Pinetree Line Miscellaneous

1958 - St. John (City) v. Fraser-Brace Overseas Corp

      International law — Exemptionof foreign sovereigns andtheir property from taxation in Canada — Leasehold interestsand chattels personal.

      Taxation — Municipal exemptions— Property owned by orheld on behalf of foreign Government.

      The Governments of Canada and theUnited States ofAmerica agreed to construct a radar defence system.  Pursuantto this arrangement, a group of construction companiesundertook the erection and completion of buildings onproperties in Saint John leased to the companies by theirowners.  All materials used in this work were already theproperty of the United States Government or were ordered bythe companies on its behalf.  The municipality imposed taxesboth on the leasehold interests in the lands and on thepersonal property.  These taxes were paid by the companies, inmost cases expressly "under protest".

      Held:  Thecompanies were entitled to recover the taxesso paid.  Under the rules of international law as recognizedby Canadian Courts, property of a foreign sovereign was exemptfrom taxation by local authorities.  Although the leaseholdinterests were not in name held by the United StatesGovernment, they were held by the companies as bare trusteesfor that Government and the exemption accordingly extended tothem.  The circumstances in which the taxes had been paid didnot amount to acquiescence in their imposition or preclude thecompanies from recovering them.

      APPEAL and cross-appeal from ajudgment of the SupremeCourt of New Brunswick, Appeal Division [(1957), 9 D.L.R. (2d)391 (sub nom.  Fraser-Brace Overseas Corp. v. Municipality ofthe City and County of Saint John et al.)], varying a judgmentof McNair C.J.N.B. [(1956), 39 M.P.R. 33 (sub nom.Fraser-Brace et al. v. Saint John County et al.)]  Appealdismissed; cross-appeal allowed.

      RAND J.:— This appealraises a question of liability totaxation by the appellants of property used by the respondentsas contractors with the Government of the United States in theconstruction of what is described as the "extension andco-ordination of a continental radar defence system withinCanada", to serve as an agency of defence for both countriesagainst possible air attacks.

      The property consisted of bothchattels personal andreal, the latter being two leases of land on which temporarybuildings were erected which, with other property set up inthem, are alleged by the municipality to be fixtures and bythe contractors to be personalty.  The local establishment wasa field station for the purposes of the radar work carried outin northern Canada and extending from the Atlantic coast tothe westerly boundary.

      The joint participation in such anundertaking wasobviously dictated by the international situation.  It wasentered into under the terms of letters exchanged between thetwo Governments which provided generally for the jointconstruction, maintenance and operation of the line.  To theextent so defined, the agreement involved an invitation topersonnel and property of the United States Government toenter upon the territory of this country for the executionjointly of the common purpose.

      A preliminary question concerns thetitle, legal andequitable, to the two classes of property.  At the trialMcNair C.J.N.B. [(1956), 39 M.P.R. 33 (sub nom. Fraser-Braceet al. v. Saint John County et al.)] found the legal title toboth to be vested in the respondents but in trust for theUnited States Government.  In the Appeal Division [(1957), 9D.L.R. (2d) 391 (sub nom.  Fraser-Brace Overseas Corp. v.Municipality of the City and County of Saint John et al.)] allthree members, Richard, Bridges and Jones JJ., agreed that thelegal title to the movable property had vested in thatGovernment, and that to the leases, executed under seal, inthe contractors, the named lessees, but subject to the trust.Each lease contained a provision permitting an assignment tothe United States Government.

      The matter of title is expresslycovered by theprovisions of the construction contract.  By art. 24(b) it isdeclared, among other things, that:

All of the property taxed except the leases was within thefirst category as having been "purchased by the contractorsfor the cost of which" they were entitled to reimbursement "asa direct item of cost"; and the beneficial interest in theleases would attach under the second.  The form of thepurchasing orders for the movables was headed with the name ofthe contractors at the top, followed by a notation immediatelybelow, "Department of the Army Contract No. . . ." etc. Theywere signed at the foot on behalf of the contractors by theirpurchasing agent.  The shipping instructions directed thegoods to be addressed to the transport officer of the UnitedStates army in care of the contractors at their address inSaint John, New Brunswick, within the municipality.  A furthernotation mentioned exemption from certain taxes, for which itwas certified that the goods were being purchased on behalf ofthe United States Government for use in the project mentionedand that they were

by virtue of an order in council of the Dominion Government.This was followed by a statement of exemption from taxesimposed by the Province of New Brunswick by way of referenceto a certificate of registration in the Department of theSecretary Treasurer of the Province.

      In the light of these matters, Iagree with the AppealDivision [(1957), 9 D.L.R. (2d) 391] that at the time of theassessment the legal title to the personal property was in theUnited States Government, and that of the leases in thecontractors but held in trust.

      The action was dismissed by theChief Justice [[1957[ 9D.L.R. (2d) 391] on the ground that it could not be said thatthe property so owned by the United States was "destined forits public use" as that expression was used by Davey L.J. inMesurus Bey v. Gadban et al. [[1894] 2 Q.B. 352 at 361], or"devoted to public use in the traditional sense" as expressedby Duff C.J. in the Reference re Powers of the City of Ottawaand the Village of Rockcliffe Park to Tax Foreign Legations,etc [[1943] S.C.R. 208 at 221, [1943] 2 D.L.R. 481].  On theappeal, Richard J., with whom Jones J. concurred, found thepurpose of the property to be that of a public use, in theappropriate sense, of the United States and that it wasconsequently immune from taxation; but that the taxation ofthe contractors, though trustees, in respect of the leases,could not be challenged.  Bridges J. agreed with the ChiefJustice that the immunity did not, in the circumstances,extend to any part of the property.

      Enough has been said to indicate theprecise obligationof the contractors to the United States Government.  It wasessentially one to furnish services, with all property,materials, tools, equipment and other means used or employedin or for the work of construction, supplied by the UnitedStates.  The fact that this field station was at some distancefrom the scene of the permanent works does not affect itsrelation to them or its derivative character.  If the workswould be exempt, then all property used in or for theirconstruction, including that in field operations, regardlessof situs, is necessarily identified with the ultimate purpose.All that was done within the municipality is to be taken asone with the final accomplishment, and the purpose of thataccomplishment will determine that of the property used bythese subsidiary agencies.

      The general principle of immunityfrom legal processes inthe broadest sense in what may be called the host country ofpublic property of a foreign state has been given itsauthoritative statement for Canada by Duff C.J. in the ForeignLegations Reference, supra.  There, as here, he was dealingwith taxation under general language in which only theinterpretation of the statute was in question.  Thesignificant aspect of the matter examined by him was that ofthe theory on which the immunity is to be placed.  In theearly considerations given it, the idea of exterritoriality,the physical projection of one sovereignty within the bordersof another, arose probably from one of its earliest examples,that of a public vessel entering a foreign port.  But as newcontacts and relations between states developed, themultiplied situations appearing rendered necessary a morerealistic and flexible conception.  On p. 218 of his reasons,after quoting a passage from Vattel on the immunities of anambassador's residence, which includes the qualification inthe application of the rule, "at least in all the ordinaryaffairs of life", Duff C.J. observes, on the latter, that itmust be read "as excluding the fiction of exterritoriality inits extreme form".  The notion was, in his view, finallyrejected by the Judicial Committee in Chung Chi Cheung v. TheKing [[1939] A.C. 160, [1938] 4 All E.R. 786, [1939] 1 W.W.R.232]; and reverting to it at p. 230 he repeats:  "This fictionof exterritoriality must be disregarded."

      What is substituted is theconception of an invitation bythe host state to the visiting state.  That is the core ofwhat was laid down by Marshall C.J. in The Schooner Exchangev. M'Faddon et al. [(1812), 11 U.S. (7 Cranch) 116], whichDuff C.J. adopts.  The fundamental attitude which states adopttowards each other is the recognition and observance ofindividual sovereignty, that is, the acknowledgment of theabsolute independence of each; and on this basic footing theirintercourse is conducted.  When one state admits within itsboundaries a foreign sovereign or his representative, theterms of that entry are to be gathered from the circumstanceof the invitation and its acceptance.  In the language ofMarshall C.J. at pp. 139 and 143:

      In the absence of something specialor unusual, when avisiting sovereign steps upon the foreign soil he does so freefrom any submission to its immanent law; from that he remainsinsulated; and the recourse against what may be considered tobe an infringement of the privileges of the invitation becomesa matter for diplomatic and not legal adjustment.  In thelanguage of Marshall C.J. at pp. 138-9, quoted by Duff C.J. atp. 215:

On the same page there is a pertinent quotation from Vattelreinforcing the same view which it is unnecessary toreproduce.

      Freedom from the coercion of thepublic law iscoextensive with the requirements of the purpose for which theentry is made.  In general, the immunity of a sovereign, hisambassadors, ministers and their staffs, together with his andtheir property, extends to all processes of Courts, allinvasions of or interferences with their persons or property,and all applications of coercive public law brought to bearaffirmatively, including taxation.

      It is obvious that the life of everystate is, under theswift transformations of these days, becoming deeplyimplicated with that of the others in a de facto society ofnations.  If in 1767 Lord Mansfield, as in Heathfield v.Chilton [(1767), 4 Burr. 2015, 98 E.R. 50], could say, "Thelaw of nations will be carried as far in England, as anywhere", in this country, in the 20th century, in the presenceof the United Nations and the multiplicity of impacts withwhich technical developments have entwined the entire globe,we cannot say any thing less.

      In the language of Sir AlexanderCockburn quoted by LordAtkin in Chung Chi Cheung, supra, at p. 172, in the absence ofprecise precedent we must seek the rule which "reason and goodsense . . . would prescribe".  In this we are not to disregardthe practical consideration, if not the necessity, of that"general assent and reciprocity", of which Lord Macmillanspeaks in Compania Naviera Vascongardo v. The "Cristina" etal. [[1938] A.C. 485 at 497, [1938] 1 All E.R. 719], cited inthe reasons of McNair C.J.  But to say that precedent is nowrequired for every proposed application to matter whichdiffers only in accidentals, that new concrete instances mustbe left to legislation or convention, would be a virtualrepudiation of the concept of inherent adaptability which hasmaintained the life of the common law, and a retrograde stepin evolving the rules of international intercourse.  Howeverslowly and meticulously they are to be fashioned they must bepermitted to meet the necessities of increasing internationalinvolvements.  It is the essence of the principle of precedentthat new applications are to be determined according to theirtotal elements including assumptions and attitudes, and in theinternational sphere the whole field of the behaviour ofstates, whether exhibited in actual conduct, conventions,arbitrations or adjudications, is pertinent to thedetermination of each issue.

      The nature and purpose of theinvitation before us,interpreted against the background of the assumptions impliedby sovereignty, and the generality of assent and reciprocity,furnish the data for the juridical deductions of itsimplications.  A similar situation arose during the late worldwar from the admission to Canada of members of the UnitedStates forces.  The question of the jurisdiction of theirmilitary tribunals over offences committed in this country wasreferred to this Court [Reference re Armed Forces of theUnited States of America, [1943] S.C.R. 483, [1943] 4 D.L.R.11, 80 C.C.C. 161] and the opinions expressed appear to me tohave accepted that basis of determination.

      That the subject-matter was of themost vital importanceto both countries surely does not require debate; it wasnational defence in the most sensitive area.  A foreign state,in peacetime, was privileged to exercise, in this country,powers of high sovereign character.  Its necessity was equalto its uniqueness, and the scope and character of those powersdetermine the scope and character of the implied privileges.

      Public works of this sort are notordinarily consideredsubjects of taxation. Their object is to preserve the agenciesthat produce national wealth, the source of taxes.  So to taxGovernment is simply to remit locally what has been exactednationally.  The work carried on by either Government in itsown land would be untaxable, and that principle must carryover to the territory of the joint work.

      I am unable, then, to infer thatwith an identity ofpurpose, status and role in each country, either theinvitation or its acceptance proceeded upon any other basisthan that of the rule of exemption from taxation.  Why shouldwe deny to property designed for common national preservationa sovereign character and purpose equal at least to that of anambassador's furniture?  Works of this sort are not to belooked upon, in principle, as furnishing a source of taxationfor municipalities nor state necessities an object of revenue;any other view would be a strange commentary upon ourconception of the role of Government in these days.  Publicworks may, at times, impose upon local resources burdens ofmunicipal responsibility; but the exemption here does nottouch services for which payment is ordinarily made, as water,electricity, etc.  These the foreign invitees must, as theirfood-supply and property generally, acquire as purchasers. Ifstrictly general municipal services providing fire-protection,repair of streets, etc., are excessively affected, the appealmust be to the domestic Government as participant in the work;and adjustment between the two countries becomes a politicalmatter.

      The immunity extends likewise to theleases.  Since theargument there has been brought to our attention a recentdecision of the House of Lords which is most pertinent to thisfeature.  In Rahimtoola v. Nizam of Hyderabad et al. [[1957] 3W.L.R. 884, [1957] 3 All E.R. 441], moneys belonging to thestate of Hyderabad had been transferred by an agent to a bankin London in the name of the High Commissioner of Pakistan toGreat Britain. While the money was still held by the bank,notice was received from the Nizam that the transfer had beenmade without authority and a demand was made on the bank forits return.  This the bank refused.  The Nizam thereuponcommenced proceedings against both the High Commissioner andthe bank.  On application by the defendants, the writ was setaside in toto, but in the Court of Appeal the order wasreversed.  In the House of Lords it was held that as the legaltitle to the account was admittedly in the High Commissioneras bare trustee or proprietary agent for Pakistan, thelatter's exemption from proceedings against its property hadbeen infringed; the interest of Pakistan, the right to directthe action of the agent, was sufficient to raise the immunity,notwithstanding that the ultimate beneficial interest was notclaimed.  The decision, restoring the original order,demonstrates that what is to be looked at is the substance ofthe matter raised and not the form; and if, in that view, aninfringement appears, the consequence is rigorously applied.It was assumed in all Courts that if the beneficial interestin the money had been shown to be in Pakistan the immunityarose; but even without that the bare legal title sufficed.It is unnecessary to do more than to indicate the differencebetween an ordinary trustee and such a fiduciary.  The formeris charged with active duties towards both the property andthe beneficiary; and it is contemplated that for all suchordinary incidents of ownership as taxes he represents allinterests.  But even for such a case, we have been referred tono authority which holds a trustee taxable in respect of theinterest of a beneficiary exempt.  Here a bare title is heldpassively by the agent, and he is chargeable with no activeresponsibility in any capacity beyond what arises under theconstruction contract.

      A further question remains.  For the years 1952 and 1953the taxes were paid. Before that happened the contractors hadmade it clear to the municipal authorities that the propertybelonged to the United States Government and that they stoodon the position that it was exempt.  Full discussion of thisquestion took place and the evidence puts it beyondcontroversy that the authorities had no intention of holdingtheir hand in prosecuting collection and that that was madeknown to the contractors. It is equally evidenced that theground taken by the contractors was maintained consistentlythroughout.  The personal property taxes for 1952 and thetotal for 1953 were paid under express protest:  in thepayment of those on the real estate for 1952 the word"protest" was not used but that the municipal authoritiesunderstood it to be so is not to be seriously doubted.  Inconsidering the question of voluntariness or coercion, thestatus and circumstance of the party resisting is a matter tobe taken into account.  As representing the United States thecontractors were firm in their objection to the taxation, andthe municipal authorities, with all the information beforethem, equally insistent on pressing it.  In that state ofthings, to require either the contractors or the United StatesGovernment to take proceedings that might later be obviated,or to await action taken to seize the property, is goingbeyond what is necessary to rebut the inference of voluntarypayment.  "Voluntariness" implies acquiescence, the absence ofpressure inducing payment.  That pressure was present hereinducing payment as a temporary means of avoiding rancorouscontroversy, as well as interference with the prosecution ofthe work.  Nothing in the circumstances of payment makes itunfair to require the municipality to submit to an action forits return.

      The considerations bearing upon arefusal to allow arecovery of this nature are indicated in Grantham v. The Cityof Toronto [(1847), 3 U.C.Q.B. 212].  At p. 215 Robinson C.J.says:

and at p. 216 Macaulay J.:

What was done in the present case was precisely what isimpliedly suggested by these quotations as furnishing groundfor recovery.

      For the assessment of 1953 there wasan express protestin writing, with the same insistence on the right andintention to proceed to collect, and the same resistance.

      I would, therefore, dismiss theappeal with costs andallow the cross-appeal with costs throughout.

      The judgment of Locke and CartwrightJJ. was delivered by

      LOCKE J.:— Anexamination of the evidence given onbehalf of the parties to these proceedings discloses thatthere is no dispute as to any material fact. By agreementbetween the Governments of the Dominion of Canada and of theUnited States of America, effected by an exchange of notes,the contracting parties agreed to construct a radar defencesystem for their mutual protection against air attacks.  Theinstallations necessary were to be, and were in fact,constructed in Newfoundland, Labrador and elsewhere in Canadaand it was agreed that the cost of the construction should beborne one-third by Canada and two-thirds by the United States.The Canadian Government granted and assured to the UnitedStates Government without charge such rights of access, useand occupation as might be required for the construction,equipment and operation of the stations allocated to thatcountry, and agreed that, within the sites so made available,the United States might do whatever was necessary orappropriate to the carrying out of its responsibility inCanada in connection with the work.  The stations whencompleted were to be manned by the two countries according toarrangements agreed upon between them.

      It was pursuant to this arrangementthat three companieswhich carried on business in Saint John, New Brunswick, andelsewhere under the name and style of Fraser-Brace-TerminalConstructors (hereinafter referred to as "Fraser-Brace"), andthe two companies which carried on business under the name ofDrake-Merritt arranged and continued the leases from Agnes LMcDonald and HG Fowler and Victoria Fowler, of the landssituate within the limits of the appellant municipality uponwhich their activities were carried on.

      Upon these lands certain buildingswere placed,constructed of prefabricated material, which, as the evidenceof the witness Joseph Hantman shows, were the property of theUnited States Government and were brought at its directionfrom St. John's, Newfoundland, and erected on the leasedproperty.  These buildings were placed upon concrete footings:whether they rested of their own weight on the footings orwere in some way attached to them is not clear from theevidence and, in any event, in the view I take of the matter,this is an immaterial consideration.

      Two other small buildings containingradio equipment wereeither built or erected from prefabricated materials broughtfrom Newfoundland.  These radio installations were for thepurpose of communicating with the sites where the work ofconstruction was carried on in Newfoundland and northernCanada.  To these premises, which were devoted entirely to theenterprise undertaken by the American Government in Canada forthe above purposes, considerable quantities of material of allkinds were brought during the periods in question for shipmentto the sites.  Part of the buildings was used by Fraser-Brace,part by the Corps of Engineers of the United States, part bythe American Army Audit Division and part by a firm ofarchitects employed by the Corps of Engineers.  Apparentlysome 200 people were employed upon the activities therecarried on.

      It was shown by the witness Hantmanthat two classes ofpersonal property were brought by Fraser-Brace to thepremises, these being property owned by the AmericanGovernment and shipped there at its direction, such as theprefabricated buildings, and property purchased byFraser-Brace for use in the work, for which that organizationwas reimbursed by the American Government.  The personalproperty purchased by Fraser-Brace was ordered from variousmanufactures and other people dealing in the required suppliesupon a purchase order form which, according to the evidence,was used for all such purchases.  One of these forms put inevidence at the trial, ordering a motor from Canadian GeneralElectric Company Limited, to be delivered at Saint John, NewBrunswick, required delivery to the Transportation Officer ofthe East Ocean Division of the Corps of Engineers, U.S. Army,co Fraser-Brace at Saint John.  One of the general conditionsendorsed upon the order read:

Endorsed upon the face of such order, which was signed onbehalf of Fraser-Brace by its purchasing agent, the followingappeared:

      The lease entered into byFraser-Brace with Agnes L.McDonald and with the Fowlers each contained a provision thatthe lessee might assign the agreement to the United States ofAmerica.  The Fowler lease contained a further provisionreading:

The leases were not assigned to the United States but, whenFraser-Brace finished its work early in the year 1954, theMcDonald lease was assigned to the respondent Drake-Merrittand possession of the premises and of the personal propertywas apparently handed over to the latter organization aboutMay 1,1954.

      Discussions took place betweenrepresentatives ofFraser-Brace and the council and assessor of the appellantmunicipality during the years 1952 and 1953 as to theliability of the leasehold and personal property to municipaltaxation.  It is clear that it was explained to the municipalauthorities at the outset that exemption from such taxationwas claimed by Fraser-Brace on the ground that all of theproperty sought to be taxed was the property of the UnitedStates of America.  Notices of assessment in respect of thebuildings and personal property were sent to Fraser-Brace forpart of the year 1952, for 1953 and part of 1954 and toDrake-Merritt for the years 1954 and 1955.

      On July 16,1952, Fraser-Braceforwarded to themunicipality its cheque for $437 in response to an assessmentnotice, the tax being levied in respect of certain of thepersonal property, stating that the payment was made underprotest.  In November of 1952 a further amount of $3,113.62was paid in respect of an assessment made upon the leaseholdinterest, the buildings and other personal property.  There isno evidence to show that, at the time this amount was paid,the municipality was informed that the amount was paid underprotest. Further assessments were made upon Fraser-Brace forthe year 1953 and, on July 28 of that year, Fraser-Brace wroteto the appellant saying that it had been instructed by theCorps of Engineers of the United States Army not to pay thetaxes demanded for the year 1953.  On September 1,1953, thecounty secretary wrote to Fraser-Brace saying that unless thetaxes were paid a levy would be made, and this threat wasrepeated in a further letter dated September 25,1953. Inconsequence, on September 29,1953, Fraser-Brace forwarded acheque for the amount of $14,273.35 stating that this paymentof real and personal property tax "is made under protest".When Drake-Merritt took over possession of the buildings andthe personal property early in the year 1954, furtherassessments were made upon that organization, as well as uponFraser-Brace, for part of the year.  Further assessments weremade against Drake-Merritt for the year 1955. The respondentslaunched their action on June 7,1955, to recover the amountspaid as taxes by Fraser-Brace totalling $17,823.97, and for aninjunction to restrain the appellant from levying or otherwiseimposing taxes, rates or other assessments against therespondents or either of them in respect of the years 1954 and1955.

      It was a term of the contractbetween the United Statesand the contractors engaged in performing the work under thedirection of the Corps of Engineers that the Government ofthat country should deliver certain property to thecontractors and that the title to such property should remainin the Government, and that title to any property purchased bythe contractors for the cost of which they were entitled to bereimbursed as an item of cost under the contract should passto and vest in the Government, upon deliver of such propertyby the vendor.

      McNair C.J.N.B. [(1956), 39 M.P.R.33 (sub. nom.Fraser-Brace et al. v. Saint John County et al.)], by whom theaction was tried, being of the opinion that the assessments ofboth the personal and the leasehold property made against thecontractors were valid, dismissed the action.  On appeal[(1957), 9 D.L.R. (2d) 391 (sub nom. Fraser-Brace OverseasCorp. v. Municipality of the City and County of Saint John etal.)], the judgment of the majority of the Court delivered byRichard J. allowed the appeal of Fraser-Brace against theassessments upon the personal property and gave judgment forthe amount of the taxes paid by that organization in respectof such property but dismissed the appeal in so far as itaffected the levy made upon the leasehold interests and thebuildings.  The appeal of Drake-Merritt was allowed to theextent of granting an injunction restraining the municipalityfrom enforcing payment of the taxes levied on personalproperty for the years 1954 and 1955, but dismissed in respectof the other levies made.  Bridges J., who dissented, wouldhave dismissed both appeals while directing that theassessment rates for the years 1952 to 1955, both inclusive,be amended so that the personal property would be assessed inthe name of the United States Government.  On the appeal tothis Court, the respondents have cross-appealed against thatportion of the judgment of the Appeal Division dismissing theclaims in respect of taxes paid or assessed in respect of theleasehold interests and the buildings.

      The arrangement between theGovernment of Canada  and theGovernment of the United States was made under the powersvested in the former by head 7 of s. 91 of the British NorthAmerica Act, which assigns to Parliament exclusive legislativeauthority in relation to militia, military and naval serviceand defence.  The installations made in northern Canada werematters undertaken for the defence of this country, and thearrangements to be made for effecting that purpose fell withinthe exclusive jurisdiction of the Government of Canada. It wasfor that Government to decide and settle the terms andconditions upon which the United States was permitted to joinwith it in carrying out these defence measures and theprivileges and immunities to be afforded to the Corps ofEngineers of the United States Army and the contractors andothers employed by the Government of that county to carry outthese works.

      It was under the Rates and TaxesAct, R.S.N.B. 1952, c.191, that the assessments in the present matter were made.The personal property in question falls within the definitionof that expression in s. 1(1)(e), and the leasehold interestsand the buildings placed on the land within the definition ofreal property in para. (h) of that subsection.  The statute,which has since been repealed by the Municipal Tax Act, 1955,c. 14, contained the usual provisions for levying municipaltaxes upon such property, declared that they should "bind andbe a special lien or charge" upon all the lands of thetaxpayer in the parish within which the assessment was made(s. 171), and by s. 84, where default in payment within theprescribed time was made, provided for the issuing ofexecution and the sale of the property affected.  By s. 85,execution might be issued against a non-resident whoseproperty within the municipality had been assessed.  It wasunder these powers that the secretary of the appellantmunicipality wrote to the respondents on September 1 and onSeptember 25,1953, and, had payment not been made byFraser-Brace in that year, it is to be assumed that theseproperties of the United States Government, brought to thepremises for the above-described purposes, would have beenseized and sold and the work upon the defence installationsconsequently impeded.

      While the question as to theliability to municipaltaxation of the properties of foreign countries used aslegations under the statutes of Ontario, which was consideredin the Reference re Powers of the City of Ottawa and theVillage of Rockcliffe Park to Tax Foreign Legations, etc.[[1943] S.C.R. 208, [1943] 2 D.L.R. 481], related to propertyof a different nature from that with which this case isconcerned, in my opinion the principles applied by Sir LymanDuff C.J. and by Rinfret J. (as he then was) and Taschereau J.(the majority of the Court) are applicable.

      The history of the immunity of thesovereign and hisproperty from suit or seizure within his own dominions istraced from the earliest times in England in the judgment ofGray J. in Briggs et al. v. The Light-Boats [(1865), 93 Mass.(11 Allen) 157] commencing at p. 166.  It is only bypermission of the sovereign that such actions or proceedingsagainst his person or his property may be taken and thisprinciple is applicable in the United States, as is shown bythe judgment of Marshall C.J. in The Schooner Exchange v.M'Faddon et al. [(1812), 11 U.S. (7 Cranch) 116]

      In The Parlement Belge [(1880), 5P.D. 197], wherereference is made to the judgments in the Courts of the UnitedStates above mentioned, Brett L.J., delivering the judgment ofthe Court, quotes from Blackstone's Commentaries, Book 1, c.7, a passage reading (p. 206):

The immunity of the property of a foreign sovereign fromseizure in a friendly country proceeds upon the ground thatthe exercise of jurisdiction over him or his property would beincompatible with his regal dignity, that is to say, with hisabsolute independence of every superior authority.

      In the Schooner Exchange case, theproperty declared bythe judgment of the Supreme Court of the United States to beexempt from seizure in that country was a war vessel ofFrance.  In The Parlement Belge, immunity from seizure wasclaimed for an unarmed packet belonging to the King of theBelgians which was in the hands of officers commissioned byhim and employed in carrying mails. The Court of Appeal heldthat the ship was not liable to be seized in a suit in rem torecover redress for a collision and that the right of immunitywas not lost by reason of the fact that it also carriedmerchandise and passengers for hire.  The first clause of theheadnote to the report accurately summarizes the grounds forthe decision:

The first of the questions to be decided was, as stated byBrett L.J., whether the Admiralty Division had jurisdiction toentertain an action in rem against a ship the property of aforeign sovereign,

      In the case of the Light-Boats,supra, where the contestwas between a litigant relying upon a right of lien claimedunder a statute of the State of Massachusetts and the UnitedStates Government, and where it was held that the lien couldnot attach, Gray J. said (p. 165):

      In the Schooner Exchange case,supra, Chief JusticeMarshall said in part (pp. 136-7):

This statement of the law was quoted with approval and adoptedin the judgment of the Judicial Committee delivered by LordAtkin in Chung Chi Cheung v. The King [[1939] A.C. 160 at 168,[1938] 4 All E.R. 786, [1939] 1 W.W.R. 232].

      In The Tervaete [[1922] P. 259], aclaim for a maritimelien was asserted against a vessel which at the time of acollision was the property of the Belgian Government andemployed on government service but which subsequently had beentransferred to a private owner.  Dealing with a contentionthat, while the authorities were to the effect that the Courtswere without jurisdiction to entertain an action against asovereign state, they did not apply when the claim was for alien upon the ship, Bankes L.J. said (pp. 268-9):

      There is no evidence in the presentmatter as to whetherthe United States granted the immunity here claimed to Canadaor to other nations, but this was clearly unnecessary.  Thequestion is what is the law of nations by which civilizednations in general are bound, not how two individual countriesmay treat one another: United States of America et al. v.Dollfus Mieg et Cie S.A. et al [[1952] A.C. 582 at 618, [1952]1 All E.R. 572 at 586].

      The property assessed in the presentmatter was theproperty of the United States destined for use for works whichwere for the defence of that country, and thus "destined toits public use", as that expression was used in theLight-Ships case, The Parlement Belge, and The Tervaete.  TheGovernment of that country, with the approval and consent ofthe Government of Canada, brought the property in questioninto Canadian territory and was thus entitled to rely upon thefact that, in accordance with the principles of internationalcomity, it would not be subject to taxation, seizure or saleat the instance of municipal or other bodies empowered toimpose taxes for their own purposes.

      The true view of the matter is notthat the Rates andTaxes Act, in so far as it purported to authorize theimposition of municipal taxes generally upon real or personalproperty within the limits of the municipalities and to give aright of seizure and sale and a lien to enforce payment, wasultra vires, but rather that it should be construed asinapplicable to property brought into the country with theapproval and consent of the Government of Canada exercisingthe powers vested in it by head 7 of s. 91 of the BritishNorth America Act for purposes such as are above described.As pointed out by Sir Lyman Duff in the Reference re ForeignLegations, supra, at p. 231, it was there unnecessary toconsider the respective jurisdictions of the Parliament ofCanada and the local Legislatures in respect of real estateowned or occupied by a foreign state, since the generallanguage of the enactment imposing the taxation must beconstrued as saving the privileges of foreign states.

      In my opinion, neither the leaseholdinterests, thebuildings nor the personal property in question were liable totaxation by the appellant municipality and, unless therespondent Fraser-Brace has disentitled itself by its conductto recover the amounts paid, there should be judgment fortheir recovery.

      In the case of the sum of $14,273.35paid on September29,1953, the right of recovery appears to me to be clear.  Theamount was paid following the threats made in the letters ofSeptember 1 and September 25,1953, that unless the amountswere paid a levy would be made: Valpy et al. v. Manley[(1845), 1 C.B. 673, 135 E.R. 673], per Tindall C.J. at p.602; Maskell v. Horner [[1915] 3 K.B. 106], per Lord ReadingC.J. at p. 118.

      As to the earlier payments made inthe year 1952, whilethere is no direct evidence that the payment of $3,113.62 madein November 1952 was made under protest, as was done inrespect of the payment of $437 made earlier, it is clear fromthe evidence that the contractors insisted from the outsetthat, as the property was that of the United States, it wasimmune from taxation and that the municipal authoritiesinsisted the contrary, and it should be inferred, in myopinion, that both amounts were paid under protest and toavoid proceedings being taken to recover the amounts.  Inthese circumstances, the moneys are, in my opinion,recoverable:  Watt v. The City of London [(1892), 19 O.A.R.675].

      I would dismiss the appeal and allowthe cross-appeal anddirect that judgment be entered for the respondentFraser-Brace for the amount of $17,823.79 and declare that theassessments made against the respondent Drake-Merritt for theyears 1954 and 1955 were invalid.  The respondents should havetheir costs throughout.

      FAUTEUX J.:— I agreethat the appeal should be dismissedwith costs and the cross-appeal allowed with costs.

      ABBOTT J.: —  I have had the advantage of consideringthe reasons of my brother Rand and I am in agreement with theviews which he has expressed as to the principles upon whichare based the immunities of a foreign state, its diplomaticagents and its property.  I desire to add only the followingobservations.

      As Duff C.J. pointed out in theLegations Reference[[1943] S.C.R. 208 at 231, [1943] 2 D.L.R. 481], theprinciples governing the immunities of a foreign state, itsdiplomatic agents and its property do not limit thelegislative authority of the legislature having jurisdictionin the particular matter affected by any immunity claimed oralleged.  After stating that in the view which he took it wasnot necessary to consider the respective jurisdictions ofParliament and the local Legislatures in the matter oftaxation of property of a foreign state in Canada, the learnedChief Justice then made the following statement, with which Iam in agreement:

(The italics are mine.)

      As my brother Rand has pointed out,there, as here, DuffC.J. was dealing with taxation under general language in whichthe interpretation of the statute only was in question.  Thereis nothing in the statues of New Brunswick authorizing theimposition of taxes by municipalities in that Province uponreal and personal property, which can be construed as"destroying this implication" that in acquiring property inCanada for public purposes a foreign state does so upon thecondition that such property is exempt from local taxation.

      For the reasons given by my brotherRand I wouldtherefore dismiss the appeal with costs and allow thecross-appeal with costs.

      Appeal dismissed with costs andcross-appeal allowed withcosts.