The Price Company Limited, Suppliant v. Her Majesty the Queen, [1973] CTC 617, 74 DTC 6081

Kerr, J:—This action was tried together with another action No 920-71 between Price (Nfld) Pulp & Paper Limited, as suppliant and Her Majesty the Queen, as respondent.* They were commenced by petitions of right in the Exchequer Court claiming refunds of sales tax paid under the Excise Tax Act, RSC 1952, c 100, as amended, on newsprint machines manufactured by Dominion Engineering Works Limited. The machine in this action was for delivery at Alma, Quebec; the machine in the other action was for delivery at Grand Falls, Newfoundland. In this action a refund of $460,899.97 of sales tax paid is claimed. In the other action a refund of $267,460.22 is claimed.

An Agreed Statement of Facts was filed in each action, and evidence was given by George C Brown common to both actions.

The Agreed Statement in this case is Exhibit P-2, as follows:

1. The suppliant is a body corporate and politic having its head office at the City of Quebec, in the Province of Quebec.

2. The name of the suppliant was changed from Price Brothers & Company, Limited to The Price Company Limited on April 21, 1966.

8. The suppliant is a manufacturer or producer engaged in the manufacture or production of newsprint at its Riverbend Mill located in the City of Alma, Province of Quebec.

4. By a written proposal dated October 8, 1965, appended hereto as Appendix “A”, Dominion Engineering Works Limited of the City of Montreal, in the Province of Quebec, offered to furnish to Rust Associates Ltd, of the City of Montreal, in the Province of Quebec, for the suppliant, one Dominion Newsprint Machine having a wire width of 326 inches and a trim of 304 inches off the winder for use by the suppliant directly in the manufacture or production of goods.

5. The total contract price for the said goods was $4,754,091.00.

6. In the said proposal it was provided inter alia as follows:

“TITLE—(a) The property and right of possession in the equipment shall not pass from the Company until all payments (including deferred payments and payments of notes and renewals thereof, if any), shall have been fully made in cash, whatever may be the mode of its attachment to the realty or other property.

(b) If default is made in any payment required to be made by the Purchaser hereunder, after the equipment has been delivered, the Company shall, in addition to all other rights and recourses, have the right to remove the equipment retaining as damages and rental for its use all payments previously received and to dispose of the equipment in accordance with the laws of the jurisdiction where it is situated.”

7. By a written proposal dated September 1, 1965, revised on October 12, 1965, and identified as Proposal No. MEA-10001, appended hereto as Appendix "B”, Rust Associates Ltd, as engineering constructor, proposed to perform for the suppliant, as purchaser, the work outlined therein under “Scope of Work” on a Cost-Plus-a-Fixed-Fee basis.

8. The scope of work proposed therein included inter alia the following:

“A. Furnish all labour, materials, equipment, subcontractor services, construction management, technical supervision, craft supervision, construction tools and equipment necessary to construct a new 304” Trim, 3,000 FPM Newsprint Paper Machine installation at Purchaser’s Riverbend Mill, Alma, P.Q.”

9. The proposal referred to In paragraph 7 herein was accepted In writing by the suppliant on October 18, 1965.

10. By Purchase Order No. 59897, dated January 7, 1966, appended hereto as Appendix “C”, the suppliant ordered from Rust Associates Ltd the purchase and installation of a new 326 inches wire width newsprint paper machine, in accordance with Proposal MEA-10001, dated September 1, 1965 and revised October 12, 1965, prices and terms as per contract.

11. The Purchase Order referred to in paragraph 10 herein provided that the goods were to be delivered to the suppliant at its Riverbend Mill, Alma, Province of Quebec.

12. By Order No. AR. 100-1 dated June 13, 1966, appended hereto as Appendix D , Rust Associates Ltd placed an order with Dominion Engineering Works Limited for shipment to the suppliant at its Riverbend Mill, Alma, Province of Quebec, one Dominion Newsprint Machine having a wire width of 326 inches and a trim of 304 inches off the winder at a net contract price of $4,945,840.00 as of June 1, 1966, all to be as described in Dominion Engineering Works proposal of October 8, 1965 and as further described in Dominion Engineering Works specification C 101-36000 dated October 8, 1965, except as amended.

13. The total cost of the said Dominion Newsprint Machine was $5,721,229.05 such sum representing the original contract price plus all additions and changes agreed upon.

14. The contract price for the Dominion Newsprint Machine was to be paid to Dominion Engineering Works Limited by Rust Associates Limited In ten instalments, as follows:

Date	Amount Amount
December 31, 1965	$500,000.00
February 28, 1966	500,000.00
April 30, 1966	500,000.00
June 30, 1966	400,000.00
August 31, 1966	700,000.00
October 31, 1966	650,000.00
December 31, 1966	700,000.00
January 31, 1967	350,000.00
March 31, 1967	200,000.00
June 30, 1967	445,840.00
	or final payment.

15. The said Dominion Newsprint Machine was shipped In sections to the suppliant over a period commencing May 6, 1966, and ending November 22, 1967.

16. The said Dominion Newsprint Machine was erected on site on September 26, 1967, and started up on October 4, 1967.

17. The final payment on the contract price was made on June 26, 1968. Instalment payments on account of the contract price were made by Rust Associates Limited to Dominion Engineering Works Limited as follows:

Date	Amount Amount
December 29, 1965	$500,000.00
February 17, 1966	500,000.00
April 27, 1966	500,000.00
June 21, 1966	400,000.00
August 22, 1966	700,000.00
October 27, 1966	650,000.00
December 28, 1966	700,000.00
January 20, 1967	350,000.00
March 20, 1967	200,000.00
July 17, 1967	327,914.00
October 25, 1967	200,000.00
April 24, 1968	1,838.00
April 24, 1968	170,463.08
June 26, 1968	42,000.00

18. Dominion Engineering Works Ltd made each month a return to the Department of National Revenue during the period 1965 to 1968 and paid instalments on account of consumption or sales tax with its monthly returns on articles of its manufacture as shown on the two ledger sheets appended hereto as Appendix “‘E”’.

19. In making monthly returns to the Department as aforesaid, Dominion Engineering included amounts on account of sales tax on the instalment payments becoming payable in accordance with the terms of the contract for the newsprint machine in question, in the accounting period to which the returns pertained, and the amounts so included and the dates on which payments were made to the Department are as follows:

January 17, 1966	$55,000.00
March 21, 1966	55,000.00
May 24, 1966	55,000.00
July 25, 1966	44,000.00
September 26, 1966	77,000.00
November 28, 1966	71,500.00
January 30, 1967	77,000.00
February 29, 1967	38,500.00
May 22, 1967	22,000.00
TOTAL	$495,000.00

On or about April 10, 1968, a refund of tax in the amount of $34,103.00 was paid to Dominion Engineering Works Limited by the Department of National Revenue as a result of changes in the tax rate during the relevant periods.

20. On January 18, 1968, K. V. Sandford of Foster Business Services applied in writing for a refund by letter to the Director, Excise Tax Operations as follows:

“In accordance with the provisions of Section 46 of the Excise Tax Act please accept this letter of intent, on behalf of our clients, The Price Company Limited and Price (Newfoundland) Pulp and Paper Limited, to file an application in writing for refund or deduction of federal sales tax paid on shipments of component parts for Dominion newsprint machines manufactured and supplied by Dominion Engineering Works Limited for our clients’ premises at River Bend, Quebec, and Grand Falls, Newfoundland.”

and appended hereto as Appendix “F” is a copy of the letter.

21. The Department of National Revenue has refused to refund the sum of $460,899.97.

22. The Examination for Discovery of George Cameron Brown, an officer of the Suppliant, may be used and referred to in accordance with the Rules of Court.

23. This Statement of Facts is intended to shorten the trial of this action, and the parties agree upon these facts only for the purpose of this action. No evidence may be offered inconsistent with this Statement but additional evidence not inconsistent with it may be offered subject to all the usual rules at the trial of this action.

The Agreed Statement of Facts in the other action is Exhibit P-1, to like effect, with necessary changes in details of amounts, dates, etc.

The witness George C Brown is vice-president of The Price Company Limited and a director of Price (Nfld) Pulp & Paper Limited. He testified that he was in overall charge of installing the two machines; that The Price Company owns 99% of the issued common stock of the Price (Nfld) company; that Rust Associates was engaged by the two com- panies as consultants and as purchasing agents to purchase the machines, and as installers of them; the two. companies had agreements with Rust Associates that they would advance to Rust Associates the money for payment of the sales taxes on the machines, and the two companies did in fact advance the money for the taxes, and each company is out of pocket for the sales tax paid.

At the trial it was agreed by counsel for the parties that Dominion Engineering Works Limited has no interest in any right to a recovery of the sales taxes in issue.

In its petition in this action the suppliant alleges that on the date when the sale of the machine was made and when title to the goods passed to the suppliant the goods were exempt from sales tax by virtue of the provisions of section 32 and of paragraph 1(a) of Part XIII of Schedule ill of the Excise Tax Act, as amended, then in force; and, in the alternative, that on the date when the machine was delivered it was exempt from sales tax. The suppliant therefore. prays that the goods be declared to be exempt from sales tax under the Excise Tax Act and that the sales tax paid by the suppliant in the sum of $460, 899.97 be returned.

The respondent’s statement of defence says that the petition discloses no cause of action and no grounds upon which the suppliant is entitled to any relief against Her Majesty; that if any refund of tax became payable under the Excise Tax Act, which is not admitted, then such a refund is now prohibited because application in writing for it was not made within two years of the time when such refund first became payable, as required by the statute; and that the goods \ were not exempt from the sales tax imposed by that Act.

Section 46 of the Act provides in part as follows:

46. (1) A deduction from, or refund of, any of the taxes imposed by this Act may be granted

(a) where an overpayment has been made by the taxpayer;

(b) where the tax was paid In error;

(c) where the original sale or importation was subject to tax, but exemption is provided on subsequent sale by this Act;

(5) No refund or deduction from any of the taxes imposed by this Act: shall be paid unless application in writing for the same is made by the person entitled thereto within two years of the time when any such refund or deduction first became payable under this Act or under any regulation made thereunder.

(6) If: any person, whether by mistake of law or fact, has paid or overpaid to Her Majesty, any moneys that have been taken to account, as taxes imposed by this Act, such moneys shall not be refunded unless application has been made in writing within two years after such moneys were paid or overpaid.

In its reply the suppliant alleges that it made an application in writing for a refund of the tax money by letter dated January 18, 1968, addressed to the Department of National Revenue by duly authorized agent on behalf of the suppliant. This letter is referred to in paragraph 20 of the Agreed Statement of Facts. The respondent admits that the letter was sent, but takes the position that the suppliant was not the party that could apply for a refund.

I will now proceed to refer to tax sections of the Excise Tax Act.

The relevant portion of subsection 30(1) of the Act reads as follows:

30. (1) There [1] shall be imposed, levied and collected a consumption or Sales tax of nine* per cent on the sale price of all goods

(a) produced or manufactured in Canada

(I) payable, in any case other than a case mentioned in subparagraph (il) or (iii), 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,

(it) payable, in a case where the contract for the sale of the goods (including a hire-purchase contract and any other contract under which property in the goods passes upon satisfaction of a condition) provides that the sale price or other consideration shall be paid to the manufacturer or producer by instalments (whether the contract provides that the goods are to be delivered or property in the goods is to pass before or after payment of any or all instalments), by the producer or manufacturer pro tanto at the time each of the instalments becomes payable in accordance with the terms of the contract, and

Subparagraph (ii) was in the Act at all times relevant to this action.

Subsection 30(1) should be read, for the purposes of this case, with subsection 32(1), which was in force at all relevant times and is as follows:

32. (1) The tax imposed by section 30 does not apply to the sale or importation of the articles mentioned in Schedule III.

I should say here that prior to June 14, 1963, Schedule III included a heading ‘‘Machinery and Apparatus to be Used in Manufacture or Production”, but that heading and the goods enumerated thereunder were repealed by SC 1963, c 12, subsection 7(6), effective June 14, 1963, and the goods did not come back into Schedule III until June 2, 1967, as appears by the amendments next mentioned.

SC 1966-67, c 40, section 9 added a new Schedule V, which included “machinery and apparatus sold to or imported by manufacturers or producers for use by them directly in the manufacture or production of goods”, and subsection 4(3) of this statute amended subsection 32(3) of the Excise Tax Act to read as follows:

32. (3) There shall be imposed, levied and collected only three-eighths of the tax imposed by section 30 on the sale or importation of the articles enumerated in Schedule V, and with respect to any such articles delivered to the purchaser or imported or taken out of warehouse for consumption after March 31, 1968, the tax imposed by section 30 shall not apply.

This statute also provided by section 10 that subsection 32(3) of the Excise Tax Act as enacted by section 4 of this statute applies to articles in Schedule V that are, in the case of goods manufactured in Canada, delivered to the purchaser after March 31, 1967.

That statute 1966-67, c 40, was followed by SC 1966-67, c 79, which increased the sales tax to 9%, and by section 2 amended subsection 32(3) of the Excise Tax Act to read as follows:

32. (3) There shall be imposed, levied and collected only three-ninths of the tax imposed by section 30 on the sale or importation of the articles enumerated in Schedule V, and with respect to any such articles delivered to the purchaser or imported or taken out of warehouse for consumption after March 31, 1968, the tax imposed by section 30 shall not apply.

Next in time came SC 1967-68, c 29, which by section 12 repealed Schedule V, and by subsection 11(10), effective June 2, 1967, added a new Part XHI of Schedule IH, which includes in paragraph 1(a) “machinery and apparatus sold to or imported by manufacturers or producers for use by them directly in the manufacture or production of goods”; and by section 13 provided as follows:

13. (1) Sections 5 and 12 and subsections (1), (3), (4), (6) and (10) of section 11 of this Act shall be deemed to have come into force on June 2, 1967, and to have applied to all goods mentioned therein imported or taken out of warehouse for consumption on or after that day and to have applied to goods previously imported for which no entry for consumption was made before that day.

On the question of the incidence of sales tax counsel for the suppliant submitted that a conditional contract of sale (such as the contract in this case) is an executory contract and that it does not constitute a “sale” under the Excise Tax Act; and that unless and until title to the goods here under consideration passed, no sales tax was payable; and by the time title passed, the goods were exempt from tax by virtue of SC 1967-68, c 29. He distinguished sales from agreements to sell, and in that respect referred to Halsbury, 3rd ed, vol 34, at page 5, which says that “sale is the transfer, by mutual consent, of the ownership of a thing from one person to another for a money price”; to Benjamin on Sale, 8th ed, at page 297 as follows:

After a contract of sale has been formed, the first question which suggests itself is naturally, What is its effect? When does the bargain amount to an actual sale, and when is it a mere executory agreement, or, as it is now called, an agreement to sell?

We have already seen that the distinction consists in this, that in a sale, the thing which is the subject of the contract becomes the property of the buyer (under the contract, that is to say), the moment the contract is concluded, and without regard to the fact whether the goods be delivered to the buyer or remain in possession of the seller, whereas in the agreement to sell, the property is to pass at a future time or subject to the fulfilment of some condition, and the goods remain the property of the seller till the contract is executed. In the one case, A sells to B: in the other, he only promises to sell.

to paragraph 2(f) of the Statutes of Newfoundland, 1955, which defines “conditional sale”; and to Faribault’s Traité de Droit Civil du Québec, vol 11, as follows:

Lorsque le vendeur conserve la propriété de la chose vendue jusqu’a ce que le prix soit entièrement payé, l’acheteur n’a pas le droit de vendre cette chose puisqu’elle ne lui appartient pas. En la vendant, il vend la chose d’autrui, et son vendeur a alors le droit de la revendiquer contre le second acheteur et même contre tout acheteur subséquent, sauf le cas ou le dernier acheteur l’aurait acheté d’un trafiquant en semblables matières. Dans cette dernière hypothèse, le premier vendeur ne peut lui revendiquer la chose qu’en offrant de lui rembourser le prix qu'il a payé.

On that issue of sale counsel for the respondent submitted that subparagraph 30(1)(a)(ii) was in the Act at all material times; in the case of a one-payment contract where payment is to be made when the goods are delivered or when the property in the goods passes, whichever is the earlier, there is a tax payable as in subparagraph (i) of paragraph 30(1)(a); in the case of instalment contracts there is a like tax with a difference that it is payable pro tanto as provided in subparagraph (ii); that the object of the section is to produce an economic result with imposition of tax in each situation; and that there was an exigible tax on the goods concerned in this action payable at the time each of the instalments became payable In accordance with the terms of the contract for the goods.

One of the closest cases to this case, referred to by counsel on each side, is The King v Dominion Engineering Company Limited before the Supreme Court of Canada ([1944] SCR 371; [1944] CTC 216; 2 DTC 674) and the Privy Council ([1947] 1 DLR 1; 2 DTC 890). It was an action by the Crown to recover sales tax claimed in respect of a contract of sale of a machine that was to be built by Dominion Engineering for the purchaser, Lake Sulphite Pulp Company, the price to be payable in nine monthly instalments, plus a balance when the machine would be in operation, title to pass on payment in full. Six instalments of the price were paid to Dominion under the contract, and Dominion paid the sales tax on them. The purchaser then went bankrupt and the three remaining instalments were not paid. The machine was never delivered to the purchaser. The Crown’s claim was to recover from Dominion sales tax on the three unpaid instalments. The taxing provision was subsection 86(1) of the Special War Revenue Act, RSC 1927, c 179, reading as follows:

86. (1) There shall be imposed, levied and collected a consumption or sales tax of eight per cent, on the sale price of all goods

(a) produced or manufactured in Canada, payable by the producer or manfacturer at the time of the delivery of such goods to the purchaser thereof.

Provided that in the case of any contract for the sale of goods wherein it is provided that the sale price shall be paid to the manufacturer or producer by instalments. as the work progresses, or under any form of conditional sales agreement, contract of hire-purchase or any form of contract whereby the property in the goods sold does not pass to the purchaser thereof until a future date, notwithstanding partial payment by instalments, the said tax shall be payable pro tanto at the time each of such instalments falls due and becomes payable in accordance with the terms of the contract, and all such transactions shall for the purposes of this section, be regarded as sales and deliveries.

Provided further that in any case where there is no physical delivery of the goods by the manufacturer or producer, the said tax shall be payable when the property in the said goods passes to the purchaser thereof.

Rand, J delivering the judgment of the Chief Justice and of Kerwin, Taschereau and Rand, JJ, said in part as follows:

The words “such transactions” refer either to the contracts themselves or to the successive liabilities for instalments. But in either sense the expression “becomes payable” is not to be limited solely to the event of the day named for the payment of the instalment. What is contemplated Is an obligation to pay arising from the legal effectiveness of the contract.

Although the section. declares the “transaction” to be a constructive sale and delivery, the fundamental support of the tax is an executory contract leading to the transfer of title and possession. That contract is conceived as a potential sale to which in turn is related a potential total tax: “the tax shall be payable”. Pro tanto portions of the tax are related to instalments of price and, when the latter become payable as parts of a whole, the right to the tax takes on the same character: but throughout, the tax depends for its efficacy upon the maturing contract. For the total tax there is only an inchoate liability created by the making of the agreement: and to sustain the right to the tax, the instalment become payable must remain an obligation of an executory contract.

The legal liability at any time for any portion of the tax in no degree restricts the parties in good faith from modifying the contract as they see fit, and a fortiori it does not prevent a modification by operation of law. If, in the legal result, the actual transaction ceases to be one of sale, then the necessary support for the tax disappears. That result, at least where the termination of the contract does not effect a total rescission, will not affect the right to taxes on any portion of the price paid to the seller nor does it touch those that have been collected or reduced to judgment by the Crown.

The fact of bankruptcy intervening is, in my opinion, a circumstance fatal to the right of the Crown to maintain this information. When, on February 22nd, the liquidation order was made, the instalments for the balance of purchase price ceased ‘to be “due” and “payable” within the meaning of the statute. What remained to the respondent was to prove for unliquidated damages subject to the right of the liquidator to elect. to complete the contract. It is not suggested there was any such election prior to the commencement of this proceeding. But the respondent could not have enforced payment of the remaining instalments and the essential condition of the tax that they should continue as effective obligations of a contract of sale was not existing when the information was issued. A right of election by the liquidator even then continuing could not affect the present proceeding.

This interpretation of the Act does not mean that either price or instalment of price in such a contract must be received before the tax is exigible but it does mean that where the obligation of such an executory contract Is by operation of law destroyed, then unpaid taxes related to Its terms, themselves suffer a corresponding effect. If that were not so, sellers with unsold property on their hands would be liable for taxes In respect of purchase price not only unpaid but the legal right to which had been annulled: and on the. other hand a resale of the same property would. attach to Itself a new tax unrelated in any sense to that attributed to the: first sale. What is created is a tax liability running parallel, to -executory commercial transactions which, before their completion, is exposed to the effect of contractual changes or fundamental legal infirmities to which they may become subjected. +

Hudson, J said in part as follows:

There is no dispute as to any material facts and the whole question is as to the interpretation of the section in relation to the facts. It must be kept in mind that the machinery was being sold as a unit, that it was never completely manufactured, and that physical delivery had not been made of any, except a small part of the value of $1,200 and that the property in such part of the machine as had been manufactured did not pass to the purchaser.

...

This section requires careful analysis.

Under (a) the tax is payable on delivery of the goods.

In the first proviso, provision is made for earlier payments in cases where the contract calls for payment by instalments. In most of the cases falling with this proviso there would be an actual physical delivery of the goods agreed to be sold. For example, in cases of conditional sales and hire- purchase, this is almost invariably the case. In some, however, there would not be physical delivery and for such it is provided that a constructive or notional delivery should be assumed.

The second proviso does not apply to cases where there is an actual physical delivery, but in any other cases makes the tax payable when the property in the goods passes to the purchaser.

The facts in the present case may bring it within the language of the first proviso. By the contract the sales price was to be paid in instalments in the nature of progress payments although there was no provision that these instalments should be made in accordance with any particular rate of progress. I think, however, that it must be assumed that it was the intention of the parties that the payments should not become payable until the respondent was making fair progress in its work. This was the interpretation of the Lake Sulphite Pulp Company officials because it appears from the evidence that that Company’s manager protested against the delays of the respondent, and in fact held up the December payment for some time on that account.

It is a question whether or not the instalments in respect of which the Crown claims ever fell due and became payable but, even if this were so, I am of the opinion that the second proviso must prevail. The language is unqualified and it is clear that the property in the goods never passed to the purchaser. The second proviso does not destroy altogether the first but applies only to cases where there is no physical delivery. I think for that reason that the rule of construction approved of in Forbes v Git ([1923] AC 256) is applicable. The machinery was never completed and thus was never capable of physical delivery in fulfilment of the contract.

The Privy Council held that the second proviso prevailed and consequently, as there had been no physical delivery of the goods and as the property in the goods had never passed to the purchaser, the tax had never become payable. The judgment was delivered by Lord Macmillan, who said in part as follows:

In imposing a sales tax one of the difficulties which confront the Legislature lies in the selection of the point of time at which the tax shall attach and become due. In the case of an ordinary retail sale for cash across the counter of a shop, the stages of agreement, appropriation of the goods to the contract, delivery, payment of the price and passing of the property are all practically simultaneous. But in more complicated transactions for the sale of goods to be produced or manufactured these stages may be spaced in time in various ways. The point of time which s 86 has selected as in general the time for imposing, levying and collecting sales tax is the time of the delivery of the goods to the purchaser. Liability for the tax, as was pointed out for the Crown, is not made dependent on the price being paid, for the goods may be delivered on credit and the purchaser may default in payment.

In the present case, however, the goods were never delivered and the general rule is inapplicable. But the leading words of the enactment are followed by two provisos, which are both designed to qualify the generality of the main rule in the matter of delivery. The first proviso introduces the conception of a notional delivery which is to be held to take place in certain specified cases, a feature of which is that the property in the goods sold does not pass to the purchaser until a future date. In particular where the contract provides that the sale price shall be paid to the manufacturer or producer as the work progresses the tax is to be payable pro tanto at the time each of such instalments falls due and becomes payable in accordance with the contract. The Crown not unnaturally relies on this as exactly and literally fitting the present case. Mr Justice Angers in his judgment ([1943} 8 DLR 12, Ex CR 49) valiantly combats this conclusion the injustice of which has obviously seemed to him more shocking than it perhaps appears to their Lordships who have by long experience become indurated to the arbitrariness of taxation. In the Supreme Court also ([1944] 4 DLR 505, SCR 371) the Crown’s contention on the first proviso is countered and rejected. Their Lordships, however, do not find it necessary to pursue or review this argument for, however aptly the first proviso may seem to fit the Crown’s case, they find in the second proviso a sufficient and complete answer to it.

The second proviso qualifies the main enactment in the matter of delivery no less than does the first proviso, and it also qualifies the first proviso itself. For it provides “further” that ‘in any case where there is no physical delivery of the goods,” the taxes to be payable when the property in the goods passes to the purchaser. Thus where there is no physical delivery the notional delivery which the first proviso introduces is rendered inapplicable. Mr Justice Angers found in the second proviso an alternative ground for his decision against the Crown and it is the main ground of Mr Justice Hudson’s judgment in the Supreme Court. In their Lordships’ view this proviso presents an insuperable obstacle to the Crown’s claim. There has been no physical delivery of the goods by the Dominion Company to the Pulp Company. The proviso enacts that “in any case” where there has been no physical delivery the tax is to be payable when the property passes. The property in the goods in question has never passed to the Pulp Company. Consequently the tax has never become payable. If the second proviso is repugnant in any way to the first proviso it must prevail for it stands last in the enactment and so, to quote Lord Tenterden CJ, “speaks the last intention of the makers”: The King v Justice of Middlesex (1831), 2 B & Ad 818 at p 821, 109 ER 1347. The last word is with the respondent, the Dominion Company, and must prevail.

Their Lordships recognize that the result of their view may lead to anomalies. It would indeed have absolved the Dominion Company from liability to pay sales tax on the six instalments which they in fact received and on which they paid tax. But anomalies in tax legislation are far from being uncommon, and the remedy lies to the hand of the Government which has apparently since 1927 passed some twenty amending statutes affecting the Special War Revenue Act.

The second proviso that was held to prevail in the Dominion Engineering case is not in the present paragraph 30(1 )(a) of the Excise Tax Act. Neither is there in the present case, as there was in the Dominion Engineering case, a destruction of the purchaser’s obligation to pay all of the instalments of the purchase price.

It appears to me that subsection 30(1) deals specially in subparagraph (a)(ii) with conditional sales contracts for the sale of goods where the contract provides that the sale price shall be paid to the manufacturer or producer by instalments, and I think that in the case of such instalment contracts the subsection imposes a sales tax” [2] payable on the sale price pro tanto at the time each of the instalments becomes payable in accordance with the terms of the contract. In the present case the contract falls within subparagraph 30(1)(a)(ii) and in my opinion the sales tax was exigible on the sale price of the goods pro tanto at the time each of the instalments became. payable in accordance with the terms of the contract.

However, if any of the taxes paid were not exigible because of the goods having been put back in Schedule III on June 2, 1967, or for any other reason, there is the question whether the suppliant is entitled to a refund under the provisions of subsection 46(1) of the Act.

The Crown says that if any refund became payable it is now prohibited because an application in writing for it was not made within two years of the time when such refund first became payable. It was agreed on behalf of the Crown that the letter set forth in paragraph 19 of the Agreed Statement of Facts was sent on January 18, 1968. But, even if that letter is treated as an application, it is an application by the suppliant, not by the manufacturer, and as 1 construe section 46 the person who is entitled under subsection. (1) to a “refund” of taxes paid to the Crown is the person who paid the taxes to the Crown. In the present case it was the manufacturer, not the suppliant, who was liable to pay the tax- and who made the payments to the Crown, as appears by paragraph 18 of the Agreed Statement of Facts, albeit with funds provided by the suppliant.

In The Queen v M Geller Inc, [1963] CTC 438; 63 DTC 1274, a tax was imposed under section 80A of the Excise Tax Act, then applicable, on furs dressed in Canada, payable by the dresser. The judgment of the Supreme Court of Canada said in part as follows (pp 439- 40 [1275-6]):

The respondent M Geller Inc is a dealer in sheepskins, and some of this material was dressed in Canada by Nu-Way Lambskin Processors Ltd, both firms operating in the City and District of Montreal.

Nu-Way, as dresser was responsible for the payment of the tax under s 80A and paid $20,011.72 to Her Majesty the Queen, and on March 8, 1957, the present respondent and Nu-Way filed a petition of right claiming from Her Majesty the Queen the sum of $20,956.74. It is argued that the tax imposed on dressed furs in Canada is illegal because sheepskin is not a fur falling within the meaning of the Act. It is admitted. by all parties that M Geller Inc reimbursed to Nu-Way the sum of $20,956.74 paid to Her Majesty the Queen by the latter.

Both Nu-Way and the respondent M Geller Inc claimed a refund of the “amount paid. The respondent in the present case alleged that it was the only one that was required to pay the tax, that it paid the tax through the intermediary of Nu-Way Lambskin and that, having made a demand for refund in writing within two years from the date of payment, as required by the Act, it was entitled to such a refund.

The learned trial judge [[1960] Ex CR 512] dismissed the petition of right of the suppliant Nu-Way Lambskin on the ground that it failed to apply for a refund within the statutory delay. Section 105(6) provides as follows:

‘105. (6) if any person, whether by’ mistake of law or fact, has paid‘ or overpaid to His Majesty, any moneys which have been taken to account, as taxes imposed by this Act, such moneys shall not be refunded unless application has been made in writing within two years after such moneys were paid or overpaid.” —;

The claim of the respondent however was maintained on the ground that the right to claim a refund is open to any person who has paid moneys which have been taken to account as taxes imposed by the Act and thai the evidence established that the respondent is in fact the person who paid the moneys in question to Her Majesty. - »

It is clear and admitted that the said sum of $20,956.74 was paid as tax and that it was not legally owing, as this Court decided in several cases and particularly in Universal Fur Dressers & Dyers Ltd v Her Majesty the Queen, [1956] SCR 632; [1963] CTC 435. In that case it was held by this Court that mouton was not fur and, therefore, not taxable under Section 80A of the Excise Tax Act. Before this Court Nu-Way did not appeal, and we are concerned therefore only with the appeal of Her Majesty the Queen against the present respondent.

I have reached the conclusion that this appeal should be allowed and the petition dismissed in part.

The person obliged to pay the tax is the dresser, and the person eniitled to a refund is the dresser if the tax has been paid through mistake of law or fact. In the present case, the tax was paid by the dresser Nu-Way and it was the sole person entitled to a refund. This was denied by the Exchequer Court, and rightly in view of the terms of Section 105(6).

The respondent has no legal right to claim. It is true that M Geller Inc reimbursed Nu-Way;, but this payment does not give a right of action to the former, which the law denies.

The arrangements made between Geller and Nu-Way are of no concern to the appeliant.. They are res inter alios acta and cannot affect the rights of the Crown. : ; ... ., . . ., ... -, .

ioregomg reasons the

For the foregoing reasons the petition of right herein is dismissed. Her Majesty Is entitled to be paid, by the suppliant, her costs of the action, to be taxed. .

As both. actions were ed together, only one set of counsel fees will be. allowed., , . . .

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