RAND, J. (concurred in by Taschereau and Cartwright, JJ.) :— This appeal hinges on a narrow question of fact : was the payment from time to time of 5% of the invoice price to an importer of goods into this country from the United States a partial rebate of price or a collateral item referable to something other than price and thereby not reducing the latter for the purposes of the “dumping” provisions of Section 6, subsections (1) and (4) of the Customs Tariff which read :
“6. (1) In the case of goods exported to Canada of a class or kind made or produced in Canada, if the export or actual selling price to an importer in Canada is less than the fair market value or the value for duty of the goods as determined under the provisions of the Customs Act, there shall, in addition to the duties otherwise established, be levied, collected and paid on such goods, on their importation into Canada, a special or dumping duty, equal to the difference between the said selling price of the goods for export and the said value for duty thereof ; and such special or dumping duty shall be levied, collected and paid on such goods although not otherwise dutiable.
(4) ‘Export price’ or ‘selling price’ in this section means the exporter’s price for the goods, exclusive of all charges thereon after their shipment from the place whence exported direct to Canada.”
The goods consisted of cough drops. The importation began in 1957 and continued in the same mode until 1949. The payment for each lot purchased was made when it had been disposed of by the importer. Thereafter at irregular times a cheque for 5% of the invoice price of the lot, a price which for the purposes of the statute is accepted as the actual market value at the place of sale, was sent or handed to the importer. Admittedly there was no contractual right to the money, nor was it any part of the negotiation when the importation began; as explained by the head of the seller’s advertising department, it was given voluntarily to induce the promotion of disposal in preference to other competing goods. The purchaser was the exclusive Canadian importer and he did in fact give the goods first place among his wares in the forms of advertising usually resorted to. As a result sales rose rapidly and the goods obtained a commanding position in the Canadian market.
The money was made out of an allotment to the exporter’s advertising department of which it was an ordinary item of disbursement. There was a severance of function between the sales and advertising departments and the head of the latter in the later ’40’s and at the time of trial, at which he was a witness, treated as being ‘‘ridiculous’’ the suggestion that the payment was in any manner, other than as a basis for determining its amount, related to the price. To him the special position accorded the product by the importer was a valuable service in relation to which and to which only the payment was made. Such payments from the advertising appropriation could have been reduced or stopped at any time. On them the importer could not rely as on an obligation. This statement of their character was accepted by the President of the Exchequer Court.
Was the payment, then, made in circumstances and in relation to such a consideration as excluded it in fact from association with the factors of price taken into account by the importer in his subsequent disposal of the goods? What the statute aims at is the elimination of the unfair influence of ‘‘dumping’’ prices upon competitors in Canada, but of the existence of that influence here there is no suggestion. It was agreed that other forms of benefit to encourage preferential treatment in the Canadian market could legitimately have been made: payment of a flat sum of money or a sum related, say, to special advertising or a service
or advantage of other than a monetary character : in short, any colalteral benefit determined in amount or value otherwise than by mathematical reference to the price. So ascertained, however, there is, in Mr. Jackett’s words, ‘‘an irresistible inference’’ of an abatement in price, which is said to follow from the contention that there is no other relation between the parties than that of seller and purchaser.
I can see no such necessity for that conclusion. It is a matter of fact. It is not a question of another relation than that of seller and purchaser ; it is whether, in respect of price, such a payment could be a collateral and wholly unrelated element in the total transactions. The answer to that seems to me to be clear that it could be. The payment probably excites suspicion and the burden of proof of its detachment will be correspondingly heavier. But once the fact is found, as it was here, and there was ample evidence on which it could have been found, the conclusion necessary to Mr. Jackett’s contention is excluded.
I would, therefore, dismiss the appeal with costs.
KELLOCK, J.:—It is obvious, in my opinion, that no manufacturer of a proprietary article, such as that here in question, would confine or continue to confine his outlet for that product exclusively to one distributor or jobber for the whole of Canada, as was done in this case, except on the basis that the manufacturer should be entitled to the employment on the part of the jobber of his best effort in the promotion of its sale. It is also obvious that the greater the margin of profit of the jobber, the greater and more sustained will be his promotional effort even in his own interest. That is the essence of such a relationship. Dissatisfaction with the volume of sales, on the one hand, and, on the other, with the margin of profit, would prompt either the manufacturer or jobber to discontinue.
In the case at bar I accept the findings of the learned trial judge that the payments in question were prompted by the manufacturer’s “selfish desire to gain priority for its products” and to that end, priority in the employment of the time of the respondent and its predecessor in their sales efforts.
The ‘‘services rendered’’, which the learned judge considered the payments were for, were the employment of the respondent’s time and effort as above, including the placing of the manufacturer’s name ‘‘first on the order form’’ used by the respondent as well as on the first page of its catalogue.
The learned judge was influenced also by the view that the payments were voluntary and, by the evidence of an officer of the manufacturer, that they were made out of the latter’s ‘‘ allotment for advertising which he could use at his discretion”. The learned trial judge considered that it was not the intention of Smith Brothers to be a party to the “dumping” of goods into Canada. He therefore dismissed the Crown’s claim.
It is provided by Section 6(1) of the Customs Tariff Act, R.S.C. 1927, c. 44, that
“In the case of goods exported to Canada of a class or kind made or produced in Canada, if the export or actual selling price to an importer in Canada is less than the fair market value or the value for duty of the goods as determined under the provisions of the Customs Act, there shall, in addition to the duties otherwise established, be levied, collected and paid on such goods, on their importation into Canada, a special or dumping duty, equal to the difference between the said selling price of the goods for export and the said value for duty thereof . . .”?
It is also provided by Section 2(2) of the Customs Act, R.S.C. 1927, c. 42, that
“All the expressions and provisions of this Act, or of any law relating to the Customs, shall receive such fair and liberal construction and interpretation as will best ensure the protection of the revenue and the attainment of the purpose for which this Act or such law was made, according to its true intent, meaning and spirit.”
In my opinion, the purpose of the Customs Tariff is to provide revenue, to protect local manufacturers in Canada of goods of a similar class or kind as against the importation of goods of such class or kind which may be purchased outside of Canada at a lower cost than prevails in Canada, as well as to encourage manufacture in Canada. To that end the actual cost of the goods to the Canadian importer is the subject of the interest of Parliament.
The question for decision in this appeal is the question as to what was the ‘‘actual selling price”? of the goods here in question to the respondent within the meaning of the statute. In so far as this is a question “as to the proper inferences to be drawn from truthful evidence’’, the original tribunal is in no better position than the members of this court; Montgomerie v. Wallace-James, [1904] A.C. 73 at 75, Lord Halsbury, L.C., referred to by Viscount Simonds in Benmax v. Austin Motor Co., [1955] 1 All E.R. 326 at 327.
The relationship between the respondent, as well as its predecessor, and Smith Brothers Inc., the manufacturer, was exclu- sively that of buyer and seller. The manufacturer, so far as the Canadian market was concerned, sold its product to the respondent solely and, before the incorporation of the respondent, solely to John Stuart. The payments in question were calculated as a percentage of the invoice price, namely, five per cent. They were not made on any basis other than as contingent upon goods being shipped and they were made with specific reference to the particular invoices. It was of the very essence of the exclusive right of the respondent to purchase that its vendor became thereby entitled to the performance on the part of the respondent of such “services” as are here in question.
The fact that the payments may be regarded as voluntary does not, in my opinion, affect their true nature. It may, however, be mentioned that on the occasion when Stuart was handed the first cheque, Bates, an officer of Smith Brothers, told him, according to the evidence of Stuart, ‘‘to work hard and you will get more of these cheques and bigger cheques. 11 Thereafter the payments were expected and they were made continuously.
On the sale by Stuart of the business to the respondent company some ten years later, it was agreed between Stuart and the respondent company that
“ . . . from then on, Smith Brothers would make these payments not to me, as they had, but to the company.
Q. And did you notify Smith Brothers to make the subsequent payments to the limited company ?
A. Yes, either myself or one of our employees advised Smith Brothers to start immediately and make these cheques to the limited company and not to me, as they had done up to that time.”
It is to be observed that this evidence was given in chief, Stuart being called on behalf of the respondent.
In his statement to the Foreign Exchange Control Board, Stuart stated, inter alia,
“. . . when I incorporated this selling agency under the name of ‘John Stuart Sales Limited’ this Company was entitled to these commissions.”
In my opinion, to the question as to the “cost” of the goods to the respondent of any particular shipment, the only proper answer which could have been made would have been that such cost was the amount of the invoice price less the payment of five per cent of such invoice subsequently made. That being so, the ‘‘actual selling price’’ to the importer, the respondent, was, in my/ opinion, the net amount, and the five per cent was simply a rebate or repayment, the nature of which cannot be altered merely by calling it a 11 commission ” (an admittedly inappropriate description) or a ‘‘payment for services”. Nor does the voluntary nature, if that be the correct view of the payment, affect the position under the Customs Tariff Act. A voluntary payment effecting a reduction in price enters quite as much into actual price as any other.
Nor, in my opinion, is it material whether there was an intention on the part of either exporter or importer to evade payment of duty or whether what was done was done in ignorance of the result involved. It is the result with which the statute is concerned.
In my opinion, the profit derived by the respondent cannot be split into two parts, with the one part, namely, the difference between the original invoice price to the respondent and the latter’s selling price, being attributed to one phase of the respondent’s activities in bringing about such sales, and the other part, namely, the payments of five per cent of the original invoice price, being attributed to the remainder of such activities.
It does not avail to describe the payments here in question as “payments for services rendered’’. Their true nature is determined by the facts. To paraphrase the language of Rowlatt, J., in Cooper v. Stubbs, 183 L.T. 582 at 585: ‘‘I think that what the learned trial judge has done is merely to give the wrong name to a state of facts which in law amount to something else.”
I would therefore allow the appeal with costs here and below.
Appeal dismissed.