Supreme Court of Canada
Aluminium du Canada Ltée v. Corporation Municipale du village de Melocheville, [1973] S.C.R. 792
Date: 1972-10-18
Aluminium du Canada Ltée (Defendant) Appellant;
and
La Corporation Municipale du village de Melocheville (Plaintiff) Respondent.
1972: February 25; 1972: October 18.
Present: Fauteux C.J. and Abbott, Martland, Ritchie and Pigeon JJ.
ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC
Municipal law—Taxes—Transformers used in an aluminum manufacturing factory—Machines made immoveable by destination not taxable—Civil Code, art. 379 and 380—Municipal Code, art. 16(27), 651 and 656 (c).
The appellant is the owner of an aluminum manufacturing factory furnished with a current received from the generating station of the Hydro-Quebec, and adapted by transformers to electrolytic processing of the alumina extracted from bauxite. This factory is in the territory of the respondent who held that these transformers were taxable property under the Municipal Code. This view was taken by the trial judge in a judgment which was affirmed by the Court of Appeal. The appellant contends that such transformers which are not attached to the factory are immoveables by destination as described in art. 379 and 380 of the Civil Code and as such are not taxable under art. 16(27) and 651 of the Municipal Code. Hence the appeal to this Court.
Held: The appeal should be allowed.
If we refer to the provisions of the Civil Code, there can be no doubt that the transformers in question fall into the category of things corporeal and moveable by nature which are destined to become and remain immoveable by destination as soon and as long as the conditions specified for these purposes in the provisions of art. 379 of the Civil Code are met in respect of them. They complement the industrial undertaking of appellant but not its buildings; they are not an integral part thereof and do not lose their independent existence.
Having regard to the immoveables which are taxable in accordance with the provisions of the Municipal Code, the word “building” does not include machines made immovable by destination in that their immoveability is purely legal, and not material or real. As to “improvements”, they are intended for
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expenses which increase the value and price of the property. Finally, the provisions of art. 656 (c) relied on by the respondent could not apply since an installation for transforming current does not constitute a transmission or distribution line within the meaning of art. 656 of the Municipal Code.
APPEAL from a judgment of the Court of Queen’s Bench, Appeal Side, Province of Quebec[1], confirming a judgment of Judge Gagnon. Appeal allowed.
P. Lamontagne, for the defendant, appellant.
M. Beauregard, for the plaintiff, respondent.
The judgment of the Court was delivered by
THE CHIEF JUSTICE—Appellant is appealing against a judgment of the Court of Appeal which dismissed its appeal from a judgment of the Provincial Court, holding that appellant’s transformers, used in its aluminum manufacturing factory, in the territory of the respondent municipal corporation, are taxable property under the Municipal Code which governs this municipality.
At trial Judge Gagnon held that the transformers were immoveables by nature and hence taxable under the Municipal Code. He said in his judgment:
[TRANSLATION] The transformers and all items or parts attached thereto in order that they carry out the function expected of them, whether they be in or upon the building, are an integral part of the construction of the building or factory or industrial operation, whatever name is applied to plaintiff’s activities.
In the Court of Appeal Mr. Justice Brossard, speaking for the Court, appears to have taken the view that this was machinery, property immoveable by destination; but, being of the opinion that no distinction is made in art. 16(27) and 651 of the Municipal Code, which specify the property that is taxable, between immoveables by nature and immoveables by destination, he concluded that no distinction
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should be made between the two categories of immoveables, and accordingly found that the trial judge had not erred in holding that appellant’s transformer installation was taxable.
Two questions must therefore be considered. The principal question, and indeed the only one virtually argued at the hearing, is whether appellant’s transformers are, as appellant contends, immoveables by destination, or whether, as respondent argues, they are immoveables by nature. If appellant is correct, then we must deal with the question concerning the validity of the interpretation given by the Court of Appeal to art. 16(27) and 651 of the Municipal Code.
The principal question being one of mixed law and fact, a brief description of appellant’s industrial establishment—as accepted in the Court of Appeal and by the parties in this Court—must be given before considering the principles of law applicable to the case.
This establishment consists of (i) a factory with two large pot rooms in which melted alumina is chemically separated by electrolysis, or in other words, by the operation of an electric current, and (ii) of an imposing installation of transformers, such transformers resting, without being attached thereto, some on the factory floor and the larger number—many of them on wheels—on the concrete floor of a large steel frame built outside, on land adjacent to the factory.
Electricity, needed by appellant, comes from the Hydro-Quebec generating station at Beauharnois, located about three-quarters of a mile from its establishment. The current which it receives from this source is a three-phase alternating current of 13,000 volts, which it transmits from there on its own lines to the hookup at the steel frame. In the event of a disturbance oil circuit breakers of 600 amperes, installed in the frame, isolate the two circuits set up for each of the pot rooms. The current passes
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through phase shifting transformers and is converted from three-phase to 120-phase, then goes through rectifier transformers where the voltage is reduced to the level required for appellant’s use, and finally becomes continuous by passing through a series of rectifiers. In this way all this equipment, these transformers, except for three auxiliary transformers which are used for lighting and to operate certain motors, is used to adapt the current received from the Hydro-Quebec station to electrolytic processing of the alumina extracted from bauxite.
If we refer to the provisions of the Civil Code on the distinction of things in order to determine the legal nature of appellant’s transformers, there can be no doubt, in my opinion, that those transformers do not fall into the category of corporeal property immoveable by nature described in art. 375 to 378 of the Code. A thing moveable by nature may become an immoveable by nature if it is incorporated in the land or the building, so as to remain an integral or component part thereof and lose its independent existence, as recently stated by Mr. Justice Mayrand in a judgment which is unpublished but substantially reproduced and confirmed on appeal (see Cloutier v. Choinière[2].) That is not the situation in the present case. Doubtless we have here, as the Court of Appeal observed, a large installation for transforming electric current, an doubtless it must be added, as did the trial judge, that these transformers are essential to the conduct of appellant’s industrial operations. It does not follow, in my opinion, that these transformers are thereby incorporated in the land, in the factory or in the frame, so as to remain integral or component parts thereof, and lose their independent existence. I note, incidentally, that in addition to the fact that the mobility of many of them is demonstrated by the wheels with which they are equipped, some have been disconnected from the factory or from the frame and sent for repairs or use in another factory, without the
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disconnection procedure necessary for these purposes having affected the factory or frame qua building.
I would say, therefore, with all due respect for the contrary opinion, that these transformers fall rather into the category of things corporeal and moveable by nature which are destined to become and remain immoveable by destination, as soon and as long as the conditions specified for these purposes in the provisions of art. 379 C.C., complemented to some degree by those of art. 380 C.C., are met in respect of them.
I quote the comments of Mignault on the point (see Mignault, Droit civil canadien, vol. 2, p. 402):
[TRANSLATION] In other words, things brought in a building in order to make use of it do not contribute to its creation. We may say, civilly speaking, and because they adhere to the building, that they are deemed to be part thereof; but strictly speaking, from a purely realistic point of view, they are not an integral part of it. Thus a forge, though installed into the ground and sealed to a wall, is not really part of the building in which it is located. I would say the same is true of vats and boilers which are installed in a factory. They are not really part of the building, however strong be the fixtures holding them to the ground or walls; because even if they were removed the building in which they stand would nonetheless remain complete as a building.
In short, adopting the very apt and concise language of Mr. Justice May rand in the aforementioned case, I would say, mutatis mutandis, that the transformers in question, including the auxiliary transformers and oil circuit breakers, complement the industrial undertaking of appellant but not its buildings; they are not part of the structure of its buildings even though they are essential to their destination.
Having regard to the relevant provisions of the Municipal Code, in accordance with which the issue must ultimately be decided, are these immoveables by destination, or more precisely these transformers owned by appellant, taxable property?
Art. 651 M.C. provides that:
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Sont des biens imposables tous les terrains, immeubles ou biens-fonds situés dans une municipalité locale…
or, in the English version,
All land or immoveable property situated in a local municipality, …is taxable property.
Art. 16 M.C. which prescribes the meaning, significance and application to be given to expressions, terms or words used in the Code, provides in the first subdivision of subparagraph 27 that:
Les mots “bien-fonds” ou “terrains” ou “immeubles” désignent toute terre… et comprennent les bâtiments et les améliorations qui s’y trouvent.
or, in the English version,
The words “land” or “immoveable” or “immoveable property” mean all lands… and include the buildings and improvements thereon.
Finally, I note that the real value of any taxable immoveable property, which according to paragraph 3 of art. 654 M.C. must be entered on the valuation roll, is defined as follows in art. 656, the two texts of which may appropriately be cited opposite each other:
| Art. 656. La valeur réelle des biens-fonds imposables comprend la valeur du terrain, et la valeur des constructions, ainsi que celle de toutes les améliorations qui y ont été faites, sauf ce qui est prescrit par l’article 657. |
Art. 656. The real value of the taxable immoveable property includes the value of the land and of the buildings, and of all improvements which may have been made thereto, except those set forth in article 657. |
Art. 657 does not concern us in this case.
In Donohue v. La Corporation de la paroisse de St-Étienne de la Malbaie[3], this Court was called upon to decide whether the machines in appellant’s pulp mill could be valued with the mill, or more precisely whether these machines, made immoveable by destination, were included in the meaning of the word “buildings”, or constituted “improvements”, under art. 16(27) and art. 656 of the Municipal Code. The Court found they were not. The appeal was allowed
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and respondent’s valuation roll was annulled, insofar as the machines had been valued with the mill. The reasons for judgment given by Mignault J. received the concurrence of Anglin and Duff JJ. Idington and Malouin JJ. did not have to decide the point as they considered that appellant’s failure to proceed under the Municipal Code rather that under art. 50 of the Code of Civil Procedure was fatal to his right of action.
The reasons given by Mignault J. for excluding the machines in this pulp mill from the meaning of the words “buildings” and “improvements” are, in my opinion, equally valid in respect of appellant’s transformers. A transformer is definitely a machine or, according to the definition given in Petit Robert—Dictionnaire de langue française—, [TRANSLATION] “an apparatus used to modify the voltage, intensity or form of electric current” or again, by the definition of the Shorter Oxford English Dictionary, “an apparatus for transforming electric energy”. Moreover, this was the finding of this Court in Northern Broadcasting Co. v. District of Mount Joy[4], which is relevant here with respect to this point. In concluding that the word “buildings” does not include machines made immoveable by destination, Mignault J. reasoned as follows in the Donohue case (supra), at pages 518 and 519:
[TRANSLATION] It seems to be admitted that the machines in question are immoveables by their destination. However, although we are dealing with an immoveable property tax, all that is immoveable is not by virtue of that fact necessarily taxable under the Municipal Code, as we have held in Breakey v. Metgermette North (61 Can. S.C.R. 237).
An immoveable by destination being, by definition, a moveable object by its nature that is considered as immoveable by reason of the immoveable to which it is attached, differs from an immoveable by nature in
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that its immoveability is purely legal and fictitious, and not material or real (Planiol, tome 1, No. 2210). It can never be said that it is part of the building or construction where it is situated, for then it would be an immoveable by its nature.
For this reason, I would not include machines which become immoveables by destination within the meaning of the word “building” or “construction”.
And in holding that the machines made immoveable by destination are not “improvements” within the meaning of the aforementioned articles of the Municipal Code, the learned judge relied finally on the fact that art. 719 of the former Municipal Code, now art. 656 of the new Code, distinguished “usines et machineries” (“factories and machine shops”) from “improvements”, which in his view indicated that “improvements” did not then include factories and machine shops, but was intended for improvements proper, namely, according to the definition of the Nouveau Dénisart, expenses which increase the value and price of the property, and he held that elimination of the words “usines et machineries” in the new Code was no authority for giving the word “improvements” a wider meaning than it had in the former Code. In conclusion Mignault J. said, at page 521:
[TRANSLATION] The word “improvements” in Article 656 does not therefore include machinery installed in a mill, even if we grant these machines the quality of immoveables by their destination, and it follows that the respondent could not include them in its valuation of the pulp mill for purposes of the valuation roll.
These reasons by Mignault J. were referred to by this Court, in support of the judgment rendered in Richmond Pulp & Paper Co. of Canada Ltd. and Corporation of the Town of Bromptonville and the School Commissioners of the Town of Bromptonville and Aluminum Company of Canada Ltd. et al[5]. In that case Mr. Justice Pigeon, speaking for the Court, noted in particular that in Quebec machinery is taxable property under the Cities and Towns Act only, and is not taxable under the Municipal Code.
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Respondent does not dispute the statement of our brother, but maintains, relying on the provisions of art. 656(c) of the Municipal Code, that transformers were treated as taxable property by the legislator. Whether considered separately or together with art. 656(a) and 656(b) with which they are linked, it is obvious that the provisions of art. 656(c) apply only to transformers, wires, insulators and anchorage, and all other accessories for electrical transmission or distribution lines, and consequently could not apply in the present case to this installation for transforming current, which, as the Court of Appeal and the trial judge found, does not constitute a transmission or distribution line within the meaning of art. 656(a) M.C.
For these reasons I would hold that appellant’s transformers and circuit breakers are not taxable under the Municipal Code, and that the appeal should accordingly be allowed.
All that remains is to determine the sum to which the valuation of the property used for transforming current received from the generating station should be reduced. In the operative part of his judgment Judge Gagnon concluded that the depreciated or real value of the interior and exterior electrical installations was $1,180,-745—see Joint Record, vol. 2, p. 280—including $75,525 for equipment other than transformers or circuit breakers. It follows, therefore, that this amount of $1,180,745 must be reduced to $75,525. I realize that in the Court of Appeal, as appears from the judgment a quo, the parties conceded that due to a slight calculation error made at trial, the valuation total set at $1,180,745 should be altered to $1,192,445, namely a difference of $11,700. This calculation error has to do with the transformers, and since in my opinion such property is not taxable, I do not see that it concerns us here.
For these reasons I would allow the appeal and alter the valuation roll in question by reducing the valuation of the interior and exterior electrical installations to the sum of $75,525;
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the whole with costs against respondent in all Courts.
Appeal allowed with costs.
Solicitors for the defendant, appellant: Geoffrion & Prud’homme, Montreal.
Solicitors for the plaintiff, respondent: Lacroix, Viau, Bélanger, Page, Hébert & Mailloux, Montreal.