Triple “F” Holdings LTD v. Minister of National Revenue, [1981] CTC 2084, 81 DTC 135

John B Goetz:—This is an appeal by the appellant with respect to its tax assessment for the 1975 taxation year.

issue

The matter to be decided in this appeal is the interpretation of the words “galvanized iron” or “corrugated iron” as defined by the Income Tax Regulations, and in particular Regulation 1100, Schedule B, Class 6. The appellant contends that “galvanized iron” and “corrugated iron” are anomalous terms and meaningless unless interpreted as being corrugated steel or galvanized steel.

Facts

In 1973 the appellant, an auto dealer, had built an all-steel building with steel frame and covered with pre-finished metal which was corrugated metal. There was no basement. The appellant filed pictures of the building and also a diagram of the building which clearly indicates that it was clad with sheet iron, with steel, and usually galvanized and corrugated.

Richard Fuhr, President of the appellant company, testified that he had no knowledge of the kind and nature of the metal used in the construction of the building.

Fortunately, however, one P J Hobbs, a consulting engineer specializing in metallurgical matters and welding, was called as a witness. He has a Master’s of Science degree in welding engineering, and is also a member of the Canadian and American Welding Societies. He has spent five years in the metallurgical field, three and a quarter years in the welding industry in steel fabricated shops and two years in consulting. Mr Hobbs made a personal examination of the building and stated that it was made of rigid frame, with steel channels and framework with metal cladding in corrugated steel-shaped forms. He describes the term “galvanized” as a zinc coating on steel or iron for weatherproofing, which is applied electrically or by hot dipping. He defines “iron” as a silvery white metallic substance obtained directly from ore. He stated that there is no such thing as “corrugated” or “galvanized” iron in that iron can only be cast in many ways and has a high carbon content, whereas steel is iron with a lower carbon content and also containing manganese, giving it a high tensile strength, capable of being bent or corrugated as in this case. As a metallurgist, Mr Hobbs states that ‘‘no such thing as corrugated iron exists’’. He says that the term “corrugated iron” is a general trade name but that he uses the term “corrugated steel”. Corrugated steel is used for metal cladding of buildings.

Mr Hobbs also states that a steel-clad building is usually of corrugated steel and that the term “corrugated iron” includes “corrugated steel” but that the term “corrugated iron” is an absurdity. The term “corrugated iron” includes the material of which the building was constructed namely, “corrugated steel”.

Findings

I accept the evidence of Mr P J Hobbs, the counsulting engineer, scientist and metallurgist, that the words “corrugated iron” or “galvanized iron” are inclusive of the words and meanings of “corrugated steel” or “galvanized steel”.

Webster's Dictionary, at 1141 describes “iron” as follows:

iron—Chemically, iron is chiefly base-forming, being bivalent in the ferrous compounds, which are white or pale green, and trivalent in the ferric compounds, which as a rule are yellow or brown. Passage from either of these series to the other by oxidation or reduction is readily effected. Commercial iron contains varying amounts of carbon and other substances (esp. silicon, sulphur, phosphorus, and manganese), which greatly affect its properties. Its constituents have been named from a physicial-chemical standpoint, as: ferrite, or pure iron; martensite, a solid solution, and pearlite, the eutectoid alloy, of iron and carbon; cementite, a carbide; etc (see these terms). Cast iron, the direct product of the blast furnace or of the cupola, is fusible and brittle. It can be tempered, but not welded or forged.

Steel is iron which is malleable between certain (variable) limits of temperature and is either capable of being cast into an initially malleable mass, or becomes extremely hard when suddenly cooled or possesses both of these properties.

The relevant portions of Regulation 1100, Schedule B, of the Income Tax Regulations are:

Class 3 (5%)

Property not included in any other class that is

(a) a building or other structure, including a component part such as electric wiring, plumbing, sprinkler systems, air conditioning equipment, heating equipment, lighting fixtures, elevators and escalators,

(b) a breakwater (other than a wooden breakwater)

(c) a dock,

(d) a trestle,

(e) a windmill,

(f) a wharf, or

(g) an addition or alteration made after March 31, 1967, to a building that would be included in this class but for the fact that it is included in Class 20.

Class 6 (10%)

Property not included in any other class that is

(a) a building of

(i) frame,

(ii) log,

(iii) stucco on frame,

(iv) galvanized iron, or

(v) corrugated iron,

construction including component parts such as electric wiring, plumbing, sprinkler systems, air-conditioning equipment, heating equipment, lighting fixtures, elevators and escalators,

(b) a wooden breakwater,

(c) a fence,

(d) a greenhouse,

(e) an oil or water storage tank,

(f) a railway tank car,

(g) a wooden wharf,

(h) an aeroplane hangar acquired after the end of the taxpayer’s 1958 taxation year, or

(i) an addition or alteration made after March 31, 1967, to a building that would be included in this class but for the fact that it is included in Class 20.

Maxwell, on The Interpretation of Statutes, 1969 edition, stated at 81:

In dealing with matters relating to the general public, statutes are presumed to use words in their popular, rather than their narrowly legal or technical sense: ‘‘/o- quitur ut vulgus, that is according to the common understanding and acceptation of the terms.” If an ‘‘Act is directed to dealing with matters affecting everybody generally, the words used have the meaning attached to them in the common and ordinary use of language.

Accepting the evidence of the metallurgist, these words, I believe, give me the direction in which I must follow, namely that the ordinary meaning of the words “corrugated iron” and “galvanized iron” is “corrugated steel”, although not so expressed in the Income Tax Act.

I have given very careful consideration to the reasoning in the judgment rendered by my learned colleague Guy Tremblay, Esq, CGA, in Belgen Inc v MNR, [1978] CTC 2099; 78 DTC 1067. In the Belgen case no expert witness was called, and I quote from pages 2105 and 1071 respectively:

The definition of steel given by the “Petit Robert” (1973) is similar: (TRANS) “Alloy of iron and carbon (less than 1.5%) which, through mechanical or thermal treatment, is given varied properties (malleability, strength). Soft steel (up to 0.25 per cent carbon), hard (0.60 to 0.70%)”.

It can be seen from these definitions that steel constitutes something more than iron. However, since the ‘‘Petit Robert” states that “tôle” (sheet iron) can be either of iron or steel, it seems at first sight that shed No. 2 comes under the description of Class 6: “un édifice en tôle galvanizée ou tôle ondulée”.

However, the Board must take into account the way in which the same regulation is worded in English: ‘‘a building of galvanized iron or corrugated iron”.

The question is whether the English word “iron” is defined in French by “acier”.

Harrap’s Standard French and English Dictionary (1970) gives “fer” as the French translation of the English word “iron”. Furthermore, expressions such as “raw iron” and “crude iron” are translated as “fer cru” and “fer brut”. “Soft iron” and “corrugated iron” are given as “fer doux” and “tôle ondulée” respectively. The same dictionary translates the word “steel” by “acier”. The following translations inter alia are also offered: “hard steel” is given as ‘‘acier dur” or “acier durci”; “annealed steel” as ‘‘acier recuit”; “mild steel” as “acier doux”; “rolled steel” as “acier laminé”; “cold-rolled steel” as ‘‘acier laminé a froid”; “hot-rolled steel” as “acier laminé à chaud”.

In view of these definitions, the Board concludes that it must respect reality and, therefore, that is cannot interpret “steel” as meaning iron, or “iron” an meaning steel. It therefore seems that the English wording “galvanized iron” and “corrugated iron” is in contradiction with the French “tôle galvanisée” and “tôle ondulée”, since the definition of the word “tôle” includes steel. If we accept the French version, shed No 2 should be included under Class 6 and is therefore depreciable at a rate of ten per cent. The building of “tôle” (steel sheet) is in fact included in this class.

Mr Tremblay’s reasoning at pages 2106 and 1072 respectively of the Be/gen decision (supra), in light of the particular facts of that case and of the French version of Regulation 1100, Schedule B, Classes 3 and 6, would seem to me to fit into the role of the words such as “galvanized iron” and “corrugated iron”, which obviously mean “corrugated steel” and should be given their ordinary meaning and usage as used in the trade. Unfortunately, Mr Tremblay did not have the benefit of evidence from a qualified metallurgist.

To hold otherwise, from the evidence in this case, I would be ruling ina case of clear ambiguity, and I might say absurdity, because the Department of National Revenue has used terminology such as “galvanized iron” and “corrugated iron” (which are totally wrong and do not exist according to the metallurgist). It would be an absurdity on my part to follow the argument of the respondent that because the Income Tax Act uses these words “galvanized iron” and “corrugated iron”, an appellant who uses steel frame and corrugated steel is precluded from the capital cost allowance allowed him under Class 6.

Decision

For the above reasons, the appeal is allowed and the matter referred back to the respondent for reconsideration and reassessment.

Appeal allowed.