The King v. Fraser Companies Ltd., [1931] SCR 490

Supreme Court of Canada

The King v. Fraser Companies Ltd., [1931] S.C.R. 490

Date: 1931-06-12

His Majesty The King (Plaintiff) Appellant;

and

Fraser Companies, Limited (Defendant) Respondent.

1931: May 12; 1931:  June 12.

Present: Newcombe, Rinfret, Lamont, Smith and Cannon, JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Revenue—Sales tax—Special War Revenue Act, R.S.C., 1927, c. 179, ss. 86, 87—Goods manufactured for sale, but consumed by the manufacturer.

Respondent was a manufacturer of lumber for sale, and consumed a portion in construction and building operations, carried on over a period of years, the lumber so consumed having been taken from stock in its yards, produced and manufactured in the ordinary course of its business of manufacturing for sale, and not produced or manufactured especially for the purpose for which it was used.

Held (Cannon J. dissenting): Respondent was liable, under the Special War Revenue Act, R.S.C., 1927, c. 179, ss. 86, 87, for sales tax on the lumber so consumed. The intention of the Act was to levy the tax on the sale price of all goods produced or manufactured in Canada, whether they be sold by the manufacturer or consumed by himself for his own purposes. Respondent could not avoid liability by invoking the wording of s. 87 (d) of the Act.

Judgment of the Exchequer Court, [1931] Ex. C.R. 16, reversed.

APPEAL from the judgment of Maclean J., President of the Exchequer Court of Canada[1], holding that the defendant (the present respondent) was not liable for the consumption or sales tax claimed from it by the plaintiff (appellant).

The defendant (respondent) is a body corporate under and by virtue of letters patent issued under the Companies Act of Canada, with head office at Plaster Rock, N.B., and chief executive office and principal place of business at Edmundston, N.B.

[Page 491]

During the period from February 1, 1924, to August 31, 1928, the defendant was engaged, inter alia, in the production, manufacture and sale to the lumber trade of long and short lumber and was in possession of a sales tax licence issued to it under the provisions of s. 5 of c. 68, 14-15 George V (1924), An Act to amend The Special War Revenue Act, 1915 (now s. 95 of the Special War Revenue Act, c. 179, R.S.C., 1927).

During the said period the defendant was also engaged in the course of the development of its business in the construction and building of pulp and other mills and in the repair thereof and in the construction, building and repair of houses and other structures for employees of the company, and in the course of such construction, building and repairing the defendant during the period aforesaid used or consumed certain quantities of long and short lumber in such work. All of such long and short lumber was taken from stock in the yards of the company, and produced and manufactured for sale and in no instance had been produced or manufactured especially for the purpose for which the same was used.

The question for the opinion of the court (under a special case stated for the opinion of the Exchequer Court) was whether or not the defendant was liable to pay His Majesty the King a consumption or sales tax in respect of the long and short lumber referred to in the next preceding paragraph.

Maclean J.[2] held that the defendant was not liable, and the present appeal was from that decision. The appeal was allowed, with costs in this Court and in the Exchequer Court, and judgment directed to be entered in favour of the Crown (Cannon J. dissenting).

F. P. Varcoe for the appellant.

R. B. Hanson, K.C., for the respondent.

The judgment of the majority of the court (Newcombe, Rinfret, Lamont and Smith JJ.) was delivered by

Smith J.—The respondent was a manufacturer of lumber for sale, and consumed a portion of the lumber so manufactured in construction and building operations, carried on

[Page 492]

over a period of years, the lumber so consumed having been taken from stock in the yards of the company, produced and manufactured in the ordinary course of the company’s business of manufacturing for sale, and not produced or manufactured especially for the purpose for which it was used.

The appellant sued the respondent company for sales tax on the lumber so consumed, amounting to the sum of $7,302.90.

Sections 86 and 87 of the Special War Revenue Act are as follows:

86. In addition to any duty or tax that may be payable under this Act or any other statute or law, there shall be imposed, levied and collected a consumption or sales tax of four per cent, on the sale price of all goods

(a) produced or manufactured in Canada, payable by the producer or manufacturer at the time of the sale thereof by him;

* * * * *

87. Whenever goods are manufactured or produced in Canada under such circumstances or conditions as render it difficult to determine the value thereof for the consumption or sales tax because

* * * * *

(d) such goods are for use by the manufacturer or producer and not for sale;

the Minister may determine the value for the tax under this Act and all such transactions shall for the purposes of this Act be regarded as sales.

The learned President of the Exchequer Court, before whom the case was tried, dismissed the action[3], on the ground that the lumber so consumed was produced in the ordinary course of business for sale, and not specifically for use by the manufacturer, within the meaning of the above quoted s. 87 (d).

With great respect, I am unable to take this view of the meaning and effect of these provisions of the Act. To so construe them is to put a narrow and technical construction upon the precise words used in clause (d), without taking into consideration the meaning and intent of the statute as a whole. It seems to me clear that the real intention was to levy a consumption or sales tax of four per cent, on the sale price of all goods produced or manufactured in Canada, whether the goods so produced should be sold by the manufacturer or consumed by himself for his own purposes.

[Page 493]

The view taken in the court below would result in the introduction of an exception to the general rule that all goods produced or manufactured are to pay a tax, and would amount to a discrimination in favour of a particular consumer. As an example, it is not unusual for a manufacturer engaged in the production and manufacture of lumber for sale to engage at the same time in the business of a building contractor. He manufactures his lumber for sale, and, as a general rule, would not manufacture any specific lumber for use in connection with his building contracts, but would simply take lumber for these purposes from the general stock manufactured for sale, and might thus, under the view taken in the court below, escape taxation on all lumber thus diverted from the general stock manufactured for sale.

I am of opinion that, construing the provisions of the Act as a whole, the respondent is liable for taxes on the lumber consumed by him, as claimed.

The appeal should therefore be allowed with costs, and judgment entered in. the court below for the amount claimed, with costs.

Cannon, J. (dissenting)—In the special case submitted for the opinion of the Exchequer Court of Canada, it is stated, and admitted by the Crown, that all the long and short lumber which we are called upon to declare liable to pay the “consumption or sales tax” “was taken from stock in the yards of the Company, and produced and manufactured for sale and in no instance had been produced or manufactured especially for the purpose for which the same was used.”

On the facts as stated above, I agree with the learned President of the Exchequer Court[4], because, although manufactured for sale, these goods were never sold; nor can they be taxed under section 86 of the Special War Revenue Act, nor under section 87, because they were not manufactured or produced in Canada for use by the manufacturer or producer, but for sale, as appears by the above mentioned statement of facts. In this case as in the Wampole case[5], in which judgment is rendered to-day,

[Page 494]

the facts agreed upon are such that the taxing provisions, as I understand them, are non-applicable.

As the Privy Council said in Crawford v. Spooner (1), “We cannot aid the Legislature’s defective phrasing of the Act; we cannot add, and mend, and, by construction, make up deficiencies which are left there.” If a statute professes to impose a charge, “the rule said the Judicial Committee in Oriental Bank Corporation v. Wright (2), is “that the intention to impose a charge on the subject must be shewn by clear and unambiguous language.”

I would dismiss the appeal with costs.

Appeal allowed with costs.

Solicitor for the appellant: W. Stuart Edwards.

Solicitors for the respondent: Hanson, Dougherty & West.