REYNOLDS
C.J.C.:—The
Appellants,
the
Canadian
Locomotive
Company
Limited
and
the
Canadian
National
Railway,
are
the
owners
of
certain
lands
situate
in
the
City
of
Kingston
on
which
buildings
have
been
erected
for
the
manufacture
of
munitions
of
war,
and
appeal
from
the
decision
of
the
Court
of
Revision
for
the
City
of
Kingston
confirming
the
assessment
thereon
in
the
amount
of
$152,540.00.
The
total
assessment
is
made
up
as
follows:
|
Land
owned
by
Canadian
Locomotive
Co.
Ltd.
|
$
2,900.00
|
|
Buildings
thereon
|
83,775.00
|
|
Land
owned
by
Canadian
National
Railway
under
|
|
|
lease
to
Canadian
Locomotive
Co.
|
3,405.00
|
|
Buildings
thereon
|
62,760.00
|
The
contention
of
the
Appellants
is
that
the
buildings
erected
on
the
land
are
the
property
of
the
Crown,
and
that
the
Canadian
Locomotive
Company
Limited
(thereinafter
referred
to
as
the
Company)
occupies
them
in
an
official
capacity
under
the
Crown,
and
that
the
land
and
buildings
are
therefore
exempt
from
taxation.
Due
to
the
unusual
relationship
that
has
been
created
between
the
Department
of
Munitions
&
Supply
and
the
Company,
the
problem
thus
presented
is
not
free
from
difficulty.
The
circumstances
giving
rise
to
the
appeal
as
related
by
William
Casey,
President
and
General
Manager
of
the
Company,
are
as
follows.
Until
September
1940
the
Company
was
engaged
in
the
manufacture
of
locomotives,
mining
machinery,
and,
for
a
few
months,
certain
war
materials
for
the
Canadian
Navy.
The
Company
was
then
approached
by
the
Department
of
Munitions
&
Supply
with
a
view
to
making
use
of
its
existing
plant
for
the
manufacture
of
shells;
but,
as
the
Company’s
existing
plant
afforded
no
facilities
to
carry
on
such
work,
the
Department
of
Munitions
&
Supply
agreed
that
it
would
assume
the
cost
of
the
construction
of
new
plant,
and
also
furnish
the
necessary
machinery
and
equipment.
In
due
course
an
agreement
was
concluded.
In
order
to
construct
the
buildings
required
under
the
agreement
it
was
necessary
for
the
Company
to
acquire
additional
land
by
way
of
lease
from
the
Canadian
National
Railway
and
also
a
small
portion
from
the
city
of
Kingston
known
as
a
part
of
William
Street.
In
respect
to
the
City
of
Kingston
land,
no
lease
has
as
yet
been
entered
into,
although
the
essential
terms
have
been
agreed
upon.
Thus,
the
buildings
erected
are
partly
upon
land
owned
by
the
Company,
partly
upon
land
owned
by
the
City
of
Kingston,
and
partly
upon
Canadian
National
Railway
land.
The
construction
of
the
buildings
was
undertaken
and
completed
by
E.
G.
M.
Cape
Construction
Company
under
a
contract
with
the
Company,
and
pursuant
to
the
Agreement
with
the
Department
of
Munitions
&
Supply
(Exhibit
1).
On
completion,
machinery
and
equipment
were
installed
pursuant
to
the
agreement
Exhibit
1,
and
are
now
in
use
for
the
manufacturing
of
shells
and
for
no
other
purpose.
Mr.
Casey
further
testified
that
all
the
machinery
and
equipment
were
furnished
by
the
Department
or
its
subsidiary
agency
known
as
"‘Citadel,’’
and
it
also
supplies
the
Company
with
all
materials
required
in
the
processing
of
the
shells.
The
Com-
pany’s
sole
obligation
is
to
supply
the
management
and
the
labour.
The
above
in
a
general
way
sets
out
the
position
of
the
Company
in
its
occupancy
of
the
buildings
in
question,
but
it
is,
I
think,
necessary
to
refer
more
particularly
to
some
of
the
provisions
in
the
agreements
entered
into
the
Department
of
Munitions
&
Supply
and
the
Company,
in
order
to
more
clearly
understand
the
submissions
made
by
the
Appellants.
The
main
agreement
is
one
dated
September
17th,
1940,
Exhibit
1,
known
as
the
Capital
Expenditure
Agreement.
Under
this
agreement
the
Company
is
authorized
to
purchase
certain
equipment
set
out
in
Schedule
"‘A’’
and
additional
equipment
if
authorized
by
the
Minister,
the
total
cost
of
which
is
borne
by
His
Majesty
but
is
not
to
exceed
$590,645.60,
and
the
Company
agrees
to
manufacture
6
inch
Howitzer
shells
at
the
rate
of
nine
thousand
per
week.
Clause
4
of
this
agreement
authorized
the
Company
to
erect
additional
plant
space
provided
the
approval
of
the
Minister
is
obtained.
Clause
7
sets
out
that
the
Company
has
entered
into
a
contract
with
E.
G.
M.
Cape
Construction
Company
for
the
construction
of
the
plant
addition
on
a
cost
plus
basis,
but
limiting
the
cost
of
His
Majesty
to
the
sum
of
$297,159.60.
Annexed
to
the
agreement
are
general
conditions
which
form
part
of
the
contract.
Under
Clause
6,
Part
II,
the
equipment
purchased
by
the
Company
pursuant
to
the
main
agreement
vests
in
His
Majesty,
and
the
Company
is
required
to
execute
and
deliver
to
the
Minister
such
documents
and
instruments
as
are
necessary
to
confirm
title
in
His
Majesty
of
equipment
purchased
under
the
agreement.
It
is
further
stipulated
that
the
Company
must
attach
to
each
item
of
equipment
a
notice
indicating
that
it
is
the
property
of
His
Majesty,
and
that
all
equipment
must
be
serially
numbered
for
identification.
Part
III
of
the
general
conditions
relating
to
plant
addition
provide
that
the
plant
addition
must
meet
with
the
approval
of
the
Minister,
and
that
the
plant
be
free
of
all
encumbrances
and
charges.
Under
Clause
12
of
Part
III
the
title
to
the
plant
addition
is
vested
in
His
Majesty,
and
I
think
it
desirable
to
set
it
out
in
full,
Any
plant
addition,
save
and
except
the
alterations
to
existing
plant
buildings
mentioned
in
paragraph
5
of
the
foregoing
agreement,
both
during
construction
and
after
completion,
shall
be
the
property
of
His
Majesty,
provided
that
if
the
plant
addition
is
constructed
upon
lands
owned
by
the
Contractor,
such
lands
shall
remain
the
property
of
the
Contractor,
but,
if
so
required
by
His
Majesty,
shall
be
made
available
to
His
Majesty,
free
of
charge,
until
five
years
after
the
cessation
of
hostilities
in
the
present
war,
and
the
Contractor
hereby
grants
to
His
Majesty
an
irrevocable
option,
exercisable
until
but
not
after
five
years
after
the
cessation
of
hostilities
in
the
present
war,
to
purchase
such
lands
at
a
fair
and
reasonable
price
to
be
determined
by
mutual
agreement
or,
in
default
of
agreement,
by
the
Exchequer
Court.
The
provisions
of
Part
IV
define
the
conditions
as
to
the
purchase
of
additional
equipment
and
materials
and
the
method
of
fixing
the
cost
thereof
to
His
Majesty.
These
provisions
also
stipulate
that
the
plant
and
equipment
must
be
used
only
for
the
purpose
of
carrying
out
contracts
with
His
Majesty,
and
that
the
equipment
and
plant
addition
may
be
removed
only
by
His
Majesty
but
not
by
the
Company.
It
is
further
provided
that
His
Majesty
shall
have
the
right
to
use
and
operate
the
plant
and
equipment
at
any
and
all
times
when
the
same
is
not
required
by
the
Company
to
carry
out
contracts
with
His
Majesty.
The
Company
is
further
obligated
to
take
reasonable
care
of
the
plant
and
equipment,
to
keep
proper
accounts
and
records
as
to
the
cost
thereof,
and
to
allow
representatives
of
the
Minister
to
inspect
them.
Under
Part
III
the
Minister
may
terminate
all
further
obligations
of
His
Majesty,
under
certain
conditions
as
to
compensation
to
the
Company,
and
may
order
the
Company
to
dispense
with
the
services
of
any
employee
of
the
Company.
The
general
power
of
the
Minister
is
contained
in
Clause
32
of
Part
IV,
which
reads
as
follows:
The
contractor
recognizes
and
acknowledges
that
this
contract
is
entered
into
for
the
purpose
of
or
for
purposes
connected
with
the
prosecution
of
the
war
in
which
the
British
and
Canadian
Governments
are
now
engaged
and
the
Contractor
agrees
that
noth
withstanding
this
contract
of
any
term
or
provision
thereof
the
Minister
shall
have
full
power
at
any
time
and
from
time
to
time
to
take
such
steps
or
action
as
in
his
opinion
may
be
necessary
or
advisable
in
the
national
interest,
having
regard
to
the
purposes
for
which
this
contract
is
entered
into.
Attached
to
the
general
conditions
is
a
schedule
of
labour
conditions,
minimum
wages
and
working
day
hours.
A
further
agreement
under
date
of
September
17th,
1940,
(Exhibit
2)
known
as
the
Manufacturing
Agreement,
contains
provisions
as
to
the
Company’s
obligation
to
manufacture
and
deliver
6
inch
Howitzer
shells
to
His
Majesty,
and
as
to
the
materials
to
be
supplied
to
the
Company
to
carry
out
the
contract
;
and
a
further
provision
as
to
the
price
of
each
shell
manufactured.
Attached
to
this
agreement,
Exhibit
2,
are
general
conditions
outlining
in
great
detail
the
methods
of
manufacture.
It
is
also
specified
that
the
materials
furnished
to
the
Company
for
manufacture
shall
remain
the
property
of
His
Majesty.
There
is
also
contained
in
this
part
provisions
whereby
the
representatives
of
the
Minister
may
at
all
times
inspect
the
conduct
of
the
work,
reject
any
unsatisfactory
supplies,
and
in
general
supervise
and
control
the
process
of
manufacture.
The
Minister
is
further
entitled
to
terminate
the
contract
under
certain
conditions
as
to
compensation
&e.
Clause
32
of
the
general
condi-
tions
obligates
the
Company
to
pay
Governmental
and
Municipal
taxes.
Three
subsequent
agreements,
Exhibits
7,
8
and
9,
amend
the
agreements
Exhibits
1
and
2
in
respect
to
the
size
and
quantity
of
shells
to
be
manufactured,
but
do
not,
except
as
stated,
vary
in
any
material
way
the
first
two
agreements,
Exhibits
1
and
2.
Although
the
two
agreements,
Exhibits
1
and
2,
contain
a
great
many
other
terms
and
provisions
to
which
reference
might
well
be
made,
those
which
I
have
indicated
are
sufficient,
I
think,
to
show
the
position
of
the
Company
in
its
occupancy
of
the
buildings
in
question.
Under
Section
4
of
the
Assessment
Act,
the
interest
of
the
Crown
in
any
property,
including
property
held
by
any
person
in
trust
for
the
Crown,
is
exempt
from
taxation;
but
under
Section
38(1)
the
tenant
of
any
land
owned
by
the
Crown
(except
a
tenant
occupying
the
same
in
an
official
capacity
under
the
Crown),
and
the
owner
of
any
land
in
which
the
Crown
has
an
interest
and
the
tenant
of
any
such
land,
is
liable
to
taxation.
"‘Land’’
as
defined
in
Section
1
of
the
Assessment
Act,
includes
all
buildings
or
any
part
of
any
building,
and
structures,
machinery
and
fixtures,
erected
or
placed
upon,
in,
over,
under
or
fixed
to
land.
"‘Tenant’’
under
Section
1
includes
an
occupant
or
tenant
in
possession
other
than
the
owner.
The
provisions
of
the
agreements
to
which
I
have
referred
indicate
that
the
Company
is
at
all
times
subject
to
rigid
controls
and
restrictions
vested
in
the
Crown,
and
that
it
is
not
an
independent
contractor
manufacturing
goods
for
the
purpose
of
selling
them
to
the
Crown.
Rather
it
is
employed
by
the
Crown
to
do
specific
work
in
the
buildings
in
question,
and
has
no
interest
in
the
buildings
except
to
perform
the
work
required
under
its
contracts
with
the
Crown.
It
must
use
the
machinery,
equipment
and
materials
owned
by
the
Crown
and
pay
the
wages
stipulated,
and
it
must
discharge
any
employee
that
the
Minister
requests.
Its
right
of
occupancy
is
confined
to
the
personnel
of
the
Company’s
management
and
to
mechanics
and
Jabourers
required
to
process
the
shells.
The
only
Ontario
cases
in
which
the
expression
"‘occupying
in
an
official
capacity”
has
been
considered
are:
Re
Town
of
Cochrane
&
Cowan,
50
O.L.R.,
169;
Re
Town
of
Cochrane
&
The
King,
56
O.L.R.,
477;
Re
Oakes
c
Township
of
Standford,
58
O.L.R.,
624.
In
each
of
these
cases
the
premises
in
question
were
occupied
by
an
individual
as
an
employee
of
the
Crown
or
agent
of
the
Crown.
The
Oakes
case
seems
to
lay
down
the
principle
that,
if
a.
servant
of
the
Crown
is
required
to
occupy
the
premises
in
order
to
discharge
his
duties,
he
is
not
liable
to
be
rated,
under
Section
38(1).
Manning
in
his
text
book
on
Assessment
and
Rating,
2nd
Edition,
1937,
at
page
189,
refers
to
several
English
cases,
and
stated
that
the
occupant
must
be
‘"by
servants
of
the
Crown
for
the
purposes
of
the
Crown.”
Although
it
is
reasonable.
to
assume
that
the
Company
may
earn
a
profit
under
the
contracts,
yet
I
do
not
consider.
that
this
factor
is
sufficient
to
change
the
character
of
the
Company
‘s
position.
It
seems
to
me
that
the
substance
of
the
agreements
is
that
the
Company
is
in
reality
an
employee
or
agent
of
the
Crown,
in
occupation
of
buildings
owned
by
the
Crown
for
the
sole
purpose
of
discharging
particular
obligations
to
the
Crown.
My
conclusion,
therefore,
is
that
the
Company
is
in
occupation
of
the
buildings
in
an
official
capacity
under
the
Crown,
and
that
neither
it
nor
the
Canadian
National
Railway,
from
which
it
has
leased
part
of
the
land,
is
liable
for
assessment
on
the
buildings
in
question.
Although
the
Company
in
the
agreement
Exhibit
2
obligates
itself
to
pay
municipal
taxes,
yet
this
does
not
entitle
the
Municipality
to
impose
taxes
against
the
Company
when
it
is
not
under
the
Assessment
Act
liable
to
be
taxed.
This
provision
simply
means
that
if
such
taxes
are
collectible,
then
the
Company
and
not
the
Crown
must
pay
them
(Attorney
General
of
Canada
v.
City
of
Montreal,
13
S.C.R.
352).
There
remains
one
further
question,
namely,
is
the
land
on
which
the
buildings
in
question
have
been
erected
also
liable
for
assesssment?
Counsel
for
the
Appellants
contends
that
the
lands
are
exempt
once
it
is
shown
that
they
are
in
the
occupation
of
the
Crown,
but
in
the
view
that
I
take
of
the
law
this
contention
cannot
be
upheld.
There
is
in
Manning’s
text
book
Assessment
and
Rating,
2nd
Edition,
1937,
a
statement
on
page
185
to
the
effect
that
land
occupied
by
the
Crown
and
otherwise
taxable
is
exempt
during
the
occupation
of
the
Crown;
but
on
page
186
the
author
refers
to
the
recent
case
of
The
City
of
Halifax
v.
Fairbanks,
[1928]
A.C.
117,
as
authority
for
the
statement
that
previous
decisions
on
the
exemption
of
property
so
held
may
be
disregarded
in
the
future.
In
the
Halifax
case
the
City
of
Halifax
imposed
a
business
tax
against
the
owner
of
land
which
had
been
let
to
the
Crown.
The
judgment
of
the
Judicial
Committee
of
the
Privy
Council
was
that
the
tax
was
not
on
property
belonging
to
the
Crown,
and
that
the
Crown’s
interest
in
the
property
was
not
thereby
affected.
Although
the
tax
in
question
is
not
a
business
tax
but
a
tax
against
land,
I
am
of
the
opinion
that
the
principle
enunciated
in
the
Halifax
case
is
applicable,
and
that
the
land
in
question
is
properly
assessed.
I
make
no
order
as
to
costs.
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