THORSON,
P.:—In
this
action
the
Crown
claims
the
sum
of
$30,616.33
from
the
defendant
as
special
or
dumping
duty
on
the
importation
by
it
of
certain
goods
from
the
United
States
during
the
period
from
September
1,
1948,
to
June
1,
1951.
The
claim
is
made
under
Section
6(1)
of
the
Customs
Tariff,
R.S.C.
1927,
c.
44,
which
provides
as
follows:
4
*6.
(1)
In
the
case
of
goods
exported
to
Canada
of
a
class
or
kind
made
or
produced
in
Canada,
if
the
export
or
actual
selling
price
to
an
importer
in
Canada
is
less
than
the
fair
market
value
or
the
value
for
duty
of
the
goods
as
determined
under
the
provisions
of
the
Customs
Act,
there
shall,
in
addition
to
the
duties
already
established,
be
levied,
collected
and
paid
on
such
goods,
on
their
importation
into
Canada,
a
special
or
dumping
duty,
equal
to
the
difference
between
the
said
selling
price
of
the
goods
for
export
and
the
said
value
for
duty
thereof;
and
such
special
or
dumping
duty
shall
be
levied,
collected
and
paid
on
such
goods
although
not
otherwise
dutiable.”
The
circumstances
under
which
the
claim
arises
may
be
stated
briefly.
The
defendant
carries
on
business
in
Canada
and
has
its
head
office
at
Montreal.
During
the
period
in
question
it
imported
goods
known
as
‘‘Smith
Brothers
Cough
Drops’’
from
Smith
Brothers
Inc.
at
Poughkeepsie
in
the
State
of
New
York.
For
each
importation
the
defendant’s
customs
brokers
made
out
an
entry
form,
known
as
‘‘B.1—Entry
for
Home
Consumption”
and
a
member
of
the
customs
brokers’
firm,
as
attorney
for
the
defendant,
made
the
declaration
set
out
on
the
back
of
the
form.
For
each
importation
Smith
Brothers
Inc.
sent
the
defendant
an
invoice
covering
the
shipment
to
it.
This
invoice
was
filed
with
the
44
B.l—Entry
for
Home
Consumption’’
form
on
the
entry
of
the
goods
into
Canada.
Each
invoice
showed
the
fair
market
value
of
the
goods
at
the
time
and
place
of
shipment
and
also
their
selling
price
to
the
purchaser
in
Canada.
To
each
invoice
there
was
attached
what
is
called
4
Form
M-A”,
containing
a
certificate
signed
by
Smith
Brothers
Inc.
by
one
of
its
officers.
The
total
amount
of
the
fair
market
value
of
the
goods
exported
by
Smith
Brothers
Inc.
to
the
defendant
during
the
period
in
question,
as
shown
by
the
invoices,
came
to
$622,111,
calculated
in
Canadian
funds,
and
in
each
case,
except
for
the
last
three
shipments
where
the
selling
price
to
the
purchaser
in
Canada
was
shown
as
slightly
more
than
the
fair
market
value,
the
selling
price
to
the
purchaser
in
Canada
was
shown
at
the
same
amount
as
that
of
their
fair
market
value.
The
defendant
paid
an
ad
valorem
customs
duty
of
20
per
cent
under
Tariff
Item
220
of
the
Customs
Tariff
on
this
valuation
of
$622,111,
or
a
total
duty:
of
$124,422.
An
investigation
of
the
importations
thus
made
by
the
defendant
was
conducted
by
Mr.
H.
E.
Ball,
an
investigator
of
customs
and
excise
of
the
Department
of
National
Revenue.
He
began
his
investigation
in
March,
1951.
He
gathered
together
all
the
“B.l—Entry
for
Home
Consumption’’
forms
filed
on
the
entry
of
the
goods
into
Canada
from
all
the
customs
ports
at
which
they
had
been
entered
together
with
the
invoices
filed
with
them
and
ascertained
that
the
total
amount
of
the
fair
market
value
of
the
goods
imported
during
the
period
in
question
came
to
$621,632
and
that
the
total
amount
of
their
selling
price
to
the
purchaser
in
Canada,
namely
the
defendant,
was
$622,111.
He
also
investigated
the
defendant’s
books
at
its
premises
and
ascertained
that
during
the
period
from
October,
1949,
until
June,
1951,
the
defendant
had
received
from
Smith
Brothers
Ine.
a
commission,
or
rebate
as
he
called
it,
of
5
per
cent
of
the
amount
of
the
selling
price
of
the
goods
as
set
out
in
the
invoices.
He
found,
for
example,
in
the
defendant’s
cash
receipt
book
under
the
date
of
December
7,
1950,
an
entry
of
$3,650.22.
This
was
5%
of
the
selling
price
of
goods
imported
at
six
dates
previously,
four
at
Niagara
Falls
and
two
at
Montreal.
The
entry
in
the
cash
receipt
book
was
then
posted
to
the
defendant’s
general
ledger
under
the
heading
“Receipts-Commissions”.
I
need
not
set
out
the
details
of
the
investigation
made
by
Mr.
Ball.
It
is
sufficient
to
refer
to
a
letter
from
the
defendant
to
him,
dated
September
24,
1951,
signed
by
Mr.
A.
J.
Taylor,
the
defendant’s
comptroller,
reading
as
follows:
“We
wish
to
advise
that
it
would
appear
from
information
obtained
by
ourselves
from
Smith
Brothers
Inc.,
Poughkeepsie,
N.Y.,
that
they
paid
the
sum
of
5%
on
all
purchases
made
by
ourselves
during
the
period
September
2nd,
1948,
to
March
12,
1951.
The
total
paid
during
the
period
amounted
to
$29,250.32
in
U.S.
Funds,
or
as
stated
by
you,
$30,616.33
in
Canadian
Funds.
’
’
Subsequently,
it
transpired
that
of
the
amount
of
$29,250.32
referred
to
in
Mr.
Taylor’s
letter
only
the
sum
of
$21,449.32
had
been
received
by
the
defendant
itself,
the
balance
of
$7,801
having
been
received
by
John
Stuart,
the
defendant’s
president.
After
discovering
these
5
per
cent
payments
by
Smith
Brothers
Inc.
Mr.
Ball
made
a
verbal
demand
on
Mr.
Taylor
for
payment
by
the
defendant
of
$30,616.33
as
special
or
dumping
duty.
He
reported
the
results
of
his
investigation
to
the
Department
of
National
Revenue.
No
formal
demand
for
payment
of
the
special
or
dumping
duty
was
made
but
the
Department
sent
the
defendant
a
notice
of
seizure,
dated
October
3,
1951,
in
which
it
was
informed
that
certain
charges
for
infraction
of
the
customs
laws
had
been
made
against
it,
namely
:
1
‘That
the
said
goods
were
entered
at
Customs
on
invoices
which
did
not
show
an
allowance
of
5%
commission
and
payment
was
thereby
avoided
of
special
or
dumping
duty
properly
payable
in
the
sum
of
$30,616.33.”
There
was
no
actual
seizure
of
any
goods.
The
charges
against
the
defendant
of
infraction
of
the
customs
laws
were
made
under
Section
203(b)
of
the
Customs
Act,
R.S.C.
1927,
c.
42.
The
defendant
refused
to
pay
any
additional
duty
and
this
action
to
recover
a
special
or
dumping
duty
in
the
amount
specified
was
then
brought.
It
is
conceded
that
the
imported
goods
were
of
a
class
or
kind
made
or
produced
in
Canada
so
that
the
only
issue
in
the
case
is
whether
the
actual
selling
price
of
the
goods
to
the
defendant
was
less
than
their
fair
market
value
in
the
country
of
export.
If
it
was
then
the
goods,
under
Section
6(1)
of
the
Customs
Tariff,
were
subject
to
a
special
or
dumping
duty
equal
to
the
difference
between
the
said
selling
price
of
the
goods
and
their
fair
market
value,
that
is
to
say,
the
sum
of
$30,616.33,
and
such
amount
would
be
recoverable
by
the
Crown
as
a
debt
under
Section
112
of
the
Customs
Act.
If
it
was
not
then
the
action
must
be
dismissed.
I
now
come
to
the
evidence
adduced
for
the
defendant
of
how
the
5
per
cent
payments
came
to
be
made
and
why
they
were
made.
Prior
to
the
incorporation
of
the
defendant
in
1947,
the
business
carried
on
by
it
was
carried
on
by
John
Stuart
under
the
name
of
John
Stuart
Sales
and
the
first
5
per
cent
payments
were
made
to
him.
Mr.
L.
M.
Shaw,
one
of
the
directors
of
Smith
Brothers
Inc.
and
the
manager
of
its
advertising
activities
during
the
period
in
question
and
prior
thereto,
said
that
during
the
said
period
the
defendant
and
prior
thereto
John
Stuart
was
the
only
person
in
Canada
to
whom
Smith
Brothers
Ine.
sold
its
cough
drops.
He
explained
that
Mr.
Stuart
and
subsequently
the
defendant
represented
ten
manufacturers
of
whom
Smith
Brothers
Ine.
was
one,
and
thus
it
was
competing
with
all
the
other
manufacturers
for
Mr.
Stuart’s
time
in
selling
its
products,
that
it
was
his
selfish
desire
to
gain
priority
for
its
products
and,
as
he
put
it,
to
pre-empt
competition
by
gaining
priority
for
Mr.
Stuart’s
time
in
the
sale
of
such
products
and
that
this
was
the
reason
for
the
payments.
They
were
made
for
services
rendered.
Smith
Brothers
Inc.
had
gained
certain
advantages
as
the
result
of
making
them.
Its
name
was
first
on
the
order
form
used
by
John
Stuart
and
the
defendant
and
on
the
first
page
of
his
and
its
catalogue.
Thus
Smith
Brothers
Inc.
had
the
first
place
among
the
manufacturers
represented
by
John
Stuart
and
the
defendant.
Mr.
Shaw
stated
that
from
the
time
when
Smith
Brothers
Inc.
first
dealt
with
John
Stuart
in
1937
the
dollar
value
of
its
sales
to
him
and
then
to
the
defendant
had
increased
approximately
20
times.
He
emphasized
that
there
was
no
obligation
by
Smith
Brothers
Inc.
to
make
the
payments
and
no
contract
or
agreement
to
make
them
and
that
they
were
voluntary
on
its
part.
They
were
made
out
of
his
allotment
for
advertising
which
he
could
use
at
his
discretion
and
were
charged
to
expense.
Mr.
Shaw
then
stated
that
the
payments
were
at
first
made
to
John
Stuart
and
that
his
instructions
to
his
accounts
payable
department
were
to
make
them
to
him
since
he
was
the
dominant
person
who
could
exert
the
influence
that
he
was
desirous
of
having.
He
could
not
tell
how
it
came
about
that
Smith
Brothers
Inc.
made
the
payments
to
the
defendant.
He
said
that
Mr.
Stuart
might
have
given
him
instructions
to
make
the
change
but
he
could
not
recall
how
it
came
about.
The
payments
were
made
at
variable
intervals.
Mr.
Stuart
and
later
the
defendant
did
not
pay
Smith
Brothers
Inc.
for
any
shipment
of
goods
until
after
they
had
been
sold
and
delivered
to
his
or
its
customers.
Then
Smith
Brothers
Inc.
was
paid
for
the
shipment
in
United
States
funds
and
it
was
sometime
after
the
receipt
of
such
payment
that
Smith
Brothers
Inc.
made
its
payment
of
5
per
cent
calculated
on
the
selling
price
of
the
shipment
the
payment
for
which
had
been
received.
The
details
of
how
this
practice
was
carried
out
appear
on
Exhibits
C
and
D,
filed
on
behalf
of
the
defendant.
Exhibit
C
shows
the
amounts
of
commissions
paid
to
John
Stuart
Sales
totalling
$7,801,
and
Exhibit
D
the
amounts
paid
to
the
defendant
totalling
$21,449.32,
each
amount
being
in
United
States
funds.
Each
exhibit
shows
the
date
of
the
invoice
for
the
goods,
the
invoice
number,
the
amount
of
sales,
the
amount
of
commission
and
the
date
of
payment
by
Smith
Brothers
Inc.
Mr.
Shaw
stated
that
Smith
Brothers
Inc.
made
similar
payments
of
commissions
to
a
firm
in
New
York
which
purchased
goods
from
it
for
export.
Mr.
Shaw
also
stated
that
he
had
mentioned
the
matter
of
these
payments
to
customs
officers
at
Ottawa
sometime
in
February,
1951,
when
he
went
there
to
discuss
a
number
of
questions.
When
he
disclosed
the
making
of
the
payments
one
of
the
officers
seemed
to
think
that
Smith
Brothers
Inc.
were
at
fault
and
took
the
position
that
the
payments
were
part
of
its
price
structure
and
should
have
been
disclosed
in
the
‘‘M-A
Form”
forming
part
of
the
invoice.
Mr.
Shaw
took
a
different
position
and
asked
for
a
decision
on
the
matter
before
he
returned
to
the
United
States
but
nothing
was
done
about
it.
It
is
inter-
esting
to
note
that
it
was
soon
after
the
date
of
this
visit
to
Ottawa
that
Mr.
Ball
commenced
his
investigation.
There
was
no
change
in
Mr.
Shaw’s
evidence
on
his
cross-examination.
He
emphasized
that
while
the
payments
were
calculated
on
the
selling
price
they
had
nothing
to
do
with
it
but
were
compensation
payments
for
services
rendered.
Mr.
John
Stuart,
the
defendant’s
president,
described
the
manner
in
which
he
and
then
the
defendant
had
done
business
with
Smith
Brothers
Inc.
He
was
not
an
agent
for
the
sale
of
its
goods
but
a
purchaser
of
them.
He
did
not
pay
for
them
on
their
receipt
but
waited
until
after
he
had
sold
and
delivered
them
to
his
customers.
Then
he
paid
for
them
in
full
in
United
States
funds.
After
the
incorporation
of
the
defendant
its
relationship
to
Smith
Brothers
Inc.
was
exactly
the
same
as
his
had
been.
Mr.
Stuart
received
his
first
payment
of
5
per
cent
from
Smith
Brothers
Ine.
in
the
spring
of
1937.
It
came
as
a
complete
surprise
to
him.
Later
that
year
he
saw
Mr.
Bates,
who
was
then
the
advertising
manager
of
Smith
Brothers
Inc.,
and
received
a
further
cheque
from
him
with
the
intimation
that
Mr.
Bates
wanted
him
to
work
hard
and
that
further
cheques
would
be
forthcoming
but
he
emphasized
that
he
never
had
any
agreement
with
Smith
Brothers
Inc.
by
which
he
had
any
right
to
receive
any
payments.
The
payments
continued
to
be
made
to
him
until
October,
1949,
even
after
the
defendant
had
been
incorporated
and
was
the
purchaser
of
the
goods.
Mr.
Stuart
then
got
into
income
tax
and
Foreign
Exchange
Control
Board
difficulties.
He
had
a
meeting
with
the
defendant’s
board
of
directors
in
the
course
of
which
he
maintained
that
the
payments
were
his
since
he
was
getting
them
as
personal
payments
for
the
job
that
he
was
doing
but
it
was
pointed
out
to
him
that
it
would
be
better
for
him
from
an
income
tax
standpoint
to
turn
the
moneys
over
to
the
defendant
and
he
did
so.
He
then
notified
Smith
Brothers
Inc.
not
to
send
any
further
cheques
to
him
but
to
send
them
to
the
defendant.
Mr.
Stuart
said
that
he
always
paid
Smith
Brothers
Inc.
in
full
for
the
goods
received
from
it
before
he
received
any
payments
from
it.
Smith
Brothers
Inc.
was
always
urging
him
to
increase
his
sales.
Mr.
Shaw
attended
meetings
with
him
and
his
salesmen
and
gave
them
hard
selling
talks.
Mr.
Stuart
always
made
Smith
Brothers
Inc.
his
number
1
item.
It
was
number
1
in
his
price
books,
in
his
report
form
and
in
his
catalogue.
He
was
getting
something
extra
for
making
Smith
Brothers
Inc.
his
number
1
item
in
his
business.
This
was
over
and
above
his
income
from
the
profit
on
the
sale
of
the
goods.
There
was
never
any
agreement
that
it
should
be
paid.
This
case
is
not
free
from
difficulty.
It
was
contended
for
the
Crown
that
the
payment
of
$30,616.33
by
Smith
Brothers
Inc.,
partly
to
Mr.
Stuart
for
the
period
from
September,
1948,
to
October,
1949,
and
the
remainder
to
the
defendant
for
the
period
from
October,
1949,
to
June
1,
1951,
amounting
to
5
per
cent
of
the
selling
price
of
the
goods
had
the
effect
of
reducing
the
selling
price
to
the
defendant
by
the
amount
of
the
payment
and
thus
brought
the
case
within
the
ambit
of
Section
6(1)
of
the
Customs
Tariff,
that
the
payments
were
a
rebate
of
the
selling
price
of
the
goods
and
had
the
effect
of
reducing
it
and
thus
attracting
special
or
dumping
duty
and
that
if
effect
were
to
be
given
to
the
submission
of
the
defendant
there
would
be
nothing
to
prevent
exporters
from
dumping
goods
into
Canada
by
indirect
methods
similar
to
the
one
used
by
Smith
Brothers
Ine.
The
reality
of
the
transaction
was
said
to
be
that
Smith
Brothers
Inc.
actually
sold
the
goods
to
the
defendant
at
5
per
cent
below
their
fair
market
value
and
so
brought
the
transactions
within
the
ambit
of
Section
6(1)
of
the
Customs
Tariff.
It
was
also
submitted
for
the
Crown
that
although
$7,801
out
of
the
total
commissions
paid
by
Smith
Brothers
Inc.
had
been
paid
to
Mr.
Stuart
personally
this
amount
really
belonged
to
the
defendant
and
the
decisions
in
Boston
Deep
Sea
Fishing
and
Ice
Company
v.
Ansell
(1888),
39
Ch.
D.
339,
and
Reading
v.
Attorney-General,
[1951]
A.C.
507,
were
cited
in
support
of
this
submission.
If
the
only
evidence
in
this
case
had
been
that
adduced
on
behalf
of
the
plaintiff
I
would
have
been
inclined
to
give
effect
to
the
Crown’s
claim.
It
was
not
unreasonable
on
Mr.
Ball’s
part
after
he
had
made
his
investigation
to
assume
that
the
payment
of
the
5
per
cent
commission
based
on
the
selling
price
of
the
goods
constituted
a
rebate
of
selling
price
so
that
the
actual
selling
price
was
5
per
cent
less
than
the
fair
market
value
of
the
goods.
But
after
careful
consideration
of
the
matter
I
have
come
to
the
conclusion
that
on
the
evidence
as
a
whole
it
would
not
be
proper
to
charge
the
defendant
with
a
special
or
dumping
duty.
In
coming
to
this
conclusion
I
am
not
unmindful
of
Section
2(2)
of
the
Customs
Act
which
provides:
“2.
(2)
All
the
expressions
and
provisions
of
this
Act,
or
of
any
law
relating
to
the
Customs,
shall
receive
such
fair
and
liberal
construction
and
interpretation
as
will
best
ensure
the
protection
of
the
revenue
and
the
attainment
of
the
purpose
for
which
this
Act
or
such
law
was
made,
according
to
its
true
intent,
meaning
and
spirit.”
But
while
the
mandate
of
this
section
must
be
kept
in
mind
it
is
essential
to
determine
the
reality
of
the
transactions
in
question
to
see
whether
they
were
really
such
as
to
bring
them
within
the
ambit
of
Section
6(1)
of
the
Customs
Tariff
and
make
the
defendant
liable
to
special
or
dumping
duty.
As
I
see
it,
the
question
to
be
determined
is
not
whether
the
5
per
cent
payments
had
the
effect
of
reducing
the
selling
price
of
the
goods
to
the
defendant
but
rather
what
their
true
nature
was.
In
the
first
place,
it
is
plain
that,
although
they
were
called
commissions,
they
were
not
commissions
for
that
term
connotes
that
the
relationship
between
John
Stuart
and
then
the
defendant
on
the
one
hand
and
Smith
Brothers
Inc.
on
the
other
was
that
of
agent
and
principal.
But
that
was
not
the
relationship.
Neither
John
Stuart
nor
the
defendant
was
an
agent
of
Smith
Brothers
Inc.
Thus,
whatever
the
nature
of
the
payments
were
they
were
not
commissions
in
the
ordinary
sense
of
the
term.
Nor
were
they
rebates
of
the
selling
price
to
the
defendant.
The
term
rebate
is
defined
in
the
New
English
Dictionary,
Volume
VIII,
as
follows
:
il
A
deduction
from
a
sum
of
money
to
be
paid,
a
discount;
also,
a
repayment,
drawback.”
The
evidence
of
Mr.
Shaw
makes
it
clear,
in
my
opinion,
that
the
5
per
cent
payments
made
by
Smith
Brothers
Inc.
were
not
rebates
of
selling
price
to
the
defendant
within
any
of
the
meanings
mentioned.
I
was
favourably
impressed
with
the
manner
in
which
he
gave
his
evidence
and
I
am
satisfied
that
his
explanation
of
why
the
payments
were
made
was
true.
In
my
judgment,
his
explanation
should
be
accepted.
There
was
no
intention
on
the
part
of
Smith
Brothers
Inc.
to
give
John
Stuart
or
the
defendant
a
rebate
of
the
selling
price
of
the
goods
and
so
make
Smith
Brothers
Inc.
a
party
to
dumping
the
goods
into
Canada.
If
Mr.
Shaw
had
any
thought
in
his
mind
that
the
payments
constituted
rebates
of
selling
price
and
that
Smith
Brothers
Incorporated
were
guilty
of
dumping
the
goods
into
Canada
he
would
never
have
told
the
customs
officers
in
Ottawa
what
his
company
had
been
doing.
I,
therefore,
accept
Mr.
Shaw’s
statement
that
the
payments
were
made
to
Mr.
Stuart
for
his
special
efforts
in
pushing
the
sale
of
Smith
Brothers
Inc.
cough
drops
and
keeping
its
name
in
the
forefront
of
Mr.
Stuart’s
activities.
They
were
made
for
valuable
performance
on
Mr.
Stuart’s
part.
That
was
the
reality
of
the
transactions.
The
fact
that
the
payments
were
calculated
on
the
amount
of
the
selling
price
of
the
goods
does
not
mean
that
they
were
rebates
of
it.
Since
they
were
based
on
Mr.
Stuart’s
performance
there
was
no
reason
why
the
value
of
his
performance
should
not
be
measured
by
the
quantum
of
the
sales
made.
Moreover,
the
payments
were
voluntary
and
entirely
at
Mr.
Shaw’s
discretion.
And
it
is
quite
clear
that
they
were
intended
to
be
for
Mr.
Stuart
because
of
his
performance
and
not
for
the
defendant
and
that
the
only
reason
that
they
were
made
to
it
was
that
Mr.
Stuart
for
income
tax
incidence
reasons
so
instructed.
I
should
also
add
that
while
the
receipt
of
the
payments
was
kept
secret
by
Mr.
Stuart
and
he
did
not
show
them
in
his
income
tax
returns,
as
appears
from
Exhibit
10,
it
does
not
follow
from
such
secrecy
and
failure
to
disclose
that
the
payments
were
rebates
of
selling
price.
Nor
was
there
any
evidence
to
support
the
allegation
in
the
statement
of
claim
that
the
defendant
had
filed
false
invoices
or
violated
any
of
the
provisions
of
Section
203(b)
of
the
Customs
Act.
In
my
opinion,
the
payments
made
by
Smith
Brothers
Ine.
to
Mr.
Stuart
and
the
defendant
were
not
rebates
of
the
selling
price
of
the
goods
imported
by
the
defendant
during
the
period
in
question
and
the
selling
price
of
the
goods
to
the
defendant
was
not
rendered
less
than
their
fair
market
value.
Consequently,
the
case
does
not
fall
under
the
ambit
of
Section
6(1)
of
the
Customs
Tariff
and
the
plaintiff’s
action
for
special
or
dumping
duty
must
be
dismissed
with
costs.
Judgment
accordingly.
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