Supreme Court of Canada
The King v. Fraser Companies Ltd.,  S.C.R. 490
His Majesty The
King (Plaintiff) Appellant;
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
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.
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,  Ex. C.R. 16, reversed.
APPEAL from the judgment of Maclean J.,
President of the Exchequer Court of Canada, 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.
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,
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.
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
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
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, 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.
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
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
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
On the facts as stated above, I agree with the
learned President of the Exchequer Court,
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, in which judgment is rendered to-day,
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
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.