May 21st, 1940. RIDDELL J.A.:—I had read the proceedings below and carefully considered them in connection with the relevant cases in Stroud’s Judicial Dictionary and "Words and Phrases,’’ and could find nothing to complain of in the judgment appealed from either on principle or on authority, and was about to write a judgment in that sense, when the judgment of my brother Henderson was placed in my hands. Concurring as I do in everything in that judgment, I think it unnecessary to add anything. The appeal must be dismissed with costs.
HENDERSON J.A.:—An appeal from an order of the Ontario Municipal Board, dated the 13th December, 1939, dismissing an appeal from His Honour Judge Parker, dated the 14th day of September, 1939, who dismissed the appeal of the appellant from the decision of the Court of Revision of the City of Toronto, which confirmed the amount of the taxable income of the appellant for the year 1938 at the sum of $63,829.07.
In addition to dismissing the appeal, the Ontario Municipal Board on the application of the respondent allowed the whole matter of the assessment to be opened and fixed the taxable income of the appellant for the year 1938 at the sum of $153,829.
The appellant controls and owns nine subsidiary companies, five of which are in Canada and four in the United States. The appellant Company leases a room 9 feet by 24 feet from its Canadian subsidiary, Service Station Equipment Company Limited at 101 Hanson Street in the City of Toronto.
The respondent assessed the appellant for income assessment pursuant to sec. 9(1)(b) of The Assessment Act, in the sum of $63,829.07 made up as follows :
Receipt of interest charges on loans to John Wood
| Manufacturing Company of Pennsylvania, one of | |
| its subsidiaries | $60.871.41 |
| Receipt of dividends and interest earned on invest | |
| ments | 2,876.43 |
| Receipt of interest on mortgages | 1,581.23 |
| $65,329.07 | |
| Less Statutory Exemption | 1,500.00 |
| Total | $63,829.07 |
His Honour Judge Parker dismissed the appeal from the Court of Revision agreeing with the appellant’s contention that it is liable under the provisions of sec. 8 of The Assessment Act to business assessment of the one-roomed premises mentioned but agreeing in effect with the respondent that the assessment as made was on income not derived from the business in respect of which it is assessable under that section, and as such liable to assessment pursuant to the provisions of see. 9(1) (6) of The Assessment Act. I quote from the reasons of the Ontario Municipal Board the following extracts:
‘‘The Board must first deal with the question of whether or not the appellant company is carrying on business within the meaning of see. 8(1)(k) of ( The Assessment Act’ and accordingly liable to be assessed for business for a sum equal to 25 per cent. of the assessed value of the premises. It is agreed that the one room in question would have an assessment of approximately $1,000.00, 25 per cent. of which would be $250.00.
"‘The members of the Board in coming to a conclusion, have had the privilege of listening to explanation of the company’s activities by counsel, have heard the evidence given by two witnesses for the appellant, W. J. Wesley, Secretary-Treasurer, and Comptroller of the company, and T. H. Gibson, Assistant Secretary of the appellant company, have examined the exhibits filed before His Honour Judge Parker which were filed with the Board at the present hearing, and the Board has also had the privilege of reading a transcript of the evidence taken before His Honour Judge Parker, on June 29th of this year, also filed an an exhibit before the Board.
"Counsel for the appellant contended that the business carried on is that of managing, operating and controlling subsidiary companies. The claim for existence of such business of operating, managing and controlling being carried on in the premises in question, appears to be based upon the activities of one J. B.' Balmer, a director and general manager of the Canadian subsidiaries, and who is the individual alleged to be occupying the premises. ‘ ‘
The Board in its reasons then gives a list of the directors and officers of the appellant, and the various subsidiary companies, and proceeds:
"The following questions by counsel and answers by the witness Gibson before His Honour Judge Parker, are significant:
Q. What do those premises consist of? A. They consist of Mr. Balmer’s office and the secretary’s office.
Q. Who is Mr. Balmer? A. Mr. Balmer is the Canadian general manager of International Metal Industries, and a director of that company.
Q. And as Canadian general manager of International Metal Industries Limited what are his duties ? A. To generally supervise and co-ordinate the work of the various subsidiary companies, to assist in carrying out the instructions of his President and Board of Directors of the parent company.
Q. Now, regarding Mr. Balmer who you have told us occupies as his office the premises covered by the lease, exhibit one, what does Mr. Balmer do? What are his duties? A. His duties are to manage and supervise these various companies.
Q. And how does he do that? A. He does that through his contact, his supervision of the plant managers and through reports to him from the managers, and of course from myself on the other end of the business, the financial end.
Q. Then, he receives these reports and then if there is a condition—we will say Service Station Equipment Company Limited plant; that is one of the Toronto plants? <A. Yes.
Q. A condition which he thinks requires some attention what would he do? A. Why he could call in the plant superintendent, or if it was the sales manager call in the sales manager, or an accounting matter he would call in me probably, and straighten it out.
Q. Are there any records of the company kept in this office? A. Yes, accounting records, dividend records, minute books, all contracts.
By THE COURT : Q. Accounting records; what else. A. Dividend records, shareholders’ lists as we receive them from the trust company, from the registrars, all minute books, general contracts and agreements.
Witness Gibson cross-examined by counsel for the respondent :
Q. Mr. Gibson, the parent company, International Metal Industries, do not do any manufacturing themselves? A. Not as a company.
Q. They have no other space except this office which is approximately what size? A. Oh, I have forgotten the exact measurements. I think it is about 40 x 11 or 12.
Mr. Mockridge: The lease says 9 x 24.
By Mr. Kent: Q. So that any business this company does actually is done—that is the space it occupies. A. No, I do not think you can say that, Mr. Kent, exactly. These are Mr. Balmer’s offices, but for instance, I do a great deal of work for International Metal Industries, and it is done through the Toronto office in general.
Q. Alright. Then, their work is more in the nature of checking up these various companies you are speaking of? A. Well, when I said that to Mr. Mockridge it occurred to me I should have said Mr. Balmer does a certain amount of work such as locating new products for the various companies, and perhaps he might make a sales contact for a special line.
Q. What is Mr. Balmer in the Service Station Equipment Company? A. He is president of that company.
Q. President? A. He occupies that same position with all Canadian subsidiary companies.
Q. As to each of these companies then he is president? A. Yes.
Q. Has he any other position in the Company? A. He is a director, no other official position.
Q. And has each of these companies a manager? A. They have. I think they are called sales managers as a rule.
Q. Sales managers? A. Yes.
Q. All directly under Mr. Balmer? A. Yes.
Q. Mr. Balmer is merely in the position of being manager of each of these companies? A. Yes.
" The evidence before the Board was substantially the same and the Board views as significant the fact that the answers of the witness, Gibson, given in outlining the said Balmer’s duties could very well have been given to questions regarding Balmer’s function as president of each of the Canadian subsidiary companies, and in fact it appears to the Board that the witness had in mind when making such answers, the said Balmer exercising functions as the president of each Canadian subsidiary, and not as a general manager of the Canadian subsidiaries, exercising independent discretion.
‘“There was no evidence tendered before the Board to show that any control or direction of any kind over the American subsidiaries emanated from the premises in question, and furthermore the minute book of the John Wood Manufacturing Company, Incorporated, shows that at a special meeting of the stockholders held on July 14th, 1934, By-law Number 12 was amended to read as follows :
"" ‘The property and business of this corporation shall be managed by its board of directors which shall consist of such numbêr of directors, not exceeding eight and not less than three, as the stockholders may deem advisable to elect. Directors need not be stockholders. They shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and duly qualified.”
“In any event while it may be quite true that Balmer, when in the premises did communicate with officials of the Canadian subsidiary companies, the Board, with respect to the learned County Court Judge, has failed to see any evidence tending to establish the existence of any business of the appellant. It would appear to the Board that any business which is carried on in the ordinary meaning of the term at the building at 101 Hanson Street, is business carried on by the subsidiary company, Service Station Equipment Company, Limited, and those other Canadian subsidiaries which occupy the premises at 101 Hanson Street.
‘The business of managing, controlling and operating subsidiary companies is not one mentioned in subsec. 8 of ( The Assessment Act,’ but counsel for the appellant contended that such business, if any such business was in existence, would come under the heading of ‘any business not before in this section or in clause 1 ” especially mentioned. ’ Upon careful consideration of all of the evidence, the Board is unable to find that the appellant company is carrying on any business at the premises leased by it from its Canadian subsidiary at 101 Hanson Street, and finds as a fact that the appellant is not carrying on any business at the said premises within the meaning of sec. 8(1) (10) of ‘The Assessment Act’ and therefore is not liable to business assessment thereunder. ‛
The jurisdiction of this Court on appeal from the orders of the Ontario Municipal Board is limited to consideration of questions of law, and in my view the Board’s order in this case is founded upon the findings of fact which I have quoted founded on the evidence before it.
I think this case falls within the judgment of this Court in Re the City of Toronto and the Famous Players Canadian Corporation Limited, [1935] O.R. 314, and I would also refer to The Corporation of the Township of Tisdale and Hollinger Consolidated Gold Mines Limited, [1933] S.C.R. 321.
I think, therefore, the appeal must be dismissed with costs.
GILLANDERS J.A.:—An appeal from a judgment of the Ontario Municipal Board finding the appellant company not liable to business assessment under the Assessment Act, R.S.O. 1937, ch. 272, see. 8, but liable to be assessed in respect of income under sec. 9(1) (a) of this Act.
The appellant company completely owns (except for qualifying shares) five Canadian subsidiary companies and one American subsidiary. The wholly owned American subsidiary has in turn three wholly owned subsidiaries in the United States. The subsidiaries are actively engaged in manufacturing and/or selling several lines of merchandise in Canada and the United States. The president, vice-president, secretary and assistant secretary of each of the five Canadian subsidiaries are the same persons who are all officers and members of the Board of the parent appellant company. There is also interlocking between the boards of the appellant company and the American subsidiaries,—both with the one directly controlled and those indirectly controlled. The appellant company leases and occupies from one of its Canadian subsidiaries at 101 Hanson Street, Toronto, a room or office some 9 feet by 24 feet occupied by the appellant company ‘s Canadian general-manager and several other employees. The appellant company is not a manufacturing or sales company but claims to be occupying and using the premises leased by it from its subsidiary for the purpose of actively carrying on the business of managing, operating and controlling its subsidiary companies, and that under the Assessment Act, sec. 8, while it is liable to business assessment on the premises so occupied and used (it is stated the premises would have an assessment of approximately $1,000 and that under sec. 8(1) (k) should be assessed for business assessment at 25 per cent. of such amount) it would, being so liable to business assessment and its income it is urged being derived from the business so carried on, not be liable to be assessed for income in respect of the items in question in this appeal.
The respondent city assessed the appellant pursuant to sec. 9(1) (b) of the Assessment Act for income in respect to two small items which are not in dispute, and in respect of an amount of $60,871.41, being interest received by the appellant on a loan or loans to its wholly owned and directly controlled American subsidiary. In appealing to the County Judge from this assessment the appellant contended that this item of $60,871.41 is income derived from its business and that it is therefore not liable to be assessed for income thereon. The learned County Court Judge dismissed the appeal as to this item of interest, holding that, although the appellant is liable to business assessment on the premises it occupies, this item is assessable as income under sec. 9(1) (b) of the Assessment Act, following the decision in City of Toronto v. John Northway Son (1923), 54 O.L.R. 81.
From this decision the appellant company appealed to the Ontario Municipal Board and on that appeal counsel for the respondent asked that the whole question of the appellant’s assessment be reopened in pursuance of the provisions of sec. 86 of the Assessment Act, and urged,
"‘1. The appellant company is not liable to business assessment in that it cannot qualify for any of the categories mentioned in sec. 8 of ‘The Assessment Act^ including (1)(k), and accordingly by virtue of see. 9(1) (a) of ‘The Assessment Act,’ is liable to income assessment.
"2. That the income assessment should include not only the present items in the assessment as made, but in addition two items of $75,000 and $15,000 which were received by the appellant company from the American subsidiary, John Wood Manufacturing Co. Inc., which it claimed to be in payment of an engineering fee and in payment of a management fee respectively.
"3. In the alternative, if it should be held that the appellant company is liable for business assessment under sec. 8(1)(k), that not only the present assessment composed of the three items above recited should be confirmed as being items ‘in respect of any income not derived from the business in which it 18 assessable under that section’ pursuant to see. 9 of ‘The Assessment Act,’ but that in addition the two items of $75,000 and $15,000 which were received by the appellant from the American subsidiary, John Wood Manufacturing Company, also should be included in the assessment.”
After a consideration of the evidence adduced, the exhibits filed and submissions tendered, the Board gave effect to the request and the submissions of counsel for the respondent, and by its Judgment finds and directs that the appellant company be assessed in respect of income not only on the item of $60,871.41 representing interest charges received by it on loans to its American subsidiary, but also on (a) an item of $15,000 received from its wholly owned and directly controlled American subsidiary, as a management fee, and (b) an item of $75,000 received from the same subsidiary and said to be an engineering fee. From this judgment the appellant appeals to this Court.
Preliminary objection was taken by counsel for the respondent that no appeal hes in that the question involved is a question of fact and does not come within the provisions of sec. 84(6). Appellant’s counsel on the other hand urges that the issues in the appeal involve the construction of see. 8(1) of the Act and are therefore properly before and should be considered by this Court.
The question whether the matters involved were questions of fact or questions of law, coming within the provisions of the Act where an appeal hes to this Court, has been the subject of considerable judicial discussion in other cases. Before considering the question in this ease reference may conveniently be made to several of these.
In McIntyre Porcupine Mines Limited and Morgan (1921), 49 O.L.R. 214, Mr. Justice Hodgins says in part:
“It is only upon questions of law that an appeal lies to this Court; and, while care should be* taken not to trench upon the final authority of the Board upon questions of fact, it is equally important that the limited right of review should not be ignored or diminished.
“The construction of the words of any statutory enactment is a question of law, while the question of whether the particular matter or thing is of such a nature or kind as to fall within the legal definition of its terms is a question of fact : Elliott v. South Devon R.W. Co. (1848), 2 Ex. 725; Attorney-General for Canada v. Ritchie Contracting and Supply Co., [1919] A.C. 999, 48 D.L.R. 147. This distinction clearly runs through the decision of this Court in Re Hiram Walker & Sons Limited and Town of Walkerville (1917), 40 O.L.R. 154, where it is said (p. 156) : ‘The case was argued by Mr. Anglin as if the legislation imposed taxation in respect of a ‘distillery.’ The question in such a case would be a very different one from that which arises when the taxation is in respect of ‘the business of a distiller.’ The Court cannot, I think, know judicially what such a business is, and the question of what it is must therefore be a question of fact.”
“The case just quoted is in line with the decision, upon somewhat similar words, in Re S. H. Knox & Co. Assessment (1909), 18 O.L.R. 645. It is no doubt difficult to separate questions of law and fact in a ease of this kind, where evidence which enables the Court to put itself in a position to construe the words of the Act is very often the same or practically the same as that which determines whether the statute covers the particular thing in question. But that is no reason for confusing two separate matters, in one of which an appeal lies and in the other the decision of the Board is final. See Re Bruce Mines Limited and Town of Bruce Mines, 20 O.L.R. 315, and the dissenting judgment of Meredith J.A. in Re S. H. Knox & Co. Assessment, supra/ f
In Re City of Hamilton and Birge (1924), 55 O.L.R. 448, in considering the question involved in that case whether Mr. Birge’s ‘‘residence’’ was or was not in the City, Mr. Justice Masten, holding that the point was a question of law, adopts the remarks of Avory J. in Stoke-on-Trent Borough Council v. Cheshire County Council, [1915] 3 K.B. 699, at pages 706 and 107.
In The Municipal Corporation of the Township of Tisdale and Hollinger Consolidated Gold Mines Limited, [1933] S.C.R. 321, at 325, Cannon J. says :
"‘The question as to whether the properties assessed or on which the buildings, plant and machinery are found are ‘mineral lands’ is one of fact, as well as that whether or not any particular substance is a ‘mineral’ within the meaning of the statute in which the word is used, there being no definition in the Act. (Union Natural Gas Company of Canada v. Corporation of the Township of Dover, 60 S.C.R. 640, at p. 642). We agree with the late Mr. Justice Grant of the Appellate Division, when he says:
‘Upon the evidence which was adduced, and upon the findings made by the Ontario Railway and Municipal Board, it appears to me quite clear that the Board must be taken to have decided that the lands in question were mineral lands, within the meaning of sec. 40, subsec. 4 ; and as their finding in that regard is one of fact, this Court is precluded from interfering therewith.’
And in The Matter of a Reference Concerning the Jurisdiction of The Tariff Board of Canada, [1934] S.C.R. 538, at p. 084, Mr. Justice Rinfret deals with the argument of counsel in that case that the Tariff Board, in making decisions as to value and as to the rate of duty applicable under the law, as a necessary consequence must determine the question of law which such decisions call for, and says :
“It is obvious, however, that the same remark may equally be made of the local appraisers or of the collectors, when they are called upon to ascertain, estimate and appraise the true and fair market value of goods. In that connection, the local appraisers, when giving their decision, are exactly on a par with the Dominion appraiser or the Board. They also, before making their appraisement, must form an opinion as to the relevant law. But, whatever incidental conclusions the appraisers or the Board must come to in order to arrive at a decision on the proper appraisement to be made, the decision of each or either of them is nothing but the finding of a fact in the particular ease: Girls Public Day School Trust Ltd. v. Ereaut, [1931] A.C. 12.’’
A recent case where this question was discussed by this Court
is Re The City of Toronto and The Famous Players Canadian Corporation Limited, [1935] O.R. 314. Mr. Justice Middleton on the facts of that case says in part:
"It is a question of law whether the income derived from the stock held in these subsidiary and allied companies is assessable at all. The question whether the income is or is not received is a question of fact.”
He was of opinion in that case that the question involved was one of law. Mr. Justice Masten, with whose opinion the majority of the Court agreed, was of opinion that no appeal lay. He says in part:
A determination of the nature of the respondent’s business is prima facie a question of fact. Circumstances may exist where it involves a question of law, but here it seems to me to depend on whether the various subsidiary corporations are independent personalities, or are mere agents controlled as such by the respondent company for the carrying on of its own business. That appears to me to be a question dependent solely on the facts adduced in evidence.
" " The further question whether the income proposed to be assessed is derived from the business so carried on in the premises liable to business assessment, or whether it is derived from independent sources outside that business, seems to me to be plainly a question of fact and not of law.’’
Passing to the case at bar the Municipal Board after consideration and discussion of the material before it, and arguments submitted, said in part:
‘““The Board . . . has failed to see any evidence tending to establish the existence of any business of the appellant. It would appear to the Board that any business which is carried on in the ordinary meaning of the term at the building at 101 Hanson Street, is business carried on by the subsidiary company, Service Station Equipment Company, Limited, and those other Canadian subsidiaries which occupy the premises at 101 Hanson Street.
“The business of managing, controlling and operating subsidiary companies is not one mentioned in subsec. 8 of ‘The Assessment Act’, but counsel for the appellant contended that such business, if any such business was in existence, would come under the heading of ‘any business not before in this section or in clause “ 1 ” especially mentioned.’ Upon careful consideration of all of the evidence, the Board is unable to find that the appellant company is carrying on any business at the premises leased by it from its Canadian subsidiary at 101 Hanson Street, and finds as a fact that the appellant is not carrying on any business at the said premises within the meaning of sec. 8(1) (k) of ‘The Assessment Act’ and therefore is not liable to business assessment thereunder.
The Board’s judgment further proceeds :
“The Board having found that the appellant should not be assessed for business assessment, the second point raised by the appellant automatically fails as see. 9(1) (b) of ‘The Assessment’ is applicable only to companies which are liable to business assessment. The Board wishes to state, however, that even if it had been able to find that the appellant company was properly subject to a business assessment, it would have felt it proper to dismiss the appeal on the ground that the item of $60,871.41 was income not derived from the business in respect of which the company was assessable under sec. 8. The item was loan interest paid by the American subsidiary, John Wood Manufacturing Company, Incorporated, and there was no evidence of any kind to show that the said item was income derived from any business that might have been carried on in the appellant’s office at 101 Hanson Street.’’
Before this Court counsel for the respondent did not contend that the business of managing, operating and controlling companies or subsidiary companies could not be a business properly assessable under sec. 8(1) (k) of the Assessment Act, but relies on the finding of the Municipal Board as expressed above that the appellant company in this case (1) is not in fact carrying on any business at the premises in question, (2) the opinion of the Board that, even if it were able to find the appellant company properly subject to business assessment, it would give effect to the respondent’s contention and hold that the items in question were not income derived from the business of the company.
Had the matter turned on the question as to whether or not managing, operating and controlling subsidiary companies may be a business in respect of which a person may occupy or use land and be liable to assessment under sec. 8 of the Act, and I would think under proper circumstances it well might be, I would consider the matter a question of law involving as it would construction of the statute as to whether or not it included as a business the particular activities of the appellant company. But in this case that is not the question involved. The Municipal Board is unable to find that the appellant company is carrying on business at the premises in question. That to my mind, in view of the decisions, is a question of fact, and the matter is therefore concluded by the Board’s finding. So also is the question as to whether the income proposed to be assessed is derived from the business or whether it is derived from independent sources outside the business, and the Board having expressed the opinion that there was no evidence to show that the item of $60,871.41 is derived from any business carried on in the appellant’s office at 101 Hanson Street, and as to the additional items of $75,000 and $15,000 that these items of income were arbitrarily allowed under the headings indicated also is a finding of fact.
For these reasons I am of opinion that effect must be given to the preliminary objection raised by the respondent and that the appeal should therefore be dismissed with costs.
Appeal dismissed with costs.