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.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.