Muldoon
J.:—By
orders
dated
September
22,
1992,
Mr.
Justice
Joyal,
with
the
parties'
consent,
ordered
that
the
actions
whose
suit
numbers
are
above
inscribed,
be
tried
together
on
common
evidence.
Fibreco
Pulp
Inc.
is
a
controlled
subsidiary
of
Fibreco
Export
Inc.
The
first
action,
T-2896-89,
was
initiated
by
Fibreco
Pulp
Inc.
[hereinafter
sometimes,
"Pulp"].
The
second
and
third
actions,
T-3322-90
and
T-3323-90,
were
instituted
by
Fibreco
Export
Inc.
[hereinafter
sometimes
"Export"].
Relief
sought
In
the
action
whose
suit
number
is
T-2896-89,
the
plaintiff,
Pulp,
claims
against
the
defendant
pursuant
to
subsection
172(2)
and
subparagraph
175(1
)(a)(i)
of
the
Income
Tax
Act,
S.C.
1970-71-72,
Chap.
63,
as
amended.
The
claim
is
in
regard
to
an
assessment
and
determination
issued
by
the
Minister
of
National
Revenue
(hereinafter
sometimes
"the
Minister")
on
April
3,
1989,
for
the
plaintiff's
1988
taxation
year.
Plaintiff
Pulp
in
paragraph
3.1
of
its
prayer
for
relief,
pleaded
3.1(b)
that
its
assessment
be
referred
back
to
the
Minister
.
.
.
on
the
basis
that
the
capital
spares
acquired
by
it
were
not
subject
to
paragraph
10(5)(a)
of
the
Act.
At
the
trial’s
opening
(transcript
1,
page
5),
the
plaintiffs’
counsel
said
that
"counsel
have,
with
the
instructions
of
course
of
their
respective
clients,
been
able
to
resolve
the
dispute,
the
second
dispute
at
issue,
the
so-called
capital
spares
issues,
and
we
need
not
trouble
[the
Court]
to
hear
any
evidence
in
respect
of
that
dispute.”
So,
there
is
an
end
of
it,
whatever
the
resolution
might
have
been,
it
is
not
an
issue
in
these
proceedings,
meaning
Pulp’s
action
T-2896-89,
as
disclosed
in
exhibit
16.
The
matter
was
explained
thus
by
the
plaintiffs’
counsel
(transcript,
vol.
1,
pages
5-6):
MR.
McDOUGALL:
My
Lord,
in
the
taxpayer’s
submission,
this
dispute
which
of
course
involves
three
appeals
which
are
to
be
heard
together,
they
are
the
1987
and
88
taxation
years
for
Fibreco
Export
and
the
1988
taxation
year
for
Fibreco
Pulp
and
in
the
evidence
Your
Lordship
will
have
explained
to
you
the
nature
of
the
relationship
between
those
two
companies.
THE
COURT:
Yes.
MR.
MCDOUGALL:
There
is,
however
only
one
issue
and
in
my
submission
it
is
a
relatively
simple
issue.
It
is
the
question
of
whether
the
taxpayer
is
entitled
to
participate
in
an
investment
tax
credit
system.
And
I
would
like
to
emphasize
by
way
of
opening
that
the
credit
under
the
statutory
scheme
is
automatic.
The
taxpayer
is
entitled
to
claim
on
the
income
tax
return
for
the
credit
and
if
entitled,
according
to
law,
the
credit
is
automatic.
There
is
no
discretionary
element
in
this.
It
is
a
question
of
pure
law
for
Your
Lordship.
MR.
McDOUGALL:
A
statutory
scheme
which
permits
a
credit
for
investments
made
by
the
taxpayer,
investments
made
in
appropriate
circumstances
in
a
capital
investment.
In
the
later
two
actions,
whose
suit
numbers
are
T-3322-90
and
T-3323-90
respectively,
the
plaintiff
in
each,
Export,
prays
that
the
assessments
and
determinations
for
its
1987
and
1988
taxation
years
be
referred
back
to
the
Minister
for
reconsideration
and
redetermination
on
the
same
basis
as
prayed
in
Pulp’s
earlier
action:
that
is,
that
the
plaintiff
Export's
mill
be
determined
to
be
“a
facility”
under
the
Regional
Development
Incentives
Act,
including
regulations
made
thereunder.
At
the
trial,
the
plaintiffs’
counsel
handed
over,
for
himself
and
for
the
defendant's
counsel
a
document
[no.
512]
titled
“Statement
of
Agreed
Facts
and
Definition
of
Issues".
It
bears
suit
no.
T-2896-89
but
serves
in
all
three
actions
herein,
as
exhibit
1(57).
The
issue
before
this
Court
is
one
of
statutory
interpretation.
Counsel
advise
that
this
is
(or
these
are)
a
case
of
first
impression.
The
statutory
text
is
found
in
section
127
of
the
Income
Tax
Act
[hereinafter
sometimes
“the
Act"]
designated
as
“Logging
Tax
Deduction”.
Subsection
127(5)
was
enacted
to
provide
for
"investment
tax
credit",
and
subsection
127(9)
provides
definitions
for
that
subsection
and
section
127.1.
The
matters
in
issue
here
find
residence
in
subsection
127(9)
which
expresses
this
definition:
“certified
property”
of
a
taxpayer
means
an
property
(other
than
an
approved
project
property)
described
in
paragraph
(a)
or
(b)
of
the
definition
“qualified
property"
(a)
that
was
acquired
by
the
taxpayer
(i)
after
October
28,
1980
and
(A)
before
1987,
or
(B)
before
1988
where
the
property
is
(I)
a
building
under
construction
before
1987,
or
(II)
machinery
and
equipment
ordered
in
writing
by
the
taxpayer
before
1987,
or
(ii)
after
1986,
other
than
a
property
included
in
subparagraph
(i),
and
that
has
not
been
used,
or
acquired
for
use
or
lease,
for
any
purpose
whatever
before
it
was
acquired
by
him,
and
(b)
that
is
part
of
a
facility
as
defined
for
the
purposes
of
the
Regional
Development
Incentives
Act
and
was
acquired
primarily
for
use
by
the
taxpayer
in
a
prescribed
area;
In
regard
to
this
case
being
one
of
first
impression,
the
defendant's
counsel
states
"tne
fact
that
the
provisions
in
question
have
been
incorporated
by
reference
from
the
Regional
Development
Incentives
Act
(RDIA)
and
incorporated
into
the
Income
Tax
Act.
.
.
.
[A]ny
entitlement
to
an
incentive
grant
under
the
RDIA
was
always
discretionary,
but
this
is
no
longer
so
under
the
Income
Tax
Act.
This
is
the
reason
why
the
definitions
in
question
and
the
administrative
interpretations
thereof,
which
have
been
in
existence
since
1969,
are
only
questioned
at
this
time.”
It
is
paragraph
127(9)
“certified
property",
paragraph
(b),
above
recited,
over
which
this
litigation
is
generated.
Here
is
the
text
of
the
aforementioned
statement
of
agreed
facts:
A.
FACTS
2.
The
plaintiff's
1988
taxation
year
end
was
June
30,
1988.
3.
In
its
1988
taxation
year
the
plaintiff
was
engaged
in
the
construction
of
a
bleached
chemi-thermo-mechanical
pulp
mill
(the
"Mill")
in
Taylor,
British
Columbia.
4,
In
constructing
the
mill
the
plaintiff
incurred
various
expenditures.
The
plaintiff
also
purchased
spare
parts
for
the
mill
(the
"spare
parts").
5.
In
its
1988
tax
return
the
plaintiff
claimed,
in
respect
of
the
expenditures
and
the
cost
of
the
spare
parts,
a
refundable
investment
tax
credit
of
$13,880,138
and
calculated
its
investment
tax
credit
carry-forward
balance
to
be
$20,820,206.
6.
By
notice
of
reassessment
dated
April
3,1989
the
Minister
of
National
Revenue
(the
"Minister")
reduced
the
plaintiff's
refundable
investment
tax
credit
by
$12,846,659
and
calculated
the
laintiff’s
investment
tax
credit
carry-forward
balance
to
be
$1,550,220.
Detailed
calculations
showing
the
Minister's
reassessment
are
found
in
Schedule
1.
7.
Property
in
respect
of
which
an
investment
tax
credit
is
claimed
can
be
either
certified
property
or
qualified
property.
Certified
property
is
entitled
to
a
greater
investment
tax
credit
than
is
qualified
property.
The
plaintiff
reported
the
relevant
Mill
expenditures
on
the
basis
that
they
were
made
for
certified
property.
The
Minister
has
reassessed
on
the
basis
that
the
expenditures
were
for
qualified
property.
The
Minister
does
not
take
issue
with
the
expenditures
or
the
specified
percentages
claimed
by
the
plaintiff
other
than
as
set
forth
herein.
8.
A
number
of
requirements
must
be
met
in
order
for
the
mill
to
be
classified
as
a
certified
property.
These
requirements
are
set
out
in
subsection
127(9)
of
the
Act:
“Certified
property"
of
a
taxpayer
means
any
property
(other
than
an
approved
project
property)
described
in
paragraph
(a)
or
(b)
of
the
definition
“qualified
property"
(a)
that
was
acquired
by
the
taxpayer
(i)
after
October
28,
1980
and
(A)
before
1987,
or
(B)
before
1988
where
the
property
is
(I)
a
building
under
construction
before
1987,
or
(II)
machinery
and
equipment
ordered
in
writing
by
the
taxpayer
before
1987,
(ii)
after
1986
and
before
1989,
other
than
a
property
included
in
subparagraph
(i),
or
(iii)
after
1988,
and
that
has
not
been
used,
or
acquired
for
use
or
lease,
for
any
purpose
whatever
before
it
was
acquired
by
him,
and
(b)
that
is
part
of
a
facility
as
defined
for
the
purposes
of
the
Regional
Development
Incentives
Act
and
was
acquired
primarily
for
use
by
the
taxpayer
in
a
prescribed
area.
9,
The
mill
is
a
prescribed
building
or
machinery
and
equipment
within
the
meaning
of
paragraphs
(a)
and
(b)
of
the
definition
of
“qualified
property"
in
subsection
127(9)
of
the
Act
and
Regulation
4600
of
the
Income
Tax
Regulations,
1971,
as
amended
for
1988.
The
mill
is
not
an
"approved
project
property”.
All
of
the
expenditures
related
to
property
that
had
not
been
used,
or
acquired
for
use
or
lease,
for
any
purpose
whatever
prior
to
their
acquisition
by
the
plaintiff.
Therefore,
the
mill
meets
the
requirements
of
paragraph
(a)
of
the
definition
of
“certified
property"
in
section
127(9)
of
the
Act.
10.
With
respect
to
paragraph
(b)
of
the
definition
of
“certified
property"
in
section
127(9)
of
the
Act,
the
mill
was
acquired
primarily
for
use
by
the
plaintiff
and
is
in
a
prescribed
area
as
prescribed
area
is
defined
in
Regulation
4602
of
the
Income
Tax
Regulations,
1971,
as
amended
for
1988.
11.
Subsection
127(10)
of
the
Act
provides
that
the
Minister
may
seek
advice
as
to
whether
property
is
certified
property:
(10)
The
Minister
may
(a)
obtain
the
advice
of
the
Minister
of
Regional
Industrial
Expansion
as
to
whether
any
property
is
property
as
described
in
paragraph
(b)
of
the
definition
"certified
property”
in
subsection
(9);
(b)
obtain
a
certificate
from
the
Minister
of
Regional
Industrial
Expansion
certifying
that
any
property
specified
therein
is
property
as
described
in
paragraph
(b)
of
the
definition
“certified
property"
in
subsection
(9);
or
(c)
provide
advice
to
the
Minister
of
Regional
Industrial
Expansion
as
to
whether
any
property
qualifies
for
certification
under
the
definition
“approved
project
property"
in
subsection
(9).
12.
In
order
for
the
mill
to
be
classified
as
certified
property
and
to
justify
a
refundable
tax
credit
in
the
amount
of
$13,880,138,
an
investment
tax
credit
carry-forward
balance
of
$20,820,206
and
the
concomitant
adjustments,
it
must
be
found
to
be
a
facility
as
defined
for
the
purpose
of
the
Regional
Development
Incentives
Act,
(the
"RDIA").
13.
The
definition
of
“facility”
for
the
purposes
of
the
RDIA
applies
for
the
purpose
of
the
definition
of
certified
property
in
subsection
127(9)
of
the
Act.
14.
Section
2
of
the
RDIA
defines
"facility":
“Facility”
means
the
structures,
machinery
and
equipment
that
constitute
the
necessary
components
of
a
manufacturing
or
processing
operation
other
than
an
initial
processing
operation
in
a
resource-based
industry.
15.
By
paragraph
15(a)
of
the
RDIA,
the
Governor-in-Council
is
empowered
to
make
regulations
defining
the
expressions"manufacturing
or
processing
operation”,
“initial
processing
operation”
and
“resource-based
industry".
16.
The
RDIA
Regulations,
1974,
were
originally
enacted
by
Order-in-Council
P.C.
1974-571,
SOR/74-166.
As
applicable
to
the
plaintiff's
1988
taxation
year,
subsection
2(2)
of
the
RDIA
Regulations
defined
“manufacturing
or
processing
operation”,
“initial
processing
operation”
and
“resource-based
industry":
‘Manufacturing
or
processing
operation’
means
an
operation
whereby
any
goods,
products,
commodities
or
wares
are
created,
fabricated,
refined
or
made
more
marketable,
but
does
not
include
(a)
the
merchandising
of
any
goods,
products,
commodities
or
wares
except
where
they
are
products
of,
and
their
merchandising
is
integral
with,
an
operation
whereby
they
are
created,
fabricated,
refined
or
made
more
marketable,
(b)
the
growing,
catching
or
harvesting
of
any
natural
or
cultivated
product
of
nature,
(c)
the
extracting
of
minerals
by
any
method,
(d)
the
production
of
energy
except
as
an
integral
part
of
and
solely
for
use
in
an
operation
whereby
any
goods,
products,
commodities
or
wares
are
created,
fabricated,
refined
or
made
more
marketable,
(e)
the
mixing
of
concrete
or
asphalt
if,
in
the
opinion
of
the
Minister,
such
operation
is
carried
out
to
a
significant
degree
for
direct
application
in
plastic
form
to
roadway
paving
or
for
direct
use
in
construction
in
metropolitan
and
surrounding
areas,
(f)
salt
or
potash
extraction,
(g)
any
mobile
manufacturing
or
processing
operation,
except
where
the
applicant
agrees
to
use
the
assets
of
the
operation
for
a
period
of
at
least
five
years
in
such
area
of
the
designated
region
as
is
specified
by
the
Minister.
(h)
construction
work,
(i)
repairing
as
distinct
from
rebuilding,
(j)
the
rendering
of
consumer
services,
(k)
publishing
other
than
printing,
and
(I)
the
manufacture
of
primary
petrochemicals
from
any
source
of
hydrocarbon
including
the
manufacture
of
methanol,
ethanol,
ethylene,
propylene,
butadiene,
butynes,
benzene,
toluene,
xylenes
and
ammonia.
‘Initial
processing
operation'
means
an
operation
the
product
of
which
is
a
fossil
fuel
or
a
material
mainly
used
for
further
processing
or
manufacturing,
and
includes
the
refining
of
petroleum,
the
production
of
newsprint
and
the
processing
of
ores
to
form
mineral
concentrates,
but
does
not
include:
(a)
the
processing
by
roasting,
leaching
or
smelting
of
mineral
concentrates
to
produce
metals,
(b)
the
processing
of
wood
by
the
sulphite
process
into
bleached
sulphite
pulp
ina
pulp
mill
that
prior
to
January
1,1972
produced
dissolving
and
high
alpha
cellulose
pulp
on
a
regular
basis,
(c)
the
converting
of
wood
pulp
into
paperboard
or
paper
other
than
newsprint,
or
(d)
the
processing,
other
than
petroleum
refining,
of
a
product
resulting
in
a
significant
chemical
change
in
the
principal
material
used.
‘Resource-based
industry’
means
an
industry
that
uses
as
a
principal
material
a
material
(a)
the
original
location
of
which
is
not
the
consequence
of
human
design,
and
(b)
that
is
in
or
close
to
its
natural
state.
17.
The
mill
is
comprised
of
structures,
machinery
and
equipment
constituting
the
necessary
components
of
a
manufacturing
or
processing
operation
for
purposes
of
the
RDIA
Regulations.
18.
The
product
of
the
mill
is
pulp.
Woodchips
are
the
principal
material
used
by
the
mill
to
make
the
pulp.
19.
In
the
making
of
the
pulp
the
woodchips
undergo
a
significant
chemical
change.
20.
The
pulp
made
by
the
mill
is
mainly
used
for
further
processing
or
manufacturing
by
persons
other
than
the
plaintiff.
21.
With
respect
to
the
spare
parts
the
Minister
has
reassessed
upon
the
basis
that
the
spare
parts
were
inventory.
The
Minister
has
now
agreed
that
the
spare
parts
were
capital.
The
Minister
takes
the
position
that
the
spare
parts
fall
within
Class
8
of
Schedule
I!
of
the
Income
Tax
Regulations,
1971
(as
amended)
while
the
plaintiff
maintains
its
position
that
the
spare
parts
fall
within
Class
29
of
Schedule
Il
of
the
Income
Tax
Regulations,
1971
(as
amended).
B.
ISSUES
22.
The
issues
to
be
decided
are:
(a)
whether
the
mill
is
an
initial
processing
operation
in
a
resource-based
industry
within
the
meaning
of
the
RDIA
and
the
RDIA
Regulations;
and
(b)
whether
the
spare
parts
should
be
classified
as
Class
8
or
Class
29
assets.
This
statement
of
agreed
facts
and
definition
of
issues
is
agreed
to
by
the
parties
for
the
purposes
of
this
action
and
any
appeal
therefrom
but
shall
not
bind
the
parties
in
any
other
action.
No
evidence
inconsistent
with
this
statement
of
agreed
facts
may
be
adduced
at
the
nearing
of
this
action
or
any
appeal
therefrom
but
additional
evidence
may
be
adduced
by
either
party.
The
plant
or
mill
in
question
is
a
bleached-chemi-thermo-mechanical
pulp
mill,
or
as
it
is
sometimes
called
a
BCTMP
mill.
It
is
owned
80
per
cent
by
Slocan
Forest
Products
whose
president,
Irving
Kirl
Barber
testified
at
the
trial
of
this
action.
Mr.
Barber
is
also
the
chairman
of
Pulp's
board.
Before
the
construction
and
equipping
of
the
subject
BCTMP
mill,
in
the
interior
(as
distinct
from
the
coast)
segment
of
the
forest
products
industry
which
started
its
major
development
in
British
Columbia
in
the
mid-1950s,
woodchips
were
produced
as
part
of
the
manufacture
of
lumber
from
the
sawmill
industry.
There
was
a
base
of
around
75
independent
sawmills
and
very
few,
around
four
or
five,
integrated
pulp
mills.
Those
sawmills
today
largely
produce
lumber,
veneer,
plywood
and
woodchips.
Because
interior
trees
ana
logs
are
significantly
smaller
than
those
on
the
coast,
according
to
Mr.
Barber,
the
production
of
lumber
and
chips
is
accomplished
by
linear
flow
on
one
machine
all
at
the
same
time.
The
sawmills
sold
woodchips
to
those
few
pulp
mills,
which
had
their
own
integrated
sawmills.
According
to
Mr.
Barber,
there
was
a
chronic
surplus
of
woodchips
generated
in
the
interior,
and
transportation
was
required
to
dispose
of
it
in
"bone-dry"
units
of
2,200
pounds,
from
which
all
moisture
had
been
extracted.
The
surplus
was
estimated
by
the
"independent
sawmill
community"
to
be
probably
in
the
order
of
500,000
to
600,000
bone-dry
units
per
year.
There
was
a
market
for
woodchips
in
Japan,
provided
the
supply
was
consistent
and
constant.
This
situation
was
the
genesis
of
Fibreco
Export,
Inc.,
a
ten-year
export
to
Japan
of
500,000
bone-dry
units
per
annum,
on
the
basis
of
averaging
freight
charges
to
make
the
collection
of
woodchips
for
export
viable
from
the
far
corners
of
British
Columbia.
There
was
still
a
surplus
of
production
and,
in
the
early
years,
a
shortfall
of
exports
because
the
Japanese
did
not
take
their
full
contracted
amounts.
So,
the
Fibreco
directorship
and
some
"key"
members
sought
ways
to
make
a
profit
from
that
continuing
surplus,
and,
Mr.
Barber
said,
”.
.
.
we
examined
the
opportunities
and
the
one
which
seemed
most
obvious
to
us
on
a
business
sense
was
the
development
of
a
BCTMP
pulp
[sic]
mill".
The
manner
in
which
the
chips
are
treated
in
the
manufacturing
of
pulp
in
the
plaintiffs’
BCTMP
mill
is
demonstrated
in
exhibit
1(21)
about
which
Mr.
Antony
Jarrett,
Export's
president,
was
cross-examined;
so:
(at
transcript,
vol.
1,
pages
Q.
Once
Fibreco
has
screened
and
rescreened
and
removed
any
metallic
objects
or
rocks
and
resliced
or
rechipped
the
oversized
chips,
then
I
take
it
that
the
general
process
described
further
on
page
3
with
respect
to
paragraph
3.03
CTMP,
then
that
actual
process
whereby
the
chips
start
to
be
treated
takes
place.
A.
Correct.
And
in
general
terms
this
whole
feasibility
describes
the
process.
There
are
minor
changes
compared
to
the
existing
mill
to
the
one
that
was
proposed.
The
B.C.T.M.
manufacturing
process
of
manufacturing
pulp
by
means
of
chemical
additives,
heat
and
mechanical
pulping
is
seen
surely
to
be
chemical,
thermal
and
mechanical
and
the
product
is
indeed
bleached.
Paragraphs
3.02
to
and
through
3.13
i,
pages
3
to
13
of
exhibit
1(21)
constitute
a
detailed
description
of
that
process,
from
which
there
are
only
minor
changes
in
practice,
according
to
Mr.
Jarrett,
above
quoted.
On
cross-examination
Mr.
Jarrett
revealed
why
northern
spruce
is
the
preferred
tree
for
chips
(at
transcript,
vol.
2,
pages
231-33):
Q.
And
you
know
that,
generally
speaking,
northern
spruce
has
a
lower
resin
content.
À.
Yes.
Q.
And
are
you
able
to
tell
His
Lordship
whether
you
know
that
northern
spruce
also
has
a
lower
density?
A.
Yes.
Q.
And
that
it
has
good
strength?
A.
Yes.
Q.
And
that
it
has
comparatively
low
extractives?
A.
Yes.
Q.
And
further,
that
it
has
a
high
natural
brightness?
A.
Yes.
THE
COURT:
Let's
back
up
one.
MS.
BURCH:
Lower
extractives.
THE
COURT:
And
would
someone,
perhaps
Mr.
Jarrett
of
course,
tell
me
what
that
means?
A.
In
very
general
terms.
.
.
.
My
understanding
is
that
they
are
materials
that
are
taken
up
by
the
tree,
are
generally
water
soluble,
and
are
removed
very
easily
from
the
pulp
by
the
washing
within
the
manufacture.
And
they're
not
the
soluble
portion
of
the
tree.
They're
not
the
solid
fibre
piece.
MS.
BURCH:
Q.
And
the
high
natural
brightness
that
we've
referred
to,
Mr.
Jarrett,
has
a
direct
impact
on
the
brightness
of
the
pulp
produced,
is
that
correct?
A.
Correct.
Q.
So
how
much
pulp,
say,
does
one
tonne
of
bone
dry
unit
make
in
the
BCTMP
process?
A.
Approximately
one
for
one,
approximately.
Q.
Approximately
—A.
One
for
one.
One
tonne
per.
It’s
a
little
less
because
you
do
lose
a
little
of
it,
but
it’s
in
the
—
Q.
It's
a
high
yield
process.
A.
It's
a
high
yield.
It's
in
the
90
per
cent,
90-95
per
cent
yield.
Mr.
Barber
was
in
error
in
his
testimony
on
the
matter
of
yield.
Counsel
for
the
defendant
spent
some
time
in
cross-examining
Mr.
Jarrett
on
correspondence
(with
enclosures)
between
the
plaintiffs
and
the
Deputy
Minister
and
other
officials
in
the
Department
of
National
Revenue
the
subject
of
which
was
the
matters
in
issue
in
this
litigation.
In
reexamination
he
was
accorded
the
opportunity
to
give
an
explanation
about
exhibit
2(4),
a
letter
dated
January
5,
1989,
from
one
Keith
Allen
of
the
audit
division,
Revenue
Canada
to
one
Howard
J.
Kellough,
theplaintiff
Pulp’s
solicitor,
which
mentions
a
laintiffs’
"Memorandum
of
Law
re:
Fibreco
dated
January
27,
1987”.
Mr.
Jarrett
was
reexamined,
thus
(at
transcript,
vol.
2,
pages
242-43):
Q.
Now
what
memorandum
of
law
is
that
referring
to?
A.
I
believe
it
to
be
the
memorandum
of
law
that
Howard
Kellough
and
his
company
put
to
the
Department
on
January
the
27,
1987,
in
which
he
pointed
out
that
we
should
be
considered
a
facility.
Q.
And
what
was
the
memorandum
addressing,
a
pulp
mill
or
a
pulp
mill
and
a
paper
mill?
A.
A
pulp
mill.
Q.
A
pulp
mill
alone?
A.
A
pulp
mill
alone.
MR.
McDOUGALL:
Needless
to
say,
My
Lord,
that
document
is
not
in
evidence.
Those
are
my
questions
in
reexamination,
My
Lor.dsay
[sic],
My
Lord,
that
document
is
not
in
evidence.
Those
are
my
questions
in
reexamination,
My
Lord.
One
wonders
how
it
matters
to
the
issues
in
dispute
in
this
litigation
what
the
parties
or
their
agents
or
solicitors
opined
about
the
questions
of
law
back
in
1987
or
in
1989.
The
Court
is
the
authentic
and
authoritative
finder
of
facts
(albeit
in
an
adversarial
mode
of
trial),
and
interpreter
of
the
law.
It
is
here
that
the
parties
make
their
submissions
on
law
and
facts,
not
to
each
other,
but
to
the
Court.
That
memorandum
of
law
(which
is
disregarded
by
the
Court
in
any
event)
and
the
Department's
"discussion
paper”
in
reply,
are
simply
irrelevant
in
time
and
in
substance,
unless
of
course,
the
defendant
be
now
adopting
and
ratifying
the
content
of
the
discussion
paper
as
and
for
defendant's
argument,
subject
to
any
discrepancies
between
the
facts
found
here
and
assumed
there.
Neither
party
is
bound
by
those
presentations
inter
se,
of
1987
and
1989,
and
neither
party
is
entitled
to
derive
any
benefit
from
the
adversary's
presentation.
It
is
apparent
that
the
parties
failed
to
agree
or
to
persuade
each
other
and
so,
in
face
of
the
Minister's
statutory
power
of
assessing
tax,
the
plaintiffs
have
sued;
and
they
and
the
defendant
have
placed
their
respective
contentions
before
the
Court
to
be
adjudicated
upon
the
evidence
adduced
and
their
respective
submissions
of
law.
The
subjects
of
the
admissibility
of
the
defendant's
administrative
practice
in
regard
to
the
legislation
in
question,
and
of
the
use
of
Hansard,
both
as
aids
to
the
interpretation
of
that
selfsame
legislation,
were
debated
by
the
parties’
respective
counsel
at
great
length.
The
defendant's
counsel
sought
strenuously
to
introduce
both
categories
of
evidence
and
the
plaintiffs’
counsel
objected
adamantly.
There
is
one
factor
common
to
both
subjects
which
militates
against
the
admission
of
the
evidence,
and
that
is
the
rule
of
law.
It
will
be
discussed
further
on
in
these
reasons.
Hansard
passages
really
ought
not
to
be
introduced
for
purposes
of
interpreting
the
legislation
then
being
debated
in
the
Senate
or
House
of
Commons,
or
for
almost
any
other
purpose.
The
"mischief",
if
any,
which
the
legislation
aims
to
suppress
or
moderate
is
the
most
notable,
if
not
sole,
exceptional
purpose.
The
defendant's
solicitors
prepared
an
impressive
book
of
authorities
on
this
subject,
including
both
jurisprudence
and
doctrine
in
the
form
of
passages
from
Elmer
A.
Driedger,
Construction
of
Statutes,
Butterworths
Toronto,
1983,
pages
76-79
and
156-58;
and
Pierre-André
Côté,
The
Interpretation
of
Legislation
in
Canada,
Les
Éditions
Yvon
Blais
Inc.,
Cowansville,
1984,
pages
364-67.
At
page
156
of
Driedger's
work
cited
for
the
defendant
under
the
headline
"C.
Parliamentary
Materials",
the
author
states
flatly:
It
is
well
established
that
debates
or
materials
before
Parliament
are
not
admissible
to
show
Parliamentary
intent."
Lord
Reid
in
Beswick
v.
Beswick,
[1967]
2
All
E.R.
1197,
[1968]
A.C.
58
(H.L.),
at
pages
73-74
(A.C.),
is
cited
in
support
to
illustrate
certain
valid
reasons.
At
page
364
of
Côté's
work
cited
for
the
defendant
under
the
headline
"4.
Resort
to
parliamentary
history
in
statutory
interpretation",
the
author
states:
In both theory and principle, parliamentary history is inadmissible, absent a constitutional context, for the purpose of interpreting a specific provision of an enactment. However, this principle is riddled with derogations and exceptions to such a point that we may ask whether it is on its last legs, if not completely finished.
Frequently the principle is simply ignored by the Court. These derogations would undoubtedly have less weight were it not for the fact that they occasionally find themselves cited in decisions of the Supreme Court of Canada.
98[many instances cited]
99 K. v. Vasil, [1981] 1 S.C.R. 469, 487,121 D.L.R. (3d) 41 (Lamer J.), commented by Graham Parker, (1982), 60 Can. Bar Rev. 502; Paul v. The Queen, [1982] 1 S.C.R. 621, 635, 653 and 660, 138 D.L.R. (3d) 455 (Lamer J.).
The
defendant's
first
case
is
that
of
Lor-Wes
Contracting
Ltd.
v.
The
Queen,
[1985]
2
C.T.C.
79,
85
D.T.C.
5310
(F.C.A.),
in
which
Mr.
Justice
MacGuigan
wrote
the
decision
for
a
unanimous
bench
of
this
Court's
Appeal
Division.
The
following
passages
from
the
decision
of
MacGuigan
J.A.
are
pertinent
to
this
very
topic
of
interpretation
of
legislation
(at
page
82
(D.T.C.
5312)):
The
Supreme
Court
of
Canada
in
recent
tax
decisions
has
cleared
out
a
great
deal
of
the
underbrush
that
previously
surrounded
tax
law.
For
example,
in
City
of
Winnipeg
v.
Morguard
Properties
Ltd.,
[1983]
2
S.C.R.
493,
3
D.L.R.
(4th)
1,
dealing
with
tax
provisions
that
derogate
from
taxpayers’
rights,
Estey
J.
said
for
the
Court:
In
more
modern
terminology
the
courts
require
that,
in
order
to
adversely
affect
a
citizen’s
right,
whether
as
a
taxpayer
or
otherwise,
the
legislature
must
do
so
expressly.
Truncation
of
such
rights
may
be
legislatively
unintended
or
even
accidental,
but
the
courts
must
look
for
express
language
in
the
statute
before
concluding
that
these
rights
have
been
reduced.
This
principle
of
construction
becomes
even
more
important
and
more
generally
operative
in
modern
times,
because
the
legislature
is
guided
and
assisted
by
a
well-staffed
and
ordinarily
very
articulate
executive.
The
resources
at
hand
in
the
preparation
and
enactment
of
legislation
are
such
that
a
court
must
be
slow
to
presume
oversight
or
inarticulate
intentions
when
the
rights
of
the
citizen
are
involved.
The
legislature
has
complete
control
of
the
process
of
legislation,
and
when
it
has
not
for
any
reason
clearly
expressed
itself,
it
has
all
the
resources
available
to
correct
that
inadequacy
of
expression.
This
is
more
true
today
than
ever
before
in
our
history
of
parliamentary
rule.
Similarly,
in
Stubart
Investments
Ltd.
v.
The
Queen,
[1984]
1
S.C.R.
536,
[1984]
C.T.C.
294,
84
D.T.C.
6305,
the
Supreme
Court,
again
speaking
through
Estey
J.,
expressed
its
point
of
view
with
respect
to
allowance
or
benefit
provisions
in
tax
statutes:
Income
tax
legislation,
such
as
the
federal
Act
in
our
country,
is
no
longer
a
simple
device
to
raise
revenue
to
meet
the
cost
of
governing
the
community.
Income
taxation
is
also
employed
by
government
to
attain
selected
economic
policy
objectives.
Thus,
the
statute
is
a
mix
of
fiscal
and
economic
policy.
The
economic
policy
element
of
the
Act
sometimes
takes
the
form
of
an
inducement
to
the
taxpayer
to
undertake
or
redirect
a
specific
activity.
.
.
.
Indeed,
where
Parliament
is
successful
and
a
taxpayer
is
induced
to
act
in
a
certain
manner
by
virtue
of
incentives
prescribed
in
the
legislation,
it
is
at
least
arguable
that
the
taxpayer
was
attracted
to
these
incentives
for
the
valid
business
purpose
of
reducing
his
cash
outlay
for
taxes
to
conserve
his
resources
for
other
Business
activities.
Although
one
rarely
dares
to
ask
questions
about
the
state
of
the
emperor's
clothing,
one
must
really
wonder
if
senators
and
M.P.s
do
in
fact
earn
their
pay
by
understanding
what
it
is
which
they
inflict
on
their
fellow
citizens
by
solemn
enactment.
Given
the
difficulties
experienced
by
the
courts
and
the
incidence
of
appeals
allowed,
and
then
sometimes
subsequently
reversed,
given
the
incidence
of
judicial
commentary
and
complaint
about
the
mind
boggling
complexity
of
the
Income
Tax
Act,
one
finds
it
easy
to
conclude
that
the
legislators
do
not
understand
the
legislation
which
they
enact.
They
and
the
Minister
of
the
day
apparently
rely
on
the
statute-crafters
in
the
public
service
and
the
tax-law
bar
whom
they
consult,
all
seemingly
with
an
interest
in
keeping
it
complex,
to
express
the
statutory
provisions
which
the
Senate
and
House
of
Commons
respective
majorities
dutifully
enact.
What
everyone
seems
to
overlook,
or
is
too
polite
to
mention
is
that
the
House
of
Commons
is
sometimes
riven
with
bloody-minded
partisanship.
It
at
least
embodies
the
notion
of
no
taxation
without
representation
partially
reified
in
sections
53
and
54
of
the
Constitution
Act,
1867,
U.K.
30
&
31
Victoria
Chap.
3,
and
in
theory
M.P.s
are
elected
to
know
what
taxation
they
participate
in
imposing
on
the
taxpayers
of
Canada.
The
fact
that
they,
the
guardians
of
the
people’s
purses
[and
purse]
seem
not
to
understand
what
they
enact
(and
how
could
they?)
is
all
the
more
reason
to
leave
its
interpretation
to
the
courts
and
not
to
the
mandarins
and
Minister
charged
with
the
duty
to
collect
taxes
from
the
people,
for
those
officials
are
notionally
in
a
conflict
of
interest
between
the
duty
to
collect
and
the
evenhanded
treatment
of
taxpayers.
So
a
Minister,
fully
briefed
by
his
staff
and
those
who
have
drafted
his
Bill
as
to
what
to
say
in
the
House
of
Commons
on
the
presentation
of
a
budget
or
other
taxation
measure,
is
hardly
a
reasonable
source
of
interpretation
of
the
legislation
about
to
be
passed.
Nothing
herein
is
intended
to
impugn
the
honour
of
those
concerned,
but
their
consistency
frequently
leaves
much
to
be
desired.
How
often
over
the
past
few
decades
has
a
party
on
the
"outs"
or
in
opposition
in
Parliament
taken
a
vehement
stand
on
some
governmental
proposal,
only
to
support
it
wholly
when
their
fortune
has
improved?
And
vice
versa.
That
may
well
be
the
norm,
which
mature
folk
have
come
to
expect,
but
it
represents
no
reliable
guide
for
the
interpretation
of
tax
law
or
other
law
to
be
found
discussed
in
Hansard.
Can
anyone
pretend
that
the
presentation
of
the
budget
has
no
partisan
overtones?
Indeed
that
is
the
profound
flaw
in
trying
to
interpret
legislation
from
Hansard,
the
record
of
a
house
divided
on
highly
partisan
lines
of
postures,
expressions
and
voting.
It
is
an
enormously
unreliable
source
of
serious
interpretation
of
the
legislation
which
it
and
the
Senate
participate
in
passing.
Indeed,
even
the
responsible
Minister
is
not
immune
from
expressing
the
party
line,
be
it
ever
so
solemnly.
In
Lor-Wes
Contracting,
above
cited,
MacGuigan,
J.A.
subsequently,
at
page
84
(D.T.C.
5314),
did
indeed
refer
to
the
budget
statement
of
the
Minister
of
Finance
of
the
day,
not
for
help
in
interpreting
the
provisions
of
the
Income
Tax
Act
under
consideration,
but
rather
to
divine
the
“mischief”
at
which
the
legislation
was
aimed,
"any
slowdown
in
investment"
and
that
in
turn
suggested
to
the
Court
a
confirmatory
interpretation
of
the
provisions
being
considered.
Associate
Chief
Justice
Jerome
came
to
the
same
conclusion
and
acted
upon
it
in
the
same
way
in
another
of
the
defendant's
cited
cases:
Vancouver
Art
Metal
Works
Ltd.
v.
The
Queen,
[1991]
2
C.T.C.
315,
91
D.T.C.
5643
(F.C.T.D.).
Jerome,
A.C.J.
is
reported,
at
pages
316-17
(D.T.C.
5644),
thus:
To
answer
the
question
then
I
have
to
go
to
the
language
of
the
statute
itself,
and
I
think
it
is
appropriate
in
cases
of
this
sort
to
look
first
at
the
purpose
of
the
enactment.
It
is,
of
course,
improper
to
look
at
parliamentary
debate
for
the
purpose
of
statutory
interpretation.
If
the
proposer
of
legislation
in
the
course
of
debate
says
that
a
given
section
has
a
given
purpose
or
a
given
interpretation,
that
is
only
that
speaker's
opinion.
The
governing
determination
or
factor
will
be
the
text
of
the
language
itself.
If
it
doesn't
say
what
the
debater
says
it
should,
it
is
the
text
that
governs.
Why
then
should
we
go
to
the
parliamentary
debates
in
this
case?
Only
to
set
the
context,
to
clarify
the
purpose
of
the
enactment.
[Emphasis
added.]
Another
case
cited
for
the
defendant
is
that
of
Vaillancourt
v.
The
Queen,
[1991]
2
C.T.C.
42,
91
D.T.C.
5408
(F.C.A.),
where
the
decision
of
the
Appeal
Division
was
written
by
Mr.
Justice
Décary,
(at
49
(D.T.C.
5412))
thus
(with
footnotes
omitted):
This
is
the
new
approach
which
MacGuigan,
J.A.
described
in
Lor-Wes
Contracting
Ltd.,
supra,
as
a
“words-in-total-context
approach
with
a
view
to
determining
the
object
and
spirit
of
the
taxing
provisions”.
Additionally,
in
determining
the
object
of
the
legislation,
this
Court
no
longer
hesitates
to
refer
to
the
parliamentary
debates
when
the
latter
rise
above
mere
partisanship,
and
in
particular
in
tax
matters
to
refer
to
the
budget
speech
made
by
the
Minister
of
Finance.
Finally,
since
reference
will
later
be
made
to
the
Interpretation
Bulletins
published
by
Revenue
Canada,
it
is
worth
noting
at
once
the
rules
governing
use
of
these
Bulletins
to
interpret
a
particular
provision.
It
is
well
settled
that
Interpretation
Bulletins
only
represent
the
opinion
of
the
Department
of
National
Revenue,
do
not
bind
either
the
Minister,
the
taxpayer
or
the
courts
and
are
only
an
important
factor
in
interpreting
the
Act
in
the
event
of
doubt
as
to
the
meaning
of
the
legislation.
Having
said
that,
I
note
that
the
courts
are
having
increasing
recourse
to
such
Bulletins
and
they
appear
quite
willing
to
see
an
ambiguity
in
the
statute
—
as
a
reason
for
using
them
—
when
the
interpretation
given
in
a
Bulletin
squarely
contradicts
the
interpretation
suggested
by
the
Department
in
a
given
case
or
allows
the
interpretation
put
forward
by
the
taxpayer.
When
a
taxpayer
engages
in
business
activity
in
response
to
an
express
inducement
by
the
government
and
the
legality
of
that
activity
is
confirmed
in
an
Interpretation
Bulletin,
it
is
only
fair
to
seek
the
meaning
of
the
legislation
in
question
in
that
bulletin
also.
As
Prof.
Côté
points
out
in
The
Interpretation
of
Legislation
in
Canada:
"The
administration’s
presumed
authority
and
expertise
is
never
more
persuasive
than
when
the
judge
succeeds
in
turning
it
against
its
author,
demonstrating
a
contradiction
between
the
administration’s
interpretation
and
its
contentions
before
the
Court.”
Is
it
not
remarkable
how
ordinary
is
the
observation
of
the
government's
own
interpretations
of
Parliament's
enactments
in
several
cases
being
wrong?
It
is
far,
far
from
unthinkable.
It
is
notable
that
Décary,
J.A.
posits
the
need
for
parliamentary
debates
to
“rise
above
mere
partisanship”
in
order
to
be
useful.
The
only
problem
is
to
perceive
when
in
fact
they
do
"rise
above
mere
partisanship”
which
is
not
necessarily
evinced
by
yelling,
exclaiming
and
desk
thumping.
Often
ministers
are
not
so
crude
as
all
that,
but
still
quite
partisan.
Another
case
cited
DY
the
defendant
is
not
exactly
redolent
of
support
for
the
defendant's
posture
on
this
issue.
It
is,
at
tab
6,
British
Columbia
Telephone
Co.
v.
Canada,
[1992]
1
C.T.C.
26,
92
D.T.C.
6129
(F.C.A.).
Mr.
Justice
MacGuigan
wrote
for
the
Appeal
Division,
expressing
in
his
opening
paragraph
(at
page
27
(D.T.C.
6129)):
This
is
a
case
of
statutory
interpretation
where
a
technological
change
has
occurred
after
the
passage
of
a
statute.
The
statute
in
question
is
the
Income
Tax
Act,
and
the
technological
change
the
development
of
fibre
optic
transmission
systems
for
telecommunication
in
place
of
copper-based
and
microwave
systems.
MacGuigan
J.A.
went
on
subsequently
to
write
(at
page
31
(D.T.C.
6132)):
The
respondent's
contention,
wrong
as
presented,
does,
however,
point
up
a
latent
ambiguity
which
might
otherwise
be
masked
by
the
sweep
of
the
words-in-total-context
approach.
Four
separate
elements,
in
fact,
may
be
distinguished
within
it:
the
words
themselves,
their
immediate
context,
the
purpose
of
the
statute
as
manifested
throughout
the
legislation,
and
extrinsic
evidence
of
parliamentary
intent
to
the
extent
admissible.
These
elements
are
not
always
concordant,
and
a
Court
has
the
obligation
of
weighing
them
against
each
other
in
order
to
arrive
at
a
proper
construction.
Sometimes
this
tas
will
be
very
simple,
when
as
in
Canadian
Marconi
v.
The
Queen,
[1991]
2
C.T.C.
352,
91
D.T.C.
5626
(F.C.A.),
the
plain
meaning
of
the
words
is
obvious
and
there
is
nothing
else
to
be
taken
into
account.
In
other
cases,
as
in
the
case
at
bar,
it
is
a
somewhat
more
complex
process.
There
is,
in
my
opinion,
no
simple
rule
that
can
effectively
make
the
problem
disappear
or
resolve
a
Court's
intellectual
difficulty.
The
issue
as
to
weight
must
be
squarely
faced
and
honestly
answered.
Nevertheless,
in
my
view
it
is
a
fair
conclusion
from
several
centuries
of
statutory
interpretation
in
England
and
Canada
that,
in
its
balancing
exercise,
a
Court
should
give
greater
weight
to
clear
words
supported
by
their
immediate
context
than
to
larger
assertions
of
parliamentary
intention,
particularly
those
based
on
extrinsic
evidence,
which
our
courts
have
always
approached
with
extreme
caution.
In
the
case
at
bar,
I
find
no
substantiation
for
the
holding
of
the
trial
judge
that
a
glass
fibre
can
be
considered
to
be
a
wire,
and
indeed
his
conclusion
to
that
effect
was
not
defended
by
the
respondent.
On
the
other
hand,
there
is
strong
support
for
the
Trial
Judge's
conclusion
that
glass
fibre,
as
used
in
the
appellant’s
telecommunications
system,
can
be
considered
to
be
a
cable.
The
presumption
is
that
statutory
language
is
to
be
construed
according
to
the
meaning
of
words
in
common
parlance
even
in
statutes
dealing
with
technical
scientific
matters:
Pfizer
Co.
v.
D./M.N.R.
(Customs
and
Excise),
[1977]
1
S.C.R.
456,
68
D.L.R.
(3d)
9.
And
further
he
wrote
(at
pages
32-33
(D.T.C.
6133))
these
passages:
The
appellant’s
strongest
contention
was
based
upon
parliamentary
intention
as
revealed
in
Budget
Paper
C,
where
allegedly
both
the
mischief
sought
to
be
remedied
(misclassification
of
telephone
industry
assets)
and
the
remedy
to
such
mischief
were
clearly
articulated.
Class
3(j),
it
was
said,
was
a
remedial
measure
to
classify
lines
and
poles
so
that
CCA
rates
would
accord
with
historic
patterns
of
depreciation.
Given
the
Trial
Judge’s
finding
that
the
CCA
for
optical
fibre
needed
to
be
higher
than
that
allowed
for
copper
cable,
the
argument
is
that
the
effect
of
including
optical
fibres
in
Class
3(j)
woulooe
to
perpetuate
the
very
mischief
which
the
legislation
sought
to
cure.
It
is
sufficiently
clear
from
Budget
Paper
C
that
the
object
of
the
CCA
system
is
only
to
classify
and
afford
different
rates
of
CCA
to
assets
according
to
actual
physical
déprécia-
tion
and
obsolescence?
It
is
common
ground
that
the
changes
proposed
moved
in
that
direction,
but
the
respondent
made
a
point
of
adding
thatthe
proposal
also
provides
for
the
tax
treatment
of
assets
upon
disposition
through
a
system
of
terminal
losses
or
recapture
of
gains.
More
important,
it
seems
to
me,
the
thrust
of
the
principle
argued
for
by
the
appellant
is
blunted
by
surrounding
limitations.
The
most
relevant
part
of
the
paper
is
as
follows
(Appeal
Book,
App.
I,
at
23-24)
[quoted]:
But
in
conclusion,
MacGuigan,
J.A.
found
that
the
very
words
of
the
law
presented
the
surest
guide
to
interpretation
(at
page
33
(D.T.C.
6134))
by
asserting
this:
This
is
indeed
a
proposed
change
in
the
pre-existing
law,
but
a
change
of
a
highly
qualified
kind,
which
is
by
no
means
clearly
intended
to
go
beyond
what
it
actually
specifies.
It
is,
in
my
opinion,
not
so
much
a
clarion
call
to
a
logically-defined
new
system,
as
an
uncertain
trumpet
whose
invitation
does
not
pass
beyond
the
words
themselves.
1
cannot
think,
that
therefore
in
the
weighing
process
necessary
for
interpretation,
the
vague
and
limited
language
of
the
budget
paper
could
have
been
intended
to
outweigh
the
much
clearer
ordinary
language
employed
by
Parliament
in
Class
3(j),
which
must
be
considered
to
be
open-textured
so
as
to
include
fibre
optic
transmission
systems
for
telecommunication.
So,
finally,
the
Court
came
to
the
conclusion
(for
those,
if
not
all,
circumstances)
that
the
actual
statutory
text
was
a
much
better
source
of
interpretation
than
the
budget
paper.
In
cases
of
ambiguity
or
of
competing
interpretations
found
in
the
bill
or
its
resultant
statute
on
the
one
hand,
and
the
parliamentary
budget
papers
or
statements
by
the
Minister,
this
Court
concludes
that
the
better
and
safer
course
is
to
find
meaning
in
the
statute’s
expressions.
Even
if
such
seem
to
be
ambiguous
or
unclear,
judges
hold
office
just
for
the
purpose
of
rendering
a
serious
and
reasonable,
as
well
as
authoritative
interpretation
of
the
statutory
text.
If
the
judicial
interpretation
fall
short
of
—
or
overshoot
—
the
governmental
or
parliamentary
expectations,
Parliament
can
hopefully,
and
should
soon
state
what
was
truly
meant
to
be
enacted.
But
any
amendment
to
state
what
was
truly
meant
must
be
enacted
by
the
majority
of
each
chamber
and
assented
to
by
the
sovereign's
representative.
It
is
not,
again,
just
what
the
cabinet
and
high
officials
say
it
is.
Another
jurisprudential
expression
cited
by
the
defendant
in
support
of
the
position
argued
by
the
defendant's
counsel
is
the
decision
of
the
Alberta
Court
of
Appeal
in
Re
Tschritter
v.
Alberta
(Children's
Guardian)
(1989),
57
D.L.R.
(4th)
579,
[1989]
4
W.W.R.
175
(C.A.).
The
decision
of
the
three-judge
bench
is
unanimous
in
the
result,
but
not
in
regard
to
the
means
to
reach
that
result
—
the
very
point
for
which
the
defendant
cited
it.
The
headnote
of
the
Tschritter
judgment
(D.L.R.)
suffices
to
illustrate
the
matter.
Madam
Justice
Hetherington
in
deciding
to
quash
a
decision
of
the
guardian
stated
inter
alia
according
to
the
headnote
at
pages
579-80:
This
interpretation
of
the
legislation
is
supported
by
a
speech
given
in
the
legislature
by
the
then
Minister
of
Social
Services
and
Community
Health
when
he
moved
second
reading
of
the
Act
in
which
he
explained
that
an
important
aspect
of
the
legislation
was
the
separation
of
the
advocacy
role,
to
be
performed
by
the
Children’s
Guardian,
from
the
service
provider
role,
to
be
performed
by
the
directors.
If
legislative
debate
is
an
acceptable
aid
in
the
interpretation
of
a
statute
in
constitutional
law
cases,
it
should
also
be
an
acceptable
aid
in
the
interpretation
of
statutes
in
non-constitutional
law
cases
so
long
as
it
is
relevant.
Statements
made
in
the
legislature
are
not,
of
course,
conclusive
as
to
the
intention
of
the
legislature
and
their
weight
must
be
determined
in
light
of
factors
which
will
vary
from
case
to
case.
Considerable
weight
could
be
given
to
the
statements
made
by
the
then
Minister
of
Social
Services
and
Community
Health
when
he
moved
second
reading
of
the
Act.
No
inconsistent
statements
were
made
by
other
members
of
the
legislature
nor
were
the
views
of
the
minister
inconsistent
with
the
Act
in
its
final
form.
Per
Stratton
J.A.,
concurring
in
the
result:
It
is
not
necessary
to
rely
upon
the
evidence
of
legislative
debate
in
order
to
allow
the
appeal.
Per
Côté
J.A.,
concurring
in
the
result:
It
is
not
necessary
to
consider
the
quotation
from
Hansard
or
its
admissibility.
.
.
.
If
the
Minister’s
recorded
remarks
were
in
such
sweet
accord
with
the
provisions
of
the
statute,
then
it
was
hardly
necessary
for
the
judge
to
consider
them:
the
judge
had
only
to
construe
the
statute
with
resolution
and
a
modicum
of
selfconfidence.
If
the
Minister's
remarks
had
been
at
odds
with
the
judge’s
appreciation
of
what
the
statute
meant
then
the
Minister's
remarks
would
have
had
to
be
ignored
in
any
event.
The
two
concurring
judges
were
correct
in
law,
if
only
with
regard
to
the
particular
case.
This
Court
considers
that
Stratton
and
Côté,
JJ.A.
were
correctly
stating
the
law
in
general,
but
probably
expressing
their
respective
statements
with
gentle
deference
to
their
colleague.
One
is,
in
any
event,
moved
to
wonder:
how
reliable
are
passages
from
the
Alberta
Legislative
Assembly's
Hansard
now?
Is
there
more
or
less
partisanship
afoot,
and
recorded
in
Hansard,
in
that
august
assembly?
Are
Ministers
inevitably
above
it
all?
And
how
can
one
tell,
from
what
they
are
recorded
as
saying,
even
in
regard
to
the
introduction
of
legislation
these
days?
This
Court
supports
the
rule
that
Hansard
is
not
to
be
consulted.
Today's
judiciary’s
juridical
ancestors
were
not
all
fools
about
the
marked
and
persistent
unreliability
of
Hansard
for
the
interpretation
of
legislation.
The
Court
has
noted
the
pertinent
jurisprudence
and
doctrine
cited
for
the
plaintiffs,
and
agrees
with
counsel’s
choice,
without
taking
the
time
and
paper
to
analyze
it
all.
The
Court
further
agrees
with
the
plaintiffs’
counsel's
analysis
of
this
jurisprudence,
especially
the
judgments
which,
at
first
blush
seem
to
go
against
the
plaintiffs’
contentions.
Those
authorities
are:
Ward's
Tax
Law
&
Planning,
Vol.
1,
Carswell,
Toronto,
1983,
pages
243-44;
The
Queen
v.
Vasil,
[1981]
1
S.C.R.
469,
129
D.L.R.
(3d)
41;
Construction
Industry
Commission
v.
Montreal
Urban
Community
Transit
Commission,
[1986]
2
S.C.R.
327,
31
D.L.R.
(4th)
641
;
R.
in
Right
of
British
Columbia
v.
Henfrey
Samson
Belair
Ltd.,
[1989]
2
S.C.R.
24,
59
D.L.R.
(4th)
726;
Multiform
Manufacturing
Co.
Ltd.
v.
The
Queen,
[1990]
2
S.C.R.
624,
79
C.R.
(3d)
390;
The
Queen
v.
Thomson,
[1992]
1
S.C.R.
385,
89
D.L.R.
(4th)
218;
Pembina
on
the
Red
Development
Corp.
v.
Triman
Industries
Ltd.,
[1992]
1
C.T.C.
133,
92
D.T.C.
6174
(Man.
C.A.);
Canadian
Marconi
Co.
v.
The
Queen,
[1991]
2
C.T.C.
352,
91
D.T.C.
5626
(F.C.A.);
British
Columbia
Telephone
Co.
v.
The
Queen,
[1992]
1
C.T.C.
26,
92
D.T.C.
6129
(F.C.A.);
MacMillan
Bloedel
Ltd.
v.
R.
in
Right
of
British
Columbia
(1984),
59
B.C.L.R.
374,
16
D.L.R.
(4th)
151
(B.C.S.C.);
Reference
re
Section
94(2)
of
the
Motor
Vehicle
Act
[1985]
2
S.C.R.
486,
24
D.L.R.
(4th)
536;
Martin
v.
British
Columbia
(A.-G.)
(1988),
53
D.L.R.
(4th)
198
(B.C.S.C.);
Regina
v.
Heywood
(1991),
65
C.C.C.
(3d)
46
(B.C.S.C.).
The
defendant
sought
to
introduce
the
government's
administrative
practice
in
dealing
with
first
grantees
and
later
taxpayers
in
order
to
bolster
its
case
against
the
present
plaintiffs.
Included
would
be
policy
formulations
and
memoranda
between
government
offices.
This
is
rather
like
communications
between
one
synapse
of
the
government's
“brain”,
and
another
synapse—it
is
all
within
the
government's
"mind".
It
is
utterly
disregarded
by
this
Court
on
that
very
basis.
To
do
what
the
defendant
wants
to
do
here
is
to
breach
the
rule
of
law,
whose
principles
inform
and
motivate
the
Constitution
of
Canada.
Given
that
in
this
tax
case,
as
in
all
others
where
the
government
is
the
adversary
with
all
the
weight
of
the
eternal
intimidating
State,
the
previous
unadjudicated
practices
of
the
government's
servants
unfairly
bear
on
the
taxpayers.
To
assert
that
government's
view
of
the
law
can
be
proved
and
enforced
because
its
view
is
supported
by
how
the
government
has
previously
always
dealt
with
taxpayers
is
to
assert
autocracy.
Fair
enough
if
the
government
puts
its
view
of
the
law
before
the
Court
in
intellectual
competition
with
the
plaintiffs’
view,
but
when
the
government
seeks
to
adduce
evidence
of
its
own
previous
practices
to
support
the
alleged
correctness
of
its
own
interpretation
of
the
law,
the
government
seeks
to
breach
the
rule
of
law.
It
would
be
condoning
special
pleading
to
permit
the
proof
of
public
servants’
own
agreed
internal
interpretations
of
the
law
to
be
offered
to
the
Court
in
support
of
the
government's
contentions.
They
have
no
meaning
in
such
litigation,
for
under
Canada’s
Constitution
the
courts
are
the
authoritative,
authentic
interpreters
of
the
law.
Of
course
many
and
various
officers
of
State
are
delegated,
by
law,
the
authority
to
administer
certain
laws
and
even
to
perform
first
instance
administrative
adjudications,
but
it
is
a
notable
feature
of
tne
Constitution
that
the
judiciary
jealously
guards
its
own
power
of
judicial
review,
even
in
face
of
legislated
privative
provisions.
One
could
make
a
proper
discourse
on
the
rule
of
law,
again
with
unlimited
time
and
paper,
but
suffice
it
to
note
that
the
rule
of
law,
not
the
rule
of
officials,
is
what
is
implanted
in
the
Constitution.
It
is
possible
to
overstate
this
notion
that
the
Crown
should
be
entitled
to
adduce
evidence
of
its
own
administrative
practices
in
order
to
demonstrate
its
own
interpretation
of
the
law,
violates
the
rule
of
law.
It
smacks
of
the
executive
high-jacking
of
the
law's
authentic
interpretation.
The
roots
of
the
rule
of
law
can
be
traced
into
the
thought
of
Plato,
Aristotle
and
Aquinas
as
Kenneth
Henley
shows
in
“The
Impersonal
Rule
of
Law”,
(1992)
5
Canadian
Journal
of
Law
&
Jurisprudence
299.
Dicey,
of
course,
provides
a
literate
source
of
definition
of
the
rule
of
law.
Madam
Justice
Beverley
McLachlin,
of
the
Supreme
Court
of
Canada
provides
good
insight
in
Rules
and
Discretion
in
the
Governance
of
Canada,
(1992)
56
Sask.
L.R.
167.
One
of
the
twelve
requirements
of
the
rule
of
law
which
she
cites
(at
page
169)
is
that
the
ordinary
(substantive)
law
should
possess
certainty,
generality
and
equality.
That
surely
means
at
least
that
the
governed
do
enough
if
they
comply
with
the
law
as
enacted
by
Parliament.
They
are
not
obliged
to
adhere
to
the
opinions
and
administrative
experience
of
Crown
servants
expressed
in
inter-office
memos.
And
those
opinions
and
experience,
in
turn,
are
not
to
be
levied
against
the
governed
as
if
such
opinions
and
administrative
experience
and
practices
inherently
possessed
the
force
of
law.
Subsection
127(10)
provides
for
the
obtaining
and
providing
of
advice
by
the
Minister
concerning
the
definition
“certified
property”.
That
is
the
substance
of
the
subsection:
advice
on
that
subject
flowing
between
Ministers
of
the
Crown.
It
is
nowhere
provided
that
such
advice
is
or
would
be
juridically
conclusive,
nor
that
such
advice
would
be
binding
on
a
taxpayer
who
appeals
to
the
Court
to
declare
that
the
Minister’s
assessment
is
wrong.
In
such
absence
the
subsection
is
constitutionally
inoffensive.
It
does
not
purport
to
usurp
the
judicial
function.
The
evidence
suggests
that
subsection
127(10)
had
been
invoked,
but
the
Court
in
rejecting
evidence
of
the
advice
tendered,
in
common
with
all
intra-governmental
communications,
policy
memos
and
interpretation
bulletins,
takes
this
position:
If
the
Crown
believes
that
any
such
advice
is
so
good
in
interpreting
statutory
provisions,
the
Crown
may
submit
the
same
advice
in
the
form
of
legal
argument
to
the
Court.
If
the
Crown
adopts
that
advice
as
argument,
it
will
be
before
the
Court,
without
its
being
considered
to
be
evidence.
That,
too,
is
why
the
Court
disregards
exhibit
2,
early
correspondence
inter
partes.
In
terms
of
the
requisite
generality,
the
law
must
apply
openly
to
all,
but
the
memos
and
practices
generated
thereby
cannot
be
applied
against
a
person's
or
corporation's
interest
unless
such
memos
and
practices
be
properly
legislated
and
promulgated
in
the
public
domain.
In
terms
of
equality,
everyone
who
comes
within
the
contemplation
of
the
law
may
take
equal
benefit
and
equal
obligation
of
the
law
without
concern
for
the
memos
and
administrative
procedures
invented
by
the
Crown's
servants
unless
the
same
be
ratified
either
by
legislation
or
approved
by
the
courts.
So,
in
terms
of
the
very
issues
at
stake
in
this
present
litigation,
that
which
the
Crown
seeks
to
adduce
to
shore
up
its
defence
is
prematurely
put
forward.
That
prematurity
in
attempted
presentation
of
inside
policy
formulation
and
as
yet
unadjudicated
administrative
experience
and
practices,
inclines
against
the
certainty,
generality
and
equality
required
by
the
rule
of
law.
In
the
Court's
view,
none
of
it
can
properly
be
adduced
to
support
the
defendant's
case.
Neither
side
was
aware
of
the
Appeal
Division’s
recent
judgment
in
Canada
(A.-G.)
v.
Innes,
A-167-93,
May
2,
1994,
a
unanimous
ruling
expressed
by
Mr.
Justice
McDonald.
He
repudiates
the
introduction
of'"legislative
debates"
by
citing
the
words
of
Heald,
J.A.
in
Garland
v.
C.E.I.C.,
(1985)
63
N.R.
129,
23
D.L.R.
(4th)
393
(F.C.A.).
Both
sides
will
be
interested
in
the
reasons
of
McDonald,
J.A.
in
that
Innes
case.
This
judge
allows,
however,
that
he
has
not
reread
the
Income
Tax
Act
in
its
entirety
for
the
purpose
of
disposing
of
the
present
litigation.
Finally
one
may
wonder
why
the
parties'
respective
counsel
made
such
a
big
issue
about
the
introduction
of
previous
administrative
experiences,
practices,
unadjudicated
policies
and
internal
memos
when
on
the
record,
as
the
Court
has
found,
they
are
all
irrelevant
insofar
as
the
law's
meaning
to
these
partiesis
concerned.
The
transcript
is
replete
with
the
Crown's
admissions
to
that
very
effect!
Here
they
are.
Counsel
for
the
Crown
stated
"However,
I
would
like
to
put
on
record
what
the
Minister
did
20
years
ago
really
has,
again,
no
bearing
on
what
we
are
talking
about
now,
or
some
Minister
did
20
years
ago"
(transcript,
vol.
3,
page
477).
Crown
Counsel
also
stated
that
”.
..
[W]hat
we
are
looking
at
is
facts.
What
the
government's
policy
is
is
irrelevant
as
to
what
it
is
at
issue
here"
(transcript:
vol.
3,
page
476).
Counsel
for
the
Crown
further
stated
“I
am
sure
on
the
record
somewhere
is
an
answer
that
was
considered
that
this
was
a
complete
specific
provision
dealing
with
the
pulp
as
such
and,
therefore,
a
general
provision
like
(d)
[excluded
from
“initial
processing
operation"]
had
no
application.
I'm
sure
that
if
you
go
and
review
your
transcripts
and
the
answers
to
the
undertakings
you
will
find
that.
In
any
case
that
is
the
answer
now.
And
whether
the
government
is
right
or
wrong
is
a
question
for
the
courts
to
decide.”
(transcript:
vol.
3,
pages
481-82.)
[Plaintiffs’
argument,
page
6.]
Finally,
the
disposition
of
the
parties’
litigation
herein
turns
upon
the
pleadings
as
modified
by
the
agreed
statement
of
facts
already
recited
earlier
herein,
the
statutory
provisions
under
consideration
and
some
of
the
viva
voce
testimony
elicited
at
trial,
as
well
as
the
relevant
doctrine
and
jurisprudence
cited,
of
course.
The
parties'
agreed
substantive
issue
It
remains
to
be
decided
as
stated
in
paragraph
22(a)
of
the
parties’
"agreed
facts
and
definition
of
issues”,
“whether
the
mill
is
an
initial
processing
operation
in
a
resource-based
industry
within
the
meaning
of
the
RDIA
and
the
RDIA
Regulations”
Indeed,
as
the
case
developed
at
trial
and
in
the
arguments
of
the
respective
counsel,
the
importance
of
the
stated
issue
is
to
discover
if
the
plaintiffs’
mill
is
a
"facility"
mentioned
in
the
definition
of
“certified
property"
included
in
subsection
127(9)
of
the
Act.
This
is
the
finding
which
the
plaintiffs
seek
in
paragraph
3.1(a)
in
each
of
the
three
statements
of
claim.
In
interpreting
the
statute
it
will
be
a
reasonable
first
step
to
note
again
the
statutory
definition
of
a
"facility",
the
interpretation
of
two
of
whose
ingredients
will
answer
the
question
posed
in
paragraph
22(a)
of
the
parties’
agreed
statement
quoted
above.
The
statutory
definition
of
a
“facility”
is:
“Facility”
means
the
structures,
machinery
and
equipment
that
constitute
the
necessary
components
of
a
manufacturing
or
processing
operation,
other
than
an
initial
processing
operation
in
a
resource-based
industry.
[Emphasis
added.]
In
deductive
style
the
ultimate
resolution
will
proceed
from
analysis
of
the
component
parts
starting
with
"a
resource-based
industry".
It
is
stated
in
subsection
2(2)
of
the
RDIA
Regulations,
1974,
enacted
by
Order-in-Council
P.C.
1974-571,
SOR/74-166
as
the
parties
agree
in
paragraph
16
of
their
statement
of
agreed
facts
and
definition
of
issues,
recited
above.
A
“resource-based
industry”
means
this:
.
.
.
an
industry
that
uses
as
a
principal
material
a
material
(a)
the
original
location
of
which
is
not
the
consequence
of
human
design,
and
(b)
that
is
in
or
close
to
its
natural
state.
The
evidence
amply
discloses,
and
the
defendant
in
paragraph
18
of
the
agreed
statement
admits,
that
the
principal
material
used
by
the
plaintiffs’
mill
to
manufacture
pulp
is
"woodchips".
The
“original
location"
of
woodchips
is
the
various
sawmills
which
supply
the
plaintiffs’
BCTMP
mill.
Those
various
sawmills
are
obviously
“the
consequence
of
human
design"
as
stated
in
subparagraph
(a)
the
definition.
Woodchips
are
made
of
wood
which
is
the
principal
material
substance
of
trees
found
in
the
forest
which
is
usually
not
a
consequence
of
human
design.
However,
the
mill’s
principal
material
is
woodchips,
not
just
the
trees
of
the
forest.
Woodchips
of
the
kind
used
by
the
plaintiffs
are
not
found
in
the
forest.
An
apt
example
of
what
is
meant
by
(b)
would
be
uniform
lengths
of
cut
or
severed
trunks
or
branches
with
bark
intact.
The
woodchips
are
made
from
lumber,
which
in
turn
is
made
from
trees,
which
in
turn
have
been
cut
down
and
hauled
(near
or
far)
to
a
sawmill.
Item
(b)
refers
to
natural
"state",
not
“material”:
Woodchips,
then,
are
far
from
being
in
a
natural
state.
Paragraph
(b)
then
misses
the
plaintiffs’
mill.
Therefore,
and
not
untypical
of
such
regulations
which
seem
to
fly
in
the
face
of
the
ordinary
expectations
and
understandings
raised
by
simple
language,
this
Court
finds
on
the
law
and
evidence
that
the
plaintiffs'
operations
are
not
in
"a
resource-based
industry”.
That
finding
would
seem
to
escalate
the
disposition
of
the
issue
like
a
"run"
or
“ladder”
in
a
silk
stocking,
or
an
interpretive
chain
reaction.
Because
the
plaintiffs'
operation
is
not
in
a
resource-based
industry,
it
would
seem
not
to
matter
whether
it
be
an
initial
processing
operation,
since
it
cannot
be
an
initial
processing
operation
as
defined
in
the
regulation
inany
event
(i.e.,
“in
a
resource-based
industry").
The
better
course
of
judicial
interpretation
is,
however,
to
follow
along
with
each
term
which
needs
to
be
interpreted,
despite
the
perceived
chain
of
interpretive
reaction,
or
"run"
of
conclusions.
The
same
regulation
which
defines
resource
based
industry
also
defined
the
other
exception
to
what
constitutes
a
“facility”,
that
other
exception
(if
it
be
not
a
part
only
of
the
one
big
exception,
emphasized
earlier
above)
being
"an
initial
processing
operation”.
The
definition
of
"an
initial
processing
operation"
evinces
four
exceptions
(a)
to
(d).
Item
(d)
is
the
important
one.
“Initial
processing
operation"
means
an
operation
the
product
of
which
is
a
fossil
fuel
or
a
material
mainly
used
for
further
processing
or
manufacturing,
and
includes
the
refining
of
petroleum,
the
production
of
newsprint
and
the
processing
of
ores
to
form
minera
concentrates,
but
does
not
include:
(a)
the
processing
by
roasting,
leaching
or
smelting
of
mineral
concentrates
to
produce
metals,
(b)
the
processing
of
wood
by
the
sulphite
process
into
bleached
sulphite
pulp
in
a
pulp
mill
that
prior
to
January
1,
1972
produced
dissolving
and
high
alpha
cellulose
pulp
on
a
regular
basis,
(c)
the
converting
of
wood
pulp
into
paperboard
or
paper
other
than
newsprint,
or
(d)
the
processing,
other
than
petroleum
refining,
of
a
product
resulting
in
a
significant
change
in
the
principal
material
used.
[Emphasis
added.]
Clearly
the
plaintiffs’
BCTMP
mill
operations
are
not
included
in
the
definition
of
“an
initial
processing
operation",
but
are
included
in
exception
(d).
Paragraph
19
of
the
parties’
statement
of
agreed
facts
asserts
as
a
fact
that
"in
the
making
of
the
[BCTM]
pulp
the
woodchips
undergo
a
significant
chemical
change.
That
is
to
say,
if
it
be
processing
at
all,
‘‘the
processing.
.
.
of
a
product
[BCTM
pulp]
resulting
in
a
significant
chemical
change
in
the
principal
material
[the
woodchips]
used."
"Processing"
here,
in
context,
means
"production"
or
"making"
rather
than
the
detailed
process
by
which
it
is
produced
or
made.
Because
the
plaintiffs’
mill
operation
(if
it
be
processing
at
all)
is
clearly
described
in
exclusion
(d)
from
the
definition
of
an
initial
processing
operation,
it
is
excluded
from
that
rubric.
The
Court
finds
that
the
plaintiffs’
BCTMP
mill
operation
is
therefore
not
"an
initial
processing
operation".
Paragraph
17
of
the
parties'
agreed
facts,
exhibit
1(57),
states
that
"the
[plaintiffs’]
Mill
is
comprised
of
structures,
machinery
and
equipment
constituting
the
necessary
components
of
a
manufacturing
or
processing
operation
for
purposes
of
the
RDIA
Regulations".
Now,
the
plaintiffs’
mill
and
operations
are
not
included
in
"facility's"
exceptions,
but
are
included
in
the
definition,
so
that
they
are
"the
structures,
machinery
and
equipment
that
constitute
the
necessary
components
of
a
manufacturing
or
processing
operation”,
which
is
a
“facility”
defined
in
section
2
of
the
RDIA,
for
the
purposes
of
the
Income
Tax
Act.
There
was
a
contentious
issue
between
the
parties
as
to
whether
the
plaintiffs’
mill
fitted
the
description
of
a
manufacturing
operation
or
a
processing
operation,
as
in
the
notion
of
"a
manufacturing
or
processing
operation".
The
plaintiffs
contend
that
it
is
a
manufacturing
operation
and
that
the
phrase
ought
to
be
read
disjunctively.
The
defendant
states
that
the
phrase
is
conjunctive
and
the
plaintiffs’
mill
and
operation
are,
in
any
event,
a
processing
operation
if
the
phrase
be
disjunctive
as
the
plaintiffs
contend.
In
that
event,
the
defendant
argues,
they
are
moreover
an
initial
processing
operation
which,
the
Court
finds,
they
are
not.
This
Court
reads
the
phrase
"a
manufacturing
or
processing
operation”
as
being
conjunctive
because
the
noun
is
a
comprehensive
singular
and
not
repeated
for
each
disparate
gerundive
adjective.
The
"or"
gives
an
alternative
mode
for
the
same
comprehensive
operation,
(the
noun).
Had
the
legislator
intended
a
disjunctive
meaning,
the
phrase,
even
where
tight
economy
of
words
is
effected,
would
most
probably
have
been
‘’a
manufacturing
operation
or
a
processing
operation".
The
defendant
is
right
in
this
interpretation
of
the
phrase.
It
is
to
be
noted
that
the
parties,
in
their
statement
of
agreed
facts,
(exhibit
1
(57),
paragraph
17,
have
agreed
that
the
mill
is
"a
manufacturing
or
processing
operation"
since
it
has
the
necessary
components
thereof.
The
plaintiffs
counsel
argued
very
persuasively
on
the
contention
that
the
mill
is
"a
manufacturing
operation”,
dealing
with
the
following
jurisprudence
in
written
argument:
York
Marble,
Tile
&
Terrazzo
Ltd.,
R.
v.,
[1968]
S.C.R.
140,
[1968]
C.T.C.
44,
67
D.T.C.
5001;
M.N.R.
v.
Dominion
Shuttle
Co.
(1933),
72
C.S.
15
(Que.
S.C.);
Canadian
Pacific
Railway
Co.,
The
Queen
v.,
[1971]
S.C.R.
821,
[1971]
C.T.C.
163,
71
D.T.C.
5078;
Federal
Farms
Ltd.
v.
M.N.R.,
[1966]
C.T.C.
62,
66
D.T.C.
5068
(Ex.
Ct.);
Tenneco
Canada
Inc.
v.
The
Queen,
[1991]
1
C.T.C.
323,
91
D.T.C.
5207
(F.C.A.)
(passages
by
Linden
J.A.
considered.);
Ocean
Construction
Supplies
Ltd.
v.
Minister
of
Finance
(1977),
1
W.W.R.
258
(B.C.S.C.).opNot
surprisingly
the
defendant's
arguments
considered
some
of
the
same
jurisprudence.
The
plaintiffs’
reference
to
the
appropriate
definitions
in
The
Shorter
Oxford
English
Dictionary
is
most
apt.
In
effect
the
plaintiffs’
counsel
persuaded
the
Court
that
their
BCTMP
mill
conducted
a
manufacturing
operation
but
it
does
not
matter
in
the
premises;
and
the
parties’
efforts
in
this
contentious
matter
were
wasted.
They,
after
all,
agreed
upon
its
being
“a
manufacturing
or
processing
operation”
and
this
Court
upon
the
evidence,
especially
the
agreed
evidence,
finds
that
the
mill
is
not,
and
is
not
conducting,
“an
initial
processing
operation".
That
surely
ends
the
matter.
Consideration
should
be
accorded
again,
but
briefly,
to
the
key
matter
of
that
“initial
processing
operation”
which
does
not
characterize
the
plaintiffs'
operation
of
their
BCTMP
mill.
The
Crown,
of
course,
evinces
no
emotion
in
matters
of
this
kind,
but
if
it
did,
one
might
perceive
surprise,
if
not
chagrin,
at
the
plaintiffs’
argument
that
their
mill
operations
conform
with
exclusion
(d)
of
the
definition
of
“initial
processing
operation”,
a
crucial
finding
by
this
Court.
Counsel
for
the
Crown
argued
energetically
that
the
plaintiffs
should
have
no
advantage
from
exception
(d)
of
the
definition.
It
will
be
recalled
that
“initial
processing
operation"
.
.
.
Means
an
operation
the
product
of
which
is
a
fuel
or
a
material
used
for
further
processing
or
manufacturing
and
includes
the
refining
of
petroleum,
the
production
of
newsprint
and
the
processing
of
ores
to
form
mineral
concentrates.
Now,
that
is
a
curious
mixed
bag,
for
there
is,
as
everyone
knows,
nothing
"initial"
about
the
production
of
newsprint!
The
text
is
clear
and
unambiguous
from
the
point
of
view
of
judicial
interpretation,
but
the
legislative
intention
to
be
derived
from
it
indicates
a
specific,
peculiar
list
willed
by
the
legislator
without
any
consistency,
without
ejusdem
generis.
From
that
mixed
bag,
the
regulation
specifically
takes
four
exclusions:
(a)
the
processing
by
roasting,
leaching
or
smelting
of
mineral
concentrates
to
produce
metals,
(b)
the
processing
of
wood
by
the
sulphite
process
into
bleached
sulphite
pulp
in
a
pulp
mill
that
prior
to
January
1,1972
produced
dissolving
and
high
alpha
cellulose
pulp
on
a
regular
basis,
(c)
the
converting
of
wood
pulp
into
paperboard
or
paper
other
than
newsprint
[newsprint
being
the
exception
to
the
exclusion
enunciated
in
(c)],
or
(d)
the
processing
other
than
petroleum
refining,
of
a
product
resulting
in
a
significant
chemical
change
in
the
principal
material
used.
It
must
be
remembered
that
the
legislator’s
intention
here
was
so
complex
and
mixed,
if
not
eclectic,
that
the
legislator
found
it
apt
to
fashion
the
special
rubric
of
"initial
processing
operation”
tor
the
special,
and
clear,
meaning
attributed
to
those
words,
used
not
entirely
within
their
ordinary
meanings.
That
evidently
accounts
for
the
four
exclusions
from
the
general
definition.
In
regard
to
the
general
definitions
inclusion
of
“a
material
mainly
used
for
further
processing
or
manufacturing",
counsel
for
the
Crown
argues:
It
has
been
admitted
that
the
pulp
produced
by
the
Fibreco
mill
is
mainly
used
for
further
processing
or
manufacturing
(see
Exhibit
1(57),
statement
of
agreed
facts;
paragraph
20).
The
definition
also
contains
three
very
specific
exclusions
from
initial
processing
operation
and
one
general
one.
This
line
of
argument
is
not
persuasive,
for
it
has
been
seen
that
the
legislator
chose
the
definition
in
order
to
describe
special
circumstances
of
mixed
opera-
tions,
and
then
made
mixed
exclusions
from
them.
While
the
meaning
is
clear,
the
internal
consistency
of
this
hotchpotch
of
a
regulation
is
not
entirely
apparent.
It
just
says
what
the
legislator
wanted
it
to
say,
which
in
regard
to
newsprint
at
least
excludes
some
veritably
“initial
processing”
from
the
operations
defined
therein.
There
is
no
particular
logic
to
these
provisions;
they
pragmatically
state
the
specially
configured
will
of
the
legislator.
The
defendant's
argument,
filed,
pages
13
et
seq.
demonstrate
the
vigour
of
the
defendant's
submissions
on
the
question
of
subparagraph
(d)'s
applicability.
Here
are
some
pertinent
paragraphs
(pages
13-14):
With
regard
to
the
pulp
and
paper
industry,
only
the
production
of
newsprint
is
specifically
mentioned
as
an
initial
processing
operation.
However,
as
is
the
case
in
the
mining
industry,
certain
activities
precede
the
production
of
newsprint,
such
as
the
harvesting
of
the
timber,
and
the
chipping
and
pulping
of
the
wood.
These
operations
are
all
“initial”
to
the
production
of
newsprint.
One
must
proceed
from
woodchips
to
pulp
to
newsprint
as
was
borne
out
by
the
evidence
at
trial,
(See
for
instance
Evidence,
Mr.
Jarrett,
page
239.)
It
was
also
admitted
by
the
plaintiff's
own
expert
and
other
witnesses
that
any
type
of
pulp
obtained
by
whatever
process
(including
Fibreco’s
BCTMP
pulp)
could
be
used
in
the
production
of
newsprint.
(See
Evidence,
Dr.
Styan,
page
283,
287,
311,
337,
341;
Mr.
Jarrett,
pages
148,
150,
239;
Mr.
Black,
pages
447-48.)
It
is
also
clear
that
the
final
use
of
the
pulp
is
not
necessarily
known
when
the
pulp
is
produced
at
the
plaintiff's
mill
(Mr.
Black,
pages
465-67).
This
provision
[subparagraph
(c)J
formed
part
of
the
definition
from
its
inception
in
1969.
It
is
submitted
that
from
the
fact
that
the
conversion
of
wood
pulp
into
paper
or
paperboard
has
to
be
specifically
excluded
as
an
initial
processing
operation,
one
must
infer
that
any
activity
which
precedes
this
conversion
of
pulp
into
paper
must
be
an
initial
processing
operation.
Therefore,
the
processing
of
woodchips
into
pulp
logically
must
be
an
initial
processing
operation
as
it
precedes
the
conversion
of
pulp
into
paper
or
newsprint.
This
conclusion
is
further
borne
out
by
the
fact
that
in
1973
the
Regulations
were
amended
by
the
addition
of
subparagraph
(b)
to
allow
one
specific
pulp
mill,
[Tembec]
using
the
sulphite
process
to
produce
dissolving
and
high
alpha
cellulose
pulp,
to
escape
from
being
caught
by
the
definition
of
initial
processing
operation.
It
is
submitted,
therefore,
that
in
the
same
way
as
the
body
of
the
definition
and
subparagraph
(a)
provide
a
complete
scheme
for
dealing
with
the
mining
industry,
so
the
body
of
the
definition
together
with
subparagraphs
(b)
and
(c)
provide
a
complete
scheme
for
dealing
with
the
pulp
and
paper
industry.
There
is
no
specific
exception
dealing
with
the
petroleum
industry,
but
in
subparagraph
(d),
which
is
a
very
general
and
not
an
industry
specific
provision,
we
find
that
petroleum
refining
is
explicitly
excluded
from
this
general
provision
dealing
with
chemical
change.
Petroleum
refining
in
this
instance
is
excepted
from
the
exclusion
in
subparagraph
(d)
and,
in
this
instance,
thrown
consistently
back
into
the
general
definition.
The
defendant's
counsel
argues
that
the
body
of
that
general
definition
and
subparagraph
(a)
provide
a
complete
scheme
for
dealing
with
the
mining
industry,
in
the
same
way
that
the
body
of
the
definition
together
with
subparagraphs
(b)
and
(c)
provides
a
complete
scheme
for
dealing
with
the
pulp
and
paper
industry.
What,
then,
to
make
of
subparagraph
(d)?
Counsel
argues:
It
is
submitted
that,
reading
the
definition
and
its
specific
inclusions
and
exceptions
in
context,
the
general
provision
contained
in
subparagraph
(d)
cannot
possibly
apply
to
the
operations
which
are
specifically
included
in
the
definition
of
initial
processing
operation.
The
dictates
of
logic
and
statutory
interpretation
surely
prevent
a
finding
that
on
the
basis
of
a
general
provision
dealing
with
chemical
change,
an
operation
which
precedes
an
activity
which
by
Regulation
is
explicitly
stated
to
be
an
initial
processing
operation,
is
not
an
initial
processing
operation
while
the
next
step
in
the
production
chain
again
becomes
an
initial
processing
operation.
If
there
is
a
reasonable
and
logical
interpretation
which
avoids
such
an
absurd
result
that
is
the
interpretation
which
should
be
adopted.
(See
also
P.A.
Côté,
The
Interpretation
of
Legislation
in
Canada,
2nd
edition,
1984,
at
pages
373-83;
E.A.
Driedger,
Construction
of
Statutes,
2nd
edition,
1983,
pages
101-03.
Furthermore,
it
was
agreed
that
there
is
a
significant
chemical
change
in
the
processing
of
the
woodchips
into
pulp
whether
it
was
by
the
so-called
chemical
or
the
BCTMP
pulping
processes.
(See
Dr.
Thomas,
pages
748-51,
761-763;
Dr.
Styan,
pages
303-04,
308).
It
must,
therefore,
be
concluded
that,
if
subparagraph
(d)
could
be
applied
to
a
pulp
mill
in
which
the
woodchips
undergo
a
significant
chemical
change,
there
would
ave
been
no
need
to
amend
the
Regulations
in
1973
by
Order-in-Council
P.C.
1973-1830
(Exhibit
15)
to
allow
the
Tembec
mill
to
escape
from
the
definition
of
“initial
processing
operation”,
especially
since
the
process
used
in
that
mill
constitutes
the
most
drastic
change
in
the
chemical
composition
of
wood
of
all
pulping
processes
to
produce
the
purest
dissolving
pulp.
(See
Exhibit
19,
Table
at
page
10;
Exhibit
3,
page
3.)
It
is
submitted,
therefore,
that
the
administrators
were
not
in
error
in
holding
that
subparagraph
(d)
did
not
apply
to
pulp
mills
as
such
a
general
provision
could
not
override
the
very
specific
provisions
dealing
with
the
pulp
and
paper
industry.
(Exhibit
13,
Discovery,
Mr.
Croteau,
pages
55-58.)
The
Court,
in
finding
the
regulation
unambiguous
has
no
difficulty
in
noting
that,
if
it
truly
expresses
the
legislator’s
will,
it
is
not
unreasonable.
That
will
does
not
need
to
possess
the
quality
of
logic,
and
it
is
clear
that
it
does
not.
To
purport
to
impose
logic
and
consistency
upon
it
would,
in
the
Court's
opinion,
thwart
the
legislator’s
will.
So
the
Crown's
argument
invests
an
inappropriate
requirement
of
logic
and
consistency
in
a
regulation
whose
“agenda”
does
not
include
those
unnecessary
characteristics.
The
Court
should
not
habitually
explain
the
reasons
for
judgment
by
importing
suppositions
and
analogies.
There
is
one
supposition
however
which
brings
all
the
elements
together
and
gives
acute
focus
to
the
Court's
reasoning.
One
might
suppose
that,
by
oversight,
the
administrators
overlooked
a
mill
which
fitted
exactly
the
description
or
Tembec's
mill
for
which
subparagraph
(b)
was
specially
legislated.
Now,
if
the
taxpaying
proprietors
of
that
other
mill
came
forward
to
claim
the
tax
credit,
presumably
the
Crown's
posture
would
be
the
same
as
it
is
here
in
regard
to
subparagraph
(d).
Presumably
it
would
reject
that
claim
on
the
basis
that
the
Crown
never
intended
subparagraph
(b)
to
apply
to
any
mill
but
Tembec's
and
the
proprietors
of
the
other
identical,
but
overlooked
mill,
could
not
invoke
subparagraph
(b)
to
keep
it
from
being
considered
an
initial
processing
operation.
Presumably
the
Crown
would
also,
as
here,
purport
to
present
all
of
its
internal
memos
and
advice
to
the
Minister
to
show
that
the
government
officials
never
intended
any
such
invocation
of
subparagraph
(b),
other
than
for
the
benefit
of
Tembec.
Now,
why
in
that
case
would
that
material
be
at
all
relevant?
It
would
surely
breach
the
rule
of
law
to
consider
it
relevant.
Surely
those
proprietors
of
the
other
mill
would
be
entitled
to
look
at,
and
take
whatever
benefit
they
could
in
regard
to
the
subparagraph
as
drafted.
It
does
not
specifically
limit
its
sway
to
Tembec.
Therefore
it
would
matter
nothing
at
all
what
the
government
officials
intended,
or
thought
it
means.
Is
that
supposition
not
exactly
what
the
Crown
purports
to
do
in
the
reality
of
this
case?
Its
argument
clearly
acknowledges
that
subparagraph
(d)
is
a
provision
of
general
application,
or
as
the
Court
would
also
call
it:
a
"catchall".
However,
because
the
Crown
did
not
or
could
not
foresee
a
pulp
mill
such
as
the
plaintiffs’
invoking
(d),
the
Crown
says
that
the
plaintiffs
are
not
entitled
to
invoke
it.
In
fact
and
in
law,
if
their
circumstances
are
contemplated
by
(d),
and
this
Court
holds
that
they
are,
then
the
plaintiffs
are
quite
entitled
to
have
the
benefit
of
it.
Subparagraph
(d)
is
not
drafted
so
as
to
exclude
the
plaintiffs’
mill,
nor
any
other
such
operation,
"other
than
petroleum
refining”.
The
Court
holds
that
the
configuration
of
(d)'s
drafting
expresses
the
will
of
the
legislator,
and
none
has
gainsaid
that
proposition.
The
Crown,
just
because
its
officials
had,
and
shared
among
themselves,
some
pre-conceived
notions
about
legislation,
simply
cannot
prevent
the
taxpayers
here
from
invoking
it
when
the
legislative
expression
is
general
and
does
not
specifically
exclude
those
taxpayers.
That,
inter
alia,
is
the
rule
of
law.
In
conclusion
and
for
all
of
the
foregoing
reasons
the
Court
holds
that:
(a)
the
plaintiffs’
mill
is
not
an
initial
processing
operation
in
a
resource-based
industry
within
the
meaning
of
the
RDIA
and
the
RDIA
Regulations,
in
answer
to
the
question
posed
in
paragraph
22.(a)
of
exhibit
1(57);
and
(b)
the
plaintiffs’
appeal
is
allowed
and
that
their
assessments
and
determinations
are
to
be
referred
back
to
the
Minister
for
reconsideration
and
redetermination
on
the
basis
that
their
mill
is
a
facility
under
the
RDIA
for
the
purposes
of
the
Income
Tax
Act,
and
(c)
the
plaintiffs
are
to
recover
their
full
party-and-party
costs
from
the
defendant,
in
each
action,
in
recognition
that
this
litigation
is
(and
is
said
by
the
parties
to
be)
a
case
of
first
impression.
In
these
circumstances,
the
Court
invokes
Rule
337(2)(b).
The
plaintiffs’
solicitors
are
to
draft
an
appropriate
form
of
judgment
in
order
to
reify
these
reasons.
They
should
consult
the
defendant's
solicitors
in
that
regard,
and,
if
possible
secure
those
solicitors’
approval
as
to
form.
Since
it
is
the
not-yet-drafted
judgment
which
disposes
of
this
litigation
the
parties'
solicitors
are
invited
to
inform
the
Court
of
any
deficiency
in
these
reasons
in
terms
of
failure
to
dispose
of
any
argued
contentions
whose
disposition
is
essential
to
the
proper
disposition
of
the
action;
and
also
of
any
unwarranted
overreach
of
these
reasons.
The
Court
will
dutifully
consider
any
such
observations.
If
the
parties
disagree
as
to
the
form
of
the
judgment
in
any
fundamental
way,
they
may
be
heard
on
the
subject
of
their
disagreement,
which,
hopefully
will
not
arise.
Appeal
allowed.
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