Supreme Court of Canada
The King v. Dominion Bridge Co. Ltd., [1940] S.C.R. 487
Date: 1940-04-23
His Majesty the King (Respondent) Appellant;
and
Dominion Bridge Company Limited (Suppliant) Respondent.
1940: Feb. 29; Apr. 23.
Present: Duff C.J. and Rinfret, Davis, Hudson and Taschereau JJ.
ON APPEAL FROM THE EXCHEQUER COURT OF CANADA
Revenue—Sales tax—Petition of right to recover money paid to the Crown for sales tax—Goods sold and delivered—Special War Revenue Act, R.S.C., 1927, c. 179, secs. 86, 87, 87 (d), 105.
By certain contracts entered into between the suppliant and His Majesty the King, represented by the Minister of Public Works for the province of Quebec, the suppliant undertook to erect the structural steel superstructure of three bridges in that province, in consideration of the sums set out in each contract. The suppliant erected the three bridges and was paid according to the contracts. In respect of the materials incorporated in the bridges, suppliant was assessed for sales tax, alleged due under the terms of the Special War Revenue Act, R.S.C., 1927, c. 17 and amendments. It paid under protest a proportion of the amounts so assessed to the Commissioner of Excise. The suppliant then claimed by way of a petition of right before the Exchequer Court of Canada a return of the moneys so paid on the grounds that no tax was payable by it in respect of the materials supplied in virtue of the contracts or, alternatively, that, if the materials were taxable, suppliant was entitled to a refund by reason of the fact that the materials were sold, if sold at all, to His Majesty the King in the right of the province of Quebec.
Held, that the above transaction between the suppliant and the Crown in right of the province of Quebec must, by force of section 87 (d)
[Page 488]
of the Special War Revenue Act, be deemed to be a sale and that the suppliant was rightly chargeable accordingly for a sales tax. (The King v. Fraser Companies, [1931] S.C.R. 490 applied); but
Held, also, that the suppliant was entitled to a refund of the money paid to the Crown appellant, pursuant to s. 105 of The Special War Revenue Act. The " transaction" in this case involved translation of the property in the goods to the provincial government, and, taking the provisions of sections 86 and 87 into account as a whole, such transaction must be deemed to fall within section 105. "Goods" are " sold " within the meaning of that section when there is a sale that is such solely by force of the statutory declaration that at shall be deemed to be a sale for the purposes of the statute. Section 105 is part of the statute and transactions within the declaration are, therefore, deemed to be sales for the purposes of the section.
Judgment of the Exchequer Court of Canada ([1939] Ex. C.R. 235) affirmed.
APPEAL from the judgment of the Exchequer Court of Canada, Angers J., holding that the suppliant (the present respondent) was entitled to a refund of a sum of $1,503 paid by it to the Crown (now appellant) on account of sales tax assessed against it under the Special War Revenue Act.
The material facts of the case and the questions at issue are stated in the above head-note and in the judgment now reported.
F. P. Varcoe K.C. for the appellant.
L. A. Forsyth K.C. and J. de M. Marler for the respondents.
The judgment of the Court was delivered by
The Chief Justice.—The contract in this case was a contract for building the superstructure of a bridge and the erection of it and the securing of it; and the contract price was an entire price for the entire job. It was not, in the ordinary sense of the words, a contract, I think, for the sale of the superstructure or for the sale of the members of the superstructure. The production, however, of the members of the superstructure for the purpose of fulfilling the contract would bring the case within section 87 (d) (Special War Revenue Act, R.S.C. 1927, c. 179 and amendments).
In The King v. Fraser Companies, four judges of this Court (Newcombe, Rinfret, Lamont and Smith JJ.) expressed the view touching the application of section 87 (d)
[Page 489]
to the facts of that case which, I think, applies here. In the judgment of those learned judges, delivered by Smith J., it is said (p. 493):
* * * 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 the 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.
This passage in the reasons of my brother Smith was not part of the ratio decidendi but it was the considered opinion of the four judges who constituted the majority of the Court. They said that, if a building contractor is also a manufacturer of building material, lumber or brick for example, and uses, for the purpose of executing a building contract, brick or lumber produced by himself, that is a case within section 87 (d) and the transaction is, by force of that section, deemed to be a sale and he is chargeable accordingly. In the present case the members of the bridge produced were produced specially for the purposes of the cor tract.
I have fully considered. the able argument addressed to us by Mr, Forsyth and my conclusion is that, when sections 86 and 87 are read together, this transaction falls within the category of cases described by section 87 (d), and that the view expressed by my brother Smith in Fraser's case is the view which ought to govern us in the disposition of this appeal. I think, in this respect, the practice of the Department is right.
Then comes the question, the real question I think on the appeal, whether in such circumstances section 105 applies. Section 105 is in these words:
105. A refund of 'the amount of taxes paid under Parts X, XI, XII and XIII of this Act may be granted to a manufacturer, producer, wholesaler, jobber or other dealer on goods sold to His Majesty in the right of the Government of any province of Canada, if the said goods are purchased by His Majesty, for any purpose other than purposes of resale or of any railway, commission, board or public utility which is operated by or under the authority of the Legislature or the Lieutenant-Governor in Council of the province.
[Page 490]
The question to be decided is not without difficulty. I have come to the conclusion that " goods" are " sold" within the meaning of this section when there is a sale that is such solely by force of the statutory declaration that it shall be deemed to be a sale for the purposes of the statute. Section 105 is part of the statute and transactions within the declaration are, therefore, deemed to be sales for the purposes of the section. A transaction within section 87 (2), for example, would, if the other conditions were fulfilled, be a sale within section 105.
Mr. Varcoe's argument is that here, while the transaction (the production of the goods in question for the use of the producer in fulfilling this contract) is deemed to be a sale by force of the statute, the goods produced are not " sold " to the provincial government. This argument has force and I have given it attentive consideration. The " use " of these goods for the purposes of the respondents in fulfilling the contract involves a translation of the property in them to the provincial government by force of the contract under which the entire consideration for the whole work is payable by the provincial government to the respondents.
Our duty, as Lord Hailsham said in Dominion Press v. Minister of Customs, is to ascertain whether the goods are " sold " to the provincial government within the meaning of those words as employed in the statute. I think, in view of the fact mentioned, that the " transaction " involves translation of the property in the goods to the provincial government, the proper view, when the provisions of sections 86 and 87 are taken into account as a whole, is that it falls within section 105.
The appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitor for the appellant: W. Stuart Edwards.
Solicitors for the respondent: Montgomery, McMichael, Common & Howard.
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