Grant,
DJ:—In
these
three
actions
the
plaintiff
appeals
from
the
reassessment
of
its
income
for
each
of
the
years
1969,1970
and
1971,
made
by
the
Minister
pursuant
to
the
provisions
of
the
Income
Tax
Act.
It
is
incorporated
under
the
laws
of
Ontario
and
since
1956
has
been
producing
antiknock
compounds
at
its
plant
in
Corunna,
Ontario
for
sale
to
the
various
gasoline
refineries
to
be
combined
with
gasoline
sold
by
them
for
use
as
a
motor
fuel.
The
sale
of
such
antiknock
product
accounted
for
over
87%
of
the
plaintiff’s
revenue
in
each
of
such
years.
The
amounts
deducted
by
the
plaintiff
from
its
income
in
its
returns
for
each
of
such
years,
to
which
the
Minister
objects
were:
in
1969—$23,279.85;
for
1970—$36,528.08;
and
for
1971—$116,891.78.
These
amounts
had
been
expended
by
the
plaintiff
company
in
such
years
by
way
of
prospecting
and
exploration
expenses
in
searching
for
minerals
in
Canada.
There
is
no
dispute
as
to
the
amounts
so
expended.
The
plaintiff
claims
the
right
to
make
such
deductions
on
the
basis
that
its
said
principal
business
in
each
of
such
years
was
the
production
and
marketing
of
petroleum
products
within
the
meaning
of
paragraph
83(A)(3a)
of
the
Income
Tax
Act,
RSC
1952,
c
48.
The
defendant
denies
that
the
plaintiff’s
production
of
its
antiknock
products
amounted
to
production
of
petroleum
products
within
the
meaning
of
such
section
and
that
therefore
the
plaintiff
was
not
entitled
to
deduct
any
of
such
expenses.
It
follows
that
the
sole
issue
to
be
decided
is
whether
the
antiknock
compounds
manufactured,
or
produced
and
marketed
by
the
plaintiff
company,
are
petroleum
products
within
the
meaning
of
such
section
in
those
years,
which
reads
as
follows:
(3)
A
corporation
whose
principal
business
is
(a)
production,
refining
or
marketing
of
petroleum,
petroleum
products
or
natural
gas,
or
exploring
or
drilling
for
petroleum
or
natural
gas,
or
(b)
mining
or
exploring
for
minerals,
may
deduct,
in
computing
its
income
under
this
Part
for
a
taxation
year,
the
lesser
of
(c)
the
aggregate
of
such
of
(i)
the
drilling
and
exploration
expenses,
including
all
general
geological
and
geophysical
expenses,
incurred
by
it
on
or
in
respect
of
exploring
or
drilling
for
petroleum
or
natural
gas
in
Canada,
and
(ii)
the
prospecting,
exploration
and
development
expenses
incurred
by
it
in
searching
for
minerals
in
Canada
as
were
incurred
after
the
calendar
year
1952
and
before
April
11,1962,
to
the
extent
that
they
were
not
deductible
in
computing
income
for
a
previous
taxation
year,
or
(d)
of
that
aggregate,
an
amount
equal
to
its
income
for
the
taxation
year
(i)
if
no
deduction
were
allowed
under
paragraph
(b)
of
subsection
(1)
of
section
11,
and
(ii)
if
no
deduction
were
allowed
under
this
section,
minus
the
deductions
allowed
for
the
year
by
subsections
(1),
(2),
(8a)
and
(8d)
of
this
section
and
by
section
28.
(These
subsections
provide
the
method
by
which
the
amount
of
the
deduction
is
ascertained).
Such
paragraph
(3a)
of
the
former
act
was
carried
verbatim
into
the
1972
revised
act
as
subparagraph
66(15)(h)(i)
with
the
addition
that
a
corporation
that
meets
the
conditions
laid
down
in
the
provision
is
now
called
a
“principal
business
corporation”.
The
plaintiff’s
witness
John
M
Collins
is
a
chemical
engineer
who
was
in
the
employ
of
such
company
from
1960
to
1970
at
its
plant
in
Corunna
and
engaged
in
the
operations
of
such
plant.
He
is
now
employed
in
the
sales
department
of
the
plaintiff
giving
technical
advice
to
the
purchasers
of
the
plaintiff’s
antiknock
compounds
on
problems
involved
in
the
production
of
gasoline
for
commercial
sale.
He
relates
as
follows:
Gasoline
is
primarily
a
petroleum
derived
material
comprised
of
a
mixture
of
hydrocarbons.
Hydrocarbons
are
chemical
molecules
comprised
primarily
of
atoms
of
carbon
and
hydrogen.
The
boiling
range
of
gasoline
is
approximately
80°
to
400°
Fahrenheit.
Crude
petroleum
is
separated
by
distillation
into
various
fractions
one
of
which
is
considered
to
be
a
gasoline
component,
ie
suitable
for
blending
into
a
finished
gasoline.
Other
crude
fractions
which
are
not
directly
suitable
for
gasoline
blending
are
processed
in
various
specially
designed
units
to
alter
the
molecular
structure
of
the
hydrocarbons
present.
The
output
of
each
of
these
units
is
again
separated
by
distillation
into
various
fractions
many
of
which
are
suitable
for
gasoline
blending
and
are
known
as
gasoline
components.
Each
of
these
gasoline
components
is
in
itself
a
mixture
of
hydrocarbons
and
generally
different
from
the
other
components.
Commercial
gasoline
may
contain
from
3
to
10
different
gasoline
components
each
of
which
has
different
qualities
as
a
motor
fuel
and
which
are
blended
to
get
a
particular
quality
of
gasoline
designed
by
the
refinery
to
serve
particular
markets.
A
most
important
quality
of
gasoline
is
its
octane
rating.
Octane
is
a
measure
of
the
gasoline’s
refusal
to
self-ignite.
When
gasoline
self-ignites
the
combustion
of
the
molecules
takes
place
instantaneously
rather
than
as
a
rapid
wave
of
combustion.
This
phenomenon
known
as
detonation
generates
very
high
pressure
in
a
closed
container.
The
higher
the
octane
rating
of
the
gasoline
the
greater
the
ability
of
the
gasoline
to
resist
self-ignition
under
conditions
of
increasing
temperature
and
pressure.
The
principle
on
which
the
gasoline
internal
combustion
engine
operates
is
that
the
fuel
is
combined
with
oxygen
in
the
form
of
air
in
a
cylinder
and
brought
under
pressure
by
a
piston.
The
mixture
under
compression
is
ignited
by
a
spark
resulting
in
an
explosion
of
the
mixture.
This
explosion
is
the
very
rapid
oxidation
or
burning
of
the
molecules
of
the
fuel
and
results
very
quickly
in
the
production
of
a
large
volume
of
hot
gases
which
force
the
piston
in
the
cylinder
against
a
crank
shaft
causing
it
to
rotate.
By
a
system
of
gears
this
rotation
is
transmitted
to
the
wheels
in
the
case
of
an
automobile.
The
fuel
mixture
is
normally
ignited
by
the
spark
plug
at
a
very
specific
point
in
time
in
the
engine
cycle.
If
the
fuel
mixture
self-ignites
before
sparking
occurs
the
resultant
detonation
produces
very
high
cylinder
pressures
at
a
time
when
the
other
cylinders
are
trying
to
compress
the
contents
of
the
self-ignited
cylinder.
As
a
result
the
engine
rotation
will
be
slowed,
its
power
output
reduced
and
possible
damage
done
to
the
engine
itself.
The
user
of
the
vehicle
can
detect
this
phenomenon
by
its
knocking
sound
during
operation.
A
higher
octane
gasoline
allows
the
operation
of
a
vehicle
that
knocks
to
obviate
or
minimize
detonation
but
the
high
octane
gasoline
is
more
expensive
to
produce
than
gasoline
with
lower
octane
rating.
The
problem
of
knocking
in
internal
combustion
engines
has
been
inherent
in
this
form
of
propulsion
since
its
invention.
Experimentation
lead
to
the
finding
that
if
lead
could
be
introduced
into
the
fuel
mixture
the
tendency
of
a
gasoline
to
ignite
prematurely
was
controlled
and
reduced.
Experimentation
has
shown
that
the
most
efficient
way
of
introducing
lead
into
the
fuel
mixture
is
by
way
of
tetraethyl
lead
or
tetramethyl
lead.
There
are
other
chemical
compounds
of
lead
and
other
substances
that
can
serve
the
same
purpose
but
none
is
as
economically
efficient
as
tetraethyl
lead
or
tetramethyl
lead.
The
purpose
of
adding
antiknock
compounds
to
gasoline
is
to
raise
the
octane
level
of
the
gasoline
at
less
cost
than
would
otherwise
have
to
be
incurred
by
the
more
severe
refining
required
to
produce
gasolines
which
have
an
equivalent
inherent
antiknock
quality
without
the
addition
of
the
antiknock
additive.
Since
the
introduction
of
tetraethyl
lead
as
an
antiknock
compound
early
in
the
1920’s
this
compound
has
been
an
essential
component
of
gasoline
produced
for
commercial
use.
Prior
to
1972
virtually
all
gasoline
contained
lead
antiknocks.
Currently
about
three-quarters
of
commercial
gasoline
contains
this
anti-knock
additive.
The
amount
of
antiknock
compound
that
may
be
added
to
gasoline
is
controlled
by
government
regulation.
The
maximum
allowance
currently
permitted
is
3.5
grams
of
lead
in
each
imperial
gallon
of
gasoline
which
is
the
amount
of
lead
contained
in
3.3
millilitres
of
antiknock
compound
TEL.
The
normal
usage
of
antiknock
compound
in
the
production
of
regular
gasoline
is
about
half
of
the
permissible
amount.
The
antiknock
compound
is
added
to
the
gasoline
at
the
refinery.
The
gasoline
produced
at
the
refinery
and
sold
to
the
consumer
is
comprised
of
the
following
elements:
(i)
a
blend
of
the
gasoline
hydrocarbon
components,
(ii)
except
in
the
case
of
unleaded
gasolines
a
lead
antiknock
compound,
(iii)
a
small
amount
of
dye
which
has
no
effect
on
the
octain
rating
of
the
gasoline,
(iv)
substances
known
as
antioxidants.
These
are
required
to
prevent
the
formation
of
gummy
materials
which
tend
to
occur
if
gasoline
is
left
exposed
to
oxygen
in
the
air
and
which
interfere
with
the
efficient
operation
of
the
engine.
Typically
two
to
three
pounds
of
such
antioxidants
are
added
to
each
1000
barrels
or
35,000
imperial
gallons
of
gasoline.
(vi)
there
may
be
other
very
small
quantities
of
additives
which
are
of
no
significance
in
the
overall
composition
of
the
commercial
material.
Antiknock
compounds
are
used
only
and
exclusively
as
additives
to
gasoline
produced
by
refineries
for
use
in
internal
combustion
engines.
In
cross-examination
he
stated
that
terms
ordinarily
applied
to
the
plaintiff’s
products
are
antiknock
products
and
gasoline
additives.
The
plaintiff’s
witness
Murray
H
MacKinnon
is
employed
by
it
at
its
plant
in
Corunna,
Ontario
as
the
plant
chemist
and
environmental
co-ordinator.
He
stated
as
follows:
His
functions
with
the
plaintiff
are
those
of
quality
control
with
respect
to
all
its
products.
He
also
advises
on
chemical
problems
that
arise
in
the
course
of
its
manufacturing
operations
and
is
in
control
of
environmental
safeguards.
He
is
in
charge
of
a
quality
control
laboratory
on
the
company’s
premises
with
a
staff
of
one
other
chemist
and
twelve
technicians.
He
joined
the
plaintiff
in
December
of
1966.
He
is
a
graduate
of
Acadia
University
with
a
BSc
degree
in
Chemistry.
Since
his
graduation
he
has
taken
numerous
courses
in
organic
chemistry
including
a
course
in
metal
organic
chemistry.
Organic
chemicals
are
those
compounds
which
contain
carbon.
Petroleum
as
a
liquid
or
as
a
natural
gas
is
an
organic
chemical
comprised
of
molecules
consisting
of
carbon
and
hydrogen
in
a
wide
range
of
proportions
and
relations.
Petroleum
in
its
natural
state
is
obtained
from
the
ground/and
is
a
mixture
of
organic
hydrocarbon
chemicals
which
are
separated
in
refineries
by
processes
of
distillation
and
fractionation
employing
controlled
conditions
of
heat
and
pressure.
One
fraction
of
petroleum
which
is
found
in
its
natural
form
in
only
minute
quantities
is
ethylene,
the
chemical
formula
of
which
is
C,H,.
Ethylene
is
a
gas
at
atmospheric
temperatures
and
occurs
in
the
course
of
distilling
or
cracking
petroleum
in
the
production
of
gasoline
and
other
commercial
products
or
in
processes
designed
to
produce
ethylene
as
a
commercial
product
in
itself.
In
the
course
of
his
studies
and
experiences
as
a
chemist
and
particularly
in
connection
with
his
employment
by
the
plaintiff,
he
has
become
in-
formed
with
regard
to
the
phenomenon
of
knocking
in
internal
combustion
engines
and
efforts
that
have
been
made
to
prevent
or
minimize
its
occurence.
Knocking
is
the
sound
that
is
heard
in
the
course
of
the
operation
of
an
internal
combustion
engine
when
the
mixture
of
gasoline
and
air
in
the
system
chamber
does
not
explode
at
the
proper
time,
that
is
to
say,
when
the
gas
in
the
chamber
is
under
full
compression
from
the
thrust
of
the
piston
but
after
the
piston
head
has
commenced
to
withdraw.
The
result
of
knocking
is
a
loss
of
power
as
applied
to
the
piston
from
the
explosion
of
the
gases
and
the
damage
to
the
gas
chamber
and
piston
themselves.
Knocking
was
a
feature
of
the
internal
combustion
engines
since
their
invention
and
received
very
extensive
attention
from
chemists
and
engineers.
It
was
found
that
if
the
gasoline
contained
certain
substances,
the
explosion
would
take
place
in
a
more
controlled
manner
and
knocking
would
be
inhibited
if
not
completely
obviated.
About
1920
it
was
found
that
tetraethyllead
inhibited
knocking
and
was
also
an
acceptable
substance
to
be
used
for
that
purpose.
The
manner
in
which
tetraethyllead
reduces
knocking
is
not
exactly
understood
but
it
is
theorized
that
when
this
material
is
burnt
in
the
compression
chamber
with
gasoline,
lead
oxide
is
produced
and
this
is
the
substance
which
brings
about
better
combustion
or
explosion
of
the
gases.
The
particular
feature
of
tetraethyllead
that
makes
it
desirable
as
an
antiknock
compound
is
that,
being
derived
from
the
same
source
as
gasoline,
namely,
petroleum,
it
is
entirely
compatible
with
gasoline
and
burns
with
the
gasoline
in
the
course
of
the
explosions
that
drive
the
cylinders.
It
has
been
demonstrated
that
tetraethyllead
or
tetramethyllead
appear
to
be
the
only
compounds
containing
lead
which
are
feasible
for
use
with
gasolines
in
the
internal
combustion
engine.
The
plaintiff’s
largest
selling
and
most
widely
used
antiknock
compound
is
the
substance
known
as
TEL
Motor
Mix
White
No
1.
This
substance
has
been
analyzed
in
such
laboratory
under
his
personal
Supervision
and
it
has
been
found
that
its
composition
in
terms
of
volume
percent
or
mole
percent
and
by
weight
percent
are
as
set
out
in
the
table
which
is
attached
to
his
statement.
In
each
table
the
substances
described
as
organics
are
the
carbon
and
hydrogen
atoms
of
the
various
components.
The
inorganics
are
lead,
bromine
or
chlorine
as
the
case
may
be
with
a
very
small
amount
of
nitrogen.
Translating
the
information
in
this
table
into
terms
that
are
readily
comprehended
by
a
layman
in
100
cubic
centimetres
of
TEL
Motor
Mis
No
1,
as
sold
to
the
refineries,
there
is
contained
if
it
could
be
separated
out,
11
cubic
centimetres
of
lead,
bromine
and
chlorine.
In
the
science
of
chemistry
comparisons
between
gaseous
substances
such
as
the
hydrocarbon
components
of
tetraethyllead,
ethylene
dibromide
and
ethylene
dichloride
and
the
solid
or
metal
components,
namely,
lead
or
the
fluids
such
as
bromine
and
chlorine,
is
by
reference
to
mole
percent.
Mole
percent
is
a
chemical
concept
used
to
establish
a
common
base
for
the
comparison
of
gases,
fluids
and
solids.
It
is
applied
by
comparing
the
number
of
molecules
of
an
element
entering
into
the
molecule
of
the
compound
to
the
total
number
of
molecules
of
all
the
elements
in
the
molecule
of
the
compound.
In
this
matter
the
mold
percent
of
a
chemical
substance
whether
molecular
or
elemental
is
determined
on
a
basis
which
can
be
compared
with
the
same
information
regarding
another
compound
or
elemental
substance.
The
table
to
which
the
witness
refers
is
as
follows:
ETHYL
CORPORATION
OF
CANADA
LIMITED
TEL
MOTOR
MIX
WHITE
NO
1
|
Volume
or
Mole
%
|
|
|
Composition
|
|
Weight
%
Composition
|
|
Organics
Inorganics
Total
|
Organics
Inorganics
Total
|
|
Vol
%
|
Vol
%
|
Vol
%
|
Wt
%
|
Wt
%
|
Wt
%
|
|
Component
|
|
|
Tetraethyllead
|
56.38
3.13(Pb)
59.51
22.10
39.39(Pb)
61.49
|
|
Ethylene
dibromide
|
10.50
|
2.62(Br
|
13.12
|
2.67
|
15.19(Br
|
17.86
|
|
Ethylene
dichloride
|
19.21
|
4.80(CI
|
24.01
|
5.32
|
13.49(CI
|
18.81
|
|
Oxidation
Inhibitor
|
.10
|
—
|
.10
|
0.05
|
—
|
0.06
|
|
Kerosene
|
2.32
|
—
|
2.32
|
1.19
|
—
|
1.19
|
|
Inerts
|
.40
|
■54(N
|
.94
|
0.29
|
0.30(N.)
|
0.59
|
|
88.91
11.09
|
100.00
31.63
68.37
|
100.00
|
Organics
are
all
from
petroleum
sources,
primarily
ethylene.
The
plaintiff’s
witness
George
R
Mills
is
a
chemical
engineer
who
is
general
manager
of
the
plaintiff
company.
He
says
that
the
processes
and
operations
described
by
him
in
his
testimony
are
those
which
have
been
carried
on
at
the
plaintiff’s
plant
during
the
years
1968-9
and
70.
He
states:
The
major
products
manufactured
at
the
plaintiff’s
plant
are
tetraethyllead
(TEL)
and
tetramethyllead
(TML)
the
technical
formulae
for
which
are
(C,H.),Pb
and
(CH.),Pb.
Certain
materials
described
below
are
added
to
these
substances
to
form
antiknock
compounds
which
are
sold
under
various
commercial
names
and
the
plaintiff’s
trade
mark
to
petroleum
refineries
to
be
mixed
with
the
gasolines
produced
at
such
refineries
before
distribution
and
sale
in
the
use
of
internal
combustion
engines.
There
is
also
manufactured
at
the
company’s
plant
substantial
quantities
of
ethyl
chloride
about
one-half
of
which
is
used
in
the
manufacture
of
TEL
with
the
remainder
being
sold
to
other
industrial
users.
Ethylene
dichloride
is
also
manufactured
at
the
company’s
plant
and
used
as
one
of
the
substances
added
to
TEL
and
TML
in
the
production
of
antiknock
compounds.
The
base
stock
used
in
the
manufacture
of
TEL
is
ethylene
which
is
an
organic
chemical
comprised
of
carbon
and
hydrogen
the
chemical
formula
for
which
is
C,H,.
Ethylene
is
a
fraction
of
petroleum
and
is
produced
by
petroleum
refineries.
The
ethylene
used
by
the
plaintiff
in
its
operations
at
the
plant
aforesaid
is
purchased
from
Imperial
Oil
Limited
and
is
delivered
to
the
plaintiff’s
plant
in
the
form
of
a
gas
under
pressure
by
pipe
line
from
the
Imperial
Oil
refinery
at
Sarnia,
located
5
miles
up
the
St
Clair
River
from
the
plaintiff’s
plant.
Ethyl
chloride
is
manufactured
in
the
plaintiff’s
plant
by
mixing
ethylene
and
anhydrous,
that
is
to
say,
dry
hydrogen
chloride,
the
chemical
formula
for
which
is
HCL
in
a
reactor
in
conjunction
with
a
catalyst
and
with
the
application
of
appropriate
heat
and
pressure.
The
manufacture
of
ethyl
chloride
is
not
a
complicated
process.
The
product
in
liquid
form
is
stored
in
tanks
on
the
plaintiff’s
premises
until
required
in
the
manufacture
of
TEL.
Ethylene
dichloride
is
manufactured
at
the
plaintiff’s
plant
by
mixing
Ethylene
and
chlorine
in
a
reactor
with
the
application
of
appropriate
heat
and
pressure.
The
manufacture
of
Ethylene
dichloride
is
not
a
complicated
process.
The
product
in
liquid
form
is
stored
in
tanks
on
the
plaintiff’s
premises
until
required
in
the
manufacture
of
TEL.
The
processes
applied
in
the
manufacture
of
TEL
and
TML
are
essentially
the
same,
the
difference
being
that
TEL
is
produced
from
ethylene
and
TML
is
produced
from
methane.
The
base
stock
for
the
production
of
TML
is
purchased
by
the
plaintiff
from
Dow
Chemical
and
Ethyl
Corporation.
Of
the
antiknock
compounds
made
by
the
plaintiff,
less
the
five
percent
are
TML
based.
The
production
of
TEL
is
graphically
displayed
in
the
flow
chart
which
is
attached
to
the
statement.
The
chemical
reaction
leading
to
the
production
of
TEL
takes
place
in
the
autoclave
which
is
a
vessel
designed
to
permit
the
application
of
controlled
amounts
of
heat
and
pressure.
The
first
step
in
making
TEL
is
to
combine
molten
sodium
with
molten
lead
to
form
an
alloy.
This
changes
the
normally
inert
lead
metal
into
a
more
reactive
material.
The
alloy
is
solidified
and
then
charged
in
the
desired
amount
into
the
autoclave
into
which
is
then
introduced
the
ethyl
chloride.
In
the
chemical
reaction
that
results
from
the
conjunction
of
the
ethyl
chloride
and
the
lead
sodium
alloy
the
chlorine
atom
in
the
ethyl
chloride
is
displaced
by
the
lead
atom
giving
rise
to
tetraethyllead
and
sodium
chloride
or
common
salt.
At
the
conclusion
of
the
action
the
products
are
discharged
from
the
autoclave.
The
tetraethyllead
is
extracted
by
a
distillation
process
and
the
common
sale
is
discarded.
The
process
gives
rise
to
a
lead
sludge
for
the
reason
that
more
sodium
lead
alloy
is
introduced
into
the
autoclave
than
is
required
to
react
with
the
ethyl
chloride.
The
lead
is
recovered
and
recycled
for
further
use.
The
tetraethyllead
then
undergoes
further
treatments
in
the
purifier
and
filter
and
is
pumped
to
a
blender.
In
the
blender
the
additional
materials
are
added
to
produce
an
antiknock
compound
having
the
qualities
required
for
the
particular
use
for
which
it
is
intended,
such
as
a
motor
fuel
or
aviation
fuel.
The
ethylene
dichloride
and
ethylene
dibromide
are
added
for
the
purpose
of
keeping
the
lead
in
the
combustion
cylinder
in
a
volatile
form
so
that
it
can
be
exhausted
from
the
cylinder.
In
certain
mixed
dye
is
added
with
small
amounts
of
such
materials
as
kerosene
and
anti-oxidant
which
experimentation
has
shown
is
required
to
reduce
decomposition
of
the
fluid
during
storage.
The
finished
product
is
then
pumped
to
bulk
storage
for
subsequent
delivery
or
directly
to
reload
tank
cars
for
shipments
to
refineries.
TEL
and
TML
are
compounds
that
are
handled
and
shipped
under
normal
atmospheric
and
temperature
conditions.
They
are,
however,
very
toxic
if
inhaled
by
humans
and
must
be
handled
very
carefully.
In
their
physical
characteristics
they
are
fluids
comparable
to
gasoline
in
viscosity
with
a
Slight
oily
quality
and
a
volatility
or
vapour
pressure
at
about
the
same
as
gasoline.
The
density
of
TEL
is
about
half
as
heavy
again
as
water.
The
plaintiff’s
witness
Harold
F
Storie
is
presently
planning
manager
for
the
olefins
product
line
of
Esso
Chemical
Canada
which
is
a
division
of
Imperial
Oil
Limited.
He
is
a
graduate
of
Queen’s
University,
Kingston,
Ontario,
in
chemical
engineering.
He
was
employed
by
Esso
Chemical
Canada
upon
graduation
and
for
eight
years
was
located
in
Sarnia,
Ontario,
where
Esso
Chemical
Canada
operates
a
chemical
plant
which
is
integrated
with
the
refinery
operated
by
Imperial
Oil
Limited
at
that
place.
He
worked
in
the
olefins
plant
in
Sarnia
for
six
years
as
a
Process
Engineer
and
subsequently
became
Technical
Superintendent
of
the
olefans
department
in
Sarnia,
Ontario.
His
present
function
involves
the
development
of
new
facilities.
His
testimony
concerns
the
production
of
ethylene
at
such
Sarnia
plant.
It
is
the
base
stock
used
in
the
manufacture
of
the
plaintiff’s
antiknock
compound.
He
stated
as
follows:
The
Esso
Chemical
plant
takes
various
components
of
crude
oil
or
petroleum
produced
by
distillation
at
the
refinery
and
by
the
application
of
further
processes
of
heat
and
pressure
cracks
the
hydrocarbon
components
naturally
found
in
the
crude
oil
into
other
hydrocarbon
substances
for
use
in
various
commerical
processes.
The
cracking
process
is
accomplished
in
high
temperature
furnaces
accompanied
by
steam.
The
steam
is
an
inert
and
is
added
to
help
prevent
coke
formation.
It
is
condensed
and
removed
in
subsequent
process
steps.
No
other
chemical
substances
are
added
to
the
hydrocarbons
which
are
subjected
to
the
cracking
process
and
the
products
differ
from
the
original
components
in
petroleum
only
in
the
relationship
between
the
carbon
and
the
hydrogen
atoms
in
the
molecules.
Ethylene
is
one
of
the
products
produced
at
the
Sarnia
plant
along
with
many
others.
Ethylene
is
produced
by
Esso
Chemical
by
the
cracking
process
described
above
and
applied
to
two
generally
different
components
of
crude
oil.
Approximately
a
third
of
the
ethylene
produced
at
Sarnia
is
derived
from
cracking
naptha
and
gas
oil
which
are
heavy
liquid
fractions
of
crude
oil.
Following
the
cracking
process
the
sulfur
which
is
frequently
a
natural
component
of
petroleum
is
removed
and
the
various
hydrocarbon
components
are
separated
by
a
further
distillation
process.
Ethylene
comes
off
as
a
gas
at
a
temperature
of
-20°
Fahrenheit.
When
sold
as
a
commercial
product
it
is
warmed
up
to
50°
Fahrenheit
and
is
sent
to
the
plaintiff
as
a
gas
by
pipe
line
under
pressure
of
250
lbs
per
square
inch.
Ethylene
is
also
made
by
cracking
light
petroleum
gases,
namely,
ethane,
propane
and
butane.
Ethane
and
butane
are
derived
from
crude
oil.
About
one
half
of
the
propane
is
derived
from
crude
oil
and
the
remainder
is
imported
from
Western
Canada
and
derived
primarily
from
natural
gas.
The
process
for
the
production
of
ethylene
from
the
light
gases
is
basically
the
same
as
that
for
producing
ethylene
from
the
heavy
liquid
fractions
except
possibly
somewhat
more
complicated
in
its
technology.
In
cross-examination,
the
witness
stated
that
over
half
of
the
ethylene
made
by
Esso
was
derived
from
liquid
cracking
of
fractions
derived
from
crude
oil.
The
other
one-half
thereof
was
procured
from
a
combination
of
ethane,
propane
and
butane
cracking.
Two
thirds
of
that
one-half
came
from
ethane
and
butane
which
are
derived
from
petroleum
by
means
of
a
very
refining
process.
One-half
of
the
propane
used
came
from
crude
oil
as
well.
The
defendant
has
not
disputed
the
testimony
of
the
plaintiff’s
said
witnesses
as
to
the
ingredients
that
make
up
the
commodity
antiknock
nor
the
origin
of
such
components
nor
the
process
by
which
the
same
are
blended
into
the
finished
product.
The
major
antiknock
product
produced
by
the
plaintiff
is
that
known
as
the
TEL
Motor
Mix
White
No
1.
It
forms
the
greatest
portion
of
the
plaintiff’s
sales
and
is
widely
used.
In
each
of
the
years
under
appeal
over
85%
of
the
plaintiff’s
sales
were
its
antiknock
compounds.
The
statute
does
not
provide
any
definition
of
the
words
“petroleum
products’’.
The
combination
of
such
two
words
does
not
have
any
special
or
technical
meaning.
We
must
therefore
interpret
the
section
of
the
statute
above
quoted
by
giving
to
them
their
plain
and
ordinary
meaning.
Laboratoire
Pentagone
Ltée
v
Parke,
Davis
&
Co,
69
DLR
(2d)
268.
The
combination
of
such
two
words
must
refer
to
a
substance
produced
or
derived
from
petroleum.
The
fact
that
the
word
“products”
is
joined
with
the
word
“petroleum”
implies
that
there
must
be
some
alteration
or
addition
to
the
petroleum
before
it
can
be
called
a
product
thereof.
It
may
be
an
additive
thereto
or
a
subtraction
therefrom
or
even
a
change
in
the
composition
of
its
elements
which
permit
the
new
substance
to
be
called
a
product
as
that
word
is
used
in
the
statute.
In
the
French
version
of
the
Act,
the
corresponding
words
are
“produits
de
Petrol”.
It
is
my
opinion
that
the
common
understanding
of
the
combination
of
such
two
words
as
used
in
the
statute
must
be
“a
product
derived
from
petroleum”.
The
difficult
problem
in
the
interpretation
before
the
Court
in
this
case
is
to
what
extent
can
the
petroleum
be
altered
or
processed
with
other
components
added
or
subtracted
before
it
ceased
to
be
regarded
as
a
product
of
the
original
petroleum.
Townsend
v
The
Northern
Crown
Bank,
[1914]
SCR
394
was
a
case
involving
the
legality
of
a
bank
loan
on
lumber.
It
was
there
held
that
“sawn
lumber”
was
a
“product
of
the
forest”.
In
view
of
the
fact
that
the
only
operation
required
to
reduce
the
standing
trees
to
sawn
lumber
was
that
of
cutting
the
tree
into
saw
logs
and
then
by
a
second
cutting
into
sawn
lumber,
there
could
be
little
reason
for
holding
it
was
not
a
product
of
the
forest.
M
F
F
Equities
Limited
v
The
Queen,
[1969]
SCR
595
was
a
case
in
which
a
manufacturer
of
margarine
claimed
that
its
product
was
exempt
from
sales
tax
because
one
of
the
main
components
was
fish
oil
and
under
the
Excise
Tax
Act,
an
edible
product
of
fish
was
exempt
from
such
tax.
The
refined,
bleached
and
deodorized
oil
was
hydrogenated,
a
process
altering
its
chemical
nature
to
such
an
extent
that
it
was
no
longer
a
fish
oil
but
a
derivative
thereof.
Cattanach,
J,
the
trial
judge,
stated:
In
my
view,
in
order
to
determine
whether
a
particular
product
falls
within
an
expression
such
as
“Fish
and
edible
products
thereof;”
resort
must
be
had
to
the
common
understanding
of
such
words
when
used
in
relation
to
articles
of
commerce.
The
question
here
is,
therefore,
whether,
in
the
ordinary
use
of
words,
margarine
may
be
fairly
regarded
as
falling
within
the
words
“Fish
and
edible
products
thereof;”
or
more
specifically,
applying
such
a
test:
is
margarine
a
product
of
fish?
I
do
not
think
that,
in
common
parlance,
the
words
“product
of
fish”
can
be
considered
as
comprehending
margarine,
even
though
it
contains
fish
oil
as
one
of
its
principal
ingredients.
Margarine
is
itself
a
well
known
article
of
commerce
and
is
neither
marketed,
purchased,
nor
thought
of
by
the
consumer
as
a
product
of
fish.
It
seems
to
me
that
the
fish
from
which
oil
has
been
extracted
and
which
is
used
in
the
manufacture
of
margarine,
which
is
by
no
means
the
sole
ingredient
of
the
end
product,
has
become
so
obscured
by
the
processes
to
which
it
and
the
oil
thereof
has
been
subjected
and
by
the
oil
being
intermingled
with
substantial
amounts
of
other
ingredients
from
other
sources,
the
whole
of
which
is
again
the
subject
of
an
extensive
manufacturing
process,
that
the
resultant
margarine
cannot
be
considered
as
a
product
of
fish,
even
though
the
fish
oil
content
may
make
the
margarine
a
fish
oil
margarine
and
the
labels
thereon
disclose
the
fish
oil
content.
Pigeon,
J,
in
delivering
the
judgment
of
the
Court
stated
that
the
trial
judge
was
fully
justified
in
reaching
such
conclusion.
The
trial
judgment
is
found
at
[1969]
CTC
29
and
69
DTC
5039.
The
composition
of
the
antiknock
product
is
set
out
in
the
table
attached
to
the
affidavit
of
the
witness
MacKinnon,
the
plaintiff’s
plant
chemist.
It
indicates
that
88.91
%
by
volume
of
the
contents
of
the
anti-knock
compound
are
derived
from
petroleum
sources
and
particularly
ethylene
and
that
11.09%
thereof
comes
from
other
sources.
The
weight
percentages
of
the
other
components
are
quite
different
because
of
the
much
greater
weight
of
the
lead
content.
Lead,
sodium
and
bromine
are
not
in
any
way
derived
from
petroleum.
Counsel
for
the
defendant
does
not
rely
upon
this
greater
weight
having
any
significance
in
the
determination
of
the
issue
to
be
decided
but
urges
that
the
important
consideration
is
that
it
is
the
lead
content
which
gives
the
product
its
quality
of
lessening
or
eliminating
the
knock
in
the
motor.
It
is
my
opinion
that
by
reason
of
the
additions
of
the
various
substances
which
are
foreign
to
petroleum
and
the
extensive
chemical
processes
to
which
the
various
elements
are
subjected
in
the
process
of
producing
the
antiknock
compound,
as
described
by
the
various
witnesses,
the
finished
product
antiknock
can
not,
in
ordinary
parlance,
be
considered
to
be
a
petroleum
product
within
the
meaning
of
the
statute.
The
appeal
should,
therefore,
be
dismissed
with
costs.
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