Jupson,
J.
(all
concur)
:—Hill-Clark-Francis
Limited
appeals
from
a
judgment
of
the
Exchequer
Court
which
held
that
a
profit
made
on
the
sale
of
certain
shares
in
the
year
1952
was
income
and
not
a
capital
gain.
The
appellant
was
incorporated
in
1913
and
carries
on
business
in
Northern
Ontario
on
a
large
scale
as
a
general
contractor
and
as
a
wholesaler
and
retailer
in
lumber.
It
buys
and
manufactures
lumber,
some
of
which
it
uses
in
its
construction
business;
some
it
sells
through
its
retail
outlets,
and
some
it
sells
in
wholesale
lots.
A
major
supplier
of
lumber
to
the
appellant
in
1952
was
a
company
called
Poitras
Frères
Inc.
The
appellant
had
contracted
in
each
year
since
1943
to
purchase
the
whole
annual
production
of
lumber
of
this
company.
In
the
year
1952,
Poitras
Frères
was
producing
about
one-third
of
the
appellant’s
lumber
requirements.
To
enable
Poitras
Frères
to
produce
the
logs
and
manufacture
the
lumber,
the
appellant
made
advances
from
time
to
time
which
were
to
be
considered
as
payments
on
account
of
the
purchase
price
of
the
products.
In
the
winter
of
1951-52,
Poitras
Frères
Inc.
was
in
financial
difficulties,
and
in
May
1952,
the
appellant
approached
the
principal
shareholder
with
a
view
to
purchasing
all
the
issued
shares
of
that
company.
This
was
done
because
the
appellant
feared
that
if
Poitras
Fréres
went
out
of
business,
it
would
lose
one
of
its
major
sources
of
supply.
In
June
1952,
the
appellant
obtained
for
$100
from
Roger
Poitras,
the
principal
shareholder,
an
option
exercisable
at
any
time
up
to
November
20,
1952,
to
purchase
all
the
issued
shares
of
the
company
for
$50,000.
The
appellant
took
an
option
rather
than
make
an
outright
purchase
of
the
shares
at
that
time
because
it
was
temporarily
short
of
cash
on
account
of
the
seasonal
nature
of
its
business.
In
1943
and
1944,
the
appellant
had
acquired
control
through
the
purchase
of
shares
of
two
other
lumber
companies.
In
each
case
its
object
in
making
these
purchases
was
to
ensure
continuing
sources
of
supply.
The
appellant
still
controls
these
subsidiary
companies
through
share
ownership
and
they
continue
to
supply
lumber
to
the
apellant.
I
am
prepared
to
accept
the
appellant’s
submission
that
in
purchasing
the
shares
of
Poitras
Frères
Inc.,
it
was
intending
to
make
this
company
its
subsidiary
just
as
it
had
done
with
the
two
companies
purchased
in
1943
and
1944.
But,
in
late
August
1952,
a
Mr.
Horace
Strong,
who
was
the
majority
shareholder
in
Haileybury
Lumber
Company,
began
to
negotiate
with
the
appellant
for
the
purchase
of
the
Poitras
shares
and,
in
September
1952,
the
appellant
accepted
his
offer
of
$160,000
for
these
shares.
The
appellant
then
exercised
its
option
and
paid
the
option
price
of
$50,000
to
Roger
Poitras,
took
delivery
of
the
shares
and
then
sold
them
to
Mr.
Strong
for
$160,000.
The
agreement
of
purchase
and
sale
also
provided
for:
(a)
the
cancellation
of
all
contracts
between
the
appellant
and
Poitras.
This
means
that
the
appellant
gave
up
its
right
to
receive
the
lumber
it
had
contracted
for;
(b)
the
payment
by
the
appellant
of
a
sum
sufficient
to
reduce
the
Poitras
bank
loan
to
$60,000;
(c)
repayment
of
the
appellant’s
advances
to
Poitras
amounting
to
approximately
$280,000
;
(d)
cancellation
of
the
appellant’s
guarantee
of
the
Poitras
bank
loan
when
it
was
reduced
to
$60,000.
It
is
apparent
from
this
outline
that
this
was
not
a
simple
purchase
and
sale
of
shares.
On
these
facts,
the
conclusions
of
the
learned
trial
judge,
in
my
respectful
opinion,
are
correct
and
unassailable.
He
found
that
the
appellant,
having
only
an
option
on
shares,
did
not
carry
out
its
plan
to
make
Poitras
a
subsidiary.
It
exercised
the
option
and
sold
the
shares
for
cash
and
the
other
stated
consideration,
and
this
gave
both
the
purchase
and
sale
of
the
shares
a
trading
character
rather
than
acquisition
and
realization
of
a
capital
asset.
He
therefore
correctly
held
that
the
profit
so
realized
was
a
profit
from
a
business
within
the
meaning
of
Section
3(c)
of
the
Income
Tax
Act
as
defined
by
Section
139(1)
(e),
and
was
properly
treated
as
income.
I
would
dismiss
the
appeal
with
costs.
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