Her Majesty the Queen, Plaintiff,, [1977] CTC 423, [1977] DTC 5290

Maguire, DJ:—The plaintiff seeks recovery from the defendant of a substantial sum for customs duties and forfeitures under the Customs Act, RSC 1970, c C-40, as amended, and for sales tax under the Excise Tax Act, RSC 1970, c E-13, on lumber, building materials and household units, imported into Canada by the defendant for use in the construction of a summer residence on an island in the Thousand Islands group, plus blueprints or plans and specifications for the development of said property and residence. In addition, a claim is made for customs duties and sales tax relative to what are termed “summer settlers’ effects’’ imported for use in said residence.

The building materials and all items other than summer settlers’ effects are set forth in Schedule A to plaintiff’s statement of particulars with alleged valuations thereof and customs duties and sales tax claimed. Schedule B to said particulars refers generally to the summer settlers’ effects with details of value, duty and tax claimed.

At trial counsel for the plaintiff abandoned the claim for recovery on items listed in said Schedule A based on the allegation of fraud as contained in paragraph 6 of the statement of claim. Plaintiff’s claims under other allegations remains.

I consider plaintiff’s abandonment on this basis was correctly taken. The defendant was at fault in several respects under the provisions of the two Acts. Proper invoices were not presented to the Customs officers; defendant had no actual knowledge of the value of the various goods imported, which were purchased by one R A Engelbrecht, an architect engaged by the defendant for this project, and billed to the defendant at cost plus surcharge of 20%. Provision for this is found in the letter agreement executed by said architect and the defendant, bearing date May 15, 1972.

Defendant or his representative estimated values on the imports in completing purported invoices for custom purposes. Estimates frequently were much below value but goods imported were accurately set forth. Certainly defendant was in error but this does not constitute fraud. Defendant testified that from a discussion with a Customs officer, he understood he would have a year from the respective dates of importing to correct any errors made in the declarations of value. No corrections were ever made, which defendant partially explains by the development of serious business problems.

Provisions of the Customs Act, and here I refer particularly to sections 18, 20, subsections 51(1), (3), sections 22, 192, 180 and subsections 205(1) and (2) and 249(1), are clear and definite, imposing specific obligations on an importer, and penalties or forfeitures for breach of certain thereof. They may, in part, be thought to be onerous, but such is necessary to maintain the purposes of the enactment. I refer also to paragraph 27(1)(d) and section 58 of the Excise Tax Act.

Counsel for the plaintiff submitted a strong prima facie case covering the goods imported; purported invoices with certification of each as to prices paid and valuations, actual valuation of each item and detailed computation of duties, forfeitures and sales tax payable. I need not review these in detail because, with three exceptions hereafter referred to, there is now no dispute between the parties on the true costs from suppliers of all items, which are fully covered and admitted by the defendant on his examination for discovery and in evidence given at trial. The exceptions are: (1) the defendant’s claim that customs duties and excise taxes on the summer settlers’ effects are remitted; (2) that the item ‘‘Blue Prints” in Schedule A should be limited to the sum of $250; and (3) reduction of plaintiff’s claim as amended at trial.

The admissions do not include the 20% fee charged by the architect on the purchase by him or his firm of goods required by the defendant. Provision for this surcharge is found in the letter agreement of May 15, 1972. Plaintiff has added this surcharge to supplier’s costs to determine valuation for duty and tax purposes. Engelbrecht, the architect, became the exporter of goods to the defendant and the surcharge is properly added to determine value, by subsection 42(2) of the Customs Act.

The defendant does maintain that duty and sales tax on summer settlers’ effects are remitted pursuant to the provisions of Order in Council SOR/63-162 of May 22, 1963. The issue here is, were these effects owned by the defendant, as importer, for at least six months prior to their importation on or about August 3, 1973?

Section 2 of said Order in Council reads:

2. Subject to these Regulations, where a person who is not a resident of Canada but who has built, purchased or otherwise acquired a summer residence in Canada or leased such a residence for a period of not less than three years, imports into Canada any article set out in the Schedule hereto that is

(a) for use at the summer residence by the importer or members of his immediate family;

(b) owned by the importer for at least six months prior to its importation; and

The defendant comes within the class of persons referred to in section 2; the effects come within the Schedule to this Order in Council and within 2(a) above.

Defendant’s evidence on ownership for at least six months is that in late January 1973 he made a special trip to New York to consult with his architect re his required effects. In one instance he stated this interview may have been in the first days of February. He explained to this architect the requirement of Ownership for six months to the end that the architect would purchase the effects so that this requirement would be met. He concludes that the architect performed his duties properly and thus assumes that purchase of effects was completed more than six months prior to August 12 or 13, 1978. Invoices by the suppliers of most of these effects, Founders, show sales to Engelbrecht & Associates as purchasers and are dated July 16 and July 20, 1973.

On this evidence I cannot find that purchase or purchases were completed at a time more than six months prior to August 3, 1973. This answers the issue, but I add that it is probable that the defendant did not become the owner at the time of purchase. The defendant had difficulty in purchasing much of his requirements in Canada. R A Engelbrecht, the architect, therefore entered into an agreement with the defendant by letter of May 15, 1972, the original of which was also signed by the defendant. This letter in part reads:

1. Since you have been unable to obtain these materials locally, we will purchase said materials (and equipment) as architectural construction managers for your project. All materials will be obtained at the best price advantage possible.

2. Because of the difficulty in obtaining a construction loan for a project in Canada, we will carry the costs of these materials until such time as a permanent mortgage agreement is obtained—this duration not to exceed one year.

3. For the above construction management services, plus extending of interim credit on all materials and equipment furnished, our fees will be 20% of the total of any and all items invoiced to you by this firm.

Counsel for the plaintiff argued that under this arrangement the purchaser of all items was Engelbrecht, and thus defendant did not become owner until a much later date. There is some validity in this argument. The remaining issue is the valuation of the blueprints (plans and specifications) valued by the defendant at $250 and now by the plaintiff at $7,200, a figure obtained from an agreement by letter from the architect Engelbrecht of November 10, 1971, duly signed by the defendant. Defendant’s value of $250 is based upon the cost of an advertised blueprint for a summer home of $50, plus a sum of $200 charged by the architect for viewing the island loca- tion and determining changes if any required in the purchased blueprint. Defendant considered the “$200.00” covered the view of the property and any changes in the basic plan produced.

The letter agreement of May 10, 1971 reads in part as follows:

This letter will serve as contract agreement for our furnishing the design, engineering, and resultant working draws for developing your Thousand Island property into a summer home complex. The intent of this agreement is to accomplish the following:

A. Planning analysis based on existing trees and topography, allowing for a future boat-house and docks.

B. Engineering water resource system.

C. Engineering waste disposal system.

D. Vacation house design.

This letter further sets the architect’s fees for the above at $7,200.

It was the blueprints (plans and specifications) so produced that were brought into Canada by the defendant on May 24, 1973. Later they were shown to Customs officers as requested.

I cannot accept defendant’s value of $250. He paid $7,200 for these blueprints and I consider this to be the value to him for custom duties and sales tax purposes.

At trial the plaintiff gave credit to the defendant on certain items in said Schedule A, thereby reducing its total claim on all goods listed in Schedule A to $34,070.04.

The plaintiff is entitled to judgment for custom duties, forfeitures and sales tax computed as follows: