Canfor Ltd. v. Minister of Finance for BC, [1976] CTC 429 (BCSC), aff'd [1977] CTC 616 (SCC), rev'g [1977] CTC 269 (BCCA)

Fulton, J:—This is an appeal from a decision of the Minister under the Corporation Capital Tax Act, SBC 1973, c 24 (“the Act”). In his decision the Minister affirmed an assessment made by the Commissioner assessing additional tax due from the appellant with respect to its 1973 fiscal year on the basis that there should be included in the calculation of its paid-up capital, the following amounts, all of which had been included in its balance sheet for the year in question under Liabilities:

1. Income taxes payable—$776,000.

2. Accounts payable to affiliated companies—$4,432,000.

3. Secured bank indebtedness—$8,000,000.

I shall deal with these three items seriatim. Before doing so, however, it is appropriate to state briefly the principles I believe to be applicable in interpreting and applying a taxing statute such as this Act, and which I will apply in respect of each of the items in issue here. That these principles are applicable in the circumstances appeared to be common ground as between counsel in their argument before me.

I. Construction of Taxing Statutes Generally

As stated in Maxwell on the Interpretation of Statutes (12th ed. 1969), at pages 140 ff and 256 ff, statutes which impose a pecuniary burden must be construed strictly in favour of those upon whom the burden is sought to be imposed. Charges upon the subject must be imposed by clear and unambiguous language. In the words of Rowlatt, J:

. . . in a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (Cape Brandy Syndicate v IRC, [1921] 1 KB 64 at 71.)

Section 8 of the Interpretation Act, SBC 1974, c 42, provides:

8. Every enactment shall be construed as being remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

It has been held that these words do not diminish the rule that a statute imposing a tax must be in clear and unambiguous language. (Trans-Canada Pipe Lines Ltd v Provincial Treasurer of Saskatchewan (1968), 63 WWR 541, and Lyne v Checker Stage Service Ltd, [1932] 1 WWR 335, both cases considering the effect of the similar provision in The Interpretation Act of Saskatchewan.)

While a taxing statute must be construed strictly, this does not mean that the canons of construction are different from those applicable to any other legislation. In all cases, the true intent of the Act must be ascertained. (Trans-Canada Pipe Lines Ltd (supra) and Thomson v MNR, [1945] CTC 63; 2 DTC 684; [1945] 3 DLR 45, aff’d [1946] SCR 209; [1946] CTC 51; 2 DTC 812.)

Further, in order to determine the meaning of the language, it must be construed in the context of the Act as a whole. As stated by Driedger, The Construction of Statutes (1974), at page 69:

The general principles, as we have seen, are that if the words are clear and unambiguous they must be followed; but if they are not, then a meaning must be chosen or found. But the Act must be read as a whole first, for only then can it be said that the words are or are not clear and unambiguous.

These principles were examined and in general confirmed in the judgment of Bull, JA in Sammartino v Attorney General of British Columbia, [1972] 1 WWR 25 at 32.

Applying these principles, I find that it is clear from the provisions of sections 2, 5, 7 and 8 that the Act, read as a whole, has as iis intent and purpose the imposition of a tax on the paid-up capital of a corporation as that paid-up capital stood at the close of the fiscal year in respect of which the tax is imposed. The amount of that paid-up capital is to be determined in accordance with the provisions of sections 11 and 12 of the Act. Section 12 is not appiicable, and for the purposes of this case the only section whose words require interpretation is section 11. Accordingly, when there is dispute or uncertainty as to the meaning or effect of any of its words, they must be construed in the context of an intent to impose a tax on paid-up capital. That section opens with the words:

11. The paid-up capital of a corporation for a fiscal year is its paid-up capital as it stood at the close of the fiscal year and includes . . .

There follow five clauses which set out specific items which are to be included in the computation of paid-up capital. Since this is a taxing statute, the rules and considerations already mentioned have the effect that in construing this section it must be taken that the Legislature intended to impose a tax on paid-up capital, including for greater certainty the items specifically enumerated, and on nothing else.

II. Rules Governing Interpretation of Words of Ordinary Commercial Usage Not Specifically Defined in the Statute

It appears clear from the cases that where a word or expression used in a taxing statute is not expressly defined or interpreted in that statute, then if that word or expression has an accepted meaning or application in accordance with ordinary commercial or accounting principles, that meaning or application is to be given to the word or expression in applying the statute. (Dominion Taxicab Association v MNR, [1954] SCR 82; [1954] CTC 34; 54 DTC 1020; Canadian General Electric Co v MNR, [1962] SCR 3; [1961] CTC 512; 61 DTC 1300.)

However, even although a word or expression is not specifically interpreted or defined in the statute, ordinary commercial or account- ing principles do not govern the determination of its meaning if from the general context or other provisions of the statute it appears that the Legislature intended otherwise. This is clearly the ratio of the decision in Trapp v MNR, [1946] CTC 30; 2 DTC 784, and is inherent in the decision in the Canadian General Electric case (supra).

III. The Rules Where There is an Apparent Conflict Between a Specific and a General Provision in the Same Enactment

The rule and principle in question here is relevant only to the inclusion or exclusion of Item 3 above as a component of paid-up capital, so the statement of the rule will be deferred until consideration of that item is commenced.

I turn then to deal with the three items seriatim.

1. Income Taxes Payable:

With respect to this item totalling $776,000, the evidence shows that it was made up of five separate amounts payable to various governments in Canada, and an overprovision of $23,000. The amounts owing were all owing in or with respect to the fiscal year in question, 1973; and four of them were paid in the first six months of 1974, the fifth was paid in September 1974. Tax under the Act was assessed on the total so provided on the basis that this amount was in fact a reserve, although treated and shown on the balance sheet accompanying the return as a current liability.

In support of the assessment by which this amount is included in the paid-up capital of the appellant subject to tax, the respondent relies on clause 11(c) of the Act. This provides as follows:

11. The paid-up capital of a corporation for a fiscal year is its paid-up capital as it stood at the close of the fiscal year and includes

(c) all its reserves, whether created from income or otherwise,

I accept the contention of the appellant that the words “whether created from income or otherwise”, while they may enlarge the source from which, for the purposes of the Act, a reserve may be created, do not define what a reserve is. I can find nowhere in the Act a definition of the word “reserve” as such, nor any provision which by necessary intendment would give a special meaning or application to that word, and accordingly on the basis of the rules previously set out, the Court may rely upon generally accepted accounting practice in order to determine its meaning and effect.

Evidence on this point was given by Mr Hart, a qualified chartered accountant and controller of the appellant and of Canadian Forest Products Ltd, the major company of the group of companies of which the appellant is a member. Mr Hart’s opinion was that as the taxes in question were owing by the appellant with respect to the year 1973, the provision for them made by the appellant is properly included as a current liability on the balance sheet, and is not a reserve. Pressed in cross-examination as to the various senses in which “reserve” can be used in accounting practice, he was firm that, according to generally accepted accounting practice in Canada, a provision for a current liability of this sort is not in fact a reserve and should not be treated as one by. the corporation in its accounts or shown as one on the balance sheet.

Counsel for the respondent stressed that as at December 31, 1975 when the provision was made, the amounts actually owing for these taxes were not ascertained, and that even after payment they could be reassessed, thus adding to the uncertainty. In his contention, the provision for an unascertained liability is properly a reserve. In my view, however, in the light of the evidence and having regard to the fact that liability for the taxes in question was incurred in the year under discussion, so that they were owing at the end of the fiscal year, and that they were ascertained and paid within a few months thereafter, it cannot be held that the fact that they were not precisely ascertained at December 31, 1973 makes them other than a current liability as at that date.

In summary on this point, the applicable rules of construction here are those outlined under headings I and Il earlier: that in the absence of provisions requiring or indicating otherwise, words used in a taxing statute are to be given their ordinary commercial or accounting usage, and that in construing them they are to be looked at in the context of the statute as a whole. Here, as seen, we are dealing with a statute imposing a tax only on paid-up capital with certain specific inclusions, and on nothing else. Applying these rules, and in the light of the evidence, the appellant has satisfied me that in providing an amount for the payment of taxes for which it was currently liable and which it in fact paid shortly thereafter, it did not thereby create a reserve, whether out of income or otherwise, and that that sum did not in fact form part of its paid-up capital. The appellant must therefore succeed in respect to this item.

2. Accounts Payable to Affiliated Companies:

The evidence in connection with this item establishes that the total of $4,432,000 represents liabilities of the appellant to affiliated companies in the group mentioned earlier, for purchases made in the normal course of trade. In brief, the appellant is a trading company within the group, and acquires goods from, and in some cases has services rendered by, other companies in the group in the course and for the purpose of its trading activities. The method of operation in effect was that these goods and services were purchased by the appellant from the affiliates on a vendor-purchaser basis, and sold by the appellant on its own account. The moneys owing for the purchases were thus moneys owing for goods and services purchased in the normal course of business, and according to th eevidence of Mr Hart the normal course as between the group was that the accounts were to be settled and paid within the month following the date when they were incurred. The amount of $4,432,000 was the amount due by the appellant to its affiliates in this respect as at December 31, 1973 and, according to Mr Hart, this amount was paid in accordance with this group practice of settling trade accounts, in the following January.

The respondent claims that the amount is included in the paid-up capital of the appellant and is therefore taxable by virtue of clause 11(d) of the Act, which reads:

11. The paid-up capital of a corporation for a fiscal year is its paid-up capital as it stood at the close of the fiscal year and includes

(d) all sums or credits advanced or loaned to the corporation by its shareholders directly or indirectly or by and other corporation, excluding such sums or credits of a non-capital nature advanced or loaned to the corporation by a bank;

On the face of it, I would have little difficulty in rejecting this contention were it not for two cases to which counsel for the respondent referred me, which I will discuss shortly. The indebtedness in question, although large in total, is clearly nothing more than the sum of a number of trade accounts payable—accounts for goods and services bought by the appellant—for which payment was to be made on a 30-day basis. As such, again they are current liabilities and the total is properly treated as such on the balance sheet. Indeed, Mr Hart explained that the only reason for segregating this amount and showing it as a separate item as “Accounts payable—Affiliated companies” instead of including it in the total of “Accounts payable—Trade” is that it is considered desirable in financial reporting for a company of this nature to show precisely the amount of accounts payable which is owing to affiliated companies; otherwise the amount would have been included in the total of trade accounts payable, which they are.

There is no suggestion—for reasons which are apparent—that the item for trade accounts payable of $8,181,000 as shown in the balance sheet should be included in computing paid-up capital and therefore subject to tax. Yet of these accounts, it is not to be supposed that a substantial number, possibly the majority, are not owing to other corporations. In today’s business world, in vast numbers of transactions where goods and services are supplied, they are supplied by corporations and are on a monthly billing and settlement basis. The suppliers of utility services—hydro, telephone, fuel, and so on—are all paid on such a basis. But there is no suggestion that because the accounts of such suppliers of such facilities—or any other suppliers of goods and services—are paid in the following month, so that at the end of any month there is a substantial account outstanding, that outstanding account is a “sum or credit advanced or loaned to the corporation .. . . by any other corporation” so as to be a part of the paid-up capital of the first-mentioned corporation.

The section makes no distinction, in this respect, between the case where the sum or credit is lent or advanced by an affiliated corporation or by a non-affiliated corporation. If, therefore, such transactions, and the accounts owing in respect of them, represent loans or advances which form part of paid-up capital when the goods or services are supplied by an affiliate, equally such transactions and the accounts owing in respect of them to non-affiliated corporations would be part of paid-up capital. According to this interpretation the amount of all trade accounts owing to other corporations would be taxable as paid-up capital. In the case of this appellant, the interpretation contended for by the respondent would have the result that any amount owing by tt as of December 31 in any year to BC Hydro for facilities provided in the ordinary course of business, would represent part of appellant’s paid-up capital and be subject to tax, if an assessment were issued accordingly under the Act. To state the proposition is to reveal it as untenable—which is no doubt why it was not advanced. The intent to provide that trade accounts owing should form part of paid-up capital would require to be expressed in the clearest and most unmistakable terms. I am satisfied that according to the principles of interpretation applicable here, the inclusion of ‘‘sums or credits advanced or loaned . . . by any other corporation” does not bear such an interpretation, and the mere fact that the transactions are between affiliated companies does not alter the situation because there is nothing in the section which singles out transactions between affiliated corporations for such special treatment.

However, counsel for the respondent cited two cases in this respect which I must consider. The first of these is Marathon Packages of Canada Limited v Treasurer of Ontario, In re Corporations Tax Act (1968), CCH Ontario Tax Reporter, para 200-073; the other is Re City Parking Canada Ltd and Minister of Revenue of Ontario, [1974] 1 OR (2d) 425. Both cases dealt with the effect of a provision in The Corporations Tax Act (Ontario) which is very similar to the provisions of clause 11(d) of our Act under consideration here. There are, however, certain differences in the facts of the cases as well as important considerations in connection with the intent and application of the Act which, in my view, afford valid grounds for declining to follow those cases.

The provision of the Ontario Act in question in both those cases, with the omission of words not relevant to the point being considered here, is as follows:

The paid-up capital of a corporation for a fiscal year is its paid-up capital as it stood at the close of the fiscal year and includes . . . all sums or Credits advanced or loaned to the corporation by any other corporation, excluding a bank, . . . .

In the Marathon Packages case, the appellant corporation was a subsidiary of an American company. In the first few years of the appellant’s operation it had a rather difficult time financially, and supplies of “board” for its products, and certain services, were furnished by its parent company. These supplies and services were paid for in the following years as the company earned income. The learned Chief Justice of the High Court of Ontario concluded that:

... the words “sums” and “credit” were probably intended by the legislature to have a wide signification which these various definitions include. It includes all sums or credits advanced or loaned to a corporation by any other corporation, which would include goods furnished with the expectation of future payment, and hence would include the board which was furnished this company, to give it the means for carrying on the business for which it was set up in Ontario.

He ‘held that corporation tax was properly assessed on the amounts and value of the goods advanced and outstanding at the close of each of the years in question.

In the City Parking case the appellant company had purchased the assets and undertakings of three other companies and in each case there were unsecured balances outstanding in respect of the purchase price. These continued outstanding in whole or in part for 4 years, and the Treasurer of Ontario included the amounts outstanding in paid-up capital of the appellant company and assessed tax thereon for each of the 4 years in question. The Ontario Court of Appeal decided that these sums were included in the meaning of “sums or credits advanced or loaned to the corporation by any other corporation” and upheld the assessment.

lt will be seen that there are significant differences between the facts of each of those cases and the facts here. In the instant case the accounts owing are trade accounts in the ordinary sense of accounts owing for goods purchased or services supplied as part of the ordinary ongoing business of the appellant, for which payment was due—and was made—in the month following the supplying, and the fact that the accounts were owing to affiliates does not change their nature. In the Marathon Packaging case (supra) the sums owing were not of that nature at all: the articles supplied were not for inventory to be sold, but were for the purpose of being used in the manufacture of the appellant’s products, and instead of being billed and paid for on a monthly basis, long-term credits for payment were extended by the parent to enable the subsidiary to become successfully established. In the City Parking case (supra) there is the same difference of fact: there the debts were long-term credits, although unsecured, and by no stretch of the imagination could be conceived as trade accounts owing in connection with goods purchased for resale, or as being incurred and payable in the ordinary course of business. In my view, in the context of a statute imposing a tax on paid-up capital, there is a fundamental difference between such long-term credits as were extended in both the Ontario cases, which can readily and logically be seen to form part of capital, and monthly trade accounts incurred and payable in the ordinary course which, being of a current nature, cannot by any logical process be regarded as forming part of paid-up capital.

It appears to me that in construing clause 11(c) under which the respondent contends this liability to tax arises, I must again have regard to the intent as gathered from the Act as a whole and, as well, to the general scheme of the section in which the clause appears. The Act imposes a tax on the paid-up capital of a corporation and the charging sections (2, 5 and 7) do not suggest that items which are clearly of a non-capital nature are to be included. Section 11 in its opening words makes it clear that it is paid-up capital which is in question, and then goes on to enumerate certain items which shall be included in the calculation of paid-up capital. Without exception these items are all of a capital nature unless the words are given a strained or tortured meaning. Thus, by clause (a) there is included the paid-up capital stock of the corporation; by clause (b) its earned, capital, and. any other surplus; by clause (c) all its reserves, with certain exceptions; and by clause (e) all its indebtedness represented by certain defined: securities such as bonds, mortgages, debentures etc and by “any other securities to which the property of the corporation or any of it. is subject”. All these, subject to one matter of interpretation of clause

(e) which will be dealt with later, are items which make up the capital of a corporation by any normal and commonsense approach. Clause:

(d) makes clear that it is items which are normal parts of capital that. are contemplated, for it provides that there shall be excluded from the paid-up capital based on sums or credits advanced or loaned to the corporation “such sums or credits of a non-capital nature advanced or loaned to the corporation by a bank”. Banks do quite normally make loans and advances of both a capital and a non-capital nature. The exclusion of the bank advance or loan of the non-capital type thus emphasizes that the intent is to include only items of a capital nature.

Accordingly ! find that to take a clause in which the legislative draftsman is speaking of sums or credits advanced or loaned, and to extend its meaning so that it includes all accounts payable for goods and services supplied, which accounts do not represent a loan or advance in any ordinary sense of those words, but which is what the respondent’s position would have them do, is to strain the meanina and take the words out of the context in which the draftsman is usina them. The Ontario cases did not deal with the question of accounts payable in the ordinary course of business, and I do not take those decisions as authority for the proposition that the statute includes such accounts as part of paid-up capital. If they do I should, with the greatest respect, be disinclined to follow them, for in my opinion the expression “sums or credits advanced or loaned to the corporation” does not, by any normal interpretation, have a meaning which includes accounts payable monthly for goods supplied in the ordinary course of business. The clause is talking of loans or advances, and had it been intended that it should sweep in ordinary trade accounts which are not capital employed in the business, words clearly denoting this intent would be required and would have been used.

The appellant therefore succeeds in respect to this amount of $4,332,000.

3. Secured Bank Indebtedness:

This item, totalling $8,000,000, was made up of three borrowings, $2,000,000 on November 27, $3,000,000 on December 3 and a further $3,000,000 on December 4, all in 1973. According to the evidence of Mr Hart, the borrowings were used in part to meet cheques issued by the appellant for current liabilities and presented for payment on the days in question, and the balance was applied in reduction of a oan to the appellant from another company in the group, which loan had been made, and the proceeds used by the appellant, for the purpose of financing its inventories and accounts receivable.

The appellant had entered into an agreement with the bank on September 21, 1973 to obtain a revolving line of credit of $8,000,000, the loans or advances thereunder to be made on the security of various assets of the appellant specified therein. At the time of entering into this agreement, the appellant executed, in favour of the bank, section 88 security covering its properties mentioned in the agreement, and gave a general assignment of book debts, both as security for the advances to be made. On each of the dates when the three loans in question were drawn down, the appellant executed a promissory note for the amount of the respective advance. This was done under the provisions of a clause in the principal agreement which reads:

The Bank may from time to time take from the undersigned notes representing the said loans and advances or any part thereof; and any notes so taken shall not extinguish or pay the indebtedness created by such loans and advances but shall represent the same only.

On the basis of these facts the respondent’s position is that the total of $8,000,000 is included in paid-up capital and taxable accordingly, by virtue of clause 11(e) of the Act which reads:

(6) all its indebtedness, whether assumed or undertaken by it, represented by bonds, bond mortgages, debentures, income bonds, income debentures, mortgages, lien notes, and any other securities to which the property of the corporation or any of it is subject.

The appellant submits that inasmuch as this total is made up of loans and advances of a non-capital nature, it is governed by the exclusion contained in clause 11(d) of the Act which, it says, overrides the general provision of clause 11(e). It will be remembered that clause

(d) includes in paid-up capital all sums or credits advanced or loaned to the corporation “excluding such sums or credits of a non-capital nature advanced or loaned to the corporation by a bank”.

Dealing first with the question of the nature of the indebtedness, I find that the loans or advances in question were clearly of a non-capital nature: they were used to pay current obligations and to provide financing for inventories and receivables. The loans and the promissory notes which represented them, were payable on demand, and the property pledged as security therefor was inventory and receivables. None of the moneys were used to purchase an asset “for the enduring benefit of the trade”. For authorities that the loans and advances comprising this indebtedness are of a non-capital nature, see British Insulated and Helsby Cables Ltd v Atherton, [1926] AC 205; and BP Australia Ltd v Commissioner of Taxation of the Commonwealth of Australia, [1966] AC 224; also Tip Top Tailors Ltd v MNR, [1957] SCR 703; [1957] CTC 309; 57 DTC 1232, and MNR v Algoma Central Railway, [1968] SCR 447; [1968] CTC 161; 68 DTC 5096 (adopting the test in BP Australia Ltd).

Since the promissory notes representing this indebtedness and the other securities given are for loans of a non-capital nature, it is necessary here to consider the third of the applicable principles mentioned earlier in connection with the interpretation of this statute: “Ill. The Rules Where There is an Apparent Conflict Between a Specific

and a General Provision in the Same Enactment”.

These have been considered and stated in a number of authorities. In Pretty v Solly (1859), 26 Beav 606 (53 ER 1032) it is thus stated at page 610:

The general rules which are applicable to particular and general enactments in statutes are very clear, the only difficulty is in their application. The rule is, that wherever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply.

This was approved by the Ontario Court of Appeal in Re Van Allan, [1953] 3 DLR 751. In that case the Court went on to say at page 754:

In a discussion of the effect of the interpretation clause contained in a statute, Craies on Statute Law, 5th ed, p 200, says: ‘‘Another important rule with regard to the effect of an interpretation clause is, that an interpretation clause is not to be taken as substituting one set of words for another, or as strictly defining what the meaning of a term must be under all circumstances, but rather as declaring what may be comprehended within the term where the circumstances require that it should be so comprehended.

In my view section 11, although not formally entitled an interpretation section, is the equivalent of one. Interpretation sections frequently make use of the formula of inclusions as well as definitions in setting out the meaning of terms or expressions in an Act, and this is the method followed in section 11. This section, then, may be taken as declaring what may be comprehended within the term paid-up capita! when the circumstances require that it should be so comprehended.

Maxwell (supra) says at page 189 that

A proviso is “of necessity . . . limited in its operation to the ambit of the section which it qualifies.”

Craies on Statute Law (7th ed, 1971), at page 218, is to the same effect.

A Canadian case dealing with the extent and effect of an excepting proviso appearing in one subsection only of a section containing another subsection dealing with the same matter, is Washington v Grand Trunk Railway Co of Canada (1898), 28 SCR 184. Sedgewick, J, giving the judgment of the Supreme Court of Canada, said as follows at page 189:

Now, it is an elementary principle that the grammatical or ordinary sense of words used in a statute are to be adhered to unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the statute, in which case the grammatical and ordinary sense of the words may be modified so as to avoid the inconsistency and absurdity, but no further.

Applying these rules to the case before me, I find that if the words of clause (e) are given their ordinary meaning, an inconsistency and absurdity most certainly arises. For there is no question that the ioans or advances made by the bank were an indebtedness of the appeliant corporation. This indebtedness was not represented by any o7 the forms of securities specifically enumerated (“bonds, bond morigages, debentures . . . etc’); however if it was represented by “any other securities to which the property of the corporation or any of it is subject” then according to the literal meaning of the words of this clause it forms part of its paid-up capital. Yet equally clearly the indebtedness is made up of sums or credits of a non-capital nature which were advanced or loaned to the corporation by a bank, and these are specifically excluded from paid-up capital by clause (d). Since it appears clear that the amount in question partakes both of the nature of “sums or credits advanced or loaned” and of “indebtedness” the situation is not helped by the rule that where there is a conflict, an exclusion should be read as affecting only the particular passage where it appears, and I must see if the words in either clause can properly be given an interpretation which would remove this absurd inconsistency of amounts specifically and without qualification excluded from paid-up capital by one provision of section 11, being included therein by virtue of an immediately following provision of that same section.

Proceeding accordingly, it is important to bear in mind again that particular words and expressions are to be read in the context of the plan or intent of the statute as a whole. The intent of the Act is to impose a tax on paid-up capital. Clause (d) makes it clear that the intent was that sums or credits of a non-capital nature advanced or loaned to a corporation by a bank should be specifically excluded from the total of paid-up capital. It would take words of the clearest and most specific import to have the effect of overriding this intent.

Counsel for the appellant, in one branch of his argument urged an interpretation based on the facts of this particular case, which would avoid the problem of the inconsistency. He submits that the indebtedness here is not “represented by” any security within the meaning of clause (e). He argues that the indebtedness cannot be said to be “represented by” the section 88 security or the assignment of book accounts, as these are only collateral security for the actual advances, the advances themselves being “represented by” the promissory notes as stated in the provision of the loan agreement set out earlier. And, so this argument runs, while the promissory notes may be a form of security, they are not securities to which the property of the appellant is subject.

I am sympathetic to this argument, particularly in view of the earlier exclusion, but I doubt that it is a safe refuge. Reference to precise dictionary definitions of the word “represented” have not helped, and I find that the words “represented by” as applied to “indebtedness” are of dubious and imprecise import: and so I find it difficult to say with certainty that the indebtedness in question is not represented by the two assignments given as security at the time the loan agreement was made.

I do not reject the argument based on these words, but I prefer to rest my decision on the plainer grounds derived from the rules discussed above, that the particular enactment must be operative, that the words of clause (e) should be taken as declaring only what may be comprehended within that clause where the circumstances require that it should be so comprehended, and that the clear intent of the Legislature to exclude from paid-up capital sums or credits of a noncapital nature advanced or loaned by a bank cannot be altered or defeated save by words conveying such an intent in equally ciear language. I find therefore that the exclusion in clause (d) operates to exclude this bank indebtedness from the paid-up capital of the appellant.

In so finding, I have given consideration to two further Ontario decisions cited by counsel for the respondent. The first is Delta Acceptance Corporation v Treasurer of Ontario, an unreported decision of Morand, J of December 6, 1965, the second is Re Ontship Ltd and Minister of Revenue (1975), 6 OR (2d) 238. In both these cases it was held that loans made by a bank formed part of paid-up capital of the appellant corporation for the purpose of The Corporations Tax Act of Ontario, by virtue of the provisions of section 68 (later section 70, now section 126) of that Act, which provisions have already been set out in part above. There are again certain differences between the facts of those cases and the facts here, as well as a variation in wording of the relevant provisions of the British Columbia and Ontario sections. which I consider of significance, and other consideration which, I believe, form valid grounds for distinguishing the Ontario decisions.

In Delta Acceptance the bank indebtedness was apparently secured by a trust deed. In Ontship the indebtedness was secured by delivery to the bank of a specific assignment of moneys due under a charter party and of a builder’s mortgage on a vessel. The differences between the nature of the security given in the Ontario cases and that given here may not be of any vital significance in and of themselves; however in neither of the Ontario decisions is there any discussion of the purpose for which the bank indebtedness was incurred, or whether it was of a capital or non-capital nature. In this case I have found that the indebtedness to the bank came about as a result of an advance or loan of sums or credits of a non-capital nature; and it is in this context that I consider that the courts in Ontario have given an application of the Ontario provision to the facts before them which have produced a result different from the proper application of the British Columbia provision to the facts before me.

It will be remembered that section 68 of the Ontario Act is in genera! form, not divided into clauses. The portions relevant here are further set out as follows:

68. The paid-up capital of a corporation for a fiscal year . . . includes . . . all sums or credits advanced or loaned to the corporation by any other corporation, excluding a bank, and all its indebtedness . . . represented by bonds, bond mortgages, debentures, income bonds, income debentures, mortgages, lien notes and any other securities to which the property of the corporation or any of it is subject.

The comparable portion of section 11 of the British Colubia Act is more particularized, and in the result reads as follows:

11. The paid-up capital of a corporation for a fiscal year . . . includes

(d) all sums or credits advanced or loaned to the corporation . by any other corporation, excluding such sums or credits of a non-capital nature advanced or loaned to the corporation by a bank; and

(e) all its indebtedness . . . represented by bonds, bond mortgages, debentures, income bonds, income debentures, mortgages, lien notes, and any other securities to which the property of the corporation or any of it is subject.

The significant point, as I see it, lies not in the fact that our section is divided into lettered clauses, but that the British Columbia Legislature has chosen to exclude, by clause (d), the specific type of bank advance or loan comprised of sums or credits of a non-capital nature, which is what comprises the nature of the indebtedness here. I cannot conceive that the use of the much more precise and specific wording in the exclusion in the British Columbia provision—which is clearly based on the Ontario provision—was done without intent, and I find that the intent and effect was to exclude from the ambit of the section this type of bank indebtedness.

It is significant that in the Delta Acceptance case Morand, J, in speaking of the effect of section 68 of the Ontario Act, at page 4 of the transcript of his reasons for judgment, sets out the following principle:

It appears to me that . . . this Section sets out a number of definitions of what shali be included in the term “paid-up capital”. . . . If the monies which this Corporation had borrowed are included under any of those sections (sic), then, in my view, it is taxable. The choice is upon the taxing authority to decide if it fits under any one of these definitions, and if it fits in any one of these definitions, then it is taxable unless it is clearly excluded by some term of the Section.* [1]

(1 believe that when he used the words “those sections” in the second sentence quoted above Morand, J meant “those definitions”.)

As stated, in my view the effect of the precise wording of clause (d) of section 11 of the Act which I am interpreting is that bank advances or loans of a non-capital nature are “clearly excluded by some term of the Section”. It is also significant that in neither of the Ontario decisions is there any discussion of the rules applicable to the resolution of an apparent conflict between a specific exclusion and a general provision.

For these reasons I do not consider that the Ontario decisions, although dealing with a provision to which the provision before me is in many respects very similar, are binding on me in the light of the facts as I have found them with respect to this bank indebtedness, and for the other reasons given I conclude that the $8,000,000 in question does not form part of the paid-up capital of the appellant.

The appeal is therefore allowed, with costs.