Crown agent for all purposes of its governing legislation, and could not exercise its powers except as agent of the Crown. Nonetheless, it was held not to enjoy Crown immunity when acting outside the purposes for which it was established. If a particular turn of phrase is not sufficient to assure Crown immunity in all circumstances, it would seem to follow that the right to invoke Crown immunity is not dependent upon a particular turn of phrase either. It could not be seriously contended that an agent of the Crown simpliciter, acting within the purposes for which it was created, would be unable to claim Crown immunity because the words "for all purposes" did not appear in its governing statute. [28] Considerable significance has been attached to the form of words used in the statute to create and describe or "delineate" the scope of a Crown corporation's agency. While the Legislature must not be taken to be speaking for no reason, there are legislative drafting conventions which are vary over time and from jurisdiction to jurisdiction. Whether the use of a particular phrase, such as "agent of the Crown", by one legislature at a particular point in time conveys a significantly different meaning than the use of another phrase, such as "agent of the Crown for all purposes", by another legislature at another time cannot be resolved by a simple juxtaposition of the words used. [29] None of this is undermined by the decision of the British Columbia Court of Appeal in British Columbia Power Corporation v. Attorney General of British Columbia (1962), 34 D.L.R. (2nd) 25 where the issue was whether the B.C. Power Corporation enjoyed Crown immunity with respect to certain litigation. Its governing legislation provided that it was an agent of Her Majesty the Queen in right of the Province. The very next section in the Act required the company to purchase the shares in the company from the persons who owned them immediately before the coming into force of the Act. DesBrisay C.J.B.C found that the words of the statute did no more than constitute the corporation an agent of the Crown when "... it performs a duty for or carries out a direction or acts for or on behalf of the Her Majesty, or deals with or otherwise acts in respect of or holds public funds or property of Her Majesty." To the extent that this represents a construction of the British Columbia legislation, it has no application to Power Corporation Act of Nova Scotia. [30] In his reasons, Sheppard J.A. rejects the corporation's contention that the bare designation of "an agent of Her Majesty in right of the Province" made it a Crown agent "for all purposes and with power to act only as agent". He then stated the question in issue as follows: Hence, whether or not the Electric Company has by the statute in question become an agent within the prerogative, immunity must be "determined by the true interpretation of the statute": Quebec Liquor Com'n v. Moore, [1924] 4 D.L.R. 901 at p. 910, [1924] S.C.R. 540 at p. 551, per Duff, J., that is from the construction of the statute as a whole and not from the one section (6(1)) [the agency clause]. In construing the statute, regard should be had to those tests applied in determining whether or not there is such an agency as to come within the prerogative of the Crown and the immunity from discovery. [31] The phrases "agent within the prerogative" and "agency as to come within the prerogative of the Crown and immunity from discovery" suggest that the question of immunity was resolved upon deciding whether the Power Corporation was an agent of the Crown. Sheppard J.A. concluded that "the statute in question does not constitute the Electric Company [the Power Corporation] an agent of the Crown so as to be immune from discovery ...". The learned judge ended his analysis by suggesting that the Power Corporation was in the same position as the British Transport Commission, as described in the following passage which the learned judge cited from Tamlin v. Hannaford, supra: These are great powers but still we cannot regard the corporation as being his agent, any more than a company is the agent of the shareholders, or even of a sole shareholder. In the eye of the law, the corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its property is not Crown property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a public authority and its purposes, no doubt, are public purposes, but it is not a province of government. The factor which the learned judge ignored is that the British Transport Commission was not designated an agent of the Crown, so that the issue was to determine if it was nonetheless sufficiently assimilated to the Crown to enjoy Crown immunity. To the extent that Sheppard J.A.'s reasons suggest that the Power Corporation's right to invoke Crown immunity turns solely on whether the latter enjoyed the status of Crown agent at common law, I consider them to have been overruled by Eldorado Nuclear. [32] Wilson J.A., in dissent, thought that the question was whether the corporation acted as an agent of the Crown in buying the outstanding common shares in the company and concluded that it did. In my respectful submission, his position was vindicated by the decision of the Supreme Court in Eldorado Nuclear. [33] The decision of this Court in Insurance Corp. of British Columbia v. Canada 2002 FCA 104, [2002] F.C.J. 380, is consistent with the position which I have set out. The issue there was whether the Insurance Corporation of British Columbia was subject to the terms of the Employment Insurance Act so as to be bound to withhold certain amounts from payments it made to a care giver on behalf of one of its insureds. Speaking for the Court, Strayer J.A. held: With respect, I believe that the cases on which he relied do not support a blanket requirement that a governmental entity be labelled an agent "for all purposes" to be entitled to rely on section 17 of the Interpretation Act. (See R. v. Eldorado Nuclear Limited et al. (1983) 4 D.L.R. (4th) 193 and cases referred to therein). In the cases referred to, where the importance of such language was suggested, there was an issue of whether the Crown corporation activity in question was part of its mandate as an agent. ... In the present case no one has suggested that the Respondent, in transferring money to Harvey in these circumstances in order to provide effective compensation for its insured (a compensation it was obliged by law to provide) was in any way acting outside its mandate. Indeed, it was doing one of the very things it was established to do. (See the Insurance Corporation Act, s. 7). (emphasis added) [34] With that background, I now turn to an examination of NSPC's mandate under the Power Corporation Act. By section 4(1), the Nova Scotia Power Commission is continued as body corporate and as an agent of the Crown under the name of Nova Scotia Power Corporation. The Act goes on to define the object of the corporation in the following terms: 6. The object of the Corporation is to develop for Nova Scotia the maximum use of power on an economic and efficient basis and for this purpose to engage in Nova Scotia and elsewhere in the development, generation, production, transmission, distribution, supply and sale of electricity, water, steam, gas, oil or other products or things used or useful in the production of power. [35] The Agreed Statement of Facts upon which this reference was based includes the following: 1. Prior to 1967, a system for producing and delivering electricity had evolved in Nova Scotia whereby the urban areas were serviced by private corporations, Eastern Light & Power Company Limited, while the rural areas were serviced by the Nova Scotia Power Commission ( the "Commission"). ... 2. In 1967, the Commission acquired the shares of Eastern Light & Power Company Limited and in 1972 acquired 99.65% of the common shares and approximately 98% of the preferred shares of Nova Scotia Light and Power Company Limited. The balance of the shares were acquired in due course. 3. In 1973, the Government of Nova Scotia enacted amendments to the Power Commission Act, continued the Commission as the Nova Scotia Power Corporation (the "Corporation") and enacted many other changes. ... 4. After the enactment of the Power Corporation Act virtually all of the electricity in Nova Scotia was produced and delivered by the Corporation, all of the capital of which was owned by the Province. 5. Between 1973 and 1992, the Corporation made significant borrowings, at least some of which were used for the acquisition of depreciable property used in the production and distribution of electricity. ... [36] In my view, the corporate objects clause outlines the purposes for which NSPC was constituted an agent of the Crown. The alternate position is that advanced by counsel for the Power Inc.: the designation is "latent", that is, it exists to allow NSPC to carry out any instructions which the Government might give it. I see little logic in ignoring the instructions contained in the objects clause in favour of instructions which may never come. Where an act creates (or continues) a corporation, makes it an agent of the Crown, sets out its objects and confers on it the powers necessary to enable it to meet its objects, it is not unreasonable to conclude that the corporation acts as a Crown agent in giving effect to its objects. There is no suggestion in this case that the powers conferred upon NSPC are insufficient to allow it to fufill its legislative objects. They may be inconsistent with a particular view of Crown agency, but no one has suggested that they are inadequate. [37] It is significant that counsel for the respondent could identify no situation in which NSPC would be entitled to Crown immunity as an agent of the Crown when discharging its statutory functions, except when it was instructed by the Crown to undertake a particular activity. This argument gives no effect to NSPC's statutory designation as agent of the Crown. [38] It is clear from the Agreed Statement of Facts that NSPC did in fact produce and deliver electricity to Nova Scotia. It is also clear that it borrowed money for the purpose of acquiring depreciable property used in the production of electricity. Given that these are the only facts in the Agreed Statement of facts which touch directly upon the question of the NSPC's authorized purposes, I conclude that in operating its electrical system, and in borrowing money for the purposes of developing and maintaining that system, NSPC was acting within its authorized purposes so as to benefit from Crown immunity. As a result, I would therefore allow the appeal and answer the first question in the affirmative. [39] However, before leaving the matter, I wish to take up a comment of Associate Chief Judge Bowman to the effect that the questions put to him did not strike him as framing the actual issue between the parties in a satisfactory way. Immunity from taxation is not the same as immunity from prosecution under a statute. The immunity from taxation of the land and property of the federal and provincial governments is enshrined in section 125 of the Constitution Act 1867: 125. No Lands or Property belonging to Canada or any Province shall be liable to Taxation. 125. Nulle terre ou propriété appartenant au Canada ou à aucune province en particulier ne sera sujette à la taxation. [40] It would be a curious result if the taxation of a provincial crown corporation fell to be decided on the basis of the application of the Interpretation Act when the fundamental principle is a constitutional one. It may be that the real issue is whether NPSC can be said to be property of the Province of Nova Scotia. Perhaps there is something to be said in favour of an analysis such as that undertaken in Buanderie centrale de Montréal Inc. v. Montreal (City), [1994] 3 S.C.R. 29, a case which deals with taxation within a province but relies upon principles derived from cases of interjurisdictional taxation. As a result, these reasons should not be taken as approving the parties' premise that issues of Crown immunity from taxation fall to be decided on the same basis as issues of immunity from prosecution. Like the trial judge, we are limited by the questions stated by the parties. [41] I would therefore allow the appeal, and answer both questions in the affirmative. The appellant shall have its costs throughout. "J.D. Denis Pelletier" J.A. "I agree B.L. Strayer, J.A." "I agree John M. Evans J.A." FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-108-02 STYLE OF CAUSE: HER MAJESTY THE QUEEN Appellant - and - NOVA SCOTIA POWER INC. Respondent PLACE OF HEARING: TORONTO, ONTARIO DATE OF HEARING: NOVEMBER 25, 2002 REASONS FOR JUDGMENT] : PELLETIER J.A. CONCURRED IN BY: STRAYER J.A. EVANS J.A. DATED: JANUARY 23, 2003 APPEARANCES: Mr. Ernest Wheeler Ms. G. St.Hilaire FOR THE APPELLANT Mr. Warren Mitchell, Q.C. Mr. Douglas Mathew FOR THE RESPONDENT SOLICITORS OF RECORD: Department of Justice FOR THE APPELLANT Tax Litigation Section Ottawa, Ontario Thorsteinssons FOR THE RESPONDENT Barristers and Solicitors Vancouver, British Columbia