Judgments

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T-3750-72
The Queen (Plaintiff)
v.
Cefer Designs Limited (Defendant)
Trial Division, Collier J.—Vancouver, June 26, 27,28,1973; Ottawa, May 14, 1974.
Sales tax—Goods produced or manufactured in Canada— Floating concrete docks—Exempt as structures—Excise Tax Act, R.S.C. 1970, c. E-13, ss. 26, 27.
The defendant, a manufacturer licensed under the Excise Tax Act, made floating concrete docks, wharves and break waters, or sections of them, at its plant and towed them to the place designated by the customer, where they were assembled and permanently put in place. The defendant's concrete docks were sold in competitive bidding with wooden docks produced by others. The plaintiff claimed the sum of $11,050 in sales tax, under section 27 of the Excise Tax Act, on these products as goods "manufactured or produced in Canada". The defendant invoked the provisions exempting "buildings or structures" in terms of section 26.
Held, dismissing the action, the docks, being permanent installations at the customer's site, were within the exemp tion of section 26(4)(a)(b) as "structures", manufactured at the defendant's plant; "erected" at a different place, the customer's site; and produced in competition with producers of "similar structures", namely wooden docks.
British Columbia Forest Products Limited v. M.N.R. [1972] S.C.R. 101; Springman v. The Queen [1964] S.C.R. 267; London County Council v. Tann [1954] 1 All E.R. 389; Cardiff Rating Authority v. Guest [1949] 1 All E.R. 27; B.C. Forest Products v. M.N.R. [1969] C.T.C. 156 and Cefer Designs Ltd. v. Dep. M.N.R. [1972] F.C. 911, applied.
ACTION. COUNSEL:
G. Eggertson and A. Anderson for plaintiff. R. J. Anthony for defendant.
SOLICITORS:
Deputy Attorney General of Canada for plaintiff.
Bouch, Edwards, Kenny and Bray, Vancou- ver, for defendant.
COLLIER J.—The plaintiff claims $11,050.81, the consumption or sales tax alleged to be owing by the defendant pursuant to the provisions of the Excise Tax Act, R.S.C. 1970, c. E-13 and amendments. The relevant portions of section 27 of the statute provide for the imposition, levying, and collection of a consumption or sales tax on the sale price of goods "... pro duced or manufactured in Canada ...".
It is admitted in the pleadings, the defendant (which is a company carrying on business in British Columbia) manufactures or produces, among other things, floating concrete docks, wharves and breakwaters. Paragraph 2 of the statement of claim asserts, and the defendant admits:
The said floating concrete docks, wharves and breakwaters, are constructed out of long hollow parallelepiped of con crete, in varying sizes and are made for a specific customer at its drydock in Richmond, British Columbia.
At trial, oral and documentary evidence was adduced. As well, certain facts were agreed upon in writing. I need only quote verbatim the following extract:
During the period October 1, 1971 to July 31, 1972, Cefer manufactured and sold ten (10) floating concrete installa tions, amongst others, to various customers for the locations and for the purposes described below.
The agreed statement of facts then goes on to set out some detail in respect of the 10 installa tions. Nine of them were docks of various kinds, and one was a floating warehouse plat form. Evidence was given describing in more detail the kinds of floating concrete docks, wharves and breakwaters constructed by the defendant in its business, and some of the projects referred to in the agreed statement of facts were, as well, described in more detail in the evidence.
The defendant is a licensed manufacturer under the Excise Tax Act. It says it is not liable to pay the taxes claimed here because it was not, for the purposes of section 27, a manufac turer or producer. Reliance is placed on what might be termed the exempting provisions found in paragraphs (a) and (b) of subsection 26(4):
(4) Where a person
(a) manufactures or produces a building or other structure otherwise than at the site of construction or erection thereof, in competition with persons who construct or erect similar buildings or structures not so manufactured or produced,
(b) manufactures or produces otherwise than at the site of construction or erection of a building or other structure, structural building sections for incorporation into such building or structure, in competition with persons who construct or erect buildings or other structures that incor porate similar sections not so manufactured or produced,
he shall, for the purposes of this Part, be deemed not to be, in relation to any such building, structure, building sections, building blocks or fabricated steel so manufactured or pro duced by him, the manufacturer or producer thereof.
The defendant contends it is a person who manufactures or produces its floating docks, wharves, and breakwaters (or the sections of them) at its plant, and tows or transports them to the place designated by the customer where they are assembled and permanently put in place (the site of construction or erection). The defendant says further it is in competition with others as those other "persons" are described in the two paragraphs already quoted.
The main point in issue between the parties is whether the concrete floating docks, wharves, and breakwaters are within the phrase "building or other structure" as it is used in subsection 26(4).
Other points were raised in addition, and I shall refer to them later.
It is necessary to review, to some extent, the evidence. I shall deal with the floating docks produced by the defendant but, as I understand it, the same general construction methods are used in respect of wharves and breakwaters. The defendant's customer specifies the design, kind, and size of dock required. The defendant then constructs the concrete sections or seg ments which make up the dock. These can be of various lengths and widths depending on the specifications. In the case of breakwaters, the maximum segment length is approximately 80'.
These segments can be joined or coupled to gether at the site, and the meaning of doing so is designed into them.
The method of fixing the concrete docks into position at the customer's site is considered by the defendant with the specifications. The fixing mechanism is then predetermined and incorpo rated into the dock. I am not referring here to dolphins, pilings, or anchors, but to the fixing mechanisms in the dock itself for attachment to dolphins, pilings, anchors, or other similar things at the site in order to secure the complete dock in place. The individual segments are then transported, usually by water, from the defend ant's plant in Richmond, B.C. to the site. In some cases the sites are considerable distances away.
In most contracts, the defendant installs the dock at the site. The segments are joined to gether and the dock is fixed in position, fre quently to dolphins or pilings driven into the water-bed. Sometimes the dock is designed to have a cut-out section to fit around pilings, or there are special steel attachments built for securing to dolphins. I should state at this point that the pilings and dolphins are intended to be permanent fixtures (apart from replacement for wear, damage, or safety). Other methods of securing the docks are by chains to a three or four-ton block serving as an anchor, and some times by fix-legs.
The docks are installed, for the most part, to provide docking space for vessels and to pro vide access to the land. One end of the dock is usually, in some manner, connected to the land. This was the case in a large number of the projects referred to in the pleadings in this case. Sometimes, however, the attachment is to a ramp rather than the actual shore. In my view, the difference is immaterial in deciding whether these docks are "buildings or other structures". The floating docks are so attached that they are able to move vertically with the tide (sometimes
as much as 16'), but are not able to move, to any appreciable extent, horizontally.
The evidence is clear that each floating dock produced by the defendant is custom-made. No two docks are exactly alike, although some of the segments in one dock may be identical to those in another. The evidence is also clear, and indeed overwhelming, that these docks are designed to remain permanently in place once installed. They are not intended to be moved about nor dismantled, even for repair. It is true they can, if necessary, be dismantled and seg ments taken away from the site for repairs, and in one instance testified to, that was done. Eco nomic considerations dictated the dismantling in the instance I have referred to. As a general rule, repairs (mostly for economic reasons) are done on the site.
In my view, the evidence in this case establishes:
(a) the concrete docks in question are, and are intended to be, permanent installations at the customer's site;
(b) the docks are assembled or put together at the customer's site;
(c) they are either attached at one end to the customer's land, or are attached to property of the customer which, in turn, is affixed in some way to land (for example, a ramp).
I turn now to the phrase "building or other structure". In my opinion, these docks are "structures" within the meaning of that phrase. A number of cases were cited by counsel but I need not refer to them all. In British Columbia Forest Products Limited v. M.N.R. [1972] S.C.R. 101, the Supreme Court had for con sideration the words "building or other struc ture" as found in Class 3 of Schedule B to the Income Tax Act, R.S.C. 1952, c. 148. The Court said at pp. 111-112:
The tanks and the recovery unit are, in my opinion, structures, if they are not buildings. I do not think that the word "structure" as used in Class 3 must be construed ejusdem generis with the word "building". It is preceded by the word "other", thus contemplating structures other than buildings. The point was considered, though in relation to a different statute, in Springman v. The Queen ([1964] S.C.R. 267). That case dealt with a charge under s. 374(1)(a) of the Criminal Code, which makes it an offence wilfully to set fire to a building or structure. Hall J., delivering the reasons of the majority of the Court, said that the term "structure" was not to be construed ejusdem generis with the term "building".
A similar view is expressed by Lord Goddard C.J. in London County Council v. Tann ([1954] 1 All E.R. 389 at 390), in relation to a provision in the London Building Act, 1930.
In determining what is a structure, reference may be made to the judgment of Denning L.J. (as he then was) in Cardiff Rating Authority v. Guest, Keen Baldwin's Iron & Steel Co. Ltd. ([1949] 1 K.B. 385 at 396), which was cited in this Court by Hall J. in the Springman case:
A structure is something which is constructed, but not everything which is constructed is a structure. A ship, for instance, is constructed, but is not a structure. A structure is something of substantial size which is built up from component parts and intended to remain permanently on a permanent foundation but it is still a structure even though some of its parts may be movable as for instance about a pivot thus a windmill or a turntable is a structure.
I think this test can properly be applied to the facts in the present case, as it was by the learned trial judge, and I would agree with his conclusion that the disputed assets outside the mill building were structures within the meaning of Class 3.
The decision of the Exchequer Court was affirmed. Sheppard D.J. reviewed the authori ties at length, including many of those cited to me, and I gratefully adopt his analysis.'
Martland J. (giving the judgment of the Court in the B.C. Forest Products case) quoted from the judgment of Denning L.J. in the Cardiff Rating Authority case (see above). Denning J. continued as follows:
... A thing which is not permanently in one place is not a structure, but it may be "in the nature of a "structure" if it has a permanent site and has all the qualities of a structure, save that it is on occasion moved on or from its site. Thus, a floating pontoon, which is permanently in position as a landing stage beside a pier, is "in the nature of a structure,"
1 See B.C. Forest Products Ltd. v. M.N.R. [1969] C.T.C. 156 at pp. 169-178.
even though it moves up and down with the tide and is occasionally removed for repairs or cleaning. It has, in substance, all the qualities of a landing stage built on piles. So, also, a transporter gantry is "in the nature of "a struc ture," even though it is moved along its site. It has the same qualities as a fixed gantry, save that it moves on its site. Applying this interpretation to the facts of this case, I think that a tilting furnace is "in the nature of a structure." It has a permanent site and has the same qualities as any other furnace, save that it moves. The only difference is that, in order to run off the molten ore, it is tipped up instead of being tapped. Again, the mains are "in the nature of a structure." They have a permanent site and have the same qualities as any fixed mains, save that they are moved occasionally for cleaning or repairs.
In my view, those remarks are apposite here. I have little difficulty in finding these docks to be "structures".
I do not think it matters that they are not affixed to the realty, in the hoary traditional sense of that expression. What is important, to my mind, is that these docks are permanent installations, resting partly on or connecting to land. The plaintiff relied on concessions by some of the witnesses called by the defendant that these docks once installed could be fairly easily physically dismantled and taken away for, say, repairs. This was said to show the docks were not permanent installations. The answer to that contention is two-fold:
(a) the remarks already quoted of Lord Den- ning, and
(b) the answer of the witness Lohheed which I summarize as follows:
Yes, the docks and breakwater can be dismantled and taken away. One can probably dismantle the Pyramids. It is a matter of economic cost.
It was then said on behalf of the plaintiff that there was no "construction or erection" of the docks at the site. (See paragraphs 26(a) and (b).) I cannot accept that contention. The substantial and key portions of the docks, including major portions of the affixing devices, were manufac tured at the defendant's plant. The assembly
and joining together of the segments, and the affixing process, are in my view an "erection" in its plain and ordinary meaning.
The last point for decision requires consider ation of the words "... in competition with persons who construct or erect similar buildings or structures not so manufactured or erected". The evidence adduced by the defendant clearly indicates that the majority of floating docks and wharves are made either of concrete or of wood. (Some other materials are used by some contractors.) The evidence establishes that the defendant has competitors who construct float ing docks and wharves of wood, and that there is competitive bidding in respect of customers' projects. I need not go into detail; several wit nesses testified to this. In my view, paragraph 26(4)(a) does not mean that the defendant must show it is in competition with others who con struct or erect "concrete" floating docks. The word used in the subsection is "similar". It has reference, in my opinion, to the type of struc ture generally, and not to the precise type of material used in the fabrication of the structure. I find support for my opinion in the judgment of Jackett C.J. in Cefer Designs Ltd. v. Dep. M.N.R. [1972] F.C. 911 at 921, although the Chief Justice expressly states his view on the point is obiter. There is no doubt that, on the evidence before me, many of the docks in ques tion, or their sections, could have been con structed of wood. I should add, for clarity, that the testimony is to the effect that the normal practice, in the case of wooden floating docks, is to fabricate and erect them on the site.
The plaintiff contended that the defendant must show, in respect to the contracts referred to in the pleadings in this case, that there was actual competition by others for the particular jobs. I do not think that is what the paragraphs of subsection 26(4) mean. There must be active competition in the particular field (which has been established here) but there need not neces-
sarily be actual competitive bidding or seeking out proved in respect of each individual project.
I conclude, therefore, the defendant has established it falls within the provisions of sub section 26(4) and, in respect of the taxes claimed, is deemed not to be the manufacturer of the docks in question.
The action is dismissed. The defendant is entitled to its costs.
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