Stone,
J.:—This
is
an
appeal
from
the
judgment
of
Reed,
J.
in
the
Trial
Division
rendered
February
13,
1985
([1985]
1
C.T.C.
192;
85
D.T.C.
5144)
whereby
a
claim
in
respect
of
the
years
1972
through
1977
that
a
particular
capital
property
of
the
appellant
should
be
treated
for
purposes
of
capital
cost
allowance
as
falling
under
Class
8
of
Schedule
B
to
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
as
amended,
rather
than
under
Class
2
of
that
Schedule,
was
rejected.
Class
2
of
Schedule
B
allows
for
capital
cost
allowance
at
a
6
per
cent
rate.
It
reads:
Property
that
is
(a)
electrical
generating
equipment
(except
as
specified
elsewhere
in
this
Schedule),
(b)
a
pipeline,
other
than
gas
or
oil
well
equipment,
unless,
in
the
case
of
a
pipeline
for
oil
or
natural
gas,
the
Minister,
in
consultation
with
the
Minister
of
Energy,
Mines
and
Resources,
is
or
has
been
satisfied
that
the
main
source
of
supply
for
the
pipeline
is
or
was
likely
to
be
exhausted
within
15
years
from
the
date
on
which
operation
of
the
pipeline
commenced,
(c)
the
generating
or
distributing
equipment
and
plant
(including
structures)
of
a
producer
or
distributor
of
electrical
energy,
except
a
property
included
in
class
10,
13,
14
or
28,
(d)
manufacturing
and
distributing
equipment
and
plant
(including
structures)
acquired
primarily
for
the
production
or
distribution
of
gas,
except
(i)
a
property
included
in
class
10,
13
or
14,
(ii)
a
property
acquired
for
the
purpose
of
producing
or
distributing
gas
that
is
normally
distributed
in
portable
containers,
or
(iii)
a
property
acquired
for
the
purpose
of
processing
natural
gas
before
delivery
to
a
distribution
system,
(e)
the
distributing
equipment
and
general
plant
(including
structures)
of
a
distributor
of
water,
except
a
property
included
in
class
10,
13
or
14,
or
(f)
the
production
and
distributing
equipment
and
general
plant
(including
structures)
of
a
distributor
of
heat,
except
a
property
included
in
class
10,
13
or
14.
Class
8,
on
the
other
hand,
provides
a
20
per
cent
rate
of
capital
cost
allowance.
It
reads:
Property
not
included
in
class
2,
7,
9
or
30
that
is
(a)
a
structure
that
is
manufacturing
or
processing
machinery
or
equipment,
(b)
tangible
property
attached
to
a
building
and
acquired
solely
for
the
purpose
of
(i)
servicing,
supporting,
or
providing
access
to
or
egress
from,
machinery
or
equipment,
(ii)
manufacturing
or
processing,
or
(iii)
any
combination
of
the
functions
described
in
subparagraph
(i)
and
(ii),
(c)
a
building
that
is
a
kiln,
tank
or
vat,
acquired
for
the
purpose
of
manufacturing
or
processing,
(ca)
a
building
or
other
structure
acquired
after
February
19,
1973
that
is
designed
for
the
purpose
of
preserving
ensilage
on
a
farm,
(cb)
a
building
or
other
structure
acquired
after
February
19,
1973
that
is
(i)
designed
to
store
fresh
fruits
or
fresh
vegetables
at
a
controlled
level
of
temperature
and
humidity,
and
(ii)
to
be
used
principally
for
the
purpose
of
storing
fresh
fruits
or
fresh
vegetables
by
or
for
the
person
or
persons
by
whom
they
were
grown,
(cc)
electrical
generating
equipment
acquired
after
May
25,
1976,
if
(i)
the
taxpayer
is
not
a
person
whose
business
is
the
production
for
the
use
of
or
distribution
to
others
of
electrical
energy,
(ii)
the
equipment
is
auxiliary
to
the
taxpayer's
main
power
supply,
and
(iii)
the
equipment
is
not
used
regularly
as
a
source
of
supply;
(cd)
electrical
generating
equipment,
acquired
after
May
25,
1976,
that
has
a
maximum
load
capacity
of
not
more
than
15
kilowatts;
(ce)
portable
electrical
generating
equipment
acquired
after
May
25,
1976;
(d)
a
tangible
capital
asset
that
is
not
included
in
another
class
in
this
Schedule
except
(i)
land
or
any
part
thereof
or
any
interest
therein,
(ii)
an
animal,
(iii)
a
tree,
shrub,
herb
or
similar
growing
thing,
(iv)
a
gas
well
(other
than
a
gas
well
that
is
part
of
the
equipment
of
a
farm
and
from
which
the
gas
produced
is
not
sold),
(v)
a
mine,
(vi)
an
oil
well,
(vii)
radium,
(viii)
a
right
of
way,
(ix)
a
timber
limit,
(x)
a
tramway
track,
or
(xi)
property
of
a
separate
class
prescribed
by
subsection
1101(2a);
or
(e)
property
not
included
in
any
other
class
that
is
radiocommunication
equipment
acquired
after
May
25,
1976.
The
capital
property
here
in
issue
consists
of
a
liquefied
natural
gas
plant
("LNG
plant")
located
on
a
natural
gas
transmission
line
in
the
Province
of
Ontario
known
as
the
"Sudbury
Lateral".
That
line
draws
natural
gas
from
the
TransCanada
pipeline
near
North
Bay
and
runs
westward
past
Sudbury
to
Espanola.
The
plant
receives
natural
gas
from
the
Sudbury
Lateral
during
periods
of
low
consumer
demand,
removes
impurities,
converts
it
to
liquefied
form,
stores
it
and,
during
periods
of
high
demand,
reconverts
it
to
gaseous
form
and
returns
it
to
the
line
for
on-carriage.
According
to
the
appellant,
the
LNG
plant
is
used
in
the
transmission
of
natural
gas
rather
than
in
its
distribution
which,
it
says,
takes
place
only
after
the
product
enters
a
distribution
system
by
which
it
is
delivered
to
consumers.
The
learned
trial
judge
refers
to
this
distinction
made
in
the
industry
and
relied
upon
by
the
appellant
between
a
distribution
system
and
a
transmission
system.
At
pages
3
and
4
of
her
reasons
for
judgment
(pages
298-299
of
the
Appeal
Book,
Vol.
2;
C.T.C.
194-95)
she
said:
There
is
no
doubt
that
this
plant
takes
gas
out
of,
and
in
winter
months
feeds
the
gas
back
into,
what
the
natural
gas
industry
calls
a
transmission
system,
not
a
distribution
system.
There
is
ample
evidence
that
the
industry
draws
a
very
specific
and
well
defined
line
between
a
natural
gas
transmission
system
and
a
natural
gas
distribution
system.
A
natural
gas
transmission
system
carries
large
quantities
of
gas
over
long
distances
at
high
pressures
(eg:
500
p.s.i.g.
to
1,000
p.s.i.g.);
a
transmission
pipeline
generally
has
a
diameter
of
10
inches
or
more
and
is
made
of
a
material
(metal)
able
to
withstand
high
stress
levels;
the
public
is
not
directly
served
from
a
transmission
line.
A
natural
gas
distribution
system
on
the
other
hand
carries
gas
at
relatively
low
pressures
(eg:
30
p.s.i.g.
to
125
p.s.i.g.)
over
shorter
distances;
it
comprises
a
network
of
small
pipes
sometimes
made
of
a
non-corrosive
material
such
as
plastic;
and
it
serves
the
public
directly.
The
end
of
a
transmission
system
and
the
beginning
of
a
distribution
system
is
clearly
ascertainable
because
at
that
point
the
gas
is
piped
through
a
"gate
station"
(a
regulating
station)
to
reduce
the
transmission
pressure
to
distribution
pressure
levels.
After
further
consideration,
the
learned
trial
judge
expressed
the
view
that
the
issue
had
to
be
determined
in
the
context
of
the
language
used
and,
on
that
basis,
it
was
her
opinion
that
the
word
“distribution”
in
the
context
of
Class
2(d)
embraces
the
LNG
plant.
She
rejected
the
argument
that
this
word
was
employed
with
the
specific
usage
of
the
natural
gas
industry
in
mind,
writing
at
page
9
of
her
reasons
for
judgment
(Appeal
Book,
Vol.
2
at
pages
303-304;
C.T.C.
197):
It
is
clear
that
class
2
of
schedule
B
as
a
whole
does
not
just
relate
to
the
natural
gas
industry.
It
relates
to
the
production
and
distribution
of
electricity,
heat
and
water
as
well
as
to
the
gas
industry
generally,
not
merely
that
involved
with
the
production
and
distribution
of
natural
gas.
Sub-paragraph
(b)
is
even
more
general,
referring
to
pipelines
without
reference
to
the
commodity
they
carry.
Accordingly,
it
is
difficult
to
conclude
that
the
word
“distribution”
in
sub-paragraph
(d)
was
chosen
with
the
specific
usage
of
the
natural
gas
industry
in
mind.
Rather,
it
seems
clear
that
the
sub-paragraphs
of
class
2
were
intended
to
encompass
the
whole
process
from
the
production
(or
manufacture)
of
the
gas
(electrical
energy,
water
or
heat)
to
its
ultimate
distribution
to
customers
(with
some
specific
exceptions).
I
think
it
would
do
violence
to
the
word
distribution
as
used
in
class
2,
if
one
interpreted
it
as
encompassing
only
the
end
use
distribution
system,
as
contended
for
by
the
Plaintiff.
Such
interpretation
would
bring
within
the
scope
of
subparagraph
(d)
gas
production
facilities
and
end
use
distribution
facilities
but
not
the
intermediate
transmission
facilities.
Such
interpretation
would
render
subparagraph
(ii)
meaningless
or
would
force
a
reader
to
conclude
that
“distribute”
in
that
section
was
being
used
in
a
sense
different
from
the
way
in
which
it
was
used
elsewhere
in
paragraph
(d).
Sub-paragraph
(ii)
refers
to
the
distribution
of
gas
in
portable
containers
—
a
process
radically
different
from
the
restricted
meaning
the
Plaintiff
wishes
to
give
to
the
word
"distribute".
In
my
view,
“distribution”
in
sub-paragraph
(d)
is
used
in
a
broad
and
general
way
and
it
was
intended
to
encompass
the
transmission
part
of
the
Plaintiffs
overall
distribution
system.
Thus,
the
LNG
plant
falls
within
class
2(d)
as
“plant
acquired
primarily
for
the
.
.
.
distribution
of
gas".
It
is
true
that
the
plant
is
a
storage
facility
but
from
the
evidence
led
by
the
Plaintiff
it
is
clear
that
the
facility
is
an
integral
part
of
the
Plaintiff's
transmission
system.
One
witness
described
it
as
an
integral
part
of
moving
large
quantities
of
gas
from
North
Bay
to
Sudbury.
Thus,
the
facility
is
a
plant
acquired
primarily
for
the
distribution
of
gas.
She
likewise
rejected
an
argument
that
the
LNG
plant
should
be
classified
under
Class
2(d)(iii).
The
simple
position
of
the
appellant
is
that
the
learned
trial
judge
erred
in
classifying
the
LNG
plant
under
Class
2(d)
of
Schedule
B
rather
than
under
Class
8(d).
The
principal
arguments
here
are
that
(a)
the
LNG
plant
cannot
properly
be
placed
under
Class
2(d)
because
it
was
acquired
solely
for
storing
gas
rather
than
for
either
its
"production"
or
"distribution";
(b)
the
plain
and
ordinary
meaning
of
the
terms
“distributing
equipment"
and
“distribution
of
gas"
in
Class
2(d)
do
not
embrace
a
storage
facility;
(c)
the
plain
and
ordinary
meaning
of
these
terms
excludes
a
facility
like
the
LNG
plant
which
was
found
by
the
trial
judge
to
be
part
of
the
appellant's
transmission
system;
(d)
these
terms
are
required
by
the
context
in
which
they
appear
to
be
given
the
meaning
they
have
in
the
industry
and,
accordingly,
that
the
LNG
plant
cannot
be
classified
as
"distributing
equipment"
for
the
"distribution
of
gas”.
It
is
evident
from
a
reading
of
the
reasons
for
judgment
of
the
trial
judge
that
these
self-same
arguments,
tailored
to
suit
that
stage
of
the
litigation,
were
advanced
and
rejected.
I
agree
with
counsel
that
the
basic
question
involves
the
proper
construction
of
Class
2(d)
and,
in
particular,
the
terms
“distributing
equipment
and
plant"
and
“distribution
of
gas"
in
the
context
in
which
they
appear
in
that
Class
and
within
the
Schedule
read
as
a
whole.
I
am
unable
to
accept
the
appellant's
contentions.
It
is
evident
that
Class
2(d)
is
not
limited
in
its
application
to
the
production
and
distribution
of
natural
gas
alone.
In
my
view,
subject
to
the
exceptions
specified,
the
distinction
it
draws
as
applied
to
this
case
is
between
property
of
the
appellant
that
is
manufacturing
equipment
and
plant
acquired
primarily
for
the
production
of
gas
and
property
that
is
distributing
equipment
and
plant
acquired
primarily
for
the
distribution
of
gas
subsequent
to
its
production.
The
appellant
relies
upon
the
decision
of
the
Trial
Division
in
Nova,
an
Alberta
Corporation
v.
The
Queen,
[1987]
1
C.T.C.
265;
87
D.T.C.
5146,
which
is
now
pending
on
appeal
to
this
Court.
The
opinion
of
Dubé,
J.
at
page
272
(D.T.C.
5152)
is
that
the
words
“manufacturing”
and
"distributing"
in
Class
2(d)
do
not
include
"transmitting"
or
"transporting"
and
that
they
refer
to
"a
totally
different
operation".
I
must
refrain
from
commenting
on
the
correctness
of
that
view
which
was
expressed
in
light
of
the
circumstances
there
before
the
Court,
as
the
appeal
has
yet
to
be
heard.
At
this
point
I
wish
merely
to
observe
that
the
conclusion
arrived
at
in
that
case
derives
from
a
somewhat
different
factual
situation
to
that
which
obtains
in
the
present
case.
I
agree
with
the
learned
trial
judge
that
“distributing”
and
“distribution”
are
used
in
a
broad
and
general
sense
and,
for
the
reasons
she
has
given
on
the
point,
that
the
LNG
plant
was
acquired
primarily
for
the
“distribution
of
gas".
I
find
nothing
in
the
context
that
requires
us
to
give
the
terms
"distributing
equipment"
and
"distribution
of
gas"
a
more
restrictive
construction
corresponding
to
the
distinction
drawn
in
the
natural
gas
industry
between
a
transmission
and
a
distribution
system.
I
would
dismiss
this
appeal
with
costs.
Appeal
dismissed.
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