ANGERS
J.:—The
suppliant,
Dominion
Bridge
Co.
Ltd.,
a
body
politic
and
corporate,
incorporated
under
the
laws
of
the
Dominion
of
Canada,
having
its
head
office
in
the
City
of
Montreal,
in
the
Province
of
Quebec,
claims
from
His
Majesty
the
King
the
refund
of
a
sum
of
$1,503,
paid
under
protest
to
the
Commissioner
of
Excise
by
cheque
to
the
order
of
the
Collector
of
National
Revenue
at
Montreal,
the
said
sum
imputable
as
follows:
$501
against
the
assessment
in
respect
of
the
materials
incorporated
in
the
bridge
constructed
over
the
St.
Lawrence
River
between
St.
Gregoire
de
Montmorency
and
Ste.
Petronille
de
l’Isle
d’Orleans;
$501
against
the
assessment
in
respect
of
the
materials
incorporated
in
the
bridge
constructed
over
the
Gatineau
River
between
the
City
of
Hull
and
Gatineau
Point;
$501
against
the
assessment
in
respect
of
the
materials
incorporated
in
the
bridge
constructed
over
the
Richelieu
River
at
the
City
of
Sorel.
The
petition
of
right
alleges
in
substance
(inter
alia)
:
By
a
contract
made
on
September
29,
1933,
before
H.
F.
Methot,
N.P.,
a
copy
whereof
was
filed
as
ex.
3,
between
His
Majesty
the
King,
represented
by
the
Honourable
J.
N.
Francoeur,
in
his
quality
of
Minister
of
Public
Works
in
His
Majesty’s
Government
for
the
Province
of
Quebec,
and.
the
suppliant
company,
the
latter,
in
consideration
of
the
sum
of
$813,747,
undertook
to
erect
the
structural
steel
super-structure
of
the
centre
portion
of
a
bridge
over
the
St.
Lawrence
River
between
St.
Gregoire
de
Montmorency
and
Ste.
Petronille,
Isle
of
Orleans,
and
to
furnish
all
materials
and
labour
necessary
for
the
execution
of
said
contract;
In
virtue
of
said
contract
the
said
superstructure
was
erected
and,
in
respect
of
the
materials
incorporated
therein,
the
suppliant
was
assessed
in
the
sum
of
$25,023.53
for
sales
tax
allegedly
due
under
the
terms
of
the
Special
War
Revenue
Act,
R.S.C.
1927,
c.
179,
and
amendments
;
By
a
contract
made
on
March
25,
1931,
before
H.
F.
Methot,
N.P.,
a
copy
whereof
was
filed
as
exhibit
1,
between
His
Majesty
the
King,
represented
by
the
Honourable
J.
N.
Francoeur,
in
his
quality
of
Minister
of
Public
Works
and
Labour
in
his
Majesty’s
Government
for
the
Province
of
Quebec,
and
the
suppliant
company,
the
latter,
in
consideration
of
the
sum
of
$94,-
920,
undertook
to
erect
the
superstructure
of
a
bridge
over
the
Gatineau
River
between
the
City
of
Hull
and
Gatineau
Point
and
to
furnish
all
materials
and
labour
necessary
for
the
execution
of
said
contract
;
In
virtue
of
said
contract
the
said
bridge
was
erected
and,
in
respect
of
the
materials
therein
incorporated,
the
suppliant
was
assessed
in
the
sum
of
$2,766.68
for
sales
tax
allegedly
due;
By
a
contract
made
on
August
21,
1931,
before
E.
Boiteau,
N.P.,
a
copy
whereof
was
filed
as
ex.
2,
between
His
Majesty
the
King,
represented
by
the
Honourable
J.
N.
Francoeur,
in
his
quality
of
Minister
of
Public
Works
and
Labour
in
His
Majesty’s
Government
for
the
Province
of
Quebec,
and
the
suppliant
company,
the
latter,
in
consideration
of
the
sum
of
$318,000,
undertook
to
erect
the
structural
steel
superstructure
of
a
bridge
over
the
Richelieu
River,
at
the
City
of
Sorel
and
the
structural
steel
work
in
the
two
approach
spans,
the
counter
weight,
roadway
and
sidewalk
materials
and
machinery
with
installation
for
the
bascule
span
and
also
operator’s
house,
and
to
furnish
all
materials
and
labour
necessary
for
the
said
structure;
In
virtue
of
said
contract
the
said
erection
was
completed
and,
in
respect
of
the
materials
incorporated
therein
the
suppliant
was
assessed
in
the
sum
of
$12,992.68
for
sales
tax
allegedly
due
;
No
sales
tax
was
payable
by
suppliant
in
respect
of
the
materials
supplied
in
virtue
of
the
contracts
aforesaid
;
Alternatively,
if
the
said
materials
were
taxable,
the
suppliant
was
entitled
to
a
refund
of
all
monies
paid
in
respect
of
such
taxes
by
reason
of
the
fact
that
the
said
materials
were
sold,
if
sold
at
all,
to
His
Majesty
the
King
in
the
right
of
the
Province
of
Quebec;
On
February
1,
1937,
suppliant’s
solicitors
sent
to
the
Commissioner
of
Excise
the
suppliant’s
cheque
to
the
order
of
the
Collector
of
National
Revenue
at
Montreal
for
$1,508
to
be
imputed
in
the
manner
hereinabove
mentioned,
the
payment
being
made
under
protest;
concurrently
with
the
said
payment,
the
suppliant,
by
letter
of
its
solicitors,
made
application
for
refund
of
the
said
amount;
The
sum
of
$1,503
was
paid,
though
not
due,
to
the
Collector
of
National
Revenue
at
Montreal
and
in
consequence
the
provisions
of
the
Civil
Code
apply
and
the
suppliant
is
entitled
to
reclaim
from
His
Majesty
the
King
in
the
right
of
the
Dominion
of
Canada
the
said
sum.
In
his
statement
of
defence
the
respondent
admits
the
allegations
of
facts
set
forth
in
the
petition,
denies
however
that
the
materials
in
question
therein
were
sold
to
His
Maesty
the
King
in
the
right
of
the
Province
of
Quebec,
denies
further
that
the
sum
of
$1,503
was
paid,
though
not
due,
to
the
Collector
of
National
Revenue
at
Montreal
and
that
consequently
the
provisions
of
the
Civil
Code
apply
and
says
that
the
materials
in
respect
of
which
the
suppliant
was
assessed
for
sales
tax
were
manufactured
or
produced
by
the
suppliant
for
the
performance
of
the
contracts
mentioned
in
the
petition
of
right
and
that
the
suppliant
became
liable
to
pay
sales
tax
in
respect
of
said
materials
and
was
rightly
assessed
in
the
sums
of
$25,023.53,
$2,766.68
and
$12,992.68.
The
issue
was
joined
by
an
answer
praying
acte
of
the
admissions
contained
in
the
statement
of
defence
and
denying
the
remainder
thereof.
The
contracts
exs.
1,
2
and
3
stipulate
that
the
contractor,
Dominion
Bridge
Co.,
shall
supply
all
the
materials,
merchandise
and
tools
necessary
for
the
execution
of
its
contracts
as
well
as
the
labour
relating
thereto.
The
clause
in
the
contract
ex.
1
dealing
with
this
subject
reads
thus:
‘‘(a)
The
Contractor
will
see
to
the
furnishing
of
all
the
materials,
merchandise,
tools
and
all
that
is
necessary
for
the
execution
of
his
contract,
of
whatever
kind
they
may
be,
and
of
the
manual
labour,
whatever
it
may
apply.”
The
clause
in
the
contract
ex.
2
is
worded
as
follows:
‘‘
(a)
The
contractor
shall,
and
he
doth
hereby
agree,
to
find,
provide,
and
furnish
all
and
every
kind
of
materials,
merchandise,
tools,
labor,
implements,
carriages
and
scaffoldings
and
the
requisite
number
of
mechanics
and
workmen,
and
all
things
needful
and
proper
for
the
due
and
proper
performance
and
completion
of
the
said
works
hereby
undertaken
and
all
matters
and
things
incident
to
the
same.”
The
clause
in
the
contract
ex.
3
is
similar
to
the
one
contained
in
the
contract
ex.
2.
William
Baxter,
assistant
secretary
of
the
suppliant
company,
asked
to
describe
the
nature
of
the
work
done
to
fabricate
the
material
required
for
the
execution
of
the
contracts
aforesaid,
replied:
‘‘The
material
is
received
from
the
rolling
mills
in
structural
shapes,
beams,
channels,
angles
and
structural
steel
plates.
These
are
manufactured
in
our
plant
according
to
special
plans
prepared
for
the
structure
and
consists
of
cutting
into
lengths,
punching,
drilling,
reaming
and
operations
of
that
sort,
and
the
riveting
of
certain
pieces
together
to
form
the
members
going
into
the
structure.
.
.
.
Q.
In
connection
with
all
three
contracts,
are
you
in
a
position
to
say
whether
the
material
that
went
into
the
members
of
the
bridge
was
manufactured
or
fabricated
or
dealt
with
by
your
company
in
the
manner
you
described
particularly
for
these
jobs?
A.
Yes,
we
have
no
stock
of
members
ready,
we
must
manufacture
that
particularly
for
each
job.”
Baxter
apportioned
the
cost
of
material
and
cost
of
erection
as
follows:
Hull-Gatineau
Point
Bridge,
cost
of
material
76%
and
cost
of
erection
24%
;
River
Richelieu
Bridge
at
Sorel,
cost
of
material
86%
and
cost
of
erection
14%;
St.
Gregoire
de
Montmorency-Ste.
Petronille
Bridge,
cost
of
material
78.7%
and
cost
of
erection
21.3%.
The
cost
of
the
material
includes
the
cost
of
transportation.
Baxter
said
that,
during
the
progress
of
the
work
or
subsequent
to
its
completion,
his
company
was
notified
that
the
Excise
Tax
Department
claimed
sales
tax
in
respect
to
these
jobs;
he
had
correspondence
with
the
Department
about
the
matter;
he
produced
as
exs.
4
and
5
copies
of
two
letters
from
the
Excise
Division
of
the
Department
of
National
Revenue
signed
‘J.
F.
Telford,
for
Superintendent
Excise
Tax
Collec-
tions,’’
dated
respectively
August
27,
1934,
and
July
30,
1935,
addressed
to
the
suppliant
company.
The
letter
of
August
27,
1934,
reads
in
part
as
follows:
"‘The
contents
of
your
letter
of
August
23
with
reference
to
the
assessment
of
$16,262.14,
sales
tax
arrears
established
against
your
company
by
Excise
Tax
Auditor
F.
A.
Doughty
in
his
report
No.
27,
have
been
carefully
considered.
“It
has
been
decided
that
the
matter
of
settlement
of
that
portion
of
the
assessment
representing
tax
due
on
sales
to
the
Provincial
Government
of
Quebec
may
be
allowed
to
remain
in
abeyance
pending
disposal
of
the
case
of
Eastern
Canada
Steel
and
Iron
Works,
Limited,
against
which
a
similar
assessment
has
been
established.
“While
the
major
portion
of
Excise
Tax
Auditor
Doughty’s
assessment
against
your
company
represents
tax
due
on
sales
to
the
Provincial
Government
of
Quebec,
there
is,
however,
included
in
the
total
of
$16,262.14
an
item
of
$500.68,
tax
on
a
sale
to
Anglin
Noreross
Limited,
Montreal,
Contract
No.
11086,
for
supplying
and
erecting
the
structural
steel
work
required
for
the
Bank
of
Montreal
at
Ottawa.’’
The
letter
of
July
30,
1935,
contains,
among
others,
the
following
statements:
“You
were
notified
on
August
27th
last
it
had
been
decided
that
the
matter
of
settlement
of
$15,761.46
sales
tax
arrears,
established
against
your
company
on
sales
to
the
Provincial
Government
of
Quebec,
would
be
allowed
to
remain
in
abeyance
pending
disposal
of
the
case
of
Eastern
Canada
Steel
and
Iron
Works,
Limited,
against
which
a
similar
assessment
had
been
established.
"
"
A
further
audit
of
the
records
of
your
company
has
recently
been
conducted
and
an
additional
assessment
of
$25,023.53
has
been
established
for
tax
on
similar
sales
made
during
the
period
from
May
1st,
1934,
to
May
31st,
1935.”
The
letter
deals
with
the
question
of
penalty
and
continues:
“While
the
matter
of
settlement
of
the
recently
established
assessment
will
likewise
bé
permitted
to
remain
in
abeyance
pending
disposal
of
the
Eastern
Canada
Steel
and
Iron
Works,
Limited
case,
it
is
desired
to
draw
to
your
attention
at
this
time
that
penalty,
computed
at
the
statutory
rate
of
two-thirds
of
one
per
cent
per
month,
will
continue
to
apply
on
both
assessments
so
long
as
they
remain
outstanding,
and
that
if
it
is
finally
decided
the
assessments
themselves
have
to
be
paid,
the
penalty
will
then
have
to
be
paid
also.
‘
‘
I
do
not
think
that
these
letters
are
material;
they
cannot
bind
the
Crown.
Witness
stated
that,
if
after
fabricating
the
members
required
for
the
erection
of
the
Gatineau
River
Bridge—I
assume
his
answer
applied
to
the
three
bridges—the
Government
of
the
Province
of
Quebec
cancelled
the
contract
and
the
bridge
was
not
erected,
the
suppliant
could
not
use
them
except
possibly
to
sell
them
as
scrap,
unless
it
got
an
order
for
a
similar
structure.
In
cross-examination
Baxter
maintained
his
statement
that
the
steel
parts
prepared
for
a
bridge
would
be
useless
in
the
event
of
the
bridge
not
being
erected,
unless
the
suppliant
got
another
bridge
contract
to
exactly
the
same
plans.
Baxter
declared
that
the
contracts
had
been
executed,
that
the
work
had
been
accepted
by
the
Provincial
Government
and
that
payment
had
been
made
to
the
suppliant
in
accordance
with
the
terms
of
the
contracts.
ASked
if
it
had
not
been
agreed
between
the
suppliant
and
the
Department
of
National
Revenue
that
the
erection
cost
would
be
figured
at
three-eighths
of
the
total
cost,
the
witness
replied
in
the
negative.
According
to
him,
the
company
said
that
it
would
pay
the
tax
on
the
basis
of
making
the
usual
deductions
for
transportation
of
the
material
and
for
erection;
whether
this
basis
was
equivalent
to
three-eighths
on
any
of
the
three
jobs
he
could
not
say.
David
Sim,
Commissioner
of
Excise,
was
called
as
witness
on
behalf
of
the
respondent.
Shown
the
letters
exs.
4
and
5,
he
stated
that
the
subscriber,
J.
F,
Telford,
was
at
the
time
a
clerk
in
the
Excise
Tax
Administration
Branch
and
that
he
had
no
authority
to
describe
the
tax
therein
mentioned
as
a
tax
due
on
sales
to
the
Government
of
the
Province
of
Quebec.
The
witness
filed
as
ex.
A
a
copy
of
a
document,
dated
July
4,
1934,
signed
by
the
Minister
of
National
Revenue,
made
in
virtue
of
the
provisions
of
ss.
(2)
of
s.
3
of
the
Department
of
National
Revenue
Act,
R.S.C.
1927,
c.
137,
whereby
the
Minister
assigned
to
the
Commissioner
of
Excise
the
administration
of
Parts
IV
to
XIV
of
the
Special
War
Revenue
Act,
delegated
to
him
the
powers
and
duties
in
connection
with
the
administration
thereof
which
are
conferred
upon
or
directed
to
be
performed
by
the
Department
of
National
Revenue
or
the
Minister
and
authorized
him
to
exercise
each
and
all
the
powers
conferred
by
the
said
Act
upon
the
Minister.
The
document
was
filed
under
reservation
of
an
objection
by
counsel
for
supplant
as
to
its
relevancy;
its
purpose
was
to
establish
that
the
Commissioner
had
the
necessary
powers
to
make
the
assessments
aforesaid;
I
am
of
opinion
that
its
production
was
legal
and
the
objection
is
overruled.
Sim
declared
that
the
assessments
in
question
had
been
made
in
accordance
with
the
Departmental
Regulations,
particularly
cl.
13
thereof
relating
to
contracts;
a
copy
of
the
Regulations
was
produced
as
ex.
B.
Asked
to
explain
the
process
under
which
the
assessments
had
been
made,
the
witness
stated:
"‘The
assessments
were
set
up
under
s.
87
of
the
Act,
as
already
pointed
out,
it
being
our
belief
there
had
been
no
sale
of
goods
to
the
Province
and
that
the
transaction
came
within
the
ambit
of
s.
87(d),
the
goods
being
for
use
of
the
manufacturer
or
producer
and
not
for
sale
and,
under
that
section,
we
assessed
the
company.
Q.
(Mr.
Vareoe)
Can
you
say,
Mr.
Sim,
just
how
this
computation
was
made
?
A.
It
was
made
in
accordance
with
the
Regulation
which
I
have
already
filed,
that
is,
on
the
contract
price
less
these
erection
expenses
arrived
at
by
regulation.
Q.
Some
proportion
was
arrived
at
by
your
Department
and
whether
in
conjunction
with
the
Department
or
not
it
does
not
matter
for
the
moment,
but
there
was
a
proportionate
basis,
was
there
not?
A.
There
was
an
amount
set
up
by
the
auditor
which
I
approved.”
Asked
in
cross-examination
if,
assuming
that
there
had
been
a
contract
between
the
suppliant
and
the
Provincial
Government
in
virtue
whereof
the
former
would
have
sold
to
the
latter
the
material
fabricated
by
it,
the
erection
to
be
made
by
another
contractor,
the
assessments
would
have
been
made
on
a
different
basis,
the
witness
replied
that
there
would
be
no
assessment
at
all
if
there
was
a
sale
of
goods
to
the
Provincial
Government,
as
there
is
an
exemption.
Sim
admitted,
however,
that
he
did
not
disagree
with
counsel’s
statement
that
there
is
a
right
to
claim
a
refund
and
not
an
exemption
of
tax.
Questioned
about
the
manner
in
which
the
assessments
had
been
arrived
at,
Sim
summed
up
his
explanation
briefly:
‘‘We
claim
the
goods
were
taken
for
the
use
of
the
manufacturer.”
According
to
him,
the
reason
for
this
was
that
there
was
a
contract
involved.
In
re-examination
the
witness
was
asked
to
produce
the
assessments,
which
he
did;
they
were
marked
as
ex.
C.
Sim
said
they
were
discussed
and
received
his
approval.
Frederick
Arthur
Doughty,
assistant
supervising
auditor
in
the
Department
of
National
Revenue
in
Montreal,
prepared
the
reports
filed
as
ex.
C.
Asked
how
the
amount
of
the
tax
was
made
up,
he
answered
that
this
was
done
by
deducting
from
the
contract
price
the
allowable
deductions,
i.e.
the
deductions
which
the
taxpayer
considered
as
allowable;
a
rather
indefinite
answer,
I
must
say.
He
could
not
state
what
proportion
of
the
contract
price
was
deducted
for
erection
cost
in
each
case;
the
proportion
would
vary
;
the
amount
of
the
deduction
would
depend
on
the
amount
of
actual
allowable
deduction,
which,
may
I
suggest,
appears
unquestionable.
Doughty
declared
that,
in
the
case
of
the
Island
of
Orleans
Bridge,
there
was
an
arrangement
between
him
and
Baxter,
in
virtue
of
which
the
proportion
of
the
deduction
or
erection
expenses
was
fixed
at
three-eighths
of
the
contract
price.
He
added
that
a
similar
arrangement
was
made
in
connection
with
the
two
other
bridges;
the
proportion
would
be
based
on
the
actual
assessment;
at
least
witness
said
he
imagined
that
was
the
basis
of
the
arrangement;
he
and
Baxter
would
reach
a
working
basis.
In
cross-examination,
Doughty
stated
that
in
the
reports
ex.
C
he
set
up
a
claim
for
tax
on
the
basis
of
the
regulation,
viz.,
the
contract
price
less
the
deduction
for
erection;
that
is
what
Baxter
said
he
set
up
in
his
books.
Witness
and
Baxter
agreed
on
the
assessment.
The
proportion
of
three-eighths
was
only
in
relation
to
the
Island
of
Orleans
Bridge.
There
is
no
dispute
about
the
amounts
of
the
assessment;
its
validity
alone
is
contested.
In
opening,
counsel
for
the
suppliant
declared
that
his
client,
for
the
purpose
of
raising
the
issue,
had
paid
certain
amounts
on
account
and
applied
for
a
fiat
for
a
petition
of
right
to
recover
them
so
that
the
legal
right
to
impose
the
tax
might
be
decided.
Counsel
for
the
suppliant
submitted
that
the
transactions
in
question
are
taxable
under
s.
86(a)
of
the
Special
War
Revenue
Act
and
that
under
s.
105
thereof
the
taxpayer
is
entitled
to
a
refund.
Counsel
for
the
respondent,
on
the
other
hand,
urged
that
the
said
transactions
are
subject
to
s.
87(d)
and
that
s.
105
does
not
apply.
It
will
be
convenient
to
cite
the
relevant
provisions
of
ss.
86,
87,
104
and
105
:
"
"
86(1)
There
shall
be
imposed,
levied
and
collected
a
consumption
or
sales
tax
of
six
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
.
.
.
(amended
1932,
c.
54,
s.
11(1))."
"87(1)
Whenever
goods
are
manufactured
or
produced
in
Canada
under
such
circumstances
or
conditions
as
render
it
difficult
to
determine
the
value
thereof
for
the
consumption
or
sales
tax
because
.
.
.
.
"‘(d)
such
goods
are
for
use
by
the
manufacturer
or
producer
and
not
for
sale;
the
Minister
may
determine
the
value
for
the
tax
under
this
Act
and
all
such
transactions
shall
for
the
purposes
of
this
Act
be
regarded
as
sales.
’
‘
•
104.
The
taxes
imposed
by
Parts
X,
XI,
XII,
and
XIII
of
this
Act
shall
apply
to
goods
imported
by
""
(a)
His
Majesty
in
the
right
of
the
Government
of
Canada:
"‘(b)
His
Majesty
in
the
right
of
the
Government
of
any
province
of
Canada,
for
the
purpose
of
resale.''
"105.
(1)
A
refund
of
the
amount
of
taxes
paid
under
Parts
X,
XI,
XII
and
XIII
of
this
Act
may
be
granted
to
a
manufacturer,
producer,
wholesaler,
jobber
or
other
dealer
on
goods
sold
to
His
Majesty
in
the
right
of
the
Government
of
any
province
of
Canada,
if
the
said
goods
are
purchased
by
His
Majesty,
for
any
purpose
other
than
purposes
of
resale.
.
.
.”
To
bring
the
transactions
which
took
place
between
His
Majesty
the
King
in
the
right
of
the
Province
of
Quebec
and
the
suppliant
within
the
scope
of
s.
86,
one
must
conelude
that
the
suppliant
sold
and
delivered
goods,
produced
or
manufactured
in
Canada,
to
His
Majesty
the
King.
Counsel
for
the
suppliant
naturally
-contended
that
this
is
what
had
occurred.
If
that
is
the
case,
the
refund
clause
contained
in
para.
1
of
s.
105
would
apply:
the
superstructure
of
the
three
bridges
in
question
erected
by
the
suppliant
with
its
materials
on
behalf
of
His
Majesty
the
King
in
the
right
aforesaid
was
not
acquired
by
the
latter
for
purposes
of
resale.
Can
it
be
said
that
the
suppliant
sold
to
His
Majesty
the
King
‘‘goods,’’
or
to
use
the
word
included
in
the
French
version
of
s.
86
to
which
my
attention
was
drawn,
"Marchandises”?
Or
is
it
more
appropriate
and
judicious
to
say,
as
suggested
by
counsel
for
the
respondent,
that
what
the
suppliant
sold
to
His
Majesty
the
King
was
an
immovable
property,
viz.,
the
superstructure
of
three
bridges?
Three
cases
were
cited
to
which
I
deem
it
convenient
to
refer
:
Dominion
Press
Ltd.
v.
Minister
of
Customs
&
Excise,
[1927]
C.T.C.;
[1927]
4
D.L.R.
225,
S.C.R.
583;
[1928]
3
D.L.R.
781;
The
King
v.
Fraser
Companies,
Ltd.,
[1931]
C.T.C.;
[1931]
4
D.L.R.
145,
S.C.R.
490;
The
King
v.
Wampole
(Henry
K.)
&
Co.,
[1931]
C.T.C.;
[1931]
3
D.L.R.
754,
8.C.R.
494.
In
the
case
of
Dominion
Press
Lid.
v.
Minister
of
Customs
&
Excise,
the
latter
had
brought
an
action
against
the
former
in
the
Superior
Court
of
the
Province
of
Quebec
claiming
arrears
of
sales
tax
under
the
Special
War
Revenue
Act,
1915,
and
amendments.
The
Superior
Court
held
that
the
company
was
not
liable
for
the
tax.
An
appeal,
taken
direct
to
the
Supreme
Court,
was
allowed
unanimously.
The
Judicial
Committee
of
the
Privy
Council
affirmed
the
decision
of
the
Supreme
Court.
As
appears
from
the
reports,
Dominion
Press
Ltd.
carried
on
business
as
job
printers.
Its
operations
consisted
in
printing
to
the
order
of
individual
customers
stationery
of
a
business
character,
such
as
cards,
labels,
order
forms,
price
lists
and
statements.
No
privity
of
contract
was
created
between
the
supplier
of
the
paper
used
and
the
customers.
The
company
supplied
at
a
fixed
price
the
material
and
the
labour
and
delivered
to
its
customers
the
finished
article.
The
judgment
of
the
Judicial
Committee
of
the
Privy
Council
was
delivered
by
Lord
Hailsham
L.C.
;
it
seems
to
me
expedient
to
quote
an
extract
therefrom
(pp.
782-3)
:
"‘The
appellants
contend
that
in
these
circumstances
they
do
not
come
within
the
words
of
the
taxing
statute.
.
.
.
The
Act
of
1922
imposes
a
tax
of
214%
‘on
sales
and
deliveries
by
Canadian
manufacturers
or
producers,
and
wholesalers
or
jobbers,’
and
it
contains
two
provisos.
First
of
all,
there
is
a
proviso
which
enacts
that
the
tax
‘shall
not
apply
to
sales
or
importations
of
.
.
.
job
printed
matter
produced
and
sold
by
printers
or
firms,
whole
sales
of
job
printing
do
not
exceed
ten
thousand
dollars
per
annum.’
Secondly,
there
is
a
proviso
that
the
taxes
‘shall
not
be
payable
on
goods
exported,
or
on
sales
of
goods
made
to
the
order
of
each
individual
customer
by
a
business
which
sells
exclusively
by
retail
under
regulations
by
the
Minister
of
Customs
and
Excise
who
shall
be
sole
judge
as
to
the
classification
of
a
business.’
.
.
.
“The
Act
of
1923,
imposes
a
tax
of
6%
‘on
the
sale
price
of
all
goods
produced
or
manufactured
in
Canada;’
and
it
does
not
reproduce
the
provisos.
“The
first
question
to
be
determined
is
obviously
whether
or
not
these
transactions
are
sales
and
deliveries
by
Canadian
manufacturers
or
producers
within
the
enacting
words
of
this
section.
In
their
Lordships’
opinion
they
do
come
within
that
language.
‘“There
has
been
a
discussion
before
the
Board
as
to
whether
or
not
the
contract
was
a
contract
of
sale
and
delivery
within
such
cases
as
Lee
v.
Griffin
(1861),
1
B.
&
S.
272,
121
E.R.
716,
or
a
contract
for
work
and
labour
done
and
materials
supplied
within
the
authority
of
Clay
v.
Yates
(1856),
1
H.
&
N.
73,
156
E.R.
1123.
“In
their
Lordships’
opinion
the
material
matter
to
be
considered
is
as
to
the
meaning
of
the
expression
‘sales
and
deliveries
by
Canadian
manufacturers
or
producers’
as
used
in
this
statute.
“Having
regard
to
the
language
of
the
first
proviso
and
to
the
general
scope
of
the
enactment,
their
Lordships
entertain
no
doubt
that
these
contracts
were
contracts
of
sales
and
deliveries
by
Canadian
manufacturers
or
producers,
within
the
meaning
of
the
taxing
statute,
and
that
the
payments
made
under
them
constituted
the
sale
price
of
goods
produced
or
manufactured
in
Canada.
That
would
be
enough
to
dispose
of
the
appeal
with
regard
to
the
period
after
January,
1924.’’
The
observations
concerning
the
second
proviso,
which
was
not
reproduced
in
the
Act
of
1923
(c.
70)
nor
in
the
subsequent
Acts,
offer
no
interest
in
the
present
case.
The
Honourable
Mr.
Justice
Rinfret,
who
delivered
the
judgment
of
the
Supreme
Court,
expressed
himself
as
follows
(pp.
228-9)
:
“On
this
evidence,
the
contract
between
the
respondent
and
its
customers
is
not
one
of
lease
and
hire,
but
one
of
sale.
It
is
a
contract
for
the
sale
of
a
thing
to
be
made
(chose
à
faire
or
chose
wne
fois
faite).
"
‘
Such
is
the
solution
of
the
Roman
law
and
of
the
old
French
law
which
the
commissioners
have
embodied
in
the
Civil
Code
of
Quebec.
On
this
subject,
a
quotation
from
Pothier
(4
Bugnet,
3rd
ed.,
No.
394)
is
strictly
in
point:—‘Ce
contrat
(de
louage
d’ouvrage)
a
aussi
beaucoup
d’analogie
avec
le
contrat
de
vente.
‘“*
‘Justinien
en
ses
Institutes
f
au
tit-de
Loc.
cond.,
dit
qu’on
doute
à
l’égard
de
certaines
contrats,
s’ils
sont
contrats
de
vente
ou
contrats
de
louage,
et
il
donne
cette
règle
pour
les
discerner
:
“lorsque
c’est
l’ouvrier
qui
fournit
la
matière,
c’est
un
contrat
de
vente;
au
contraire,
lorsque
c’est
moi
qui
fournis
à
l’ouvrier
la
matière
de
l’ouvrage
que
je
lui
fais
faire,
le
contrat
est
un
contrat
de
louage.’’
Par
example,
si
j’ai
fait
marché
avec
un
orfèvre
pour
qu’il
me
fasse
une
paire
de
flambeaux
d’argent,
et
qu’il
fournisse
la
matière,
c’est
un
contrat
de
vente
que
cet
orfèvre
me
fait
de
la
paire
de
flambeaux
qu
’il
se
charge
de
faire;
mais
si
je
lui
ai
fourni
un
lingot
d’argent
pour
qu’il
m’en
fit
une
paire
de
flambeaux,
c’est
un
contrat
de
louage.
‘Observez
que,
pour
qu’un
contrat
soit
un
contrat
de
louage,
il
suffit
que
je
fournisse
à
l’ouvrier
la
principale
matière
qui
doit
entrer
dans
la
composition
de
l’ouvrage;
quoique
l’ouvrier
fournisse
le
surplus,
le
contrat
n’en
est
pas
moins
un
contrat
de
louage.
"
On
peut
apporter
plusieurs
exemples
de
ce
principe.
"
"
“Lorsque
j’envoie
chez
mon
tailleur
de
l’étoffe
pour
me
faire
un
habit
:
quoique
le
tailleur,
outre
sa
façon,
fournisse
les
boutons,
le
fil,
même
les
doublures
et
les
galons,
notre
marché
n’en
sera
pas
moins
un
contrat
de
louage,
parce
que
je
fournis
est
ce
qu’il
y
a
de
principal
dans
un
habit.
"
"
"
Pareillement,
le
marché
que
j’ai
fait
avec
un
entrepreneur
pour
qu'il
me
construise
une
maison,
ne
laisse
pas
d’être
un
contrat
de
louage,
quoique
par
notre
marché
il
doive
fournir
les
matériaux,
parce
que
le
terrain
que
je
fournis
pour
y
construire
la
maison,
est
ce
qu’il
y
a
de
principal
dans
une
maison,
quum
aedificium
solo
cedat.’
‘‘The
modern
doctrine
and,
jurisprudence
in
France
should
perhaps
be
accepted
with
caution,
because
art.
1711
of
the
Code
Napoléon
contains
the
following
definition,—‘Les
devis,
marchés
ou
prix
faits
pour
l’entreprise
d’un
ouvrage
moyennant
un
prix
déterminé
sont
aussi
un
louage
lorsque
la
matière
est
fournie
par
celui
pour
qui
l’ouvrage
se
fait,’
which
is
not
to
be
found
in
the
Civil
Code
of
Quebec.
But
the
preponderating
opinion
is
that
the
above
passage
of
Pothier
well
expresses
the
state
of
the
old
law
(Fuzier-Herman,
Répertoire,
verbo
Louage
d’ouvrage,
de
services
et
l’industrie,
no.
1105).
Planiol
(Droit
Civil
6th
ed.,
vol.
2,
no.
1902)
calls
it
the
‘solution
traditionnelle.
’
On
the
authority
of
Clay
v.
Yates
(1856),
1
H.
&
N.
73;
156
E.R.
1123,
the
situation
would
be
the
same
under
the
common
law.
“According
to
the
evidence
before
us,
the
respondent
does
not
undertake
to
print
on
material
(such
as
tags,
cards,
or
paper
generally)
supplied
by
the
client.
It
contracts
to
sell
and
deliver
printed
business
cards,
labels,
order
forms,
price
lists,
statements
and
general
stationery.
The
transactions
described
in
the
evidence
and
in
respect
of
which
the
Minister
seeks
to
recover
taxes
are
sales.
In
the
words
of
Pothier,
‘elles
participent
du
contrat
de
vente.’
”
In
that
case
the
goods
involved
were
movables
and
remained
so;
in
the
present
instance
the
goods,
originally
movables,
were
incorporated
in
an
immovable
property
and
are
now
an
integrant
part
thereof.
It
was
urged
on
behalf
of
respondent
that
the
members
which
the
suppliant
fabricated
and
incorporated
in
the
superstructure
of
the
bridges
were
not
sold
and
delivered
to
His
Majesty
the
King
but
that
the
object
of
the
sale,
if
there
were
a
sale,
was
the
superstructure
of
the
bridges
fully
completed
and
erected.
I
do
not
think
that
it
makes
a
particle
of
difference
that,
instead
of
being
sold
separately
and
distinctly,
the
members
of
the
superstructures
in
question,
manufactured
expressly
for
His
Majesty
the
King,
were
incorporated
in
the
constructions
which
the
suppliant
had
undertaken
to
make
for
him.
The
transactions
which
took
place
between
the
suppliant
and
His
Majesty
the
King,
in
so
far
as
the
supply
of
the
materials
required
for
the
erection
of
the
superstructure
of
the
bridges
is
concerned,
constitute
a
sale.
The
next
case
cited
is
that
of
The
King
v.
Fraser
Companies,
Ltd.,
[1931]
C.T.C.;
[1981]
4
D.L.R.
145.
The
defendant
respondent
was
a
manufacturer
of
lumber
for
sale
;
it
consumed
a
portion
of
the
lumber
so
manufactured
in
the
construction
and
repair
of
pulp
and
other
mills
and
of
houses
for
its
employees.
The
lumber
so
consumed
was
taken
from
stock
in
the
yards
produced
and
manufactured,
in
the
ordinary
course
of
the
com-
pany’s
business,
for
sale
and
not
produced
or
manufactured
for
the
purpose
for
which
it
was
used.
The
majority
of
the
Supreme
Court
(Newcombe,
Rinfret,
Lamont
and
Smith
JJ.,
Cannon
J.
dissenting)
held
that
the
company
was
liable
for
sales
tax
on
the
lumber
so
consumed.
Smith
J.
who
delivered
the
judgment,
after
relating
the
facts
and
quoting
ss.
86(a)
and
87(d),
continued
as
follows
(p.
146)
:
"‘Maclean,
P.,
before
whom
the
case
was
tried,
dismissed
the
action,
[1931]
2
D.L.R.
212,
on
the
ground
that
the
lumber
so
consumed
was
produced
in
the
ordinary
course
of
business
for
sale,
and
not
specifically
for
use
by
the
manufacturer,
within
the
meaning
of
the
above
quoted
s.
87(d).
“With
great
respect,
I
am
unable
to
take
this
view
of
the
meaning
and
effect
of
these
provisions
of
the
Act.
To
so
construe
them
is
to
put
a
narrow
and
technical
construction
upon
the
precise
words
used
in
ss.
(d),
without
taking
into
consideration
the
meaning
and
intent
of
the
statute
as
a
whole.
It
seems
to
me
clear
that
the
real
intention
was
to
levy
a
consumption
or
sales
tax
of
4%
on
the
sale
price
of
all
goods
produced
or
manufactured
in
Canada,
whether
the
goods
so
produced
should
be
sold
by
the
manufacturer
or
consumed
by
himself
for
his
own
purposes.
“The
view
taken
in
the
Court
below
would
result
in
the
introduction
of
an
exception
to
the
general
rule
that
all
goods
produced
or
manufactured
are
to
pay
a
tax,
and
would
amount
to
a
discrimination
in
favour
of
a
particular
consumer.
As
an
example,
it
is
not
unusual
for
a
manufacturer
engaged
in
the
production
and
manufacture
of
lumber
for
sale
to
engage
at
the
same
time
in
the
business
of
a
building
contractor.
He
manufactures
his
lumber
for
sale,
and,
as
a
general
rule,
would
not
manufacture
any
specific
lumber
for
use
in
connection
with
his
building
contracts,
but
would
simply
take
lumber
for
these
purposes
from
the
general
stock
manufactured
for
sale,
and
might
thus,
under
the
view
taken
in
the
Court
below,
escape
taxation
on
all
lumber
thus
diverted
from
the
general
stock
manufactured
for
sale/’
It
is
quite
clear
that
the
lumber
in
question,
although
manufactured
for
sale,
was
used
by
the
manufacturer
for
its
own
purpose
and
benefit.
I
do
not
think
that
this
decision
has
any
application
in
the
present
case.
The
third
case
to
which
reference
was
made
is
that
of
The
King
v.
Wampole
(Henry
K.)
&
Co.,
[1931]
C.T.C.;
[1931]
3
D.L.R.
754.
The
company,
in
the
course
of
its
business
as
manufacturer
of
pharmaceutical
products,
put
up
in
small
packages
and
distributed
free
among
physicians
and
druggists
samples
of
its
products
for
the
purpose
of
acquainting
them
with
their
character
and
quality.
A
special
case
was
agreed
upon
for
the
opinion
of
the
Court,
cl.
4
of
which
was
drafted
as
follows:
"‘4.
The
cost
of
producing
such
samples
was
paid
by
the
company
as
a
necessary
expense
of
business,
and
the
company
in
its
books
treated
such
expense
as
a
necessary
cost
of
production
of
articles
manufactured
and
sold,
in
respect
of
which
last
mentioned
articles
the
company
has
paid
sales
tax.’’
After
quoting
this
clause,
Anglin
C.J.C.
delivering
the
judgment
of
the
majority
of
the
Court
(Anglin
C.J.C.
and
Rinfret,
Lamont
and
Cannon
JJ.,
Neweombe
J.
dissenting)
said
(p.
754)
:
"‘It
is
obvious
to
me
that
it
cannot
have
been
the
intention
of
the
Legislature
to
tax
the
same
property
twice
in
the
hands
of
the
manufacturer.
Having
regard
to
the
admission
of
para.
4,
above
quoted,
such
double
taxation
would
ensue
were
we
to
hold
the
samples
here
in
question
to
be
now
subject
to
the
consumption
or
sales
tax,
it
being
there
admitted
that
the
cost
of
producing
such
samples
is
included
in
the
‘cost
of
production
of
articles
manufactured
and
sold,
in
respect
of
which
.
.
.
the
Company
has
paid
sales
tax.'
“If
the
cost
or
value
of
these
goods
used
as
samples
has
already
been
a
subject
of
the
sales
tax
in
this
way,
it
would
seem
to
involve
double
taxation
if
they
should
now
be
held
liable
for
sales
tax
on
their
distribution
as
free
samples.
But
for
the
admission
of
para.
4,
however,
I
should
certainly
have
been
prepared
to
hold
that
the
‘use’
by
the
company
of
goods
manufactured
by
it
as
free
samples
for
advertising
purposes
is
a
‘use’
within
clause
(d)
of
s.
87.”’
The
dissent
of
Newcombe
J.,
related
to
the
interpretation
to
be
given
to
cl.
4
of
the
special
case
aforesaid;
the
learned
Judge
expressed
the
following
opinion
(p.
799)
:
“I
am
in
agreement
with
my
Lord
and
my
learned
brethren
as
to
the
interpretation
of
the
charging
section;
but
I
am
not
persuaded
that
the
facts
admitted
by
clause
4
of
the
case,
constitute
payment,
or
operate
to
relieve
the
respondent
company
of
its
liability
for
the
tax.
If
the
sale
price
of
the
goods
were
increased
by
the
company’s
method
of
bookkeeping,
I
do
not
doubt
that
the
fact
would
have
been
stated.
“I
see
nothing
in
the
case
to
justify
a
finding
of
double
taxation,
or
that
the
tax
upon
the
samples,
to
which,
in
the
view
of
the
Court,
the
Government
was*
entitled,
has
been
paid;
.
.
.
.’’
Here
again
it
is
evident
that
the
goods
upon
which
His
Majesty
the
King
wanted
to
impose
a
sales
tax
were
used
by
the
manufacturer
thereof
for
its
own
benefit
and
advantage,
and
I
do
not
think
that
the
decision
has
any
bearing
on
the
question
at
issue.
The
underlying
principle
of
the
Act,
to
my
mind,
is
that
all
goods
produced
or
manufactured
in
Canada
shall
be
subject
to
a
consumption
or
sales
tax
on
the
sale
price
or
value
thereof,
according
as
they
are
sold
by
the
producer
or
manufacturer
or
consumed
by
him
for
his
own
purposes.
It
was
contended
on
behalf
of
the
respondent
that
the
matter
in
controversy
herein
is
governed
by
s.
87(d)
and
not
by
para.
(a)
of
ss.
(1)
of
s.
86,
because
there
was
no
sale
of
the
goods
but
use
thereof
by
the
suppliant.
I
cannot
agree
with
this
contention
;
I
do
not
think
that
the
members
incorporated
in
the
superstructure
of
the
bridges
can
be
considered
as
goods
made
for
the
use
of
the
suppliant
and
not
for
sale.
Although
I
believe
that
the
material
matter
to
be
determined
is
the
meaning
of
the
expression
‘‘on
the
sale
price
.
.
.
at
the
time
of
the
delivery,’’
I
may
perhaps
note
that,
under
the
law
of
the
Province
of
Quebec,
the
contracts
entered
into
between
His
Majesty
the
King
in
the
right.
of
the
Province
of
Quebec
and
the
suppliant
are
not
contracts
of
lease
and
hire
but
are
contracts
of
sale
:
Mignault,
Droit
Civil,
vol.
7,
p.
401,
para.
11;
Pothier
(ed.
Bugnet)
vol.
4,
No.
394;
Guillouard,
Traité
du
Contrat
de
Louage,
vol.
2,
no.
772;
Fuzier-Herman,
Répertoire
Général,
vol.
26,
no.
1105;
Lyon-Caen
&
Renault,
Traité
de
Droit
Commercial,
4th
ed.,
vol.
5,
no.
152
;
Planiol,
Traité
Elémentaire
de
Droit
Civil,
9th
ed.,
vol.
2,
no.
1902;
Planoil
&
Ripert,
Traité
Pratique
de
Droit
Civil
Français,
ed.
1932,
vol.
11,
no.
912.
After
a
careful
perusal
of
the
evidence
and
of
the
argument
of
counsel
and
the
authorities
cited,
I
have
reached
the
conclusion
that
the
materials
supplied
by
the
suppliant
company
and
incorporated
by
it
in
the
superstructure
of
the
three
bridges
aforesaid
must
be
considered
as
goods
sold
and
delivered
to
His
Majesty
the
King
in
the
right
of
the
Province
of
Quebec
within
the
meaning
of
s.
86(a)
of
the
Special
War
Revenue
Act
and
are
consequently
liable
to
a
sales
tax
thereunder.
As
these
goods
were
not
purchased
by
His
Majesty
The
King
in
the
right
of
the
Province
of
Quebee
for
purposes
of
resale,
I
am
of
opinion
that
ss.
(1)
of
s.
105
applies
and
that
the
suppliant
is
entitled
to
a
refund
of
the
sum
of
$1,503,
without
interest.
The
suppliant
will
have
its
costs
of
the
action.
Judgment
accordingly.
Email this Content