Carrothers, D J:—I will ask my brother Macfarlane to give the first judgment.
Macfarlane, J A:—The respondent Trustee in Bankruptcy partially disallowed a proof of claim made on behalf of Her Majesty the Queen in Right of Canada. The appellant then appealed to the Supreme Court of British Columbia, pursuant to subsection 106(4) of the Bankruptcy Act, RSC 1970, c B-3. By consent and with leave of that Court, an issue was tried on facts agreed between the appellant and the respondent upon a special case for the opinion of that Court pursuant to Rule 33 of the Rules of Court.
This is an appeal from the order of the Honourable Mr Justice Macdonell, pronounced February 11, 1982, whereby His Lordship determined the special case in favour of the respondent and dismissed the appellant’s appeal.
The facts are that: Four vessels were purchased by Sealand of the Pacific Ltd from Philbrook’s Shipyard Ltd, each of which carries in excess of twelve passengers. Philbrook’s took the position that sale of these vessels was exempt from consumption or sales tax under the Excise Tax Act, RSC 1970 c E-13 (as amended effective May 26, 1976). If the sale of the vessels was not exempt then Her Majesty the Queen is a creditor of the estate in the amount of $50,719.31 for tax and a further amount of $2,552.51 for interest to the date of bankruptcy.
The parties agreed for the purposes of arguing the special case that Sealand, as purchaser, bought the vessels for use in carrying paying passengers (and for the passengers being carried to enjoy activities of a sporting or recreational nature) as follows:
(a) To transport passengers for the purposes of sightseeing and nature watching from and to the Canadian Princess, which is a floating hotel and restaurant owned by Oak Bay Marina Ltd and is located at Ucluelet, British Columbia.
(b) To transport scuba diving parties between the Canadian Princess and various diving sites at which the vessels served as divers’ tenders.
(c) to transport fishing parties between the Canadian Princess and offshore locations suitable for fishing at which the vessels served as fishing platforms.
Upon putting each of the vessels to that use and prior to being lawfully entitled to carry paying passengers on the vessel, Sealand was required to and did apply for and obtain a Home Trade II Licence and a Coasting Licence.
The scheme of the Excise Tax Act is to impose a consumption or sales tax upon “manuacturers and producers” (which expression is widely defined by the Act) and importers of goods into Canada. The relevant portion of the charging section of the Act reads as follows:
27. (1) There shall be imposed, levied and collected a consumption or sales tax of nine percent on the sale price of all goods.
(a) produced or manufactured in Canada
(i) payable, in any case .. . by the producer or manufacturer at the time when the goods are delivered to the purchaser or at the time when the property in the goods passes, whichever is the earlier. ..
The Act further provides for an exemption from such taxes as follows:
29. (1) The tax imposed by section 27 does not apply to the sale or importation of articles mentioned in Schedule III.
The exemption relied upon by the respondent is provided for as transportation equipment and is found in section 8.1 of Part XVII of Schedule III of the Act (hereinafter referred to as section 8.1) the relevant part of which reads as follows:
8.1. Ships and other marine vessels, purchased or imported for use exclusively in such marine activities, other than sport or recreation, as the Governor in council may by regulation prescribe . . .
A Regulation, being Ships and other Marine Vessels Exemption Regulations was prescribed and it is common ground in this appeal that the use of the vessels in question conforms to the use set out in section 2(a) of those Regulations provided that the use is not sport or recreation within the meaning of the Act.
Section 2(a) of the Regulations read as follows:
2. The following are hereby prescribed to be marine activities for the purposes of section 8.1 of Part XVII of Schedule III of the Excise Tax Act:
(a) public transportation by water provided by marine vessels designed and permanently equipped to carry 12 or more passengers.
The judge reached this conclusion:
It is my view, on examining the various sections of the Act and regulations, and in particular s 8.1 of the regulations that what is envisaged is that those operating marine activities as a commercial enterprise are exempt from tax and those who acquire a motor vessel for their own recreation or sport are not exempt. I hold, therefore, that the vessels are exempt. The appeal from the disallowance by the Trustee is therefore dismissed with costs.
The judge by inadvertence referred to section 8.1 as being contained in the regulations. It is common ground, as I have said, that that section is contained in Schedule III of the Excise Tax Act. I do not think that the judge’s slip in that respect had any bearing on the result in the case.
The respondent does not rely, however, upon the distinction made by the judge between commercial and non-commercial use. Rather, he seeks to put his argument on another basis.
On the appeal, counsel for both the appellant and the respondent have agreed that the vessels in question were purchased for use exclusively in marine activities as prescribed by the regulations. In short, they were purchased for use in transporting twelve or more passengers.
The appellant contends, however, that the use to which the vessels were to be put was for sport or recreation because they were to be used as a platform for scuba diving or fishing parties. In short, it is the contention of counsel for the appellant that the vessels were to be used for sport or recreation. It is contended that there would be no exemption provided by section 8.1 if that were the case.
The respondent contends that it is the use to which the purchaser is going to put the vessel that is decisive of whether there is an exemption under section 8.1. The use to which the purchaser was going to put these vessels was for transportation of passengers for hire. The fact that the passengers on the vessel used it at times for recreation or sport does not mean that the exemption is loss. If that were so then a purchaser of a vessel to be used in the business of sightseeing would not be entitled to an exemption, even though the vessels had been purchased for use in the business of a sightseeing operator.
Clearly, the language of the Act and of section 8.1 in particular, does not extend that far. If the legislature intended that type of result, then it would have said so and could have said so clearly. It has not done so. Any ambiguity on the question must be resolved in favour of the taxpayer.
I would dismiss the appeal.