Lillian Brown Et Al v. Her Majesty the Queen, [1979] CTC 7

MacDonald, J:—This action has proceeded to trial upon an agreed statement of facts and the Court is asked this question: Is Lillian Brown properly liable for $4.38, or part thereof, social services tax in respect of the electricity purchased from British Columbia Hydro and Power Authority between October 12, 1976 and December 9, 1976? The agreed statement of facts is as follows:

1. The plaintiff, Lillian Brown, an Indian within the definition of the Indian Act (Canada) is a pensioner and lives on Skidegate Indian Reserve in the Queen Charlotte Islands, BC.

2. The defendant Her Majesty the Queen in the right of the Province of British Columbia is hereinafter referred to as “The Queen”.

3. The defendant, British Columbia Hydro and Power Authority (“Hydro”) is a body duly incorporated under the laws of British Columbia and inter alia, carries on the business of generating, distributing and supplying electricity.

4. Between October 12, 1976 and January 4, 1977, the plaintiff Lillian Brown maintained a residence on the Skidegate Indian Reserve.

5. Between October 12, 1976 and December 9, 1976 Hydro delivered a quantity of electricity to the plaintiff’s residence which she used for domestic purposes in her residence and for the lease light.

6. During the said period, Hydro leased an outdoor electric flood light (lease light) to the plaintiff at her place of residence.

7. After December 9, 1976 but prior to January 4, 1977 Hydro billed the plaintiff Lillian Brown:

(a) $54.20 for said quantity of electricity;

(b) $8.30 for the lease light;

(c) $4.38 for the tax imposed by the Social Services Tax Act.

8. The said tax was imposed on:

(a) the rental of the lease light;

(b) the electricity for the light;

(c) the electricity for the home.

9. On January 11, 1977, Hydro received from the plaintiff Lillian Brown $62.50 in respect of the electricity and lease light rental and $4.38 tax.

10. The defendant Hydro remitted the social services tax to the Queen at the times and in the manner provided by the Social Services Tax Act RSBC 1960 Chapter 361.

The agreed question is restricted to tax imposed on the electricity. It is not concerned with the tax imposed on the rental of the lease light.

The tax was imposed pursuant to subsection 3(1) [am 1976, c 51, s 1] of the Social Services Tax Act, RSBC 1960, c 361. It provides:

3.(1) Every purchaser shall pay to her Majesty in right of the Province at the time of making the purchase a tax at the rate of 7% of the purchase price of the property purchased.

These are relevant definitions in section 2 of the statute:

“purchaser” means any person who acquires tangible personal property at a sale in the Province for his own consumption or use . ..

“tangible personal property” means personal property that can be seen, weighed, measured, felt, or touched, or that is in any other way perceptible to the senses, and includes electricity, natural or manufactured gas, and telephone services;

Exemption from the tax is claimed upon the basis of section 87 of the Indian Act, RSC 1970, c I-6, which reads:

87. Notwithstanding any other Act of the Parliament of Canada or any Act of the legislature of a province, but subject to subsection (2) and to section 83, the following property is exempt from taxation, namely:

(a) the interest of an Indian or a band in reserve or surrendered lands; and

(b) the personal property of an Indian or band situated on a reserve;

and no Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (a) or (b) or is otherwise subject to taxation in respect of any such property; and no succession duty, inheritance tax or estate duty is payable on the death of any Indian in respect of any such property or the succession thereto if the property passes to an Indian, nor shall any such property be taken into account in determining the duty payable under the Dominion Succession Duty Act, being chapter 89 of the Revised Statutes of Canada, 1952, or the tax payable under the Estate Tax Act, on or in respect of other property passing to an Indian.

Mr Mossop agrees that the onus is on the plaintiffs to prove the exemption. In summary, this is his submission on the matter. Although no authority is right in point, the cases tend to show that electricity is personal property. Then, turning to the Indian Act, the clear purpose of section 87 is to provide an economic shield to reserve Indians to encourage them to live on the reserves in their ancient way of life. It is argued that the words “and no Indian ... is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (a) or (b) or is otherwise subject to taxation in respect of any such property’’ are of wide scope and show the intention of Parliament to cover a whole host of possible tax situations.

Counsel for the Attorney-General of British Columbia countered by saying that electricity at common law was not considered to be property or goods and that almost all the cases respecting its nature are statutory interpretation ones. Mr Leask pointed out that in the Social Services Tax Act itself “tangible personal property” is not defined to include electricity. If it had not been so included it would not be personal property. Counsel points out that “personal property” is defined in the Indian Act or any applicable federal statute. And he goes on to submit that the social services tax is a tax on a sale—on a transaction—and is not a tax on or in respect of personal property. Section 87, he contended, is aimed at wealth taxes and is not directed at customs duties or sales tax.

Is electricity personal property? Deputy Minister of National Revenue v Quebec Hydro-Electric Commission et al, [1968] CTC 329; 68 DTC 5211, is not a case in point but the following passage from the judgment of Jackett, P at p 332 [p 5223] illustrates the difficulty in classifying electricity:

Before coming to the facts, it should be noted that, while section 30 imposes the tax in question on the sale price of “goods” in which context the word “goods” would appear to be used in the common sense of merchandise or wares (which probably includes all moveable tangible property), it is common ground that the word “goods”, both in section 30 and, what is more important from the respondent’s point of view in this case, in paragraph (a) of Schedule V, must be construed as including “electricity” which, according to the Shorter Oxford English Dictionary (Third Edition), according to the view now current, is “a peculiar condition of the molecules of a body or of the ether surrounding them even though this “peculiar condition” could hardly be regarded as falling within any sense in which the words “goods” is ordinarily used in the English language.

At common law electricity was not property. Low v Blease (1975), 119 Sol Jo 695, is a judgment delivered for the Court by Lord Widgery, CJ, upon a stated case. The question was whether electricity was “property” within a section of the 1968 Theft Act. The Court held that it was not. The judgment is cited in 16 Hals, 4th ed, p 63, para 100, as authority for the statement: “Electricity is not ‘property’, and so cannot be the subject of theft under the general law.” In recognition of that common law situation, our Criminal Code contains a special section, section 287, enacting that everyone commits theft who fraudulently or without colour of right, abstracts, consumes or uses electricity.

However, the submission of the plaintiffs receives considerable support in judgments in the Supreme Court of Canada: City of Montreal v Montreal Light, Heat & Power Co (1909), 42 SCR 431. The Court was considering a contract for the supply of electrical energy. No statutory interpretation was involved. All five Judges concurred in dismissal of the appeal. At page 441, Anglin, J specifically stated that the contract for the supply of electrical energy was one for the sale of a commodity. He stated it this way: “But, in my opinion, the agreement is a contract for the sale of a commodity produced and to be supplied by the plaintiffs to the defendant.” Girouard, J concurred in his reasons. The applicable definitions of “commodity” in the Shorter Oxford English Dictionary are: “A thing of use or advantage to mankind; spec in Comm a kind of thing produced for use or sale; in pl goods, merchandise, produce.”

This question has arisen for consideration in American cases. I refer firstly to the judgment of the California Court of Appeal, Second District, Terrace Water Co v San Antonio Light & Power Co et al (1905), 82 P 562. The relevant part of the headnote is as follows:

Under Civil Code sections 654, 655, 663, declaring that anything of which there may be ownership is ‘property’ under the Code, that there may be ownership of all inanimate things which are capable of appropriation or of manual delivery and that every kind of property that is not real is personal, a plaintiff was entitled to recover for breach of a contract for the delivery of electricity under a complaint charging a breach of a contract to sell and deliver “personal property”.

The authority of this decision is apparent from the fact that it is cited in the definition of electricity in 29 CJS 859, section 1, as the principal support for the statement: ‘‘While it is not a material substance, it has been considered to be personal property, which may be the subject of ownership and of barter and sale.”

The nature of electricity was considered by the Illinois Supreme Court in People of State of Illinois v Menagas (1937), 367 III 330, 11 NE 2d 403. The Court had the benefit of the evidence of an electrical engineer and considered many American cases on the subject. The question for decision was whether electrical energy was the subject of larceny under a statute which provided that [p 336]: “Larceny shall embrace every theft which deprives another of his money or other personal property”. The Court answered affirmatively. It found that electrical energy was a valuable commodity bought and sold like other personal property; that it may be transported from place to place; and that while intangible, it was none the less personal property. That case was approved and followed by the Supreme Court of Alaska in Se/man v State of Alaska (1965), 406 P 2d 181. People of State of Illinois v Menagas was relevant to the Alaskan Court’s finding that electricity could be the subject of larceny and was included within the concept of “goods and chattels” in the State’s larceny statute.

In 1972 there were two conflicting American decisions. Buckeye Union Fire Insurance Co et al v Detroit Edison Co (1972), 196 NW 2d 316, a judgment of the Court of Appeals of Michigan, decided that electricity was not a “good” as that term is defined in the Uniform Commercial Code. But the Court of Appeals of Indiana, First District, in Helvey v Wabash County REMC (1972), 278 NE 2d 608, found that electricity furnished by an electric company to a householder was a “good” within the meaning of the word in that Code.

Leaving the American cases, I note that Hutchison, J, in ob/ter, in South Taranaki Electric-Power Board v Patea Borough, [1955] NZLR 954 at 959, said that he inclined to the view that electricity was a commodity.

The trend of the cases is towards characterization of electricity as personal property. I decide this case on the basis that the Supreme Court of Canada in City of Montreal v Montreal Light Heat & Power Co, supra, has decided that electricity is a commodity and accepting the view expressed in People of State of Illinois v Menagas that electricity is personal property. But what is in question here is the intent of Parliament in its use in section 87 of the words “personal property ... situated on a reserve”. Favouring the interpretation urged on behalf of the plaintiffs in the Indian Act as a whole. It is a paternalistic statute, making many special provisions for Indians. As was Stated by Rand, J in St Ann’s Island Shooting & Fishing Club Ltd v The King, [1950] 2 DLR 225 at 232, [1950] SCR 211 at 219:

The language of the statute embodies the accepted view that these aborigines are, in effect, wards of the state, whose care and welfare are a political trust of the highest obligation.

But it is clear that Parliament has not gone so far as to say that an Indian residing on a reserve is not subject to any tax or duty. Notwithstanding section 87, if he imports goods without paying customs duties, and takes those goods to his home on the reserve, he is liable for those duties: Francis v The Queen (1956), 3 DLR (2d) 641, [1956] SCR 618. If in British Columbia he leaves the reserve and purchases tangible personal property, he will be liable for tax under the Social Services Tax Act on the same basis as any other purchaser.

In weighing this matter, I take account of the principle that the onus is upon the plaintiffs to prove that they come within the exemption. Another applicable principle is that preference should be given to a construction that will avoid a constitutional collision: R v Burnshine (1974), 44 DLR (3d) 584 at 601, 15 CCC (2d) 505, [1975] 1 SCR 693. And no one questions the validity of the Social Services Tax Act as a statute of general application.

There is another consideration which I think provides an indication of the legislators’ intent. Electricity is intangible. it is not a chose in action and it is not property capable of being the subject of a succession. When section 87 goes on to provide the personal property talked about is not to be subject to succession duty, inheritance tax or estate duty, it suggests that what is contemplated is property which might, otherwise, be subject to such levies.

Upon consideration of the whole, I have come to the conclusion that electricity, in the circumstances disclosed by the agreed statement of facts, is not property exempt from taxation under section 87. The action must, therefore, be dismissed.