WALSH,
J.:—This
appeal
is
from
a
notice
of
re-assessment
of
income
for
the
taxation
year
1959
dated
May
27,
1964
whereby
$68,255.10
was
added
to
the
appellant’s
taxable
income
previously
reported
in
respect
of
alleged
income
from
the
sale
by
the
appellant
of
74,420
shares
of
Combined
Estates
Limited
during
the
year.
By
further
notice
of
re-assessment
dated
May
7,
1965
minor
adjustments
were
made
to
deduct
a
share
of
legal
and
trust
fees
and
the
cost
of
the
Combined
Estates
Limited
shares
sold
and
this
appeal
is
also
from
that
re-assessment.
By
agreement
between
the
attorneys
for
the
parties
this
appeal
was
heard
immediately
following
the
conclusion
of
the
evidence
in
the
appeal
of
Lauch
F.
Farris,
Executor
of
the
Estate
of
Donald
F.
Farris
v.
M.N.R.
relating
to
re-assessments
of
alleged
income
on
an
identical
share
disposal,
in
which
the
parties
were
represented
by
the
same
attorneys,
and
the
evidence
of
the
witnesses
John
Earl
White,
Walter
Potter,
Joseph
Weldon
Graham,
portions
of
the
examination
for
discovery
of
lan
Montague
Harford
and
most
of
the
exhibits
filed
in
the
record
of
the
case
were
read
into
the
present
record,
subject
always
to
the
same
objections
raised
during
the
hearing
in
that
case
and
taken
under
advisement.
The
only
portions
of
the
evidence
in
that
case
left
out
of
the
record
of
the
present
appeal,
are
the
evidence
of
Lauch
Farris,
executor
of
the
estate
of
the
late
Donald
Farris
who
had
died
after
the
institution
of
his
appeal
and
certain
exhibits
which
related
only
to
that
case.
On
the
other
hand
certain
additional
exhibits
relating
only
to
the
present
appeal
were
filed
during
the
course
of
the
evidence
of
the
appellant
Ralph
K.
Farris,
and
as
his
evidence
was
very
extensive
and
illuminating
it
is
convenient
to
deal
with
this
appeal
first.
The
written
arguments
submitted
by
the
attorneys
for
the
parties
were
prepared,
by
agreement,
in
such
a
fashion
that
they
would
be
applicable
to
both
appeals,
the
distinction
between
the
two
cases
being
pointed
out,
where
such
a
distinction
exists,
in
these
arguments.
It
must
be
stated
that
the
decision
reached
in
the
present
appeal
need
not
necessarily
apply
to
the
appeal
against
the
assessment
of
the
late
Donald
F.
Farris
any
more
than
the
decision
in
either
or
both
of
these
appeals
need
follow
that
arrived
at
in
the
case
of
John
S.
Davidson
v.
M.N.R.,
[1968]
2
Ex.C.R.
113;
[1968]
C.T.C.
136,
in
which
Sheppard,
D.J.
found
that
the
identical
transaction
relating
to
the
sale
of
shares
of
Combined
Estates
Limited
by
the
appellant
in
that
case
was
the
realization
of
an
investment
and
that
the
gain
thereon
was
not
subject
to
income
tax,
which
Judgment
was
not
appealed
by
the
Minister.
It
is
well
settled
that
the
profits
in
the
sale
of
property
by
one
taxpayer
may
not
be
taxable
while
the
profits
in
the
sale
of
identical
property
under
similar
circumstances
by
another
taxpayer
may
be
subject
to
tax
as
an
adventure
in
the
nature
of
trade,
depending
on
the
apparent
intentions
of
the
taxpayer
at
the
time
of
acquiring
same
and
the
nature
of
his
business
background
and
usual
occupation.
(See
Gladys
M.
Mainwaring
v.
M.N.R.,
[1963]
C.T.C.
48;
William
C.
Mainwaring
v.
M.N.R.,
11964]
C.T.C.
341
;
Alexander
Bruce
Robertson
v.
M.N.R.,
[1963]
C.T.C.
990,
confirmed
in
the
Supreme
Court
of
Canada;
and
Robert
Henry
Brackman
Ker
v.
M.N.R.,
[1964]
C.T.C.
415,
in
which
cases
on
an
identical
transaction
Mrs.
Mainwaring
was
found
not
to
be
taxable
and
the
other
members
of
the
group
were
taxed
as
having
entered
into
a
trading
transaction.)
The
background
of
the
share
disposal
we
are
dealing
with
in
the
present
case
is
as
follows:
On
December
10,
1954
a
private
company
Welfar
Holdings
Limited
was
incorporated,
the
initial
shareholders
being
Donald
F.
Farris
and
Ralph
K.
Farris
(the
profit
in
the
disposal
of
whose
shares
being
the
issue
with
which
these
two
cases
are
concerned),
John
8.
Davidson
(who
was
found
to
be
not
taxable
on
the
disposal
of
his
shares
by
the
Judgment
of
Sheppard,
D.J.
(supra)),
Frank
8.
Welters
(whose
re-assessment
on
the
disposal
of
the
same
shares
is
under
appeal
and
has
not
yet
come
on
for
hearing)
and
James
8.
McKee
(who
died
on
October
21,
1958
and
whose
estate
was
not
re-assessed
on
the
disposal
of
his
shares
in
1959),
each
of
whom
subseribed
to
200
shares
at
$1
each.
A
sixth
shareholder,
Geoffrey
II.
Whitelaw,
who
was
an
employee
of
B.C.
Estates
Limited
which
will
be
referred
to
later,
and
managed
it
as
well
as
Welfar
Holdings
Limited,
received
in
March
1956
by
transfer
20
shares
in
each
company
from
each
of
the
five
original
shareholders,
leaving
them
with
180
shares
each
and
him
with
100
shares.
He
was
re-assessed
on
the
disposal
of
these
shares
and
later
withdrew
his
appeal
from
this
re-assessment.
A
second
company,
B.C.
Estates
Limited,
was
incorporated
on
the
same
day
as
Welfar
Holdings
Limited,
December
10,
1954,
with
the
same
five
shareholders,
each
subscribing
for
200
of
the
1,000
issued
common
shares
at
$1
each.
This
company
was
formed
to
underwrite
and
offer
to
the
public
shares
in
companies
owning
apartment
blocks,
commercial
or
industrial
buildings
and
to
act
as
a
broker
in
any
general
resale
of
such
shares.
Commencing
in
1958
it
also
managed
the
buildings
for
which
service
it
was
paid
a
management
fee
by
the
corporations
that
owned
the
buildings
in
each
ease
(paragraph
15,
Agreed
Statement
of
Facts).
Between
1954
and
1959
Welfar
Holdings
Limited,
together
with
B.C.
Estates
Limited,
caused
the
incorporation
of
19
real
estate
companies
(referred
to
during
the
evidence
as
“little
companies”)
each
of
which
would
purchase
or
construct
one
or
two
apartments
or
commercial
buildings
in
Vancouver.
In
each
case
Welfar
Holdings
Limited
subscribed
for
approximately
10
to
15
per
cent
of
the
total
issued
shares
in
each
of
these
little
companies
at
a
price
of
10^
per
share
and
the
remaining
issued
shares
would
then
be
sold
to
B.C.
Estates
Limited
by
virtue
of
an
underwriting
agreement
for
resale
to
the
general
public
at
$1
per
share.
The
initial
acquisition
of
the
real
estate
in
each
case
was
made
by
loans
to
the
individual
little
companies
concerned
using
funds
which
Welfar
Holdings
Limited
borrowed
from
the
Canadian
Imperial
Bank
of
Commerce
on
the
personal
guarantee
of
its
five
directors,
the
top
line
of
authorized
credit
being
$165,000
(paragraph
5
of
the
Agreed
Statement
of
Facts).
By
December
of
1958
Welfar
Holdings
Limited
had
assets
consisting
of
a
total
of
461,912
shares
of
the
19
little
companies
which
were
held
in
escrow
on
orders
of
the
Superintendent
of
Brokers.
During
this
period
Welfar
Holdings
Limited
paid
no
dividends
or
salary
to
any
of
its
Shareholders
other
than
a
salary
to
Mr.
Whitelaw,
although
it
did
receive
dividends
from
its
shares
in
the
little
companies.
B.C.
Estates
Limited
sold
shares
in
the
little
companies
through
the
medium
of
commission
salesmen,
direct
mail
solicitation
and
newspaper
advertising
but
the
shares
were
never
listed
or
exchanged
on
any
stock
exchange
even
on
an
over-the-counter
basis.
On
December
22,
1958,
9,000
of
the
total
authorized
capitalization
of
10,000
shares
of
Welfar
Holdings
Limited
were
cancelled
leaving
only
the
1,000
issued
and
outstanding
shares
and
under
the
same
resolution
these
shares
were
subdivided
on
the
basis
of
420
shares
for
each
share,
leaving
Ralph
K.
Farris,
Donald
F.
Farris,
and
each
of
the
other
associates
with
a
holding
of
75,600
shares
with
the
exception
of
Geoffrey
H.
Whitelaw
who
now
held
42,000
shares,
and
as
of
this
date
the
directors
estimated
the
market
value
of
the
securities
owned
by
the
company
to
be
$420,000.
On
January
26,
1959
the
shareholders
each
sold
to
B.C.
Estates
Limited
75,420
of
their
shares
leaving
them
with
180
shares
each
(with
the
exception
of
Mr.
Whitelaw
who
sold
41,900
of
his
shares,
leaving
him
with
100
shares)
and
as
a
result
of
this
disposition
realized
in
excess
of
the
cost
of
the
shares
sold
the
sum
of
$67,546.74
each,
except
for
Mr.
Whitelaw
who
realized
$37,919.50.
Before
doing
this
the
name
of
Welfar
Holdings
Limited
had
been
changed
on
January
15,
1959
to
Combined
Estates
Limited,
and
a
further
fact
of
some
interest
is
that
on
December
24,1958
these
same
shareholders
of
Combined
Estates
Limited
(excepting
James
F.
McKee
who
was
deceased)
had
caused
a
company
called
Farwel
Holdings
Limited
to
be
incorporated
with
identical
shareholders
to
carry
on
a
similar
business.
B.C.
Estates
eventually
disposed
of
the
shareholdings
in
Welfar
Holdings
Limited
(now
known
as
Combined
Estates
Limited)
which
it
had
acquired
from
the
original
shareholders
to
the
general
public.
As
indicated,
Mr.
Whitelaw
acted
as
a
managing
director
for
both
B.C.
Estates
Limited
and
Welfar
Holdings
Limited,
being
first
employed
in
August
1954
somewhat
prior
to
their
actual
incorporation.
It
was
his
responsibility
to
locate
and
advise
the
directors
of
properties
that
were
suitable
for
purchase
and
when
the
decision
of
the
directors
was
made
B.C.
Estates
Limited
through
him
would
then
purchase
the
property
in
question
as
agent
for
a
limited
company
to
be
formed
(one
of
the
little
companies).
The
company
would
first
be
formed
as
a
private
company
and
later
converted
to
a
public
company,
and
qualifying
shares
were
issued
to
each
of
the
directors
who
were
drawn
from
the
same
persons
who
were
the
directors
of
Welfar
Holdings
Limited
and
B.C.
Estates
Limited.
The
shares
subscribed
for
by
Welfar
Holdings
Limited,
amounting
to
about
10
to
15
per
cent
of
the
total
share
capital,
at
about
10¢
a
share,
were
then
placed
in
escrow
and
the
balance
of
the
shares
issued
to
B.C.
Estates
Limited,
pursuant
to
an
underwriting
agreement
at
approximately
85^
per
share
to
be
sold
to
the
public
for
$1
per
share
in
blocks
of
1,000
shares.
The
amount
of
money
required
to
purchase
new
properties
over
and
above
the
mortgage
would
be
borrowed
from
Welfar
Holdings
Limited
which
in
turn
borrowed
from
the
bank
on
the
guarantee
of
the
directors,
and
on
receipt
of
the
money
from
the
sale
of
the
shares
of
the
little
companies
by
B.C.
Estates
Limited,
the
demand
promissory
note
which
had
been
given
to
Welfar
Holdings
Limited
would
then
be
paid
off.
Welfar
Holdings
Limited
would
also
be
paid
a
nominal
sum
for
services
rendered
in
connection
with
the
organization
of
the
new
company
which
in
most
of
the
companies
was
in
itself
sufficient
to
pay
for
the
shares
to
which
it
had
subscribed
before
the
offer
to
the
public.
While
in
the
first
instance
the
management
of
the
properties
was
handled
by
the
Montreal
Trust
Company,
in
1958
the
actual
management
was
taken
over
by
B.C.
Estates
Limited
on
5-year
management
contracts.
When
B.C.
Estates
Limited
distributed
the
shares
of
the
Combined
Estates
Limited
(formerly
Welfar
Holdings
Limited)
to
the
general
public
it
followed
the
identical
procedure
as
had
been
utilized
in
the
distribution
of
the
shares
of
the
19
little
companies.
Farwel
Holdings
Limited
which
was
incorporated
to
continue
the
operations
of
Welfar
Holdings
Limited
arranged
for
the
incorporation
and
sale
of
shares
of
three
more
little
companies
in
1959
in
an
identical
manner
to
that
previously
adopted
by
Welfar
Holdings
Limited.
On
occasion
B.C.
Estates
Limited
made
payments
by
way
of
contributed
surplus
to
various
of
the
little
companies
to
enable
them
to
maintain
an
8%
dividend
payment,
this
being
the
rate
which
had
been
indicated
to
be
likely
in
the
sales
brochures.
The
amounts
involved
were
as
follows:
May
31,
1957
—
$
4,000
1958
—
$
4,400
1959
—
$
17,232
1960
—
$
13,250
In
the
same
years
the
aggregate
dividends
paid
to
all
shareholders
by
the
little
companies
were
approximately
1957
—
$
85,370
1958
—
$181,555
1959
—
$282,066
1960
—
$198,860
following
which
they
were
unable
to
continue
their
regular
8%
dividend
payments
due
to
the
development
of
a
depressed
rental
market
(Agreed
Statement
of
Facts,
paragraphs
34
to
36).
The
directors
of
B.C.
Estates
Limited
had,
at
December
31,
1958,
a
report
from
staff
on
the
status
of
the
various
properties
that
indicated
that
the
payments
made
to
the
various
little
companies
could
be
expected
to
diminish
in
future.
(Paragraph
39,
Agreed
Statement
of
Facts.)
By
order
of
Sheppard,
D.J.
dated
December
4,
1969,
on
the
application
of
counsel
for
respondent
pursuant
to
Section
29(6)
of
the
Canada
Evidence
Act,
respondent
was
permitted
to
inspect
and
take
copies
of
any
entries
in
the
books
or
records
of
the
Canadian
Imperial
Bank
of
Commerce,
Georgia.
and
Burrard
Branch,
Vancouver,
British
Columbia,
relating
to
Combined
Estates
Limited
(formerly
Welfar
Holdings
Limited),
Farwel
Holdings
Limited
and
B.C.
Estates
Limited
for
the
period
from
1954
to
1964
subject
to
the
appellant’s
right
of
objection
to
the
admissibility
of
any
documents
obtained
by
the
respondent
pursuant
to
the
said
order.
By
a
further
order
dated
January
7,
1970
respondent
was
permitted
to
inspect
and
take
copies
of
any
entries
in
the
books
or
records
of
the
Canadian
Imperial
Bank
of
Commerce,
640
West
Hastings
Street,
Vancouver,
with
respect
to
the
account
of
Ralph
K.
Farris
as
guarantor,
the
Toronto
Dominion
Bank,
260
West
Hastings
Street,
Vancouver,
with
respect
to
the
account
of
Ralph
K.
Farris
and
the
Toronto
Dominion
Bank,
560
West
Hastings
Street,
Vancouver,
with
respect
to
the
account
of
Donald
F.
Farris,
deceased,
again
subject
to
appellant’s
right
of
objection
to
the
admissibility
of
any
documents
obtained
by
the
respondent
pursuant
to
this
order.
Similar
orders
were
made
in
connection
with
the
Donald
F.
Farris
Estate
case.
Pursuant
to
a
Notice
to
Admit
Documents
dated
February
3,
1970
applicable
to
both
cases
respondent
called
on
appellant
to
admit
that
such
of
the
documents
as
are
specified
to
be
originals
were
respectively
written,
signed
or
executed
as
they
purport
respectively
to
have
been;
that
such
as
are
specified
as
copies
are
true
copies
and
such
documents
as
are
stated
to
have
been
served,
sent
or
delivered
were
so
served,
sent
or
delivered
respectively,
saving
all
just
exceptions
to
the
admissibility
of
all
such
documents
as
evidence
in
this
cause.
A
considerable
number
of
documents
are
listed
in
Schedules
to
this
Notice
to
Admit
and
were
filed
in
due
course
under
the
several
headings
General
Documents,
Midland
Petroleums
Ltd.
(N.P.L.),
Cariboo
Hudson
Gold
Mines
(1946)
Limited
(N.P.L.),
Charter
Oil
Co.
Ltd.
National
Explorations
Limited
(N.P.L.),
Harvard
Syndicate,
Bata
Petroleums
Ltd.
(N.P.L.),
Northern
Ontario
Natural
Gas
Co.
Ltd.,
Twin
City
Gas
Co.
Ltd.,
Magna
Pipe
Line
Co.
Ltd.,
Natural
Gas
Transmission
Co.,
Cascade
Natural
Gas
Corporation,
Pan
Provincial
Oil
and
Gas
Ltd.
Pursuant
to
the
order
of
Sheppard,
D.J.
relating
to
the
banking
records
of
Combined
Estates
Limited,
Farwel
Holdings
Limited
and
B.C.
Estates
Limited,
an
affidavit
of
Kenneth
Travers,
manager
of
the
Canadian
Imperial
Bank
of
Commerce,
Georgia
and
Burrard
Branch,
Vancouver,
to
which
are
annexed
154
pages
of
copies
of
banking
records,
states
that
the
deponent
is
advised
by
Joe
Weldon
Graham,
manager
of
the
branch
at
the
time
the
records
were
created,
that
the
original
documents
of
which
the
exhibits
are
copies
were
at
the
time
of
their
creation
ordinary
books
or
records
of
the
bank
and
that
the
entries
contained
therein
were
made
in
the
usual
and
ordinary
course
of
the
business
of
the
bank,
was
filed
as
Exhibit
17
in
the
Donald
F.
Farris
Estate
case.
Mr.
Graham
also
testified
at
length
concerning
this
and
respondent
sought
to
have
certain
specified
pages
of
this
exhibit
introduced
into
the
record.
Several
objections
were
made
by
counsel
for
appellant
to
the
introduction
of
part
of
this
evidence
and
in
particular
to
inter-office
memos,
such
as
communications
from
the
branch
manager
to
head
office
in
connection
with
credit
applications,
which
recount
statements
made
to
him
by
Donald
Farris
and
other
interested
parties.
Section
29(1)
of
the
Canada
Evidence
Act*
as
amended
on
February
13,
1969
reads
as
follows:
29.
(1)
Subject
to
this
section
a
copy
of
any
entry
in
any
book
or
record
kept
in
any
financial
institution
shall
in
all
legal
proceedings
be
received
as
prima
facie
evidence
of
such
entry
and
of
the
matters,
transactions
and
accounts
therein
recorded.
Subsection
(5)
as
amended
reads
as
follows:
(5)
A
financial
institution
or
officer
of
a
financial
institution
is
not
in
any
legal
proceedings
to
which
the
financial
institution
is
not
a
party
compellable
to
produce
any
book
or
record,
the
contents
of
which
can
be
proved
under
this
section
or
to
appear
as
a
witness
to
prove
the
matters,
transactions
and
accounts
therein
recorded
unless
by
order
of
the
court
made
for
special
cause.
Subsection
(6)
reads
in
part
as
follows:
(6)
On
the
application
of
any
party
to
a
legal
proceeding
the
court
may
order
that
such
party
be
at
liberty
to
inspect
and
take
copies
of
any
entries
in
the
books
or
records
of
a
financial
institution
for
the
purposes
of
the
legal
proceeding;
.
.
.
Counsel
for
appellant
contended
that,
while
subsection
(6)
permits
the
inspection
and
taking
of
copies
under
court
order
of
any
entries
in
the
books
or
records
of
a
financial
institution
for
the
purposes
of
the
legal
proceedings,
this
does
not
mean
that
they
can
be
produced
in
court
and
that
when
subsection
(1)
refers
to
an
entry
in
a
book
or
record
this
must
be
considered
as
meaning
merely
entries
in
the
bank’s
books
and
does
not
extend
to
inter-office
correspondence
and
memoranda.
He
contended
that
Section
29
applies
to
financial
institutions,
which,
as
defined
therein,
would
include
banks,
while
Section
29A
would
apply
to
other
businesses.
Section
29A
as
inserted
in
the
Canada
Evidence
Act\
on
February
13,
1969
reads
in
part
as
follows:
29A.
(1)
Where
oral
evidence
in
respect
of
a
matter
would
be
admissible
in
a
legal
proceeding,
a
record
made
in
the
usual
and
ordinary
course
of
business
that
contains
information
in
respect
of
that
matter
is
admissible
in
evidence
under
this
section
in
the
legal
proceeding
upon
production
of
the
record.
(3)
Where
it
is
not
possible
or
reasonably
practicable
to
produce
any
record
described
in
subsection
(1)
or
(2),
a
copy
of
the
record
accompanied
by
an
affidavit
setting
out
the
reasons
why
it
is
not
possible
or
reasonably
practicable
to
produce
the
record
and
an
affidavit
of
the
person
who
made
the
copy
setting
out
the
source
from
which
the
copy
was
made
and
attesting
to
its
authenticity,
each
affidavit
having
been
sworn
before
a
commissioner
or
other
person
authorized
to
take
affidavits,
is
admissible
in
evidence
under
this
section
in
the
same
manner
as
if
it
were
the
original
of
such
record.
(6)
For
the
purpose
of
determining
whether
any
provision
of
this
section
applies,
or
for
the
purpose
of
determining
the
probative
value,
if
any,
to
be
given
to
information
contained
in
any
record
received
in
evidence
under
this
section,
the
court
may,
upon
production
of
any
record,
examine
the
record,
receive
any
evidence
in
respect
thereof
given
orally
or
by
affidavit
including
evidence
as
to
the
circumstances
in
which
the
information
contained
in
the
record
was
written,
recorded,
stored
or
reproduced,
and
draw
any
reasonable
inference
from
the
form
or
content
of
the
record.
(9)
Subject
to
section
4,
any
person
who
has
or
may
reasonably
be
expected
to
have
knowledge
of
the
making
or
contents
of
any
record
produced
or
received
in
evidence
under
this
section
may,
with
leave
of
the
court,
be
examined
or
cross-examined
thereon
by
any
party
to
the
legal
proceeding.
(11)
The
provisions
of
this
section
shall
be
deemed
to
be
in
addition
to
and
not
in
derogation
of
(a)
any
other
provision
of
this
or
any
other
Act
of
the
Parliament
of
Canada
respecting
the
admissibility
in
evidence
of
any
record
or
the
proof
of
any
matter,
or
(b)
any
existing
rule
of
law
under
which
any
record
is
admissible
in
evidence
or
any
matter
may
be
proved.
(12)
In
this
section,
(a)
“business”
means
any
business,
profession,
trade,
calling,
manufacture
or
undertaking
of
any
kind
carried
on
in
Canada
or
elsewhere
whether
for
profit
or
otherwise,
including
any
activity
or
operation
carried
on
or
performed
in
Canada
or
elsewhere
by
any
government,
by
any
department,
branch,
board,
commission
or
agency
of
any
government,
by
any
court
or
other
tribunal
or
by
any
other
body
or
authority
performing
a
function
of
government;
(e)
“record”
includes
the
whole
or
any
part
of
any
book,
document,
paper,
card,
tape
or
other
thing
on
or
in
which
information
is
written,
recorded,
stored
or
reproduced,
and,
except
for
the
purposes
of
subsections
(3)
and
(4),
any
copy
or
transcript
received
in
evidence
under
this
section
pursuant
to
subsection
(3)
or
(4).
Counsel
for
respondent
contended
that
the
definition
of
business
is
quite
wide
enough
to
include
a
financial
institution,
such
as
a.
bank,
as
defined
in
Section
29
and
that
the
existence
of
Section
29
does
not
exclude
the
application
of
Section
29A,
this
being
made
especially
clear
by
the
provisions
of
Section
29A(11).
The
definition
of
record
in
Section
29A(12)(e)
is
also
wide
enough
to
include
the
inter-office
memos
included
in
the
bank’s
records.
While
it
is
true
that
Section
29(1)
states
that
the
entry
shall
be
“received
as
prima
facie
evidence’’
while
Section
29A(1)
refers
merely
to
the
record
being
‘‘admissible
in
evidence
..
.
.
upon
production
of
the
record’’,
I
have
reached
the
conclusion
that
the
very
broad
powers
given
in
Section
29A
permit
the
production
of
the
entire
bank
records
in
question.
The
probative
value,
however,
of
the
inter-office
memoranda
is
another
matter.
In
reaching
a
conclusion
with
respect
to
this
I
have
had
the
opportunity
of
hearing
the
evidence
of
the
witness
Graham
with
respect
to
these
entries,
the
most
significant
of
which
were
made
by
him
or
under
his
direction
during
the
period
while
he
was
manager
of
the
branch.
Aside
from
objecting
to
the
admissibility
of
part
of
these
bank
records
under
the
provisions
of
the
Canada
Evidence
Act,
counsel
for
appellant
also
objected
to
all
the
material
in
same
relating
to
Farwel
Holdings
Limited
contained
in
pages
1
to
96
of
the
said
Exhibit
17
on
the
ground
that
it
was
not
even
incorporated
until
just
before
the
shares
of
Combined
Estates
Limited
(formerly
Welfar
Holdings
Limited)
were
disposed
of,
and
that
its
subsequent
operations
would
have
no
bearing
on
the
question
as
to
whether
the
profits
realized
from
the
disposition
of
these
shares
constituted
a
capital
gain
for
the
shareholders
or
not.
Here
again
I
believe
that
this
objection
cannot
justify
the
refusal
to
admit
this
part
of
the
evidence,
but
touches
rather
on
the
weight
to
be
given
to
it.
To
some
extent
the
continued
actions
of
the
shareholders
in
the
period
immediately
following
the
disposition
of
their
shares
may
perhaps
be
of
some
assistance
in
a
determination
of
their
intent
with
respect
to
them
during
the
time
they
were
shareholders,
but
it
would
be
going
too
far
afield
to
permit
hindsight
evidence
of
what
took
place
perhaps
two
or
three
years
later
to
affect
the
decision
of
the
Court.
The
reason
why
counsel
for
respondent
insists
on
the
introduction
of
this
bank
evidence
is
in
an
attempt
to
refute
appellant’s
contention
that
the
sale
of
the
shares
in
question
became
necessary
as
a
result
of
the
death
of
James
McKee
and
that
this
was
the
sole
motivation
for
selling
them
at
the
time,
whereas
respondent
contends
that
these
shares
had
always
been
considered
by
appellant
as
an
adventure
in
the
nature
of
trade
and
that
plans
were
already
afoot
to
dispose
of
them
profitably
when
the
incomes
of
the
little
companies
showed
signs
of
commencing
to
deteriorate,
so
that
they
would
have
been
sold
for
this
reason
in
any
event
whether
or
not
he
had
died
when
he
did.
While
a
decision
on
this
point
will
not
in
itself
necessarily
be
conclusive
in
determining
the
taxability
or
non-taxability
of
appellant
on
the
profit
realized
by
the
sale,
the
motive
for
selling
the
shares
is
an
important
factor
in
the
determination
of
the
issue.
The
most
important
part
of
Exhibit
17
is
contained
in
pages
102
to
107
being
a
report
made
by
Mr.
Graham,
the
manager
at
that
time
(December
11,
1958),
to
the
regional
superintendent
of
the
bank
in
connection
with
an
application
for
credit
by
Welfar
Holdings
Limited.
At
this
time
Mr.
Mckee
had
already
died
and
the
application
for
an
additional
$20,000
to
$25,000
was
to
be
guaranteed
by
Messrs.
Welters,
Davidson,
Ralph
Farris
and
Donald
Farris,
as
well
as
by
B.C.
Estates
Limited.
In
this
report
on
page
104
there
is
the
following
statement:
While
the
directors
were
in
the
process
of
arranging
to
make
the
subject
company
a
public
one
and
selling
the
approximately
425,000
shares
to
the
public
for
$1.50
each
and
all
the
present
directors,
excepting
Whitelaw,
withdrawing
from
both
the
subject
company
and
B.C.
Estates
Limited,
James
MacKee,
one
of
the
guarantors,
aged
53
died.
Since
then
it
has
been
decided
to
proceed
with
making
the
subject
company
a
public
one.
A
sales
programme
is
now
being
organized
and
the
directors,
including
of
course,
the
MacKee
estate,
expect
to
realize
a
net
of
about
$100,000
each.
We
are
told
the
Income
Tax
authorities
will
permit
the
approximately
$95,000
each
director
will
get
over
and
above
his
$5,000
investment
four
years
ago,
as
capital
gain
and
not
subject
to
tax.
After
this
has
been
accomplished,
a
new
company
to
be
called
Farwell
Holdings
Limited
will
be
incorporated
and
each
of
the
directors
will
again
make
a
nominal
investment
in
the
new
company
as
they
did
in
the
subject
company,
and
it
is
the
intention
to
pretty
well
endeavour
to
duplicate
the
procedure
followed
by
the
subject
company
over
the
past
four
years.
Again
on
page
106
we
find
the
following:
The
Manager
looked
over
all
the
residential
and
business
properties
of
these
companies
in
Greater
Vancouver
when
he
was
approached
by
Mr.
Whitelaw
for
an
opinion
of
what
credit
the
Bank
might
grant
to
Welfar
Holdings
Limited
when
all
the
present
guarantors
were
thinking
of
selling
their
shares
and
withdrawing
from
all
the
companies.
Although
these
statements
which
may
well
have
been
made
by
Mr.
Graham
on
the
basis
of
information
furnished
him
by
Mr.
Whitelaw,
with
whom
he
apparently
dealt
principally,
the
respondent
contends
they
show
that
plans
for
the
reorganization
of
Welfar
Holdings
Limited,
the
sale
of
the
shares
in
same
to
the
public,
and
the
incorporation
of
the
new
company
Farwel
Holdings
Limited
were
contemplated
before
the
death
of
Mr.
McKee
and
did
not
result
from
his
death.
Mr.
Graham
was
questioned
at
length
concerning
these
bank
records.
In
fairness
to
him
it
must
be
pointed
out
that
he
was
testifying
with
respect
to
events
which
took
place
over
eleven
years
ago
and
in
the
course
of
his
duties
as
branch
manager
at
the
time
he
had
occasion
to
prepare
or
sign
some
50
such
credit
reports
every
week,
so
it
is
not
surprising
that
his
recollection
as
to
the
details
and
sequence
of
events
should
be
somewhat
confused.
However,
it
must
be
said
that
he
was
not
a
very
satisfactory
witness.
Although
no
serious
suggestion
was
made
of
tampering
with
his
evidence,
it
was
admitted
that
he
had
spoken
to
Mr.
Davidson,
whose
case
had
already
been
heard
and
finally
adjudicated
upon
in
his
favour,
shortly
before
he
testified
in
the
present
proceedings
in
connection
with
this
report
of
December
11,
1958,
and
that
Mr.
Davidson
had
suggested
to
him
that
his
comments
in
it
might
not
be
correct,
as
to
when
the
shareholders
had
commenced
formulating
their
plans
for
disposing
of
their
Shares.
It
was
apparent
during
his
evidence
and
cross-examination
that
he
was
aware
how
embarrassing
his
comments
in
this
report
were
now
proving
for
his
former
clients
and
he
was
prepared
to
admit
that
the
information
which
he
had
included
in
this
report
might
be
erroneous,
but,
on
the
other
hand,
when
confronted
with
it,
he
agreed
that
it.
was
a
correct
reporting
of
the
information
which
had
been
given
to
him
at
the
time.
He
did
testify
that
prior
to
October
21,
1958
he
had
never
heard
of
any
proposal
to
sell
the
shares
of
Welfar
and
had
never
met
Ralph
Farris
prior
to
that
date
in
his
office
nor
did
he
know
him
at
that
time.
He
was
unable
to
recall
whether
the
property
inspections
he
referred
to
on
page
106
had
been
made
before
or
after
Mr.
McKee’s
death,
and
stated
that,
since
the
question
of
whether
the
decision
to
sell
the
shares
was
made
before
or
after
Mr.
McKee’s
death
was
of
no
great
significance
to
him
or
to
the
bank,
this
might
account
for
the
inference
which
he
made.
His
report
was
certainly
inaccurate
in
a
number
of
other
respects,
which
need
not
be
gone
into
here.
The
evidence
of
the
witness
Walter
Potter
is
also
of
some
interest
in
helping
to
determine
when
the
shareholders
first
thought
of
disposing
of
their
interests
in
Welfar
Holdings
Limited.
He
was
the
property
development
manager
for
B.C.
Estates,
having
started
work
for
that
company
in
February
1958,
and
in
later
years
he
became
a
director
of
some
of
the
little
companies.
His
principal
function
was
to
assist
in
locating
suitable
properties
for
purchase.
He
worked
under
Whitelaw
but
sometimes
dealt
with
the
others,
and
occasionally
attended
a
meeting
of
the
directors
of
B.C.
Estates
when
they
were
discussing
the
purchase
of
some
property
he
had
recommended.
He
was
aware
that
B.C.
Estates
was
making
grants
to
some
of
the
little
companies
to
assist
them
to
maintain
their
dividend
payments,
and
became
concerned
about
their
financial
position
in
view
of
the
large
number
of
new
building
starts
in
the
area,
which
was
producing
more
competition.
He
prepared
a
joint
report,
together
with
W.
8S.
Murray,
director
and
financial
adviser
of
the
company,
which
was
produced
as
Exhibit
15
and
another
report
produced
as
Exhibit
16.
It
must
be
pointed
out
that
the
first
of
these
reports
was
dated
April
10,
1959,
and
the
second
June
30,
1959,
that
is
to
say,
after
the
shares
in
question
in
Welfar
Holdings
Limited
had
been
disposed
of,
so
that
it
cannot
be
said
that
the
share
disposal
was
made
as
a
result
of
these
reports,
but
if
it
can
be
shown
that
the
information
on
which
these
reports
were
based
was
known
to
appellant
and
his
associates
prior
to
the
death
of
Mr.
McKee,
then
this
might
be
considered
to
have
had
some
influence
on
their
decision
to
dispose
of
their
shares.
The
first
page
of
Exhibit
15,
less
the
last
paragraph,
was
incorporated
in
the
Agreed
Statement
of
Facts.
This
report
states
in
part
(as
of
April
10,
1959)
:
.
.
.
During
the
last
year,
vacancy
losses
were
suffered
and
have
now
become
a
substantial
factor.
The
slight
surplus
of
supply
over
demand
is
having
the
usual
result.
The
customer
is
able
to
shop
around
and
bargain
to
get
the
best
deal
he
can.
.
.
.
The
report
goes
on
to
state
that
some
of
the
buildings
such
as
2300
West
-
1st
Avenue,
1371
Harwood
Street
and
2181
Haul-
tain
Street,
Victoria,
have
losses
above
the
average.
It
refers
to
the
practice
of
some
landlords
to
reduce
rentals,
provide
free
parking
and
even
offer
a
month’s
free
rent
or
free
removal
expenses,
and
to
the
increasing
need
for
maintenance
for
some
of
the
buildings
which
were
new
when
bought,
but
will
now
require
substantial
redecorating.
The
report
goes
on
to
say:
In
summary,
therefore,
we
are
now
faced
with
a
group
of
adverse
factors,
most
of
which
were
not
present
a
few
years
ago.
Vacancy
loss
must
be
reckoned
with.
Some
rents
have
had
to
be
reduced.
Increased
costs
on
repairs
are
to
be
expected
and
items
which
are
completely
uncontrollable
such
as
taxes,
janitor
charges
and
other
operating
expenses
have
risen
quite
substantially
and
cannot
be
recovered
from
the
tenants
as
the
market
is
today.
The
report
continues
:
Many
private
landlords
have
quite
a
margin
to
operate
in
and
can
take
the
long
view,
but
any
reduction
in
revenue
or
increase
in
expenditures
places
our
companies
in
immediate
jeopardy.
They
are,
without
exception,
in
poor
financial
condition.
On
the
basis
of
current
estimates
approximately
$50,000.00
will
be
required
to
support
dividend
payments
during
the
forthcoming
year.
All
the
companies
were
originally
set
up
with
almost
no
working
capital
and,
because
all
subsequent
earnings
from
operations
have
been
paid
out
in
dividends,
the
companies
are
now
without
the
resources
required
to
finance
major
expenditures.
The
only
practical
way
to
obtain
the
funds
that
are
required
to
maintain
the
properties
in
a
sound
physical
and
financial
condition
is
to
impose
a
cut
in
the
dividend
rate.
The
report
dated
June
30,
1959
indicates
that
conditions
continued
to
deteriorate
during
the
intervening
three
months.
It
attributes
the
situation
to
the
large
volume
of
construction,
reduced
immigration,
and
poor
economic
conditions.
It
points
out
that
the
average
number
of
housing
units
started
annually
between
1954
and
1957
in
Vancouver
was
7,900
whereas
in
1958
there
were
12,298
starts.
Multiple
units
started
in
1957,
an
average
year,
were
doubled
in
1958,
going
up
from
1,893
to
3,773.
The
report
goes
on
to
point
out
that
all
but
four
of
the
public
companies
underwritten
by
B.C.
Estates
Limited
have
net
income
below
the
required
dividend
rate
and
that
“No
company
underwritten
by
B.C.
Estates
Limited
in
the
past
214
years
since
January
1957
has
earned
an
8%
dividend.”
Now
although
these
reports
are
dated
after
the
sale
of
the
Shares
it
is
evident
that
the
deteriorating
condition
was
known
at
least
to
the
writers
of
the
reports,
and
certainly
to
Mr.
Whitelaw
to
whom
they
reported,
for
some
time,
and
certainly
during
most
of
1958
as
the
deterioration
was
gradual.
Appellant
during
the
course
of
his
evidence
testified
that
he
had
nothing
to
do
with
the
day-to-day
operations
of
any
of
the
companies
from
1954
to
1958,
save
as
a
director,
that
the
sales
of
the
shares
in
the
little
companies
were
handled
entirely
by
Mr.
Whitelaw,
and
that
he
himself
was
not
aware
of
the
adverse
trend
in
rentals
in
1958
and
did
not
see
Exhibits
15
and
16
until
shortly
after
they
were
prepared,
nor
was
he
aware
of
Mr.
Potter’s
concern
over
the
deteriorating
prospects.
We
find,
however,
in
the
minutes
of
the
meeting
of
B.C.
Estates
Limited
held
on
July
17,
1958,
at
which
both
the
appellant
and
Donald
Farris
were
present
(part
of
Exhibit
28,
Donald
Farris
Estate
case)
the
following
statement:
At
this
stage,
Mr.
W.
S.
Murray
and
Mr.
W.
R.
Potter
were
invited
to
the
Meeting.
Mr.
Murray
was
questioned
on
several
matters
of
interest
to
the
Directors
and
was
requested
to
give
an
analysis
of
the
donations
made
by
B.C.
Estates
Limited
to
various
companies,
the
reasons
for
these
donations
and
the
likelihood
that
they
will
recur.
Later
at
the
same
meeting
the
following
statement:
A
brief
but
complete
report
was
presented
to
the
meeting
by
Mr.
Whitelaw
outlining
the
growth
of
the
company.
during
the
past
year
and
some
of
the
problems
that
have
been
met
and
others
that
are
to
be
faced
in
the
coming
year.
Surely
it
is
not
conceivable
that
neither
Mr.
Murray
nor
Mr.
Whitelaw
in
their
reports
to
the
meeting
would
have
dealt
with
the
deteriorating
situation
which
subsequently
became
the
subject
of
the
written
reports
in
April
and
June
1959.
Mr.
Potter
in
his
evidence
had
also
testified
that
in
the
summer
of
1958
he
had
made
known
his
misgivings
to
Mr.
McKee,
a
former
neighbour
of
his
with
whom
he
was
apparently
on
sufficiently
friendly
terms
to
go
over
the
head
of
Mr.
Whitelaw,
who
appears
not
to
have
taken
his
misgivings
too
seriously.
Mr.
Mckee
was
present
at
this
meeting
on
July
17,
1958
also
and
in
any
event
it
is
not
reasonable
to
assume
that
considering
his
close
personal
and
business
relationships
with
his
fellow
directors
he
had
not,
on
any
occasion
prior
to
his
death
in
October
1958,
discussed
Mr.
Potter’s
views
with
them.
Appellant,
although
claiming
to
have
taken
no
active
part
in
the
running
of
the
companies,
agreed
in
cross-examination
that
he
may
have
attended
as
many
as
151
directors’
meetings
of
13
of
the
underlying
companies
alone,
not
including
Welfar
and
B.C.
Estates
during
this
period.
He
testified
that
he
was
particularly
busy
in
connection
with
the
promotion
of
Magna
Pipe
Line
Co.
Limited,
and
Northern
Ontario
Natural
Gas
between
1954
and
1959
and
spent
a
substantial
portion
of
his
time
in
eastern
Canada,
particularly
during
1956.
Nevertheless,
I
believe
him
to
be
too
experienced
and
astute
a
business
man
not
to
be
aware
of
developments
and
future
prospects
in
the
operations
of
Welfar
Holdings
Limited,
B.C.
Estates
Limited
and
at
least
in
a
general
way,
with
the
business
prospects
of
the
little
companies,
and
that
he
and
his
fellow
directors,
while
perhaps
giving
Mr.
Whitelaw
a
free
hand
in
the
day-to-day
operations
of
the
companies,
must
at
all
times
have
been
well
aware
of
any
significant
changes
and
in
particular
the
deteriorating
rental
market
in
Vancouver.
He
testified
further
that
this
decision
to
sell
their
shares
in
Welfar
Holdings
Limited
resulted
wholly
from
the
death
of
Mr.
McKee,
since
following
his
death
the
remaining
four
directors
did
not
wish
to
continue
to
guarantee
the
bank
loans
themselves
for
the
benefit
of
McKee’s
estate,
especially
as
there
would
appear
to
be
some
doubt
as
to
whether
his
executor
could,
on
behalf
of
the
estate,
continue
to
guarantee
these
loans
or
more
specifically
guarantee
new
loans
as
new
little
companies
were
formed.
There
were
therefore
only
three
choices
open
to
them.
First,
they
could
have
bought
out
the
shares
held
by
the
McKee
estate
which
they
rejected
as
this
would
have
been
too
costly.
Secondly,
they
might
have
replaced
the
late
Mr.
McKee
by
someone
else,
or
thirdly,
they
could
follow
the
procedure
which
they
adopted
whereby
the
shares
were
subdivided
and
they
all
sold
their
shares
so
the
McKee
estate
could
get
its
money
out,
and
the
profits
received
by
the
other
four
principal
shareholders
enabled
them
to
increase
the
amount
of
the
bank
loans
they
guaranteed
when
the
new
company
Farwel
Holdings
Limited
was
incorporated.
He
admitted
that
the
guarantees
incurred
for
this
new
company
were
higher
than
those
for
which
they
were
liable
for
the
loans
to
Welfar
Holdings
Limited,
but
by
this
time
the
properties
involved
were
larger
and
provided
additional
security.
He
stated
that
they
never
considered
the
possibility
of
converting
to
a
public
company,
in
which
the
McKee
estate
alone
would
sell
its
shares
and
the
others
would
retain
theirs.
The
shares
they
finally
retained
in
Welfar
Holdings
Limited
represented
only
a
very
small
proportion
of
the
total
shareholdings
after
being
subdivided
420
for
1.
In
the
light
of
all
the
foregoing
evidence,
I
have
reached
the
conclusion
that
the
reorganization
of
Welfar
Holdings
Limited,
change
of
name,
subdivision
and
sale
of
the
majority
of
its
shares
by
appellant
and
his
associates
cannot
be
attributed
entirely
to
the
death
of
Mr.
McKee.
While
there
were
reasons
why
this
became
a
very
convenient
way
of
disposing
of
the
interest
of
his
estate
in
the
company
and
it
may
have
advanced
somewhat
the
eventual
sale
of
these
shares,
there
is
sufficient
ground
for
believing
that
this
possibility
had
been
in
the
minds
of
appellant
and
his
associates
before
Mr.
McKee’s
death
as
the
assets
of
the
company
were
at
a
peak
in
value
in
1958
and
there
was
some
reason
for
moderate
concern
that
the
little
companies
might
be
entering
into
a
difficult
period
when
their
dividends
could
no
longer
be
maintained,
and
hence
the
promotion
and
sale
of
shares
in
additional
little
companies
which
was
the
business
carried
on
by
Welfar
Holdings
Limited
through
B.C.
Estates
Limited
as
underwriter
would
become
increasingly
difficult.
To
state
that
appellant
and
his
associates
disposed
of
their
shares
at
a
propitious
time
when
they
had
reached
their
peak
in
value
and
could
still
be
readily
disposed
of
is
not,
of
course,
to
state
that
the
profits
realized
from
such
a
sale
must
necessarily
be
taxable.
We
now,
therefore,
have
to
consider
the
indications
as
to
the
intent
of
appellant
when
he
acquired
the
shares
and
in
this
connection
his
business
background
and
conduct
in
similar
transactions
must
be
carefully
examined.
Although
he
testified
that
when
he
purchased
the
treasury
shares
of
Welfar
Holdings
Limited
in
1954
he
had
no
intention
of
selling
them
at
a
profit
but
looked
on
them
as
being
in
the
nature
of
a
long
term
annuity,
I
attribute
little
weight
to
this
evidence.
In
any
tax
case
of
this
sort
one
must
anticipate
that
the
appellant
will
testify
that
when
he
acquired
the
asset
in
question
he
had
no
intention
whatsoever
of
doing
so
as
an
adventure
in
the
nature
of
trade
and
that
if
he
subsequently
was
successful
in
selling
it
at
a
substantial
profit
this
was
unforeseen
at
the
time
of
acquisition
and
is
a
capital
gain;
if
he
is
not
prepared
to
so
testify
there
would
be
no
issue
to
litigate.
We
must,
therefore,
not
depend
too
much
on
the
expressed
intentions
of
the
taxpayer
but
rather
examine
his
apparent
intentions
as
indicated
by
his
conduct
in
dealing
with
the
property,
and
the
frequency
with
which
he
has
dealt
with
similar
property
in
a
similar
manner.
During
the
course
of
his
testimony
Mr.
Ralph
Farris
was
taken
through
the
history
of
his
dealings
with
various
companies
with
which
he
has
been
associated
during
their
development
and
promotion
and
whose
stock
he
has
held,
and
a
substantial
number
of
exhibits
were
filed
outlining
the
details
of
these
dealings,
which
we
need
only
go
into
briefly
here.
In
1939
he
was
a
minority
shareholder
in
Midland
Securities
and
an
employee
who
sat
on
the
boards
of
two
companies
which
that
firm
had
an
interest
in
but
was
not
a
floor
trader
nor
a
registered
salesman.
Subsequently,
he
went
to
Prince
Rupert
as
the
resident
officer
of
a
large
construction
company.
In
due
course
he
incorporated
Ralph
K.
Farris
Limited
which
took
over
the
seat
of
his
former
employers
on
the
Vancouver
Stock
Exchange
but
he
was
only
active
in
connection
with
this
brokerage
business
for
two
or
three
years
until
about
1949
or
1950
although
he
carried
the
seat
as
an
investment
until
1958
or
1959.
He
had
a
share
position
in
Charter
Oil
Company
and
carried
out
extensive
market
operations
in
the
purchase
and
sale
of
its
shares,
though
his
best
known
promotion
was
Northern
Ontario
Natural
Gas
Company
in
which
his
75
original
shares
expanded
to
37,500
shares
and
of
which
he
eventually
became
a
salaried
employee.
He
was
also
a
salaried
employee
and
president
of
Charter
Oil
Company
Limited
commencing
about
1952.
Appellant
testified
further
that
Ralph
K.
Farris
Limited
was
a
very
small
company
dealing
primarily
in
arbitrage
accounts.
He
eventually
became
a
minority
shareholder
in
Pacific
Coast
Securities
which
took
over
Ralph
K.
Farris
Limited.
One
of
his
fellow
directors.
was
the
same
John
8S.
Davidson
who
was
later
associated
with
him
in
connection
with
Welfar
Holdings
Limited.
Although
it
is
not
primarily
because
of
this
earlier
connection
with
brokerage
firms
that
the
claim
against
him
is
being
made
for
tax
on
the
present
sale
of
shares,
it
is
of
some
interest
to
note
that
his
attention
was
called
to
the
danger
of
his
being
taxed
on
capital
gains
in
a
letter
dated
April
20,
1949
from
A.
P.
Gardiner
and
Company
(Exhibit
5)
where
they
indicate
that
they
are
anxious
that
he
should
be
classified
as
an
employee
of
Ralph
K.
Farris
Limited
so
that
the
Tax
Department
will
not
take
the
stand
that
he
is
a
private
trader
deriving
his
livelihood
from
transactions
in
stocks
and
bonds.
As
an
employee
he
would
be
receiving
an
income
which
could
be
used
as
an
argument
that
this
was
his
chief
occupation
for
purposes
of
income
tax
‘
leaving
any
gains
from
stock
transactions
in
the
best
position
to
argue
as
of
a
capital
nature’’.
In
connection
with
Midland
Petroleum
Limited,
Ralph
K.
Farris
Limited
did
some
of
the
underwriting.
He
had
a
substantial
insider
position
in
connection
with
this
company.
He
had
some
unsuccessful
promotions,
such
as
Cheam
Bridge
Co.
Ltd.,
an
attempt
to
enter
into
a
contract
with
B.C.
Electric
Co.,
in
connection
with
the
conversion
from
one
type
of
gas
to
another,
and
Pan
Provincial
Oil
and
Gas
Co.
Ltd.
He
also
participated
in
the
promotion
of
Cariboo
Hudson
Gold
Mines.
On
June
29,
1950
he
provided
Charter
Oil
Co.
Limited
with
$4,500
for
initial
operating
funds
in
consideration
of
which
he
was
to
receive
90,000
shares.
On
September
15,
1950
the
prospectus
of
that
company
offered
600,000
shares
for
sale
at
$1
per
share
(Exhibit
24).
He
continued
to
deal
in
shares
of
this
company
over
a
period
of
some
years
(Exhibits
25
to
28).
He
stated
that
he
had
operated
a
market
stabilization
account
to
protect
his
interest
as
a
shareholder
because
the
underwriters
and
bankers
were
not
doing
so.
He
had
a
25
%
interest
in
Pacifie
Coast
Securities
but
had
nothing
to
do
with
the
management
of
it
when
it
bought
a
share
interest
in
Bata
Petroleums
of
which
one
of
his
later
associates,
Frank
8.
Welters
was
president.
He
was
also
involved
in
the
promotion
of
National
Explorations
Limited,
in
which
he
was
associated
among
others
with
John
S.
Davidson.
He
attempted
to
promote
Magna
Pipe
Line
to
pipe
natural
gas
from
the
mainland
to
Vancouver
Island
but
this
was
never
established.
It
is
not
necessary
to
go
into
the
rather
voluminous
details
of
his
share
transactions
in
these
various
companies
but
an
examination
of
the
exhibits
produced
indicates:
his
primary
occupation
to
be
that
of
a
promoter
or
trader,
rather
than
that
of
an
executive
or
employee
of
any
given.
company,
although
from
time
to
time
he
has
been
a
director
and
occasionally
a
paid
officer
of
many
companies.
It
is,
however,
apparent
in
dealing
with
the
shares
of
these
many
companies
which
he
promoted
that
he
was
involved
in
a
substantial
number
of
buying
and
selling
transactions,
whereas
in
the
present
case
there
was
only
the
one
sale
of
shares
after
they
had
been
held
for
some
four
or
five
years.
This
distinction
must
be
made
for
appellant
relies
substantially
on
it
in
arguing
that
although
he
may
frequently
have
been
a
trader
it
should
not
be
concluded
that
he
was
so
in
connection
with
this
specific
deal.
It
can
be
conceded
that.
even
a
promoter
and
trader
can
make
a
capital
gain
on
an
isolated
transaction
or
transactions
as,
for
example,
should
he
buy
shares
of
a
company
such
as
Bell
Telephone
or
General
Motors
on
the
Stock
Exchange
and
subsequently
sell
same
at
a
substantial
profit.
The
respondent
makes
the
distinction,
however,
that
when
he
has
an
insider
position,
as
in
the
present
case,
the
situation
is
different.
As
indicated,
counsel
for
appellant
places
considerable
reliance
on
the
twofold
argument
that
the
shares
of
Welfar
Holdings
Limited
(subsequently
Combined
Estates
Limited)
were
disposed
of
by
the
shareholders
in
a
single
transaction
and
then
only
after
having
been
held
from
1954
until
early
in
1959
and
that
there
was
no
buying
and
selling
or
trading
of
these
shares
in
the
interval,
and
that
in
fact
it
operated
as
a
private
company
with
restrictions
on
share
transfers
until
just
prior
to
the
conversion
and
sale
of
the
shares.
It
appears,
however,
that
this
particular
scheme
differed
in
several
respects
from
other
promotions
in
which
appellant
had
engaged,
in
that
what
we
might
refer
to
as
the
“parent
company”
Welfar
Holdings
Limited
was
not
formed
to
promote
a
single
undertaking
such
as
the
development
of
a
mine,
the
construction
of
a
pipe
line,
nor
a
bridge,
but
rather
it
was
active
in
the
promotion
of
a
total
of
19
little
companies
over
a
four-year
period
(and
subsequently
Farwel
Holdings
Limited
promoted
three
others
on
the
same
basis)
and
might
have
carried
on
on
the
same
basis
for
a
number
of
years
as
long
as
the
real
estate
market
justified
such
promotions.
It
was
therefore
not
in
the
same
category
as
a
single
promotion
where
the
original
shareholder
would
get
out
as
soon
as
the
promotion
was
completed,
for
in
a
sense
this
promotion
was
never
completed
until
after
the
sale
by
the
original
shareholders
of
their
shares,
when
Welfar
Holdings
Limited
ceased
to
develop
any
further
little
companies
and
its
business
thereafter
ceased
to
be
that
of
promotion
but
became
a
more
or
less
dormant
business
operation
existing.
on
income
from
its
shareholdings
in
the
little
companies.
Being
a
private
company,
its
shares
were
never
sold
on
any
exchange
nor
distributed
to
the
public.
until
after
the
conversion
to
a
public
company
and
stock
split
when
appellant
and
all
his
fellow
shareholders
disposed
of
their
holdings
together
(keeping
only
1,000
of
the
420,000
new
shares)
so
there
was
no
question
of
buying
or
selling
additional
shares
in
the
interval.
Under
the
cireumstances
I
do
not
find
that
the
fact
that
there
was
no
dealing
in
these
shares
by
appellant
until
the
final
sale
or
that
he
held
them
for
nearly
five
years
justifies
the
conclusion
that
this
was
not
an
adventure
in
the
nature
of
trade.
As
was
stated
in
M.N.R.
v.
James
A.
Taylor,
[1956]
C.T.C.
189
at
190:
The
singleness
or
isolation
of
a
transaction
cannot
be
a
test
of
whether
it
was
an
adventure
in
the
nature
of
trade
.
.
.
it
is
the
nature
of
the
transaction,
not
its
singleness
or
isolation
that
is
to
be
determined.
Appellant
argued
that
any
trading
that
was
done
was
carried
out
by
B.C.
Estates
Limited
who
underwrote
and
sold
the
shares
of
the
little
companies
and
eventually
the
shares
of
appellant
and
his
associates
in
Welfar
Holdings
Limited,
and
that
it
is
not
the
taxability
of
B.C.
Estates
Limited
or
Welfar
Holdings
Limited
that
is
in
issue
here.
I
cannot
accept
this
argument.
The
shares
of
both
B.C.
Estates
Limited
and
Welfar
Holdings
Limited
were
entirely
owned
by
appellant
and
his
associates
who
were
also
the
directors
of
these
companies
and
the
actions
of
these
companies
were
dictated
by
them
in
their
quality
as
directors.
In
deciding
when
to
dispose
of
their
shares
in
Welfar
Holdings
Limited
they
had
inside
knowledge
of
the
position
of
both
companies
resulting
from
their
position
as
directors.
As
Martland,
J.
said
in
Norman
R.
Whittall
v.
M.N.R.,
[1967]
C.T.C.
377
at
393:
.
.
.
Counsel
for
the
appellant
took
issue
with
the
statement
that
“the
appellant
assisted
materially
in
the
marketing
of
these
securities”,
contending
that
it
was
the
investment
company
which
had
done
the
marketing
and
not
the
appellant.
But
the
learned
trial
judge
uses
the
word
“assisted”,
and
the
appellant
was,
at
the
material
times,
the
majority
shareholder,
a
director
and
officer
of
Ross
Whittall
Ltd.
and
the
president
of
its
successor.
Undoubtedly
he
assisted
in
the
marketing
operations
mentioned.
While
the
direct.
marketing
of
the
securities
and
the
activities
of
both
Welfar
Holdings
Limited
and
B.C.
Estates
Limited
were
carried
on
by
Mr.
Whitelaw
and
his
staff
and
not
by
the
appellant
or
his
associates
personally,
it
must
be
remembered
that
Mr.
Whitelaw
and
his
staff
though
employed
by
the
companies
were
certainly
under
the
direction
of
appellant
and
his
associates,
the
directors
of
those
companies.
As
Noel,
J.
said
in
Racine,
Demers
and
Nolin
v.
M.N.R.,
[1965]
D.T.C.
5098
at
5103
:
To
give
to
a
transaction
which
involves
the
acquisition
of
capital
the
double
character
of
also
being
at
the
same
time
an
adventure
in
the
nature
of
trade,
the
purchaser
must
have
in
his
mind,
at
the
moment
of
the
purchase,
the
possibility
of
reselling
as
an
operating
motivation
for
the
acquisition
;
that
is
to
say
that
he
must
have
had
in
mind
that
upon
a
certain
type
of
circumstances
arising
he
had
hopes
of
being
able
to
resell
it
at
a
profit
instead
of
using
the
thing
purchased
for
purposes
of
capital.
Generally
speaking,
a
decision
that
such
a
motivation
exists
will
have
to
be
based
on
inferences
flowing
from
circumstances
surrounding
the
transaction
rather
than
on
direct
evidence
of
what
the
purchaser
had
in
mind.
As
previously
stated,
appellant
testified
that
when
he
bought
the
shares
of
Welfar
Holdings
Limited
he
had
no
intention
of
selling
them
as
a
profit
but
looked
on
them
in
the
nature
of
a
long-term
annuity.
The
whole
background
of
appellant
as
a
very
successful
promoter
indicates
that
he
certainly
would
not
consider
a
$200
investment
as
a
very
substantial
one,
nor
would
he
be
interested
merely
in
the
potential
dividend
returns
for
same.
The
fact
that
no
dividends
were
ever
paid
does
not
alter
this
since
they
could
have
been
paid.
Noel,
J.
goes
on
to
say
at
page
5104:
With
reference
to
the
past
operations
of
the
appellants,
I
find
nothing
there
to
indicate
that
they
necessarily
had
in
their
minds
the
idea
of
reselling
the
commercial
enterprise
as
a
motivating
force
at
the
time
of
the
purchase.
In
effect
the
proof
does
not
show
that
they
have
ever
before
bought
and
resold
a
commercial
enterprise.
They
probably
engaged
in
many
commercial
ventures
but,
in
almost
all
the
cases,
they
seem
to
have
retained
them
for
what
future
income
these
businesses
might
supply
them.
This
is
certainly
not
the
case
with
the
present
appellant
whose
history
is
one
of
buying
in
and
out
of
many
companies,
obtaining
treasury
shares,
and
evntually
selling
them
at
very
substantial
profits,
and
there
is
nothing
to
indicate
that
in
the
present
case
he
did
not
always
have
a
secondary
intention
in
mind
of
selling
out
his
shares
in
Welfar
Holdings
Limited
at
the
most
propitious
time.
Appellant
also
places
considerable
reliance
on
the
case
of
I
wi-
gation
Industries
Limited
v.
M.N.R.,
[1962]
S.C.R.
346;
[1962]
C.T.C.
215,
where
the
appellant
which
had
incurred
a
bank
loan
for
the
purchase
of
real
estates
purchased
shares
of
the
common
stock
of
another
company,
borrowing
money
to
do
so.
When
called
upon
to
pay
its
overdraft
it
sold
some
of
these
shares
for
this
purpose
and
the
remaining
shares
were
subsequently
sold
at
a
substantial
profit.
It
was
held
that
this
was
an
acquisition
by
the
appellant
of
a
capital
interest
in
a
new
corporate
business
venture
which
had
the
characteristics
of
an
investment.
The
mere
fact
that
the
shares
were
disposed
of
soon
after
at
a
profit
does
not
make
it
an
adventure
in
the
nature
of
trade,
and
an
accretion
to
capital
does
not
become
income
merely
because
the
original
capital
was
invested
in
the
hope
and
expectation
that
it
would
rise
in
value;
if
it
does
so
rise
its
realization
does
not
make
it
income.
I
believe
that
case
can
clearly
be
distinguished,
however,
in
that
it
involved
the
purchase
of
only
4,000
shares
out
of
a
total
issue
of
500,000
shares
of
a
company
in
which
the
predecessor
had
no
insider
position.
As
Martland,
J.
stated
at
page
354
[p.
222]:
.
.
.
The
appellant’s
purchase
was
not
an
underwriting,
nor
was
it
a
participation
in
an
underwriting
syndicate
with
respect
to
an
issue
of
securities
for
the
purpose
of
effecting
their
sale
to
the
public,
and
did
not
have
the
characteristics
of
that
kind
of
a
venture.
What
the
appellant
did
was
to
acquire
a
capital
interest
in
a
new
corporate
business
venture,
in
a
manner
which
has
the
characteristics
of
the
making
of
an
investment,
and
subsequently
to
dispose,
by
sale,
of
that
interest.
Appellant,
as
is
to
be
expected,
relies
most
heavily
on
the
decision
of
Sheppard,
D.J.
in
the
case
of
appellant’s
associate
John
S.
Davidson
(supra),
which
held
that
his
profits
from
the
sale
of
his
shares
in
Welfar
Holdings
were
not
taxable
constituting
capital
gain.
Certainly
the
judgment
in
that
case
must
be
examined
carefully,
and
should
be
followed
unless
a
distinction
can
be
made
between
the
position
of
the
appellant
in
the
present
proceedings
and
that
of
John
S.
Davidson
in
that
case.
It
was
pointed
out
during
the
hearing
of
the
present
proceedings
that
a
considerable
amount
of
evidence
was
introduced
which
was
not
available
to
Sheppard,
D.J.
at
the
time
he
heard
the
said
case
and
which,
had
this
evidence
been
before
him,
might
have
altered
his
decision.
It
would
be
profitless
to
speculate
as
to
the
effect
additional
evidence
might
have
had
on
a
decision
already
made,
and
in
any
event,
I
must
base
my
decision
in
the
present
case
on
the
evidence
now
before
me,
having
heard
the
evidence
of
the
witness
Graham
and
examined
the
bank
records
and
certain
of
the
entries
from
the
minute
books
of
the
companies
produced
as
exhibits,
and
having
also
heard
the
evidence
of
Mr.
Potter,
none
of
which
was
before
Sheppard,
D.J.
in
the
Davidson
(supra)
case.
I
have
now
reached
the
conclusion,
as
previously
indicated,
that,
while
the
death
of
Mr.
McKee
was
an
important
contributory
factor
in
the
decision
to
sell
the
shares
of
Welfar
Holdings
Limited
when
they
were
sold,
it
was
not
the
sole
reason
for
their
sale,
the
possibility
of
which
had
been
in
contemplation
sometime
before
his
death.
This
finding
is
contrary
to
the
finding
of
Sheppard,
D.J.
in
the
Davidson
(supra)
case
and
can
readily
be
explained
by
the
additional
evidence
brought
before
me.
Certain
evidence
was
also
brought
before
me
that
Davidson
was
a
director
of
Beaver
Lodge
Uranium
Mines
Limited,
Far
West
Tungsten
Copper
Mines
Limited
and
Western
Tungsten
Copper
Mines
Limited,
of
which
the
late
Donald
Farris
and
the
late
James
McKee
were
also
directors
and
that
he
had
also
acquired
Shares
in
Bethsaida
of
which
Donald
Farris
was
the
president
and
director.
Part
of
this
evidence
was
not
before
the
Court
in
his
appeal
though
counsel
for
appellant
indicates
in
his
written
argument
that
his
shareholdings
in
Beaver
Lodge
and
Far
West
Tungsten
were
known
to
the
Court
in
that
case.
As
counsel
for
the
appellant
points
out
in
his
argument
the
evidence
that
Davidson
was
a
shareholder
in
a
number
of
other
companies
(Exhibit
47)
does
not
constitute
evidence
of
share
trading
activity
by
him,
but
it
might
well
be
that
the
new
evidence
of
his
previous
association
:with
the
late
Donald
Farris
and
the
late
James
McKee
in
various
mining
developments
of
a
speculative
nature
might
have
influenced
the
decision
in
his
case
which
was
based
primarily
on
the
fact
that
Davidson
was
in
business
during
the
entire
period
as
an
insurance
broker.
In
any
event,
it
is
not
necessary,
nor
would
it
be
proper
for
me
to
decide
whether
on
the
evidence
now
before
me
I
would
have
reached
a
different
conclusion
in
the
Davidson
(supra)
appeal
which
was
finally
disposed
of
in
the
well
reasoned
and
unappealed
judgment
of
Sheppard,
D.J.
The
fact
that
one
of
a
group
of
people
engaged
in
a
business
deal
may
be
taxable
while
others
of
the
group
may
not
be
taxable
in
connection
with
the
identical
deal
has
already
been
established
by
the
Mainwaring
{supra),
Ker
(supra),
Robertson
(supra),
and
Mrs.
Mainwaring
(supra)
cases,
and
the
fact
that
the
learned
judge
in
the
Davidson
(supra)
case
reached
the
conclusion
that
insofar
as
he
was
concerned
the
profit
on
the
disposal
of
his
shares
in
We]far
Holdings
Limited,
in
view
of
the
fact
that
his
profession
was
that
of
insurance
agent,
was
a
capital
gain
and
not
taxable
as
an
adventure
in
the
nature
of
trade,
does
not
preclude
a
different
finding
in
the
present
appeal
if
I
reach
the
conclusion
that
the
appellant
herein
had
as
his
principal
occupation
the
promotion
and
development
of
corporations,
often
of
a
speculative
nature,
and
the
trading
in
the
stock
thereof
from
an
insider
position.
Appellant
Ralph
Farris
testified
that
Mr.
Whitelaw
who
had
been
‘brought
to
him
by
Mr.
Welters,
had
an
idea
that
many
persons
who
did
not
have
sufficient
funds
to
invest
in
real
estate
as
individuals
might
be
interested
in
investing
in
the
stock
of
revenue
producing
properties
as
a
worthwhile.
He
then
took
them
to
Farris
and
Company,
his
lawyers,
and
stated
that
there
may
have
been
further
discussions
there
as
to
the
appropriate
method
to
be
used.
It
is
clear
that
he
and
his
brother,
the
late
Donald
Farris,
the
late
James
McKee,
Frank
S.
Welters
and
John
S.
Davidson
had
had
previous
business
associations
in
various
combinations
and
apparently
worked
well
together.
There
is
little
doubt,
as
Mr.
Farris
testified,
that
the
main
responsibility
for
the
operations
was
left
to
Whitelaw
who
was
given
quite
a
free
hand.
It
is
apparent,
however,
that
the
modus
operandi
was
carefully
worked
out
by
appellant
and
his
associates
in
conjunction
with
their
attorneys
with
the
result
that
instead
of
investing
directly
in
the
little
companies
themselves
Welfar
Holdings
Limited
whose
shares
they
wholly
owned
was
incorporated
by
them
and
was
able
to
acquire
approximately
10%
of
the
stock
of
each
of
the
little
companies
at
very
little
expense.
The
underwriting
of
the
sale
of
the
remaining
shares
of
the
little
companies
to
the
public
by
B.C.
Estates
Limited
whose
shares
appellant
and
his
associates
also
wholly
owned,
resulted
in
the
earning
by
it
of
commissions
of
an
amount
equal
to
or
more
than
what
Welfar
Holdings
Limited
had
paid
for
its
shares
in
these
companies.
Appellant
and
his
associates
had
very,
good
credit
standing
which
they
used
to
guarantee
the
loans
required
by
the
little
companies
to
acquire
the
properties
in
question,
which
were
repaid
when
the
sale
of
their
shares
by
B.C.
Estates
Limited
was
completed.
The
10%
shareholding
in
each
of
the
little
companies
by
Welfar
Holdings
Limited
was
sufficient
to
maintain
the
effective
control
over
these
companies
until
a
proxy
battle
in
1963
respecting
some
of
the
little
companies
disturbed
this.
B.C.
Estates
Limited
helped
out
the
little
companies
from
time
to
time
by
grants
in
aid
so
that
the
little
companies
were
able
to
maintain
an
8%
dividend
which
they
had
indicated
to
their
shareholders
in
their
sales
brochures
would
be
payable,
and
this
in
turn,
helped
in
the
promotion
and
sale
of
the
shares
of
each
new
little
company
as
it
was
incorporated.
Welfar
Holdings
Limited
of
course
received
its
dividends
on
the
10%
of
the
shares
it
held
and
since
these
shares
had
been
purchased
for
10^
each
instead
of
at
a
dollar,
the
dividend
was
equivalent
to
an
80%
return
on
the
capital
investment
by
it
to
acquire
these
shares.
Its
surplus
continued
to
grow
therefore
as
did
that
of
B.C.
Estates
Limited.
B.C.
Estates
Limited
in
addition
to
making
the
grants
in
aid
took
other
steps
to
maintain
the
market
for
the
shares
of
the
little
companies.
In
the
minutes
of
a
meeting
of
directors
of
B.C.
Kstates
Limited
on
January
12,
1958
(the
present
appellant
Mr.
Ralph
Farris
was
not
present),
it
is
recorded
:
Mr.
Whitelaw
suggested
to
the
Meeting
that
it
would
be
beneficial
from
a
selling
standpoint
if
B.C.
Estates
Limited
were
to
advertise
in
the
press
offering
to
purchase
shares
in
companies
underwritten
by
B.C.
Estates
Limited.
A
discussion
took
place
concerning
the
advisability
of
such
action
and
it
was
suggested
by
Mr.
Donald
Farris
that
before
placing
any
such
advertisements
that
a
substantial
number
of
stockholders
in
previous
companies
be
canvassed
by
telephone
with
the
object
of
ascertaining
what
percentage
might
consider
selling
their
stock
holdings,
and
that
should
the
percentage
be
relatively
small
then
the
advertisement
offering
to
purchase
stock
be
inserted
in
the
press
but
limiting
the
number
of
companies
in
the
first
instance
to
four,
and
that
should
the
response
from
such
advertisement
be
relatively
small
that
further
advertisements
offering
to
purchase
stock
in
all
companies
underwriten
by
B.C.
Estates
Limited
be
duly
inserted.
Clearly
this
was
a
market
support
move
and
I
do
not
think
that
we
can
infer
from
the
fact
that
the
present
appellant
was
not
present
at
that
meeting
that
he
remained
unaware
of
this
decision.
In
the
case
of
M.N.R.
v.
Firestone
Management
Limited,
[1967]
1
Ex.
C.R.
340;
[1966]
C.T.C.
771,
where
respondent
corporation
purchased
all
the
shares
in
another
corporation
controlled
by
the
same
person
and
a
year
later
caused
the
latter
corporation
to
become
a
public
company
and
its
shares
to
be
subdivided
and
then
sold
half
of
them
to
a
group
of
underwriters
for
resale
to
the
public
which
yielded
a
substantial
profit,
it
was
held
by
Jackett,
P.
that
the
profit
was
not
taxable
as:
.
.
.
The
evidence
indicated
that
respondent
did
not
acquire
the
shares
of
the
sales
company
with
the
intention
of
turning
them
to
account
at
a
profit
by
offering
them
for
sale
to
the
public,
as
it
subsequently
did.
Neither
did
respondent’s
activities
following
its
acquisition
of
the
shares
in
the
sales
company
as
an
investment,
viz.
in
converting
it
to
a
public
company,
reorganizing
its
capital
structure,
employing
expert
assistance,
arranging
for
necessary
registration
with
United
States
securities
authorities,
amount
to
the
carrying
on
of
a
business:
it
merely
did
what
its
advisers
advised
it
to
do
in
order
to
realize
most
advantageously
a
portion
of
an
investment
which
as
a
matter
of
good
judgment
called
for
some
diversification.
In
the
present
case
we
have
something
more,
however,
in
that
we
have
the
active
direction
by
appellant
and
his
associates
of
the
affairs
not
only
of
Welfar
Holdings
Limited
but
also
of
the
B.C.
Estates
Limited
and
of
the
little
companies
controlled
by
Welfar
Holdings
Limited
in
such
a
way
as
to
promote
and
build
up
the
value
of
their
shareholdings
in
Waif
ar
Holdings
Limited,
with
the
end
result
that
they
could
eventually
be
subdivided,
and
upon
the
company
going
public
be
disposed
of
at
a
substantial
profit.
This,
in
my
view,
constitutes
an
adventure
in
the
nature
of
trade.
I
do
not
believe
much
significance
should
be
attributed
to
what
happened
after
1959.
In
support
of
his
argument
that
the
sale
of
the
shares
of
Welfar
Holdings
Limited
resulted
wholly
from
McKee’s
death,
the
appellant’s
counsel
contended
that
the
fact
that
the
new
company
Farwel
Holdings
Limited
was
immediately
esablished
by
the
four
surviving
associates
(and
Whitelaw
for
his
minority
interest)
to
carry
on
in
the
same
way
and
did
in
fact
sponsor
the
incorporation
of
three
little
companies,
operating
again
by
virtue
of
the
personal
guarantees
of
the
four
principal
shareholders,
indicated
a
continuing
investment.
It
appears
to
me
however,
that
this
must
be
considered
as
a
separate
venture,
although
following
the
same
pattern.
Having
disposed
of
their
interest
in
Welfar
Holdings
Limited
at
a
time
when
they
could
realize
a
handsome
profit
on
same,
and
being
aware
that,
although
the
real
estate
rental
market
may
have
passed
its
peak,
this
did
not
entirely
preclude
the
possibility
of
further
profits
being
made,
there
was
no
reason
why
they
should
not
have
recommenced
a
similar
operation,
but
this
did
not
involve
the
re-investment
of
the
realized
profits
from
the
disposal
of
their
shares
in
Welfar
Holdings
Limited.
Shortly
after
appellant
and
his
associates
disposed
of
most
of
their
shares
in
Welfar
Holdings
Limited
(Combined
Estates),
the
little
companies
entered
into
five-year
irrevocable
management
contracts
with
B.C.
Estates
Limited
which
therefore
continued
to
manage
the
properties.
This
was
a
wise
business
move
but
I
do
not
see
how
this
affects
the
taxability
of
appellant
on
the
profits
realized
on
the
sale
of
his
shares
of
Welfar
Holdings
Limited.
An
abortive
attempt
to
sell
the
shares
of
B.C.
Estates
Limited
to
Macaulay
Nicolls
Maitland
and
Co.
Ltd.,
took
place
early
in
1960
and
in
1963
a
further
attempt
was
made,
and
also
in
1963
a
further
offer
was
received
from
the
latter
group
to
purchase
the
management
contracts
of
the
little
companies
held
by
B.C.
Estates
Limited
(Exhibits
19
to
24,
Donald
Farris
Estate
case).
Here
again
the
fact
that
appellant
and
his
associates
wished
to
divest
themselves
of
their
interests
in
B.C.
Estates
Limited
after
disposing
of
their
shares
in
Welfar
Holdings
Limited
does
not,
as
I
see
it,
affect
in
any
way
the
issue
at
present
before
me.
It
is
of
some
interest
that
in
a
previous
tax
case
in
which
the
present
appellant
Ralph
K.
Farris
was
involved,
namely,
Ralph
K.
Farris
v.
M.N.R.,
[1963]
C.T.C.
345,
dealing
with
the
disposal
of
certain
oil
permits
which
had
been
acquired
by
appellant,
Kearney,
J.
found
that
the
profit
was
‘‘taxable
income
:not
only
from:.an
adventure
in
the
nature
of
trade,
but
also
from
the
ordinary
course
of
the
appellant’s
business,
judging
by
his
past
and
subsequent
activities’’.
Having.
disposed
of
80%
of
his
interest
he
had
retained
a
20%
interest
which
he
claimed
he
intended
to
retain
but
for
a
very
generous
offer
received
from
a
prospective
purchaser.
Kearney,
J.
held
(p.
356)
:
.
.
.—
I
do
not
doubt
but
that
the
appellant
had
some
intention
of
retaining
a
20%
interest,
but
I
think
this
is
a
case
where
the
doctrine
of
alternative
intention
which
has
been
followed
in
this
Court
as
a
result
of
the
Regal
Heights
Ltd.
v.
M.
N.
R.,
[1960]
S.C.R.
902;
[1960]
C.T.C.
384,
must
prevail.
A
person
may
have,
I
think,
different
degrees
of
intent
which
may
vary
from
wishful
thinking
to
a
firm
resolve.
I
believe
that
this
doctrine
of
secondary
intent
is
of
some
interest
to
us
in
the
present
case,
as
even
if
it
were
conceded
that
appellant
made
his
investment
in
Welfar
Holdings
Limited
with
the
intent
of
retaining
same
as
long
as
it
proved
profitable
to
do
so,
he
may
well
formed
a
secondary
intention
to
dispose
of
his
holdings
as
soon
as
the
prospect
of
profit
from
rental
properties
deteriorated.
While
I
have
given
careful
consideration
to
the
jurisprudence
cited
by
learned
counsel
for
both
parties
in
their
extensive
written
arguments,
it
must
be
stated
that
in
the
last
analysis
the
decision
in
any
case,
such
as
the
present,
must
depend
on
the
specific
facts
and
circumstances,
which
are
not
identical
to
those
of
any
other
case.
This
is
well
expressed
in
j
the
judgment
of
Lord
Upjohn
in
Ogden
Industries
Pty.
Ltd.
v.
Lucas,
[1970]
A.C.
127
(P.C.),
where
he
states:
It
is
quite
clear
that
judicial
statements
as
to
the
construction
and
intention
of
an
Act
must
never
be
allowed
to
supplant
or
supersede
its
proper
construction
and
courts
must
beware
of
falling
into
the
error
of
treating
the
law
to
be
that
laid
down
by
the
judge
in
construing
the
Act
rather
than
found
in
the
words
of
the
Act
itself.
‘No
doubt
a
decision
on
particular
words
binds
inferior
courts
on
the
construction
of
those
words
on
similar
facts
but
beyond
that
the
observations
of
judges
on
the
construction
of
statutes
may
be
of
the
greatest
help
and
guidance
but
are
entitled
to
no
more
than
respect
and
cannot
absolve
the
court
from
its
duty
of
exercising
an
independent
judgment.
It
is
with
these
principles
in
mind
that
their
Lordships
approach
this
very
considerably
body
of
authority.
I
have
to
construe
Sections
3
and
4
of
the
Income
Tax
Act
which
read
as
follows:
3.
The
income
of
a
taxpayer
for
a
taxation
year
for
the
purposes
of
this
Part
in
his
income
for
the
year
from
all
sources
inside
or
outside
Canada
and,
without
restricting
the
generality
of
the
foregoing,
includes
income
for
the
year
from
all
(a)
businesses,
(b)
property,
and
(c)
offices
and
employments.
4.
Subject
to
the
other
provisions
of
this
Part,
income
for
a
taxation
year
from
a
business
or
property
is
the
profit
therefrom
for
the
year.
in
the
light
of
the
definition
of
“business”
contained
in
Section
139(1)
(e)
of
the
Act
reading:
(e)
“business”
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatsoever
and
includes
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment;
It
is
my
Judgment
that
on
the
evidence
presented
before
me,
the
acquisition
and
subsequent
disposal
of
the
shares
in
question
of
Welfar
Holdings
Limited
by
appellant
was
‘‘an
adventure
in
the
nature
of
trade’’
and
that
the
profits
realized
therefrom
are
therefore
taxable.
The
appeal
from
the
Notice
of
Re-
Assessment
dated
May
27,
1964.
as
amended
by
the
Notice
of
Re-Assessment
dated
May
7,
1965
is
therefore
dismissed
with
costs.
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