Placer Dome Canada Limited v. Ontario (Minister of Finance)

Placer Dome Canada Limited v. Ontario (Minister of Finance) Collection Decisions of the Court of Appeal Date 2004-08-31 Docket numbers C39007 Judges Gillese, Eileen E.; Armstrong, Robert Patrick; Blair, Robert Ashley Subject Civil Decision Content DATE: 20040831 DOCKET: C39007 COURT OF APPEAL FOR ONTARIO GILLESE, ARMSTRONG and BLAIR JJ.A. BETWEEN: PLACER DOME CANADA LIMITED Appellant Al Meghji and Mahmud Jamal, for the appellant - and - ONTARIO (MINISTER OF FINANCE) Respondent Anita C. Veiga-Minhinnett, for the respondent Heard: March 1, 2004 On appeal from the judgment of Justice M. Cullity of the Superior Court of Justice dated September 25, 2002. ARMSTRONG J.A.: Placer Dome Canada Ltd. (“PDC”), a subsidiary of Placer Dome Inc. (“PDI”), is in the gold mining business. It operates five gold mines in Canada. It also owns all the shares of a company that is engaged in the operation of a gold mine in Quebec. In 1995 and 1996, PDC entered into certain financial transactions (the “Transactions”). The Transactions were executed by PDI on behalf of PDC as part of a “hedging program”. Counsel for PDC stated at trial that the use of the term “hedging” reflected the commonly understood meaning of the word: “an arrangement which effectively offsets a price or exchange risk inherent in another transaction or arrangement.” The net gains realized from the Transactions were $6,423,000 and $11,440,000 in 1995 and 1996, respectively. The issue in this appeal is whether the Transactions constitute “hedging” as defined in the Mining Tax Act, R.S.O. 1990, c. M.15 (sometimes referred to as the “Act”) and whether the net gains therefrom are subject to tax under the Act. The Minister of Finance for the Province of Ontario, by notices of reassessment, assessed PDC for taxes concerning the net gains realized from the Transactions. PDC filed notices of objection and the Minister confirmed the reassessments. PDC appealed the reassessments to the Superior Court of Justice. Cullity J. of the Superior Court (the “trial judge”) dismissed the appeal. PDC now appeals to this court. FACTUAL BACKGROUND The trial judge made the following thorough and succinct findings of fact as set out in his reasons for judgment at para. 7: A. PDC is a wholly-owned subsidiary of PDI; B. PDI is a Canadian resident corporation whose shares are traded on stock exchanges in Toronto, New York, Australia, Paris and Switzerland; C. PDI has approximately 50 direct and indirect subsidiaries resident in Canada and in other countries. It, and these subsidiaries (collectively “the PDI Group) are involved in the exploration, production and sale of gold worldwide; D. In 1995 and 1996 the PDI Group owned a total of 13 gold mines as well as other mines producing copper, silver and molybdenum. These mines are located in Canada, the United States, Papua and New Guinea, Australia and Chile. E. In these years PDC, or a predecessor prior to an amalgamation, operated three gold mines in Ontario – Campbell, Detour Lake and Dome – the Sigma cold mine in Quebec and the Endako molybdenum mine in British Columbia. It also owned all the shares of a corporation that operated the Kiena gold mine in Quebec. F. Although senior officers of PDI typically sit on the board of directors of its subsidiaries, the day-to-day mining operations, and the sale of gold produced by, the subsidiaries were carried out by employees of the subsidiaries with a substantial degree of automony. G. All gold produced by PDC in 1995 and 1996 was sold to bullion dealers at, or approximately at, the spot market price at the time of the sales. No part of the gold production was the subject-matter of a forward sale or a futures contract and none of it was delivered or dealt with pursuant to, or for the purpose of, the Transactions; H. The Transactions were effected exclusively by employees of PDI without involvement of personnel of the subsidiaries. Their purpose was to protect the output of the PDI Group worldwide from fluctuations in the spot price of gold. On, or shortly after, entering into the Transactions, PDI allocated them among the subsidiaries; I. An agreement between PDI and PDC, dated December 21, 1995, recited that: “PDI conducts precious metal and foreign currency hedging activity on its own behalf and has experience in this activity. PDC is a producer of precious metals with foreign currency exposure and wishes to conduct hedging activity but has no experience in this activity. PDC wishes to avail itself of PDI’s experience in precious metals and foreign currency hedging activity and PDI is prepared to act as PDC’s agent for such activity.” J. Section 1 of the agreement provided that PDI was appointed as PDC’s “exclusive agent to conduct precious metals and foreign currency hedging activity on its behalf for the term of this agreement. K. Section 2 provided: “With the exception of the amounts of precious metals and foreign currency to be hedged, on which PDI shall take instruction from PDC, PDI shall be free to conduct precious metal and foreign currency hedging activity on PDC’s behalf in PDI’s name in a manner to be determined at PDI’s discretion”. (emphasis added) L. In 1995 and 1996 the Transactions allocated by PDI to PDC, and the gains or losses from them, were as follows: Transaction 1995 Gain/(Loss) 1996 Gain/(Loss) Fixed forward $2,711,451.31 $11,131,997.90 Spot deferred $1,961,897.44 $ 1,043,973.59 Fixed interest floating lease rate $ 227,743.00 Call option exercised ($2,039,082.60) ($1,981,762.93) Put option exercised $3,364,501.79 $ 473,986.34 Call option premiums received $7,892,428.00 $ 4,923,242.61 Call option premiums paid_ ($6,122,314.41) ($2,049,761.40) Net gains $7,944,613.53 $13,541,676.11 M. In its internal bookkeeping and financial statements, and in computing its income from gold production for the purpose of claiming a resource allowance in its corporations tax returns, PDC allocated the Transactions among its Canadian gold mines – including the mine in Quebec – on the basis of the proportionate production from each mine. In each case, the amount of gold which was the subject-matter of the Transactions allocated to a particular mine was less than the actual production from the mine. The reassessments made by the Minister were made on the basis of the same allocation. The evidence at trial also revealed that prior to October 1998, the Minister of Finance had an administrative policy with respect to the taxation of “hedging” under the Act that was identical to the position adopted by PDC in this case. The position of PDC was that the Transactions did not constitute “hedging” as defined in the Act. The Minister’s administrative policy was set out in an internal ministry memorandum from John Haalboom of the Ontario Corporations Tax Branch dated August 15, 1997: Ontario’s position is that the actual physical output of the mine must be used to satisfy the forward/futures commodity contract in order for the contract to be “hedging” that is included in “proceeds” and “profits”. The definitions of “hedging” and “proceeds” are interpreted by Ontario to require the actual output be used. When a mining operator sells its output on the spot market, the spot price should be used to compute “proceeds”. Forward contract prices arranged by the operator to coincide or parallel the spot sales do not form “hedging” and are not included in “proceeds”. Ontario does not allow the operator to include hedging in proceeds simply because the quantity covered by the forward contracts is equivalent to the quantity of output produced in a period. The forward contracts must be related directly to mine output with actual use of the output. Ontario does not follow the decision in Echo Bay Mines Ltd. v. The Queen, 92 DTC 6437 (FCTD). The Court determined that all hedging gains and losses should be included in resource profits under the federal Income Tax Act. Ontario is of the view that the MTA [Mining Tax Act] has specific definitions which include only hedging that involves delivery of the output of the mine. PDC filed its 1995 and 1996 mining tax returns in accordance with the above policy. On examination for discovery the Minister’s representative, Mr. Hemant Mehta, agreed that this was so: [Mr. Meghji] Q. Okay. So let us go back, sir, to the policy as you have agreed with me that until 1998 the police [sic: policy] was that unless there was delivery, the gains were not caught by the Mining Tax Act, right? [Mr. Mehta] A. That’s right. Q. Okay, I’m going to tell you this and you can check this if you want, but I have a copy of the Ontario mining tax return that was – the 1995 Ontario mining tax return that was filed by Placer Dome, and at the bottom of the page there is a signature and it is signed June 15th – June 19th, 1996. Do you see that? A. Yes. Q. And that is the return in which Placer Dome did not include the hedging gains? A. That’s correct. Q. Is that correct? So you would agree with me that on the date on which Placer Dome signed this tax return and filed it, maybe you’ll say they don’t have to file it on that date but assume that they filed it around that time, okay you would agree with me that at the time that Placer Dome signed and filed this tax return, they did so in a manner that was consistent with the Minister’s assessing practice? Because the assessing practice in 1996 was not to include gains unless they were part of delivery; isn’t that the case? A. That’s correct. Q. And, similarly, sir, if you were to look at the Ontario mining tax return for Placer Dome for the taxation year ended 1996, you would see that at the bottom of the page it is dated June 19th, 1997; isn’t that correct? A. That’s correct. Q. And you would agree with me that at the time, therefore, that Placer Dome filed its 1996 tax return, it did so in a manner that was consistent with the Minister’s understanding of how hedging gains should be taxed? A. That’s correct. Q. Okay. And you would agree with me that in – that until 1998, the Minister could not have taken issue or would not have suggested that Placer Dome’s tax returns were inaccurate? A. That’s correct. (emphasis added) Counsel for the Minister on this appeal denied the above position in her factum on the basis that the evidence “represented read-ins of the examination for discovery of Mr. Hemant Mehta, who was not a witness at trial”. Counsel for the Minister also dismissed the Haalboom memorandum as an internal document which did no more than reflect Mr. Haalboom’s understanding of the Ministry’s assessment practices at the time it was prepared. I see no merit in these submissions. It is also apparent that the trial judge accepted that prior to 1998, the Minister’s position had been the same as that advanced by PDC: It was submitted [by counsel for PDC] that the statutory inclusion of all consideration received or receivable from hedging could only have effect when gold produced by PDC was actually delivered for the purpose of completing the Transactions. In support of this interpretation of the Act, counsel relied also on the definition of “hedging” as the fixing of a price for “output of a mine”. It was not disputed that, prior to 1998, the Minister had adopted the same interpretation for the purpose of assessing tax under the Act (emphasis added). THE MINING TAX ACT Section 3(1) of the Act imposes a tax on the profits of a mine operator. Profit is defined under s. 3(5) of the Act as the amount by which “the operators’ proceeds for the taxation year from the mines” exceeds certain listed expenses. “Proceeds” are defined as follows: “proceeds” means the total consideration that is received or is receivable from another person or persons, in any currency, whether in cash or non-cash form, from the output of the mine, including all by-products sold, or the amount determined in the prescribed manner, and all consideration received or receivable from hedging and future sales or forward sales of the output of the mine, converted at the date of receipt of the consideration to the equivalent in Canadian funds, if receivable in funds of another country; See s. 1(1) of the Act “Output” is defined as follows: “output” means, (a) the mineral substances raised, taken or obtained from any mine in Ontario, if those mineral substances are sold as such, or (b) the product of a processing operation, where the mineral substances are raised, taken or gained from any mine in Ontario, if the processed product is sold; See s. 1(1) of the Act. “Hedging” is defined as follows: “hedging” means the fixing of a price for output of a mine before delivery by means of a forward sale or a futures contract on a recognized commodity exchange, or the purchase or sale forward of a foreign currency related directly to the proceeds of the output of a mine, but does not include speculative currency hedging except to the extent that the hedging transaction determines the final price and proceeds for the output; See s. 1(1) of the Act. TRIAL JUDGMENT As already stated, the issue before the trial judge was whether the transactions in question fell within the definition of “hedging” under the Act and, hence, the net gains derived therefrom were subject to tax. The trial judge found that the Transactions constituted “hedging” as defined by the Act. In so finding, the appellant submits that the trial judge made six errors: (i) The trial judge erred in failing to respect the definition of “hedging” in the Mining Tax Act; (ii) The trial judge erred in finding that only “some link” is required between an operator’s hedging transactions and the output of the mine; (iii) The trial judge erred in finding that “all consideration” referred to in the definition of “proceeds” contemplates a net amount; (iv) The trial judge erred in finding that the appellant’s interpretation of “hedging” would result in a redundancy in the definition of “proceeds”; (v) The trial judge erred in concluding that “forward sales” included “options”; and (vi) The trial judge erred in rejecting the Minister’s administrative policy as an interpretive aid. ANALYSIS The relevant principles of statutory interpretation The Supreme Court of Canada has adopted the general rule of statutory interpretation articulated by E.A. Driedger in Construction of Statutes 2nd ed. (Toronto: Butterworths, 1983) at p. 87. See Ludco Enterprises Ltd. v. Canada, [2001] 2 S.C.R. 1082 at para. 36: Today there is only one principle or approach, namely, 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…. Where the language of the statute is clear and unambiguous, its terms must simply be applied. This is particularly true in taxing statutes. See McLachlin J. in Shell Canada Ltd. v. Canada, [1999] 3 S.C.R. 622 at para. 40: … It is well established in this Court’s tax jurisprudence that a searching inquiry for either the “economic realities” of a particular transaction or the general object and spirit of the provisions at issue can never supplant a court’s duty to apply an unambiguous provision of the Act to a taxpayer’s transaction. Where the provision at issue is clear and unambiguous, its terms must simply be applied (case citations omitted). In Ludco Enterprises Ltd., supra, Iacobucci J. said at para. 38: Furthermore, when interpreting the Income Tax Act courts must be mindful of their role as distinct from that of Parliament. In the absence of clear statutory language, judicial innovation is undesirable (case citations omitted). In the event that the court is left with a reasonable doubt as to the proper interpretation of a provision in a taxing statute, there is a residual presumption in favour of the taxpayer. See Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3 at p. 20. The issues in this appeal (i) Did the trial judge err in failing to respect the definition of “hedging” in the Mining Tax Act? The relevant portion of the definition of “hedging” is as follows: “‘Hedging’ means the fixing of a price for output of a mine before delivery by means of a forward sale or a futures contract on a recognized commodity exchange …”. In my view, the above definition is clear, unambiguous and precise. However, instead of applying the precise language of the definition to the facts before him, the trial judge employed a broader definition based upon the “general purpose and characteristics of hedging.” The trial judge stated: Although the parties chose not to tender expert evidence of the concept, and treatment, of hedging under GAAP, it was conceded that the Transactions should be so characterized in relation to the global output of the PDI Group. They had the general purpose and characteristics of hedging in the sense that they were essentially synthetic derivative contracts effected to protect the returns to be obtained from future production of gold and it was not suggested that there was anything atypical or unusual in the manner in which they were carried out and performed. Putting on one side the question whether a necessary link, or connection, existed between the Transactions and the output of PDC – as distinct from that of the PDI Group – I am satisfied that the general purpose, characteristics, and in particular, the methods and mechanics, of hedging, as understood by the parties – and as recognized by the courts in previous cases such as Echo Bay Mines Ltd., Atlantic Sugar Refineries v. Minister of National Revenue, [1949] S.C.R. 706, [1949] 3 D.L.R. 641 and Manitoba (Attorney General) v. Canada (Attorney General), [1925] 2 D.L.R. 691, [1925] 2 W.W.R. 60 (P.C.), at p. 693 D.L.R. – should be attributed to the concept of hedging for the purposes of the Act and that they should inform the meaning to be given to the words of the statutory definition. (para. 14). The statutory definition contains the following elements: (i) the fixing of a price for the output of a mine; (ii) before delivery; and (iii) by means of a forward sale or a futures contract on a recognized commodity exchange. I accept the submission of counsel for the appellant that the statutory definition does not encompass “synthetic derivative contracts effected to protect the returns to be obtained from future production of gold”. The trial judge’s concept of hedging does not fix a price for the output of a mine. I also agree with the appellant’s submission that the trial judge’s broader interpretation of “hedging” is at odds with the purpose of the Act which is to tax the value of the resource taken from the ground. Hedging, as viewed by the trial judge, involves a risk management activity. The gains and losses resulting from such activity generate income which would be taxable to the owner of the mine under the Corporations Tax Act, R.S.O. 1990, c. C.40. However, such activity, on the facts of this case, does not generate profit from the gold taken from the mine. The trial judge’s approach to the interpretation of the definition of “hedging” under the Act was informed by the judgment in Echo Bay Mines Ltd. v. The Queen (1992), 92 D.T.C. 6437 (Fed. T.D.). Although the trial judge acknowledged the differences in fact and law between Echo Bay and this case, he said: I reach the same conclusion as the court in that case with respect to the purpose of the Transactions. They were in the words of McKay J. “undertaken to assure returns by fixing the price for the future production in a fluctuating market”. The trial judge adopted the conclusions of the judge in Echo Bay, which were based upon expert accounting evidence of the meaning of “hedging” under Generally Accepted Accounting Principles (“GAAP”) and applied them to this case. In so doing, I believe he was in error. The Echo Bay case involved the interpretation of the meaning of “resource profits” in the regulations under the Income Tax Act. Neither the Income Tax Act nor the regulations contained a definition of “hedging”. Instead, the court relied upon the expert accounting evidence to assist in its determination of that concept. In my view, the broader concept of hedging, as described in Echo Bay, simply does not fit the more limited definition prescribed in the Act which restricts hedging to “the fixing of a price for the output of a mine”. Furthermore the evidence in relation to GAAP was not before the court in this case. The trial judge noted that the parties chose not to call such evidence. I do not believe it was open to the trial judge to fill what he perceived to be a deficiency in the record by relying on the evidence in Echo Bay. Such an approach also offends the rule of statutory interpretation articulated by Iacobucci J. in Ludco Enterprises Ltd., supra against judicial innovation. It should also be observed that in Echo Bay the court was involved in a search for the “economic realities” of the transactions under consideration in that case. See pp. 6439 – 6440: […] a court should be desirous of assessing “the economic and commercial reality of the taxpayers actions”. Evidence of the sort given by the experts testifying for the plaintiff in this case is relevant to “the economic and commercial reality” of the taxpayer’s operations and those operations are the basis of the report by the taxpayer of income to which the Income Tax Act and Regulations are applied. Echo Bay is a 1992 case that was decided several years before McLachlin J.’s caution, in Shell Canada, to avoid a searching inquiry for the “economic realities” of a particular transaction in the face of a clear and unambiguous provision of a statute. I have had the opportunity of reading the draft reasons of my colleague, Justice Gillese. Respectfully, I do not agree that the definition of “hedging” is ambiguous, as I have said, or that its language is capable of the second meaning she attributes to it. She concludes that “hedging” as defined may refer to a forward sale or a futures contract in which the subject matter of the contract could be something other than the output of the mine. Such a construction is not only contrary to the plain wording of the statutory definition – which says that “hedging” means the fixing of a price for the output of a mine – but it is also inconsistent with the second part of the definition, which encompasses “the purchase or sale forward of a foreign currency related directly to the proceeds of the output of the mine”. It is therefore apparent from the definition of “hedging”, taken as a whole, that the subject matter of the contracts in question cannot relate to something other than the output of a mine. This is in keeping with the definition of “proceeds”, as well, which is intended to capture the total consideration received “from the output of the mine”. (ii) Did the trial judge err in finding that only some link is required between an operator’s hedging transactions and the output of the mine? The trial judge accepted “that, for the purposes of the Act, some link is required between an operator’s hedging transactions and output.” He went on to find that: A sufficient link, or nexus, between the Transactions and the output from the mines was established here by the combination of the following factors: (a) The underlying purpose of the transactions; (b) The existence and terms of the agency agreement; (c) The allocation of Transactions to PDC pursuant to the agreement; and (d) PDC’s treatment of the gains and losses for the purpose of its internal accounting and corporations tax returns. The trial judge attempted to overcome the restrictive definition of “hedging” in the Act by finding “some link” or a “sufficient link” between the Transactions and the output of the mine. I do not agree that this is a valid approach. What is required to bring the transactions within the statutory definition is the “fixing of a price for the output of a mine” delivered in respect of a forward sale or futures contract. In my view, the trial judge’s conclusion flies in the face of his finding of fact that: All gold produced by PDC in 1995 and 1996 was sold to bullion dealers at, or approximately at, the spot market price at the time of the sales. No part of the gold production was the subject-matter of a forward sale or a futures contract and none of it was delivered or dealt with pursuant to, or for the purpose of, the Transactions. To repeat, the language of the definition is precise. It does not lend itself to finding “some link” or “a sufficient link” between the transactions and the output of the mines. By introducing a “some link” test, the trial judge appears to have introduced ambiguity into the definition of hedging where none exists. How do we know when “some link” is established? (iii) Did the trial judge err in finding that “all consideration” referred to in the definition of proceeds contemplates a net amount? The gains from the transactions were net gains. The reassessments were made on that basis. If the net gains are to be caught by the definition of “proceeds” in the Act, it follows that “consideration” is a net amount. For convenience, I repeat here the definition of proceeds: “proceeds” means the total consideration that is received or is receivable from another person or persons, in any currency, whether in cash or non-cash form, from the output of the mine, including all by-products sold, or the amount determined in the prescribed manner, and all consideration received or receivable from hedging and future sales or forward sales of the output of the mine, converted at the date of receipt of the consideration to the equivalent in Canadian funds, if receivable in funds of another country. The trial judge concluded that “all consideration” referred to in the definition of proceeds is, in fact, a net amount: […] I do not think it does violence to the language of the provision to read the reference to “all consideration” as contemplating a net amount – the net gains and losses from the Transactions – which is, in effect the approach on which the reassessments were based. “Consideration” is not defined under the Act. It is therefore appropriate to rely on the common law for a definition of the term. G.H.L. Fridman, in The Law of Contract, 4th ed., 1999 at p. 91 defines consideration as follows: The act or promise of one party is, as it were, “bought” or “bargained for” by the act or promise of the other; each party exchanges something of value. To create an enforceable contract there must be, as Lennox J. said in Loranger v. Haines (1921), 64 D.L.R. 364 at 372 (Ont. C.A.) “reciprocal undertakings”. Sopinka J. in R. v. Kelly, [1992] 2 S.C.R. 170 at p. 198 said: “Ordinarily, in any transaction the ‘consideration for’ is the quid pro quo for each party’s obligation.” In 65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804 at para. 39, Iacobucci J. described profit as “inherently a net concept.” By the same token, I accept the appellant’s submission that consideration is inherently a gross concept. There is nothing in the common law definition of consideration to suggest it is a net concept. (iv) Did the trial judge err in finding that the appellant’s interpretation of “hedging” would result in a redundancy in the definition of proceeds? The trial judge came to the following conclusion in respect of a redundancy in the definition of proceeds: …quite apart from the difficulty of reconciling an interpretation that treats consideration as necessarily a gross amount with the inclusion, in the statutory definition of hedging, of futures contracts traded on a commodities exchange, and the purchase and sale of foreign currency, the suggested interpretation of the definition that confines hedging by means of “a forward sale” to sales that are settled by delivery of output would deprive that part of the definition of any meaning that would not already be covered by the inclusion in the definition of “proceeds” of the “total consid-eration…from the output of the mine”. The inclusion of consideration received from hedging through forward sales in the definition must have been intended to refer to amounts that would not be covered by the earlier words of the same definition. Counsel for the appellant submits that no such redundancy exists. He made the following submission in his factum: The trial judge erred in finding that a reading of “hedging” that requires delivery of “output” would render part of the definition of “proceeds” redundant. The term “all consideration received or receivable from hedging”, in the definition of “proceeds”, is the amount or premium received or receivable for entering into a forward sale or futures contract that fixes or assures the price of the “output” at a future date – the “front-end” of such a sale transaction. The premium is different from consideration from “the output of the mine”, which refers to the consideration received or receivable for the “output of the mine” itself – the “back-end” of such a sale transaction. Based on the above analysis, counsel for the appellant argues that a taxpayer is prohibited from claiming, that part of the price received for its output at delivery is not attributable to the sale of the minerals taken from the ground. There is therefore no redundancy if a hedging transaction, caught by the Act, is analyzed in accordance with this “front-end/back-end” concept. Counsel for the respondent submitted that the appellant’s analysis is based upon a notional concept for which no evidentiary basis was established at trial. Counsel argued that the appellant, in advancing this position, was attempting to lead fresh evidence on the appeal without meeting the test for its admission. My colleague, Justice Gillese, also concludes that giving a plain reading interpretation to “hedging” renders the second source of “consideration” provided for in the description of the word “proceeds”, meaningless. I do not read the two sources of consideration as meaning the same thing if “hedging” is given the definition I ascribe to it, however. There may well be future sales or forward sales contracts relating to the output of the mine that do not fall within the particular definition of “hedging” in the Act, either because they do not take place on a recognized commodity exchange or for some other reason. The intent of the legislation is to catch them all, as part of the total consideration received by the mining company from the output of the mine. Even if it can be said that there is a redundancy in the definition of “proceeds” under the Act, I do not see how the court can ignore the plain meaning of the definition of “hedging” under the Act as applied to the facts found by the trial judge. (v) Did the trial judge err in concluding that “forward sales” included “options”? The Transactions which were executed by PDI on behalf of PDC included options. The appellant submitted at trial and in this court that “options” did not fall within the definition of “hedging” under the Act because they were not “forward sales”. The trial judge rejected that submission. The trial judge observed that it would have been helpful to have had the benefit of expert evidence on this issue. However, in the absence of such evidence, he turned to the definition of the term, “forward contract” in Blacks Law Dictionary: An agreement to buy or sell a particular non-standard asset (usually currency) at a fixed price on a future date. The trial judge accepted that a contract creating a put or call option is not itself a sale but rather provides for a sale. He concluded that the options in this case either provided, contingently for a sale of gold by PDC or, involved the purchase of call options in conjunction with a forward sale. He concluded his analysis as follows: On the basis of the evidence adduced in this case, I am not prepared to find that the Minister was obligated to assess PDC for mining tax on the basis that a material distinction existed between agreements for forward sales and agreements creating options – whether or not the options were exercised. The agreements creating options were designed to fix the price of the output from the mines in Ontario and sufficiently provided for, or were associated with, future sales of gold to entitle the Minister to include the gains and losses that PDC realized from them in computing the consideration it received from “hedging” as that term is defined in the Act. Counsel for the appellant relied upon the definition of “option” in Blacks Law Dictionary: A right, which acts as a continuing offer, given for consideration, to purchase or lease property at an agreed upon price and terms, within a specified time. An option is an agreement which gives the optionee the power to accept an offer for a limited time […] an option to purchase or to sell is not a contract to purchase or sell, as optionee has the right to accept or to reject the offer, in accordance with its terms, and is not bound. I agree with the submission of counsel for the appellant that it is only when the option is exercised that an agreement of purchase and sale takes place. Therefore, an option cannot be a forward sale. It is my view that the options in this case do not fall within the definition of “hedging”. Again, I agree with the submission of the appellant that if the legislature had intended to include options within the definition of hedging, it could have done so. However, the definition of “hedging” under the Act is restricted to “forward sales” and “future contracts”. (vi) Did the trial judge err in rejecting the Minister’s administrative policy as an interpretive aid? The trial judge rejected the submission of the appellant that the Minister’s administrative policy prior to 1998, based upon the definition of “hedging” as the fixing of a price for the output of a mine, should be used as an aid to interpretation: However, no question of estoppel arises and I do not believe that the task of interpreting the Act should be affected by the fact that the Ministry at one time accepted an interpretation that it subsequently decided was erroneous. While prior administrative policy is not determinative of the correct interpretation of a statutory provision, such policy is entitled to appropriate consideration by the court. In my view, it goes too far to say that the task of interpretation in this case should not be affected by the Minister’s policy which existed for a number of years and is directly on point. In Will-Kare Paving & Contracting v. Canada, [2000] 1 S.C.R. 915 at para. 66, Binnie J. stated: Administrative policy and interpretation are not determinative but are entitled to weight and can be an important factor in case of doubt about the meaning of legislation (citations omitted). Binnie J.’s observation in Will-Kare is particularly apt in a case where there is some ambiguity or lack of clarity in the legislative provision under consideration. While I have concluded that there is no ambiguity in the definition of “hedging” under the Act, the trial judge clearly came to a different conclusion. If he is right that the definition of “proceeds” under the Act produces redundancy, and therefore affects the interpretation of the definition of “hedging”, then it is my view that he would and should have been assisted by the Minister’s administrative policy. The policy expressly rejected the decision in Echo Bay upon which the trial judge’s decision is largely based. One of the authorities relied upon by Binnie J. in Will-Kare was Harel v. Deputy Minister of Revenue of Quebec, [1978] 1 S.C.R. 851 where De Granpré J. stated at p. 859: Once again, I am not saying that the administrative inter-pretation could contradict a clear legislative text; but in a situation such as I have just outlined, this interpretation has real weight and, in case of doubt about the meaning of the legislation, becomes an important factor. In a more recent case, Sexton J.A. made a similar point in Silicon Graphics Ltd. v. Canada, [2003] 1 F.C. 447 at para. 52: Of course, statements by Revenue Canada officials are not declarative of the law. However, in the recent case of Canadian Occidental U.S. Petroleum Corp. v. Canada (2001), 2001 DTC 295 (T.C.C.), Bowman A.C.J. noted that while the administrative position of Revenue Canada is not declarative of the law, it is nonetheless of assistance in circumstances where the Minister seeks to reassess the taxpayer in a manner inconsistent with its own administrative position. Associate Chief Justice Bowman wrote, at paragraph 30: The Court is not bound by departmental practice although it is not uncommon to look at it if it can be of any assistance in resolving a doubt: Nowegijick v. The Queen et al., 83 DTC 5041 at 5044. I might add as a corollary to this that departmental practice may be of assistance in resolving a doubt in favour of a taxpayer. There can be no justification for using it as a means of resolving a doubt in favour of the very department that formulated the practice (emphasis added). CONCLUSION In summary, the trial judge erred in broadening the definition of “hedging” in the Mining Tax Act which led him to accept the imposition of a tax on the net gains from the Transactions. He did so in the face of his expressed finding of fact that all gold produced by PDC in 1995 and 1996 was sold to bullion dealers at, or approximately at, the spot market price at the time of sale. He also found that no part of the gold production was the subject-matter of a forward sale or a futures contract and none of it was delivered or dealt with pursuant to the Transactions. In my view, those findings remove the Transactions from “hedging” as defined in the Act. I would add that the burden of proving that the Act imposes a tax on the net gains from the Transactions rests with the respondent. See Notre-Dame de Bon-Secours, supra at p. 15. Although I believe that the definition of hedging under the Act is clear and unambiguous and therefore it was unnecessary to provide expert evidence as to its meaning, the trial judge appears to have thought otherwise. To the extent that he was faced with a deficient record, the responsibility lies with the respondent. Also, if I am in error that the definition of “hedging” in the Act is clear and unambiguous, then at most, I say that there is a reasonable doubt about the correct interpretation. In accordance with Notre-Dame de Bon-Secours, supra such doubt should be resolved in favour of the taxpayer, PDC. DISPOSITION I would therefore allow the appeal and order that the assessment in respect of the 1995 and 1996 taxation years for PDC be referred back to the Minister for reconsideration and reassessment on the basis that the gains realized on the Transactions are not subject to tax under the Mining Tax Act. I would order the costs of the proceeding before the trial judge in favour of PDC to be assessed on a partial indemnity scale. I would order the costs of this appeal in favour of PDC on a partial indemnity scale fixed in the amount of $75,000 including disbursements and Goods and Services Tax. “Robert P. Armstrong J.A.” “I agree R.A. Blair J.A.” GILLESE J.A. (dissenting): My interpretation of the relevant provisions of the Mining Tax Act, R.S.O. 1990, c. M. 15 (“the Act”), differs from that of my colleague. For the reasons that follow, I am of the view that the trial judge correctly concluded that the transactions in question constituted hedging and were properly taxed under the Act. I would, therefore, dismiss the appeal. BACKGROUND Placer Dome Canada Limited (“PDC”) is a wholly‑owned subsidiary of Placer Dome International (“PDI”). PDI is one of the world’s largest gold producers. It is a Canadian resident corporation whose shares are traded on stock exchanges in Toronto, New York, Australia, Paris and Switzerland. PDI has approximately fifty direct and indirect subsidiaries resident in Canada and other countries. PDI and its subsidiaries (“the PDI Group”) are involved in the exploration, production and sale of gold worldwide. In 1995 and 1996, the PDI Group owned thirteen gold mines in addition to other mines that produce copper, silver and molybdenum. The gold mines are located in Canada, the United States, Papua and New Guinea, Australia and Chile. Before 1993, PDI owned mines in Ontario. In 1994, PDI conveyed the mines to PDC. In 1995 and 1996, PDC (or a predecessor prior to an amalgamation) operated three gold mines in Ontario: the Campbell Red Lake underground mine, the Detour Lake mine and the Dome mine. PDC also operated the Sigma gold mine in Quebec and the Endako molybdenum mine in British Columbia. In addition, PDC owned all the shares of a corporation that operated the Kiena gold mine in Quebec. The Ontario mines are significant. For example, the Campbell Red Lake underground mine is one of the world’s highest-grade, lowest-cost gold mines. It annually produces approximately 250,000 ounces of gold at a cash cost of below $200 per ounce. In 1995 and 1996, PDI acted as PDC’s exclusive agent for the purposes of conducting hedging activity. PDC told PDI the amounts of gold to be hedged from PDC mines but the hedging transactions were effected exclusively by PDI. The purpose of the transactions was to protect the output of the PDI Group worldwide from fluctuations in the spot price of gold. The terms of the arrangement between PDC and PDI are reflected in the “Hedging Agency Agreement” (“the Agreement”) that PDC and PDI entered into on December 21, 1993. The Agreement recited: WHEREAS: PDI conducts precious metal and foreign currency hedging activity on its own behalf and has experience in this activity. AND WHEREAS: PDC is a producer of precious metals with foreign currency exposure and wishes to conduct hedging activity but has no experience in this activity. AND WHEREAS: PDC wishes to avail itself of PDI’s experience in precious metals and foreign currency hedging activity and PDI is prepared to act as PDC’s agent for such activity. Sections 1 and 2 of the Agreement stated: 1. APPOINTMENT OF PDI AS HEDGING AGENT PDC hereby appoints PDI as its exclusive agent to conduct precious metal and foreign currency hedging activity on its behalf for the term of this Agreement. 2. CONDUCT OF HEDGING ACTIVITY With the exception of the amounts of precious metals and foreign currency to be hedged, on which PDI shall take instruction from PDC, PDI shall be free to conduct precious metal and foreign currency hedging activity on PDC’s behalf in PDI’s name in a manner to be determined at PDI’s discretion. In 1995 and 1996, PDC realized net gains of $6,423,000 and $11,440,000 from transactions conducted by PDI on its behalf (“the Transactions”). In its internal bookkeeping and financial statements, and in computing its income from gold production for the purpose of claiming a resource allowance in its corporate tax returns, PDC allocated the Transactions among its Canadian gold mines on the basis of the proportionate production from each mine. In each case, the amount of gold that was the subject matter of the Transactions allocated to a particular mine was less than the actual production from the mine. The reassessments made by the Minister were made on the basis of the same allocation. All gold produced by PDC in 1995 and 1996 was sold to bullion dealers at, or approximately at, the spot market price at the time of the sales. No part of the gold production was the subject matter of a forward sale or a futures contract and none of it was delivered or dealt with pursuant to, or for the purpose of, the Transactions. In 1999, the Minister audited PDC for the 1995 and 1996 taxation years. On January 20, 2002, it issued notices of reassessment relating to those taxation years. In the reassessments, the net gains that PDC realized from the Transactions in 1995 and 1996 were taxed under s. 3(1) of the Mining Tax Act as “profit” from the Campbell, Detour Lake and Dome mines. PDC objected to the reassessments. The Minister confirmed the reassessments and PDC appealed from those reassessments. Justice Cullity dismissed the appeals. PDC appeals to this court. PDC acknowledges here, as it did below, that the Transactions are hedging, as that word is commonly understood. However, PDC says that the Transactions are not “hedging” within the definition in the Act, and that the trial judge was in error in so concluding. Consequently, the correct interpretation of “hedging” becomes the cornerstone of this appeal. THE TRIAL JUDGMENT The trial judge held that the net gains that PDC realized from the Transactions in 1995 and 1996 were properly included by the Minister in the amount subject to mining tax under s. 3(1) of the Act. Specifically, he held that the Transactions fell within the definitions of “proceeds” and “hedging” set out in s. 1(1) of the Act. At trial, PDC acknowledged that the Transactions were “hedging” within the common usage of that term. However, it submitted that the definition of the term “hedging” in the Act requires a direct link between the Transactions and either the delivery of output from a mine in Ontario or the consideration received for that output. PDC further submitted that the statutory inclusion of “all consideration received or receivable from hedging” in the definition of the term “proceeds” could only have effect when gold produced by PDC was actually delivered for the purpose of completing the Transactions. The trial judge rejected these submissions. He stated, at para. 14, that: [The Transactions] had the general purpose and characteristics of hedging in the sense that they were essentially synthetic derivative contracts effected to protect the returns to be obtained from future production of gold and it was not suggested that there was anything atypical or unusual in the manner in which they were carried out and performed. Putting on one side the question whether a necessary link, or connection, existed between the Transactions and the output of PDC – as distinct from that of the PDI Group – I am satisfied that the general purpose, characteristics and, in particular, the methods and mechanics, of hedging, as understood by the parties – and as recognized by the courts in previous cases such as Echo Bay Mines Ltd. [v. The Queen (1992), 92 D.T.C. 6437 (Fed. T.D.)], Atlantic Sugar Refineries v. Minister of National Revenue, [1949] S.C.R. 706, [[1949] 3 D.L.R. 641] and [Manitoba (Attorney General) v. Canada (Attorney General)], [1925] 2 D.L.R. 691, (P.C.), at page 693 – should be attributed to the concept of hedging for the purposes of the Act and that they should inform the meaning to be given to the words of the statutory definition. The trial judge held that although the definition of the term “hedging” did not require that gold produced by an operator actually be delivered for the purpose of completing the operator’s hedging transactions, that definition did require that a “sufficient link” or “nexus” exist between an operator’s hedging transactions and the output from that operator’s mine. He concluded that a sufficient link or nexus existed between the Transactions and the output from PDC’s mines. This reasoning is reflected in para. 17 of the reasons: Whether there is a sufficient link between output and transactions of the kind in issue here to require a conclusion that the latter were hedging for the purpose of the Act must, I believe, be considered to be a question of fact to be decided on the evidence presented in each case. In my judgment, a sufficient link, or nexus, between the Transactions and the output from the mines was established here by the combination of the following factors: (a) the underlying purpose of the transactions; (b) the existence and terms of the agency agreement; (c) the allocation of Transactions to PDC pursuant to the agreement; and (d) PDC's treatment of the gains and losses for [the purposes] of its internal accounting and corporations tax returns. At trial, PDC also submitted that the net gains from the Transactions could not form part of “all consideration received or receivable from hedging” under the definition of the term “proceeds” because the term “consideration”, as a legal concept, is a gross concept, not a net concept. The trial judge did not accept this argument. He stated at para. 14 that: In these circumstances, I do not think it does violence to the language of the provision to read the reference to “all consideration” as contemplating a net amount – the net gains and losses from the Transactions –which is, in effect, the approach on which the reassessments were based. Finally, PDC submitted that gains and losses from put and call options did not fall within the definition of the term “hedging” because such options could not be considered “forward sales” – an option is merely a contract to keep an offer open for a particular period. Its creation is not a sale. Moreover, even if the option is exercised and a sale results, the sale occurs at that time and therefore the option cannot be considered to be a “forward sale”. The trial judge did not accept this submission either. He stated at para. 25 that: On the basis of the evidence adduced in this case, I am not prepared to find that the Minister was obligated to assess PDC for mining tax on the basis that a material distinction existed between agreements for forward sales and agreements creating options – whether or not the options were exercised. The agreements creating options were designed to fix the price of the output from the mines in Ontario and sufficiently provided for, or were associated with, future sales of gold to entitle the Minister to include the gains and losses that PDC realized from them in computing the consideration it received from “hedging” as that term is defined in the Act. THE RELEVANT LEGISLATIVE PROVISIONS Before setting out the relevant provisions in the Mining Tax Act, it is useful to understand the general taxation structure created by those provisions as they apply in the instant case. Taxation of mining operators, including PDC, is based on the following four propositions. (The applicable legislative provisions are referred to at the end of each proposition and are set out fully in the following paragraphs.) 1. A mine operator pays tax based on profit: s. 3(1). 2. Profit = proceeds – allowable deductions: s. 3(5). Proceeds = (a) total consideration from the output of the mine + (b) all consideration from hedging + (c) all consideration from future sales or forward sales of the output of the mine: s. 1(1). Hedging = fixing of a price for output of a mine before delivery by means of a forward sale or futures contract on a recognized commodity market: s. 1(1). Section 3(1) establishes that a mine operator is taxed on profit. 3. (1) Every operator is liable for and shall pay a tax for a taxation year equal to the amount calculated using the formula, [( A - B ) x C] + [(D - E) x 0.05] in which, “A” is the amount of the operator’s profit, if any, as determined under subsection (5) for the taxation year, from all mines, other than remote mines, in which the operator has an interest [emphasis added], [The definitions of symbols “B” through “E” are not relevant to this appeal.] Section 3(5) provides that profit is based on proceeds less allowable expenses and deductions. 3(5) An operator’s profit for a taxation year from all mines, other than remote mines, in which the operator has an interest is the amount, if any, by which, (a) the operator’s proceeds for the taxation year from the mines, other than amounts included in the computation of tax payable under this Act for a prior taxation year in respect of the mines, exceeds the aggregate of, (b) the expenses incurred by the operator in the taxation year that are not otherwise deductible under this subsection, to the extent that the expenses are attributable to the production of output from the mines [emphasis added]; [Additional expenses and allowances are set out in paragraphs (c) to (l). They are not relevant to this appeal.] The definition of “proceeds” in s. 1(1) of the Act reads as follows: “proceeds” means the total consideration that is received or is receivable from another person or persons, in any currency, whether in cash or non-cash form, from the output of the mine, including all by-products sold, or the amount determined in the prescribed manner, and all consideration received or receivable from hedging and future sales or forward sales of the output of the mine, converted at the date of receipt of the consideration to the equivalent in Canadian funds, if receivable in funds of another country [emphasis added]; “Hedging” is defined in s. 1(1) as: “hedging” means the fixing of a price for output of a mine before delivery by means of a forward sale or a futures contract on a recognized commodity exchange, or the purchase or sale forward of a foreign currency related directly to the proceeds of the output of a mine, but does not include speculative currency hedging except to the extent that the hedging transaction determines the final price and proceeds for the output [emphasis added]; THE RELEVANT PRINCIPLES OF STATUTORY INTERPRETATION I agree with my colleague that the jurisprudence of the Supreme Court of Canada makes it clear that where the language of a taxing statute is unambiguous, it terms must be applied. As the Court explained in Canada v. Antosko, [1994] 2 S.C.R. 312 at 326-27: While it is true that the courts must view discrete sections of the Income Tax Act in light of the other provisions of the Act and of the purpose of the legislation, and that they must analyze a given transaction in the context of economic and commercial reality, such techniques cannot alter the result where the words of the statute are clear and plain and where the legal and practical effect of the transaction is undisputed [emphasis added]. However, as Major J. stated, on behalf of the majority of the Court in Friesen v. Canada, [1995] 3 S.C.R. 103, when the statutory language admits of some ambiguity, it is useful to resort to the object and purpose of the provision in question. At pp. 113-14 he accepts the following passage from P.W. Hogg and J.E. Magee in Principles of Canadian Income Tax Law : (1995), Section 22.3(c) “Strict and purposive interpretation” at pp. 453-54: It would introduce intolerable uncertainty into the Income Tax Act if clear language in a detailed provision of the Act were to be qualified by unexpressed exceptions derived from a court's view of the object and purpose of the provision.... [The Antosko case] is simply a recognition that “object and purpose” can play only a limited role in the interpretation of a statute that is as precise and detailed as the Income Tax Act. When a provision is couched in specific language that admits of no doubt or ambiguity in its application to the facts, then the provision must be applied regardless of its object and purpose. Only when the statutory language admits of some doubt or ambiguity in its application to the facts is it useful to resort to the object and purpose of the provision [emphasis added]. This court has held that the approach to interpretation of tax legislation established by the Supreme Court in Friesen is applicable to all provincial tax legislation. See W.E. Roth Construction Ltd. v. Ontario (Minister of Finance) (2001), 141 O.A.C. 366 at 369. IS THE MEANING OF “HEDGING” AMBIGUOUS? The key question to be decided by this appeal is whether the net gains from the Transactions that were allocated to the Ontario mines are “proceeds”. The answer to that question requires a determination as to whether the net gains are consideration from “hedging”. It will be recalled that the term “proceeds” is defined as the aggregate of consideration from three sources: 1. the output of the mine; 2. hedging; and 3. future sales or forward sales of the output of the mine. It will be further recalled that “hedging” is defined in s. 1(1) as: “hedging” means the fixing of a price for output of a mine before delivery by means of a forward sale or a futures contract on a recognized commodity exchange, or the purchase or sale forward of a foreign currency related directly to the proceeds of the output of a mine, but does not include speculative currency hedging except to the extent that the hedging transaction determines the final price and proceeds for the output [emphasis added]; The Transactions in question do not involve the purchase or sale forward of a foreign currency. Nor, as PDC acknowledges, do the Transactions involve speculative hedging. When PDI conducted the Transactions, it was acting on the basis of the Hedging Agency Agreement pursuant to which PDC instructed PDI on the amounts of gold to be hedged from its (PDC’s) mines. Thus, the italicized portion of the definition of “hedging” is that which is relevant to this case. Accordingly, “hedging” occurs when the price for output of a mine is fixed before delivery by means of a forward sale or futures contract. In my view, this definition of “hedging” can reasonably support two different interpretations. One possible interpretation is that hedging refers to a transaction in which the price for the output of a mine is fixed, by means of a forward sale or a futures contract, prior to delivery of the output of the mine. A second possible interpretation is that hedging refers to a transaction in which the price for the output of a mine is fixed, prior to the delivery of that output, by means of a forward sale or a futures contract but the subject matter of the transaction is not necessarily the output of the mine. As is explained in the following paragraphs, the first interpretation of the definition of “hedging” renders the word “hedging” in the definition of “proceeds” redundant. The third element in the definition of “proceeds” is all consideration received or receivable from “future sales or forward sales of the output of the mine”. The subject matter of these “future sales or forward sales” must be the output of the mine. Future sales or forward sales, of necessity, involve the fixing of the price of the output of the mine before delivery of the output of the mine. Therefore, the third element refers to all consideration received or receivable from forward sales or future sales of the output of the mine where the price of the output of the mine is fixed by means of the forward sales or future sales prior to delivery of the output of the mine. A comparison of the meaning of the third element in the definition of “proceeds” with the first possible interpretation of “hedging” reveals that the two are the same. Thus, the result of a plain reading interpretation of the definitions of “hedging” and “proceeds” is to give the second source of consideration in the definition of “proceeds” (i.e. “hedging”) the same meaning as the words used to describe the third type of consideration included in that definition. For that reason, the plain meaning interpretation of the definition of “hedging” renders the second type of consideration in the definition of “proceeds” (i.e. hedging) meaningless. Such an interpretation runs afoul of the principle that where two different forms of expression are used in legislation, each form of expression is assumed to have a unique meaning. See R. v. Barnier, [1980] 1 S.C.R. 1124 at 1135-36. In Sullivan and Driedger on the Construction of Statutes, 4th ed. (Markham: Butterworths, 2002), Ruth Sullivan explains at pp. 162-63 the presumption of consistent expression in this way: [T]he legislature is presumed to avoid stylistic variation. Once a particular way of expressing a meaning has been adopted, it is used each time that meaning is intended. Given this practice, it then makes sense to infer that where a different form of expression is used, a different meaning is intended. For that reason, it can be assumed that the second type of consideration included in the definition of the term “proceeds” – consideration from “hedging” – is meant to be something different than the third type of consideration included in the definition of “proceeds” – consideration from “future sales or forward sales of the output of the mine”. This assumption carries considerable weight in the circumstances of this case. The definitions of the terms “proceeds” and “hedging” are in the same subsection: s. 1(1). The words used to describe the second and third types of consideration in the definition of the term “proceeds” are right next to one another. And, the term “hedging”, outside of its own definition, is mentioned in the definition of the term “proceeds” and nowhere else in the Act. It is useful to recall the second possible interpretation at this point. On the second interpretation, the definition of “hedging” refers to a transaction in which the subject matter of the forward sale or futures contract could be something other than the output of the mine as long as that contract was (a) on a recognized commodity exchange and (b) the means by which the price of the output of a mine was fixed. To conclude, in my view the meaning of “hedging” within s. 1(1) of the Mining Tax Act is ambiguous in that it reasonably supports two different interpretations. As a result of this ambiguity, the approach to be followed in interpreting “hedging” in s. 1(1) is that enunciated in Friesen. On this approach, the court must determine which of the two possible interpretations better reflects the object and purpose of the provision. Before doing so, I will deal with PDC’s argument in relation to the Minister’s administrative policies relating to the interpretation of “hedging” as the history of those policies reinforces the conclusion that the term “hedging” is ambiguous. THE MINISTER’S ADMINISTRATIVE POLICY In Will-Kare Paving & Construction Ltd. v. Canada, [2000] 1 S.C.R. 915, a case concerning the interpretation of tax legislation, Binnie J. (dissenting but not on this point) stated at p. 947 that “[a]dministrative policy and interpretation are not determinative but are entitled to weight and can be an important factor in case of doubt about the meaning of legislation”. Thus, given the doubt about the meaning of the term “hedging”, the history of the Minister’s administrative policy on the interpretation of the term “hedging” is a factor for consideration. In my view, that history demonstrates that the meaning of “hedging” is sufficiently ambiguous to reasonably support the two different interpretations offered above. Prior to 1998, the Minister took the position that a hedging transaction only fell within the definition of the term “hedging” if output from the operator’s mine was actually delivered for the purpose of completing the transaction. That is, the Minister’s administrative policy was based on that which is referred to above as the first possible interpretation of “hedging”. In October 1998, the Minister’s position changed. It determined that its assessing practice going forward would be to treat hedging gains and losses as “proceeds” under the Act, irrespective of delivery of the commodity, so long as the quantities of the commodity “hedged” did not exceed the operator’s output of the commodity for the taxation year in question. In other words, even if the actual output of the mine was not the subject matter of the “hedging” transaction in question and therefore not delivered pursuant to the transaction, the transaction could qualify as “hedging”. In effect, the Minister’s practice was to assess “hedging” according to the second possible interpretation. PDC argues that the trial judge erred in failing to take into account the Minister’s first administrative policy on the meaning of the term “hedging” and that the Minister’s reliance on the post-October 1998 interpretation is “arbitrary and unfair” because in another case (Inco Ltd. v. Ontario (Minister of Finance), [2002] O.J. No. 3150 (Sup. Ct.), the Minister relied on its first interpretation. It is clear from the reasons given by the trial judge at para. 12 that he explicitly considered the Minister’s first interpretation. And, as the trial judge notes in para. 12, in the circumstances of this case, the Minister was not estopped from changing its practice having decided that its original interpretation was erroneous. THE MEANING OF HEDGING PDC argues that this court determined the purpose of the Mining Tax Act in Re Sheridan Geophysics Ltd. and Minister of Mines and Northern Affairs for Ontario, [1972] 2 O.R. 355 (C.A.). In Sheridan, Kelly J.A. stated at p. 364 that “[t]he purpose of the [Mining Tax Act] is to tax the ore gained, raised or taken from a mine at a ‘value’ in arriving at which the cost of gaining the ore is deductible.” See also Re McIntyre Porcupine Lines Ltd. and Morgan (1921), 49 O.L.R. 214 at 216 (C.A.) and Nickel Rim Mines Ltd. v. Attorney-General for Ontario, [1966] 1 O.R. 345 (H.C.J.) (appeal allowed on other grounds: [1966] 1 O.R. 345 at 358 (C.A.)). PDC claims that in light of the purpose of the Act identified in these cases, the definition of the term “hedging” should not be interpreted so as to include financial transactions in respect of Ontario mines that are not tied directly to mine output. On this line of reasoning, the second possible interpretation of “hedging” does not accord with the purpose of the Act in that it includes forward sales and futures contracts whose subject matter is not necessarily the output of the mine. There are two difficulties with this argument. First, all three of the cases relied upon by the appellant were decided before the definition of term “hedging” was introduced into either the regulations under that Act (in O. Reg. 126/75) or the Act itself (in the Mining Tax Amendment Act, 1987, S.O. 1987, c. 11). Second, accepting that the general purpose of the Act is as stated in Sheridan Geophysics, the court must also consider the object and purpose of the specific legislative provision in question. See Friesen, supra at 137 and Ottawa Salus Corp. v. Municipal Property Assessment Corp., [2004] O.J. No. 213 (C.A.) at para. 24. Although not explicit, it appears that it was a consideration of the purpose of including hedging in the definition of “proceeds” that underlay the trial judge’s explanation of the general purpose, characteristics, methods and mechanics of hedging and his determination that such considerations should be attributed to the concept of hedging for the purposes of the Act. (See paras. 13 – 15 of the reasons.) Given the ambiguity in the meaning of “hedging” in s. 1(1), as explained above, the trial judge was correct in his approach. In order to determine the specific purpose of the legislative provision in question, it is useful to consider why a mining company would enter a hedging transaction. As the trial judge did, I turn to Echo Bay Mines Ltd. v. The Queen (1992), 92 D.T.C. 6437 (Fed. T.D.), in which MacKay J. considered the concept of hedging and its purpose in the context of the mining industry. Justice MacKay offered the following explanation of the concept of hedging at p. 6440: [U]nder generally accepted accounting principles, a producer’s gain or loss from its execution of forward sales contracts may be considered a “hedge” and therefore matched against the production of the goods produced, if four conditions are met…. 1. The item to be hedged exposes the enterprise to price (or interest rate) risk. 2. The futures contract reduces that exposure and is designated as a hedge. 3. The significant characteristics and expected terms of the anticipated transactions are identified. 4. It is probable that the anticipated transaction will occur. He gave an example of a typical “hedging” transaction by a mining company at p. 6438: (a) Assume the market price of a commodity on January 1st is $200 – a price which the producer wishes to “lock in”. (b) Assume in Case 1 that on July 1st the price is $350, and in Case 2 the price on July 1st is $100. (c) Assume that on January 1st the producer buys a forward sales contract at $200. Case No. 1 Case No 2 Gain (loss) on closing out contract $(150) $100 Sale of commodity 350 100 Price realized $200 $200 Thus, through a combination of the sale of the commodity and the gain or loss on the future sales contract, a producer has “locked in” or “hedged” today’s price. Note that in the example offered by MacKay J., the producer’s output is not the subject matter of the hedging transaction (i.e. the forward sales contract purchased on January 1st). Instead, the producer “closes out” the forward sales contract by purchasing a commodity in an amount equal to the amount sold in the forward sales contract at the July 1st market price. The producer’s gain or loss on closing out the contract is the difference between the market price on January 1st and the market price on July 1st. The sale of the producer’s actual output on July 1st is a separate transaction. The producer buys the forward sales contract in order to ensure that even if the market price of the commodity drops from $200 to $100, the sum of the gain from the future sales contract and the sale of the producer’s output will equal the “locked in” price of $200. In this manner, the hedging transaction reduces the producer’s exposure to price risk. As MacKay J.’s example demonstrates, a forward sale or futures contract can fix the price of the output of a mine even though that forward sale or futures contract is not itself a contract for the sale of the output of the mine. That is, a transaction may effectively “lock in” the price for the output of a mine even though the output of the mine is not the subject matter of that transaction. From this, it appears that the purpose of including the term “hedging” in the definition of the term “proceeds” is to tax the output of a mine at its “locked in” price, which is the sum of (1) the market price at which the output is sold and (2) the gains or losses from the mine operator’s hedging transactions. In order to tax the output of a mine at its “locked in” price, the Act must tax gains from hedging transactions – purely financial transactions with no direct relationship to the output of the mine. I now return to the two possible interpretations of the definition of hedging. The essential difference between these two interpretations is that under the first interpretation hedging is limited to transactions whose subject matter is the output of a mine, while under the second interpretation hedging includes transactions whose subject matter is not necessarily the output of a mine. The general purpose of the Act is to tax output from a mine. However, there is no reason to refer to anything but the first type of consideration in the definition of “proceeds” if the purpose of that provision is limited to taxing output. The apparent purpose of including the second and third types of consideration is to tax gains arising from specified types of financial transactions (i.e. hedging, future sales or forward sales) that are related to the output of the mine. From that perspective and keeping in mind the purpose and operation of hedging, as explained above, it is the second possible interpretation that better reflects the purpose of the legislative provisions. The first possible definition is too narrow to effectively tax the output of a mine at its “locked in” price. In other words, the first interpretation is too narrow to capture the specified types of financial transactions that are based on the output of the mine. Arguably, the first interpretation is the plain meaning interpretation and to be favoured for that reason. However, the second is consonant with the actual words in the definition of “hedging”. Recall that the definition of the term “hedging” does not state that the forward sale or futures contract that fixes the price of the output of the mine must be a contract for the sale of the output of the mine. Instead, the definition requires only that the forward sale or futures contract be the means by which the price of the output is fixed. As a consequence, the subject matter of the forward sale or futures contract in question could be something other than the output of the mine as long as that contract was (1) formed before the output itself was delivered in a sale, (2) on a recognized commodity exchange and (3) the means by which the price of the output of a mine was fixed. And, in contrast to the plain meaning interpretation of the definitions of the terms “hedging” and “proceeds”, the purposive interpretation of these definitions does not conflict with the presumption of consistent expression. There is no conflict because under the purposive approach to the interpretation of the definitions, the second and third types of consideration listed in the definition of “proceeds” no longer share the same meaning. The second type of consideration (i.e. “hedging”) is consideration from a “forward sale or futures contract” that fixes the price of the output of a mine. This forward sale or futures contract must be on a recognized commodity exchange and formed before the output itself was delivered in a sale, but its subject matter is not necessarily the output of the mine. The third type of consideration is consideration from “future sales or forward sales of the output of the mine” but there is no requirement that the future sale or forward sale in question must be on a recognized commodity exchange. The definitions offer no guidance on how to determine whether a given transaction is the means by which the price of the output of a mine is hedged. In order to resolve this ambiguity, the trial judge stated, at paras.16 and 17, that: I accept that, for the purposes of the Act, some link is required between an operator’s hedging transactions and output. Hedging – as distinct from speculation on fluctuation in the price of commodities – requires such a nexus and this is made explicit in the statutory references to the output of a mine as well as in the inclusion of foreign currency hedging "related directly to the proceeds of the output". … Whether there is a sufficient link between output and transactions of the kind in issue here to require a conclusion that the latter were hedging for the purpose of the Act must, I believe, be considered to be a question of fact to be decided on the evidence presented in each case. In my judgment, a sufficient link, or nexus, between the Transactions and the output from the mines was established here by the combination of the following factors: (a) the underlying purpose of the transactions; (b) the existence and terms of the agency agreement; (c) the allocation of Transactions to PDC pursuant to the agreement; and (d) PDC’s treatment of the gains and losses for [the purposes] of its internal accounting and corporations tax returns. PDC makes two arguments against the “nexus” test. First, relying on Ludco Enterprises, [2001] 2 S.C.R. 1082, it says that the trial judge engaged in unacceptable judicial innovation. In Ludco Enterprises, Iacobucci J. stated at p. 1101 that: [W]hen interpreting the Income Tax Act courts must be mindful of their role as distinct from that of Parliament. In the absence of clear statutory language, judicial innovation is undesirable…. Rather, the promulgation of new rules of tax law must be left to Parliament. Second, PDC submits that the nexus test introduces “intolerable uncertainty” into the Act in that the sufficiency of the required link is an uncertain question of fact to be determined in each case. I find neither argument convincing given the ambiguity in the legislative provisions. The factors considered by the trial judge under the nexus test are all relevant to a determination as to whether the Transactions were the means by which PDC hedged the price of the output of its mines in Ontario. The trial judge’s nexus test qualifies as “judicial innovation” only to the extent that it represents an attempt to flesh out the inherently ambiguous terms of the Act. Similarly, it does not introduce “intolerable ambiguity” into the Act. Rather, it addresses an ambiguity already present within the text of the Act. Accordingly, in my view the trial judge did not err in concluding that the Transactions constituted hedging within the meaning of the Act. THE REMAINING ISSUES The foregoing analysis explains why I reject the appellant’s various arguments that the trial judge erred in his interpretation of the meaning of “hedging”. The balance of PDC’s arguments can be dealt with briefly. The meaning of “consideration” PDC submits that the trial judge erred in finding that the words “all consideration” in the definition of the term “proceeds” contemplates a net amount. PDC says that while the term “consideration” is not defined in the Act, the term has a settled meaning in law as a gross concept and the settled meaning should be applied. PDC also says that the term “consideration” is used elsewhere in the Act as a gross concept and, given the presumption that words used in a statute are deemed to have the same meaning throughout, the term “consideration” should be read as a gross concept throughout the Act. Furthermore, PDC says the trial judge’s interpretation of the term “all consideration” is inconsistent with the nature and purpose of the Act because the Act determines a mine operator’s “profit” by subtracting certain prescribed deductions from the mine operator’s “proceeds”. Thus, “proceeds” is a gross amount, while “profit” is a net amount. As a consequence, PDC argues that the various forms of consideration referred to in the definition of “proceeds” are all gross concepts. In my view, the trial judge correctly concluded that the phrase “all consideration received or receivable from hedging” in the definition of the term “proceeds” contemplates a net amount: the net gain or loss from each hedge transaction. The purpose of including hedging transactions – transactions that necessarily involve the “netting out” of gains and losses – in the definition of the term “proceeds” would be defeated if the words “all consideration” from “hedging” contemplated a gross amount. Options PDC submits that the trial judge erred in concluding that “forward sales” includes options. In my view, because this determination involved a matter of mixed law and fact, it is entitled to some deference. See Housen v. Nikolaisen, [2002] 2 S.C.R. 235. I see no reason to interfere with the trial judge’s determination at para. 25 that, on the evidence before him: The agreements creating options were designed to fix the price of the output from the mines in Ontario and sufficiently provided for, or were associated with, future sales of gold to entitle the Minister to include the gains and losses that PDC realized from them in computing the consideration it received from “hedging” as that term is defined in the Act. In so concluding, I note that “forward sale” is not a defined term in the Act and that PDC’s annual reports for 1995 and 1996 both state that “[t]he Corporation employs forward sales contracts including spot deferred contracts and options to hedge prices for anticipated gold sales” [emphasis added]. CONCLUSION I would, therefore, dismiss the appeal with costs to the respondent fixed in the amount of $53,000.00, inclusive of disbursements and GST. RELEASED: “AUG 31 2004” “E.E. Gillese J.A.” “RPA”