Court of Appeal

CASE NO.                                                  VOLUME                                                          PAGE

Cite as: Johnson v. Nova Scotia (Attorney General), 1998 NSCA 204

STANLEY JOHNSON, ROBERT                                        THE ATTORNEY GENERAL OF

JOHNSON, GENEVIEVE JULIAN                                    NOVA SCOTIA, representing Her

and JOHN BERNARD                                                        Majesty the Queen in Right of the

                                                                                                                 Province of Nova Scotia

                                                                        - and -

(Appellants)                                                                                                              (Respondent)

C.A.  No.  146791                                Halifax, N.S.                                              FLINN, J.A.

APPEAL HEARD:                                        November 17, 1998

JUDGMENT DELIVERED:             December 30, 1998

SUBJECT:           Health Services Tax Act, R.S.N.S. 1967, c. 126 (as amended) - unauthorized pre-collection system - claim for statutory rebate, rebate by virtue of implied in fact contract or restitution

SUMMARY:        Between 1985-89 the consumption and use of tobacco products was taxed under the Health Services Tax Act.  Although the tax was the responsibility of the ultimate user to pay - and the retail vendor to collect - a collection system was set up whereby that tax was pre-collected at the wholesale level.  Further, in 1985, to prevent abuses to the system, s. 10A of the Act was enacted to prevent vendors from determining exempt status of certain purchasers.  The retail vendor paid an amount equivalent to the tax to the wholesaler.  If the ultimate purchaser was exempt the purchaser who paid the tax applied for a rebate.  The appellants were all status Indians and retail vendors.  Between 1985-89 they purchased, for re-sale, tobacco products from wholesalers, on which they paid amounts equivalent to tax of over $400,000.00.  In 1990 the Nova Scotia Court of Appeal decided that there was no legislative authority in the Health Services Tax Act to provide for the collection system at the wholesale level.  The appellants claimed a statutory rebate of the monies under s. 10A; alternatively, a rebate on the basis of an implied in fact contract; and alternatively, for restitution.  The trial judge dismissed the claims.

RESULT: Appeal dismissed.  The claims for statutory rebate, and implied in fact contract, both fail because they rely on the rebate provisions of s. 10A.  The rebate provisions of s. 10A do not apply to retail vendors who purchased for resale.

The claim for restitution fails because, as the trial judge found, the appellants suffered no loss.  They recouped the payment under the  unauthorized collection system when they sold to the ultimate purchaser.  Even if the trial judge was wrong; and the appellants did suffer a loss, because they did not collect the tax from the ultimate purchaser, in that case their loss arises from unlawful conduct (breach of statutory provisions) and not from the unauthorized collection system.  Equity would deny restitution.