Macdonald C.J.B.C. (dissenting) :—This case turns upon the construction of the contract in question. I have examined the contract with care, and in my opinion the learned trial Judge reached the right conclusion. I would therefore dismiss the appeal.
MCQUARRIE J.A.:—This is an appeal by the Commissioner of Income Tax of British Columbia from the judgment of Murphy J., supra, setting aside an income tax assessment against the respondent for the years 1927-1937 which had been made by the Commissioner of Income Tax and confirmed on appeal to the Minister of Finance. The appeal is brought under s. 42(6) of thé Income Tax Act, R.S.B.C. 1936, c. 280. Approximately $9,000 is involved, to say nothing of taxes for following years. There is no dispute as to the facts. According to counsel for the respondent the whole question is—did the respondent earn any profit in British Columbia? It is manifest that if Mackenzie, White & Dunsmuir Ltd. is agent of the respondent, the respondent is liable for the tax. The relationship between them depends upon the contract. The respondent claims that it is a vendor and purchaser contract and not an agency agreement as alleged by the appellant. No question as to the validity of the Act is involved, nor was it raised below. The relevant facts are sufficiently stated in the reasons for judgment of my brother O’Halloran. In addition, I think it should be pointed out that stock is kept in the respondent’s property located at Vancouver, Victoria, New Westminster and Nelson. The fire insurance on that stock is carried by the respondent and Mackenzie, White & Dunsmuir Ltd. has no responsibility in connection therewith— See ex. 4.
Exhibit 4 is a letter dated March 1, 1934 at Hamilton, Ontario, from the respondent to Mr. John Dunsmuir, Mackenzie, White & Dunsmuir, Vancouver, B.C. The said letter reads as follows:
"‘You will be relieved of all responsibility whatsoever as to fire insurance on Firestone stock which is our property located at Vancouver, Victoria, New Westminster, and Nelson. This arrangement is to remain in force until the expiration of your contract August, 3lst, 1937.”
It is to be noted that this letter definitely refers to the contract. It is true that it appears from the contract that originally the insurance was to be taken care of by Mackenzie, White & Dunsmuir Ltd. to the extent therein specified, but in any event, at least after the date of ex. 4 respondent had to carry the insurance. That indicates another strong reason why the appeal should be allowed, particularly as in his reasons for judgment the learned trial Judge stresses the fact "‘The Distributor is bound to receive and warehouse the goods set out in the mem- orandum invoice and so long as they remain in its warehouse or in its possession, such goods are at the risk of the Distributor.”
I do not consider it necessary for me to review the authorities cited, as that had been done by my brother O’Halloran in a manner acceptable to me. I am inclined to agree with counsel for the respondent when he submits that every case must be decided on its own facts. In the result I am of opinion that the decision of the appellant as confirmed on appeal to the Provincial Minister of Finance is correct, and that on the undisputed facts the respondent comes within the Act. I would therefore allow the appeal.
SLOAN J.A.:—In my opinion the appeal should be allowed and as I am in such substantial agreement with the reasons for judgment handed down by my brother O’Halloran I deem it unnecessary to add anything thereto.
0 ’Halloran J.A.:—The respondent Firestone Tire & Rubber Co. of Canada Ltd. is incorporated under the Dominion Companies Act and its manufacturing plant is situate in Hamilton, Ontario. The sale of its products in the British Columbia area is conducted through Mackenzie, White & Dunsmuir Ltd., Vancouver, under a ‘‘ Firestone Distributors’ Warehouse Contract.’’
The respondent’s liability to pay income tax to the Province of British Columbia (for the purpose of this appeal at any rate) depends upon whether it owns the "‘Firestoné‘‘ products sold in this Province by Mackenzie, White & Dunsmuir Ltd. (hereafter called ‘‘the distributor’’). That is determined by the terms of the contract and the*course of dealing prescribed thereby. If it is found that the respondent does own these products, then the distributor emerges inter se as its agent in their sale even though the distributor may sell them as an apparent principal. In that event the respondent must be held liable, for then the only sale which takes place occurs in this Province when the distributor sells to the trade.
It is common ground that certain “Firestone” products, such as accessories, repair material and repair equipment are sold the distributor in Hamilton, Ontario. The appellant Commissioner of Provincial Income Tax does not claim income tax on profits of the respondent derived from those sales. The invoices of such sales disclose the order to buy is accepted by the respondent in Hamilton; the invoices also disclose that the goods are forwarded to Vancouver on condition that the [distributor] pay for them on the 20th of the following month. However, those sales are excluded from the present controversy, which concerns only ‘‘Firestone’’ products warehoused by the dis- tributor in Vancouver, and for which the distributor is under no liability to pay as long as it can show they remain in its warehouse.
The distributor carries a stock of ‘‘Firestone’’ products in Vancouver valued at approximately $50,000. Once every month it sends the respondent a ‘‘monthly inventory and sales report’’ thereof (ex. 7) for the period ending the 20th of the month. It is important to note this report sets out under appropriate column headings—(1) the number of each product on hand at the beginning of that monthly period; that is the ‘‘opening inventory;” (2) the number of each product received from the respondent during that monthly period; (8) the number of each product on hand at the end of that monthly period ; that is the “closing inventory;’’ and (4) the number of each product sold by the distributor during that monthly period. It is obvious that (4) must equal the difference between (3) and the sum of (1) and (2).
On receipt of this ‘‘monthly inventory and sales report,’’ the respondent sends the distributor a statement (ex. 8) of the amount it is required to remit in respect to the products listed in (4) supra; that is to say, for the goods sold by the distributor during the monthly period last ended. That statement shows on its face that the amount there set forth relates to the proceeds of sales made by the distributor during the last monthly period as disclosed in the ‘‘monthly inventory and sales report. ‘ ‘ It is of first significance to observe that it does not relate to sales made by the respondent to the distributor. It seems to me to be a determining point in this case that the amount there set forth does not relate to sales from the respondent to the distributor during that period. Examination of exs. 7 and 8 leaves no room for uncertainty on this point. Exhibit 8 dated October 26th reads:
“Sales Sept. 21 to Oct. 20 attached _.
$20,490.66. Quantities O.K. ”
The word ‘‘attached’’ in the quotation refers to ex. 7 supra, which the respondent returns to the distributor attached to ex. 8, after having filled in (in ex. 7) the “price” column (5) and the ‘‘price extension’’ column (6). If the amount in ex. 8 related to sales from the respondent to the distributor it would check with the price extension of column (2) supra in ex. 7, viz., the number of products received from the respondent. But it does not cheek with column (2) but does check with the price extension of column (4) supra which sets out the distributor’s sales during that period. It is conclusive therefore that ex. 8 is not an "‘invoice’’ of sales made by the respondent to the distributor.
The fact is, the respondent does not at any time bill the distributor for any of these goods at all—as it would if it were in truth selling goods to the distributor, and as it does in the case of the sales referred to at the outset; with which we are not now concerned. Exhibit 8 is not a sales invoice. It is in real effect, as stated, a statement from the respondent of the amount the distributor is required to remit in respect to its previous. month’s sales to the trade, after the fixed commissions have been adjusted. It is manifest from the nature of the transaction described that no sale or agreement to sell is made in Hamilton or in Vancouver, or at all, when the respondent ships the goods to the distributor. It is also apparent that the distributor does not buy or agree to buy goods from the respondent at any time after they are shipped to it or received by it.
This is confirmed, if confirmation is required, by the fact that Mackenzie, White & Dunsmuir Ltd. neither includes such goods in the inventory of assets shown in its balance sheet, nor discloses any liability in its balance sheet in respect thereto as it would if it had bought or agreed to buy the goods. The respondent however does include in its inventory of assets disclosed. in its balance sheet the $50,000 worth of its products warehoused with the distributor in Vancouver. It is confirmed further by this extract from the evidence:
"The Court: They (the distributors) may never sell them (the goods) and they remain the Firestone property. Suppose
—without reflecting on the Mackenzie White Dunsmuir Co- pany for a moment—suppose it went into bankruptcy, the Firestone Company would take those goods, they would not be entitled to rank as creditors. They could simply say ‘These are our goods’ and take them. Is that not so, Mr. Dunsmuir?
“Mr. Dunsmuir: Yes.”
The conclusion reached in the Court below that the warehoused goods were sold to the distributor in Hamilton on the basis of deferred payments, with respect, cannot be supported, if the unquestioned facts to which I have referred are given the weight which their importance and relevancy demands. These facts of course are in harmony with the agreement. The foregoing analysis of exs. 7 and 8 definitely excludes any sale by the respondent to the distributor and clearly defines the working out in practice of the agency relationship which the agreement demands. The agreement correctly describes itself as a " " distributor’s warehouse contract. ’ Nowhere in it does the dis- tributor agree to buy the warehoused goods. If a sale were intended in a commercial agreement of this character, one would not expect that intention to be cleverly disguised, but would expect to find it expressed in apt words.
It follows from what has been said that the distributor in Vancouver is not required to pay for the goods it receives from the respondent. Its obligation under the agreement is to account for them in the monthly inventory report, and to remit the proceeds of the sales thereof it has made during the last monthly period. The distributor obviously acts as an agent in the sale of the respondent ‘s goods, as it is clear from what has been said that it does. not itself purchase the* goods from the respondent at any time. The goods are sent to the distributor in Vancouver where it holds them for the respondent. When the distributor can sell them it does so, and remits the proceeds to the respondent monthly, less the remuneration agreed on. This sale of respondent’s goods by the distributor is the only sale which takes place and obviously it takes place in Vancouver.
It is true the respondent fixes the prices at which the distributor may sell to the trade, and also fixes the portion of the price which the distributor shall remit when the latter has sold the goods. But in this case that is a convenient way in which to fix the distributor’s commission as an agent. Agents usually receive a commission on sales, but the form in which the commission is payable may vary with the class of the business and the exigencies arising thereout. One of the exigencies of the tire business is the maintenance of a uniform price to the trade in all parts of Canada. It requires the respondent to fix the uniform price, and to take measures all over Canada to see that it is not departed from. Once the respondent fixes the price at which the distributor shall sell, it matters not whether the latter’s remuneration is fixed in terms of a percentage or as 1S done here in terms of a portion of the price the agent shall remit.
It goes without saying that if the respondent is to maintain and increase the market for its products in Vancouver, it is forced to keep a substantial stock in Vancouver to fill the demands of that market. For example, it would not be practicable for the distributor to take an order for a tire and send that order to the respondent in Hamilton to be filled. The respondent could have its own warehouse in Vancouver stocked with goods and keep a branch office there. But the business apparently does not warrant it. Again the respondent could have a distributor in Vancouver which would purchase all the “Firestone” products it kept in stock. A distributor of this description would likely buy the products in Hamilton and agree to pay for them on the 20th of the following month, as is done now in the case of accessories, repair equipment and repair material referred to at the outset.
But that policy was inexpedient, for the distributor would then have to invest a substantial sum in ‘‘Firestone” products. In that regard the responsible officer of the distributor said: ‘We neither had the money nor the desire to invest as much as was called for on the basis of a shipment purchased. ‘ ‘
In the result the respondent employed a responsible distributor to warehouse its goods in Vancouver, and which for a stipulated. remuneration would sell its goods as effectually in its interest as if the respondent had its own branch office and warehouse in Vancouver. It is true this distributor sells the goods in its own name as if it owned them. But that does not destroy the agency relation, for as Channel J (Divisional Court) said in Watson v. Sandie c Hull as reported in [1898] 1 Q.B. 326 at p. 331 :
“It is quite consistent with goods being treated as the property of the agent as between the agent and the purchaser that, as between the agent and the foreign principal, the goods should be in fact the goods of the principal.”
In the report of this decision in 67 L.J.Q.B. 319, Channell J., is thus quoted at p. 321 : ‘‘The truth here is that Squire & Co. are really principals, because the contracts (with the trade) are made by a person (Sandie & Hull) who is, in fact, their agent, although he contracts in his own name.’’
What has just been said explains paragraph 10 of the schedule attached to the contract. It reads: “10. The distributor has the exclusive right to sell ‘Firestone’ products to dealers in the territory specified, but this contract is not to be construed as constituting the distributor the agent of the Company for any purpose.”
That requires the distributor to sell “Firestone” products to dealers in its own name, and debars it from contracting or representing itself as an agent of the respondent in such sales. But it does not affect the real relation between the respondent and the distributor inter se, which is that as between them, the sales to the trade are made by a person [sic] which is in fact the respondent’s agent, although it sells in its own name.
The learned Judge appealed from excluded agency on the ground the distributor’s liability to pay arose when the goods “disappeared” from the inventory. He reasoned that this “disappearance” might result from fire, theft or other occurrences not connected with a sale by the distributor; and that the distributor’s obligation to pay might therefore arise even though it had not sold the goods. But with respect that is entirely consistent with agency. For an agent who has goods of his principal for sale must account or pay for them, whether he sells them or loses them. It is his duty to sell them or return them. Supplementing what has been already said the agreement as a whole points convincingly to the conclusion that the distributor holds the goods for sale on behalf of the respondent and that at no time does it purchase the goods itself.
The provision for the respondent’s lien in para. 4 stipulates the property shall remain in the respondent "‘so long as the same or any part thereof shall remain in the said warehoused stock and shall not have been bona fide sold or otherwise disposed of to dealers or consumers . . . .”
By para. 5 the distributor may " ‘ resell in the usual and ordinary course of his business, but not otherwise, any of the Firestone products delivered or to be delivered by the Company.” . . . .”
It is evident that the word ‘‘re-sell’’ in para. 5 and in one or two other places in the contract really means " " sell. ’ Read as “‘re-sell’’ it implies a previous sale to the distributor; but that is excluded by the language of paras. 4 and 5 just quoted, in addition to other cogent reasons already stated. If the distributor had already bought the goods, it could of course sell them at will, and it would not require the respondent’s permission given in para. 5 to ‘‘re-sell in the usual and ordinary course of his business.
John Deere Plow Co. v. Agnew, 10 D.L.R. 576, was much relied on to support the judgment appealed from. That case turned upon the right of an unlicensed extra-provincial company to sue in this Province, if it was ‘‘carrying on business” in the Province. The right to sue is not involved here, nor may the appellant’s claim to the payment of income tax be determined by a decision as to whether the respondent is ‘‘carrying on business” in the Province within the meaning of the Companies Act provisions considered in the John Deere Plow case. By s. 3(1)
(a) of the Income Tax Act, R.S.B.C. 1936, c. 280, ‘‘the income earned within the Province of persons not resident in the Province shall be liable to taxation.”
By s. 2 of the same Act ‘‘person’’ includes ‘‘corporations, agents, and trustees;” and ‘‘income’’ includes “All income, revenue . . . or profits arising, received, gained, acquired, or accrued due from . . . any venture, business, or profession of any kind whatsoever. ’’
In my view ‘‘profits from any venture’’ within the Province may be quite a different thing from profits from “carrying on business’’ in the Province; the more so if the latter statutory phrase should be restricted as it was in the John Deere Plow case (vide the concluding paragraph of the judgment of Duff J. (as he then was) at p. 585) to a company which “. . . had a fixed place of business at which it carried on some part of its own business within the province.”
Furthermore if the point were necessary to decide in this appeal, I should hesitate to hold that liability for Provincial Income Tax upon "‘profits from any venture’’ must depend upon whether the "‘venture’’ is an ‘‘exercise of trade’’ as that phrase may be interpreted in decisions based on other statutes.
But there is another essential distinction between the John Deere Plow case and the one now under review. In the former case Agnew bought all the goods he received from the John Deere Plow Co. Under his agreement (p. 584) he had to
‘‘settle by cash and notes’’ for the goods on the first of the month following each shipment. That is exactly the case here in respect to the accessories, repair material and equipment for which the distributor agreed to pay on the 20th of the month following shipment. But as stated at the outset hereof, the claim of appellant Commissioner of Income Tax is not concerned with these admitted sales to the distributor. But that is not the case in respect to the goods to which this appeal applies, for unlike the distributor in the present case, Agnew had agreed to buy all the goods which he had on hand.
That the John Deere Plow contract was a contract of sale and not a ‘‘distributor’s warehouse contract’’ (as the respondent’s contract in this case is truly described on its face) is further evidenced by the provision (p. 584) therein that in the event of Agnew’s default in payment on the first of the month following shipment all monies owing by him became payable at once and the John Deere Plow Co. was authorized to sell all the goods to which the agreement related, and after crediting Agnew therewith could hold him liable for any deficiency. These provisions are consistent only with a sale of the goods when shipped. It was on these facts that Duff J. (as he then was) said at p. 584 :
" " It is, in my Judgment, an agreement relating to the sale and purchasing of goods embodying elaborate provisions for the protection of the sellers.’’
The respondent’s contract under review cannot be so described. It is a distributor’s warehouse contract, as it says it is, giving the distributor the ‘‘right to sell” (para. 1) goods which it has agreed ‘‘to receive and warehouse’’ (para. 3). Nowhere does the distributor agree to buy the goods; but it does agree in para. 3"to vigorously push sales’’ and "‘to sell to commercial accounts . . . ,’’ indicating its true role as an agent selling respondent’s goods. The distributor did not buy or agree to buy the goods. If the distributor decided to terminate the agreement under para. 14 thereof, it could return the whole of the Firestone Warehouse goods to the respondent. The respondent could not then compel the distributor to pay for them.
Needless to say, that would not be so, if the distributor had bought or agreed to buy the goods as happened in the John Deere Plow case, and in Lamb & Sons v. Goring Brick Co. (1932), 101 L.J.K.B. 214 (Court of Appeal). In the latter case as here the plaintiffs were appointed sole selling agents of the defendants. But the plaintiffs had also agreed (p. 218) which is not the case here, to pay the defendants ‘‘for all goods supplied by the end of the month following delivery.”
For these reasons, with respect, I would allow the appeal.
McDonald J.A. (dissenting) :—Mr. Justice Murphy in the Court below held that this case falls within the decision in John Deere Plow Co. v. Agnew, 10 D.L.R. 576. While the matter is not entirely free from doubt I think the learned Judge reached the right conclusion and there is nothing useful that I can add to his reasons for judgment.
Appeal allowed.