Reed,
J:—This
is
an
appeal
from
an
assessment
of
the
Minister
of
National
Revenue
against
the
five
taxpayers
who
are
plaintiffs
in
these
actions:
George
L
Schneider;
George
L
Schneider
Limited;
Maplepark
Development
Limited;
Mohawk
Horning
Limited
and
Dekston
Limited.
The
Minister
assessed
the
proceeds
received
from
an
expropriation
of
73
acres
of
land
held
by
the
plaintiffs
and
others
as
business
income.
The
plaintiffs
argue
it
should
have
been
assessed
as
a
capital
gain.
The
land
in
question
was
acquired
in
1969
by
the
five
plaintiffs
in
association
with
three
others
(Messrs
De
Benedictis,
Di
Silvestro
and
O’Leary).
These
eight
formed
a
consortium
(a
corporation)
which
they
called
Desjardins
Estates
for
the
purposes
of
acquiring
and
developing
the
land
in
question.
In
early
1969
the
objectives
of
the
consortium,
as
appears
from
a
document
prepared
by
Mr
Schneider
and
entitled
“Basic
Points
for
the
Proposed
Consortium
or
Partnership
Agreement”,
were
described
as
follows:
(a)
to
acquire
approximately
73
acres
of
land,
more
particularly
described
as
.
.
.
(b)
to
develop
said
land
as
a
housing
and
commercial
subdivision
(c)
to
sell
said
developed
land
in
parcels
or
parts
as
deemed
most
profitable
(d)
to
engage
a
Director,
Secretary
and
Treasurer
to
manage
the
affairs
of
the
consortium.
The
basic
point
in
issue
is
whether
this
original
intention
of
the
consortium
changed
prior
to
the
expropriation
in
1976
so
that
the
land
at
that
time
was
being
held
not
for
the
purposes
of
development
and
resale
but
for
the
purpose
of
constructing
an
apartment/townhouse
complex
to
be
held
and
operated
by
the
consortium
for
its
rental
income.
It
is
clear
from
the
documentary
evidence
and
from
the
viva
voce
evidence
of
Mr
Schneider
that
the
original
intention
of
the
consortium
was
to
acquire
the
property,
develop
it
and
then
sell.
Mr
Schneider
gave
evidence,
which
I
have
no
reason
to
doubt,
that
at
least
by
February
or
March
1969
he
had
become
convinced
that
the
most
appropriate
use
of
the
land
was
not
for
subdivision
and
sale
of
single
family
dwellings
but
for
multiple
residency
apartment/townhouse
complexes.
This
conclusion
is
reflected
in
a
report
he
prepared
for
the
town
of
Dundas
in
February,
1969.
Accordingly,
he
maintains
that
he
came
to
the
conclusion
that
the
consortium
should
after
building
these
complexes
retain
them
as
investments
for
the
rental
income
they
could
produce.
While
Mr
Schneider’s
intention
seems
clear
one
cannot
automatically
in
this
case
equate
his
intention
with
that
of
the
consortium.
There
were
eight
shareholders
in
the
consortium;
six
held
a
10
per
cent
investment;
two
held
a
20
per
cent
interest
each.
Mr
Schneider
held
a
10
per
cent
interest
personally
and
a
10
per
cent
interest
was
held
by
George
L
Schneider
Ltd.
(Mrs
Schneider
represented
that
company
at
the
meetings
of
the
consortium).
In
addition,
Mr
Schneider
held
a
one-half
per
cent
interest
in
Maplepark
Developments
which
in
turn
held
a
20
per
cent
interest
in
the
consortium,
and
he
and
his
wife
were
two
of
the
seven
shareholders
who
owned
Mohawk
Horning;
Mohawk
Horning
held
a
20
per
cent
interest
in
the
Desjardins
Estates
consortium.
It
is
clear
therefore
that
Mr
Schneider
did
not
control
the
consortium.
I
was
referred
to
the
decision
of
this
Court
in
Kit-Win
Holdings
(1973)
Ltd
v
The
Queen
[1981]
CTC
43;
81
DTC
5030
at
47
[5035]
where
Mr
Justice
Cattan-
ach
had
been
able
to
hold
that
an
individual,
even
though
not
the
principal
shareholder
or
president
of
a
company
was
indeed
the
dominant
member
and
directing
mind
of
the
company’s
activities.
Thus
he
found
that
the
intentions
of
this
dominant
member
of
the
company
were
synonymous
with
the
intentions
of
the
company.
I
can
find
no
such
identity
of
intention
between
the
intentions
of
Mr
Schneider
and
the
intentions
of
the
consortium.
A
lack
of
identity
of
intention
appears
continually
upon
reading
the
minutes
of
the
shareholders’
and
directors’
meetings.
Is
there
then
sufficient
evidence
elsewhere
to
substantiate
the
claim
that
the
consortium
changed
its
intention
before
1975
when
expropriation
negotiations
commenced?
It
should
be
noted
that
none
of
the
other
members
of
the
consortium
were
called
to
give
evidence.
Much
was
made
of
the
fact
that
Mr
Schneider’s
original
proposal
for
remuneration
was
changed
to
allow
him
four
per
cent
of
the
profits.
It
was
argued
that
this
was
based
on
the
fact
that
the
consortium
was
thinking
of
four
per
cent
of
rental
income
and
therefore
demonstrated
a
changed
intention
on
the
part
of
the
consortium.
The
facts
are
as
follows:
the
original
proposal
in
January
1969,
made
by
Mr
Schneider
to
the
consortium,
was
that
he
be
made
director
having
authority,
among
other
things,
to
“negotiate
sales
agreements
for
the
land’’
and
that
his
remuneration
be
“a
fee
calculated
at
10
per
cent
of
the
consortium
profits,
before
taxes,
due
on
receipt
of
payment
on
sales
of
land’’.
It
was
agreed
at
a
meeting
of
January
13,
1969
that
Mr
Schneider
would
be
the
managing
director
of
the
consortium
but
his
remuneration
was
not
settled.
At
a
meeting
of
December
22,
1969
Mr
Schneider
made
another
proposal
regarding
his
duties
and
remuneration.
It
described
his
duties,
in
part,
as
including
responsibility
to
—
plan
the
staging
and
negotiate
with
the
authorities
concerning
the
various
phases
of
subdivision
agreements;
—
retain
and
co-ordinate
the
specialized
expertise
of
lawyers,
surveyors
and
engineers
as
required
to
develop
the
land;
—
negotiate
the
purchase
and
sale
of
lands
for
the
benefit
of
the
consortium.
The
suggested
remuneration
was:
(a)
if
any
land
is
sold
undeveloped,
the
fee
shall
be
5%
of
the
profit
to
the
consortium
before
taxes
or
distribution;
(b)
if
any
land
sold
has
been
rezoned,
the
fee
shall
be
7‘/2%
of
the
profit,
etc.;
(c)
if
any
land
is
sold
after
subdivision
registration,
the
fee
shall
be
10%
of
the
profit
to
the
Consortium
before
taxes,
etc.
The
minutes
of
the
December
22
meeting
of
the
consortium
disclose
that
this
proposal
was
rejected:
Mr
Schneider
proposed
a
managing
director’s
contract
.
.
.
there
followed
much
discussion
on
this
matter
.
.
.
It
was
suggested
that
if
a
percentage
fee
is
to
be
used,
it
should
not
be
a
varying
percentage,
as
proposed.
It
was
pointed
out
that
the
increased
value
of
the
property
due
to
development,
etc
would
automatically
result
in
a
proportionately
higher
remuneration,
in
comparison
with
the
sale
of
undeveloped
lands,
at
the
same
fee
percentage
.
.
.
It
was
moved
by
Anthony
Di
Silvestro
and
seconded
by
Antonio
Falcone
that
the
chairman,
John
Shea,
appoint
a
committee
to
work
out
a
schedule
of
fees
and
propose
an
offer
to
Mr
Schneider
for
a
management
fee
by
January
15,
1970.
The
fee
finally
settled
upon
was
four
per
cent
of
the
profits.
The
minutes
of
a
meeting
of
the
consortium
held
January
8,
1970
disclose:
.
.
.
it
was
finally
unanimously
agreed
that
George
L
Schneider
would
receive
4%
of
profit,
before
tax,
with
the
Company
paying
all
engineering,
consultants,
etc.
Frankly,
I
see
nothing
in
this
evidence
to
indicate
any
changed
intention
on
the
part
of
the
consortium.
All
it
illustrates,
to
me,
is
a
negotiation
about
the
total
amount
of
the
fee
to
be
paid
but
there
is
nothing
in
that
negotiation
which
demonstrates
any
intention
on
the
part
of
the
consortium
to
build
the
apart-
ment/townhouse
complexes
and
keep
them
for
the
rental
income
they
would
produce.
I
find
most
of
the
rest
of
the
evidence
relied
upon
to
demonstrate
this
changed
intention
equally
neutral
in
character.
It
was
argued
that
since
the
shareholders’
agreement
signed
on
January
17,
1970
by
all
the
members
of
the
consortium
provided
that
Desjardins
Estates
would
retain
$18,000
annually
of
profit
(if
profits
existed)
this
demonstrated
a
clear
intention
to
operate
the
development
for
investment
purposes.
In
my
view
it
does
not
do
so.
What
is
more,
another
clause
of
this
same
agreement
indicates
that
the
consortium
intended
to
sell
portions
of
the
property
as
and
when
it
became
advantageous
to
do
so:
if
at
any
time
and
from
time
to
time
any
portion
of
the
lands
owned
by
the
Company
are
sold
at
profit
and
Shareholder
S
holding
30%
of
the
issued
common
shares
of
the
capital
stock
of
the
Company
so
require,
such
profit
shall
be
distributed
pro
rata
among
all
the
shareholders.
Also
on
May
10,
1980
a
land
use
report
was
sent
to
the
Town
of
Dundas
in
support
of
its
application
for
a
change
in
the
zoning
of
the
area
proposed
to
be
developed
in
which
Desjardins
Estates
described
its
objectives
as
follows:
Desjardins
Estates
Limited
are
the
proposed
developers
of
the
assembled
land.
This
company
is
a
consortium
of
individuals
and
companies
organized
to
pool
the
talents
and
capabilities
of
land
development,
engineering,
construction
and
finance.
The
intent
is
to
both
develop
and
service
the
land
and
to
build
the
component
structures
and
buildings.
The
finished
units
to
be
held
and
operated
or
sold
as
circumstances
warrant.
There
is
certainly
nothing
in
the
consortium’s
own
description
of
its
intention
at
this
time
which
would
lead
one
to
the
conslusion
that
it
had
made
a
firm
decision
to
construct
the
apartments
and
townhouses
in
question
and
hold
them
for
investment
income.
Reference
was
made
to
a
portion
of
the
minutes
of
a
meeting
of
the
consortium
on
April
20,
1971.
A
discussion
had
apparently
taken
place
concerning
changes
in
the
development
proposal
required
because
the
Hamilton
Wentworth
Planning
Area
Board
had
changed
its
mind
and
reduced
the
estimated
number
of
people
it
was
prepared
to
see
accommodated
in
the
development
area
from
6,000
to
3,500.
The
minutes
read:
Reducing
the
proposed
population
of
6,000
people
to
3,500
would
result
in
a
reduction
of
approximately
one
million
dollars
in
the
anticipated
revenue
of
the
company.
Counsel
for
the
plaintiff
argues
this
clearly
refers
to
a
loss
of
annual
rental
income.
Counsel
for
the
defendant
argues
that
it
refers
to
a
loss
of
income
on
sale
of
the
developed
property.
In
the
absence
of
any
indication
as
to
how
that
estimate
was
arrived
at,
I
find
it
is
not
useful
one
way
or
the
other
as
proof
of
intention.
About
the
only
concrete
evidence
that
the
issue
of
operating
the
rental
complexes,
as
opposed
to
merely
building
them,
was
ever
discussed
is
found
in
the
minutes
of
meetings
of
the
consortium
in
July
and
August
1971.
Mr
Schneider
placed
the
following
item
on
the
agenda
of
the
August
16
meeting,
at
the
request
of
other
members
of
the
consortium:
AGENDA
4.
Policy
decision
on
the
future
of
Desjardins
Estates
(a)
To
sell
as
developed
land
(b)
To
build
and
operate
Housing
Project
(c)
Combination
of
(a)
and
(b).
Mr
Schneider
also
prepared
revenue
projections
based
on
the
alternatives
for
consideration
by
the
consortium.
But
I
do
not
find
any
clear
decision
recorded
in
the
minutes
that
the
consortium
decided
to
develop
the
land,
build
the
apartments
and
townhouses
and
to
operate
and
manage
them
thereafter
for
the
rental
income
they
could
produce.
At
this
time
the
consortium
was
investigating
financing
which
might
be
provided
to
it
by
certain
mortgage
companies,
in
order
to
commence
building
(should
it
ever
get
the
required
approval
of
the
Ontario
Municipal
Board
for
its
project).
The
consortium
found
that
lending
institutions
were
seeking
equity
participating
in
projects
at
that
time
because
of
the
low
interest
rates
prevailing.
In
the
minutes
of
August
16,
1971
regarding
this
issue,
the
following
is
found:
Discussion
ensued
as
to
the
“Equity
Participation’’
feature
demanded
by
most
mortgage
companies.
It
was
felt
that
the
consortium’s
basic
objective
was
to
build
and
operate
a
large
Apartment
and
Townhouse
complex;
however,
if
up
to
a
maximum
of
fifty
percent
interest
in
Desjardins
Estates
were
sold
to
a
mortgage
partner
the
income
loss
might
be
far
less
than
the
percentage
sold.
Given
all
the
circumstances
I
do
not
find
that
this
cryptic
remark
is
sufficient
evidence
for
me
to
hold
that
the
consortium
changed
its
original
intention
of
building
the
complex
and
then
selling
it,
either
in
part
or
completely.
The
reference
in
the
minutes
of
August
1971
is
too
slim
on
which
to
find
a
changed
intention
as
argued
by
the
taxpayer.
Reference
can
be
made
to
the
decision
of
the
Federal
Court
of
Appeal
in
Edmund
Peachey
Ltd
v
The
Queen,
[1979]
CTC
51;
79
DTC
5064
for
the
need
for
an
unequivocal
act
evidencing
intention
in
cases
such
as
this.
At
the
time
that
the
discussions
concerning
financing
were
held
they
were
completely
preliminary
in
nature.
Indeed,
financing
arrangements
were
never
completed
because
the
consortium
never
got
to
the
point
where
the
proposed
development
required
financing.
The
development
was
stalled
by
one
governmental
hindrance
after
another
so
that
it
never
did
receive
approval
of
the
Ontario
Municipal
Board
prior
to
the
expropriation
initiative
of
1975.
There
is
some
evidence
that
in
preliminary
discussions
with
lending
institutions
data
respecting
rental
revenue
properties
were
presented
to
the
institutions
and
one
sentence
in
a
document
prepared
for
distribution
to
lending
institutions
states:
“As
officially
sanctioned,
the
development
is
planned
as
a
one-ownership
rental
project.”
But,
again,
I
do
not
find
this
enough,
given
all
the
circumstances,
to
demonstrate
a
changed
intention
by
the
consortium.
Describing
the
projected
rental
revenue
would
be
a
natural
thing
to
do
for
a
prospective
lender
regardless
of
whether
the
consortium
intended
to
continue
to
operate
and
manage
the
development
of
its
construction
or
not.
Equally,
describing
the
development
as
a
“one-ownership
rental
project”
does
not
lead
to
the
conclusion
that
the
consortium
intended
to
manage
the
project
after
completion.
One
last
factor
remains
to
be
discussed.
Counsel
for
the
plaintiff
relied
heavily
on
the
fact
that
in
November
1973
ICI
Developments
(Georgetown)
Limited
offered
to
purchase
the
property
for
$3.5
million
and
the
consortium
refused
the
offer
and
made
a
counter
offer,
offering
to
sell
ICI
a
50
per
cent
equity
interest.
Reference
in
the
minutes
of
the
meetings
of
the
consortium
respecting
this
counter
offer
are
slim.
Indeed,
I
could
not
find
record
of
them
at
all.
The
only
written
evidence
of
the
counter
offer
filed
in
evidence
is
a
paper
entitled
“MEMORANDUM
—
To
the
Sale
of
50%
Ownership
of
DESJARDINS
ESTATES
LTD”.
It
is
dated
March
1,
1974
and
appears
to
be
an
internal
memorandum
from
the
files
of
Desjardins
Estates.
There
is
nothing
in
the
minutes
of
the
meeting
of
the
consortium
which
seems
to
authorize
the
making
of
this
counter
offer
or
discuss
the
consortium’s
intention
with
regard
to
it.
It
was
Mr
Schneider’s
evidence
that
one
reason
for
making
this
counter
offer
was
to
obtain
management
expertise
respecting
rental
projects
which
ICI
had,
and
indeed
the
text
of
this
March
memorandum
specifically
states
that
Desjardins
Estates
are
“desirous
of
broadening
their
financial
base
and
acquiring
Realty
Management
capability”.
It
is
difficult
to
know
exactly
how
much
to
read
into
this
evidence.
One
thing
is
clear,
the
minutes
of
the
meeting
at
which
the
consortium
turned
down
the
ICI
offer
contain
no
explanation
as
to
the
reason
for
doing
so.
In
addition,
Mr
Schneider’s
managing
director’s
report
to
that
meeting
described
the
ICI
offer
in
very
serious
terms.
There
is
no
indication
in
that
report
that
accepting
the
offer
would
be
a
substantial
change
in
the
objectives
of
the
corporation
(ie
relinquishment
of
its
alleged
intention
to
hold
the
developed
property
for
rental
income).
The
text
of
that
report
reads:
4.
While
we
are
not
promoting
the
idea
of
selling
Desjardins
Estates,
there
has
been
considerable
action
from
local
and
Toronto-based
realtors.
We
have
a
conditional
offer
of
sale
to
be
considered
and
we
comment
as
follows:
(a)
we
discussed
with
the
principal
as
to
the
matter
of
the
deposit.
He
agrees
that
this
could
be
held
in
trust
by
both
solicitors.
(b)
The
quantity
and
mix
of
units
noted
is
unrealistic.
He
agrees
to
quantity
and
mix
based
on
what
is
practical
and
attainable.
(c)
The
acre
valuation
for
partial
discharge
must
be
raised
to
$60,000
per
acre
to
be
safe.
(d)
The
realtor’s
fee
would
be
$80,000.
If
the
consortium’s
intention
was
as
Mr
Schneider
alleges,
I
think
one
would
have
found
either
in
his
report
or
in
the
minutes
of
the
meeting
discussing
this
offer,
some
reference
to
the
change
in
direction
accepting
such
an
offer
could
have
meant.
In
addition,
it
is
to
be
noted
that
in
the
1973
annual
report
of
December
16
prepared
by
Mr
Schneider,
and
sent
to
all
shareholders,
there
is
no
reference
to
an
objective
of
the
company
being
to
retain
the
rental
units
once
constructed
for
rental
income
purposes.
It
would
have
been
a
natural
place
to
find
such
a
reference
given
the
tenor
of
the
rest
of
that
report.
As
mentioned
above,
there
is
no
evidence
as
to
why
the
consortium
rejected
the
ICI
offer.
It
may
be
it
wished
to
continue
its
original
plan
and
develop
the
property
itself.
I
note
that
the
ICI
offer
was
made
conditional
on
the
vendor
obtaining
Ontario
Municipal
Board
approval
for
development
of
the
property,
something
the
consortium
had
not
been
able
to
do
up
to
that
time
for
itself.
I
do
not
recall
reference
having
been
made
to
this
in
evidence
nor
its
significance
being
discussed.
But,
in
any
event,
I
do
not
find
in
the
rejection
of
this
offer
sufficient
evidence
of
an
intention
as
alleged
by
the
taxpayer.
It
may
have
been
that
had
the
property
ever
actually
been
developed
the
consortium
might
have
made
the
decision
to
hold
it
and
manage
it
for
rental
income,
but
I
do
not
find
that
such
an
intention
existed
during
the
period
relevant
to
this
case.
Accordingly,
the
actions
will
be
dismissed.
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