MATHIESON,
C.J.:—Case
stated
under
Order
XXXIII
of
the
Judicature
Act.
"‘1.
The
plaintiff
is
a
body
corporate
under
an
enactment
of
the
Legislature
of
Prince
Edward
Island
known
as
the
City
of
Charlottetown
Incor
poration
Act.
“2.
The
defendant
is
a
body
corporate
incorporated
by
Letters
Patent
issued
under
authority
of
an
enactment
of
the
Parliament
of
Canada
and
having
as
one
of
its
objects
and
powers
the
construction
of:
buildings,
generally
throughout
Canada.
•
3.
On
or
about
the
28th
day
of
April,
A.D.
1930,
at
Montreal
in
the
Province
of
Quebec
the
defendant
entered
into
a
contract
with
Canadian
National
Realties,
a
body
corporate
with
head
office
without
Prince
Edward
Island,
for
the
construction
of
a
hotel
(except
the
foundation
and
steel
frame)
for
said
Canadian
National
Realties
in
the
City
of
Charlottetown,
and
the
defendant
built
and
constructed
such
hotel
under
the
said
contract.
he
materials
used
in
such
construction
were
largely
imported
into
Prince
Edward
Island.
"
"
4.
Section
112(19)
of
the
City
of
Charlottetown
Incorporation
Act,
being
1903
(P.E.I.),
e.
17,
is
as
follows
:—
‘It
is
hereby
enacted
that
the
City
Council
of
Charlottetown
shall
have
power
to
pass
by-laws
imposing
a
tax
on
contractors
resident
outside
this
province
doing
business
within
the
City
of
Charlottetown.
‘
"5.
In
pursuance
of
said
statute
the
plaintiff’s
City
Council
on
May
21,
1908,
duly
and
regularly
passed
the
following
bylaw
:—
“1.
All
persons
commonly
known
as
contractors
non-residents
of
the
Province
of
Prince
Edward
Island
who
shall
engage
in
the
business
of
a
contractor
for
the
performance
Of.
any
work
of
a
publie
or
private
nature
within
the
City
of
Charlottetown
under
a
contract
or
agreement
shall
pay
to
the
City
of
Charlottetown
on
every
such
contract
or
agreement
a
direct
tax
to
be
computed
in
the
manner
following,
that
is
to
say:
“
(a)
On
all
contracts
where
the
contract
price
does
not
exceed
$10,000
the
tax
shall
be
3%
of
such
contract
price.
"‘(b)
Where
the
contract
price
exceeds
$10,000
but
does
not
exceed
$25,000
the
tax
shall
be
244%
of
such
contract
price.
“
(c)
Where
the
contract
price
exceeds
$25,000
but
does
not
exceed
$50,000
the
tax
shall
be
2%
of
such
contract
price.
(d)
Where
the
contract
price
exceeds
$50,000
the
tax
shall
be
114%
of
such
contract
price.
"‘2.
In
cases
where
the
exact
amount
of
the
contract
price
cannot
be
ascertained
and
in
all
cases
where
the
same
is
dis-
puted,
the
Mayor
of
the
said
City
shall
have
power
to
fix
the
precise
amount
of
said
tax
and
when
so
fixed
by
the
Mayor
as
aforesaid
such
tax
may
be
sued
for
and
recovered
in
the
manner
hereinafter
provided.
u
3.
The
tax
aforesaid
shall
be
paid
on
or
before
the
expiration
of
ten
days
after
it
has
been
applied
for
by
the
Collector
of
the
said
City
or
other
persons
duly
authorized,
and
in
default
of
payment
may
be
sued
for
and
recovered
in
any
court
of
competent
jurisdiction.”
1’6.
Under
the
foregoing
enactment
and
by-law
the
plaintiff
city
has
sought
to
impose
upon
the
defendant
a
tax
of
$7,812.50,
being
the
rate
of
114%
on
$625,000,
said
$625,000
being
the
amount
of
the
defendant’s
contract
for
the
building
of
said
hotel
(except
the
foundation
and
steel
frame)
as
estimated
and
fixed
by
the
Mayor
of
the
plaintiff
City.
"‘7.
The
due
and
proper
assessment
and
demand
as
based
on
the
said
by-law
and
statute
(whose
provisions
are
not
admitted
to
be
intra
vires)
is
accepted
subject
to
later
determination
of
the
actual
contract
price
if
admissible.
(8.
The
Head
Office
of
the
defendant
company
is
at
Halifax
in
the
Province
of
Nova
Scotia
;
it
has
no
place
of
business
in
the
Province
of
Prince
Edward
Island;
there
is
no
allegation
of
any
other
or
further
work
done
in
the
City
by
the
defendant,
and
it
is
not
assessed
by
the
plaintiff
City
in
respect
to
any
property
or
in
any
way,
except
the
said
tax
in
respect
to
the
said
contract.
“9.-
The
question
for
the
Court
is
whether
or
not
the
defendant
is
liable
to
pay
the
tax
claimed,
and
more
particularly
"(1)
Is
the
tax
‘indirect
taxation,’
and
so
ultra
vires?
((2)
Is
the
tax
an
interference
with
the
status
and
powers
of
Dominion
companies,
and
so
ultra
vires
?
If
not
ultra
vires
for
this
reason,
is
it
enforceable
against
the
defendant,
a
Dominion
company
?
"
4
(3)
Is
the
tax
an
interference
with
"Trade
and
Commerce,’
and
so
ultra
vires
?
16
(4)
Is
it
taxation
‘within
the
Province’
within
the
meaning
of
the
B.N.A.
Act,
1867?
“(5)
Is
the
by-law
ultra
vires
the
statute
in
professing
to
tax
an
isolated
transaction
?’’
The
plaintiff’s
case
depends
first
on
its
power
to
impose
any
tax
upon
the
defendant.
That
power
is
not
inherent
in
its
muniçi-
pal
constitution
but
can
only
be
derived
from
provincial
legislation.
The
statute
of
the
Province
relied
upon
by
the
plaintiff
and
the
relative
civic
by-law
are
set
forth
in
the
case
stated.
The
by-law
is
admitted
to
have
been
duly
and
regularly
passed,
which
may
be
taken
as
referring
to
procedure
only
as
in
substance
the
by-law
leaves
the
vague
authority
of
the
statute
far
behind
and
works
out
a
system
of
its
own.
The
departure
in
my
opinion
is
such
as
to
make
it
doubtful
that
the
by-law
had
even
such
authority
as
the
statute
might
confer.
Considering
now
in
their
order
the
questions
submitted
to
the
Court,
the
first
is
as
to
the
nature
of
the
tax
in
question—Is
it
a
direct
tax
within
the
meaning
of
s.
92
of
the
B.N.A.
Act
and
therefore
one
which
the
Province
or
a
municipality
empowered
by
the
Province
could
impose?
The
definition
of
the
expression
"‘direct
taxation’’
adopted
by
the
Judicial
Committee
is
that
of
John
Stuart
Mill
in
his
work.
4
‘Principals
of
Political
Economy,’’
where
he
says:—"‘A
direct
tax
is
one
which
is
demanded
from
the
very
person
who
it
is
intended
or
desired
should
pay
it.’’
In
contrast
he
defines
an
indirect
tax
as
‘‘one
demanded
from
one
person
in
the
expectation
and
intention
that
he
shall
indemnify
himself
at
the
expense
of
another,
such
as
the
customs
or
excise.”
Here
the
contractor
is
called
upon
to
pay
a
tax
which
is
described
in
the
by-law
as
a
‘‘direct
tax”
not
upon
any
tangible
thing
but
‘‘upon
a
contract
for
the
performance
of
any
work”
—a
tax
graduated
according
to
the
contract
price.
Is
not
this
such
a
tax
as
is
demanded
from
one
person
in
the
expectation
and
intention
that
he
shall
indemnify
himself
at
the
expense
of
another
such
as
the
excise
or
customs
?
A
contractor
preparatory
to
tendering
for
such
a
contract
in
the
ordinary
course
would
make
up
his
estimates
including
materials,
labour,
insurance
and
all
other
outgoings
in
respect
of
the
contract.
If
the
contract
is
the
subject
of
taxation,
he
must
include
that
item
with
the
rest
and,
just
as
the
merchant
must
add
the
customs
duty
to
the
cost
of
his
imported
goods
and
pass
it
on
on
to
his
customers,
so
must
the
contractor
pass
a
tax
on
his
contract
over
to
the
owner
if
he
is
to
avoid
bankruptcy.
Out
of
his
own
pocket
he
cannot
be
expected
to
pay
a
tax
on
the
cost
of
the
houses
he
builds
for
other
people.
The
alternative
would
be
that
he
should
include
the
tax
in
his
contract
price,
in
which
case
it
would
fall
into
the
class
of
indirect
taxes
which
can
only
be
imposed
by
Dominion
authority.
To
call
an
indirect
tax
"
"
direct
‘
‘
as
is
done
in
this
case
does
not
change
its
character.
Another
ground
of
objection
to
the
legislation
imposing
the
tax
is
its
alleged
interference
with
Trade
and
Commerce.
The
defendant—a
Dominion
company—is
well
described
as
a
citizen
not
only
of
Canada
generally
but
of
every
Province
in
which
it
resides
or
operates.
It
is
‘‘at
home’’
in
every
Province.
It
is
bound
to
obey
provincial
laws
which
are
validly
passed.
It
is
subject
to
taxation
under
provincial
laws
of
general
application
but
it
may
not
be
interfered
with
by
any
provincial
law
in
such
a
manner
or
degree
as
to
injuriously
affect
its
capacity
or
status.
A
Dominion
company
within
a
Province
is
in
short
entitled
to
the
rights
and
subject
to
the
obligations
of
citizenship.
Any
provincial
enactment
which
would
violate
or
deny
the
rights
of
a
Dominion
company
within
the
Province
is
therefore
ultra
vires.
Does
the
present
legislation
stand
the
test?
Its
object
is
plainly
expressed,
viz.,
to
impose
a
tax
upon
all
contractors
non-residents
of
this
Province
who
shall
engage
in
the
business
of
contractor
for
the
performance
of
any
work
of
a
public
or
private
nature
within
the
City
of
Charlottetown
under
a
contract
or
agreement.
The
defendant
company
comes
under
the
description.
of
nonresident
contractor.
Upon
the
alleged
fact
of
non-residence
the
plaintiff
relies
to
maintain
this
action.
A
contractor
resident
in
this
Province
would
have
no
tax
to
pay.
It
was
contended
on
behalf
of
the
plaintiff
at
the
hearing
that
this
was
not
a
discrimination
against
the
defendant,
that
it
was
being
treated
on
a
parity
with
all
non-residents
of
this
Province
both
Canadian
and
foreign,
that
the
tax
as
to
all
outsiders
was
one
of
general
application
and
that
the
legislation
was
therefore
not
in
derogation
of
the
status
of
a
Dominion
company.
The
fatal
defect
in
that
contention
is
that
the
defendant
a
Canadian
company
had
a
status
other
than
that
of
a
foreigner,
that
is
to
say
the
status
of
a
Canadian
company
entitled
within
this
Province
to
the
rights
of
a
citizen.
A
denial
of
such
rights
would
be
a
direct
interference
with
the
freedom
of
Trade
and
Commerce
within
the
Dominion.
The
legislation
appears
to
have
been
better
calculated
to
exclude
non-resident
contractors
than
to
yield
a
revenue
to
the
city.
I
would
accordingly
answer
the
general
question
in
the
negative
and
in
particular
as
to
question
(1)
viz.,
"‘Is
the
tax
‘indirect
taxation’
and
so
ultra
vires?’’
I
would
answer
“yes.”
As
to
question
(2)
viz.,
‘‘Is
the
tax
an
interference
with
the
status
and
powers
of
Dominion
companies
and
so
ultra
vires
V
9
my
answer
is
‘‘yes’’;
and
as
to
the
remaining
part
of
question
(2)
viz.,
‘‘Is
it
enforceable
against
the
defendant,
a
Dominion
company
?’’
my
answer
is
‘‘no’’.
I
would
answer
question
(3)
in
the
affirmative.
In
the
view
above
expressed
questions
(4)
and
(5)
are
not
material
to
be
answered.
As
to
costs
I
think
the
plaintiff
had
a
right
to
test
the
validity
of
the
legislation
in
question.
The
conduct
of
the
case
has
been
such
as
to
avoid
all
unnecessary
costs.
No
order
for
costs
should
therefore
be
made.
ARSENAULT,
J.:—The
facts
in
this
case
are
sufficiently
set
out
in
the
judgment
just
delivered
by
the
learned
Chief
Justice.
As
to
the
first
point
submitted
for
the
consideration
of
the
Court,
I
am
of
opinion
that
the
proposed
tax
is
an
indirect
tax.
The
definition
of
indirect
taxation
as
enunciated
by
John
Stuart
Mill
in
his
Principles
of
Political
Economy
is
now
generally
accepted,
that
is,
"indirect
taxes
are
those
that
are
demanded
from
one
person
in
the
expectation
and
intention
that
he
shall
indemnify
himself
at
the
expense
of
another.’’
This
definition
has
generally
been
adopted
by
the
Court:
as
substantially
correct.
The
Act
conferring
the
authority
for
the
tax
in
question
is
1903
(P.E.I.),
ce.
17,
s.
112(19)
(quoted
supra).
In
considering
a
tax
of
this
nature
and
imposed
in
this
way,
it
is
to
be
considered
that
a
contractor
is
in
the
business
for
profit.
In
order
that
he
may
make
a
profit
and
in
drawing
up
his
estimates
on
a
contract
for
the
purpose
of
a
tender,
the
contractor
must
take
into
consideration
all
his
outlay
for
material,
labour,
freight,
insurance
and
taxes.
All
of
these
have
to
be
charged
up
before
he
can
add
his
percentage
for
profit.
It
cannot
be
considered
that
he
will
absorb
the
tax
himself
for
the
amount
of
the
tax
as
in
this
case
might
be
the
very
margin
of
his
profit.
It
is
then
a
tax
that
he
must
of
necessity,
if
he
is
to
make
a
reasonable
profit,
pass
on
and
add
to
the
amount
of
his
contract
and
as
such
it
is
an
indirect
tax
and
ultra
vires.
The
answer
to
question
(1)
should
be
"‘yes.’’
The
manifest
intention
of
the
by-law
is
not
only
to
raise
a
revenue
for
the
city
but
to
handicap
an
extra-provincial
contractor
as
against
a
provincial
contractor.
It
was
contended
by
counsel
for
the
city
that
the
object
was'
to
raise
revenue
for
the
city
and
to
place
extra-provincial
contractors
on
the
same
footing
as
contractors
residing
within
the
city.
Counsel
contended
that
the
contractor
within
the
city
had
to
pay
taxes
of
a
different
kind,
whereas
an
extra-provincial
contractor,
if
no
tax
were
imposed,
would
have
a
decided
advantage.
If
the
sole
object
of
the
by-law
was
to
raise
revenue
the
question
naturally
arises,
why
are
contractors
residing
outside
the
City
of
Charlottetown
but
within
the
Province
exempted
from
the
tax?
Contractors
within
the
city
would
be
at
the
same.
disadvantage
as
against
the
latter
that
they
would
be
against
extra-provincial
contractors
and
I
can
come
to
no
other
conclusion
than
that
one
of
the
main
reasons
the
by-law
was
passed
was
for
the
purpose
of
barring
out
or
at
least
seriously
handicapping
extra-provincial
contractors
from
competing
against
local
contractors.
This.
by-law
is
an
attempt
on
the
part
of
the
city
to
prevent
a
company
incorporaed
under
a
Dominion
charter
from
doing
business
in
the
City
of
Charlottetown
and
so
interferes
with
its
rights
under
its
charter.
The
first
part
of
question
(2)
should
therefore
be
answered
in
the
affirmative
and
so
it
is
not
necessary
to
answer
the
second
part
of
the
question.
But
this
is
not
all.
The
by-law
as
framed
would
enable
the
city
collector
immediately
on
the
signing
of
the
contract
and
before
the
contractor
had
entered
upon
he
work
or
even
before
he
had
gathered
his
materials
to
apply
to
the
contractor
for
the
amount
of
the
tax
and,
if
he
did
not
then
pay
before
the
expiration
of
ten
days,
the
city
could
sue
and
recover
the
amount.
The
contractor
might
or
might
not
perform
the
contract
he
might
not
even
put
himself
within
jurisdiction,
that
is,
he
might
not
engage
in
the
business
of
contractor
within
the
City
of
Charlottetown.
It
is
true
that
is
a
tax
on
he
individual
to
be
measured
by
the
amount
of
the
contract,
but
until
that
contract
is
performed
is
there
really
any
way
by
which
the
amount
of
the
tax
can
be
measured?
Until
such
contract
is
performed
and
the
contractor
becomes
entitled
I
do
not
see
that
there
is
anything
by
which
the
amount
of
the
tax
can
be
measured
and
even
if
it
were
a
direct
tax
it
does
not
become
so
until
it
is
ascertained
and,
as
there
is
an
attempt
here
to
make
a
contractor
liable
before
he
comes
within
jurisdiction,
it
is
not
a
tax
within
the
Province.
It
does
not
seem
to
me
that
this
is
taxation
within
the
Province
and
question
(4)
should
be
answered
in
the
negative.
As
to
the
third
question
I
am
not
prepared
to
pronounce
on
it,
nor
do
I
consider
it
necessary.
I
now
come
to
the
last
question,
that
is
(5),
"‘Is
the
by-law
ultra
vires
the
statute
in
professing
to
tax
‘an
isolated
transaction
?‘‘
If
the
by-law
were
otherwise
valid,
that
is
intra
vires,
I
would
hesitate
to
pronounce
it
ultra
vires
from
the
fact
that
this
is
an
isolated
transaction
but
even
if
the
statute
under
which
the
by-law
was
passed
is
itself
intra
vires,—and
as
to
this
it
is
not
necessary
to
give
an
opinion,—still
I
think
that
the
by-law
goes
much
farther
than
is
authorized
by
the
statute.
It
is
to
be
observed
that
the
statute
simply
gives
power
to
the
city
to
pass
a
by-law
imposing
a
tax
on
contractors
residing
outside
the
Province
doing
business
within
the
City
of
Charlottetown.
The
statute
is
silent
as
to
the
nature
of
the
tax
or
the
mode
of
imposing
it.
It
might
be
quite
proper
if
the
city
found
a
nonresident
contractor
doing
business
in
the
city
to
so
frame
a
by-law
as
to
enable
it
to
collect
certain
taxes
from
the
contractor
and
I
am
not
prepared
to
say
that
such
a
by-law
could
not
be
passed
nor
that
it
would
be
invalid.
But
we
are
here
dealing
with
a
specific
by-law
which
is
much
wider
in
its
effect
than
is
contemplated
by
the
statute.
I
do
not
think
that
the
Legislature
ever
contemplated
that
the
city
would
undertake
to
impose
and
collect
a
tax
before
the
contractor
ever
came
within
the
Province
and
within
the
jurisdiction
of
the
city
or
of
the
Province:
and
if
I
am
correct
in
my
interpretation
of
the
by-law
it
has
the
effect
which
is
mentioned
in
the
first
part
of
this
judgment.
I
am
of
opinion
that
the
by-law
is
ultra
vires
and
in
coming
to
this
conclusion
I
am
guided
by
the
principles
set
out
in
the
eases
of
A.-G.
Que.
v.
Reed
(1884)
10
App.
Cas.
141;
Brewers
c
Malsters’
Ass
f
LL
v.
A.-G.
Ont.
[1897]
A.C.
231,
and
subsequent
cases.
To
question
(1)
therefore
the
answer
should
be
"‘yes.’’
As
to
the
first
part
of
qquestion
(2)
in
view
of
the
way
the
by-law
is
drawn
the
answer
should
be
‘‘yes.’’
On
question
(3)
I
do
not
think
it
is
necessary
to
pronounce.
On
question
(4)
the
answer
should
be
"‘no.’’
As
to
(5)
I
am
not
prepared
to
answer
the
question
as
it
is
put
down
but
I
would
answer
that
the
by-law
is
ultra
vires
the
statute
as
being
much
wider
than
is
authorized
by
the
statute.
In
view
of
the
fact
that
this
comes
before
us
in
the
way
of
a
stated
case
to
determine
the
validity
of
a
city
by-law,
which,
so
far
as
it
appears,
had
not
before
been
questioned
and
had
been
acted
on
in
good
faith,
I
am
of
opinion
that
each
party
should
pay
their
own
costs.
SAUNDERS,
J.:—It
seems
to
me
we
should
in
this
ease
first
ascertain
the
purpose
and
object
of
passing
the
legislation
under
which
the
tax
is
imposed;
that
we
must
find
the
pith
and
substance
of
the
Act.
‘I
think
the
pith
and
substance
of
the
Act
and
by-law
is
to
enable
the
city
to
raise
a
revenue
for
civic
purposes.
I
doubt
very
much
if
the
idea
of
excluding
foreign
companies
or
preserving
the
building
trade
for
the
city
or
Province
or
interfering
with
Trade
and
Commerce
ever
entered
the
minds
of
those
who
obtained
the
legislation.
I
am
quite
free
to
admit
however
that
it
may
be
very
well
argued
that
such
is
the
case;
and
that
this
legislation
might
have
the
effect
of
excluding
foreign
companies,
preserving
the
building
trade
for
the
city
and
Province
and
of
restricting
trade;
but
as
a
fact
I
do
not
believe
it
would.
It
seems
to
me
clear,
however,
that
this
is
a
tax
which
will
naturally
and
in
the
ordinary
course
be
passed
on
to
another
party
;
in
fact
much
more
readily
and
easily
than
a
tax
on
many
commodities
which
of
necessity
must
depend
on
many
contingencies
such
as
market
conditions,
etc.
I
cannot
imagine
any
foreign
contractor,
who
makes
a
careful
estimate
of
all
things,
entering
into
a
contract
overlooking
such
an
important
matter
as
this
tax
and
no
including
it
in
his
estimate
and
tender.
It
seems
to
me
a
clear
case
of
a
tax
being
demanded
of
a
contractor
in
the
expectation
that
he
will
indemnify
himself
at
the
expense
of
the
owner;
that
is,
this
is
an
indirect
tax
and
so
wltra
vires
of
the
provincial
legislation.
It
is
not
necessary
for
the
purpose
of
this
case
to
determine
the
other
points
raised.
For
the
reasons
mentioned
I
hold
the
defendant
is
not
liable
to
pay
the
tax
imposed
;
but
as
this
matter
comes
before
the
Court
as
a
stated
case
I
am
of
opinion
that
each
party
should
pay
their
own
costs.
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