Macfarlane,
J
A:—The
respondent
Trustee
in
Bankruptcy
partially
disallowed
a
proof
of
claim
made
on
behalf
of
Her
Majesty
the
Queen
in
Right
of
Canada.
The
appellant
then
appealed
to
the
Supreme
Court
of
British
Columbia,
pursuant
to
subsection
106(4)
of
the
Bankruptcy
Act,
RSC
1970,
c
B-3.
By
consent
and
with
leave
of
that
Court,
an
issue
was
tried
on
facts
agreed
between
the
appellant
and
the
respondent
upon
a
special
case
for
the
opinion
of
that
Court
pursuant
to
Rule
33
of
the
Rules
of
Court.
This
is
an
appeal
from
the
order
of
the
Honourable
Mr
Justice
Macdonell,
pronounced
February
11,
1982,
whereby
His
Lordship
determined
the
special
case
in
favour
of
the
respondent
and
dismissed
the
appellant’s
appeal.
The
facts
are
that:
Four
vessels
were
purchased
by
Sealand
of
the
Pacific
Ltd
from
Philbrook’s
Shipyard
Ltd,
each
of
which
carries
in
excess
of
twelve
passengers.
Philbrook’s
took
the
position
that
sale
of
these
vessels
was
exempt
from
consumption
or
sales
tax
under
the
Excise
Tax
Act,
RSC
1970
c
E-13
(as
amended
effective
May
26,
1976).
If
the
sale
of
the
vessels
was
not
exempt
then
Her
Majesty
the
Queen
is
a
creditor
of
the
estate
in
the
amount
of
$50,719.31
for
tax
and
a
further
amount
of
$2,552.51
for
interest
to
the
date
of
bankruptcy.
The
parties
agreed
for
the
purposes
of
arguing
the
special
case
that
Sealand,
as
purchaser,
bought
the
vessels
for
use
in
carrying
paying
passengers
(and
for
the
passengers
being
carried
to
enjoy
activities
of
a
sporting
or
recreational
nature)
as
follows:
(a)
To
transport
passengers
for
the
purposes
of
sightseeing
and
nature
watching
from
and
to
the
Canadian
Princess,
which
is
a
floating
hotel
and
restaurant
owned
by
Oak
Bay
Marina
Ltd
and
is
located
at
Ucluelet,
British
Columbia.
(b)
To
transport
scuba
diving
parties
between
the
Canadian
Princess
and
various
diving
sites
at
which
the
vessels
served
as
divers’
tenders.
(c)
to
transport
fishing
parties
between
the
Canadian
Princess
and
offshore
locations
suitable
for
fishing
at
which
the
vessels
served
as
fishing
platforms.
Upon
putting
each
of
the
vessels
to
that
use
and
prior
to
being
lawfully
entitled
to
carry
paying
passengers
on
the
vessel,
Sealand
was
required
to
and
did
apply
for
and
obtain
a
Home
Trade
II
Licence
and
a
Coasting
Licence.
The
scheme
of
the
Excise
Tax
Act
is
to
impose
a
consumption
or
sales
tax
upon
“manuacturers
and
producers”
(which
expression
is
widely
defined
by
the
Act)
and
importers
of
goods
into
Canada.
The
relevant
portion
of
the
charging
section
of
the
Act
reads
as
follows:
27.
(1)
There
shall
be
imposed,
levied
and
collected
a
consumption
or
sales
tax
of
nine
percent
on
the
sale
price
of
all
goods.
(a)
produced
or
manufactured
in
Canada
(i)
payable,
in
any
case
..
.
by
the
producer
or
manufacturer
at
the
time
when
the
goods
are
delivered
to
the
purchaser
or
at
the
time
when
the
property
in
the
goods
passes,
whichever
is
the
earlier.
..
The
Act
further
provides
for
an
exemption
from
such
taxes
as
follows:
29.
(1)
The
tax
imposed
by
section
27
does
not
apply
to
the
sale
or
importation
of
articles
mentioned
in
Schedule
III.
The
exemption
relied
upon
by
the
respondent
is
provided
for
as
transportation
equipment
and
is
found
in
section
8.1
of
Part
XVII
of
Schedule
III
of
the
Act
(hereinafter
referred
to
as
section
8.1)
the
relevant
part
of
which
reads
as
follows:
8.1.
Ships
and
other
marine
vessels,
purchased
or
imported
for
use
exclusively
in
such
marine
activities,
other
than
sport
or
recreation,
as
the
Governor
in
council
may
by
regulation
prescribe
.
.
.
A
Regulation,
being
Ships
and
other
Marine
Vessels
Exemption
Regulations
was
prescribed
and
it
is
common
ground
in
this
appeal
that
the
use
of
the
vessels
in
question
conforms
to
the
use
set
out
in
section
2(a)
of
those
Regulations
provided
that
the
use
is
not
sport
or
recreation
within
the
meaning
of
the
Act.
Section
2(a)
of
the
Regulations
read
as
follows:
2.
The
following
are
hereby
prescribed
to
be
marine
activities
for
the
purposes
of
section
8.1
of
Part
XVII
of
Schedule
III
of
the
Excise
Tax
Act:
(a)
public
transportation
by
water
provided
by
marine
vessels
designed
and
permanently
equipped
to
carry
12
or
more
passengers.
The
judge
reached
this
conclusion:
It
is
my
view,
on
examining
the
various
sections
of
the
Act
and
regulations,
and
in
particular
s
8.1
of
the
regulations
that
what
is
envisaged
is
that
those
operating
marine
activities
as
a
commercial
enterprise
are
exempt
from
tax
and
those
who
acquire
a
motor
vessel
for
their
own
recreation
or
sport
are
not
exempt.
I
hold,
therefore,
that
the
vessels
are
exempt.
The
appeal
from
the
disallowance
by
the
Trustee
is
therefore
dismissed
with
costs.
The
judge
by
inadvertence
referred
to
section
8.1
as
being
contained
in
the
regulations.
It
is
common
ground,
as
I
have
said,
that
that
section
is
contained
in
Schedule
III
of
the
Excise
Tax
Act.
I
do
not
think
that
the
judge’s
slip
in
that
respect
had
any
bearing
on
the
result
in
the
case.
The
respondent
does
not
rely,
however,
upon
the
distinction
made
by
the
judge
between
commercial
and
non-commercial
use.
Rather,
he
seeks
to
put
his
argument
on
another
basis.
On
the
appeal,
counsel
for
both
the
appellant
and
the
respondent
have
agreed
that
the
vessels
in
question
were
purchased
for
use
exclusively
in
marine
activities
as
prescribed
by
the
regulations.
In
short,
they
were
purchased
for
use
in
transporting
twelve
or
more
passengers.
The
appellant
contends,
however,
that
the
use
to
which
the
vessels
were
to
be
put
was
for
sport
or
recreation
because
they
were
to
be
used
as
a
platform
for
scuba
diving
or
fishing
parties.
In
short,
it
is
the
contention
of
counsel
for
the
appellant
that
the
vessels
were
to
be
used
for
sport
or
recreation.
It
is
contended
that
there
would
be
no
exemption
provided
by
section
8.1
if
that
were
the
case.
The
respondent
contends
that
it
is
the
use
to
which
the
purchaser
is
going
to
put
the
vessel
that
is
decisive
of
whether
there
is
an
exemption
under
section
8.1.
The
use
to
which
the
purchaser
was
going
to
put
these
vessels
was
for
transportation
of
passengers
for
hire.
The
fact
that
the
passengers
on
the
vessel
used
it
at
times
for
recreation
or
sport
does
not
mean
that
the
exemption
is
loss.
If
that
were
so
then
a
purchaser
of
a
vessel
to
be
used
in
the
business
of
sightseeing
would
not
be
entitled
to
an
exemption,
even
though
the
vessels
had
been
purchased
for
use
in
the
business
of
a
sightseeing
operator.
Clearly,
the
language
of
the
Act
and
of
section
8.1
in
particular,
does
not
extend
that
far.
If
the
legislature
intended
that
type
of
result,
then
it
would
have
said
so
and
could
have
said
so
clearly.
It
has
not
done
so.
Any
ambiguity
on
the
question
must
be
resolved
in
favour
of
the
taxpayer.
I
would
dismiss
the
appeal.
Email this Content