ASSESSOR OF AREA 10 - BURNABY-NEW WESTMINSTER CHEVRON CANADA LIMITED. Supreme Court of British Columbia (A840694) Vancouver Registry

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1 The following version is for informational purposes only, for the official version see: for Stated Cases see also: for PAAB Decisions SC 191 AA10 v. Chevron Canada Ltd. Quick Link to Stated Case #191 (BCCA) ASSESSOR OF AREA 10 - BURNABY-NEW WESTMINSTER v. CHEVRON CANADA LIMITED Supreme Court of British Columbia (A840694) Vancouver Registry Before: MR. JUSTICE A.B. MacKINNON Peter W. Klassen for the Assessor S. Bradley Armstrong for Chevron Canada Limited Vancouver, October 4 and 5, 1984 Structures - Machinery and Equipment - Fixtures Assessability for General or School and Hospital Purposes The Appellant before the Board argued that larger tanks located at its Burnaby refinery in which gasoline was blended by means of a pump located outside the tank, or an agitator within the tank were machinery and therefore were exempt from assessment for taxation for general purposes because as machinery they are removable between landlord and tenant. The Appellant further argued that certain equipment which had been installed as a result of requirement of the District of Burnaby by-law was pollution control equipment within the meaning of section 398( q) of the Municipal Act. The Board found that the tanks were structures and therefore the question of whether or not they were also machinery did not have to be addressed and that the tanks were assessable for general purposes. With reference to the noise abatement equipment, the Board held that the equipment was pollution control equipment within the meaning of section 398( q). The taxpayer appealed on the matter of the tanks and the Assessor appealed on the matter of the noise abatement equipment. HELD: 1. That the tanks were structures, and on the reasoning to be found in the majority judgment in the Trans-Mountain case, that it was not necessary to inquire into the question of whether or not the tanks were machinery and equipment and therefore the tanks being structures were assessable for general purposes. 2. The Board found that noise was not pollution within the meaning of section 398(q) of the Municipal Act and found that the noise abatement equipment was not pollution control equipment within section 398(q). Reasons for Judgment October 11, 1984 Both the Assessor and Chevron appealed by way of stated case pursuant to s. 74 (2) of the Assessment Act, R.S.B.C. 1979, c. 21.

2 BLENDING TANKS Chevron's oil refinery operation receives raw crude oil through a pipeline operated by Trans Mountain Oil Company. The oil is received into tanks and by a blending process with chemicals converted into gasoline and other fuels. The primary function of the tanks is to blend the crude oil with chemicals, although they are used at times for storage. The blending is achieved by means of a propeller inside the tank driven by a motor outside the tank. The Assessment Appeal Board (Board) found as a fact on consideration of the physical characteristics of the tanks, their size, their site permanence, and method of fabrication or removal, that the tanks are clearly structures and correctly defined as improvements pursuant to the first definition of "improvements" in s. 1 of the Assessment Act. The questions on which the Board seeks the opinion of the court are: 5. "Did the Board err in law in finding that certain blending tanks were not exempt from assessment as an improvement for general municipal and provincial taxation purposes in accordance with the definition of "improvements" for those purposes under the Assessment Act?" 6. "Was there any evidence before the Board upon which to base the finding of fact that certain tanks were "storage tanks" in accordance with the meaning of that term under the definition of "improvements" under the Assessment Act?" The relevant part of s. 1 of the Assessment Act defines "improvements" and reads: "improvements" for general municipal and Provincial taxation purposes under the Municipal Act, Vancouver Charter and Taxation (Rural Area) Act includes (a) all buildings, fixtures, machinery, structures and similar things erected in, on, under or affixed to land or to a building, fixture or structure in, on, under or affixed to land and, without limiting the generality of the foregoing, includes aqueducts, tunnels other than mine workings, bridges, dams, reservoirs, roads, transformers and storage tanks of whatever kind or nature, but does not include those fixtures, machinery and similar things, other than buildings and storage tanks as, if erected or affixed by a tenant, would, as between landlord and tenant, be removable by the tenant as personal property. Chevron submits that, notwithstanding the finding the "blending tanks" are "structures", they are nonetheless "machinery" falling within the exception to the definition of improvements, i.e. "... but does not include those fixtures, machinery and similar things, other than buildings and storage tanks as, if erected or affixed by a tenant, would, as between landlord and tenant, be removable by the tenant as personal property" (my emphasis). In particular, it is submitted that (a) The blending tanks are "machinery"; and (b) The blending tanks would, "as between landlord and tenant be removable by the tenant as personal property," on the grounds that they are either: (i) not "fixtures" and hence removable by a tenant; or (ii) "tenant's fixtures" and hence removable by a tenant.

3 Counsel for the appellant cited numerous cases in support of its submission the blending tanks were machinery: Hiram Walker & Sons Ltd. v. Town of Walkerville (1933),3 D.L.R. 433; Sogemines Ltd. v. M.D. of Stoney Plain (1971), 5 W.W.R. 481; Auckland City Corporation v. Auckland Co. Ltd. (1919), N.Z.LR 561; Re Indusmin Ltd. (1972), 1 O.R. 221 Re Weyerhaeuser Canada Ltd. and City of Sault Ste. Marie (1968) 1 O.R. 460; Warren Bituminous Paving Co. Ltd. v. Otonabee (1962), 35 D.L.R The Board made no finding as to whether or not the blending tanks were "machinery". Likewise, it did not look into the question of whether or not the blending tanks are "fixtures" or "tenant's fixtures". It contented itself with a consideration of whether or not the blending tanks were "structures". It found they were and, as such, were within the definition of assessable improvements and therefore assessable. The Board's finding is one of fact or mixed fact in law and not reviewable by the court. Counsel for the Assessor relies upon Trans Mountain Oil Pipeline Company v. Town of Hope et al., B.C. Stated Cases No. 46, where Branca, J.A. said at p. 246: And at p. 248: I am of the opinion, therefore, that it is quite immaterial whether the tanks in question were mere chattels or personal property, as in either event under the Northern Broadcasting case they come specifically within the definition of improvements and are specifically excluded from the exception relating to tenants' "fixtures, machinery... and similar things" unless a working tank, as the appellant's counsel termed the tanks in question, is not at law a storage-tank, and unless it can be said that tanks of this nature do not come within the connotation of structures erected in, upon, or under, or affixed to land or structures therein, thereon, or thereunder. Applying that reasoning to the tanks in question, it would appear that the tanks in question are of a size which connotes being built or constructed on the site as opposed to being brought there; they are things which, after installation, have remained on the site permanently and are removable only by a process amounting to taking to pieces. Jenkins, L.J. stated that whether or not the thing was physically attached to the land was only a relative consideration. Each of the tanks in the instant appeal, whether storagetanks, working tanks, or holding tanks, has been either erected upon land or erected upon land and affixed to a structure (pipe-line) under the land. Applying the principles of Trans Mountain Oil Pipeline, I am of the view that a finding by the Board the blending tanks were "structures" makes the question of whether or not they were machinery wholly irrelevant. Here, "structures" are not specifically excluded in the statutory exception as "storage tanks" were in the Trans Mountain case. However, "structures" fall specifically within the definition of improvements and are, therefore, assessable unless otherwise excepted. There was no need for the Board to determine whether or not the blending tanks were also machinery. Once the Board found the blending tanks were structures, they were assessable as improvements. The answers to the questions in this regard are:

4 No. 5-No No.6-Yes FIRE FIGHTING EQUIPMENT This equipment consists of pipes welded to the tanks which lead to a metal rim welded to the surface of the top of the tank. If a fire should occur, the mobile fire fighting truck is parked near the tank and a hose is connected to the pipe and a fluid is pumped to the top of the tank where it is converted to foam. This foam is then constrained within the perimeter of the metal ring and acts as a fire retardant. The Board found that all of this equipment was permanently affixed to the structures and therefore became improvements. The questions on which the Board seeks the opinion of the court are: 3. "Did the Board err in law in finding that certain fire fighting equipment was not exempt from assessment as an improvement for general municipal and provincial taxation purposes in accordance with the definition of improvements for those purposes under the Assessment Act?" 4. "Was there any evidence before the Board upon which to base the finding that the fire fighting equipment in question had been permanently affixed to the structure?" The question of whether or not the fire fighting equipment is in the class of fixtures falling within the statutory exception relating to tenants' fixtures is a question of fact or mixed fact in law and, as such, falls within the jurisdiction of the Board and not the court. After making its finding that the fire fighting equipment was a fixture, the Board should have gone further and determined whether or not it was a fixture that fell within the statutory exclusion. It did not do so. This matter should therefore be referred back to the Board for their consideration as it is not a proper function of the court to make a finding in this regard. The answers to the questions are as follows: No. 3- Yes No. 4- Yes NOISE ABATEMENT EQUIPMENT Certain equipment placed in the refinery was installed as a direct result of Bylaw 7332 passed in 1972 by the Corporation of the District of Burnaby. This bylaw makes it an offence to "make or cause any noise in or on a highway or elsewhere in the Municipality which disturbs, or tends to disturb, the quiet, peace, rest, enjoyment, comfort, or convenience of the neighbourhood, or of persons in the vicinity"; or to "make or cause any noise or sound or continuous noise or continuous sound or non-continuous noise or non-continuous sound in the Municipality that exceeds the dba's authorized by this Bylaw." The equipment installed did not improve efficiency of the refinery. It was installed for the sole purpose of controlling and abating noise pollution. The Board found that the equipment was specifically designed and installed to control or abate pollution and, therefore, entitled to be exempted from assessment and taxation pursuant to s. 398 (q) of the Municipal Act.

5 The questions on which the Board seeks the opinion of the court are: 1. "Did the Assessment Appeal Board err in law when it found that certain machinery, equipment and improvements installed by Chevron Canada Limited for the purpose of controlling and abating noise were exempt from assessment and taxation pursuant to s. 398 (q) of the Municipal Act, R.S.B.C., c 290?" 2. "Did the Assessment Appeal Board err in law when it held that an improvement used for the purpose of controlling or abating noise was "an improvement... used exclusively to control or abate water, land or air pollution..." within the meaning of s. 398 (q) of the Municipal Act, R.S.B.C., c. 290?" Section 398 (q) of the Municipal Act provides: Unless otherwise provided in this Act, the following property is exempt from taxation to the extent indicated: (q) an improvement or land used exclusively to control or abate water, land or air pollution, including sewage treatment plants, effluent reservoirs and lagoons, deodorizing equipment, dust and particulate matter eliminators; and where the improvement or land is not exclusively but is primarily so used, the assessment commissioner may, in his discretion, determine the portion of the assessed value of the improvements or land attributable to that control or abatement and that portion is exempt. Counsel submitted there was no case law of assistance to the court in interpreting whether noise pollution would fall within the scope of the relevant section. The Shorter Oxford English Dictionary, 3rd edition, defines "pollution" as: 1. The action of pollution. or condition of being polluted; defilement; uncleanness or impurity... Webster's New Collegiate Dictionary defines "pollution" as: To make physically impure or unclean; befoul. dirty esp. to contaminate (an environment) esp. with man-made waste, synonym - see contaminate. In its reasons the Board stated. at p. 14: While it is grammatically correct to say that the word "noise" cannot be found in sec. 398 (q) of the Municipal Act, the subsection does exempt from taxation, "an improvement or land used exclusively to control or abate water, land or air pollution..." The Board is confident that the legislators of the Province of British Columbia. as a matter of public policy, intended to assist anyone who is required by any enactment or who is prepared to expend funds solely to control or abate pollution of any kind. by exempting items designed and installed especially for this purpose from assessment or taxation. However desirable it may be to grant relief to persons expending funds to control or abate pollution of any kind, I am unable to conclude from the plain and ordinary meaning of the words of the section that noise abatement falls within the exemption section.

6 The answers to the questions are: No. 1 Yes No. 2 Yes The parties are in agreement that the question as to whether certain asphalt tanks are properly described as "storage tanks" or as "blending tanks" should be referred back to the Assessment Appeal Board for their consideration and decision. Accordingly, the court makes such a direction. The Assessor is entitled to costs. Judgment accordingly. SC 191cont AA10 v. Chevron Canada Ltd. CHEVRON CANADA LIMITED v. ASSESSOR OF AREA 10 - BURNABY-NEW WESTMINSTER British Columbia Court of Appeal (CA ) Vancouver Registry Before: MR. JUSTICE J.D. TAGGART MR. JUSTICE A.B.B. CARROTHERS MR. JUSTICE W.A. CRAIG MR. JUSTICE J.D. LAMBERT MR. JUSTICE H.E. HUTCHEON B.J. Wallace & S.B. Armstrong for the Appellant Chevron Canada Limited J.K. Greenwood for the Respondent Assessor of Area 10 Burnaby-New Westminster Improvements - Definitions - Blending Tanks February 26, 1986 The Appellant had an oil refinery and tank farm in Burnaby. B.C. This appeal involved certain large cylindrical tanks described as 'blending tanks', used for mixing raw streams from the refinery with various additives to create saleable products. The Board had found the tanks to be 'structures' within the meaning of cases such as Cardiff Rating Authority v. Guest Keen Baldwin's Iron and Steel (1941) 1 K.B. 385 (C.A.); and both the Board and the Supreme Court judge below had held that this was sufficient to place them within the first definition of improvements (for general municipal purposes). These bodies relied upon the decision of the B.C.C.A. in Trans- Mountain Oil Pipe Line v. Hope (Stated Case 46). On further appeal to a 5 man bench of the B.C. Court of Appeal, HELD: 1. The words 'structures', 'buildings', 'fixtures', 'machinery' and 'similar things' describe overlapping categories, so it is possible for an item to be both 'structure' and 'machinery'. 2. If the item, although a 'structure' is also 'machinery', it may be within the exclusion clause of the first definition of improvements, and must be subjected to the test of whether it is removable between landlord and tenant.

7 3. This test of removability is not to be determined by reference to any particular agreement, but by reference to the general law, as if the property were the subject of a bare lease for a term of years, silent as to tenant's fixtures. 4. Because the Trans Mountain case could have been decided simply on the basis that the tanks involved were storage tanks, no ratio decidendi emerges from that case applicable to the subject case. 5. Since the Board did not face the factual questions of whether the tanks were 'machinery', 'fixtures' or 'storage tanks' and whether they were removable as between landlord and tenant, there is a reference back to the Board to determine these questions. Reasons for Judgment of Mr. Justice Lambert February 26, 1986 The Court sat in a division of five to hear this appeal because counsel for Chevron Canada Limited had notified the Court that one of his arguments would invite the Court to overrule its previous decision in Re Trans Mountain Oil Pipe Line Company Appeal (1966), 56 W.W.R Chevron operates an oil refinery and tank farm in Burnaby. There are 171 tanks, of which 35 are blending tanks. This appeal is brought under the Assessment Act and concerns the applicability of the definition of "improvements", in the form that the definition takes for general municipal and Provincial taxation purposes, to the blending tanks. The Assessment Appeal Board placed a great deal of weight, to use its own words, on the decision of this Court in Trans Mountain. The Board found that 17 of the tanks were structures and, as such, came within the definition of "improvements". The Board found that the remaining 18 tanks, which were used for storing asphalt, were storage tanks, and were structures too, and so also came within the definition of "improvements". Chevron required the Board to state a case for the opinion of the Supreme Court of British Columbia, under s-s. 74(2) of the Assessment Act. The following paragraphs from the stated case sufficiently set out the facts for the purposes of this appeal. The tanks are cylindrical and have varying dimensions from 29 to 47 feet in height and 36 to 91 feet in diameter. They are constructed of metal sheets with welded or riveted seams and they rest on their own weight on a prepared foundation of sand, asphalt or concrete. The tanks can be moved by cutting the seams of the metal plates, dismantling and reassembling at a new location. The raw streams produced continually from the oil refinery area are piped to the tank farm and shipping area and yielded into receiving tanks. The separate streams are then transferred, one component at a time, from the receiving tanks into the blending tanks in proportions according to a specific recipe for final saleable products. When the raw stream components have been transferred into a blending tank, chemical additives are then either injected into the tank or pumped in by recirculating the tank contents and injecting the additives into the recirculating stream. The chemical additives include tetraethyl lead, anti-deposant additive, dyes and various other additives. The mixture of raw streams and chemical additives is then agitated by means of a mixer inside the blending tank. This mixer consists of a propeller inside the tank driven by a motor located outside the tank. The agitation turns the contents of the tank around to accomplish the mixing of the components and additives. In some cases, the tanks do not have a mixer and the mixing is accomplished by use of a pump which circulates the contents by withdrawing and returning them to the blending tank.

8 In the stated case, the Board said that it was required by Chevron to ask this question: 5. Did the Board err in law in finding that certain "blending" tanks were not exempt from assessment as an improvement for general municipal and provincial taxation purposes in accordance with the definition of "improvements" for those purposes under the Assessment Act? But the Board added that, in its opinion, Question 5 was not a question of law arising in the appeal. The appeal book contains a document entitled "Clarification of the Issues Raised in Question #5". It reads Counsel are agreed that the following questions of law are raised by Question #5: 1. With reference to para. (a) of the definition of "improvements" under the Assessment Act, for general, municipal, and Provincial taxation purposes: Can property which falls into the category of "machinery" and/or "structures" in the general clause of para. (a) also fall into the category "fixtures, machinery, and similar things other than buildings and storage tanks as, if erected or affixed by a tenant, would, as between landlord and tenant, be removable by the tenant as personal property" in the excluding clause of para, (a)? 2. With reference to para. (a) of the definition of "improvements" under the Assessment Act, for general, municipal, and Provincial taxation purposes: Where property is found to fall within the category of "machinery" and/or "structures" in the general clause of (a), is that same property excluded from the definition of "improvements" if it is also found to fall within the category of "fixtures, machinery and similar things, other than buildings and storage tanks as, if erected or affixed by tenant, would, as between landlord and tenant, be removable by the tenant as personal property" under the excluding [clause of] para. (a)? Those two questions have come to be called Questions 5(1) and 5(2). The appeal, by way of stated case, was heard by Mr. Justice MacKinnon. He said: Applying the principles of Trans Mountain Oil Pipeline, I am of the view that a finding by the Board the blending tanks were "structures" makes the question of whether or not they were machinery wholly irrelevant. So Mr. Justice MacKinnon answered "No" to Question No. 5, and he did not separately answer Questions 5(1) and 5(2). This appeal is from his decision. Leave to appeal has been granted under ss. 74(7) of the Assessment Act. The part of the definition of "improvements" with which we are concerned reads: "improvements" for general municipal and Provincial taxation purposes under the Municipal Act, Vancouver Charter and Taxation (Rural Area) Act includes (a) all buildings, fixtures, machinery, structures and similar things erected in, on, under or affixed to land and, without limiting the generality of the foregoing, includes aqueducts, tunnels other than mine workings, bridges, dams, reservoirs, roads, transformers and storage tanks of whatever kind or nature, but does not

9 include those fixtures, machinery and similar things, other than buildings and storage tanks as, if erected or affixed by a tenant, would, as between landlord and tenant, be removable by the tenant as personal property; (my underlining) The real questions at the heart of this appeal are whether, if a piece of plant is a structure, it can also be machinery, and, if so, is it excluded from the definition if it comes within the meaning of the phrase"... machinery...as, if erected or affixed by a tenant, would, as between landlord and tenant, be removable by the tenant as personal property;"? I think that these questions are answered by an examination of the structure of the definition itself. The initial words "... buildings, fixtures, machinery, structures and similar things...", taken as a separate phrase, might well be capable of describing either five mutually exclusive categories or five categories where there could be some overlapping. But the words "... but does not include those fixtures, machinery and similar things, other than buildings..." make it clear that it was contemplated that "fixtures, machinery and similar things", when used at the exclusion stage of the definition, could apply to buildings and, so, since they were not, at that second stage, to be applied to buildings, it was necessary to add the words "other than buildings". The addition of those words demonstrates that, at the exclusion stage of the definition, the word "buildings" and the words "fixtures, machinery and similar things" describe four separate categories where there might be some overlapping. If those words contemplate overlapping categories where they are used in the exclusion part of the definition, those same words must be taken to contemplate overlapping categories at the beginning of the definition, unless a contrary intention is made clear. It is not. So, in my opinion, as a matter of law, it is possible for a piece of plant to be both a structure and machinery. If a piece of plant is both a structure and machinery, then the next question is whether the piece of plant, if erected or affixed by a tenant, would, as between landlord and tenant, be removable by the tenant as personal property. That is a hypothetical question, of course, and must be answered with respect to the particular piece of plant, but not with respect to the terms of any particular lease or tenancy agreement. The particular piece of plant must be taken to be on the property under a bare lease for a term of years which is silent on the subject of fixtures and where the tenant's rights with respect to fixtures installed by him are to be dealt with in accordance with general statute and common law. If the piece of plant is removable by the tenant as personal property under that general law, then it is within the exclusion clause in the definition. If it is within the exclusion clause, then it is excluded by the definition, even if it is also within the inclusion clause. The reason is that exclusions from the definition are paramount over inclusions, because they occur last in the definition and must be applied last in deciding what is to be included and what excluded. The conclusions set out in the immediately preceding paragraph are sufficient to dispose of the questions of law raised by this appeal. But I propose to add a comment about the Trans Mountain case. The property in question in that case consisted of a number of tanks which formed part of an oil pipe line transmission system. When the case reached this Court, separate judgments were given by Mr. Justice Davey, Mr. Justice Lord and Mr. Justice Branca. Mr. Justice Lord and Mr. Justice Branca decided that the tanks were within the definition of "improvements". Mr. Justice Davey dissented. The questions of law are difficult to extract from the reasons. The points that were argued are far from clear. But, at p. 718, Mr. Justice Branca said that "stripping this section of its irrelevant verbiage" the pertinent part should be read like this: "Improvements includes all buildings, fixtures, machinery, structures and similar things, including storage tanks of whatever kind or nature erected in, on or upon lands." And immediately thereafter: "In addition, the tenant's fixture part of the section would be of no benefit to the appellant as storage tanks are specifically excluded from the exception." In my opinion, having regard to Mr. Justice Branca's statements,

10 and to the points to which the Trans Mountain decision is shown by those statements to have been confined, no ratio decidendi emerges from that case that could be said to apply to this case. As the Assessment Appeal Board said, Question No. 5 is not a question of law but a mixed question of fact and law. The factual components of that question are not answered in the stated case, because the relevance of those facts did not become significant until this appeal. Whether the tanks are "machinery", whether they are "fixtures", whether they are "storage tanks", and whether, on the hypothesis that they were erected or affixed by a tenant on a bare lease that says nothing of fixtures, they would be removable by the tenant as personal property, are questions that have factual components that have not yet been addressed by the Assessment Appeal Board. The relevant legal components of Question No. 5 have been split out, by the agreement of counsel, as Questions 5(1) and 5(2). I would answer "Yes" to both of those questions. I would allow this appeal and refer this matter back to the Assessment Appeal Board. THE HONOURABLE MR. JUSTICE TAGGART: I agree. THE HONOURABLE MR. JUSTICE CARROTHERS: I agree. THE HONOURABLE MR. JUSTICE CRAIG: I agree. THE HONOURABLE MR. JUSTICE HUTCHEON: I agree.