MACLEAN
J.
:—
This
is
an
Information,
exhibited
by
the
Attorney-General
of
Canada,
for
the
recovery
of
sales
tax
under
s.
86
of
the
Special
War
Revenue
Act,
and
of
excise
tax
under
s.
80
of
the
same
Act,
from
the
defendant,
Noxzema
Chemical
Company
of
Canada
Ld.
(hereafter
called
‘‘Noxzema’’),
an
American
corporation
carrying
on
in
Canada
the
business
of
manufacturing
and
selling
articles
commercially
known
as
toilet
articles
and
medicated
preparations,
since
1932,
its
head
office
being
in
the
City
of
Toronto,
in
the
Province
of
Ontario.
.
During
the
period
commencing
January
1,
1939,
and
ending
July
31,
1939,
Noxzema
made
sales
of
toilet
articles
and
medicated
preparations
manufactured
by
it,
to
a
company
known
as
Better
Proprietaries
Limited,
thereby
incurring
liability
for
the
sales
and
excise
tax
thereon,
but
it
is
claimed
by
the
Minister
of
National
Revenue
(hereafter
called
"‘the
Minister”)
that
the
said
sales
were
made
at
prices
which,
in
his
judgment,
were
less
than
the
fair
prices
on
which
the
said
taxes
should
be
imposed,
within
the
meaning
of
s.
98
of
the
Act,
and,
accordingly,
the
Minister,
in
September,
1939,
acting
under
the
power
claimed
to
be
vested
in
him
by
s.
98
of
the
Special
War
Revenue
Act,
determined
the
fair
prices
on
which
the
said
taxes
should
be
imposed,
and
this
determination
was
in
the
following
terms
:
Whereas
the
Noxzema
Chemical
Company
of
Canada
Limited
did,
prior
to
January
1st,
1939,
sell
the
whole
of
its
manufactured
products
to
various
wholesalers
and
chain
stores,
tax-included,
and
account
for
excise
and
sales
tax
on
the
basis
of
such
sales
to
the
trade;
And
whereas,
commencing
January
1st,
1939,
the
Noxzema
Chemical
Company
of
Canada
Limited
entered
upon
an
arrangement
with
Better
Proprietaries
Limited
whereby
the
latter
company
obtained
exclusive
selling
rights
of
the
products
of
the
Noxzema
Chemical
Company
of
Canada,
Limited;
And
whereas,
during
the
period
January
1st
to
July
31st,
1939,
the
Noxzema
Chemical
Company
of
Canada
sold
or
purported
to
sell
to
Better
Proprietaries
Limited
the
whole
of
its
manufactured
products
for
resale
to
the
wholesalers
and
chain
stores
aforesaid;
And
whereas,
in
the
judgment
of
the
undersigned,
the
prices
obtained
by
the
Noxzema
Chemical
Company
of
Canada
Limited
from
sales
to
Better
Proprietaries
Limited
were
less
than
the
fair
prices
on
which
sales
tax
and
excise
tax
should
be
imposed.
The
undersigned,
therefore
pursuant
to
the
powers
vested
by
Section
98
of
the
Special
War
Revenue
Act,
does
hereby
determine
that
the
prices
at
which
Better
Proprietaries
Limited
sold
the
goods
in
question
to
the
wholesalers
and
chain
stores
were
the
fair
prices
on
which.
the
taxes
payable
by
the
Noxzema
Chemical
Company
of
Canada
should
be
imposed.
If
the
Minister
is
empowered
under
the
Act,
and
upon
the
state
of
facts
here,
to
determine
the
fair
prices
on
which
the
taxes
should
be
imposed
on
the
goods
manufactured
and
sold
by
Noxzema
within
the
period
in
question,
and
Noxzema
is
found
liable
for
the
said
taxes
upon
the
sale
prices
determined
by
the
Minister,
then,
as
I
understand
it,
there
is
no
dispute
as
to
the
quantity
of
the
goods
sold
and
liable
for
the
taxes,
or
as
to
the
rates
of
taxation
imposed
upon
such
sales,
for
the
sales
and
excise
tax
respectively.
It
is
claimed
by
Noxzema
that
it
paid
all
the
sales
taxes
and
excise
taxes
for
which
it,
as
a
licensed
manufacturer
and
wholesaler,
was
liable
in
respect
of
its
sales
within
the
period
in
question,
the
amount
paid
being
$18,494.86;
that
the
prices
at
which
the
said
sales
were
made
were
fair
and
bona
fide
prices
of
sale
and
not
less
than
the
fair
prices
on
which
the
said
taxes
should
be
imposed;
and
that,
in
any
event,
the
Minister
erred
in
determining
that
the
said
prices
of
sale
were
less
than
the
fair
prices
on
which
the
sales
tax
and
excise
tax
should
be
imposed,
and
that
there
was
no
foundation
for
the
judgment
or
discretion
he
purported
to
exercise.
It
will
be
convenient
to
mention
at
once
those
provisions
of
the
Special
War
Revenue
Act
which
are
relevant
to
the
controversy
here.
The
sales
tax
is
imposed
by
s.
86
of
the
Act,
and
the
important
part
of
that
provision
reads
:
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
manufacturer
at
the
time
of
the
delivery
of
such
goods
to
the
purchaser
thereof
.
.
..
"‘Sale
price’’
is
defined
by
s.
85
(a)
of
the
Act
and
that
is
as
follows
:
(a)
"sale
price”
for
the
purpose
of
calculating
the
amount
of
the
consumption
or
sales
tax
shall
mean
the
price
before
any
amount
payable
in
respect
of
the
consumption
or
sales
tax
is
added
thereto
and
shall
include
any
charges
for
advertising,
financing,
servicing,
warranty
or
any
other
charges
of
a
similar
nature
contracted
for
at
the
time
of
sale
whether
these
items
be
charged
for
separately
or
not
and
shall
also
include
the
amount
of
other
excise
duties
when
the
goods
are
sold
in
bond;
and
in
the
case
of
goods
subject
to
the
taxes
imposed
by
Parts
X
and
XII
of
this
Act,
shall
include
the
amount
of
such
taxes;
in
the
case
of
imported
goods,
the
sale
price
shall
be
deemed
to
be
the
duty
paid
value
thereof;
The
excise
tax
is
imposed
by
s.
80
of
the
Act,
and
s.
80
(1)
reads
as
follows:
1.
Whenever
goods
mentioned
in
Schedules
I
and
II
of
this
Act
are
imported
into
Canada
or
taken
out
of
warehouse,
or
manufactured
or
produced
in
Canada
and
delivered
to
a.
purchaser
thereof,
there
shall
be
imposed,
levied
and
collected,
in
addition
to
any
other
duty
or
tax
that
may
be
payable
under
this
Act
or
any
other
statute
or
law,
an
excise
tax
in
respect
of
goods
mentioned.
(a)
In
Schedule
I,
at
the
rate
set
opposite
to
each
item
in
the
said
Schedule
computed
on
the
duty
paid
value
or
the
sale
price,
as
the
case
may
be;
(b)
In
Schedule
II,
at
the
rate
set
opposite
to
each
item
in
the
said
schedule.
Schedule
I
is
the
relevant
one
here
as
the
goods
there
enumerated
include
those
of
the
class
manufactured
and
sold
by
Noxzema,
and
the
rate
of
the
excise
tax
thereon
is
ten
per
cent,
and,
as
stated
in
subs.
(a),
is
to
be
computed
on
the
duty
paid
value
or
the
"‘sale
price/
‘
as
the
case
may
be.
The
next
provision
to
be
mentioned
is
s.
98,
the
important
one
in
this
ease,
the
one
under
which
the
Minister
purported
to
act
in
determining
the
fair
price
on
which
the
sales
tax
and
the
excise
tax
should
be
imposed
in
respect
of
the
goods
manufactured
and
sold
by
Noxzema,
and
it
reads:
Where
goods
subject
to
tax
under
this
Part
or
under
Part
XI
of
this
Act
are
sold
at
a
price
which
in
the
judgment
of
the
Minister
is
less
than
the
fair
price
on
which
the
tax
should
be
imposed,
the
Minister
shall
have
the
power
to
determine
the
fair
price
and
the
taxpayer
shall
pay
the
tax
on
the
price
so
determined.
The
principal
issue
here
is
such
that
it
becomes
necessary
to
narrate
carefully
certain
facts
relating
to
the
business
affairs
of
Noxzema,
and
of
another
corporation
known
as
Better
Proprietaries
Limited
(hereafter
called
"‘Proprietaries’’),
a
Canadian
company
incorporated
under
the
laws
of
the
Province
of
Ontario,
and
the
business
relations
of
a
Mr.
Shaw
with
both
of
these
companies.
The
controlling
interest
in
Noxzema
is
owned
by
Noxzema
Chemical
Company
of
Baltimore,
an
American
corporation,
the
parent
company
of
Noxzema.
It
is
unnecessary
to
explain
the
capital
structure
of
Noxzema
except
to
say
that
its
capital
shares
are
divided
into
what
are
known
as
Class
A
shares,
and
Class
B
shares.
When
Noxzema
determined
to
establish
a
factory
and
sales
office
in
Canada,
in
1932,
it
selected
Shaw,
whose
name
I
have
just
above
mentioned,
to
manage
the
manufacture
and
sale
of
its
products
in
Canada,
and
the
terms
of
his
employment
became
the
subject
of
a
written
contract.
The
principal
terms
of
that
contract
were
that
Shaw
was
to
manage
the
manufacture
and
sale
of
the
products
of
Noxzema
in
Canada
for
a
period
of
five
years
and
he
was
not
to
engage
in
any
other
employment
without
the
consent
of
Noxzema;
Shaw
was
to
be
paid
a
salary
of
$7,500
for
the
first
year,
and
any
upward
change
was
to
be
at
the
discretion
of
the
Directors
of
Noxzema,
but
as
the
con-
tract
was
based
upon
the
fulfilment
of
a
planned
schedule
of
operations,
which
if
not
fulfilled
at
the
end
of
three
years,
it
was
provided
that
the
contract
was
subject
to
termination
at
the
option
of
Noxzema;
and
Shaw
was
to
receive
as
a
bonus
or
additional
compensation
a
specified
number
of
the
B
shares
of
the
capital
stock
of
Noxzema
each
year
during
the
term
of
the
contract,
but
if
the
employment
of
Shaw
ceased
at
any
time
during
such
term
then
the
said
bonus
or
additional
compensation
was
to
cease.
In
due
course,
under
the
terms
of
this
contract,
Shaw
became
the
owner
of
2,325
of
the
B
shares
of
Noxzema.
Such
were
the
principal
terms
of
the
contract
of
employment,
and
this
was
renewed
in
1937
for
a
further
period
of
five
years,
but
the
terms
of
the
renewal
need
not
be
stated.
On
December
31,
1938,
or
a
few
days
thereafter,
Proprietaries
was
organized
for
the
purpose,
inter
alia,
of
dealing
in
proprietary
and
patent
medicines,
pharmaceutical
and
toilet
preparations,
and
all
articles
and
things
which
are
commonly
or
may
conveniently
be
dealt
in
by
drug
stores.
The
capital
of
Proprietaries
was
divided
into
four
thousand
non-voting
preference
shares
of
the
par
value
of
$10,
and
four
thousand
common
shares
without
any
nominal
or
par
value.
Shaw,
with
the
consent
of
Noxzema,
became
President
and
General
Manager
of
Proprietaries
and
a
shareholder
therein,
while
at
the
same
time
continuing
his
employment
with
Noxzema
under
the
terms
of
the
contract
mentioned.
Noxzema
then
entered
into
a
contract
with
Proprietaries
whereby
the
latter
was
to
take
over,
and
did
take
over,
the
Canadian
sales
of
Noxzema
products,
as
from
January
1,
1959.
By
the
terms
of
that
contract,
which
was
to
run
for
one
year,
Proprietaries
was
to
become
the
sole
distributor
in
Canada
of
the
products
of
Noxzema
and
it
was
to
maintain
an
adequate
sales
force
at
all
times
;
Proprietaries
was
to
pay
Noxzema
for
its
products
the
prices
stipulated
in
a
certain
schedule
and
was
to
charge
its
dealers
the
prices
stipulated
in
another
schedule
for
such
products
which,
I
understand,
were
the
prices
formerly
charged
by
Noxzema,
to
its
dealers.
The
contract
was
renewable
by
mutual
consent
for
such
period
as
might
be
agreed
upon,
and
it
was
a
term
thereof
that
if
Shaw
should
at
any
time
during
the
term
of
the
contract,
or
any
renewal
thereof,
cease
to
be
the
President
and
General
Manager
of
Proprietaries,
then
Noxzema
should
have
the
right,
upon
notice,
to
cancel
the
contract.
The
prices
which
Noxzema
was
to
charge
for
its
products
sold
to
Proprietaries
were
such
as
to
net
Noxzema
approximately
what
it
had
been
previously
receiving
from
its
sales
to
dealers,
the
prices
to
Proprietaries
being
about
1214
per
cent
below
that
previously
charged
to
the
dealers
of
Noxzema.
The
difference
between
the
prices
at
which
Noxzema
had
sold
its
goods
to
its
dealers
and
those
at
which
it
sold
the
same
goods
to
Proprietaries,
approximately
1212
per
cent,
was
determined
after
a
careful
analysis
of
the
sales
of
Noxzema
for
the
year
1937,
and
of
the
expenses
and
cost
of
selling
the
same.
The
details
of
that
difference
are
expressed
in
one
Exhibit
as
follows:
"‘2%
cash
discount,
approximately
2810%
freight,
and
approximately
7%0%
selling
cost,’’
and
these
items
of
expense
of
business
Noxzema
was
relieved
of
by
reason
of
its
contract
with
Proprietaries.
The
prices
which
Proprietaries
charged
its
dealers
were,
I
understand,
the
prices
which
Noxzema
had
been
charging
its
dealers,
which
were
the
"fair
prices’’
fixed
by
the
Minister
on
the
sales
from
Noxzema
to
Proprietaries
for
taxation
purposes,
and
which
is
the
subject
of
this
appeal.
I
should
mention,
if
I
have
not
already
done
so,
that
Shaw
became
a
common
shareholder
in
Proprietaries,
holding
one
share
therein,
as
did,
I
think,
all
the
other
common
shareholders,
four
in
number,
one
of
whom
was
F..
J.
Andrews
to
whom
I
shall
presently
refer
as
Dr.
Andrews.
The
preferred
shareholders
of
Proprietaries
were
five
in
number,
consisting,
I
think,
of
the
five
salesmen
employed
by
Proprietaries,
three
of
whom
were
formerly
in
the
employ
of
Noxzema
in
the
same
capacity.
Concurrently
with
the
arrangement
entered
into
between
Noxzema
and
Proprietaries
an
arrangement
was
entered
into
between
Proprietaries
and
Bromo-Seltzer
Ld.,
a
Canadian
corporation
carrying
on
business
at
Toronto,
whereby
the
former
was,
on
much
the
same
terms
as
with
Noxzema,
to
become
the
sole
distributor
in
Canada
of
the
goods
manufactured
by
the
latter,
and
of
which
concern
Dr.
Andrews
was
the
directing
head.
I
think
I
am
correct
in
saying
that
the
only
product
produced
by
Bromo-Seltzer
Ld.
was
the
well
known
preparation
called
"
"
Bromo-Seltzer.
”
In
1937,
Bromo-Seltzer
Ld.
had
an
arrangement
with
McGillivray
Bros.
Ld.
(hereafter
called
"McGillivray''),
a
selling
and
marketing
agency
carrying
on
business
at
Toronto,
to
sell
and
distribute
its
product
in
Canada
on
much
the
same
terms,
if
not
precisely
the
same,
as
with
Proprietaries,
that
is,
the
prices
to
McGillivray
were
at
specified
wholesale
prices,
and
it
in
turn
was
to
invoice
its
customers
at
specified
prices.
The
occasion
for
referring
to
this
business
arrangement
between
Bromo-Seltzer
Ld.
and
McGillivray
is
that
Bromo-Seltzer
Ld.
was
assessed
by
National
Revenue
for
the
sales
tax
on
its
sale
prices
to
McGillivray,
and
not
on
the
sale
prices
of
McGillivray
to
its
customers.
Proprietaries,
on
entering
into
this
arrangement
with
Bromo-Seltzer
Ld.,
took
over
the
selling
organization
of
Bromo-Seltzer
Ld.,
just
as
in
the
case
of
Noxzema.
Proprietaries
also
became
the
sole
distributors
in
Canada
for
two
other
preparations
or
articles
known
as
"‘Rem’’
and
‘‘Rel’’
respectively.
As
the
customers
for
the
products
of
Noxzema
and
Bromo-Seltzer
Ld.
were
largely
druggists
and
chain
stores,
it
was
expected
that
a
saving
would
be
effected
in
the
sale
and
distribution
of
such
products
through
the
one
selling
organization
of
Proprietaries,
and
the
latter
expected
to
secure
from
time
to
time
the
sole
selling
rights
in
Canada
of
the
products
of
other
producers,
the
customers
for
which
would
be
largely
those
who
were
the
customers
for
the
goods
Proprietaries
were
already
distributing
under
the
arrangements
mentioned.
The
idea
of
creating
such
an
organization
as
Proprietaries
originated
with
Dr.
Andrews,
of
Bromo-Seltzer
Ld.
He
had
some
years
earlier
proposed
to
Shaw
the
organization
of
such
a
selling
and
distributing
agency
as
Proprietaries,
with
a
view
to
acquiring
the
exclusive
selling
rights
for
Canada
of
the
products
of
Noxzema
and
Bromo-Seltzer
Ltd.,
believing
that
advantages
to
all
concerned
would
accrue
therefrom,
but
he
was
unable
at
that
time
to
induce
his
associates
to
look
with
favour
upon
this
suggestion
or
proposal.
Later
Dr.
Andrews
again
approached
Shaw
with
this
proposal,
which
after
a
time
resulted
in
the
organization
of
Proprietaries,
and
Shaw
became
its
President
and
General
Manager,
with
the
assent
of
Noxzema
and
the
parent
company.
As
already
mentioned,
while
Shaw
is
associated
with
and
interested
in
Proprietaries,
and
from
which
he
receives
a
salary
of
$2,500
a
year,
he
still
continues
to
be
the
General
Manager
of
the
manufacturing
business
of
Noxzema,
under
the
terms
of
his
contract
with
Noxzema;
he
devotes
the
major
portion
of
his
time
to
the
business
affairs
of
Noxzema,
but
the
working
portion
of
Saturdays
he
devotes
entirely
to
the
affairs
of
Proprietaries,
at
its
business
office
which
is
quite
distinct
and
separate
from
that
of
Noxzema,
and
an
hour
or
two
on
other
days
in
supervising
its
business
operations.
I
have
felt
obliged
to
explain
at
length
all
these
matters
pertaining
to
the
business
affairs
of
Noxzema
and
Proprietaries
in
order
to
disclose
fully
their
relations
the
one
to
the
other,
and
the
relations
of
Shaw
to
each
of
them,
all
of
which
matters
were
prominently
mentioned
during
the
course
of
the
trial.
The
conduct
of
the
business
relations
between
Noxzema
and
Proprietaries
is
in
some
respects
rather
unusual,
and
in
an
issue
of
this
kind
they
are
liable
to
fall
under
suspicion.
However,
after
hearing
all
the
evidence,
I
have
no
difficulty
whatever
in
finding
that
the
business
arrangement
entered
into
between
those
two
companies,
and
the
association
of
Shaw
with
each
of
them
in
the
capacities
I
have
described,
were
conceived,
entered
into,
and
at
the
material
time
were
being
carried
out,
in
good
faith,
for
what
seemed
to
the
parties
concerned
as
fair
and
sound
business
reasons,
and
that
it
was
in
no
way
designed
to
avoid
the
taxes
in
question,
or
to
defeat
in
any
way
the
public
revenues.
It
is
not
possible,
in
my
opinion,
to
reach
any
other
conclusion
upon
the
evidence.
Whether
this
arrangement
was
a
prudent
engagement
for
the
parties
concerned
to
enter
into,
or
whether
the
results
are
likely
to
be
financially
fruitful,
is
something
with
which
the
Court
is
not
concerned.
The
arrangement
was
not
an
unusual
one,
and
was
one
often
made
in
this
country
and
other
countries,
and
illustrations
of
corresponding
arrangements
in
Canada
are
shown
in
one
of
the
exhibits
put
in
evidence.
It
simply
means
that
a
manufacturer
of
goods
contracts
to
sell
his
products
to
a
selling
and
distributing
organization
instead
of
doing
that
himself.
Bromo-Seltzer
Ld.
had
the
Same
arrangement
with
McGillivray
prior
to
its
arrangement
made
with
Proprietaries.
Such
an
arrangement
cannot
be
condemned
because,
as
was
alleged,
it
creates
an
administrative
problem
in
imposing
the
sales
tax,
that
is,
because
the
volume
of
the
tax
would
vary
in
the
case
where
a
manufacturer
himself
disposes
of
his
own
products
on
the
market
from
the
case
where
another
manufacturer
sells
the
same
class
of
goods
to
a
selling
and
distributing
organization.
I
am
not
at
all
sure
that
this
does
in
fact
constitute
what
might
be
called
an
administrative
problem.
In
this
case
there
is
no
ground,
in
my
opinion,
for
doubting
that
the
arrangement
between
Noxzema
and
Proprietaries
was
entered
into
in
good
faith
and
without
any
ulterior
purpose,
or
that
the
sales
to
Proprietaries
were
not
made
at
fair
prices
and
were
not
based
on
the
usual
cost
and
profit
factors
determining
the
prices
at
which
a
manufacturer
might
transfer
his
products
to
a
purchaser,
which
is
a
selling
and
distributing
organization.
The
fact
that
Shaw
was
an
officer
and
employee
of
both
concerns
is
not,
I
think,
such
an
element
in
the
combined
facts
here
as
should
justify
the
conclusion
that
the
relations
of
Noxzema
and
Proprietaries
were
of
a
character
different
from
what
I
find
them
to
be.
There
appears
to
have
been
the
utmost
frankness
on
the
part
of
Noxzema
and
Proprietaries,
and
Mr.
Wilson
their
solicitor,
in
disclosing
to
the
tax
authorities,
prior
to
the
bringing
of
this
action,
all
the
facts
relating
to
the
origin
of
the
trading
arrangement
between
them,
and
the
manner
in
which
that
arrangement
was
being
carried
out.
Such
are
my
conclusions
as
to
the
facts
of
this
phase
of
the
case
and
probably
I
shall
have
occasion
to
revert
to
such
facts
in
discussing
other
points
which
have
been
raised.
Before
proceeding
to
a
discussion
of
the
main
point
for
decision
there
are
one
or
two
matters
of
a
preliminary
nature
to
which
I
should
refer,
and
the
first
is
the
memorandum,
or
judgment
as
it
was
called
by
Mr.
Carson,
wherein
the
Minister
determined
the
"‘fair
price,”
and
which
I
have
already
recited
fully.
I
think
it
is
correct
to
say
that
where
by
statute
a
power
is
given
a
member
of
the
executive
government,
in
his
administrative
capacity,
to
determine
what
is
the
"‘fair
price”
under
section
98
of
the
Special
War
Revenue
Act,
he
is
to
act
judicially,
and
the
judicial
act
must
be
performed
upon
proper
principles,
which
Mr.
Carson
contends
the
Minister
failed
to
do
here.
In
this
connection
Mr.
Carson
referred
to
Pioneer
Laundry
&
Dry
Cleaners
Ld.
v.
The
Minister
[FN: (1939) S.C.R. 1; (1940) A.C. 127; (1939) 4 D.L.R. 481.],
and
the
authorities
therein
mentioned,
wherein
that
principle
is
discussed.
I
do
not
think
it
is
necessary
to
discuss
further
that
principle
or
to
refer
to
the
many
other
authorities
touching
it.
The
memorandum
of
the
Minister
recites
that
Noxzema,
prior
to
January
1,
1939,
sold
the
whole
of
its
manufactured
products
to
various
wholesale
dealers,
the
sale
prices
for
which
included
the
sales
tax,
and
it
accounted
for
the
sales
and
excise
tax
on
the
basis
of
such
sales
to
the
trade;
that
commencing
January
1,
1939,
Noxzema
entered
into
an
arrangement
with
Proprietaries
whereby
the
latter
obtained
the
exclusive
selling
rights
of
the
products
of
the
former,
in
Canada,
and
during
the
period
from
January
1st
to
July
31st
of
1939,
Noxzema
"‘sold
or
purported
to
sell’’
the
whole
of
its
manufactured
products
to
Proprietaries
for
resale
to
wholesalers
and
chain
stores;
that
the
prices
received
by
Noxzema
from
such
sales
to
Proprietaries
were
less
than
the
fair
prices
on
which
the
sales
tax
and
excise
tax
should
be
imposed;
and
the
final
paragraph
declares
that
the
prices
at
which
Proprietaries
sold
the
goods
in
question
to
wholesalers
and
chain
stores
were
the
fair
prices
on
which
the
taxes
payable
by
Noxzema
should
be
imposed.
Such
a
formal
presentment
of
the
reasons
for
the
Minister’s
determination
was
not,
I
think,
imperative
though
perhaps
desirable.
Mr.
Carson
endeavoured
in
many
ways
to
ascertain
the
evidence
upon
which
the
Minister
acted,
and
its
souree.
An
administrator
is,
I
think,
in
a
relatively
free
position
so
far
as
the
evidence
upon
which
he
acts
is
concerned.
It
has
been
said
by
some
text-book
writers
on
administrative
law
that
he
may
act
without
evidence,
he
may
act
against
what
evidence
there
is,
or
he
may
accept
as
evidence
testimony
of
a
kind
which
would
not
for
a
moment
be
admissible
in
a
court
of
law,
and
all
this,
I
think,
is
in
a
general
way
correct.
He
may
obtain
the
necessary
material
from
any
source
to
which
he
desires
to
resort.
When
Parliament
entrusts
a
Department
with
judicial
duties,
Parliament
must
be
taken,
in
the
absence
of
any
declaration
to
the
contrary,
to
have
intended
it
to
follow
its
own
particular
methods
of
procedure,
which
is
necessary
if
it
is
to
do
its
work
efficiently.
In
a
large
Department
like
that
of
National
Revenue,
where
a
large
volume
of
work
is
entrusted
to
the
Minister,
he
cannot
be
expected
to
do
much
of
that
work
himself.
As
was
said
by
the
Lord
Chancellor
in
Local
Government
Board
v.
Arlidge
[FN: (1915) A.C. 120 at 133.]
:
"‘He
is
expected
to
obtain
his
material
vicariously
through
his
officials,
and
he
has
discharged
his
duty
if
he
sees
that
they
obtain
these
materials
for
him
properly
.
.
.
.
Unlike
a
judge
in
a
court,
he
is
not
only
at
liberty
but
is
compelled
to
rely
on
the
assistance
of
his
staff.”
It
may,
I
think,
be
said
safely
that
the
"‘fair
prices”
determined
by
the
Minister
were
reached
by
adopting
the
distributor’s
prices,
the
prices
of
Proprietaries.
I
think
the
fair
inference
to
be
drawn
from
the
written
document
is
that
the
"fair
prices’’
were
determined
by
the
Minister,
on
the
ground
of
some
association
existing
between
the
two
companies,
or
that
Proprietaries
was
but
the
selling
agent
of
Noxzema,
or
that
they
both
had
a
common
interest
in
such
sales,
otherwise
the
sale
prices
of
Proprietaries
were
entirely
irrelevant.
The
sale
prices
of
Proprietaries
were,
I
think,
adopted
only
because
of
a
belief
in
the
existence
of
some
such
relationship
between
the
two
companies,
but
if
such
there
were
not,
the
prices
of
Proprietaries
cannot,
I
think,
be
translated
into
the
prices
at
which
Noxzema
sold
its
goods.
All
the
evidence
introduced
or
brought
out
by
Mr.
McRuer
at
the
trial
supports
such
an
inference,
and
plainly
points
to
the
fact
that
the
taxing
authorities
were
under
the
belief
that
the
relations
beween
Noxzema
and
Proprietaries
were
such
that
the
Minister
was
warranted
in
holding
that
the
sale
prices
of
the
latter
were
for
taxation
purposes
the
sale
prices
of
the
former.
While
perhaps
Mr.
McRuer
did
not
unequivocally
argue
that
Proprietaries
was
the
mere
selling
agent
of
Noxzema,
and
was
not
an
independent
concern,
yet
he
persistently
suggested
that
idea.
He
urged,
to
use
almost
his
exact
words,
that
when
the
Minister
found
such
a
relation
between
Noxzema
and
Proprietaries
as
he
did,
when
he
found
Proprietaries
interposed
between
Noxzema
and
dealers
in
the
trade,
when
he
found
the
General
Manager
of
Noxzema
was
the
General
Manager
of
Proprietaries,
and
when
he
observed
the
circumstances
surrounding
the
set-up
of
both
companies,
all
these,
he
said,
were
elements
for
the
Minister
to
take
into
consideration
when
determining
the
sales
price
under
section
98.
I
cannot
avoid
the
conclusion
that
the
determination
of
the
Minister
here
was
induced
by
the
fact
that
he
had
reached
the
conclusion,
or
was
so
advised
by
his
officers,
that
the
business
relations
between
Noxzema
and
Proprietaries
were
such
as
to
justify
the
conclusion
that
the
sale
prices
of
Proprietaries
were
the
fair
sale
prices
of
Noxzema,
and
that
the
sale
prices
of
Proprietaries
should
be
treated
as
the
‘‘fair
prices’’
of
Noxzema,
and
the
exposition
of
facts
preceding
the
final
paragraph
in
the
Minister’s
determination
would
appear
to
support
that
inference;
and
without
hearing
all
the
evidence
which
I
heard,
the
conclusion
reached
by
the
Minister
is
one
that
may
be
readily
understood,
but
any
such
presumption
I
exclude
by
my
findings
upon
the
facts
disclosed
at
the
trial.
That
the
"‘fair
prices’’
were
reached
by
the
Minister
in
the
manner
I
have
indicated
is,
I
think,
a
fair
inference
from
the
composition
and
form
of
the
written
determination,
and
that
idea
runs
like
a
red
thread
throughout
the
whole
of
the
ease
of
the
Crown.
That,
I
think,
was
wrong.
I
have
not
been
able
to
see
how
the
Minister
could
determine
the
"‘fair
prices””
of
Noxzema
to
be
those
of
the
sale
prices
of
Proprietaries
except
upon
the
theory
of
the
existence
of
the
relationship
which
I
have
mentioned,
because
I
think
it
is
clear
that
Noxzema
did
sell
its
goods
to
Proprietaries
at
fair
prices,
considering
the
conditions
of
sale,
and
there
was
no
suggestion
that
those
prices
were
below
the
prices
which
such
goods
would
fetch
on
a
sale
in
the
open
market
at
the
time,
or
below
the
sale
prices
of
other
manufacturers
for
similar
goods,
if
sold
for
delivery
at
the
factory.
Another
matter,
one
of
the
most
difficult
points
raised
in
this
ease
is
the
following,
and
it
is
of
general
importance.
It
was
contended
that
the
Minister
having
determined
the
sale
prices
under
s.
98,
that
determination
is
conclusive
against
the
taxpayer,
and
further,
that
even
if
Noxzema
is
sued
for
the
taxes
so
determined
as
a
debt,
it
is
precluded
from
contesting
the
validity
of
such
tax
levy,
and
virtually
from
raising
any
defence
thereto,
on
the
ground
that
the
Court
is
without
jurisdiction
to
entertain
any
claim
to
set
aside
or
vary
the
determination
made
by
the
Minister
under
s.
98
of
the
Act.
The
real
defence
raised
here
by
Noxzema
is
that
it
is
not
liable
for
the
taxes
sued
upon
at
all,
computed
at
any
sale
prices,
and
it
claims
that
in
fact
and
in
law
no
such
liability
ever
existed,
that
any
taxes
for
which
it
was
liable
were
already
paid
and
at
prices
not
less
than
the
fair
prices,
and
that
the
sale
prices
of
Proprietaries
are
utterly
irrelevant
here,
it
being
an
independent
trading
unit
and
in
no
way
associated
with
Noxzema,
except
as
a
purchaser
of
its
goods.
The
Information
here
is
based
on
the
written
determination
of
sales
prices
by
the
Minister,
and
it
is
contended
that
in
this
action
for
debt
the
determination
of
the
fair
prices
under
s.
98
is
conclusive
of
the
liability
of
Noxzema
for
the
taxes
sued
upon.
If
that
be
so
then
there
is
a
serious
obstacle
in
the
path
of
Noxzema
in
attempting
to
resist
the
claim
of
the
Minister,
even
though
this
proceeding
be
an
action
for
a
debt
alleged
to
be
due
the
Crown.
While
there
appears
to
be
no
remedy
by
way
of
appeal
available
to
the
taxpayer
from
the
determination
made
by
the
Minister
under
s.
98
of
the
Act
still
I
do
not
think
that
precludes
the
taxpayer
from
raising
any
proper
defence
to
this
action.
I
do
not
think
that
any
provision
of
the
Act,
expressly
or
by
necessary
implication,
excludes
the
exercise
of
that
common
law
right.
The
Special
War
Revenue
Act
makes
no
provision
for
an
appeal
from
the
imposition
of
the
sales
tax
under
s.
86,
or
from
any
sales
price
determined
by
the
Minister
under
s.
98,
in
fact
there
does
not
appear
to
be
any
provision
for
an
appeal
by
the
taxpayer
under
any
of
the
Parts
of
the
Act.
And
probably
it
was
on
practical
considerations
that
it
was
deemed
undesirable
to
make
any
provision
for
appeals
where
a
tax
on
sales
of
goods
is
imposed
by
reference
to
their
value,
and
where
the
tax
has
so
wide
an
application.
Sec.
106
of
the
Act
requires
every
person
liable
for
the
sales
tax
to
make
a
return
of
his
taxable
sales
monthly,
verified
by
statutory
declaration,
and
the
tax
is
payable
within
a
month
of
the
time
prescribed
by
the
Act
or
by
regulations
established
thereunder.
Considering
the
large
number
of
returns
to
be
made
and
the
small
number
likely
to
be
seriously
contested,
on
the
ground
of
the
sale
price,
it
was
likely
deemed
prudent
to
provide
that
any
denial
of
liability
by
the
taxpayer
for
the
tax,
in
whole
or
in
part,
would
be
heard
and
determined
when
and
if
the
tax
levied
were
sued
upon
by
the
Crown.
See.
108
(1)
provides
that
all
taxes
or
sums
payable
under
the
Act
shall
be
recoverable
at
any
time
after
the
same
should
be
accounted
for
and
paid,
as
a
debt
due
to
or
as
a
right
enforceable
by
the
Crown,
in
the
Courts
there
mentioned.
This
would
preserve
the
legal
rights
of
the
taxpayer
and
afford
him
an
opportunity
of
presenting
and
establishing
any
defence
as
to
his
legal
liability
for
the
tax.
It
was
in
such
circumstances
that
this
proceeding
was
initiated,
which
is
an
action
for
debt,
and
so
far
as
I
know
such
has
been
the
usual
practice
where
the
tax
is
unpaid
and
its
validity
is
in
dispute
between
the
taxpayer
and
the
revenue
authorities.
One
can
hardly
imagine
the
Crown
designedly
refraining
to
provide
some
procedure
whereby
the
subject
might
at
some
stage
contest
his
liability
for
a
tax
imposed
by
the
Crown,
if
such
were
his
desire.
In
such
cases
as
The
King
v.
Rice
Mills
,[FN: [1989] S.C.R. 84; C.T.C.]
The
King
v.
B.C.
Brick
c
Tile
Co.
,[FN: [1936] Ex. C.R. 71; C.T.C.]
The
King
v.
The
Palmolive
Manufacturing
Co.
,[FN: [1933] S.C.R. 131; C.T.C.]
and
The
King
v.
Plotkins
,[FN: [1939] Ex. C.R. 1; [1939]]
the
sales
taxes
claimed
were
sued
upon
as
a
debt,
and
the
debt
claimed
by
the
Crown
was
in
each
case
the
difference
between
the
prices
at
which
the
defendant
and
some
other
party
sold
the
same
goods,
it
being
alleged
by
the
Crown
in
each
case
that
the
defendant
and
the
other
party
were
so
associated
in
connection
with
the
manufacture
or
the
sale
of
the
goods
in
question,
that
the
defendant
was
liable
for
the
sales
tax
at
the
selling
prices
of
that
other
party,
just
as
in
this
case;
the
exact
facts
as
they
developed
in
each
of
those
cases
I
need
not
pause
to
explain.
It
is
true
that
in
none
of
the
cases
mentioned
did
the
Minister
determine
the
fair
price
under
s.
98
of
the
Act
before
action
was
brought,
but
the
issues
there
were
in
principle
nevertheless
exactly
the
same
as
here,
that
is
to
say,
the
prices
at
which
the
other
party
sold
the
goods
were
said
to
be
the
fair
prices
upon
which
the
defendant
should
be
taxed
because
of
its
business
association
with
that
other
party.
But
in
none
of
such
cases
was
it
suggested
or
urged
that
the
taxpayer
could
not
be
heard
to
say
that
the
tax
imposed
was
invalid,
on
grounds
other
than
what
was
the
fair
sale
price.
In
an
action
by
the
Crown
for
a
debt,
I
think,
it
is
the
right
of
the
subject
to
plead
any
proper
and
available
defence
thereto
and
to
sustain
the
same
by
evidence
if
he
can,
and
my
attention
has
not
been
directed
to
any
authority
to
the
contrary,
and
I
do
not
think
that
right
has
been
taken
away
by
any
of
the
terms
of
the
Special
War
Revenue
Act.
Nor
do
I
think
that
in
such
a
case
as
this
the
Court
is
without
jurisdiction
to
entertain
the
defences
here
submitted
by
Noxzema,
by
reason
of
the
determination
of
the
"‘fair
price’’
by
the
Minister
under
s.
98
of
the
Act.
See.
108
(4)
provides
for
the
filing
of
a
certificate’
of
default
in
the
payment
of
the
tax
and
this
operates
as
a
judgment
obtained
upon
the
filing
of
such
certificate
in
a
Court.
This
section
provides
a
summary
procedure
for
obtaining
judgment
where
there
has
been
a
default
in
the
payment
of
the
tax
and
this
procedure
is
availed
of
in
hundreds
of
cases
annually
in
this
Court,
by
the
taxing
authorities,
but,
I
assume,
usually
in
eases
where
liability
for
the
tax
claimed
is
not
in
dispute.
It
is
the
equivalent
of
a
judgment
entered
in
default
of
pleading
by
a
defendant
in
the
ordinary
action
in
any
Court,
and
would
be
readily
opened
up
by
that
Court
on
cause
being
shown.
Here
the
real
issue
is
whether
Noxzema
is
liable
at
all
for
any
portion
of
the
amount
sued
upon,
on
the
ground
which
I
have
already
stated
and
need
not
repeat.
I
am
of
the
opinion
that
Noxzema
is
entitled
to
present
that
defence
in
answer
to
the
Information.
I
come
now
to
a
consideration
of
the
provisions
of
the
Special
War
Revenue
Act
relevant
to
the
matter
to
be
decided
here.
The
principal
provisions
of
the
Act
with
which
we
are
concerned
are
found
in
Part
XIII
of
the
Act,
consisting
of
sections
85
to
98
inclusive.
Sec.
86
imposes
the
sales
tax
"‘on
the
sale
price
of
all
goods
produced
or
manufactured
in
Canada,’’
and
the
tax
is
made
payable
by
the
producer
or
manufacturer
"‘at
the
time
of
the
delivery
of
the
goods
to
the
purchaser
thereof.’’
Noxzema,
as
a
manufacturer,
was
therefore
liable
for
the
sales
and
excise
taxes
on
the
sale
price
of
goods
produced
by
it
.
and
sold
to
Proprietaries,
and
the
same
were
paid.
But
it
is
contended
that
the
prices
at
which
Noxzema
sold
the
goods
in
question
to
Proprietaries
were,
in
the
judgment
of
the
Minister,
"‘less
than
the
fair
price
on
which
the
tax
should
be
imposed,”
and
s.
98
provides
that
in
such
a
case
the
Minister
‘‘shall
have
the
power
to
determine
the
fair
price,’’
and
"‘the
taxpayer
shall
pay
the
tax
on
the
price
so
determined.’’
What
then
is
the
‘‘fair
price’’
in
the
facts
of
this
case,
or
within
the
meaning
of
the
Act?
See.
85
states
that
the
‘‘sale
price,’’
for
the
purpose
of
calculating
the
amount
of
the
sales
tax,
means
the
price
before
the
sales
tax
is
added
thereto,
and
includes
any
charges
for
advertising,
financing,
servicing,
or
any
other
charges
of
a
similar
nature
contracted
for
at
the
time
of
the
sale;
the
‘
‘
sale
price’’
therefore
means
the
price
at
which
such
goods
are
sold
by
the
manufacturer,
plus
such
of
those
other
charges
just
mentioned
if
they
form
a
term
of
the
contract
of
sale,
but
charges
of
that
nature
do
not
enter
into
this
case.
Ordinarily,
the
sale
price
would
be
the
‘‘fair
price.”
The
phrase
‘‘fair
price
”
is
a
commercial
term
and
not
a
legal
term,
and
it
involves
a
question
of
fact,
into
which
many
considerations
may
enter.
The
sale
price
of
one
manufacturer
may
not
be
the
sale
price
of
another
manufacturer
of
the
same
class
of
goods,
and
the
statute
does
not,
I
think,
contemplate
such
a
thing,
and
in
fact
could
not
in
fairness
and
reason
do
so,
because
production
costs
vary
with
manufacturers.
Business
agencies
organized
for
the
purchase,
sale
and
distribution
of
the
goods
of
producers
are
well
known,
and
in
such
eases
such
organizations
purchase
goods.
from
producers
and
assume
the
expenses
incidental
to
the
selling
and
distribution
of
the
same,
whereas
in
other
cases
the
producer
who
sells
and
distributes
his
own
products
assumes
that
expense,
and
that
of
course
enters
into
the
computation
of
his
sale
price.
While
Noxzema
belongs
to
the
first
group,
yet
it
is
being
held
liable
for
the
tax
as
if
it
belonged
to
the
second
group,
and
is
asked
to
agree
that
its
sale
price
should
be
the
same
as
in
the
case
of
those
of
the
second
group
who
must
bear
all
the
expenses
incurred
in
selling
and
distributing
their
products,
which
those
of
the
first
group
do
not
incur.
That
does
not
seem
to
me
the
thing
that
the
statute
means,
or
that
the
legislature
intended
it
to
mean.
No
evidence
was
introduced
on
behalf
of
the
Minister
to
show
what
were
the
sale
prices
charged
by
producers
other
than
Noxzema,
for
goods
of
the
class
in.
question
here,
if
sold
to
a
sales
and
distributing
organization,
but
it
need
not
be
doubted
that
they
would
be
substantially
the
same;
I
have
mentioned
the
case
of
the
sales
of
Bromo-Seltzer
Ld.
to
MeGillivray,
and
I
have
no
doubt
other
similar
examples
might
be
found.
If
the
sales
prices
of
Noxzema
to
Proprietaries
were
the
normal
prices
of
all
manufacturers
of
a
comparable
class
of
goods
to
independent
dealers,
and
such
I
think
they
were,
I
do
not
see
how
it
can
be
said
that
the
prices
of
Noxzema
were
less
than
the
fair
prices,
as
contemplated
by
the
Act.
That
brings
me
to
the
definite
question
as
to
whether
in
the
state
of
facts
here
the
statute
empowers
the
Minister
to
fix
the
sales
prices
of
Noxzema
so
as
to
include
items
of
cost
and
expense
which
it
has
not
incurred,
and
which
could
not
enter
into
the
computation
of
its
production
costs
or
its
sale
prices.
Did
the
Act,
in
the
circumstances
here,
empower
the
Minister
to
fix
the
sale
prices
of
Noxzema
at
other
than
its
actual
sale
prices,
when
they
were
not
below
the
fair
prices
as
between
a
manufacturer
and
a
dealer,
the
dealer
being
an
independent
trading
corporation
?
I
think
not.
There
is
no
evidence
to
show
that
the
sale
prices
of
Noxzema
were
less
than
the
fair
prices,
in
fact
the
evidence
indicates
that
its
prices
were
the
fair
prices
when
sold
to
a
selling
and
distributing
organization
which
had
to
assume
the
expenses
of
sale
and
distribution.
I
do
not
think
the
statute
can
be
construed
to
mean
that
the
Minister
might
arbitrarily
advance
the
sale
prices
of
Noxzema
for
the
purposes
of
the
tax,
without
evidence
that
such
prices
were
less
than
the
fair
prices,
when
sold
in
the
circumstances
I
have
described.
A
test
of
the
fairness
of
the
prices
at
which
Noxzema
sold
its
goods
to
Proprietaries
is
that
they
were
the
same
prices
as
those
at
which
it
had
previously
sold
its
goods
to
the
trade,
less
the
expenses
of
sale
and
distribution
which
were
now
to
be
borne
by
Proprietaries.
The
trading
position
of
Noxzema
was
not
adversely
affected
so
far
as
net
profits
were
concerned,
and
in
fact
its
gross
sales
increased
about
thirty
per
cent
in
the
first
eighteen
months
of
the
arrangement
with
Proprietaries.
I
think
that
s.
98
contemplates
the
case
where
the
producer
has
sold
his
goods
to
a
dealer
below
the
normal
market
prices,
below
the
average
of
the
prices
of
other
manufacturers
of
the
same
class
of
goods,
and
was
not
designed
or
intended
to
meet
the
facts
developed
in
the
case
under
consideration.
I
am
therefore
of
the
opinion
that
the
Minister
was
not
empowered
in
this
case
to
determine
that
the
sale
prices
of
Noxzema
should
be
those
of
the
independent
trading
corporation,
Proprietaries,
and
that
Noxzema
is
not
liable
to
pay
the
taxes
in
question
on
the
sale
prices
determined
by
the
Minister.
The
Information
is
therefore
dismissed
and
with
costs
to
the
defendant.
Judgment
accordingly.
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