Rip,
T.C.C.J.:—The
executors
of
the
Estate
of
the
late
George
A.
Richardson
("Estate")
disagree
with
the
respondent,
the
Minister
of
National
Revenue
("Minister"),
as
to
the
value
of
75,000
Cheyenne
Petroleum
Corporation
("Cheyenne")
shares
issued
to
George
A.
Richardson
("Richardson")
in
1979
for
his
past
services
to
Cheyenne.
The
Minister,
in
reassessing
for
1979,
determined
the
value
of
the
shares
to
be
$297,000,
or
$3.96
per
share.
Cheyenne's
shares
traded
on
the
Vancouver
Stock
Exchange.
The
estate
is
of
the
view
that
prior
to
the
shares
being
delivered
to
Richardson
they
were
subject
to
deposit
in
escrow
as
required
by
the
Vancouver
Stock
Exchange.
Thus
their
value
should
be
discounted
from
their
trading
price.
In
the
alternative,
the
shares
had
been
allotted
to
Richardson
in
1978,
or
at
the
latest
at
the
beginning
of
1979.
If
they
were
allotted
and
not
issued
then
the
value
of
the
right
Richardson
had
in
the
shares,
which
would
be
much
less
than
the
price
they
were
being
traded
at
the
date
they
were
allotted,
is
to
be
included
in
income.
The
Minister
is
of
the
view
that
the
shares
were
never
deposited
in
escrow
and
they
were
allotted
to
Richardson
about
the
time
they
were
issued
to
him.
The
Minister
allowed
no
discount
in
valuing
the
shares.
The
parties
agreed
on
the
following
facts
set
forth
in
the
appellant's
notice
of
appeal:
(a)
The
deceased
died
December
19,
1979,
aged
83.
In
his
lifetime
he
had
been
engaged
in
endeavoured
discovery
promotion
and
development
of
natural
gas
resources
in
what
became
known
as
the
Grizzly
Valley
Gas
field.
(b)
The
date
of
incorporation
or
amalgamation
of
Cheyenne
was
September
24,
1973.
At
material
times
its
shares
were
listed
for
trading
on
the
Vancouver
Stock
Exchange.
(c)
March
3,
1978,
the
directors
of
Cheyenne
adopted
a
resolution
for
allotment
of
75,000
shares
of
that
company
to
the
deceased
and
10,000
shares
of
that
company
to
one,
J.L.
Wilson
(now
deceased)
at
a
price
or
consideration
of
60¢
per
share
determined
by
the
Directors
pursuant
to
the
Company
Act,
R.S.B.C.
1979,
c.
59,
and
subject
to
deposit
in
escrow
as
required
by
securities
regulatory
bodies
and
to
approval
by
resolution
of
shareholders
of
the
company.
(d)
As
presented
by
the
directors
of
Cheyenne
to
a
meeting
of
its
shareholders
for
approval,
allotment
of
such
shares
was
described
to
be:
(e)
Respecting
J.L.
Wilson,
for
payment
for
services
provided
by
Mr.
Wilson
to
the
Company,
its
predecessors
and
the
Grizzly
Monkman
project
over
the
past
number
of
years
in
addition
to
the
duties
he
has
performed
as
a
director
of
the
company".
(f)
Respecting
Mr.
Richardson:
In
connection
with
the
significant
and
substantial
services
provided
by
him
to
the
company,
its
predecessors
and
the
Grizzly
Monkman
project
during
the
past
30
years
in
addition
to
the
duties
he
has
performed
as
a
director
of
the
company.
(g)
Approval
of
allotment
of
such
shares
was
adopted
by
resolution
of
members
of
the
company
May
12,
1978
subject
to
deposit
of
such
shares
in
escrow
upon
terms
and
subject
to
periodic
release
of
the
discretion
of
securities
regulation
bodies.
(h)
The
deceased
Mr.
Richardson
subscribed
to
a
regular
form
of
escrow
agreement
of
the
Vancouver
Stock
Exchange
and
of
the
British
Columbia
Superintendent
of
Brokers
August
8,
1978.
A
book
consisting
of
22
documents
was
filed
by
counsel
of
the
parties
as
Exhibit
A-1.
The
valuation
report
of
Cheyenne
shares
as
at
May
20,
1979
prepared
by
Dennis
Turnbull
(“Turnbull”),
C.G.A.,
referred
to
in
tab
20
of
the
Exhibit
A-1,
was
not
included
in
the
book
of
documents
but
was
provided
separately.
The
Minister
produced
two
statements
of
Cheyenne
filed
with
the
Vancouver
Stock
Exchange,
one
dated
June
8,
1978,
and
the
second,
May
31,
1979.
The
appellant
does
not
dispute
the
market
value
of
the
shares
at
$3.96
each,
determined
by
Turnbull.
The
appellant
states
that
since
the
shares
were
subject
to
deposit
to
escrow
they
were
worth
about
10
per
cent
to
20
per
cent
of
the
value
of
freely
traded
shares,
as
stated
by
Turnbull
in
his
report.
However,
Turnbull
was
of
the
view
that
the
shares
were
never
deposited
in
escrow
and
valued
the
shares
at
then
average
trading
price
on
May
30,
1979
($33,850
-:-
8558
shares).
The
exhibits
reflect
the
following:
(a)
A
notice
dated
April
12,
1978,
advised
members
that
the
annual
general
meeting
of
members
for
1977
of
Cheyenne
would
be
held
on
May
12,1978
to
consider,
amongst
other
things,
approving
the
issuance
of
75,000
common
shares
in
the
capital
stock
of
Cheyenne
to
Richardson.
The
Information
Circular
accompanying
the
notice
of
meeting
stated
that
two
directors,
Wilson
and
Richardson,
would
be
allotted
shares
in
the
corporation.
The
Information
Circular
states:
By
resolution
of
the
board
of
directors
of
the
company
made
at
a
meeting
held
on
March
3,
1978,
it
was
resolved
that
the
company
should
allot,
issue
and
deliver
to
the
following
present
directors
shares
in
its
capital
stock
subject
to
the
approvals
of
the
regulatory
securities
authorities
and
of
the
members
of
the
company:
1.
John
L.
Wilson:
Mr.
Wilson
is
to
be
allotted
10,000
Company
shares
in
payment
for
services
which
he
has
provided
to
the
company,
its
predecessors
and
the
Grizzly-Monkman
project,
over
the
past
numbers
of
years
in
addition
to
the
duties
he
has
performed
as
a
director
of
the
company.
2.
George
A.
Richardson:
Mr.
Richardson
is
to
be
allotted
75,000
company
shares
in
connection
with
the
significant
and
substantial
services
provided
by
him
to
the
company,
its
predecessors
and
the
Grizzly-Monkman
project
during
the
past
thirty
years
in
addition
to
the
duties
he
has
performed
as
a
director
of
the
company,
which
shares
are
to
be
issued
to
them
as
fully
paid
and
non-assessable
shares
subject
to
the
requirements
of
the
regulatory
securities
authorities.
In
the
past,
the
company
has
been
unable
to
properly
remunerate
Messrs.
Richardson
and
Wilson
for
their
services
due
to
financial
circumstances.
The
company
shares
to
be
issued
to
Messrs.
Wilson
and
Richardson
are
to
be
deposited
with
the
company's
registrar
and
transfer
agent
in
escrow
under
escrow
agreements
on
terms
as
may
be
required
by
the
regulatory
securities
authorities
subject
to
periodic
releases
in
the
discretion
of
the
regulatory
securities
authorities.
Under
the
circumstances
that
these
shares
are
to
be
deposited
in
escrow
and
thereby
no
subject
to
immediate
release
except
in
the
discretion
of
the
regulatory
securities
authorities
.
.
.
Apparently
Wilson
was
dissatisfied
with
the
number
of
shares
to
be
issued
to
him
and
had
advised
Cheyenne
he
would
take
legal
action
without
further
notice
if
Cheyenne
persisted
in
attempting
to
pursue
the
directors'
resolution
to
allot
Richardson
shares
in
excess
of
those
to
be
allotted
to
Wilson.
Obviously
no
shares
had
been
allotted
or
issued
to
Richardson
by
April
12,
1978.
Note
9
to
Cheyenne's
financial
statements
for
the
year
ended
June
30,
1978
stated
that
the
shares
were
issued
in
escrow.
(b)
Richardson
ceased
to
be
a
director
of
Cheyenne
on
May
12,
1978.
(c)
Richardson
executed
a
document
entitled
"Escrow
Agreement",
dated
August
8,
1978
(Exhibit
A-1,
Tab
8).
Richardson,
the
first
party
to
the
Agreement,
is
referred
to
as
a
shareholder,
but
the
name
of
the
corporation
of
which
he
is
a
shareholder
is
omitted.
An“
escrow
agent"
is
the
second
party
to
the
escrow
agreement
but
no
person
is
so
identified.
Finally
Cheyenne
is
referred
to
as
the
third
party.
The
president
and
secretary
of
Yorkshire
Trust
Company
("Yorkshire")
appear
to
have
executed
the
agreement.
However
there
is
no
description
of
Yorkshire's
interest
in
the
escrow
agreement.
The
escrow
agreement
also
appears
to
have
been
executed
on
behalf
of
the
escrow
agent,
but
the
name
of
the
agent
is
absent;
indeed,
the
same
persons
who
executed
the
escrow
agreement
on
behalf
of
the
escrow
agent
also
appear
to
have
signed
on
behalf
of
Cheyenne.
It
would
appear
however
Yorkshire
executed
this
escrow
agreement
sometime
in
May,
1979
(See
Appendix
VIII
of
Turnbull
Valuation
Report).
(d)
By
letter
dated
August
8,1978
Richardson
wrote
to
the
Superintendent
of
Brokers
of
British
Columbia
undertaking
to
lodge
in
escrow
with
Cheyenne's
registrar
and
transfer
agent
the
75,000
shares
pursuant
to
an
escrow
agreement
with
the
Vancouver
Stock
Exchange.
The
recital
to
the
latter
escrow
agreement
states
the
shares
of
Cheyenne
registered
in
Richardson's
name
"are
at
present
deposited
in
escrow
with
the
Vancouver
office
of
the
Yorkshire
Trust
Company.
.
.
."
Counsel
for
the
appellant
acknowledged
this
was
not
so.
Richardson
agreed
he
would
not,
without
the
written
consent
of
the
Vancouver
Stock
Exchange,
sell,
deal
in,
assign
or
transfer
in
any
manner
whatsoever
any
of
the
said
shares
and
that
the
certificates
representing
the
shares
deposited
in
escrow
would
not
be
released
from
escrow
without
the
prior
written
consent
of
the
Vancouver
Stock
Exchange.
(e)
By
letter
dated
January
16,
1979,
Mr.
F.
Michael
P.
Warren,
solicitor
for
Cheyenne
and
President
and
Director
of
Cheyenne
in
1979,
wrote
to
the
Vancouver
Stock
Exchange
that
his
firm
has
been
instructed
by
Cheyenne
"to
request
that
you
approve
the
issuance
by
the
company
of
the
escrow
shares
to
Messrs.
Richardson
and
Wilson”.
He
referred
to
the
situation
with
Wilson
"in
the
proposed
allocations
of
company
shares",
advising
the
"company
wishes
to
proceed
with
the
allotment
of
the
escrow
shares
regardless
of
what
action,
if
any
Mr.
Wilson
may
take
(f)
On
February
1,
1979
Mr.
Desmond
H.
Harrison,
Vice
President,
listings
of
the
Vancouver
Stock
Exchange
advised
Warren
the
Exchange
“now
consents
to
the
issuance"
of
the
shares
to
Richardson
and
Wilson
in
escrow.
(g)
On
May
11,1979
Cheyenne
issued
a
Treasury
order
to
Yorkshire
authorizing
and
directing
it
to
issue
a
certificate
representing
75,000
shares
to
Richardson.
The
order
states
the
shares
have
been
allotted
as
fully
paid
and
non-assessable.
(h)
On
May
30,
1979
the
Vancouver
Stock
Exchange
consented
to
the
release
of
the
75,000
shares
of
Cheyenne
"held
in
escrow"
pursuant
to
the
escrow
agreement
signed
by
Richardson
in
1978.
(i)
Yorkshire,
on
May
30,
1979,
advised
the
Vancouver
Stock
Exchange
on
that
day
it
issued
from
Treasury
75,000
shares
of
Cheyenne
to
Richardson.
It
is
quite
clear
that
no
shares
were
issued
from
Cheyenne's
treasury
before
May
30,1979
and
accordingly
none
of
the
75,000
shares
issued
to
Richardson
were
ever
deposited
in
escrow,
notwithstanding
the
documents
stating
they
were
or
the
purported
intentions
of
Richardson,
Cheyenne
and
Yorkshire.
Appellant's
counsel
then
argued,
if
I
understand
him
correctly,
that
notwithstanding
no
shares
were
issued
to
Richardson
before
May
30,
the
value
of
the
shares
should
be
discounted
on
the
basis
firstly,
the
directors
of
Cheyenne
allotted
the
shares
to
Richardson
before
that
time
and
secondly,
all
the
parties,
that
is,
Richardson,
Cheyenne
and
Yorkshire,
had
intended
that
the
75,000
shares
be
held
in
escrow.
The
British
Columbia
Company
Act,
R.S.B.C.
1979,
c.
59
authorizes
a
company
to
allot
shares:
section
41.
Section
42
refers
to
the
price
of
shares
to
be
“allotted
or
issued".
The
words
"allot",
“allotment”
and
“allotted”
are
peculiar
to
the
Company
Act,
in
particular
Part
3
concerning
corporate
finance.
None
of
the
Alberta
Business
Corporations
Act,
S.A.
1981,
c.
B-15,
the
Canada
Business
Corporations
Act,
R.S.C.
1985,
c.
C-44,
and
the
Ontario
Business
Corporations
Act,
R.S.O.
1990,
c.
B.16,
for
example,
use
these
words
in
provisions
analogous
to
Part
3
of
the
Company
Act.
Bouck,
J.
examined
the
meaning
of
the
words
"allotted"
and
“issued”
in
Milburn
v.
Copperbank
Resources
Ltd.
(1975),
58
D.L.R.
(3d)
138
(B.C.S.C.)
at
page
152:
The
words
“allot”
and
"issue"
and
their
derivatives
are
used
in
the
Companies
Act
in
various
ways.
It
is
not
clear
what
the
Legislature
actually
intended
the
words
to
mean
because
they
are
undefined
in
the
statute.
The
word
“allot”
has
been
defined
by
other
authorities
but
I
must
first
look
to
the
statute
to
see
how
the
two
words
interrelate.
Section
63
refers
to
entering
the
name
of
an
“allottee”
on
the
register
of
members
and
when
a
person's
name
is
on
the
register
of
members,
he
is
for
all
intents
and
purposes
a
member.
Section
42
states
that
no
shares
may
be
issued
until
fully
paid.
Section
47
says
that
within
one
month
after
allotment
and
payment
for
shares
the
company
shall
have
ready
a
share
certificate
for
delivery.
Other
sections
taken
together
with
the
above
seem
to
mean
that
the
company
may
not
allot
shares
from
its
treasury
in
the
sense
that
these
shares
are
reserved
for
the
allottee
and
issue
certificates
following
the
allotment.
On
the
other
hand
it
would
seem
that
only
those
shares
that
have
been
paid
for
should
be
shown
as
being
allotted
to
the
member
on
the
register
of
members.
The
reason
for
this,
is
that
the
register
of
members
is
used
to
calculate
who
is
entitled
to
vote
at
meetings,
to
dividends,
to
participate
in
the
distribution
of
the
proceeds
on
a
winding-up
etc.
Chitty,
J.
discussed
the
word“
"allotment"
in
Nicol's
Case
(1885),
29
Ch.
D.
at
pages
426-27:
There
is
no
difference,
as
has
often
been
pointed
out,
between
a
contract
to
take
shares
and
any
other
contract.
What
is
termed
"allotment"
is
generally
neither
more
nor
less
than
the
acceptance
by
the
company
of
the
offer
to
take
shares.
To
take
the
common
case,
the
offer
is
to
take
a
certain
number
of
shares,
or
such
a
less
number
of
shares
as
may
be
allotted.
That
offer
is
accepted
by
the
allotment
either
of
a
total
number
mentioned
in
the
offer
or
a
less
number,
to
be
taken
by
the
person
who
made
the
offer.
This
constitutes
a
binding
contract
to
take
that
number
according
to
the
offer
and
acceptance.
To
my
mind
there
is
no
magic
whatever
in
the
term
allotment”
as
used
in
these
circumstances.
It
is
said
that
the
allotment
is
an
appropriation
of
a
specific
number
of
shares.
It
is
an
appropriation,
not
of
specific
shares,
but
of
a
certain
number
of
shares.
It
does
not,
however,
make
the
person
who
has
thus
agreed
to
take
the
shares
a
member
from
that
moment;
all
that
it
does
is
simply
this:
it
constitutes
a
binding
contract
under
which
the
company
is
bound
to
make
a
complete
allotment
of
the
specified
number
of
shares,
and
under
which
the
person
who
has
made
the
offer
and
is
now
bound
by
the
acceptance
is
bound
to
take
that
particular
number
of
shares.
In
most
cases
the
act
of
placing
the
person
who
has
agreed
to
become
a
member
on
the
register
is
a
mere
matter
of
form,
and
may
be
described
as
a
mere
ministerial
act;
but
it
appears
to
me
that
in
point
of
law
all
that
is
done
by
the
process
I
have
just
indicated,
and
all
that
was
done
in
this
case,
was
to
make
a
complete
and
binding
contract.
In
Nelson
Coke
&
Gas
Co.
v.
Pellatt
(1902),
4
O.L.R.
481
(C.A.),
Maclennan,
J.S.,
said
at
page
489:
As
applied
to
a
fixed
quantity
of
anything,
or
a
fixed
number
of
shares,
the
word
"allotment"
can
mean
nothing
more
than
to
give,
to
assign,
to
set
apart,
to
appropriate.
The
word
has
all
these
meanings.
Nor
does
the
word
"issue"
in
the
present
case
mean
the
doing
of
any
particular
act,
and
I
think
"issue",
and
"allotment"
taken
together
mean
no
more
than
some
signification
by
the
company
of
its
assent
that
the
defendant
now
was
or
had
become
the
owner
of
the
number
of
shares
which
he
agreed
to
take.
On
the
facts
before
me
there
is
no
acceptance
by
Cheyenne
of
any
offer
by
anyone
to
take
the
shares
simply
because
there
was
no
such
offer.
Neither
the
formality
described
by
Chitty,
J.
nor
the
register
of
allotment
required
by
section
65
of
the
Company
Act,
for
example,
is
present
in
the
appeal
at
bar.
The
term
“allotted”
in
the
resolution
of
directors
of
Cheyenne
at
the
meeting
of
March
3,
1978
has
no
special
legal
or
technical
meaning
different
from
its
normal
meaning.
Fraser
and
Stewart,
at
page
213,
wrote:
In
its
proper
sense,
the
term”
"allotment"
signifies
a
positive
act
by
which
shares
authorized
but
unissued
are
allocated
to
an
applicant
by
the
duly
authorized
executive
authority
of
the
company.
The
Shorter
Oxford
English
Dictionary
on
Historical
Principles
defines
the
word
"allot"
as
follows:
1.
To
distribute
by
lot,
or
in
such
way
that
the
recipients
have
no
choice;
to
assign
shares
authoritatively;
to
apportion.
2.
To
assign
as
a
lot
or
portion
to;
to
appoint
(without
distribution);
hence,
to
appropriate
to
a
special
person
or
purpose.
.
.
.
The
word
"allot"
and
its
derivatives
add
nothing
to
the
word
“issue”
in
either
sections
41
and
42
of
the
Company
Act
or
the
director's
resolution
of
March
3,
1978.
The
word
“allot”
on
the
facts
before
me,
means
that
prior
to
unissued,
but
authorized,
shares
being
issued,
the
company
sets
aside
from
its
authorized
capital
the
number
of
shares
to
be
issued
to
specific
persons.
In
the
appeal
at
bar
—
and
in
most
other
cases
as
far
as
I
can
see
—
the
allotment
and
issuance
of
shares
are
contemporaneous.
I
have
not
been
given
any
example
where
the
procedure
to
issue
shares
in
a
company
under
the
Company
Act
is
any
different
from
the
issuance
of
shares
in
a
company
under
a
similar
statute
of
another
province
or
Canada.
I
understand
that
even
in
these
jurisdictions
it
is
the
practice
of
many
solicitors
when
drafting
directors'
resolution
authorizing
the
company
to
issue
shares
to
employ
the
phrase
“allot”
and
"issue".
Hence
I
cannot
agree
that
Richardson
had
received
some
right
to
the
shares,
which
had
a
value,
in
1978
or
early
1979
as
a
result
of
any
allotment.
As
far
as
the
relevance
of
the
intentions
of
Richardson,
Cheyenne
and
Yorkshire
is
concerned
I
need
only
refer
to
Friedberg
v.
Canada,
[1992]
1
C.T.C.
1,
92
D.T.C.
6031,
a
judgment
of
the
Federal
Court
of
Appeal,
where
Linden,
J.
stated,
at
pages
2-3
(D.T.C.
6032):
In
tax
law,
form
matters.
A
mere
subjective
intention,
here
as
elsewhere
in
the
tax
field,
is
not
by
itself
sufficient
to
alter
the
characterization
of
a
transaction
for
tax
purposes.
If
a
taxpayer
arranges
his
affairs
in
certain
formal
ways,
enormous
tax
advantages
can
be
obtained,
even
though
the
main
reason
for
these
arrangements
may
be
to
save
tax
(see
The
Queen
v.
Irving
Oil,
[1991]
1
C.T.C.
350,
(F.C.A.),
91
D.T.C.
5106,
per
Mahoney,
J.A.).
If
a
taxpayer
fails
to
take
the
correct
formal
steps,
however,
tax
may
have
to
be
paid.
If
this
were
not
so,
Revenue
Canada
and
the
courts
would
be
engaged
in
endless
exercises
to
determine
the
true
intentions
behind
certain
transactions.
Taxpayers
and
the
Crown
would
seek
to
restructure
dealings
after
the
fact
so
as
to
take
advantage
of
the
tax
law
or
to
make
taxpayers
pay
tax
that
they
might
otherwise
not
have
to
pay.
While
evidence
of
intention
may
be
used
by
the
Courts
on
occasion
to
clarify
dealings,
it
is
rarely
determinative.
In
sum,
evidence
of
subjective
intention
cannot
be
used
to
"correct"
documents
which
clearly
point
in
a
particular
direction.
See
also
Rose
v.
M.N.R.,
[1973]
C.T.C.
74,
73
D.T.C.
5083
(F.C.A.)
at
page
80
(D.T.C.
5087)
per
Jackett,
C.J.
The
facts
are
clear:
Cheyenne
allotted
and
issued
the
75,000
shares
to
Richardson
on
May
30,
1979.
Before
that
time
none
of
the
75,000
shares
had
been
allotted
or
issued
to
him.
The
value
of
the
shares
at
that
date
was
$287,000.
I
find
no
error
in
the
assessment
and
dismiss
the
appeal.
Appeal
dismissed.
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