Walsh,
D.J.:—The
issue
in
this
case
is
the
proper
classification
of
fibre
optic
transmission
systems
in
the
telecommunications
industry
for
capital
cost
allowance
purposes
for
the
year
1983,
which
is
the
year
in
question,
although
the
decision
will
no
doubt
have
some
influence
on
assessments
for
subsequent
years.
The
hearing
of
the
action
was
shortened,
although
there
was
a
lengthy
argument,
by
a
partial
agreed
statement
of
facts
and
by
the
fact
that
plaintiff
called
only
two
expert
witnesses
who
testified
briefly
while
defendant
called
no
witnesses.
It
will
be
useful
to
quote
the
partial
agreed
statement
of
facts
which
reads
as
follows:
The
parties
by
their
respective
solicitors
agree
hereto
as
to
the
following
facts
in
the
subject
action.
1.
The
plaintiff
is
a
body
corporate
incorporated
pursuant
to
the
laws
of
Canada
and
having
its
head
office
in
the
Municipality
of
Burnaby,
in
the
Province
of
British
Columbia.
The
plaintiff
carries
on
the
telecommunications
business
within
the
Province
of
British
Columbia.
2.
Prior
to
1981
the
plaintiff
employed
only
copper-based
and
microwave
systems
for
signal
transmission.
(a)
Copper-based
systems
used
as
the
medium
of
transmission
copper
wires
arranged
in
cables,
which
cables
may
consist
of
a
number
of
twisted
pairs
or
which
may
be
coaxial
cables.
Signals
are
conducted
in
the
copper
wire,
as
a
flow
of
electrons.
The
technology
embodied
in
a
copper-based
system
is
a
mature
technology.
While
the
cabling
materials
and
insulation
have
changed
since
the
invention
of
the
telephone
in
the
late
19th
century,
the
copper
conductors
and
the
principle
of
signal
transmission
have
remained
the
same
throughout.
(b)
In
microwave
systems,
electromagnetic
waves
emanate
from
an
antenna
and
radiate
through
free
space.
3.
Prior
to
May
25,
1976,
a
composite
rate
approach
was
used
for
certain
assets
of
a
telephone
system
which
were
included
in
Class
17
of
Schedule
B
of
the
Regulations
made
pursuant
to
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the"Act").
Class
17
read
as
follows:
Class
17
(8
per
cent)
Property
that
would
otherwise
be
included
in
another
class
and
that
is
a
telephone
or
telegraph
system
or
part
thereof,
except
(a)
radio
receiving
and
transmission
equipment,
and
(b)
property
included
in
class
10,
13,
14
or
28.
Thus,
prior
to
May
25,
1976
the
copper
wire
arranged
in
cables
and
its
support
equipment
all
fell
within
Class
17.
4.
In
1976,
in
the
context
of
a
thorough
review
of
the
capital
cost
allowance
system,
because
the
composite
approach
for
the
telephone
industry
did
not
adequately
correspond
to
the
changing
mix
of
assets
in
the
industry,
the
system
was
revised
with
the
objective
of
more
closely
approximating
the
actual
rate
of
obsolescence
and
depreciation
with
the
rate
of
capital
cost
allowance
afforded
specific
assets.
Budget
Paper
C,
a
copy
of
which
is
attached
as
Appendix
A
to
this
partial
agreed
statement
of
facts,
is
incorporated
herein
by
reference.
Accordingly,
the
system
was
revised
to
include
the
following
changes:
(a)
wire
or
cable
and
supporting
equipment
was
included
in
Class
3
having
a
deduction
rate
of
five
per
cent;
(b)
most
mechanical
switching
equipment
remained
in
Class
17
having
a
deduction
rate
of
eight
per
cent;
and
(c)
microwave
system
equipment
(previously
included
in
Class
9)
and
electronic
switching
equipment
both
fell
within
Class
8
having
a
deduction
rate
of
20
per
cent.
At
that
time
both
microwave
technology
and
electronic
switching
technology
were
not
mature
technologies,
but
were
undergoing
constant
change
and
improvement.
5.
This
revision
was
implemented
by
Order
in
Council
of
December
2,
1976,
which
added
paragraph
(j)
to
Class
3
of
Schedule
B
(now
Schedule
II)
to
the
Regulations
made
pursuant
to
the
Income
Tax
Act.
This
paragraph,
read
in
context,
is
as
follows:
Class
3
(8
per
cent)
Property
not
included
in
any
other
class
that
is
.
.
.
(j)
telephone,
telegraph
or
data
communication
equipment,
acquired
after
May
25,
1976,
that
is
(i)
a
wire
or
cable,
or
(ii)
supporting
equipment
such
as
a
pole,
mast,
tower,
conduit,
brace,
crossarm,
guy,
or
insulator
that
is
ancillary
to
a
wire
or
cable
referred
to
in
subparagraph
(i).
and
Class
17
was
amended
to
read
as
follows:
Class
17
(8
per
cent)
Property
that
would
otherwise
be
included
in
another
class
in
this
Schedule
that
is
(a)
a
telephone
system,
telegraph
system,
or
a
part
thereof,
acquired
before
May
26,
19/6,
except
(i)
a
radiocommunication
equipment,
or
(ii)
a
property
included
in
Class
10,
13,
14,
or
28,
and
property
not
included
in
any
other
class,
acquired
after
May
25,
1976,
that
is
(b)
telephone,
telegraph
or
data
communication
switching
equipment,
except
(i)
equipment
installed
on
customers'
premises,
or
(ii)
property
that
is
principally
electronic
equipment
or
systems
software
therefor;
or
(c)
a
road,
sidewalk,
airplane
runway,
parking
area,
storage
area
of
similar
surface
construction.
6.
The
plaintiff
has
classified
its
copper-based
cable
acquired
after
May
25,
1976
as
falling
within
Class
3(j),
and
its
microwave
equipment
as
falling
within
Class
8
of
Schedule
II
of
the
Regulations
made
pursuant
to
the
Income
Tax
Act.
7.
In
the
1960s
the
theory
was
advanced
that
optical
fibre
made
of
ultrapure
silica
could
be
capable
of
guiding
an
electromagnetic
wave
with
low
transmission
loss.
It
was
further
theorized
that
this
could
have
application
in
long
distance
communication
systems.
By
1976
this
theory
was
still
in
the
experimental
stage
and
had
not
been
commercially
applied.
8.
Unlike
copper-based
systems
which
use
copper
wires
through
which
signals
are
conducted
as
a
flow
of
electrons,
in
an
optical
fibre
transmission
system
optical
fibres
guide
photons
(electromagnetic
waves)
in
a
lightwave
frequency
range.
The
optical
fibre
system
is
similar
to
a
microwave
system
in
that
both
require
equipment
to
convert
electrical
signals
into
electromagnetic
signals
which
radiate
to
the
receiver.
In
the
case
of
a
microwave
system,
electromagnetic
signals
emanate
from
an
antenna
and
radiate
through
free
space.
In
the
case
of
an
optical
fibre
system,
the
electromagnetic
signals
emanate
from
a
laser
and
are
guided
through
glass
core
optical
fibres.
9.
By
1981,
optical
fibre
technology
had
advanced
to
where
it
could
be
used
for
the
commercial
transmission
of
signals,
and
at
that
time
the
plaintiff
began
to
install
the
new
optical
fibre
technology
where
appropriate.
10.
In
contrast
with
technology
for
a
copper-based
system,
which
is
a
mature
technology,
the
technology
for
optical
fibre
has
already
progressed
through
several
generations
since
the
time
of
its
introduction.
Fibres
in
use
in
1981
were
able
to
carry
672
conversations
over
a
distance
of
up
to
seven
kilometres
before
the
signal
required
regeneration.
Today's
fibres
can
carry
up
to
8,064
conversations
over
a
distance
of
90
kilometres
or
more
before
the
signal
must
be
regenerated.
Seventy
per
cent
of
the
first
generation
optical
fibre
(multimode),
all
of
which
was
installed
prior
to
1986,
has
been
taken
out
of
service.
None
of
the
second
generation
fibre
(single
mode)
installed
after
1984
has
been
taken
out
of
service.
Of
all
the
optical
fibre
of
all
generations
less
than
three
per
cent
has
been
taken
out
of
service.
Of
the
remaining
97
per
cent,
90
per
cent
was
installed
from
1985
to
1990.
11.
Optical
fibres
now
in
use
in
the
telecommunications
industry
are
bundled
together
with
a
steel
core
within
a
protective
coating.
This
process
is
called
"cabling"
and
the
result
is
called
“fibre
optic
cable”,
"fibre
cable"
or
sometimes,
depending
upon
the
context,
simply
"cable".
12.
For
financial
statement
purposes,
the
depreciation
rates
used
by
the
plaintiff
for
fibre
optic
cable
since
1983
expressed
as
a
percentage
one
per
cent)
were
as
follows:
|
Year
|
Aerial
|
Underground
|
Buried
|
Submarine
|
|
1983
|
4.65
|
3.56
|
4.55
|
——
|
|
1984
|
4.08
|
4.08
|
4.08
|
—
|
|
1985
|
4.08
|
4.08
|
4.08
|
—
|
|
1986
|
4.08
|
4.08
|
4.08
|
—
|
|
1987
|
4.08
|
4.08
|
4,08
|
—
|
|
1988
|
4.08
|
4.08
|
4.08
|
—
|
|
1989
|
6.30
|
6.30
|
6.30
|
6.30
|
|
1990
|
6.30
|
6.30
|
6.30
|
6.30
|
13.
The
rates
set
out
in
paragraph
12
were
based
on
depreciation
study
reports
prepared
by
the
plaintiff,
based
upon
its
growing
experience
from
time
to
time
with
optical
fibre
and
accepted
by
the
Canadian
Radio
and
Television
Commission
for
telephone
rate
setting
purposes.
14.
With
respect
to
the
enactment
of
Class
3(j)
as
proposed
in
the
May
25,
1976
budget,
the
Department
of
Finance
and
National
Revenue
do
not
have
any
memoranda
or
other
information
indicating
at
the
time
this
study
was
proposed
and
at
the
time
Regulation
Class
3(j)
was
enacted
it
was
contemplated
that
optical
fibre
was
intended
to
be
included
or
excluded.
As
well,
neither
Department
has
any
record
of
discussions
during
that
time
period
with
a
third
department
on
the
issue
of
optical
fibre.
15.
For
the
purpose
of
determining
capital
cost
allowance
in
computing
its
income,
the
plaintiff
treated
optical
fibre
as
not
falling
within
Class
3
or
Class
17,
but
rather
as
falling
within
the
same
class
as
microwave
equipment,
Class
8
of
Schedule
II
of
the
Regulations
made
pursuant
to
the
Income
Tax
Act
as
being:
Class
8
(20
per
cent)
Property
not
included
in
Class
2,
7,9
or
30
that
is
.
.
.
(i)
a
tangible
capital
property
that
is
not
included
in
another
class
in
this
Schedule
16.
By
notice
of
reassessment
dated
July
22,
1987
for
the
plaintiff's
1983
taxation
year
the
Minister
of
National
Revenue
reassessed
the
plaintiff
and,
inter
alia,
treated
$1,644,412
of
the
cost
of
the
optical
fibre
as
being
included
in
Class
3
and
not
Class
8
of
Schedule
II
of
the
Regulations.
17.
By
notification
dated
October
19,
1987
the
plaintiff
objected
to
the
said
reassessment.
18.
By
notice
of
reassessment
dated
April
30,
1990
the
Minister
of
National
Revenue
again
reassessed
the
plaintiff,
and
confirmed
the
treatment
with
respect
to
optical
fibre
of
the
July
22,1987
reassessment.
Budget
Paper
C
referred
to
in
the
partial
agreed
statement
of
facts
states,
inter
alia,
The
Government's
view
is
that
the
present
system
of
capital
cost
allowance
is
basically
sound
in
generally
providing
a
legislation
system
of
allowances
with
a
relatively
small
number
of
classes
in
the
diminishing
balance
method
of
calculation.
In
reaching
this
conclusion,
however,
it
still
follows
that
the
basic
rates
within
such
a
relatively
simple
system
should
be
related
as
closely
as
practicable
to
economic
depreciation,
unless
there
are
specific
national
economic
objectives
to
the
contrary.
Referring
to
changes
in
the
rate
system,
the
report
states:
As
noted
above,
assets
are
generally
classified
under
the
present
system
by
their
type
rather
than
by
the
industry
in
which
they
are
used,
and
it
has
been
concluded
that
this
general
emphasis
should
be
continued.
As
an
exception
to
this
general
approach,
certain
assets
used
in
a
railway
system
or
in
a
telephone
system
have
been
grouped
together
and
entitled
to
a
composite
rate
of
6%
and
8%
respectively.
Experiences
demonstrated,
however,
that
this
composite
rate
approach
does
not
adequately
reflect
the
changing
mix
of
assets
which
can
occur
over
the
years.
In
these
industries,
the
proportion
of
shorter-lived
assets
has
tended
to
become
more
important.
Accordingly,
it
is
proposed
that
the
present
composite
rate
be
discontinued
and
that
future
asset
acquisitions
be
broken
into
the
more
usual
categories
which
apply
to
other
industries.
In
the
case
of
a
telephone
system,
the
present
composite
rate
of
8%
would
be
replaced
by
8%
for
switching
equipment,
5%
for
poles
and
lines
and
the
usual
rates
for
other
categories
of
buildings,
equipment,
etc.
These
various
rates
would
also
apply
to
the
categories
of
assets
in
the
telegraph
system,
which
are
presently
within
the
composite
railway
rate
of
6%.
The
information
given
in
the
partial
agreed
statement
of
facts
was
substantially
corroborated
by
the
expert
witness,
Koichi
Abe
of
the
National
Optics
Institute.
He
has
a
doctorate
in
chemistry
from
the
University
of
Tokyo.
From
1973
to
1979,
he
was
with
the
scientific
staff
of
Optoelectronics
at
Bell
Northern
Research
working
on
fibre
optics
becoming
manager
of
their
optical
fibre
and
cable
research
department
in
1979
to
1983
and
from
1983
to
1984
he
was
manager
of
its
Fibre
R&D
Pilot
Plant
and
from
1985
to
1987
he
was
director
of
its
Optical
Systems
Division
and
subsequently
Director
of
Technology
in
that
Division.
After
a
year
in
Finland
as
a
consultant
for
Nokia
Cables,
he
became
senior
scientist
at
the
National
Optics
Institute.
As
he
explained,
optical
fibre
is
a
new
signal
transport
medium
using
light
to
carry
information
by
means
of
a
fibre
made
of
glass
(silica)
about
the
size
of
a
thread.
Actually
the
light
signal
is
confined
within
the
center
core
which
is
only
about
one
tenth
of
the
fibre
diameter
and
can
only
be
observed
under
a
microscope.
The
relatively
low
signal
loss
gives
a
reach
of
50
kilometres
without
using
repeaters
to
boost
the
signal
as
compared
with
two
kilometres
for
coaxial
cables
with
a
similar
capacity.
The
idea
of
using
silica
glass
for
light
signal
transport
was
proposed
in
1966
but
it
was
not
until
1970
that
it
was
confirmed
in
a
laboratory
and
it
took
another
ten
years
to
produce
the
transmission
to
a
90
per
cent
level
for
the
fibres
produced
in
a
factory
environment.
By
the
early
1980s,
there
was
no
doubt
in
the
telecommunication
industries
that
this
new
technology
would
become
commercially
viable
and
eventually
revolutionize
the
industry.
According
to
his
evidence,
in
the
early
1970s
a
suitable
light
source,
i.e.,
a
reliable
laser
diode
was
not
available
and
the
electronics
to
convert
the
electronic
signal
to
optical
signal
had
to
be
developed.
The
development
of
the
technology
was
extraordinary.
The
first
field
test
in
1977
carried
about
90
voice
channels
per
fibre
over
a
four-kilometre
distance
and
quickly
became
obsolete.
In
the
early
1980s,
optical
communications
systems
which
carried
672
voice
channels
per
fibre
were
becoming
commercially
available
and
field
installation
started.
The
performance
of
the
equipment
was
primitive
compared
to
today's
standards.
Today,
a
single
fibre,
the
size
of
a
thread,
carries
about
8,000
voice
channels
simultaneously
over
a
distance
of
50
kilometres
without
any
regenerators.
He
stated
that
even
this
will
be
dwarfed
by
the
next
generation
system
with
four
times
the
capacity
in
the
near
future.
Many
TV
channels
are
now
transported
through
optical
fibres
over
a
long
distance
beyond
the
reach
of
aerial
broadcasting.
In
addition
to
improvements
in
fibre
design,
in
order
to
realize
the
potential
of
this
form
of
transmission,
it
was
necessary
to
further
research
light
sources.
A
light
emitting
diode,
operating
the
wave
length
of
840
nm
was
the
only
available
light
source
in
the
early
1970s
but
it
was
found
that
the
wave
length
was
not
optimum
for
silica
based
fibres.
At
about
1,300
nm
the
transmission
loss
was
predicted
to
be
lower
and
it
was
discovered
that
the
chromatic
dispersion
causing
a
signal
distortion
is
at
a
minimum
at
that
wave
length.
Using
a
laser
diode
as
a
light
source,
however,
minimized
chromatic
dispersion
as
the
laser
diodes
of
the
1970s
were
not
sufficiently
reliable
for
telecommunications
use
or
optimum
for
silica
based
fibres.
In
his
opinion
he
states
that
1976
fibre
optics
technology
for
telecommunication
was
still
in
the
laboratory
research
stage.
Until
the
1980s,
hardware
used
for
field
trials
became
obsolete
by
the
time
the
installation
was
completed.
Even
the
commercial
installations
of
them
are
already
antiquated
compared
with
the
current
industry
standards
and
anticipated
in
the
future.
While
testifying,
he
stated
that
in
the
early
installations
ninety
phone
calls
could
be
carried
over
a
single
fibre
for
four
kilometres,
now
8,000
can
be
carried
simultaneously
over
50
kilometres,
and
the
laboratory
research
indicates
that
in
future
40,000
communications
will
be
carried
over
80
kilometres,
as
a
result
of
improvement
in
the
silica
and
the
fibre.
Early
installations
prior
to
1983
used
light
emitting
diodes
as
the
light
source,
lasers
are
what
are
now
used.
Twelve
optical
fibres
are
normally
enclosed
in
a
single
cable.
While
he
did
not
agree
that
fibre
optic
itself
is
a
cable,
preferring
to
call
it
a
transmission
medium,
he
conceded
that
what
it
is
enclosed
in
is
a
cable
and
that
the
term
optic
fibre
cable
is
frequently
used
at
seminars
in
the
industry.
Large
conversion
units
are
needed
to
transfer
light
signals
of
the
fibre
optics
to
the
sound
signals
of
microwave
transmission.
He
stated
that
because
of
the
relatively
short
time
within
which
commercial
installations
have
been
in
use,
physical
obsolescence
cannot
be
calculated
on
the
basis
of
experience,
and
can
only
be
estimated.
He
believes
that
the
fibre
optic
cables
built
today
have
a
relatively
long
life
time
of
perhaps
20
years
though
even
in
the
1980s
there
were
some
failures.
With
respect
to
obsolescence
resulting
from
the
constantly
improving
technology,
he
stated
that
this
is
great,
since,
for
example,
three
new
elements
have
been
discovered
since
1970.
The
other
expert
called,
Elie
Thimot,
has
been
employed
by
Bell
Canada
since
1962,
being
a
mechanical
engineer
with
post-graduate
work
at
Queen's
University
and
a
program
of
Engineering
Economics,
Evaluation
and
Depreciation
at
Iowa
State
University.
He
has
been
involved
in
construction,
cable
repair,
and
long-range
technical
planning,
capital
management
and
depreciation
programs
of
the
company
and
was
loaned
as
a
consultant
to
France
for
over
two
years
and
to
Lebanon,
prepared
materials
for
the
company's
rate
cases
and
construction
programs
in
regulatory
proceedings
between
1981
and
1984.
He
has
appeared
as
an
expert
witness
in
plant
evaluation
cases
in
Quebec.
In
his
report
which
was
taken
as
read,
he
states
that
in
1976
optical
fibre
for
telephone
communication
was
not
advanced
to
the
state
of
practical
application
whereas
the
copper
wire
or
cable
then
in
use
was
a
mature
technology.
If
he
had
been
asked
in
1976
to
determine
a
rate
of
depreciation
for
optical
fibre
he
would
have
had
to
make
an
assumption
that
it
would
be
developed
to
the
state
of
commercial
viability
and
that
since
the
product
was
in
its
infancy
there
would
be
ten
to
fifteen
years
of
technological
change
and
consequential
obsolescence.
He
concludes
that
it
has
since
been
determined
that
an
appropriate
rate
of
depreciation
to
be
ascribed
to
optical
fibre
in
1976
would
be
greatly
in
excess
of
the
rate
ascribed
to
copper
wire
or
cables.
During
his
testimony
he
stated
that
while
Bell
started
using
fibre
optics
in
1980
or
1981,
it
was
not
until
1985
that
they
even
attempted
to
study
what
its
life
expectancy
would
be,
nor
did
they
at
first
claim
depreciation
on
it.
He
has
stated
that
since
copper
cables
have
long
durability
and
are
currently
in
use,
the
replacement
of
them
would
require
something
with
an
economically
longer
life.
The
length
of
life
expectancy
is
however
relatively
immaterial
as
it
is
the
economics
that
the
company
would
be
looking
at.
There
is
now
a
transCanada
fibre
glass
network.
In
1981,
the
company
had
between
3
1/2
and
4
billion
dollars
invested
in
copper
cable
and
by
1985,
had
only
25
million
invested
in
fibre
glass
which
was
so
relatively
insignificant
that
the
installations
were
charged
to
R&D
and
not
capitalized
for
depreciation
at
that
time.
In
1985,
it
depreciated
copper
cable
at
3.4
to
4.5
per
cent
depending
on
whether
it
was
underground
or
overhead,
and
7.6
to
8.5
per
cent
for
fibre
glass.
If
anything,
the
experience
of
fibreglass
has
worsened
since
then,
but
the
rates
referred
to
are
what
CRTC
approved.
Some
discovery
was
read
in
and
in
answer
to
an
undertaking
given
on
discovery,
defendant
states:
The
Departments
of
Finance
and
National
Revenue
do
not
have
any
memoranda
or
other
information
indicating
at
the
time
this
study
was
proposed
and
at
the
time
Regulation
Class
3(j)
was
enacted,
it
was
contemplated
that
fibre
was
intended
to
be
included
or
excluded.
As
well,
neither
Department
has
any
record
of
discussions
during
that
time,
with
a
third
Department
on
the
issue
of
”
fibre”.
As
counsel
for
plaintiff
expresses
it
succinctly,
in
his
notes
of
argument:
The
issue
to
be
resolved
is
whether
optical
fibres
are
to
be
included
in
Class
3(j)
as
“telephone
equipment
that
is
a
wire
or
a
cable”
or
in
Class
8(i)
as"
property
that
is
a
tangible
capital
property
that
is
not
included
in
another
class
in
this
Schedule
III).
As
is
clear
from
the
evidence,
use
of
fibre
optics
in
telecommunication
transmission
was
not
addressed
nor
even
thought
of
when
the
1976
amendments
changing
the
capital
cost
allowance
schedules
were
adopted.
These
have
not
been
changed
since.
It
is
also
evident
that,
while
even
now
not
too
much
is
known
about
the
physical
deterioration
of
fibre
optics
equipment
in
the
past,
and
certainly
in
the
1983
taxation
year,
relatively
high
obsolescence
due
to
constantly
evolving
research
and
improvements
in
the
product,
in
some
cases
the
earlier
installations
were
obsolete
before
they
were
even
installed.
It
is
also
evident,
and
defendant
itself
recognizes
that,
with
respect
to
capital
cost
allowance
rates,
they
must
take
into
account
not
only
physical
depreciation
on
assets
but
also
the
obsolescence
that
would
have
occurred
through
new
developments.
This
appears
from
one
of
the
items
in
the
budget
paper
referred
to,
supra
dealing
with
computers
which
states:
As
indicated
by
the
survey,
technology
in
the
computer
field
continues
to
change
quickly,
and
the
present
general
equipment
rate
of
20%
is
inadequate.
It
is
proposed
therefore
that
the
rates
for
computer
hardware
and
related
software
be
increased
from
20%
to
30%.
What
applies
to
computers
would
certainly
apply
to
fibre
optics
which
are
a
very
rapidly
developing
field.
Certainly,
capital
cost
allowance
would
be
greater
than
that
allowed
for
copper
cable,
for
which
the
durability
technology
was
well
established.
While
it
would
certainly
be
desirable
and
presumably
fair
if
a
study
were
made
determining
on
the
basis
of
what
is
now
known
what
rate
of
capital
cost
allowance
should
be
allocated
to
fibre
optic
transmission
systems,
defendant
cannot
be
blamed
for
not
having
done
this
in
1976
when
the
commercial
use
of
them
was
not
even
contemplated,
nor
most
likely
even
in
1983
at
which
time
there
was
very
little
knowledge
which
was
not
speculative
as
to
what
the
rate
of
obsolescence
should
be.
It
is
not
for
the
Court
to
tell
defendant
what
steps,
if
any,
it
should
take
to
remedy
this
situation.
The
present
case
must
be
decided
on
the
basis
of
the
capital
cost
allowance
schedule
provided
in
the
1976
budget.
Plaintiff
resists
the
interpretation
of
the
word
"
cable”
in
Class
3(j)
as
including
any
unforeseen
future
development
that
would
fall
within
the
meaning
of
word,
arguing
that
it
must
be
taken
in
context
with
other
words
in
the
paragraph
and
with
the
scheme
and
object
of
the
schedule
as
a
whole,
as
was
the
intention
of
Parliament
in
enacting
the
paragraph.
Reference
is
made
to
the
well-known
text
E.A.
Driedger
Construction
of
Statutes,
2nd
ed.,
1983
at
page
87:
Three
expressions
used
with
reference
to
statutes
are:
(1)
object
or
purpose
of
the
Act,
(2)
scheme
of
the
Act,
and
(3)
intention
of
Parliament.
These
expressions
are
loosely
used:
in
no
clearly
defined
meaning,
they
are
often
used
interchangeably.
However,
if
we
can
look
at
them
through
the
eyes
of
a
draftsman,
we
can
assign
fairly
definite
meanings
to
them.
The
object
of
the
Act
is
the
social
objective:
the
scheme
of
an
Act
is
the
draftsman
legislative
scheme;
the
intention
of
Parliament
is
the
ideas
embodied
in
the
words
of
the
Act.
While
both
parties
quoted
extensive
jurisprudence,
dictionary
definitions
and
authorities
on
interpretations
of
statutes
to
support
their
respective
arguments,
much
of
this
when
carefully
read
can
be
distinguished
on
the
facts
or
the
period
of
time
at
which
the
quoted
statements
were
made.
Plaintiff's
principal
argument—in
fact
the
entire
thrust
of
its
argument—is
that
the
ordinary
common
interpretation
of
the
words"
wire
or
cable”
does
not
include
optical
fibres
made
of
silica
and
bound
into
protective
cables,
which
should
only
be
interpreted
in
the
context
of
the
scheme
and
object
of
the
capital
cost
allowance
schedule
and
the
intent
of
Parliament
in
enacting
it.
Reference
was
made
to
cases
dealing
with
the
propriety
of
introducing
Parliamentary
debates
or
reports
of
Commissions
of
Inquiry
into
evidence,
such
as
the
case
of
Lor-
]^es
Contracting
Ltd.
v.
The
Queen,
[1985]
2
C.T.C.
79;
85
D.T.C.
5310
at
84
(D.T.C.
5314)
where
the
judgment
of
the
Court
of
Appeal
rendered
by
Justice
MacGuigan
states:
"I
am
strengthened
in
this
conclusion
by
the
clear
indication
of
the
evil
sought
to
be
remedied
found
in
the
parliamentary
debates
of
which
as
public
documents
this
Court
can
take
judicial
notice.”
He
refers
to
the
Supreme
Court
case
of
the
City
of
Winnipeg
v.
Morguard
Properties
Ltd.
(1983),
50
N.R.
264
at
269-70
as
authority
for
a
statement
that:
"The
present
rule
would
thus
appear
to
be
that
Hansard
may
be
used,
like
the
report
of
a
commission
of
inquiry,
in
order
to
expose
and
examine
the
mischief,
evil
or
condition
to
which
the
legislature
was
directing
its
attention.”
Plaintiff
argues
that:
"The
stated
intention
of
Parliament
was
to
do
away
with
the
composite
rate
applicable
to
telephone
systems
and
to
apply
specific
rates
to
specific
assets
by
reference
to
actual
economic
depreciation.”
This
line
of
argument
concludes
that,
since
optical
fibres
were
not
even
considered
when
Class
3(j)
was
enacted,
no
depreciation
rate
could
have
been
ascribed
to
them,
and
"it
is
clear
that
it
could
not
have
been
the
object
of
the
Act
or
the
intention
of
Parliament
to
include
optical
fibres
in
the
classification
afforded
to
telephone
wires
or
cables.”
This
argument
appears
to
me
to
be
somewhat
specious
since
the
fact
they
could
not
have
been
included
does
not
justify
a
conclusion
that
they
should
be
excluded,
and.
therefore
necessarily
put,
as
plaintiff
desires,
in
Class
8(i)
as
property
that
is
a
tangible
capital
property
that
is
not
included
in
another
class
in
this
Schedule
(II)"
(for
which
the
rate
is
20
per
cent).
Plaintiff
contends
that
the
intent
was
to
move
some
equipment
such
as
electronic
switching
equipment
and
microwave
equipment
to
Classes
8(i)
and
(j)
respectively.
By
no
stretch
of
the
imagination
can
the
fibreglass
including
the
protective
cable
in
which
it
is
enclosed
be
considered
as
analogous
to
electronic
switching
equipment
or
microwave
equipment.
The
mere
fact
that
since
it
was
also
undergoing
rapid
technological
improvement
at
the
time,
comparable
to
the
other
items
included
in
Class
8
justifying
20
per
cent
capital
cost
allowance,
it
too
would
have
been
included
in
that
category
had
this
been
thought
of,
but
was
not,
does
not
help
plaintiff
since
it
is
not
what
might
have
been
which
the
Court
must
consider
in
interpreting
a
statute
but
what
in
fact
the
statute
states.
The
cases
referred
to
by
plaintiff
deal
with
situations
where
the
words
used
in
the
statute
are
ambiguous
or
require
interpretation,
so
that
the
intent
of
Parliament
must
be
looked
at
as
an
aid
to
this
interpretation.
While
I
do
not
believe
that
this
case
should
be
decided
on
the
basis
of
dictionary
definition,
plaintiff
refers
to
Webster's
Deluxe
Unabridged
Dictionary,
2nd
Edition,
1979
defining
"
cable”
as"a
bundle
of
insulated
and
protected
wires
through
which
an
electric
current
can
be
passed".
Defendant
refers
to
1976
Webster's
3rd
New
International
Dictionary
definition
of
"cable",
inter
alia,
as
"an
assembly
of
electrical
conductors
insulated
from
each
other
but
laid
up
together
usually
by
being
twisted
around
a
central
core",
and
the
1983
edition
of
Webster's
Ninth
New
Collegiate
Dictionary
definition
includes
"something
resembling
or
fashioned
like
a
cable
(a
fibre-optic
cable).”
Considerable
argument
was
devoted
to
the
question
as
to
whether
the
words
"wire
or
cable”
in
Class
3(j)(i)
must
be
interpreted
as
they
were
understood
in
1976
or
whether
they
are
"open-textured".
Plaintiff
argues
that
the
asset
classes
of
Schedule
II
were
not
designed
to
have
an
open
texture,
and
cites
instances
that,
where
they
were
supposed
to
include
assets
other
than
those
specifically
named,
words
were
added
to
attain
this
result
such
as
“or
similar”
or
"other".
An
examination
of
these
sections,
however,
indicates
that
the
intent
was
to
also
cover
similar
items
to
those
specifically
designated
which
items
were
known,
as
the
sections
were
supposed
to
cover
all
items
of
this
nature,
including
some
not
named
which
might
otherwise
have
been
excluded.
It
is
evident
that,
had
the
words
“or
similar
objects"
or
"other
objects
resembling
wire
or
cable”
been
added
to
the
words
"wire
or
cable”,
this
would
not
have
helped
plaintiff
as
it
would
certainly
have
strengthened
defendant's
argument.
It
was
not
necessary
since
the
words
"wire
or
cable”
used
are
quite
comprehensive,
and
even
plaintiff's
expert
Dr.
Abe
admitted
that
the
exhibit
produced
of
the
fibreglass
enclosed
in
its
protective
covering
is
a
cable,
although
not
admitting
that
the
fibreglass
itself
is
a
cable,
calling
it
"a
transmission
medium".
He
stated,
however,
that
the
function
of
a
cable
is
to
get
signals
from
A
to
B
by
the
means
inside
it.
Plaintiff
argues
that
under
the
noscitur
a
sociis
principle,
two
words
coupled
together
such
as
the
words
"wire
or
cable”
take
colour
from
each
other
and
the
more
general
word
“cable”
becomes
restricted
by
the
specific
word
"wire"
so
as
to
mean
a
cable
of
a
wire
genre
citing
as
authority
for
this
Maxwell's
Interpretation
of
Statutes,
12th
Edition
1969,
page
289.
The
argument
continues
by
the
definition
of
"wire",
quoted
from
the
Shorter
Oxford
English
Dictionary,
3rd
Edition
1973
as"
metal
wrought
into
the
form
of
a
slender
rod
or
thread".
While
no
later
definitions
or
other
authorities
were
cited,
it
would
appear
to
me
that
with
the
invention
of
fibre
optics,
a
glass
fibre
could
be
considered
as
a“
wire”*and
not
excluded,
merely
because
it
is
not
made
of
metal.
The
physical
exhibits
filed
are
sections
of
cable
and
the
purpose
of
a
cable
is
to
get
a
signal
from
point
A
to
point
B
whether
it
is
copper,
fibre
or
super-conductor
cable.
To
use
fibre
optics
you
need
a
cable
enclosing
it.
From
the
early
1970s,
the
scientific
industry
and
the
telephone
industry
knew
that
there
was
fibre
optic
cable,
coaxial
cable
as
well
as
copper
cable.
This
clearly
differs
from
microwave
transmission
in
which
there
is
no
cable
link.
In
support
of
the
noscitura
sociis
principle,
plaintiff
refers
to
the
British
case
of
Foster
v.
Diphwys
Casson
and
Slate
Co.
(1887),
18
Q.P.D.
429
which
dealt
with
transporting
gunpowder
into
a
mine
other
than
in
a
"case
or
canister".
It
was
brought
in
a
linen
bag
and
exploded.
The
Court
held
at
page
431
that
the
words
"case
or
canister"
explain
one
another,
that
the
word
"case"
used
in
connection
with
"canister"
must
mean
a
case
in
the
nature
of
a
canister,
not
strictly
speaking,
a
canister
but
it
must
be
a
solid
and
substantial
thing
of
wood
or
metal;
or
some
other
solid
substance
which
could
be
covered
over
so
as
to
prevent
ignition
from
a
spark.
In
order
to
construe
the
Act
according
to
its
purpose
a
linen
bag
could
not
be
considered
as
a
"case".
In
the
present
case,
there
is
no
such
distinct
or
obvious
difference
distinguishing
the
cable
enclosed
fibre
optic
filament,
whether
the
glass
filament
can
by
itself
be
considered
as
a
cable
or
not,
from
an
ordinary
copper
cable.
Finally,
plaintiff
submits
extensive
authority
for
the
conclusion
that
when
a
taxing
statute
is
ambiguous
or
lacking
in
explicitness,
ambiguity
should
be
resolved
in
favour
of
the
taxpayer.
To
apply
this
argument
it
would
be
necessary
to
conclude
that
the
words,
in
the
disputed
section
3(j)(i),
"wire
or
cable”
are
ambiguous,
and
I
do
not
so
conclude.
Defendant
for
its
part
denies
that
there
is
any
ambiguity.
It
refers
inter
alia
to
the
British
case
of
Grenfell
v.
C.I.R.
(1876),
1
Ex.
D.
242
construing
the
Stamp
Act
which
held
at
page
248
that
it
is
not"
to
be
construed
according
to
the
strict
or
technical
meaning
of
the
language
contained
in,
but
that
it
is
to
be
construed
in
its
popular
sense:
meaning,
of
course,
by
the
words
"popular
sense"
that
sense
which
people
conversant
with
the
subject
matter
with
which
the
statute
is
dealing
would
attribute
to
it."
The
words
used
are
not
technical
words
but
even
if
they
were,
the
case
of
Pfizer
Co.
v.
Deputy
Minister
of
National
Revenue
(Customs
and
Excise),
[1977]
1
S.C.R.
456;
68
D.L.R.
(3d)
9,
held
that
even
with
respect
to
words
appearing
in
statutes
dealing
expressly
with
scientific
matters,
if
it
is
proven
that
scientific
meaning
of
word
differs
from
its
popular
meaning
"the
rule
that
statutes
are
to
be
construed
according
to
the
meaning
of
the
words
in
common
language
is
quite
firmly
established
and
it
is
applicable
to
statutes
dealing
with
technical
or
scientific
matters".
As
a
secondary
argument,
defendant
submits
that
even
if
it
were
concluded
that
the
word
"cable"
in
Class
3
would
not
in
1976
have
included
fibre
optic
cables
an
open
textured
interpretation
should
nevertheless
be
given
to
it.
Reference
is
made
to
Maxwell
Interpretation
of
Statutes,
11th
Edition,
page
76
where
it
is
stated:
Except
in
some
cases
where
the
principle
of
excessive
strict
construction
has
been
applied,
the
language
of
a
statute
is
generally
extended
to
new
things
which
were
not
known
and
could
not
have
been
contemplated
by
the
legislature
when
it
was
passed.
This
occurs
when
the
Act
deals
with
the
genus
and
the
thing
which
afterwards
comes
into
existence
is
a
species
of
it.
Although
it
was
not,
of
course,
dealing
with
fibre
optics,
the
British
case
of
Attorney-General
v.
The
Edison
Telephone
Company
of
London
Ltd.
(1886),
Q.B.D.
244,
held
that
the
telephone
was
a
telegraph
within
the
sense
of
the
Telegraph
Act.
The
telephone
was
not
known
at
the
time.
The
Act
was
intended
to
confer
powers
and
impose
duties
upon
companies
established
for
the
purposes
of
communicating
information
by
the
action
of
electricity
upon
wires
and
“absurd
consequences
would
follow
if
the
nature
and
extent
of
those
powers
and
duties
were
made
dependent
upon
the
means
employed
for
the
purpose
of
giving
the
information"
(pages
254-55).
It
was
held
that
the
word
“telegraph”
so
defined
was
wide
enough
to
cover
every
instrument
which
may
ever
be
invented
which
employs
electricity
transmitted
by
a
wire
as
a
means
for
conveying
information.
"The
wire
is
a
wire”.
In
the
Quebec
case
of
Deneault
v.
Monette,
55
Que.
K.B.
111,
the
statutory
use
of
a
generic
term
was
involved.
It
was
held
that
a
truck
is
exempt
from
seizure
in
the
same
fashion
as
are
"horses,
summer
vehicles,
winter
vehicles
and
equipment
that
a
driver
must
use
to
earn
his
livelihood”
(translated
from
French).
The
truck
was
a
recent
invention
and
the
legislature
could
not
have
considered
it
when
promulgating
the
section
in
question.
The
Court
held
[translation]:
It
is
more
than
likely
that
the
legislator
when
he
made
his
law,
was
only
thinking
of
types
of
vehicles
which
were
being
used
at
that
time
by
charioteers
and
truck
drivers.
This,
however,
hardly
matters.
We
must
give
to
the
terms
of
the
law
their
natural
meaning.
It
is
untenable
to
hold
that
the
law
must
be
amended
every
time
a
new
type
of
item
is
invented.
It
was
argued
that
it
is
appropriate
that
fibre
optic
cable
be
included
in
the
broad
open
textured
term
“cable”
in
Class
3,
for
the
purpose
of
the
new
technology
that
is
identical
in
purpose
to
the
old,
namely
the
transmission
of
communications.
This
is
substantiated
by
the
words
in
Class
3
referring
to
the
items
"acquired
after
May
25,
1976”.
This
would
include
future
developments
in
the
industry
of
data
communication
and
the
word
"cable"
was
not
frozen
for
all
time
to
cables
that
were
known
at
that
time.
In
conclusion,
I
find
that
defendant
succeeds
in
both
arguments.
The
fibre
optic
wires,
although
of
silicon
or
glass,
enclosed
in
a
protective
covering
and
used
in
the
transmission
of
signals
normally
transmitted
by
a
copper
cable
are
themselves
a
cable
within
the
ordinary
meaning
of
the
term,
and
furthermore,
even
if
what
was
known
about
them
did
not
lead
to
their
being
considered
for
inclusion
in
the
words
"wire
or
cable”
as
known
at
that
time,
an
open
structured
interpretation
should
be
given
to
the
words
so
as
to
include
them
as
they
were
known
in
1983,
the
taxation
year
in
question.
I
find
no
ambiguity
in
the
words
or
any
justification
for
concluding
that
this
was
not
Parliament's
intention
in
the
said
capital
cost
allowance
schedule
as
amended
in
1976.
As
previously
indicated,
I
find
no
merit
in
plaintiff's
argument
that
because
this
type
of
transmission
was
not
specifically
included
in
section
3(j),
it
must
be
deemed
to
have
been
excluded
or
as
falling
into
another
category,
in
which
it
clearly
does
not
belong.
On
the
contrary,
it
might
be
more
accurate
to
say
that
since
it
was
not
specifically
excluded
and
put
into
another
or
separate
category,
it
must
be
deemed
to
have
been
included.
The
fact
is,
however,
that
quite
properly
the
question
was
not
even
considered
nor
was
it
included
or
excluded.
Plaintiff's
appeal
is
therefore
dismissed
with
costs.
Appeal
dismissed.
Email this Content