Supreme Court of Canada
The
Municipality of the City and County of Saint-John et al. v. Fraser-Brace
Overseas Corporation et al., [1958] S.C.R. 263
Date:
1958-04-01
The Municipality of the City and County of Saint
John, Aubrey D. Logan and Roy E. Clayton (Defendants) Appellants;
and
Fraser-Brace Overseas Corporation, Terminal
Construction Company, Limited and J. A. Jones Construction Company, doing business
under the name and style of Fraser-Brace-Terminal Constructors; and Johnson,
Drake & Piper International Corporation, and Merritt, Chapman & Scott
Corporation, doing business under the name and style of Drake-Merritt (Plaintiffs)
Respondents.
1957: December 10, 11; 1958: April 1.
Present: Rand, Locke, Cartwright, Fauteux and Abbott JJ.
ON APPEAL FROM THE SUPREME COURT OF NEW BRUNSWICK, APPEAL
DIVISION.
International law—Exemption of foreign sovereigns and
their property from taxation in Canada—Leasehold interests and chattels
personal.
Taxation—Municipal exemptions—Property owned by or held
on behalf of foreign Government.
The Governments of Canada and the United States of America
agreed to construct a radar defence system. Pursuant to this arrangement, a
group of construction companies undertook the erection and completion of
buildings on properties in Saint John leased to the companies by their owners.
All materials used in this work were already the property of the United States
Government or were ordered by the companies on its behalf. The municipality
imposed taxes both on the leasehold interests in the lands and on the personal
property. These taxes were paid by the companies, in most cases expressly
"under protest".
Held: The companies were entitled to recover the taxes
so paid. Under the rules of international law as recognized by Canadian Courts,
property of a foreign sovereign was exempt from taxation by local authorities.
Although the leasehold interests were not in name held by the United States
Government, they were held by the companies as bare trustees for that
Government and the exemption accordingly extended to them. The circumstances in
which the taxes had been paid did not amount to acquiescence in their
imposition or preclude the companies from recovering them.
[Page 264]
APPEAL and cross-appeal from a judgment of the Supreme
Court of New Brunswick, Appeal Division ,
varying a judgment of McNair C.J.N.B.
Appeal dismissed; cross-appeal allowed.
A. B. Gilbert, Q.C., for the defendants,
appellants.
E. N. McKelvey and L. M. Machum, for
the plaintiffs, respondents.
Rand J.:—This
appeal raises a question of liability to taxation by the appellants of property
used by the respondents as contractors with the Government of the United States
in the construction of what is described as the "extension and
co-ordination of a continental radar defence system within Canada", to
serve as an agency of defence for both countries against possible air attacks.
The property consisted of both chattels personal and real,
the latter being two leases of land on which temporary buildings were erected
which, with other property set up in them, are alleged by the municipality to
be fixtures and by the contractors to be personalty. The local establishment
was a field station for the purposes of the radar work carried out in northern Canada
and extending from the Atlantic coast to the westerly boundary.
The joint participation in such an undertaking was obviously
dictated by the international situation. It was entered into under the terms of
letters exchanged between the two Governments which provided generally for the
joint construction, maintenance and operation of the line. To the extent so
defined, the agreement involved an invitation to personnel and property of the
United States Government to enter upon the territory of this country for the execution
jointly of the common purpose.
A preliminary question concerns the title, legal and
equitable, to. the two classes of property. At the trial McNair C.J.N.B. found the legal title to both to
be vested in. the respondents but in trust for the United States Government In
the Appeal Division
all three members, Richard, Bridges and Jones JJ., agreed that the legal title
[Page 265]
to the movable property had vested in that Government, and
that to the leases, executed under seal, in the contractors, the named lessees,
but subject to the trust. Each lease contained a provision permitting an
assignment to the United States Government.
The matter of title is expressly covered by the provisions
of the construction contract. By art. 24(b) it is declared, among other things,
that:
Title to all property purchased by the contractor, for the
cost of which the contractor is entitled to be reimbursed as a direct item of
cost under this contract, shall pass to and vest in the Government upon
delivery of such property by the vendor. Title to other property, the cost of
which is reimbursable to the contractor under this contract, shall pass to and
vest in the Government upon (i) issuance for use of such property in the
performance of this contract, or (ii) commencement of processing or use of such
property in the performance of this contract, or (iii) reimbursement of the
cost thereof by the Government, whichever first occurs.
All of the property taxed except the leases was within
the first category as having been "purchased by the contractors for the
cost of which" they were entitled to reimbursement "as a direct item
of cost"; and the beneficial interest in the leases would attach under the
second. The form of the purchasing orders for the movables was headed with the
name of the contractors at the top, followed by a notation immediately below,
"Department of the Army Contract No. . . ." etc. They were signed at
the foot on behalf of the contractors by their purchasing agent. The shipping
instructions directed the goods to be addressed to the transport officer of the
United States army in care of the contractors at their address in Saint John, New
Brunswick, within the municipality. A further notation mentioned exemption
from certain taxes, for which it was certified that the goods were being
purchased on behalf of the United States Government for use in the project
mentioned and that they were
to become and remain the property of the Government of the
United States and are not for Resale, Personal or Private use, and are exempt
from Sales Tax, Excise Tax, and Duty
by virtue of an order in council of the Dominion
Government. This was followed by a statement of exemption from taxes imposed by
the Province of New Brunswick by way of reference to a certificate of
registration in the Department of the Secretary Treasurer of the Province.
[Page 266]
In the light of these matters, I agree with the Appeal
Division
that at the time of the assessment the legal title to the personal property was
in the United States Government, and that of the leases in the contractors but
held in trust.
The action was dismissed by the Chief Justice on the ground that it could not
be said that the property so owned by the United States was "destined for
its public use" as that expression was used by Davey L.J. in Mesurus
Bey v. Gadban et al., or
"devoted to public use in the traditional sense" as expressed by Duff
C.J. in the Reference re Powers of the City of Ottawa and the Village of
Rockcliffe Park to Tax Foreign Legations, etc. On the appeal, Richard J., with
whom Jones J. concurred, found the purpose of the property to be that of a
public use, in the appropriate sense, of the United States and that it was
consequently immune from taxation; but that the taxation of the contractors,
though trustees, in respect of the leases, could not be challenged. Bridges J.
agreed with the Chief Justice that the immunity did not, in the circumstances,
extend to any part of the property.
Enough has been said to indicate the precise obligation of
the contractors to the United States Government. It was essentially one to
furnish services, with all property, materials, tools, equipment and other
means used or employed in or for the work of construction, supplied by the United
States. The fact that this field station was at some distance from the scene
of the permanent works does not affect its relation to them or its derivative
character. If the works would be exempt, then all property used in or for their
construction, including that in field operations, regardless of situs,
is necessarily identified with the ultimate purpose. All that was done within
the municipality is to be taken as one with the final accomplishment, and the
purpose of that accomplishment will determine that of the property used by
these subsidiary agencies.
The general principle of immunity from legal processes in
the broadest sense in what may be called the host country of public property of
a foreign state has been given
[Page 267]
its authoritative statement for Canada by Duff C.J. in the Foreign
Legations Reference, supra. There, as here, he was dealing with taxation
under general language in which only the interpretation of the statute was in
question. The significant aspect of the matter examined by him was that of the
theory on which the immunity is to be placed. In the early considerations given
it, the idea of exterritoriality, the physical projection of one sovereignty
within the borders of another, arose probably from one of its earliest
examples, that of a public vessel entering a foreign port. But as new contacts
and relations between states developed, the multiplied situations appearing
rendered necessary a more realistic and flexible conception. On p. 218 of his
reasons, after quoting a passage from Vattel on the immunities of an
ambassador's residence, which includes the qualification in the application of
the rule, "at least in all the ordinary affairs of life", Duff C.J.
observes, on the latter, that it must be read "as excluding the fiction of
exterritoriality in its extreme form". The notion was, in his view,
finally rejected by the Judicial Committee in Chung Chi Cheung v. The King; and reverting to it at p. 230 he
repeats: "This fiction of exterritoriality must be disregarded."
What is substituted is the conception of an invitation by
the host state to the visiting state. That is the core of what was laid down by
Marshall C.J. in The Schooner Exchange v. M'Faddon et
al., which Duff C.J. adopts. The fundamental attitude which
states adopt towards each other is the recognition and observance of individual
sovereignty, that is, the acknowledgment of the absolute independence of each;
and on this basic footing their intercourse is conducted. When one state admits
within its boundaries a foreign sovereign or his representative, the terms of
that entry are to be gathered from the circumstance of the invitation and its
acceptance. In the language of Marshall C.J. at pp. 139 and 143:
A sovereign committing the interests of his nation with a
foreign power, to the care of a person whom he has selected for that purpose,
cannot intend to subject his minister in any degree to that power; and,
therefore, a consent to receive him, implies a consent that he shall possess
those privileges which his principal intended he should retain. …
[Page 268]
[The] extent [of the implied consent] must be regulated by
the nature of the case, and the views under which the parties requiring and
conceding it must be supposed to act.
In the absence of something special or unusual, when a
visiting sovereign steps upon the foreign soil he does so free from any
submission to its immanent law; from that he remains insulated; and the
recourse against what may be considered to be an infringement of the privileges
of the invitation becomes a matter for diplomatic and not legal adjustment. In
the language of Marshall C.J. at pp. 138-9, quoted by Duff C.J. at p. 215:
The assent of the sovereign to the very important and extensive
exemptions from territorial jurisdiction which are admitted to attach to
foreign ministers, is implied from the considerations that, without such
exemption, every sovereign would hazard his own dignity by employing a public
minister abroad. His minister would owe temporary and local allegiance to a
foreign prince, and would be less competent to the objects of his mission. A
sovereign committing the interests of his nation with a foreign power, to the
care of a person whom he has selected for that purpose, cannot intend to
subject his minister in any degree to that power; and, therefore, a consent to
receive him, implies a consent that he shall possess those privileges which his
principal intended he should retain— privileges which are essential to the
dignity of his sovereign, and to the duties he is bound to perform.
On the same page there is a pertinent quotation from
Vattel reinforcing the same view which it is unnecessary to reproduce.
Freedom from the coercion of the public law is coextensive
with the requirements of the purpose for which the entry is made. In general,
the immunity of a sovereign, his ambassadors, ministers and their staffs,
together with his and their property, extends to all processes of Courts, all
invasions of or interferences with their persons or property, and all
applications of coercive public law brought to bear affirmatively, including
taxation.
It is obvious that the life of every state is, under the
swift transformations of these days, becoming deeply implicated with that of
the others in a de facto society of
nations. If in 1767 Lord Mansfield, as in Heathfield v. Chilton, could say, "The law of nations
will be carried as far in England, as any where", in this country, in the
20th century, in the presence of the United Nations and
[Page 269]
the multiplicity of impacts with which technical
developments have entwined the entire globe, we cannot say any thing less.
In the language of Sir Alexander Cockburn quoted by Lord
Atkin in Chung Chi Cheung, supra, at p. 172, in the absence of precise
precedent we must seek the rule which "reason and good sense … would
prescribe". In this we are not to disregard the practical consideration,
if not the necessity, of that "general assent and reciprocity", of
which Lord Macmillan speaks in Compania Naviera Vascongardo v. The
"Cristina" et al., cited
in the reasons of McNair C.J. But to say that precedent is now required for
every proposed application to matter which differs only in accidentals, that
new concrete instances must be left to legislation or convention, would be a
virtual repudiation of the concept of inherent adaptability which has
maintained the life of the common law, and a retrograde step in evolving the
rules of international intercourse. However slowly and meticulously they are to
be fashioned they must be permitted to meet the necessities of increasing
international involvements. It is the essence of the principle of precedent
that new applications are to be determined according to their total elements
including assumptions and attitudes, and in the international sphere the whole
field of the behaviour of states, whether exhibited in actual conduct,
conventions, arbitrations or adjudications, is pertinent to the determination
of each issue.
The nature and purpose of the invitation before us,
interpreted against the background of the assumptions implied by sovereignty,
and the generality of assent and reciprocity, furnish the data for the
juridical deductions of its implications. A similar situation arose during the
late world war from the admission to Canada of members of the United States
forces. The question of the jurisdiction of their military tribunals over
offences committed in this country was referred to this Court and the opinions expressed appear to
me to have accepted that basis of determination.
[Page 270]
That the subject-matter was of the most vital importance to
both countries surely does not require debate; it was national defence in the
most sensitive area. A foreign state, in peacetime, was privileged to exercise,
in this country, powers of high sovereign character. Its necessity was equal to
its uniqueness, and the scope and character of those powers determine the scope
and character of the implied privileges.
Public works of this sort are not ordinarily considered
subjects of taxation. Their object is to preserve the agencies that produce
national wealth, the source of taxes. So to tax Government is simply to remit
locally what has been exacted nationally. The work carried on by either
Government in its own land would be untaxable, and that principle must carry
over to the territory of the joint work.
I am unable, then, to infer that with an identity of
purpose, status and role in each country, either the invitation or its
acceptance proceeded upon any other basis than that of the rule of exemption
from taxation. Why should we deny to property designed for common national
preservation a sovereign character and purpose equal at least to that of an
ambassador's furniture? Works of this sort are not to be looked upon, in
principle, as furnishing a source of taxation for municipalities nor state
necessities an object of revenue; any other view would be a strange commentary
upon our conception of the role of Government in these days. Public works may,
at times, impose upon local resources burdens of municipal responsibility; but
the exemption here does not touch services for which payment is ordinarily
made, as water, electricity, etc. These the foreign invitees must, as their
food-supply and property generally, acquire as purchasers. If strictly general
municipal services providing fire-protection, repair of streets, etc., are
excessively affected, the appeal must be to the domestic Government as
participant in the work; and adjustment between the two countries becomes a
political matter.
The immunity extends likewise to the leases. Since the
argument there has been brought to our attention a recent decision of the House
of Lords which is most pertinent to this feature. In Rahimtoola v. Nizam of
Hyderabad et al.,
[Page 271]
moneys belonging to the state of Hyderabad had been
transferred by an agent to a bank in London in the name of the High
Commissioner of Pakistan to Great Britain. While the money was still held by
the bank, notice was received from the Nizam that the transfer had been made
without authority and a demand was made on the bank for its return. This the
bank refused. The Nizam thereupon commenced proceedings against both the High
Commissioner and the bank. On application by the defendants, the writ was set aside
in toto, but in the Court of Appeal the order was reversed. In the House
of Lords it was held that as the legal title to the account was admittedly in
the High Commissioner as bare trustee or proprietary agent for Pakistan, the
latter's exemption from proceedings against its property had been infringed;
the interest of Pakistan, the right to direct the action of the agent, was
sufficient to raise the immunity, notwithstanding that the ultimate beneficial
interest was not claimed. The decision, restoring the original order,
demonstrates that what is to be looked at is the substance of the matter raised
and not the form; and if, in that view, an infringement appears, the
consequence is rigorously applied. It was assumed in all Courts that if the
beneficial interest in the money had been shown to be in Pakistan the immunity
arose; but even without that the bare legal title sufficed. It is unnecessary
to do more than to indicate the difference between an ordinary trustee and such
a fiduciary. The former is charged with active duties towards both the property
and the beneficiary; and it is contemplated that for all such ordinary
incidents of ownership as taxes he represents all interests. But even for such
a case, we have been referred to no authority which holds a trustee taxable in
respect of the interest of a beneficiary exempt. Here a bare title is held
passively by the agent, and he is chargeable with no active responsibility in
any capacity beyond what arises under the construction contract.
A further question remains. For the years 1952 and 1953 the
taxes were paid. Before that happened the contractors had made it clear to the
municipal authorities that the property belonged to the United States
Government and that they stood on the position that it was exempt. Full
discussion of this question took place and the evidence
[Page 272]
puts it beyond controversy that the authorities had no
intention of holding their hand in prosecuting collection and that that was
made known to the contractors. It is equally evidenced that the ground taken by
the contractors was maintained consistently throughout. The personal property
taxes for 1952 and the total for 1953 were paid under express protest: in the
payment of those on the real estate for 1952 the word "protest" was
not used but that the municipal authorities understood it to be so is not to be
seriously doubted. In considering the question of voluntariness or coercion,
the status and circumstance of the party resisting is a matter to be taken into
account. As representing the United States the contractors were firm in their
objection to the taxation, and the municipal authorities, with all the
information before them, equally insistent on pressing it. In that state of
things, to require either the contractors or the United States Government to
take proceedings that might later be obviated, or to await action taken to
seize the property, is going beyond what is necessary to rebut the inference of
voluntary payment. "Voluntariness" implies acquiescence, the absence
of pressure inducing payment. That pressure was present here inducing payment
as a temporary means of avoiding rancorous controversy, as well as interference
with the prosecution of the work. Nothing in the circumstances of payment makes
it unfair to require the municipality to submit to an action for its return.
The considerations bearing upon a refusal to allow a
recovery of this nature are indicated in Grantham v. The City of Toronto. At p. 215 Robinson C.J. says:
It is unreasonable to contend that the plaintiff paid the
rate under compulsion, for the just presumption is, that if the plaintiff had
made the defendants aware of the fact, nothing more would have been exacted
than was right. If this action could lie, then it must follow that whenever an
inhabitant of the city has been assessed for property which he did not own, or
for more than he owned, and has paid the tax without objection, he can harass
the corporation with an action to recover it back again.
and at p. 216 Macaulay J.:
He [the plaintiff] should have remonstrated it first; if
actions like this are tenable, any number of persons accidentally overrated,
may pay the rates without saying a word, and then bring actions for money had
and received. It is too late.
[Page 273]
What was done in the present case was precisely what is
impliedly suggested by these quotations as furnishing ground for recovery.
For the assessment of 1953 there was an express protest in
writing, with the same insistence on the right and intention to proceed to
collect, and the same resistance.
I would, therefore, dismiss the appeal with costs and allow
the cross-appeal with costs throughout.
The judgment of Locke and Cartwright JJ. was delivered by
Locke J.:—An
examination of the evidence given on behalf of the parties to these proceedings
discloses that there is no dispute as to any material fact. By agreement
between the Governments of the Dominion of Canada and of the United States of
America, effected by an exchange of notes, the contracting parties agreed to
construct a radar defence system for their mutual protection against air
attacks. The installations necessary were to be, and were in fact, constructed
in Newfoundland, Labrador and elsewhere in Canada and it was agreed that the
cost of the construction should be borne one-third by Canada and two-thirds by
the United States. The Canadian Government granted and assured to the United
States Government without charge such rights of access, use and occupation as
might be required for the construction, equipment and operation of the stations
allocated to that country, and agreed that, within the sites so made available,
the United States might do whatever was necessary or appropriate to the
carrying out of its responsibility in Canada in connection with the work. The
stations when completed were to be manned by the two countries according to
arrangements agreed upon between them.
It was pursuant to this arrangement that three companies
which carried on business in Saint John, New Brunswick, and elsewhere under the
name and style of Fraser-Brace-Terminal Constructors (hereinafter referred to
as "Fraser-Brace"), and the two companies which carried on business
under the name of Drake-Merritt arranged and continued the leases from Agnes L.
McDonald and H. G. Fowler and Victoria Fowler, of the
lands situate
[Page 274]
within the limits of the appellant municipality upon which
their activities were carried on.
Upon these lands certain buildings were placed, constructed
of prefabricated material, which, as the evidence of the witness Joseph Hantman
shows, were the property of the United States Government and were brought at
its direction from St. John's, Newfoundland, and erected on the leased
property. These buildings were placed upon concrete footings: whether they
rested of their own weight on the footings or were in some way attached to them
is not clear from the evidence and, in any event, in the view I take of the
matter, this is an immaterial consideration.
Two other small buildings containing radio equipment were
either built or erected from prefabricated materials brought from Newfoundland.
These radio installations were for the purpose of communicating with the sites
where the work of construction was carried on in Newfoundland and northern Canada.
To these premises, which were devoted entirely to the enterprise undertaken by
the American Government in Canada for the above purposes, considerable
quantities of material of all kinds were brought during the periods in question
for shipment to the sites. Part of the buildings was used by Fraser-Brace, part
by the Corps of Engineers of the United States, part by the American Army Audit
Division and part by a firm of architects employed by the Corps of Engineers.
Apparently some 200 people were employed upon the activities there carried on.
It was shown by the witness Hantman that two classes of
personal property were brought by Fraser-Brace to the premises, these being
property owned by the American Government and shipped there at its direction,
such as the prefabricated buildings, and property purchased by Fraser-Brace for
use in the work, for which that organization was ' reimbursed by the American
Government. The personal property purchased by Fraser-Brace was ordered from
various manufactures and other people dealing in the required supplies upon a
purchase order form which, according to the evidence, was used for all such
purchases. One of these forms put in evidence at the trial, ordering a motor
from Canadian General Electric Company Limited, to be delivered at Saint John, New
Brunswick, required
[Page 275]
delivery to the Transportation Officer of the East Ocean
Division of the Corps of Engineers, U.S. Army, c/o Fraser-Brace at Saint John.
One of the general conditions endorsed upon the order read:
The articles and/or services furnished hereunder are for the
exclusive use of the United States Government but invoices shall be submitted
to the Purchaser for payment in accordance with the provisions of War
Department Contract.
Endorsed upon the face of such order, which was signed
on behalf of Eraser-Brace by its purchasing agent, the following appeared:
I hereby certify that the goods herein described are being
purchased on behalf of the Government of the United States for use in the
Construction, Maintenance and Operation of the joint Canada-United States
project "Pinetree" and
are to become and remain the property of the Government of the United States
and are not for Resale, Personal or Private use …
The lease entered into by Fraser-Brace with Agnes L.
McDonald and with the Fowlers each contained a provision that the lessee might
assign the ageement to the United States of America. The Fowler lease contained
a further provision reading:
Notwithstanding any
provision to the contrary herein contained, the Lessors grant to the Lessees
and to the United States of America the right of any employees of the United
States Government to occupy any part of the said premises, during the term
hereby granted.
The leases were not assigned to the United States but,
when Fraser-Brace finished its work early in the year 1954, the McDonald lease
was assigned to the respondent Drake-Merritt and possession of the premises and
of the personal property was apparently handed over to the latter organization
about May 1, 1954.
Discussions took place between representatives of
Fraser-Brace and the council and assessor of the appellant municipality during
the years 1952 and 1953 as to the liability of the leasehold and personal
property to municipal taxation. It is clear that it was explained to the
municipal authorities at the outset that exemption from such taxation was
claimed by Fraser-Brace on the ground that all of the property sought to be
taxed was the property of the United States of America. Notices of assessment
in respect of the buildings and personal property were sent to Fraser-Brace for
part of the year 1952, for 1953 and part of 1954 and to Drake-Merritt for the
years 1954 and 1955.
[Page 276]
On July 16, 1952, Fraser-Brace forwarded to the municipality
its cheque for $437 in response to an assessment notice, the tax being levied
in respect of certain of the personal property, stating that the payment was
made under protest. In November of 1952 a further amount of $3,113.62 was paid
in respect of an assessment made upon the leasehold interest, the buildings and
other personal property. There is no evidence to show that, at the time this
amount was paid, the municipality was informed that the amount was paid under
protest. Further assessments were made upon Fraser-Brace for the year 1953 and,
on July 28 of that year, Fraser-Brace wrote to the appellant saying that it had
been instructed by the Corps of Engineers of the United States Army not to pay
the taxes demanded for the year 1953. On September 1, 1953, the county
secretary wrote to Fraser-Brace saying that unless the taxes were paid a levy
would be made, and this threat was repeated in a further letter dated September
25, 1953. In consequence, on September 29, 1953, Fraser-Brace forwarded a
cheque for the amount of $14,273.35 stating that this payment of real and
personal property tax "is made under protest". When
Drake-Merritt took over possession of the buildings and the personal property
early in the year. 1954, further assessments were made upon that organization,
as well as upon Fraser-Brace, for part of. the year. Further assessments were
made against Drake-Merritt for the year 1955. The respondents launched their
action on June 7, 1955, to recover the amounts paid as taxes by Fraser-Brace
'totalling $17,823.97, and for an injunction to restrain the appellant from
levying or otherwise imposing taxes, rates or other assessments against the
respondents or either of them in respect of the years 1954 and 1955.
It was a term of the contract between the United States and
the contractors engaged in performing the work under the direction of the Corps
of Engineers that the Government of that country should deliver certain
property to the contractors and that the title to such property should remain
in the Government, and that title to any property purchased by the contractors
for the cost of which they were entitled to be reimbursed as an item of cost
under the contract should pass to and vest in the Government, upon delivery of
such property by the vendor.
[Page 277]
McNair C.J.N.B., by whom the action was tried,
being of the opinion that the assessments of both the personal and the
leasehold property made against the contractors were valid, dismissed the
action. On appeal, the
judgment of the majority of the Court delivered by Richard J. allowed the
appeal of Fraser-Brace against the assessments upon the
personal property and gave judgment for the amount of the taxes paid by that
organization in respect of such property but dismissed the appeal in so far as
it affected the levy made upon the leasehold interests and the buildings. The
appeal of Drake-Merritt was allowed to the extent of granting an injunction
restraining the municipality from enforcing payment of the taxes levied on
personal property for the years 1954 and 1955, but dismissed in respect of the other
levies made. Bridges J., who dissented, would have dismissed both appeals while
directing that the assessment rates for the years 1952 to 1955, both inclusive,
be amended so that the personal property would be assessed in the name of the
United States Government. On the appeal to this Court, the respondents have
cross-appealed against that portion of the judgment of the Appeal Division
dismissing the claims in respect of taxes paid or assessed in respect of the
leasehold interests and the buildings.
The arrangement between the Government of Canada and the
Government of the United States was made under the powers vested in the former
by head 7 of s. 91 of the British North America Act, which assigns to
Parliament exclusive legislative authority in relation to militia, military and
naval service and defence. The installations made in northern Canada were
matters undertaken for the defence of this country, and the arrangements to be
made for effecting that purpose fell within the exclusive jurisdiction of the
Government of Canada. It was for that Government to decide and settle the terms
and conditions upon which the United States was permitted to join with it in
carrying out these defence measures and the privileges and immunities to be
afforded to the Corps of Engineers
[Page 278]
of the United States Army and the contractors and others
employed by the Government of that county to carry out these works.
It was under the Rates and Taxes Act, R.S.N.B. 1952,
c. 191, that the assessments in the present matter were made. The personal
property in question falls within the definition of that expression in s. 1(1)
(e), and the leasehold interests and the buildings placed on the land
within the definition of real property in para, (h) of that subsection.
The statute, which has since been repealed by the Municipal Tax Act, 1955,
c. 14, contained the usual provisions for levying municipal taxes upon such
property, declared that they should "bind and be a special lien or
charge" upon all the lands of the taxpayer in the parish within which the
assessment was made (s. 171), and by s. 84, where default in payment within the
prescribed time was made, provided for the issuing of execution and the sale of
the property affected. By s. 85, execution might be issued against a
non-resident whose property within the municipality had been assessed. It was
under these powers that the secretary of the appellant municipality wrote to
the respondents on September 1 and on September 25, 1953, and, had payment not been
made by Fraser-Brace in that year, it is to be assumed that these properties of
the United States Government, brought to the premises for the above-described
purposes, would have been seized and sold and the work upon the defence
installations consequently impeded.
While the question as to the liability to municipal taxation
of the properties of foreign countries used as legations under the statutes of
Ontario, which was considered in the Reference re Powers of the City of
Ottawa and the Village of Rockcliffe Park to Tax Foreign Legations, etc., related to property of a
different nature from that with which this case is concerned, in my opinion the
principles applied by Sir Lyman Duff C.J. and by Rinfret J. (as he then was)
and Taschereau J. (the majority of the Court) are applicable.
The history of the immunity of the sovereign and his
property from suit or seizure within his own dominions is traced from the
earliest times in England in the judgment
[Page 279]
of Gray J. in Briggs et al. v.
The Light-Boats
commencing at p. 166. It is only by permission of the sovereign that such
actions or proceedings against his person or his property may be taken and this
principle is applicable in the United States, as is shown by the judgment of
Marshall C.J. in The Schooner Exchange v. M'Faddon et
al.
In The Parlement Belge, where reference is made to the judgments in the Courts of
the United States above mentioned, Brett L.J., delivering the judgment of the
Court, quotes from Blackstone's Commentaries, Book 1, c. 7, a passage
reading (p. 206) :
Our king owes no kind of subjection to any other potentate
on earth. Hence it is that no suit or action can be brought against the king,
even in civil maters, because no Court can have jurisdiction over him. For all
jurisdiction implies superiority of power; authority to try would be vain and
idle without an authority to redress, and the sentence of a Court would be
contemptible unless the Court had power to command the execution of it, but who
shall command the king?
The immunity of the property of a foreign sovereign
from seizure in a friendly country proceeds upon the ground that the exercise
of jurisdiction over him or his property would be incompatible with his regal
dignity, that is to say, with his absolute independence of every superior
authority.
In the Schooner Exchange case, the property declared
by the judgment of the Supreme Court of the United States to be exempt from
seizure in that country was a war vessel of France. In The Parlement Belge, immunity from seizure was claimed for an
unarmed packet belonging to the King of the Belgians which was in the hands of
officers commissioned by him and employed in carrying mails. The Court of
Appeal held that the ship was not liable to be seized in a suit in rem
to recover redress for a collision and that the right of immunity was not lost
by reason of the fact that it also carried merchandise and passengers for hire.
The first clause of the headnote to the report accurately summarizes the
grounds for the decision:
As a consequence of the absolute independence of every
sovereign authority and of the international comity which induces every
sovereign state to respect the independence of every other sovereign state,
each
[Page 280]
state declines to exercise by means of any of its Courts any
of its. territorial jurisdiction over the person of any sovereign or
ambassador, or over the public property of any state which is destined to its
public use, or over the property of any ambassador, though such sovereign,
ambassador, or property be within its territory.
The first of the questions to be decided was, as stated
by Brett L.J., whether the Admiralty Division had jurisdiction to entertain an
action in rem against a ship the property of a foreign sovereign,
a public vessel of his state, in the sense of its being used
for purposes treated by such sovereign and his advisers as public national
services, it being admitted that such ship, though commissioned, is not an
armed ship of war or employed as a part of the military force of his country.
In the case of the Light-Boats, supra, where the contest
was between a litigant relying upon a right of lien claimed under a statute of
the State of Massachusetts and the United States Government, and where it was
held that the lien could not attach, Gray J. said' (p. 165):
The immunity from such interference arises, not. because
they are-instruments of war, but because they are instruments of sovereignty;
and does not depend on the extent or manner of their actual use at any
particular moment, but on the purpose to which they are devoted.
In the Schooner Exchange case, supra, Chief
Justice Marshall said in part (pp. 136-7):
The world being composed of distinct sovereignties,
possessing equal rights and equal independence, whose mutual benefit is
promoted by intercourse with each other, and by an interchange of those good
offices which humanity dictates and its wants require, all soverigns have
consented to a relaxation in practice, in cases under certain peculiar
circumstances, of that absolute and complete jurisdiction within their
respective territories-which sovereignty confers …
This perfect equality and absolute independence of
sovereigns, and this-common interest impelling them to mutual intercourse, and
an interchange of good offices with each other, have given rise to a class of
cases in which every sovereign is understood to waive the exercise of a part of
that complete exclusive territorial jurisdiction, which has been stated to be
the attribute of every nation.
This statement of the law was quoted with approval and
adopted in the judgment of the Judicial Committee delivered by Lord Atkin in Chung
Chi Cheung v. The King.
In The Tervaete, a
claim for a. maritime lien was asserted against a vessel which at the time of a
collision was the property of the Belgian Government and employed on government
service but which subsequently had been
[Page 281]
transferred to a private owner. Dealing with a contention
that, while the authorities were to the effect that the Courts were without
jurisdiction to entertain an action against a sovereign state, they did not
apply when the claim was for a lien upon the ship, Bankes L.J. said (pp.
268-9):
It seems to me impossible consistently with the law as there
expressed [in The Parlement Belge, supra]
to hold that it is permissible to recognize a maritime lien as attaching to the
property of a sovereign or a sovereign state. I see no distinction in principle
between the act of the individual issuing the writ and the act of the law
attaching the lien. Each equally offends the rule affording immunity.
There is no evidence in the present matter as to whether the
United States granted the immunity here claimed to Canada or to other nations,
but this was clearly unnecessary. The question is what is the law of nations by
which civilized nations in general are bound, not how two individual countries
may treat one another: United States of America et
al. v. Dollfus Mieg et Cie S. A. et al.
The property assessed in the present matter was the property
of the United States destined for use for works which were for the defence of
that country, and thus "destined to its public use", as that
expression was used in the Light-Ships case, The Parlement Belge, and The
Tervaete. The Government of that country, with the approval and consent of
the Government of Canada, brought the property in question into Canadian
territory and was thus entitled to rely upon the fact that, in accordance with
the principles of international comity, it would not be subject to taxation,
seizure or sale at the instance of municipal or other bodies empowered to
impose taxes for their own purposes.
The true view of the matter is not that the Rates and
Taxes Act, in so far as it purported to authorize the imposition of
municipal taxes generally upon real or personal property within the limits of
the municipalities and to give a right of seizure and sale and a lien to
enforce payment, was ultra vires, but rather that it should be construed
as inapplicable to property brought into the country with the approval and
consent of the Government of Canada exercising the powers vested in it by head
7 of s. 91 of the British North America Act for purposes such as
[Page 282]
are above described. As pointed out by Sir Lyman Duff in the
Reference re Foreign Legations, supra, at p. 231, it was there
unnecessary to consider the respective jurisdictions of the Parliament of
Canada and the local Legislatures in respect of real estate owned or occupied
by a foreign state, since the general language of the enactment imposing the
taxation must be construed as saving the privileges of foreign states.
In my opinion, neither the leasehold interests, the
buildings nor the personal property in question were liable to taxation by the
appellant municipality and, unless the respondent Fraser-Brace has disentitled
itself by its conduct to recover the amounts paid, there should be judgment for
their recovery.
In the case of the sum of $14,273.35 paid on September 29,
1953, the right of recovery appears to me to be clear. The amount was paid
following the threats made in the letters of September 1 and September 25, 1953,
that unless the amounts were paid a levy would be made: Valpy et al. v. Manley, per
Tindall C.J. at p. 602; Maskell v. Horner, per Lord Reading C.J. at p. 118.
As to the earlier payments made in the year 1952, while
there is no direct evidence that the payment of $3,113.62 made in November 1952
was made under protest, as was done in respect of the payment of $437 made
earlier, it is clear from the evidence that the contractors insisted from the
outset that, as the property was that of the United States, it was immune from
taxation and that the municipal authorities insisted the contrary, and it
should be inferred, in my opinion, that both amounts were paid under protest
and to avoid proceedings being taken to recover the amounts. In these
circumstances, the moneys are, in my opinion, recoverable: Watt v. The City
of London.
I would dismiss the appeal and allow the cross-appeal and
direct that judgment be entered for the respondent Fraser-Brace for the amount
of $17,823.79 and declare that the assessments made against the respondent
Drake-
[Page 283]
Merritt for the years 1954 and 1955 were invalid. The
respondents should have their costs throughout.
Fauteux J.:—I
agree that the appeal should be dismissed with costs and the cross-appeal
allowed with costs.
Abbott J.:—I
have had the advantage of considering the reasons of my brother Rand and I am
in agreement with the views which he has expressed as to the principles upon
which are based the immunities of a foreign state, its diplomatic agents and
its property. I desire to add only the following observations.
As Duff C.J. pointed out in the Legations Reference, the principles governing the
immunities of a foreign state, its diplomatic agents and its property do not
limit the legislative authority of the legislature having jurisdiction in the
particular matter affected by any immunity claimed or alleged. After stating
that in the view which he took it was not necessary to consider the respective
jurisdictions of Parliament and the local Legislatures in the matter of
taxation of property of a foreign state in Canada, the learned Chief Justice
then made the following statement, with which I am in agreement:
The general language of the enactments imposing the taxation
in question must be construed as saving to the privileges of foreign states.
The general principle is put with great clearness and force in the judgment of
Marshall C.J. [in The Schooner Exchange v. M'Faddon et al. (1812),
11 U.S. (7 Cranch) 116], from which I have quoted so freely. These are his
words:
"Without doubt, the
sovereign of the place is capable of destroying this implication. He may claim
and exercise jurisdiction either by employing force, or by subjecting such
vessels to the ordinary tribunals … Those general statutory provisions … which
are descriptive of the ordinary jurisdiction … ought not, in the opinion of
this Court, to be so construed as to give them jurisdiction in a case, in which
the sovereign power has impliedly consented to waive its jurisdiction."
(The italics are mine.)
As my brother Rand has pointed out, there, as here, Duff
C.J. was dealing with taxation under general language in which the
interpretation of the statute only was in question. There is nothing in the
statutes of New Brunswick authorizing the imposition of taxes by municipalities
in that Province upon real and personal property, which can be construed as
"destroying this
[Page 284]
implication" that in acquiring
property in Canada for public purposes a foreign state does so upon the
condition that such property is exempt from local taxation.
For the reasons given by my brother Rand I would therefore
dismiss the appeal with costs and allow the cross-appeal with costs.
Appeal dismissed with costs and cross-appeal
allowed with costs.
Solicitors for the plaintiffs, respondents and
cross-appellants: Gilbert, McGloan & Gillis, Saint John.
Solicitors for the defendants, appellants:
McKelvey, Macaulay & Machum, Saint John.
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