Great Lakes Power Limited v. Regional Assessment Commissioner, Region No. 31

Great Lakes Power Limited v. Regional Assessment Commissioner, Region No. 31 Collection Decisions of the Court of Appeal Date 1999-08-05 Docket numbers C30989 Judges Finlayson, George Duncan; Austin, Allan McNiece; Borins, Stephen Subject Civil Decision Content DATE: 19990805 DOCKET: C30989 COURT OF APPEAL FOR ONTARIO FINLAYSON, AUSTIN AND BORINS JJ.A. IN THE MATTER OF section 43 of the Assessment Act, R.S.O. 1990, c.A. 31, as amended; AND IN THE MATTER OF a decision of the Ontario Municipal Board with respect to appeals by the Regional Assessment Commissioner, Region No. 31, The Corporation of the City of Sault Ste. Marie, The Corporation of the Township of Michipicoten, The Township of Michipicoten Board of Education, The Sault Ste. Marie Board of Education with respect to certain properties. AND IN THE MATTER OF section 96(1) of the Ontario Municipal Board Act, R.S.O. 1990, c.O.28, as amended; BETWEEN: ) ) GREAT LAKES POWER LIMITED ) Peter Milligan and Prakash David ) for the appellant Appellant ) ) and ) ) REGIONAL ASSESSMENT COMMISSIONER ) Carl Davis REGION NO. 31, THE CORPORATION OF ) for the respondent, Regional THE CITY OF SAULT STE. MARIE, THE ) Assessment Commissioner, CORPORATION OF THE TOWNSHIP OF ) Region No. 31 MICHIPICOTEN, THE TOWNSHIP OF ) MICHIPICOTEN BOARD OF EDUCATION ) Gordon Acton and THE SAULT STE. MARIE BOARD OF ) for the respondents, The EDUCATION ) Corporation of the City of Sault ) Ste. Marie and The Corporation Respondents ) of the Township of Michipicoten, ) The Township of Michipicoten ) Board of Education, and The ) Sault Ste. Marie Board of ) Education ) ) Heard: June 24, 1999 On appeal from the judgment of the Divisional Court (Farley, Coo and Chapnik JJ.) dated June 4, 1998. BORINS J.A. (Dissenting): [1] This appeal concerns whether the business of Great Lakes Power Limited (GLP) is that of a manufacturer within the meaning of s.7(1)(d) of the Assessment Act, R.S.O. 1990, c.A. 31 for the purpose of paying business tax pursuant to Part XXII of the Municipal Act, R.S.O. 1990, c.M.45. If the business is that of a manufacturer, the business tax to be levied pursuant to s.362 of the Municipal Act is to be based on 60% of the assessed value of GLP’s land, as assessed under s. 3 of the Assessment Act. If the business is not that of a manufacturer, the tax base is 30% of the assessed value of GLP’s land as provided by s.7(1)(k) of the Assessment Act which applies to any businesses “not specially mentioned” in s.7(1)(a)-(j). [2] The Divisional Court upheld a decision of the Ontario Municipal Board to the effect that GLP carries on the business of a manufacturer within the meaning of s.7(1)(d). It appears to be common ground that GLP generates, transmits and distributes electricity for sale to the general public to whom it charges rates for electrical services that are regulated by Ontario Hydro. It is the largest private power producer in Ontario. Its origins date back to 1888. [3] It appears that this is the first occasion which this court has had to consider the nature of the business carried on by a producer of electricity such as GLP since Re Township of Coleman & Northern Ontario Light and Power Co. Ltd. (1927), 60 O.L.R. 405 (C.A.). [4] The Assessment Act is complementary to the Municipal Act for the purposes of municipal taxation. Section 3 of the Assessment Act provides that all real property in Ontario is subject to assessment and taxation, subject to a long list of exemptions from taxation contained in the section. The exemptions found in paras. 17 and 18 of s.3, in my view, are relevant to this appeal. [5] Section 7(1) of the Assessment Act establishes the tax base for business tax levied under the Municipal Act as a percentage of the s.3 assessed value of a person’s land which is used or occupied by that person for the purpose of, or in connection with, the various businesses described in s.7(1)(a)-(j). The tax base varies from 25% to 75% of the assessed value, depending on the business carried on by the taxpayer. Although s.7(1)(a)-(j) appears to be very comprehensive, s.7(1)(k) is intended to capture any business “not specially mentioned” in the previous subsections and sets the tax base for such businesses at 30% of the assessed value. [6] The following are the relevant portions of s.7(1) of the Act: 7.(1) Irrespective of any assessment of land under this Act, every person occupying or using land for the purpose of, or in connection with, any business mentioned or described in this section, shall be assessed for a sum to be called “business assessment” to be computed by reference to the assessed value of the land so occupied or used by that person as follows: E. (d) The business of a manufacturer, including the business of a flour miller, maltster, a concentrator or smelter of ore or metals, and the business of obtaining minerals from the ground, for a sum equal to 60 per cent of the assessed value of the land so occupied or used, provided that a manufacturer is not liable to business assessment as a wholesale merchant by reason of selling by wholesale the goods that manufacturer manufactures on the land. …. (g) The business of, …. (iii) the transmission of water or of steam, heat or electricity for the purposes of light, heat or power, for a sum equal to 30 per cent of the assessed value of the land so occupied or used, except a highway, lane or other public communication or public place or water or private right of way, occupied or used by such person, exclusive of the value of any machinery, plant or appliances erected or placed upon, in, over, under or affixed to the land. …. (k) Any business not specially mentioned before in this section, for a sum equal to 30 per cent of the assessed value of the land so occupied or used. [Emphasis added.] [7] In dismissing the appeal from the Ontario Municipal Board, the Divisional Court concluded that the decision of the majority of the Court of Appeal in Coleman does not stand for the proposition that the business of a company similar to that of GLP was not a manufacturing business within the meaning of s.10(1)(d) of the Assessment Act, R.S.O. 1914, c.195, which is similar to s.7(1)(d) of the present Act. As “manufacturer” is not defined in the Act, the Divisional Court applied the definition of manufacturer found in Minister of National Revenue v. Dominion Shuttle Co. (Ltd.) (1933), 72 Que. S.C. 15, per Archambault J. at 18, noting that the definition had been accepted by the Supreme Court of Canada in Canada v. York Marble, Tile & Terrazzo Ltd., [1968] S.C.R. 140 and Royal Bank of Canada v. Canada (Deputy Minister of National Revenue, Customs & Excise), [1981] 2 S.C.R. 139. [8] I approach this appeal from the perspective of the principles that are to be applied in the interpretation of taxing statutes. As such, on the basis of my interpretation of the Assessment Act, I find it unnecessary to consider the correctness of the Divisional Court’s application of the Dominion Shuttle definition of manufacturer. [9] In Québec (Communauté Urbaine) v. Corp. Notre-Dame de Bon- Secours, [1994] 3 S.C.R. 3 the Supreme Court of Canada outlined five rules to guide the courts in interpreting tax legislation. For the purpose of these reasons, I find it helpful to quote the following passage from the reasons of Gonthier J., at p.17, in which he discussed the first rule: In light of this passage there is no longer any doubt that the interpretation of tax legislation should be subject to the ordinary rules of construction. At page 87 of his text Construction of Statutes (2nd ed. 1983), Driedger fittingly summarizes the basic principles: “…the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”. The first consideration should therefore be to determine the purpose of the legislation, whether as a whole or as expressed in a particular provision. [10] On a consideration of the Assessment Act as a whole, it is my view that the legislature did not consider the business of an electrical utility such as GLP to be the business of a manufacturer within the meaning of s.7(1)(d). I reach this conclusion because in both s.3 and s.7 the legislature has recognized a distinction between the business of a manufacturer and businesses, which on the evidence before the Ontario Municipal Board, constitute elements of the business carried on by GLP. [11] Under s.3 real property is liable to taxation and is to be assessed subject to a number of exemptions. Para. 17 provides an exemption for all machinery and equipment used, inter alia, for manufacturing. However, para. 18 provides an exemption for all “machinery and equipment…to the extent and in the proportion used for producing electric power for sale to the public…”. This is an element of the business carried on by GLP. In my view, this indicates the intention of the legislature to regard producers of electric power as different and distinct from manufacturers. If this were not so, it would be unnecessary to include the exemption provided by para. 18. [12] I have reached the same conclusion on an analysis of s.7(1). As I have indicated, s.7(1)(d) provides the tax base for the business tax assessment of manufacturers. In s.7(1)(g)(iii), the tax base for the business tax assessment of the business of “the transmission of water or of steam, heat or electricity for the purposes of light, heat or power” is fixed at 30% of the assessed value under s.3. This is also an element of the business carried on by GLP. Once again, in my view, the legislature has recognized a distinction between the business of manufacturers and the business of public electrical utilities, such as GLP. In my opinion, s.3, para. 18 is complementary to s.7(1)(g)(iii). [13] It may be, as counsel suggested, that the Coleman case is not easy to interpret. However, as I read Coleman it supports the conclusion which I have reached. The 1914 Act contained provisions in s.10(1)(d) and (k) which correspond to the provisions in s.7(1)(d) and (g)(iii) of the present Act. At p.407 of Coleman, on behalf of four of the five members of the Court of Appeal, Middleton J.A. stated: The company transmits electricity and supplies compressed air by a system of pipes from a compressor plant outside the township, assisted by an auxiliary plant within the township. We agree that this is not in any sense a manufacturing business within [s.10(1)(d)]. [14] Because the electrical utility in Coleman, it would seem, carried on different aspects of its overall business in different municipalities or regions, it was necessary for the court to have recourse to s.10(3) of the 1914 Act, which is virtually identical to s.7(8) of the present Act. Both s.10(3) of the 1914 Act and s.7(8) of the present Act preclude multiple assessments where a taxpayer carries on more than one of the businesses contained in s.10(1) and s.7(1), respectively, the assessment being governed by the taxpayer’s “chief or preponderating business”. In doing so, Middleton J.A. stated at p.408: We also agree that the electrical business is the “preponderating business” carried on upon the premises, under subsec.3, and so the case comes within [s.10(1)(k) and not s.10(1)(j)]. The appeal therefore fails and is dismissed with costs. Section 10(1)(k) and (j) of the 1914 Act corresponds to s.7(1)(g)(iii) and (k) of the present Act. The passages which I have quoted constitute in their entirety the reasons of Middleton J.A. for the majority. [15] It is helpful to reproduce s.10(1)(k) of the 1914 Act to illustrate the similarity between the italicized words and s.7(1)(g)(iii) of the present Act: 10(1)(k) Every person carrying on the business of a telegraph or telephone company, or of an electric railway, tramway, street railway or incline railway, or of the transmission of oil or water, or of steam, heat, gas, or electricity for the purposes of light, heat or power, for a sum equal to 25 per cent of the assessed value of the land (not being a highway, lane, or other public communication or public place or water or private right of way), occupied or used by such person, exclusive of the value of any machinery, plant or appliances erected or placed upon, in, over, under or affixed to such land. [Emphasis added.] [16] In Coleman, the company produced electrical power in another municipality and transmitted electricity by high tension power lines to a transformer station in the Township of Coleman. The court was presented with two issues. The first issue was whether the company carried on its “chief or preponderating business” in the Township of Coleman within the meaning of s.10(3) of the 1914 Act. The court found that it did. The second issue was whether the company’s business was a manufacturer within s.10(1)(d) of the 1914 Act (s.7(1)(d) of the present Act), the transmission of electricity within s.10(1)(k) of the 1914 Act (s.7(1)(g)(iii) of the present Act), or whether the company’s business fell within the “basket clause” found in s.10(1)(j) of the 1914 Act (s.7(1)(k) of the present Act). The court found that the company’s business was “not in any sense a manufacturing business” within s.10(1)(d), but was “the electrical business” within s.10(1)(k). This is the interpretation of the decision in Coleman found in H.E. Manning, Assessment & Rating: Municipal Taxation in Canada, 4th ed., (1962), 109, 185-86, 221. [17] Further support for my conclusion that the legislature does not consider the business of an electrical utility to be that of a manufacturer within the meaning of s.7(1)(d) can be found in Re Hydro-Electric Power Commission of Ontario & City of Hamilton (1920), 47 O.L.R. 155 (C.A.), which also concerned the 1914 Act. The Commission was assessed under s.10(1)(k). The issue was whether the Commission was exempt from paying business taxes under other provisions in the Act. A County Court judge found that the exemptions did not apply and that the Commission was liable to assessment for business tax under s.10(1)(k). In doing so, he was required to answer a number of questions, the first of which was: (1) Was the appellant a person carrying on the business of the transmission of electricity for the purposes of light, heat, and power, within the meaning of sec. 10 of the Assessment Act, so as to be liable to a business assessment thereunder? [18] Meredith C.J.O., on behalf of the court, concluded that the County Court judge correctly answered the question in the affirmative, stating at p.162: I do not understand that it is essential, in order that the Commission shall be liable to the business assessment, that it should carry on its business in Hamilton. If it carries on one of the businesses mentioned in sec. 10, and the Commission does carry on one of the businesses mentioned in para. (k) of sub-sec. 1, and occupies or uses land for the purpose of its business, it is, as I understand the provisions of the section, to be assessed “for a sum to be called ‘Business Assessment’ to be computed by reference to the assessed value of the land so occupied or used”. [19] Thus, in both Coleman and Hydro-Electric Power Commission of Ontario this court was satisfied that the business of an electrical utility similar to that of GLP came within s.10(1)(k) of the 1914 act, which corresponds with s.7(1)(g)(iii) of the present Act. From this it follows that since at least 1914 the legislature has not intended that the business of an electrical utility be taxed as the business of a manufacturer within the meaning of s.10(1)(d) of the 1914 Act and s.7(1)(d) of the present Act. Thus, specific provision for the business of an electrical utility is contained in s.7(1)(g)(iii) with the result that GLP’s tax base for the calculation of its business tax is 30% of the assessed value of the land which it occupies or uses. [20] Accordingly, I would allow the appeal and set aside the judgment of the Divisional Court with costs before that court in addition to the costs of the appeal. An order is to issue in accordance with these reasons. Signed: “S. Borins J.A.” FINLAYSON J.A.: [21] I agree with the judgment of the Divisional Court in appeal and, accordingly, am unable to concur with the reasons of Borins J.A. However, accepting his outline of the facts and the issues, I am able to briefly express my own views. [22] The appellant argued that the Divisional Court erred in its interpretation of settled law of some 70 years in Ontario. In the submission of appellant’s counsel, this court, in Re Township of Coleman and Northern Ontario Light and Power Co. Ltd. (1927), 60 O.L.R. 405 (C.A.), held that an electrical business, which included the generation of electricity from water power and the transmission of that electricity, is not a “manufacture” for purposes of business assessment under s.10(1)(d) of the Assessment Act, R.S.O. 1914, c.195. Section 10(1)(d) of the 1914 Assessment Act is the equivalent of the present s.7(1)(d) in the Assessment Act, R.S.O. 1990, c.A.31. [23] The reasons in Coleman are extremely brief. In determining that the company was not a manufacturer, Middleton J.A. said only the following for the majority at p. 407: The company transmits electricity and supplies compressed air by a system of pipes from a compressor plant outside the township, assisted by an auxiliary plant within the township. We agree that this is not in any sense a manufacturing business within clause (d). [24] It is clear from the dissenting reasons of Masten J.A. that the company generated the electricity in another township and then transmitted the electricity to an auxiliary plant in Coleman Township where the character of the electricity was altered and the electricity was then distributed. In my view, the majority simply noted that in Coleman Township the company was primarily engaged in the transmission of electricity and determined that electricity transmission is not manufacturing. Transmission of electricity was covered by the then equivalent of s.7(1)(g)(iii). In my opinion, this case is not particularly relevant to the generation of electricity and, from the combined research of the respondent’s counsel and my own, it appears that there are no citations to Coleman in subsequent cases on any subject. It is an isolated case that is restricted to its particular facts. [25] On the other hand, Minister of National Revenue of the Dominion of Canada v. Dominion Shuttle Co. (Ltd.) (1933), 72 C.S. 15 (Que. S.C.), relied upon by the Divisional Court, has been referred to by this court and lower Ontario courts in the context of the Assessment Act and has been adopted by the Supreme Court of Canada with respect to the Excise Tax Act, R.S.C. 1985, c.E- 15. [26] In Dominion Shuttle, Archambault J. of the Québec Superior Court defined manufacturer at p.18: First, what is a manufacturer? There is no definition of the word “manufacturer” in the Act and it is practically impossible to find a definition which will be absolutely accurate, but from all the definitions contained in leading dictionaries, Corpus Juris, Encyclopedias, etc., the Court gathers that to manufacture is to fabricate; it is the act or process of making articles for use; it is the operation of making goods or wares of any kind; it is the production of articles for use from raw or prepared material by giving to these materials new forms, qualities and properties or combinations whether by hand or machinery. [27] This definition has been quoted with approval on numerous occasions, some specifically in reference to the production of electricity by the operation of generators. Although Archambault J. was interpreting the Special War Revenue Act, R.S.C. 1927, c.179, and the adoption of this definition by the Supreme Court of Canada was outside the context of the Assessment Act, this court and other provincial courts have not hesitated to use it with reference to the Assessment Act. [28] In The Village of Delhi v. Imperial Leaf Tobacco Company of Canada Limited, [1949] O.R. 636, Roach J.A. considered the meaning of the term “manufacturer” in the context of the Assessment Act. At p. 655, he referred to the definition from Dominion Shuttle in the course of determining that the company in question was not a manufacturer. [29] The definition from Dominion Shuttle was also considered by this court in Re Alliston Curling Club Inc. and Town of Alliston, [1964] 2 O.R. 251 (C.A.). McGillivray J.A. found that the equipment was not used for “manufacturing … purposes” in the context of the Assessment Act. The portion of Re Alliston that quotes the Dominion Shuttle definition was subsequently quoted with approval by this court in R. v. Daniel (1982), 40 O.R. (2d) 620 (C.A.) in the context of the Narcotic Control Act. [30] Similarly, the Dominion Shuttle definition was considered with respect to the meaning of “manufacture” in the Assessment Act in Re Walsh [1961] O.W.N. 105 (Co. Ct.) at p. 107 and in Warren Bituminous Paving Co. Ltd. v. Corporation of Township of Otonabee, [1963] 1 O.R. 29 (H.C.J.) at p. 34. [31] The Supreme Court of Canada has also quoted the definition from Dominion Shuttle, but only in the context of the Excise Tax Act. Spence J. wrote for the Court in R. v. York Marble, Tile and Terrazzo Limited, [1968] S.C.R. 140. In considering the meaning of the word “manufactured” in the Excise Tax Act, he adopted the following portion of the Dominion Shuttle definition at p.145: “manufacture is the production of articles for use from raw or prepared material by giving to these materials new forms, qualities and properties or combinations whether by hand or machinery.” [32] In Royal Bank of Canada v. Deputy Minister of National Revenue for Customs and Excise (1981), 128 D.L.R. (3d) 385 (S.C.C.), McIntyre J. adopted the Dominion Shuttle definition as quoted in York Marble, supra, and said of thermal generation of electricity at p.388: “… I conclude that the appellant becomes a manufacturer by producing electric current by the operation of the generators.” I know of no technical reason why for assessment purposes we should differentiate among thermal, hydro or nuclear generation of electricity. [33] The goal of statutory interpretation is to determine the intent of the legislature in enacting the provisions in question. The plain meaning of the words is the starting point, but the provision must be interpreted in the context of the rest of the legislation. With respect to the case in appeal, I do not think that an analysis of the provisions of the Assessment Act relating to the assessment and taxation of real property is of any assistance in the light of the introductory language of s. 7 dealing with business assessment. The section states: 7. – (1) Irrespective of any assessment of land under the Act, every person occupying or using land for the purpose of, or in connection with, any business mentioned or described in this section, shall be assessed for a sum called “business assessment” to be computed by reference to the assessed value of the land so occupied or used by that person as follows: [34] The definition of “manufacture” adopted by the courts has been consistent since Dominion Shuttle in 1933 and has been applied in this province. It has been the definition of choice under the Assessment Act and has been expressly applied to the generation of electrical power. Hydro generated electricity has been such a significant source of power in this Province for so many years that one can only assume that it if the legislature intended to treat it in some special manner under the Assessment Act, it would have done so long before this date. [35] Accordingly, I would dismiss the appeal with costs. Released: AUG 5 1999 Signed: “G.D. Finlayson J.A.” “I agree with Finlayson J.A. Austin J.A.”