Bonner,
T.C.J.:—
This
is
an
appeal
from
an
assessment
of
income
tax
for
the
1984
taxation
year.
In
his
return
of
income
for
the
year
the
appellant
sought
to
deduct
in
computing
income
the
sum
of
$65,000
which
he
described
as
“loss
on
guarantee
entered
into
for
fees".
In
making
the
assessment
under
appeal
the
respondent
disallowed
the
deduction.
The
appellant
objected
to
the
assessment
and
the
respondent
confirmed
on
the
basis
that
the
amount
claimed
had
not
been
shown
to
have
been
incurred
for
the
purpose
of
gaining
or
producing
income
from
a
business.
In
his
notice
of
appeal,
the
appellant
stated
"the
losses
were
realized
as
a
result
of
agreements
entered
into
for
the
purpose
of
earning
income
from
a
business
and
accordingly
should
be
allowed
as
an
expense
incurred
for
the
purpose
of
earning
income
under
subsection
18(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
appellant
now
asserts
that
the
amount
deductible
in
computing
income
for
the
year
is
not
$65,000
but
rather
is
$352,758.
The
appellant
contends
further
that
the
respondent
did
not
deal
with
his
notice
of
objection
“with
all
due
dispatch”
as
required
by
paragraph
165(3)(a)
of
the
Act.
The
appellant
sent
the
notice
of
objection
to
the
respondent
on
September
9,
1988.
The
respondent
confirmed
the
assessment
on
April
19,
1990.
I
do
not
propose
to
set
forth
an
account
of
the
intervening
events
as
revealed
by
the
evidence.
It
is
now
well
settled
that
where
there
has
been
a
failure
by
the
Minister
of
National
Revenue
to
act
with
all
due
dispatch
as
required
by
paragraph
165(3)(a)
of
the
Act,
the
taxpayer's
remedy
is
to
launch
an
appeal
following
the
expiry
of
the
90-day
period
under
paragraph
169(b)
of
the
Act
(Harald
Apfelbaum
v.
M.N.R.,
[1991]
1
C.T.C.
2599;
91
D.T.C.
800).
The
existence
of
that
remedy
makes
it
illogical
to
argue
that
the
legislation
must
be
construed
as
providing
that
an
otherwise
valid
assessment
loses
its
force
and
validity
as
a
result
of
delay
on
the
part
of
the
respondent
in
confirming.
I
therefore
turn
to
the
question
of
the
deductibility
of
the
appellant's
losses
under
the
guarantees.
The
appellant
is
a
chartered
accountant
practising
his
profession
in
Calgary.
He
and
his
wife
Terry
were
sole
shareholders,
directors
and
officers
of
Horaceville
Developments
Corporation
Ltd.
(hereinafter
"Horaceville").
That
company
carried
on
the
business
of
real
estate
syndication,
that
is
to
say,
it
acquired
rental
real
estate
projects
for
resale
to
syndicates
of
investors.
It
derived
income
from
the
resale
to
investors
of
one
of
the
projects.
On
all
projects
it
derived
income
from
fees
for
services
in
connection
with
the
formation
of
the
syndicates,
from
fees
earned
for
financing
the
acquisitions,
from
fees
earned
for
ongoing
management
of
the
projects
and
finally
from
fees
earned
for
providing
to
the
investors
guarantees
of
cash
flow.
The
appellant
was
in
charge
of
the
syndication
and
financing
operations
of
Horaceville.
Mrs.
Hill
was
in
charge
of
property
management.
On
January
15,
1981
Horaceville
entered
into
a
written
agreement
with
the
appellant
as
follows:
WHEREAS
Horaceville
carries
on
the
business
of
syndicating
and
managing
real
property
in
the
City
of
Calgary
and
surrounding
area,
and
WHEREAS,
Horaceville
earns
revenue
in
the
form
of
fees
for
syndicating,
managing
rental
properties,
guaranteeing
cash
flows,
and
arranging
financing
of
the
projects,
and
WHEREAS,
the
relation
maintained
by
Hill
with
the
Royal
Bank
of
Canada,
Horaceville’s
bankers
are
critical
to
the
success
of
Horaceville,
and
WHEREAS,
from
time
to
time
Hill
is
or
may
be
required
to
guarantee
loans
provided
by
the
Royal
Bank
of
Canada
to
the
projects
managed
by
Horaceville,
and
WHEREAS,
it
is
in
the
interest
of
Horaceville
to
request
Hill
to
provide
guarantees
to
the
bank
in
support
of
Horaceville’s
activities,
THIS
AGREEMENT
WITNESSETH,
(1)
that
Hill
shall
be
paid
fees
to
be
determined
from
time
to
time
as
full
consideration
for
providing
said
guarantees,
such
fees
to
be
paid
in
conjunction
with
other
fees
for
management
services
provided
to
Horaceville
by
Hill.
(2)
in
the
event
that
Hill
is
called
upon
by
the
bank
to
honour
his
guarantee,
Hill
shall
be
obliged
to
satisfy
the
bank
with
recourse
to
Horaceville
or
any
other
shareholders
of
Horaceville.
[Errors
in
spelling
and
grammar
are
from
original.]
Guarantees
were
given
by
the
appellant
to
the
bank
in
the
following
circumstances.
The
members
of
the
syndicate
paid
little
or
no
cash
to
Horaceville
for
their
interests
in
the
syndicate.
Each
provided
to
Horaceville
either
a
letter
of
credit
or
promissory
note.
Those
instruments
were
then
pledged
by
Horaceville
to
the
bank
as
security
for
a
loan,
the
proceeds
of
which
were
used
to
pay
the
cash
portion
of
the
purchase
price
of
the
project
being
bought
by
the
syndicate.
The
appellant
guaranteed
three
such
loans.
In
addition
he
guaranteed
a
loan
made
by
the
bank
to
Horaceville
to
enable
the
company
to
honour
its
guarantees
to
investors
relating
to
cash
flows.
Copies
of
the
guarantees
were
not
produced
in
evidence.
Horaceville
paid
fees
to
the
appellant
which
it
described
in
its
financial
statements
for
the
1981,
1983
and
1984
taxation
years
either
as
management
fees
or
as
management
fees
and
bonus.
The
appellant
testified
that
the
fees
thus
paid
were
in
part
consideration
for
the
provision
of
guarantees
as
contemplated
by
the
agreement
between
him
ana
Horaceville.
The
exact
amount
paid
as
consideration
for
the
guarantees
(if
any
was
paid)
was
never
identified
apparently
because
the
appellant
and
Horaceville
did
not
agree
on
any
breakdown.
T4
and
T4A
summaries
of
remuneration
paid
by
Horaceville
were
produced.
In
those
returns
Horaceville
included
under
the
heading
“other
income"
the
amounts
said
to
have
been
in
part
management
fees
and
in
part
consideration
for
the
guarantees.
In
my
opinion
the
assertion
that
Horaceville
paid
guarantee
fees
to
the
appellant
amounts
to
nothing
more
than
a
selfserving
reinterpretation
of
past
events.
Those
events
viewed
objectively
do
not
bear
that
interpretation.
It
could
have
happened
but
the
evidence
does
not
show
that
it
did
happen.
It
would
seem
that
the
appellant
borrowed
funds
from
the
bank
or
at
least
delivered
to
the
bank
promissory
notes
totalling
$230,000
in
connection
with
the
acquisition
by
him
of
one
"investor"
unit
in
each
of
the
syndicates.
In
a
schedule
marked
Exhibit
A-16,
the
appellant
asserts
that
$582,758
was
demanded
by
the
bank
in
relation
to
the
guarantees
of
Horaceville
debts
of
which
$230,000
relates
to
loans
arising
from
acquisitions
made
by
him
as
a
joint
venture
investor.
The
amount
claimed
is
the
difference
between
the
two
figures.
However,
the
basis
on
which
the
$582,758
figure
is
calculated
was
not
explained.
The
appellant
appears
to
have
asserted
the
$352,758
claim
for
the
first
time
at
the
hearing
of
the
appeal.
The
evidence
as
to
the
precise
components
of
it
is
quite
unsatisfactory.
On
May
14,
1984
the
bank
demanded
payment
from
Horaceville
of
a
number
of
loans
totalling
more
than
$2,000,000.
On
the
same
day
it
demanded
payment
from
the
appellant
of
$610,000
under
his
guarantees
of
the
debts
and
liabilities
of
Horaceville.
Negotiations
ensued
and
on
May
8,
1985
an
agreement
was
reached
between
the
bank
on
the
one
hand
and,
on
the
other
hand,
the
appellant,
his
wife,
Horaceville
and
one
other
company.
That
agreement
pro-
vided
for
a
general
release
by
the
bank
of
the
appellant,
his
wife
and
Horaceville.
In
consideration
payments
by
the
appellant
to
the
bank
totalling
$95,000
were
to
be
made
and
other
property
was
to
be
transferred.
The
appellant
produced
a
schedule,
Exhibit
A-16,
setting
forth
a
breakdown
of
the
sum
of
$140,723
said
to
have
been
the
total
paid
by
him
in
settlement
of
his
liabilities
to
the
bank.
It
was
the
appellant's
position
that
he
was
entitled
to
a
deduction
in
1984
of
the
entire
amount
claimed
by
the
bank
in
that
year
and
that
in
1988,
when
his
entire
liability
was
extinguished
as
a
consequence
of
payment
of
the
$140,723,
the
provisions
of
section
80
of
the
Act
would
apply.
The
appellant,
in
argument,
asserted
that:
From
the
Offering
circulars
to
the
Joint
Venture
agreements,
to
the
Banking
arrangements,
to
the
titles
of
the
properties,
to
the
financial
reporting
of
Joint
Venture
and
Horaceville
affairs,
all
the
evidence
points
to
the
indisputable
fact
that
Horaceville
was
a
general
agent
of
the
Joint
Ventures,
appointed
to
manage
all
aspects
of
the
joint
venture,
including
specifically
arranging
for
the
financing
necessary
for
the
projects.
This
agency
was
created
by
written
agreement
and
by
implication
and
confirmed
by
the
course
of
conduct
throughout
the
period
of
the
agency.
The
law
of
agency
clearly
states
that
the
acts
of
the
agent,
when
acting
within
the
authority
given
to
it
are,
in
fact,
acts
of
the
principle
[sic].
The
four
principles
[sic]
in
this
instant
are
the
four
Joint
Ventures.
Inasmuch
as
the
loans
were
therefore
the
loans
of
the
principles,
[sic]
namely
the
joint
ventures,
Hill
was
not
a
guarantor
of
Horaceville
Debts
but
was
a
guarantor
of
Joint
Venture
Debts.
Hill
had
been
contracted
as
a
third
party
to
provide
the
guarantees
and
had
been
compensated
significantly
for
providing
the
guarantees.
In
addressing
the
demand
for
the
repayment
of
the
loans
to
Horaceville,
the
bank
was
serving
notice
to
the
agent,
in
whose
name
the
loans
were
carried
for
and
on
behalf
of
the
Joint
Ventures.
Horaceville
perhaps
did
have
a
defence
against
the
liability
to
the
bank
inasmuch
as
the
bank
was
aware
of
the
agency,
however,
this
is
not
relevant
inasmuch
as
Hill's
liability
to
the
Bank
under
the
guarantee
was
indisputable.
These
facts
clearly
distinguish
this
case
from
M.N.R.
v.
George
H.
Steer
(66
D.T.C.
5481).
In
the
Steer
case,
the
Steer
guarantee
was
characterized
by
the
court
as
a
"deferred
loan”
to
the
company.
The
guarantee
was
for
loan
of
the
corporation
of
which
Steer
was
a
shareholder.
Steer's
compensation
for
said
guarantee
was
in
interest
in
a
Net
Royalty
Unit
Trust
which
unit
had
minimal
value
in
respect
to
the
size
of
the
loans
guaranteed.
Clearly,
from
a
practical
business
sense,
the
Steer
case
is
also
distinguishable
inasmuch
as
the
loan
guaranteed
was
used
to
create
capital
value
for
the
corporation
owned
by
Steer.
In
the
present
case,
all
the
economic
benefits
of
the
loan
were
for
the
account
of
the
joint
venture,
not
Horaceville,
and
not
thereby
indirectly
as
shareholder,
Hill.
[Errors
in
spelling
and
grammar
are
from
original.]
The
short
answer
to
all
of
this
is
that
the
claim
made
by
the
bank
was
based
on
guarantees
given
by
the
appellant
of
the
indebtedness
of
Horaceville.
Those
guarantees
were
not
known
to
have
been
given
in
the
course
of
a
business
or
adventure
in
the
nature
of
trade
involving
the
provision
of
guarantees
for
reward.
There
was
no
evidence
that
any
such
business
existed.
This
is
a
case
in
which
a
claim
for
payment
was
made
under
a
guarantee
given
by
a
shareholder
to
a
bank
to
induce
it
to
advance
the
capital
required
by
the
shareholder's
company
to
carry
on
its
business.
Such
a
payment,
when
made,
is
an
outlay
of
capital
(M.N.R.
v.
George
Steer,
[1966]
C.T.C.
731;
66
D.T.C.
5481).
No
such
outlay
was
made
by
the
appellant
in
1984.
Furthermore
in
1984
the
quantum
of
the
liability
was
not
fixed.
The
appellant
resisted
the
claim
for
$610,000
originally
made
by
the
bank
in
May
of
1984.
Over
the
next
year
he
succeeded
in
negotiating
it
down
and
settling
on
a
total
amount
of
$140,723.
No
loss
was
incurred
until
the
extent
of
the
outlay
required
to
meet
the
bank's
claim
was
ascertained
(Associated
Investors
of
Canada
Ltd.
v.
M.N.R.,
[1967]
C.T.C.
138;
67
D.T.C.
5096
and
The
Queen
v.
Burnco
Industries,
[1984]
C.T.C.
337;
84
D.T.C.
6348).
The
appeal
will
therefore
be
dismissed.
Appeal
dismissed.