Ebco Industries Ltd. v. Canada, docket T-2519-90

Date: 20000106

Docket: T-2519-90

            

BETWEEN:

     EBCO INDUSTRIES LTD.,

     Plaintiff,

     - and -

     HER MAJESTY THE QUEEN,

     Defendant.

     REASONS FOR ORDER

MR. JOHN A. HARGRAVE,

PROTHONOTARY

[1]      The Plaintiff, Ebco Industries Ltd. ("Ebco"), sold goods which were used in the construction of the light rapid transit rail link, called Skytrain, which now runs between Vancouver and New Westminster and into Surrey, to British Columbia Transit ("BC Transit"), a Crown Corporation. In due course and on the basis that BC Transit was a municipality for the purpose of the Excise Tax Act , Ebco applied for a refund of Federal Sales Tax for the goods which were supplied between 1 August 1987 and 31 July 1989, in the amount of $99,425.

[2]      Key to the refund is Part XII of Schedule III to the Excise Tax Act, R.S.C. 1985, c. E-15, which provides that certain goods sold to a municipality are exempt from Federal Sales Tax.

[3]      The Minister of National Revenue denied the refund on the basis that BC Transit was not, at the relevant time, a municipality, this determination being made 28 December 1989.

[4]      These basic facts, augmented by an agreed statement of facts, lead to the question of law to be determined and here I quote from the Plaintiff"s Memorandum of Fact and Law:

Did BC Transit acquire designation as a municipality within the meaning of section 2(1)(b) of the Excise Tax Act by virtue of section 2.1 of the BC Transit Act?

I have answered this question in the affirmative: BC Transit acquired municipal status through being amalgamated with Metro-Transit Operating Company, which the Governor General in Council designated as a municipality.

CONSIDERATION

[5]      In order to look at the issue of the status of BC Transit as a municipality one must consider the status of an earlier transit operator, Metro-Transit Operating Company ("Metro-Transit"), a Crown Corporation established under section 2 of the Metro-Transit Operating Act , R.S.B.C. 1979, c. 257. The relevance here is that the rights and obligations of Metro-Transit, an entity which still exists, became the rights and obligations of a new entity, BC Transit, by legislation which is said to have provided, among other things, an amalgamation.

[6]      The Metro-Transit Operating Company Act sets out the purpose and powers of Metro-Transit in section 3, which provides in part:

The purpose of the company is to operate public passenger transportation systems in accordance with the annual operating agreements and, to facilitate carrying out its purposes, the company shall take over all public passenger transportation operations from [British Columbia] Hydro [and Power Authority].

[7]      Metro-Transit, which then operated the buses in Vancouver and in Victoria and the Seabus system in Vancouver Harbour, applied for municipal status and was so designated by the Governor General in Council pursuant to section 2(1)(b) of the Excise Tax Act, on 24 April, 1986. Section 2(1) of the Excise Tax Act provides, in part, that a municipality includes, in addition to various obvious municipal bodies:

(b) such other local authority as the Governor in Council may determine to be a municipality for the purposes of this Act;

The 24 April 1986 determination is as follows:

HER EXCELLENCY THE GOVERNOR GENERAL

IN COUNCIL, on the recommendation of the Minister of National Revenue, pursuant to paragraph (b) of the definition of "municipality" in subsection (2(1) of the Excise Tax Act, is pleased hereby to determine the authority listed in the schedule hereto to be a municipality for the purposes of the Excise Tax Act.

[8]      BC Transit, a crown corporation had, as of 12 August, 1982, been established by means of the BC Transit Act, R.S.B.C. 1979, ch. 421, as amended.¹ The parties have provided a copy of the Act as it existed 25 November, 1993. In that version, the "authority", defined as BC Transit, was to "...plan, acquire, construct or cause to be constructed public passenger transportation systems and rail transit systems, and provide for the maintenance and operation of those systems..." (Section 3), a mandate similar to but perhaps a little broader than that of Metro-Transit. Of particular relevance is section 2.1 of the BC Transit Act which, in addition, to making BC Transit liable for the debts and obligations of Metro-Transit, vested the property and rights of Metro-Transit in BC Transit:

2.1(1) All property and rights of the Metro-Transit Operating Company are transferred to and vested in the authority without any further act or deed.

This vesting provision became effective 1 June, 1985.

[9]      As I have already indicated BC Transit built and owns the Skytrain transportation system for which Ebco provided construction material between 1 August 1987 and 31 July 1989. Ebco then applied for a refund of federal sales tax. The application was rejected by the Minister by a 28 December 1989 Notice of Determination which provides in part:

This application purports to be for refund of federal sales tax, paid on goods supplied under or used in a contract between the applicant and British Columbia Transit. The exempting provision quoted in the application is Part XII, Schedule III of the Excise Tax Act. The application is rejected for the following reasons:

Exemption under Part XII of Schedule III of the Excise Tax Act is restricted to goods sold to municipalities for their own use. The sale or transfer on which this claim is based is to an entity other than a municipality and the aforementioned exemption, therefore, does not apply.

[10]      The Crown, perhaps feeling there was a lose end, issued an Order in Council of 15 February 1990, P.C. 1990-276, whereby it was pleased to revoke the initial Order in Council of 24 April 1986 which had determined Metro-Transit to be a municipality for the purposes of the Excise Tax Act.

[11]      The Plaintiffs submits that BC Transit acquired the status of and was a municipality after relevant time for three reasons:

1)      the designation of municipality granted to Metro-Transit, 24 April 1986, was a right that was transferred to BC Transit by virtue of section 2.1 of the BC Transit Act;

2)      in the alternative, the application of Metro-Transit for designation as a municipality was in itself a right that was transferred to BC Transit by section 2.1 of the Metro-Transit Act;

3)      in the further alternative section 2.1 of the BC Transit Act had the effect of statutorily amalgamating BC Transit and Metro-Transit so that BC Transit acquired all of the rights of Metro-Transit.

I will consider each of these views in turn.

Transfer of the Designation of Municipality as a Right

[12]      For convenience I will again set out part of section 2.1 of the BC Transit Act:

2.1(1) All property and rights of the Metro-Transit Operating Company are transferred to and vested in the authority without any further act or deed.

To succeed on the argument of a transfer of the municipal designation, as a right, Ebco must establish the designation in fact as a right and then that is transferred by section 2.1 of the BC Transit Act to BC Transit.

[13]      The Plaintiff"s argument is that, by section 29 of the Interpretation Act , R.S.B.C. 1979, ch. 206, a "right" includes a privilege, a term not further defined. The Plaintiff does look to legal dictionaries, including, Black"s Law Dictionary which provides, as a primary definition of "privilege":

A particular and peculiar benefit or advantage enjoyed by a person, company, or class, beyond the common advantages or other citizens. An exceptional or extraordinary power or exemption. A right, power, franchise, or immunity held by a person or class, against or beyond the course of the law.

This definition in is terms of a benefit or advantage peculiar to a certain entity, but beyond the ordinary advantages of others.

[14]      The Plaintiffs next refers to In re Turner, [1922] 2 W.W.R. 414 (Sask.K.B.). There at issue was a preference of a landlord as a share-cropper. The landlord was held to have a privilege, being "an advantage" over above that generally possessed by others (Page 416).

[15]      In the present context the Plaintiff submits that the designation, as a municipality, "is a clear privilege not available to those entities not so designated." (Page 12 of Motion Record). It then follows, according to the Plaintiff, that the designation, as a privilege, is included in the Interpretation Act definition of a right, a right automatically transferred to BC Transit by section 2.1 of the BC Transit Act.

[16]      Where this argument falls down is that the determination or designation of municipal status is not, in itself a right. Rather the right, the ability to avoid sales tax, is something which flows from the determination. That determination is not a right, but a designation or special description, or titling of Metro-Transit as a municipality "intended to reflect the powers and duties of the local authority" (paragraph 14 of the Defendant"s submissions). In effect, it is not the designation, per se , that is important, but rather the benefit that flows from the designation or exemption from federal sales tax.

[17]      The key to his approach is the concept of a determination, for that is what the Governor General in Council did, in determining Metro-Transit to be a municipality. Here I have been referred to the Shorter Oxford Dictionary which as a pertinent meaning defines the transitive of the verb in terms that include to "settle or decide" and to "lay down authoritatively, pronounce, declare". Further, the Compact Edition of the Oxford English Dictionary defines determination in terms of "the action of definitely ascertaining the position, ... (of anything)" and "the mental action of coming to a decision." In effect the determination of municipal status is the process by which the Minister considers the circumstances surrounding the entity applying for municipal status. The Defendant then looks at this as a designation, here utilizing the word "designation" as used by the Plaintiff in its written argument in examining the municipal designation of Metro-Transit as a right.

[18]      Turning now to the words designate and designation, the Defendant refers to Black"s Law Dictionary, although not to any specific edition. In examining various editions I noticed that Black"s seems to vacillate quite decidedly, over a period of not very many years, as to their understanding of the word. I have therefore gone to the Compact Edition of the Oxford English Dictionary to look at relevant meanings. Designate is "to point out by name or descriptive appellation; to name, denominate, entitle, style.". Similarly a designation is "a descriptive name, an appellation;". However, perhaps an elaboration on these definitions and indeed a more useful definition is that set out in Newton v. Marylebone Borough Council (1914), 78 J.P. 169 (K.B.D.), a decision of Mr. Justice Channell, as he was then:

Now what is meant by the word "designated"? So far as this gentleman"s rights are concerned, one has to consider that word "designated". It is a peculiar word, which is not common in the statute book. What is its ordinary meaning? In my opinion it means "described as such", or "described as an officer"; in other words, there must be some special description of him as an officer in an established capacity. It may be said that it means described eo nomine ; I think it does mean in substance, that he is so designated. It does not mean merely "called". It is something more. "Designated" seems to me to involve the idea of being "specially described as".

        

The key here is that designated means more than merely called, but rather it incorporates the idea of being specially described.

[19]      Now I should look at the designation of Metro-Transit using both the ordinary meaning and the purpose and scheme of the legislation. Section 2.1 of the Excise Tax Act allows the Governor General in Council to determine various entities, including an entity such as Metro-Transit, to be specially described as a municipality. It does nothing more. It might have gone on to allow the Governor General in Council to specifically vest in a body a right of tax exemption. But it does not. Any benefits or rights, of which there are many specific to a municipality, merely flow from the designation or determination. The designation or the determination result in a status but neither are, in themselves, rights. There being no rights involved in the special description or designation of Metro-Transit as a municipality, I do not have to consider whether anything passed to BC Transit under section 2.1 of the BC Transit Act. Moreover, there is nothing in the Excise Tax Act pointing out any intention by Parliament which might allow for the transference of a designation or determination. I now turn to the Plaintiff"s second submission, that the application of Metro-Transit, for the designation, was in itself a right transferred by section 2.1 of the BC Transit Act .

The Application for Municipal Status as a Right

[20]      The Plaintiff next submits, as an alternative, that the application of Metro-Transit for a determination that it was a municipality is in and of itself a right which was transferred to BC Transit by section 2.1 of the BC Transit Act.

[21]      The basis for the Plaintiff"s argument is the concept that once a proper application has been made, for example for some intangible, such as the municipal designation, the application becomes a right, here referring to Falconbridge Nickel Mines Ltd. v. Minister of Revenue , [1981] CTC 120, a decision of the Ontario Court of Appeal. In Falconbridge, the Plaintiff claimed a sales tax refund. The Plaintiff, at the time of the over-payment of tax, had a right to the refund, subject to very minimal or negligible ministerial discretion. Subsequently, before the application for the refund was made, the Provincial Crown amended the legislation to interpose a limitation period. The Ontario Court of Appeal considered that the refund had been virtually certain until the limitation had been imposed. The certainty of the refund gave rise to a right or at least to a right to have the Minister consider the refund application without reference to the limitation amendment.

[22]      This concept of an application constituting an accrued or perhaps an accruing right has no application in the present context. In Falconbridge the application had been improperly denied. In the present instance, Metro-Transit applied to be determined to be a municipality and that determination was granted. Surely an application for a determination of any sort, once acted upon and completely satisfied, cannot grant any residual benefit. To hold otherwise, that applications once finally disposed of were still alive and might be transferred and be reactivated to confer some benefit, would result in complete chaos. By analogy it would be contrary to the concept that litigation must come to a timely end at some point. In the case of an application, such as that for determination of municipal status, it must come to an end when the application is fully dealt with. The present satisfied application does not, in itself, constitute a right. However, the concept of a transfer of a designation by amalgamation is a more promising approach.

Transfer of Municipal Status by Amalgamation

[23]      As a further alternative Ebco submits that if neither the designation of municipal status nor the application for such are rights, the British Columbia legislature intended the designation to be among the items transferred on the statutory amalgamation of Metro-Transit and BC Transit which was effected by the BC Transit Act..

[24]      The BC Transit Act does not specifically refer to the process by which BC Transit came to possess and to operate Metro-Transit"s enterprises as amalgamation, but that is no bar to looking at the result, deciding if it is in fact an amalgamation and then considering what of relevance flows from the amalgamation.

[25]      The process and effect of amalgamation, in the Canadian context generally and in the British Columbian context particularly, are touched upon in Fraser"s Handbook on Company Law , 6^th Edition, Carswell. To quote Fraser, at page 407, "amalgamation is a term loosely applied to various forms of union of interests of two or more companies". This in itself is rather a loose definition and that is perhaps because amalgamation is a commercial term and, even as such, has no definite meaning:

... the word "amalgamation" has not any definite legal meaning. It is a commercial, and not a legal term, and, even as a commercial term, it bares no exact definite meaning. In each case one has to decide whether the transaction is such that, in the meaning of commercial men, it is one which is comprehended by the term "amalgamation". To constitute an amalgamation there must be a blending substantially of two or more existing concerns. (Attorney General for Ontario v. Electrical Development Co. (1919) 45 O.L.R. 186 at 190).

In Electrical Development Co. Mr. Justice Middleton of the Ontario High Court acknowledges the source of this passage as In re South African Supply and Cold Storage Co., [1904] 2 Ch. 268, a decision of Mr. Buckley, as he was then. Mr. Justice Buckley was of the view that a determination of an amalgamation involved an examination of substance and of facts (page 282). To follow this through he posed a question "Now what is an amalgamation?" at page 287:

Now what is an amalgamation? An amalgamation involves, I think, a different idea. There you must have the rolling, somehow or other, of two concerns into one. You must weld two things together and arrive at an amalgam - a blending of two undertakings. It does not necessarily follow that the whole of the two undertakings should pass - substantially they must pass - nor need all the corporators be parties, although substantially all must be parties. The difference between reconstruction and amalgamation is that in the latter is involved the blending of two concerns one with the other, but not merely the continuance of one concern. An amalgamation may take place, it seems to me, either by the transfer of undertakings A. and B. to a new corporation, C., or by the continuance of A. and B. by B. upon terms that the shareholders of A. shall become shareholders in B. It is not necessary that you should have a new company. You may have a continuance of one of the two companies upon the terms that the undertakings of both corporation shall substantially be merged in one corporation only.

Mr. Justice Buckely, in South African Supply, at page 286, had contrasted amalgamation with reconstruction, a latter being the same business carried by substantially the same persons, but without all of the assets or liabilities necessarily passing to the new entity, in effect a continuance of one concern. The difference between a reconstruction and an amalgamation, according to Mr. Justice Buckely, is that in the former there is a continuance of one concern, but in the latter there is a blending of two concerns. In the present instance there is that blending in that BC Transit took the property, rights and liabilities of Metro-Transit and added them to its own enterprise to produce a transit authority with a broader base.

[26]      Closer to home and more current is Seaboard Life Insurance Co. v. Attorney General of British Columbia (1987), 30 D.L.R. (4^th) 264 (B.C.S.C.), in which Mr. Justice Gibbs dealt with a de facto amalgamation, not by way of corporate legislation, but as counsel for Seaboard put it, as a common law amalgamation. Mr. Justice Gibbs relied largely upon South African Supply and found a factual rolling together of two life insurance companies, a business legally, physically and factually amalgamated and carried on by Seaboard.

[27]      A final case to which I will refer, dealing with the nature of an amalgamation, is Regina v. Black & Decker Manufacturing Co. Ltd. (1974), 43 D.L.R. (3^rd) 393, a decision of the Supreme Court of Canada, written by Mr. Justice Dickson as he then was. That case affirmed the survival of criminal charges, engendered by the pre-amalgamation acts of Black & Decker, resulting in charges being laid following the amalgamation. Mr. Justice Dickson makes the point that upon an amalgamation, there under the Canada Corporations Act, neither a new company was created nor an old company extinguished (page 397) and that on amalgamation the offices, warehouses, factories, corporate records, correspondence and documents were still there with business going on as usual (page 399). In effect the amalgamated companies remained liable, after the amalgamation, to prosecution for a criminal offence alleged to have been committed before the amalgamation.

[28]      Black & Decker has relevance in the present incidence, for as I read the BC Transit Act and the notes in the Act as to the coming into force of various sections, BC Transit came into being on 12 August 1982. The transfer of property and rights from Metro-Transit to BC Transit occurred 1 June 1985, that being the date of the apparent amalgamation. The determination of Metro-Transit as a municipality occurred 24 April 1986. Just as an amalgamated enterprise may not escape responsibility for a crime committed by one of the concerns, a post-amalgamation grant to one part of an amalgamated enterprise ought to vest in or be to the advantage of the amalgamated enterprises as a whole, a point to which I shall return.

[29]      I turn now to the issue of whether BC Transit is the result of an amalgamation. Here I have in mind not a statutory amalgamation under BC company legislation, for that entails satisfying some fairly specific procedural requirements, evidence of which is not before me, but rather a common law amalgamation brought about by the BC Transit Act, such as was successfully argued in the Seaboard Life case. What I am looking for is a combining of enterprises, a passing on of an undertaking and the continuation of Metro-Transit"s business by BC Transit with Metro-Transit"s facilities and records being employed and with Metro-Transit still subsisting, but there being a broader undertaking by reason of the additional mandate of BC Transit.

[30]      Counsel for Ebco contends, and this is consistent with sections 2.1(1) and (2) of the BC Transit Act, that all of Metro-Transit"s assets and liabilities passed to BC Transit. Pursuant to section 2.1(3) Metro-Transit"s creditors may look to BC Transit. Further, the Metro-Transit Operating Act has not been repealed and thus Metro-Transit still subsists: this is consistent with both Black & Decker (supra), that no old company has been extinguished and with South African Supply and Cold Storage (supra), which considers the blending together of two concerns, not merely the continuation of only one concern. All of this is consistent with the reference in the 10 February 1986 letter from the B.C. Deputy Minister of Transport, to Revenue Canada, which refers to the amalgamation of Metro-Transit and BC Transit.

[31]      Earlier I noted, when commenting on Black & Decker, that a post-amalgamation grant to one of the amalgamated companies ought to pass to the amalgamated enterprise itself. For some judicial authority on this proposition I refer to Witco Chemical Co. Canada Ltd. v. Town of Oakville (1974), 43 D.L.R. (3d) 413 (S.C.C.). In Witco the amalgamation had taken place the day before one of the amalgamating companies had issued a writ. Mr. Justice Spence upheld the validity of the writ both on a procedural approach, involving the Ontario Rules of Practice and on an amalgamation argument. Dealing with the latter he found difficult to contemplate a situation in which an amalgamating company does not cease to exist for all purposes yet might, as apparently argued by the Defendants, not commence an action. He found there was not an extinguishment of the corporatised entity of the amalgamating company sufficient to hold that the writ had been wrongly issued. It is implicit in the result that the new amalgamated company would take the benefit of the legal proceedings. Given the continued existence, in fact and in law, of Metro-Transit and the principal in Witco, there is, at this point in my analysis, no reason why BC Transit should not have the benefit of the municipal designation which Metro-Transit received after the amalgamation and initial transfer of its assets and liabilities to BC Transit.

[32]      In its brief the Defendant agrees that there was a legislative intent to amalgamate Metro-Transit and BC Transit. I have concluded that there was more than an intent: there was in fact an amalgamation.

[33]      Having concluded that BC Transit received the use of Metro-Transit"s designation as a municipality by way of amalgamation, there perhaps remain further difficulties. The Defendant submits that when Metro-Transit, which the Defendant characterizes as a local authority within section 2 of the Excise Tax Act , amalgamated with BC Transit the resulting entity was not a local authority, but in fact a provincial authority. Section 2 of the Excise Tax Act provides that a municipality includes a metropolitan authority "... or (b) such other local authority as the Governor in Council may determine to be a municipality..."

[34]      Counsel for the Defendant referred me to Supercrete Precast Ltd. v. The Minister of National Revenue [1989] C.I.T.T. No. 30, a decision of the Canadian International Trade Tribunal at Vancouver, B.C., for the bare proposition that BC Transit is not a municipality. Leaving aside that the Tribunal"s decision is not binding on this Court, that the finding that BC Transit is not a municipality is not essential to the decision reached and a number of other factors, the case is not applicable in the present instance in that it looked at BC Transit at a time before Metro-Transit had been designated a municipality.

[35]      Counsel for the Defendant also refers to Storz Canada v. The Minister of National Revenue [1992] C.I.T.T. No. 116, again a decision of the Canadian International Trade Tribunal, out of Ottawa, Ontario. There one of the issues was whether the fire marshall, operating under the Ontario Ministry of the Solicitor General and purchasing equipment for various unorganized communities in Northern Ontario, was a municipality and thus eligible for relief under the Excise Tax Act. The reasons were rather brief and not particularly helpful, however the Tribunal, after finding in the negative, comments "nor has the Minister of National Revenue designated the bodies as a municipality." (page 3) thus by implication, leaving open the question of whether the Minister might in fact designate the Ontario Ministry of the Solicitor General, Office of the Fire Marshal, to be a municipality. Clearly the Tribunal did not take a restrictive view of the sort of entity which might be deemed to be a municipality.

[36]      The Defendant submitted that even if BC Transit obtained the benefit of municipal status, by way of amalgamation with Metro-Transit, the benefit was lost because BC Transit did not fall within the ambit of the sort of entities which might be municipalities. Here counsel referred to Bouchard v. The Queen [1998] 1 C.T.C. 3071 (T.C.C.) and to Sincock v. The Queen (1995) 95 D.T.C. 535 (T.C.C.).

[37]      In Bouchard, Mr. Bouchard became ineligible for the income tax child tax credit because of a change in circumstances, namely that his former wife had custody of the child. In Sincock the taxpayer lost a physical impairment tax credit because an insulin dependant diabetic infant son did not qualify as having a severe and prolonged physical impairment going to an inability to perform any basic activity of daily living.

[38]      The Bouchard and Sincock cases and the underlying principle, that on a change of circumstances a benefit will be discontinued, are not dispositive of the municipal designation for two reasons. First, Metro-Transit had been designated a municipality by the Federal Crown which must be taken to have been aware of Metro-Transit"s mandate: I do not see any real change in mandate as a result of what Metro-Transit did and what BC Transit does following the amalgamation. Second, one must distinguish between the designation and the benefit. Certainly a tax benefit may be denied when a taxpayer does not qualify for it, but outside of a clear legislative provision I do not see a designation by the Governor General in Council suddenly disappearing. Surely a designation by Order-in-Council remains until revoked as was done in due course in the present instance. I now turn to a more cogent argument made by the Defendant.

[39]      The crux of the Defendant"s argument is that the Crown entity operating transit systems in British Columbia, Metro-Transit, ceased to be a local authority when it amalgamated into BC Transit and ceased to have day to day supervision of bus systems in greater Vancouver and in Victoria and the Sea-bus system in Vancouver harbour. Of course the operations of Metro-Transit were carried on by BC Transit as a result of the amalgamation. Moreover, the statutory mandate of Metro-Transit and of BC Transit, while differently worded, are really similar in purpose and result. Yet one may legitimately question whether BC Transit is indeed a local authority.

[40]      In considering the meaning of section 2 of the Excise Tax Act, whereby the Governor-in-Council may determine a local authority to be a municipality, I ought to look at the plain meaning of the words, unless the wording admits to some doubt, in which case I may interpret it to accord with the purpose of the legislation, a purposive interpretation. Indeed, the Federal Court of Appeal had this to say in Rubin v. Canada (1998) 221 N.R. 145 at 153: "... where there is more than one plausible interpretation of a section the one that accords best with the purpose of the Act (which in this case is that exemptions are to be limited and specified) should be chosen.". The Court of Appeal went on to adopt a passage from Driedger on the Construction of Statutes , 1994 Edition, at page 131:

"There is only one rule in modern interpretation, namely, courts are obligated to determine the meaning of legislation in its total context, having regard to the purpose of the legislation, the consequences of proposed interpretations, the presumptions and special rules of interpretation, as well as admissible external aids. In other words, the courts must consider and take into account all relevant and admissible indicators of legislative meaning. After taking this into account, the court must then adopt an interpretation that is appropriate. An appropriate interpretation is one that can be justified in terms of (a) its plausibility, that is, its compliance with the legislative text: (b) its efficacy, that is, its promotion of the legislative purpose; and (c) its acceptability, that is, the outcome is reasonable and just."

[41]      In the present instance the subject matter and the apparent intention of the legislation, including the section 2(1)(b) extended definition of a municipality by determination by the Governor-in-Council, certainly point to an intent that all municipalities be on equal tax exemption footing, even if a municipality chooses to operate through some form of outside authority. This approach, to give the legislation meaning compatible with the evident goals, without further analysis, might be tempting. However there are pitfalls, including introduction of uncertainty, if clear legislative language is to be qualified by the view of a court as to the objective and purpose of a given provision and here I would refer to a passage from Hogg & Magee, on Principles of Canadian Income Tax Law, Carswell, 1995, adopted by the majority in Friesen v. Canada [1995] 3 S.C.R. 103 at 113-114:

I accept the following comments on the Antosko case in P. W. Hogg and J.E. Magee, Principles of Canadian Income Tax Law (1995), Section 22.3(c) "Strict and purposive interpretation", at pp. 453-54:

It would introduce intolerable uncertainty into the Income Tax Act if clear language in a detailed provision of the Act were to be qualified by unexpressed exceptions derived from a court"s view of the object and purpose of the provision ... [The Antosko case] is simply a recognition that "object and purpose" can play only a limited role in the interpretation of a statute that is as precise and detailed as the Income Tax Act. When a provision is couched in specific language that admits of no doubt or ambiguity in its application to the facts, then the provision must be applied regardless of its object and purpose. Only when the statutory language admits of some doubt or ambiguity in its application to the facts is it useful to resort to the object and purpose of the provision.

Taking this train of thought a little further, a court ought not to make an overly fine or nit-picking search for doubt or ambiguity in a statutory provision.

[42]      Finally, as to construction, I would refer to the majority decision in The Queen v. Heywood [1994] 3 S.C.R. 761 at 784:

When a statutory provision is to be interpreted the word or words in question should be considered in the context in which they are used, and read in a manner which is consistent with the purpose of the provision and the intention of the legislature: Elmer A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87; R. v. Hasselwander, [1993] 2 S.C.R. 398. If the ordinary meaning of the words is consistent with the context in which the words are used and with the object of the act, then that is the interpretation which should govern.

[43]      To return to the Defendant"s submission, it is that Metro-Transit was a local authority but BC Transit is not a purely local authority, referring to the definition of a municipality in section 2(1) of the Excise Tax Act :

"municipality" means

(a) an incorporated city, town, village, metropolitan authority, township, district, county or rural municipality or other incorporated municipal body however designated, or

(b) such other local authority as the Minister may determine to be a municipality for the purposes of this Act;

[44]      I should begin by looking at the ordinary meaning of the phrase "local authority". I do not believe there is anything useful to be gained by breaking the phrase, "local authority", into two separate components for, as the editors of Jowitt"s Dictionary of English Law point out, in the 1977 edition, it is an expression and moreover it is of modern origin, the scope of which is usually defined in the legislation. It expresses a concept.

[45]      The Defendant refers to The Dictionary of Canadian Law (Carswell, 1991) which defines a local authority in terms of:

any public organization created by an act of a legislature and exercising jurisdiction or powers of a local nature (Carswell 1991)

This definition, in itself, is not without difficulty. The Defendant seeks to limit the phrase, by looking at a dictionary definition of "local", to the sense of belonging to or being confined to a particular place. However, The Dictionary of Canadian Law definition clearly includes any statutorily created public organization exercising powers of a local nature: it does not say that the public organization, in itself, must either be local or limited to exercising its powers in one local venue. Indeed, here is a patent ambiguity:"local authority", broken down, seems to mean one thing, yet, as a term of art, the phrase may have a very different meaning.

[46]      This conclusion, of the existence of an ambiguity in the phrase "local authority", on the basis of dictionary definitions, does not end the exercise of determining the ordinary meaning of the phrase. Rather than giving Ebco the benefit of the most favourable interpretation, it is proper to look at the context in which the phrase appears:

When words are considered in isolation, abstracted from their context, they reveal little about the meaning of the text in which they appear. Individual words have definitions which can be looked up in dictionaries, but they acquire the power to communicate a meaning primarily through their connection with other words as part of a structure of meaning. Thus, when courts seek to establish the ordinary meaning of a disputed term or expression, they may begin with a dictionary definition, but their task is not complete until they have considered the influence of the other words in the text to which the term or expression is connected.

[Driedger on the Construction of Statutes, Butterworths, 1994]

[47]      The Defendant submits that the various specific entities listed in section 2(1)(a) of the Excise Tax Act definition of a municipality, which are cities, metropolitan authorities, towns, villages, townships, districts or rural municipalities, or other incorporated municipal bodies, limit the ambit of local authority to one which has a very specific and limited geographical ambit. Here I would comment that this list seems exhaustive: if that indeed is the case and only a local entity may be a municipality, one wonders at the purpose of the provision which follows, allowing the Governor-in-Council to determine other entities to be municipalities.

[48]      I have already set out the Excise Tax Act definition of municipality. It is important to observe that the specific examples of a municipality are separated from the ministerial discretion to determine other entities to be local authorities by the disjunctive "or". Lord Justice MacKinnon in Sutherland Publishing Co. Ltd. v. Caxton Publishing Co. Ltd. [1938] Ch. 174 (C.A.) said that "... "or" can never mean "and"." (page 201). Further, in Federal Steam Navigation Co. Ltd. v. Department of Trade and Industry [1974] 1 Lloyd"s 520 (H.L.) Lord Reed, in dissent, said " "or" can never mean "and"" (page 521), Lord Wilberforce, also in dissent, was of a similar mind. In Federal Steam Navigation the majority of the Law Lords did not grapple directly with the question, but merely decided that the draftsman of the statute in question had made an error, intended "or" to be "and" and, rather that read "or" in a conjunctive manner, merely substituted the word "and", but did so only in order to avoid an absurdity.

[49]      In the present instance the use of "or", in the disjunctive sense, in the two branches of the definition of a municipality in the Excise Tax Act , reads perfectly well. The two portions of the definition, one setting out specific entities that are municipalities and the other granting the Governor-in-Council authority to deem some entity a municipality, ought to be read disjunctively. To that end, the Governor-in-Council may determine any local authority to be a municipality. Here I would refer back to the concept that a local authority, on a dictionary definition basis, is not limited to a local body, but clearly can mean an authority exercising its powers Province-wide, so long as they are powers of a certain type. Here it is interesting to note that Metro-Transit, to whom the Minister gave the designation of a municipality, was not limited in its mandate to any one specific geographical area.

[50]      Having found ambiguity in the Excise Tax Act definition of municipality, no real help in the Canadian International Trade Tribunal cases referred to me by the Defendant and only some inconclusive assistance in the disjunctive definition of municipality in the Excise Tax Act, now is the appropriate time to look at the apparent intent of this portion of the Excise Tax Act. I have already noted the view of the Federal Court of Appeal in Ruben v. Canada (supra) that if there is more than one plausible interpretation one ought to choose that which best accords with the purpose of the legislation. As put by Driedger, at page 131, set out above, I must look for an appropriate interpretation which is an interpretation justified in terms of plausibility, efficacy in the promotion of legislative purpose and acceptability in that the outcome is reasonable and just.

[51]      Part XII of Schedule III to the Excise Tax Act provides exemption from tax for various goods sold to municipalities. At issue is whether a provincial government umbrella organization, providing a service to municipalities, likely in a more knowledgeable, efficient and coordinated way than could the municipalities themselves, ought to be denied the exemption, a denial which would clearly penalize the client municipalities.

[52]      To grant the tax exemption to BC Transit, by way of the designation as a municipality of Metro-Transit and amalgamation, is plausible in the sense of compliance with the text of the exemption. Moreover, to grant the exemption to BC Transit is efficacious in that it promotes the purpose of the legislation, the granting of a tax break to municipalities in the broadest sense of the term. Finally, such a grant of an exemption to all such municipalities, whether directly or indirectly by way of BC Transit, is most reasonable and just.

CONCLUSION

[53]      The legislation by which an entity may be determined to be a municipality has a purpose, that of giving tax relief to such entities. Municipalities should all be on equal footing: there should be no tax discrimination based merely on the way in which a municipality elects to provide legitimate services to its residents. Metro-Transit was designated a municipality by Order-in-Council. BC Transit obtained the use of that designation by its amalgamation with Metro-Transit, a benefit that remained until the designation of Metro-Transit, as a municipality, was revoked by Order-in-Council. Thus, during the relevant period, BC Transit acquired designation as a municipality within the meaning of section 2 of the Excise Tax Act and by virtue of section 2.1 of the B.C. Transit Act.

[54]      If flows from this determination that Ebco Industries Ltd is entitled to a refund of Federal sales tax paid on goods supplied to BC Transit.

                             (Sgd.) "John A. Hargrave"

                                 Prothonotary

January 6, 2000

Vancouver, British Columbia

     FEDERAL COURT OF CANADA

     TRIAL DIVISION

     NAMES OF COUNSEL AND SOLICITORS ON THE RECORD

COURT FILE NO.:          T-2519-90

STYLE OF CAUSE:          EBCO INDUSTRIES LTD.

                 v.

                 HER MAJESTY THE QUEEN

PLACE OF HEARING:      VANCOUVER, BC

DATE OF HEARING:      January 15, 1999

REASONS FOR ORDER OF MR. JOHN A. HARGRAVE, PROTHONOTARY

DATED:              January 6, 2000

APPEARANCES:

Mr. W. H. G. Heinrich      for the Plaintiff

Ms. K. A. Truscott          for the Defendant

SOLICITORS OF RECORD:

Koffman Kalef

Vancouver, BC          for the Plaintiff

Morris Rosenberg

Deputy Attorney General

of Canada              for the Defendant

__________________

¹      This Act was initially called the Urban Transit Authority Act, but in due course became the BC Transit Act.