Walsh,
J:—This
action
was
joined
for
hearing
with
T-1831-76
Gladstone
Investment
Corp
and
Her
Majesty
the
Queen,
the
facts
and
legal
issues
being
the
same
except
for
the
amounts
added
back
to
income
by
the
Minister
for
the
1969
and
1970
taxation
years
of
the
two
companies.
The
issue
arises
out
of
whether
two
sales
of
land
by
Place
Versailles
Inc,
acting
as
a
nominee
for
the
two
plaintiffs,
to
Eastmere
Investment
Corporation
on
February
13,
1969
and
January
30,
1970
resulted
in
profits
which
should
be
treated
as
capital
gain
or
as
a
trading
transaction.
The
land
in
question
has
been
purchased
in
1962
as
part
of
a
much
larger
area
on
which
a
shopping
centre
was
developed,
and
it
will
be
convenient
to
refer
to
the
land
so
sold
as
the
“apartment
house
land”.
According
to
the
figures
of
the
Minister
the
two
sales
resulted
in
a
profit
amounting
to
$241,290.39
in_1969
and
$320,618.37
in
1970
of
which
plaintiff
Choice
Realty’s
share
was
76
/3%
amounting
to
$184,997.34
in
1969
and
$245,818
in
1970
respectively
and
plaintiff
Gladstone
Investment
Corporation’s
23
/3%.
share
amounted
to
$56,293.05
in
1969
and
$74,800.37
in
1970.
These
were
the
amounts
added
to
income
of
the
two
corporations
by
the
Minister
in
his
assessment.
In
addition
to
the
contention
that
the
profit
so
realized
was
a
capital
gain
transaction,
which
would
not
be
taxable
by
virtue
of
the
law
in
force
in
1969
and
1970,
plaintiffs
raised
two
subsidiary
arguments
which
only
become
applicable
if
the
sale
is
found
to
be
a
trading
transaction.
The
first
of
these
arguments
is
to
the
effect
that
by
virtue
of
the
provisions
of
paragraph
85B(1)(d)
of
the
Income
Tax
Act
in
effect
at
the
time
they
are
entitled
to
a
reserve
with
respect
to
the
1969
taxation
year,
although
not
for
the
1970
sale
which
was
a
cash
transaction.
The
second
subsidiary
argument
is
to
the
effect
that
the
calculation
by
the
Minister
of
the
so-called
profits
is
incorrect,
plaintiff’s
cost
of
land
having
been
reduced
by
the
amount
of
expropriation
proceedings
pursuant
to
an
expropriation
effected
by
the
Government
of
the
province
of
Quebec
subsequent
to
the
agreement
to
purchase
but
before
the
deed
of
sale
was
signed,
plaintiff’s
contention
being
that
part
of
such
proceeds
represented
an
accretion
in
value
of
the
land
so
expropriated
which
should
not
be
used
to
reduce
the
cost
to
them
of
the
balance
of
the
land
which
includes
the
apartment
house:
land.
The
background
of
the
litigation
is
complex,
involving
a
considerable
number
of
individuals
and
corporations,
most
of
whom
were
not
dealing
together
at
arm’s
length
although
not
in
all
cases
related
within
the
meaning
of
subsections
(5),
(5a),
(5b),
(50),
(5d)
and
(6)
of
section
139
of
the
Act.
By
memorandum
of
agreement
entered
into
on
January
22,
1962,
with
Lanabar
Realty
Inc
(which
later
changed
its
name
to
Place
Versailles
Inc),
Harry
Dubrovsky
who
held
70%
of
the
shares
of
Lanabar
Realty
Inc
and
William
Gregory
who
held
29%
of
the
shares,
acting
as
nominees
for
Mrs
Gloria
Gregory,
Michael
Shoore,
Louis
Dubrovsky,
Harold
Rosen,
Fay
Cotier,
Explorer
Investment
Corporation,
Choice
Realty
Corporation,
and
Gladstone
Investment
Corporation,
acquired
a
parcel
of
land
of
an
area
of
approximately
2,872,637
square
feet
in
the
east
end
of
Montreal
bordering
in
part
on
Sherbrooke
Street
East
and
in
part
on
Montée
St
Léonard
from
La
Communauté
des
Soeurs
de
Charité
de
la
Providence.
This
property,
part
of
a
very
large
tract
of
land
owned
by
the
Sisters
had
outstanding
development
potential
in
that
it
is
unusual
to
find
in
an
urban
area
such
a
large
tract
of
vacant
land
with
residential
and
commercial
development
having
already
taken
place
in
the
immediate
vicinity.
At
the
time
it
was
in
the
town
of
Gamelin,
an
unusual
independent
municipality
consisting
almost
entirely
of
land
owned
by
La
Communauté
des
Soeurs
de
Charité
de
la
Providence
including
the
large
St
Jean
de
Dieu
Hospital
property
to
the
south,
and
as
a
result
was
not
subject
to
any
building
bylaws
or
restrictions.
The
promoters
of
the
development,
primarily
the.
Dubrovsky
family,
and
William
Gregory
who
owned
all
the
shares
of
Gladstone
Development
Corporation,
all
had
wide
experience
as
real
estate
developers
as
was
conceded.
Their
intention
was
to
develop
a
large
shopping
centre
and
other
ancillary
property,
as
in
fact
was
done.
They
foresaw
that
such
a
development
would
require
the
provision
of
extensive
municipal
services
and
that
the
town
of
Gamelin
was
bound
to
be
taken
into
either
the
city
of
Montreal
or
Ville
d’Anjou
to
the
North
at
an
early
date.
The
city
of
Montreal
had
building
bylaws
limiting
commercial
construction
to
a
depth
of
100-150
feet
on
Sherbrooke
Street.
They
had
discussed
zoning
with
Ville
d’Anjou
in
the
event
the
property
was
annexed
by
it
and
that
municipality
had
agreed
to
furnish
services
and
to
zone
the
property
as
commercial,
but
they
were
afraid
that
since
the
city
of
Montreal
had
more
influence
with
the
Quebec
authorities
the
property
was
more
likely
to
be
annexed
by
that
city
as
was
in
fact
done
by
the
Act
11-12
Elizabeth
II,
ch.
70
assented
to
on
April
24,
1963.
Being
astute
developers
they
decided
that
while
the
property
was
still
part
of
the
town
of
Gamelin
and
not
subject
to
restrictions
they
would
immediately
arrange
for
some
commercial
development
on
Sherbrooke
Street
so
that
if
and
when
the
property
was
annexed
by
the
city
of
Montreal
the
city
would
be
faced
with
existing
commercial
development
on
Sherbrooke
Street
before
its
bylaws
became
applicable.
A
Fina
service
centre
was
constructed
at
the
corner
of
the
property
using
a
depth
of
375
feet
on
Sherbrooke
Street
whereas
the
city
of
Montreal
normally
allowed
only
100
to
150
feet
and
also
had
a
bylaw
prohibiting
further
gas
stations
fronting
on
that
street.
Because
they
did
not
wish
to
alert
the
city
of
Montreal
to
their
acquisition
of
the
property,
the
purchase
memorandum
of
agreement
was
not
registered
against
it
and
was
kept
a
closely
guarded
secret.
The
actual
deed
of
sale
was
not
executed
until
August
6,
1962.
Meanwhile
in
April
1962
the
Fina
centre
had
been
built
and
in
June
or
July
construction
was
started
on
the
first
portion
of
the
shopping
centre
on
behalf
of
Steinberg’s,
Miracle
Mart,
and
35
other
stores.
Meanwhile
they
had
given
the
Sisters
an
additional
$100,000
to
extend
the
delay
for
the
signing
of
the
deed
for
60
days,
and
subsequently
another
$100,000
for
further
delay
of
60
days
until
the
Quebec
Legislature
Session
of
1962
was
closed
so
that
there
was
no
danger
of
the
city
of
Montreal
obtaining
annexation
of
the
property
that
year.
The
memorandum
of
agreement
previously
referred
to
provided
that
the
first
five
persons
named,
namely
Mrs
Gloria
Gregory,
Michael
Shoore,
Louis
Dubrovsky,
Harold
Rosen
and
Fay
Cotler,
acting
on
behalf
of
a
company
or
companies
to
be
formed
would
acquire
an
area
of
1,713,000
square
feet
referred
to
as
“shopping
centre
land’’
while
Gladstone
Investment
Corporation,
Choice
Realty
Corporation
and
Explorer
Investment
Corporation
would
acquire
the
remainder
of
the
total
area
of
2,872,637
square
feet
referred
to
as
“development
land”
in
the
said
memorandum.
The
development
land
was
vested
to
the
extent
of
70%
in
Choice
Realty
Corporation,
15%
in
Gladstone
Investment
Corporation
and
15%
in
Explorer
Investment
Corporation.
but
Subsequently
Explorer
Investment
Corporation
sold
its
share
to
the
other
two
owners,
the
resultant
ownership
at
the
date
of
the
sale
of
the
apartment
house
land
being,
as
already
indicated,
76%%
for
Choice
Realty
Corporation
and
23
/3%
for
Gladstone
Investment
Corporation.
The
shareholders
of
Choice
Realty
Corporation
who
are
Loudee
Holdings
Inc
hold
50%
of
the
shares
and
Fred-Mar-Da-Rick
Inc
hold
the
other
50%.
Louis
Dubrovsky
owned
100%
of
the
shares
of
Loodee
Holdings
Inc
and
the
shareholders
of
Fred-Mar-Da-Rick
are
the
four
sons
of
Harry
Dubrovsky
(paragraph
6(f)
of
the
defense
states
they
were
the
sons
of
Louis
Dubrovsky
but
this
was
amended
at
the
opening
of
the
hearing).
As
already
indicated
William
Gregory
owned
all
the
shares
of
Gladstone
Investment
Corporation.
It
was
conceded
that
part
of
the
income
of
Loudee
Holdings
Inc,
Fred-Mar-Da-Rick
Inc
and
Gladstone
Investment
Corporation
was
derived
from
purchase
and
sale
of
land
or
buildings.
The
two
sales
of
the
apartment
house
land
in
1969
and
1970
have
already
been
referred
to,
but
it
is
important
to
note
that
the
apartment
house
land
so
sold
did
not
constitute
all
nor
even
the
major
portion
of
the
“development
land”
owned
by
the
two
companies,
the
two
sales
involving
131,773.5
square
feet
and
208,374
Square
feet
respectively
or
a
total
cf
340,147.5
square
feet,
while
the
development
land
had
an
area
of
1,159,637
square
feet.
At
the
time
of
the
purchase
offer
and
the
signing
of
the
deed
of
sale
a
portion
of
the
property
which
was
situated
along
Montée
St
Léonard
at
the
corner
of
Sherbrooke
Street
and
on
the
northwest
side
of
Sherbrooke
Street
of
a
total
area
of
512,600
square
feet
had
been
expropriated
by
the
Provincial
Government
in
connection
with
the
construction
of
the
Trans
Canada
Autoroute.
The
deed
of
sale
therefore,
provided
for
the
reduction
of
the
area
sold
by
this
portion.
The
witness
Gregory
explained
however
that
the
Sisters
preferred
to
have
the
purchasers
carry
out
the
negotiations
with
the
Provincial
Government,
believing
that
they
would
be
able
to
secure
a
greater
indemnity,
so
the
purchase
price
of
$2,000,000
remained
unaltered
but
it
was
agreed
that
whatever
was
received
for
the
portion
expropriated
would
be
applied
in
reduction
of
the
balance
due.
A
table
prepared
by
a
representative
of
the
Minister
gave
the
actual
area
of
the
May
30,
1962
expropriation
as
513,115
square
feet.
In
any
event
there
was
a
retrocession
by
the
Provincial
Government
on
July
11,
1963
of
142,216
square
feet
which
apparently
it
did
not
require.
Since
at
the
date
of
the
expropriation
the
owner
of
the
expropriated
land
was
still
La
Communauté
des
Soeurs
de
Charité
de
la
Providence
the
retrocession
was
made
to
them.
A
further
expropriation
took
place
on
May
26,
1965,
however,
amounting
to
69,256
square
feet.
Another
expropriation
from
Place
Versailles
Inc
took
place
on
the
same
day
as
the
retrocession
on
July
11,
1963
and
amounted
to
73,241
square
feet.
The
net
area
of
land
remaining
was
2,359,241
square
feet
and
according
to
the
Minister’s
calculations
the
net
cost
of
this
was
$1,427,917.25.
The
calculation
is
involved,
contains
errors,
and
extended
litigation
took
place
between
Place
Versailles
Inc
and
La
Communauté
des
Soeurs
de
Charité
de
la
Providence
against
the
Minister
of
Justice
of
Quebec
which
ended
up
in
the
Supreme
Court.
The
parties
agreed
that
the
summary
of
the
expropriations
as
set
out
in
that
judgment
dated
October
5,
1976
is
correct
and
for
that
purpose
the
judgment
was
filed
as
an
exhibit.
The
actual
figures
respecting
the
amount
of
the
indemnity
only
become
relevant,
as
mentioned
earlier,
if,
as
a
result
of
concluding
that
the
subsequent
sale
of
a
portion
of
the
property
by
plaintiffs
to
Eastmere
Investment
Corporation
was
a
trading
transaction,
the
cost
to
them
of
the
property
so
sold
becomes
pertinent.
It
is
not
without
significance
however
that
the
total
area
of
the
property
Originally
bought
ended
up
by
being
substantially
reduced
as
a
result
of?various
expropriations,
the
first
of
which
was
between
the
date
of
signing
of
the
purchase
agreement
and
the
deed
of
sale.
Mr
Gregory
testified
that
they
had
sought
to
have
the
city
of
Montreal
zone
the
entire
property
as
commercial
but.
that
the
city
wanted
a
buffer
zone
to
the
north
adjacent
to
Ville
d’Anjou
for
apartment
development.
It
was
finally
agreed
that
about
2,000,000
square
feet
would
be
zoned
as
commercial
and
about
500,000
to
the
north
as
residential.
They
wanted
the
residential
area
zoned
to
permit
10
story
apartment
buildings
and
this
was
at
first
agreed
to
but
was
reduced
to
6
stories.
The
plan
of
February
21,
1963,
indicating
the
10
story
zoning
is
referred
to
in
the
Act
of
the
Legislature,
in
condition
1
of
the
conditions
of
the
annexation
of
the
land
by
the
city
of
Montreal
appearing
in
section
57
of
the
Act
11-12
Elizabeth
Il,
referred
to
above.
He
testified
that
the
Place
Versailles
shopping
centre
development
now
has
750,000
square
feet
of
buildings
and
uses
2,000,000
square
feet
of
land.
There
are
130
stores,
the
revenue
being
$4,000,000
a
year.
At
the
time
of
the
purchase
the
Rockland
shopping
centre
was
the
largest
in
the
Montreal
area
containing
800,000
to
900,000
square
feet
but
he
and
his
associates
felt
that
they
would
require
1,000,000
to
1,250,000
square
feet.
Their
intention
for
the
balance
of
the
property
was
to
use
it
for
ancillary
developments.
They
had
discussions
with
the
Holiday
Inn,
National
Bowling
Company
for
construction
of
bowling
lanes
and
restaurant,
a
Volkwagen
dealer
who
was
interested
in
80,000
square
feet
and
Texaco
which
wanted
to
locate
a
service
station
on
Montée
St
Léonard
but
was
unable
to
get
a
permit
from
the
city
of
Montreal
for
this
after
the
annexation.
The
National
Bowling
Company
went
bankrupt
a
few
years
ago.
After
the
first
development
phase
in
June
and
July
of
1962
already
referred
to
a
second
phase
took
place
in
1965
when
30
stores
were
built
between
the
Miracle
Mart
and
the
Sherbrooke
Street
parking
area.
The
next
expansion
in
1969
took
place
further
to
the
north
of
the
property
for
additional
shops
including
a
large
Pascal
hardware
store
and
a
5
story
office
tower.
In
1973
a
Bay
store
was
added
and
further
parking
area
to
the
north
adjacent
to
the
apartment
house
development.
A
movie
theatre
was
built
some
time
between
1962
and
1963.
Actually
the
developers
find
themselves
short
of
parking
area
and
had
to
lease
part
of
Hydro
Quebec
property
adjacent
to
their
property
and
across
the
road
consisting
of
60,000
square
feet
for
parking,
which
lease
commenced
January
1,
1964.
They
have
been
trying
to
buy
the
entire
Hydro
Quebec
property
of
220,000
square
feet
for
parking
which
includes
the
60,000
square
feet
leased
and
made
an
offer
for
it
in
1975
of
$251,250
which
was
refused
because
the
city
of
Montreal
indicated
it
was
interested
in
buying
the
property.
However
no
sale
to
the
city
had
taken
place
prior
to
1976
and
Place
Versailles
was
still
in
communication
with
Quebec
Hydro
respecting
the
purchase
of
this
property,
until
in
September
1976
Quebec
Hydro
sold
it
to
the
city
for
parking
in
connection
with
a
new
metro
station.
They
also
attempted
in
1973
to
move
a
proposed
street
situated
between
the
commercial
land
and
a
portion
of
the
apartment
house
land
still
owned
by
them
150
feet
to
the
north
so
that
it
could
be
rezoned
and
incorporated
into
the
commercial
centre
to
provide
additional
parking.
The
city
of
Montreal
had
previously
agreed
to
cancel
a
proposed
street
in
the
middle
of
the
property
which
had
never
been
constructed
but
on
which
sewer
and
water
lines
had
been
placed
to
serve
the
Miracle
Mart
store,
and
the
developers
were
hopeful
that
the
same
could
be
done
again
to
the
street
which
is
now
blocking
the
further
use
of
their
own
land
for
parking
purposes.
This
street
diversion
was
finally
refused
by
the
city
in
March
1976.
In
October
1973
they
also
bought
from
the
Sisters
a
large
parcel
of
land
on
the
south
side
of
Sherbrooke
Street.
When
Sherbrooke
Street
was
rebuilt
a
tunnel
had
been
constructed
under
it
although
it
is
closed
but
if
this
were
opened
it
would
give
access
to
this
property.
To
alleviate
the
parking
problem
they
also
attempted
to
build
a
parking
deck
over
the
existing
parking
area
to
the
south
of
the
Steinberg
Store
but
Steinberg’s,
while
not
objecting
to
the
deck
in
principle,
did
not
want
it
in
front
of
their
store.
Mr
Gregory
testified
that
Place
Versailles
Inc
acted
for
seven
corporations
namely
Loudee
Holdings
Inc,
Fred-Mar-Da-Rick
Investment
Corporation,
Faye-Bess
Investment
Corporation,
Harwell
Investment
Corporation,
Gladstone
Investment
Corporation,
and
Choice
Realty
Corporation
and
at
one
time
also
for
Explorer
Investment
Corporation.
The
shopping
centre
development
area
was
owned
by
Loudee,
Harwell,
Faye-Bess,
Fred-Mar-Da-Rick
and
Explorer
which
Originally
had
an
interest
in
part
of
it
before
selling
out.
The
development
land
as
already
explained
is
owned
by
Gladstone
and
Choice
in
proportion
of
23
/3%
to
76
/3%
respectively.
The
witness
in
addition
to
owning
through
Gladstone
Investment
Corporation
23
/3%
of
the
development
land
also
controlled
23
/3%
of
the
shopping
centre
through
Harwell
Investment
Corporation
of
which
his
four
children
are
the
shareholders.
The
other
76%%
of
the
shopping
centre
development
land
is
controlled
by
Loudee,
Fred-Mar-Da-Rick
and
Faye-Bess
with
the
latter
corporation
consisting
of
the
sisters
and
brothers
0‘
the
late
Harry
Dubrovsky
and
of
Louis
Dubrovsky.
The
original
planned
land
division
would
have
given
about
1,200,000
square
feet
to
the
shopping
centre
and
1,/00,000
to
the
development
portion
of
the
land
with
the
line
running
back
of
the
Miracle
Mart
store,
but
the
shopping
centre
expanded
rapidly
with
the
result
that
the
Pascal
store,
the
Bay
store
and
part
of
the
office
tower
are
built
on
the
development
land.
As
the
parties
did
not
wish
to
develop
the
apartment
house
land
themselves
they
attempted
in
June
1966
to
interest
Winston-Muss
(Quebec
Limited)
in
an
emphyteutic
lease,
Winston-Muss
being
large
American
developers,
and
submitted
a
draft
to
them.
The
latter
were
unable
to
get
financing
however
unless
they
held
title
to
the
land
so
this
fell
through.
Negotiations
were
then
taken
up
with
Toulon
Construction
and
with
Eastmere
Investment
Corporation
and
in
1967
they
began
to
negotiate
with
Mr
D
Deskin
an
architect
in
connection
with
an
emphyteutic
lease
for
the
apartment
house
land.
He
did
not
take
it
up
but
put
them
in
touch
with
one
Pat
Gavasi
who
was
interested
in
taking
25%,
and
Joseph
Brott,
also
a
builder,
Harry
Greenspoon,
an
architect,
and
Louis
Shoore.
Place
Versailles
Inc
also
took
a
25%
interest
in
Eastmere
Investment
Corporation.
The
arrangement
was
that
the
apartment
buildings
were
to
be
built
on
the
basis
of
an
emphyteutic
lease
which
would
yield
revenue
for
the
developers
for
the
duration
of
the
lease.
They
would
retain
title
to
the
land.
Financing
was
to
be
by
a
first
mortgage
guaranteed
by
Central
Mortgage
and
Housing
Corporation.
The
financing
was
arranged
through
Morguard
Investments
Quebec
Limited
a
very
experienced
corporation
in
this
field.
On
April
30,
1968
they
wrote
Eastmere
Investment
Corporation
to
advise
them
that
their
application
for
a
National
Housing
Act
insured
first
mortgage
loan
on
phase
1
of
the
Versailles
apartment
development
had
been
approved
subject
to
the
issuance
of
an
undertaking
to
insure
this
project
by
Central
Mortgage
and
Housing
Corporation
and
the
other
conditions
set
out
therein.
One
of
these
conditions
was
that
the
first
advance
must
be
drawn
by
October
1,
1968
or
the
loan
commitment
would
be
cancelled.
On
August
28,
1968,
CMHC
sent
to
Morguard
Investment
Corporation
their
undertaking
to
insure
subject
to
certain
relatively
minor
changes
in
the
plans
and
the
following
day
Morguard
sent
a
copy
of
this
letter
and
undertaking
to
insure
to
Mr
Gavasi
for
Eastmere
Investment
Corporation.
On
this
basis
excavation
was
commenced
immediately
by
the
developers
especially
in
view
of
the
requirement
that
the
first
advance
must
be
drawn
down
by
October
1,
1968.
it
was
not
until
October
17,
1968,
that
CMHC
returned
the
draft
emphyteutic
lease
which
they
had
in
their
possession
all
this
time
stating
that
a
clause
must
be
inserted
to
the
effect
that
in
the
event
of
repossession
by
the
mortgage
creditor
or
the
CMHC
they
would
be
exempt
from
payment
of
rent
and
that,
with
respect
to
transfer
of
the
rentals,
this
would
have
to
be
subrogated
to
the
rights
of
the
mortgage
creditor.
The
following
day,
October
18,
1968,
CMHC
wrote
to
Morguard
setting
out
as
a
special
requirement
for
insuring
the
loan
that
the
lender
should
obtain
a
title
of
absolute
ownership
in
the
property
before
any
claim
for
the
insurance
would
be
recognized
and
that
such
ownership
must
be
transferred
to
CMHC
free
and
clear
of
the
lease.
As
the
effect
of
this
would
be
that
plaintiffs
in
the
event
of
a
default
by
Eastmere
would
lose
title
to
the
land
it
was
impossible
for
them
to
proceed
with
the
emphyteutic
lease.
Eastmere
was
in
the
very
unfortunate
position
therefore
of
having
already
commenced
construction
but
now
being
unable
to
acquire
the
necessary
loan.
Whereas
funds
are
available
from
private
sources
for
commercial
developments
which
are
not
insurable
by
CMHC
the
witness
testified
that
it
was
impossible
to
get
funds
from
any
mortgage
lender
for
an
apartment
house
development
unless
same
was
protected
by
CMHC
guarantee.
Despite
the
commitments
made
CMHC
remained
adamant
in
their
requirements
and
letters
to
Morguard
brought
no
results.
It
was
therefore
necessary
to
consider
what
could
be
done
to
salvage
the
situation
and
it
became
necessary
for
plaintiffs
to
sell
the
property
to
Eastmere
Investment
Corporation,
and
abandon
the
intention
of
obtaining
revenue
from
an
emphyteutic
lease.
Fernand
Simon
testified
for
CMHC,
although
he
was
not
in
its
employ
at
the
time
in
question
and
has
no
personal
knowledge
of
the
dealings
of
the
Corporation
with
the
plaintiffs
herein
or
with
Eastmere
Investment
Corporation.
He
produced
two
circulars
of
General
Instructions
of
the
Corporation
relating
to
emphyteutic
leases,
dated
September
4,
1963,
and
August
4,
1967
respectively,
from
which
it
is
evident
that
the
requirements
of
the
Corporation
before
agreeing
to
insure
a
loan
on
the
proposed
emphyteutic
lease
were
those
generally
imposed.
He
testified
that
these
general
instructions
are
not.
for
internal
use
only
and
should
be
known
by
proposed
mortgage
lenders
seeking
to
have
their
loans
insured,
but
has
no
personal
knowledge
as
to
whether
they
had
been
communicated
to
Morguard
or
to
Eastmere
before
approval
of
the
loan,
or
before
Central
Mortgage
and
Housing
Corporation
had
on
August
28,
1968,
given
Morguard
its
undertaking
to
insure
without
calling
attention
to
this
requirement.
The
evidence
is
certainly
insufficient
to
justify
a
conclusion
that
plaintiff’s
intentions
of
disposing
of
the
apartment
house
land
to
Eastmere
by
means
of
an
emphyteutic
lease
were
in
any
way
unrealistic
or
incapable
of
being
accomplished.
Mr
Gregory
testified
that
no
plans
had
ever
been
made
after
1963
for
the
development
of
the
apartment
house
land
by
plaintiffs
themselves.
but
that
they
had
been
approached
by
other
people
in
this
connection
and
had
always
insisted
on
emphyteutic
leases.
Various
plans
had
fallen
through
in
1967
and
1968.
Negotiations
had
started
with
the
Eastmere
group
at
the
end
of
1967
or
early
in
1968
when
he
became
associated
with
it.
When
the
eventual
sale
was
made
to
Eastmere
he
guaranteed
payment
to
the
extent
of
12
/2%
but
has
never
paid
his
share
of
the
balance
of
price,
and
it
seems
likely
that
Place
Versailles
Inc
did
not
press
him
as
he
was
one
of
the
original
group
of
developers.
Joseph
Brott,
Harry
Greenspoon
and
Shoore
paid
amounts
totalling
$45,001.66
to
Place
Versailles
Inc
on
account
of
their
guarantees
but
apparently
Gavasi
made
no
payment.
The
statement
of
Place
Versailles
Inc
showing
advances
and
receivables
to
Eastmere
in
connection
with
the
apartment
building
indicates
that
in
addition
to
the
original
balance
of
price
due
on
the
first
sale
of
$100,000
additional
advances
were
made
from
time
to
time,
and
after
deducting
the
recoveries
there
was
still
a
balance
owing
in
1973
in
the
amount
of
$194,102.86.
This
has
little
to
do
with
the
tax
assessments
now
before
the
Court
but
corroborates
the
evidence
that
the
apartment
house
developments
were
not
successful
and
plaintiffs
have
not
been
paid
the
full
balances
due
on
the
purchase
price.
There
is
no
issue
between
the
parties
as
to
the
amount
of
the
purchase
price
which
presumably
approximated
the
market
value
of
the
property
at
the
time
of
the
two
sales
which
plaintiffs
were
obliged
to
make
to
enable
East-
mere
to
continue
with
the
apartment
house
construction
which
had
already
been
commenced
prior
to
the
first
sale.
Ralph
Welikovitch,
CA
auditor
for
Plaintiff
Choice
Realty
Corporation
although
not
Gladstone
testified
that
the
$194,000
loss
on
the
sales
were
charged
up
to
those
corporations
as
a
loss
on
capital
surplus.
While
some
slight
revenue
was
obtained
from
the
development
lands
in
1967
as
the
result
of
the
use
of
part
of
them
as
parking
space
for
the
shopping
centre,
and
the
carrying
charges
taxes
and
interest
had
always
been
charged
to
Gladstone
and
Choice,
it
was
not
until
after
1969
that
this
portion
of
the
property
was
really
developed.
As
previously
indicated
it
is
not
denied
that
Mr
Gregory,
the
members
of
his
family,
Louis
Dubrovsky
and
the
late
Harry
Dubrovsky
and
the
members
of
their
families
have
been
land
speculators
as
well
as
developers.
They
and
the
various
companies
involved
in
the
present
development,
including
the
two
plaintiffs
before
the
Court,
Choice
Realty
Corporation
and
Gladstone
Investment
Corporation,
as
well
as
Eastmere
Investment
Corporation,
and
Place
Versailles
Inc
are
all
so
closely
connected
that
in
determining
the
intention
of
the
two
plaintiff
corporations
at
the
time
of
acquisition
of
the
subject
property
it
is
necessary
to
look
at
the
background
and
experience
of
Gregory,
the
Dubrovsky’s,
and
their
associates,
and
their
intentions,
not
only
as
expressed
by
them,
but
as
indicated
by
the
course
of
conduct
they
followed
in
connection
with
the
subject
property.
A
substantial
part
of
the
evidence
adduced
relates
to
periods
subsequent
to
the
1969
and
1970
taxation
years
in
issue,
but
is
I
believe
admissible
as
indicating
the
consistent
progress
of
the
development,
not
only
with
respect
to
the
shopping
centre
land
but
with
respect
to
the
area
referred
to
as
Development
Lands
all
of
which
was
largely
envisioned
by
the
individuai
promoters
at
the
time
of
the
purchase,
although
its
success
may
have
been
more
rapid
and
exceeded
even
the
almost
certain
success
foreseen
by
them
at
the
time.
With
respect
to
the
background
experience
of
the
parties,
Gregory
has
since
1949
dealt
in
vacant
land
both
personally
and
through
various
corporations.
In
1959
he
formed
Gladstone
Investment
Corporation
for
the
purposes
of
buying
7,000,000
square
feet
of
land
in
St
Vincent
de
Paul
near
Montreal.
Part
was
sold
to
other
people
and
part
developed
as
apartments.
Three
million
square
feet
were
sold
at
once
for
a
small
profit
as
he
had
no
intention
of
holding
all
the
land.
No
one
was
interested
in
a
shopping
centre
there.
Some
of
it
was
expropriated
by
the
Provincial
Government
for
the
construction
of
the
Pix
IX
bridge
and
eventually
all
the
land
was
disposed
of.
In
these
transactions
he
and
thé
corporations
with
which
he
was
involved
acted
as
traders
and
were
taxable
as
such
on
their
profits
as
he
readily
admits.
With
respect
to
Louis
Dubrovsky
he
testified
that
he,
the
late
Harry
Dubrovsky
and
Gregory
were
the
prime
movers
in
the
present
project.
He
too
admits
having
been
involved
through
corporation
in
which
he
is
interested
as
well
as
personally
in
tax
cases
before,
winning
some
and
losing
some.
In
Harry
Dubrovsky
and
Louis
Dubrovsky
v
MNR,
[1970]
CTC
403;
70
DTC
6278,
the
brothers
were
held
to
be
taxable
on
the
basis
of
the
doctrine
of
secondary
intention.
On
the
same
basis
they
were
found
taxable
in
the
case
of
Varennes
Holdings
Corporation
v
The
Queen,
[1975]
CTC
230;
75
DTC
5164,
a
development
near
Montreal
in
which
Ace
Holdings,
another
of
Mr
Louis
Dubrovsky’s
companies
was
involved.
However,
as
is
frequently
stated,
each
case
must
depend
on
its
own
facts
and
even
a
speculator
is
entitled
to
make
a
capital
gain
on
land
dealings
on
occasion
if
the
facts
indicate
a
bona
fide
intention
of
development
of
the
property
for
income
producing
purposes
and
no
secondary
intention
of
disposing
of
it
at
a
profit
in
the
event
that
the
original
intention
is
frustrated
or
because
an
offer
which
is
too
good
to
refuse
has
been
made.
The
doctrine
of
secondary
intention
is
well
stated
by
Noel,
J
as
he
then
was
in
the
case
of
Paul
Racine,
Amédée
Demers
and
François
Nolin
v
MNR,
[1965]
CTC
150
at
159;
65
DTC
5098
at
5103
where
it
is
stated:
It
is
not.
in
fact,
sufficient
to
find
merely
that
if
a
purchaser
had
stopped
to
think
at
the
moment
of
the
purchase,
he
would
be
obliged
to
admit
that
if
at
the
conclusion
of
the
purchase
an
attractive
offer
were
made
to
him
he
would
resell
it.
for
every
person
buying
a
house
for
his
family.
a
painting
for
his
house,
machinery
for
his
business
or
a
building
for
his
factory
would
be
obliged
to
admit,
if
this
person
were
honest
and
if
the
transaction
were
not
based
exclusively
on
a
sentimental
attachment.
that
if
he
were
offered
a
sufficiently
high
price
a
moment
after
the
purchase,
he
would
resell.
Thus,
it
appears
that
the
fact
alone
that
a
person
buying
a
property
with
the
aim
of
using
it
as
capital
could
be
induced
to
resell
it
if
a
sufficiently
high
price
were
offered
to
him,
is
not
sufficient
to
change
an
acquisition
of
capital
into
an
adventure
in
the
nature
of
trade.
In
fact.
this
is
not
what
must
be
understood
by
a
“secondary
intention”
if
one
wants
to
utilize
this
term.
In
the
present
case
there
is
not
a
vestige
of
secondary
intention.
The
parties
clearly
wanted
to
develop
all
the
property
for
revenue
producing
purposes.
Their
plans
were
partially
frustrated
when
they
were
unable
to
get
the
entire
property
zoned
as
commercial,
but
they
nevertheless
continued
with
the
orderly
development,
first
of
the
shopping
centre
land,
then
of
the
development
land
behind
it,
and
could
have
used
all
of
the
property
eventually
zoned
as
apartment
house
land
for
commercial
development
had
this
been
possible.
When
this
could
not
be
done,
and
as
they
themselves
preferred
not
to
develop
the
apartment
house
land
personally
but
rather
to
let
someone
else
develop
it
(although
Gregory
did
have
an
interest
in
Eastmere
Investment
Corporation
as
did
Place
Versailles
Inc)
they
then
proposed
to
dispose
of
it
on
the
basis
of
continuing
to
draw
revenue
from
it
by
means
of
an
emphyteutic
lease.
This
was
not
an
unrealistic
proposal,
and
it
was
only
when
this
was
frustrated
by
the
stringent
requirements
of
Central
Mortgage
and
Housing
Corporation
in
the
event
of
default
by
the
borrower
before
they
would
insure
the
loan,
that,
then,
as
a
last
resort
they
were
obliged
to
sell
it.
While,
because
of
the
development
of
the
shopping
centre
and.
development
land
to
the
south
and
developments
in
the
area
generally
these
sales
resulted
in
a
profit,
especially
as
the
land
had
originally
been
purchased
at
a
very
low
price,
there
is
no
justification
for
concluding
that
they
had
at
the
time
of
the
purchase,
or
at
any
subsequent
time,
any
intention
of
selling
any
part
of
the
land.
Under
the
circumstances
I
conclude
that
the
profit
on
the
sale
of
this
land
constitutes
capital
gain
and
is
not
taxable
as
income
in
the
hands
of
Choice
Realty
Corporation
or
Gladstone
Investment
Corporation
and
their
actions
should
therefore
be
maintained.
As
a
result
of
this
conclusion
it
is
not
actually
necessary
to
deal
with
plaintiff’s
subsidiary
arguments,
but
since
the
litigation
might
reach
a
higher
court
it
is
desirable
that
I
should
make
a
finding
on
them.
With
respect
to
the
question
of
reserve
it
only
arises
with
respect
to
the
1969
taxation
year
when
the
first
sale
of
the
apartment
land
was
made
calling
for
a
balance
of
price
of
$100,000
payable
on
February
13,
1971.
Actually
this
balance
was
never
paid
although
as
previously
indicated
amounts
totalling
$45,001.66
were
paid
on
account
of
it
in
December
1972
and
April
1973.
The
question
of
a
reserve
was
never
raised
by
plaintiffs
in
their
notice
of
objection
to
the
Minister’s
assessment
as
required
by
section
165
of
the
Income
Tax
Act
in
effect
at
that
time,
and
it
was
first
raised
in
the
statement
of
claim
filed
on
April
12,
1976,
in
the
case
of
Choice
and
May
11,
1976,
in
the
case
of
Gladstone.
Subsection
85B(1)
and
paragraphs
(b)
and
(d)
of
the
Act
permitted
the
deduction
of
a
reserve
when
part
of
the
payment
was
to
be
made
in
a
later
taxation
year
and
the
taxpayer
was
using
an
accrual
basis
of
accounting.
I
have
examined
the
cases
of
Isadore
Weinstein
v
MN
Ft,
[1968]
CTC
357;
68
DTC
5332,
Bronze
Memorials
Limited
(No
2)
v
MNR,
[1969]
CTC
620;
69
DTC
9420
and
Heskel
S
Abed
v
MNR,
[1978]
CTC
5;
78
DTC
6007
to
which
I
was
referred.
In
the
latter
case,
in
reference
to
the
Weinstein
case
it
was
stated
at
20,
6018:
While
this
is
authority
for
the
conclusion
that
the
Minister
can
of
his
own
accord
apply
the
provisions
of
section
85B
this
is
nevertheless
contingent
on
the
taxpayer
failing
to
object
to
this.
While
it
cannot
be
said
in
the
present
case
that
Appellant
has
refused
to
agree
to
the
application
of
section
85B
in
his
case
by
the
Minister
since
this
issue
did
not
arise
as
long
as
he
was
denying
any
tax
liability
in
Canada
whatsoever.
I
do
not
believe
that
as
a
result
of
his
appeals
against
the
assessments
he
has
now
lost
this
option.
On
the
contrary
in
view
of
my
finding
as
to
his
taxability
in
Canada,
I
believe
he
should
now
have
this
option.
I
would
also
reserve
Appellant’s
right
to
agree
to
the
application
by
the
Minister
of
the
provisions
of
section
85B
of
the
Income
Tax
Act
to
his
assessments
for
the
years
in
question.
In
that
case
however
all
relevant
years
were
still
subject
to
reassessment.
In
the
Bronze
Memorials
case
however
my
brother
Gibson,
J
commented
at
623,
5423:
The
Minister
had
no
power
to
issue
a
reassessment
in
1965
since
more
than
four
years
had
elapsed
from
the
date
of
the
original
assessment
for
income
of
the
appellant’s
1959
taxation
year
pursuant
to
subsection
46(4)
of
the
Act
and
the
Minister
had
not
adduced
any
evidence
that
the
appellant
had
at
any
time
made
any
misrepresentations
or
committed
any
fraud
in
filing
its
return
or
in
supplying
any
information
under
the
Act.
In
the
present
case
it
is
not
a
question
of
the
Minister
wishing
to
reassess
the
taxpayer
by
allowing
a
reserve
in
plaintiff's
1969
return
after
more
than
four
years
have
elapsed
since
the
original
assessment
but
rather
of
the
taxpayer
first
raising
on
April
12,
1976
for
Choice
and
May
11,
1976
for
Gladstone
an
issue
which
it
should
have
raised
in
its
notice
of
objection
to
the
reassessment
of
December
5,
1974
for
Choice
and
December
2,
1974,
for
Gladstone.
While
it
was
not
at
the
date
the
issue
was
first
raised
in
the
statements
of
claim
too
late
for
the
Minister
to
re-assess
the
1969
taxation
assessments
nor
to
reopen
the
1972
and
1973
assessments
so
as
to
include
as
taxable
income
the
amounts
paid
in
those
years
the
Minister
was
certainly
under
no
obligation
to
allow
the
reserve
of
his
own
motion
when
making
the
original
reassessments,
nor
to
re-assess
again
on
receipt
of
the
statements
of
claim.
Plaintiffs
had
never
set
up
a
reserve
under
section
85B
with
respect
to
the
balance
of
price,
as
they
took
the
position
that
the
profit
on
the
sale
was
a
capital
gain
and
not
taxable,
and
it
would
appear
very
belated
for
them
to
seek
to
file
amended
returns
now.
The
second
subsidiary
issue
is
more
complex
and
I
do
not
propose
to
deal
with
the
actual
figures,
since
the
statement
on
which
the
Minister’s
reassessments
were
based
was
not
prepared
personally
by
Mr
Edwin
Dahms,
CA,
defendant’s
witness,
and
admittedly
contains
some
errors.
The
issue
is
whether
amounts
received
by
La
Communauté
des
Soeurs
de
Charité
de
la
Providence
between
the
date
of
the
promise
of
sale
agreement
of
January
22,
1962,
which
was
not
registered
against
the
property
and
the
deed
of
sale
on
August
6th,
1962,
and
applied
against
the
original
purchase
price
of
the
property
should
be
taken
into
account
to
reduce
the
cost
base
to
plaintiffs
of
the
remaining
property
including
the
apartment
house
land
with
which
the
present
actions
are
concerned
so
as
to
increase
the
profit
on
the
sale
of
same
to
Eastmere
Investment
Corporation.
The
promise
of
sale
agreement
called
for
the
purchase
of
approximately
2,872,637
square
feet
of
land
for
a
total
price
of
$2,000,000.
Notarial
fees
amounted
to
$4100
and
Property
Sales,
a
company
controlled
by
Messrs
Shoore
and
Gregory
who
acted
as
agents
remitted
their
commission
towards
the
satisfaction
of
the
purchase
price.
Accordingly
the
net
cost
to
Place
Versailles
Inc
would
have
been
$1,904,100
or
approximately
66¢
a
square
foot.
On
May
30,
1962,
the
Minister
of
Roads
of
Quebec
expropriated
513,115
square
feet
for
which
the
sum
of
$501,780.50
was
payable
to
the
Sisters.
In
due
course
on
July
11,
1963
142,216,000
square
feet
were
retroceded,
the
value
and
damages
being
established
at
$159,174.97
leaving
a
net
amount
payable
to
the
Sisters
of
$342,605.53.
On
the
same
day
however
73,241
square
feet
were
re-expropriated
the
indemnity
paid
being
$235,917.
This
was
strongly
criticized
in
the
Supreme
Court
judgment
respecting
the
indemnities
allowed
in
the
various
expropriations,
the
great
discrepancy
between
the
amount
credited
for
the
retrocession
and
that
paid
the
Same
day
for
the
re-expropriation
being
unjustifiable.*
On
March
10,
1966,
the
Sisters
sold
to
Place
Versailles
Inc
the
property
which
appears
to
be
that
which
was
retroceded
to
them
and
not
re-expropriated
for
$106,191.95.
Testimony
indicated
that
this
sum
would
not
have
been
actually
paid
at
the
time
but
was
credited
against
the
balance
due
on
the
original
purchase
price.
A
subsequent
expropriation
on
May
26,
1965
of
69,256
square
feet
for
which
$90,122.09
was
paid
does
not
enter
into
the
controversy
respecting
the
cost
to
plaintiffs
of
the
apartment
house
land
subsequently
sold
to
Eastmere
at
a
profit.
The
problem
arose
primarily
because
in
the
eventual
deed
of
sale
from
the
Sisters
it
was
provided
that
the
land
expropriated
(which
incidentally
according
to
the
deed
measured
512,600
square
feet
and
not
the
figure
which
the
parties
now
seem
to
have
agreed
on
of
913,115
square
feet)
would
be
deducted
from
the
land
purchased
without
any
change
however
in
the
purchase
price
of
$2,000,000
but
that
the
indemnities
to
be
paid
by
the
Government
for
the
expropriated
property
would
be
credited
by
the
Sisters
to
the
purchasers
in
reduction
of
the
purchase
price.
In
short
the
Sisters
would
receive
the
same
amount
whatever
was
paid
as
a
result
of
the
expropriation
and,
to
the
extent
that
the
purchaser,
who
represented
and
assisted
the
vendors
in
the
negotiations
and
litigation
with
respect
to
the
expropriation
indemnity,
succeeded
in
obtaining
more
or
less
than
66¢
a
foot
for
the
property
expropriated
the
balance
due
for
the
remaining
land
could
be
less
or
greater
as
the
case
might
be
per
square
foot.
Defendant’s
witness
Mr
Dahms
conceded
that
if
the
expropriation
had
taken
place
after
Place
Versailles
Inc
had
become
the
registered
owner
of
the
land
the
profit
portion
of
the
proceeds
of
the
expropriation
would
not
have
been
utilized
by
the
Minister
to
reduce
the
cost
base
of
the
balance
of
the
land
but
would
have
been
treated
as
a
profit
on
the
expropriated
property.
The
Minister
takes
the
position
however
that
since
defendant
!s
a
third
party
with
respect
to
any
agreement
between
the
Sisters
and
plaintiffs,
and
the
expropriation
had
to
be
made
from
the
Sisters
as
registered
owners
of
the
property
and
the
indemnity
paid
to
them,
the
purchasers
really
acquired
only
the
residual
property
after
the
expropriation
for
a
price
representing
the
balance
of
the
$2,000,000
due
after
deduction
of
the
proceeds
of
the
expropriations.
This
would
reduce
the
cost
base
of
the
residual
property
substantially
below
66¢
a
square
foot.
Articles
of
the
Quebec
Civil
Code
are
invoked.
Article
1478
is
involved
by
plaintiffs
and
it
reads
as
follows:
1478.
A
promise
cf
sale
with
tradition
and
actual
possession
is
equivalent
to
sale.
It
is
not
disputed
that
plaintiffs
had
possession
of
the
property
on
the
date
of
the
promise
of
sale
agreement.
Defendants
invoke
Article
2098
the
first
two
paragraphs
of
which
read
as
follows:
2098.
All
acts
inter
vivos
conveying
the
ownership
of
an
immoveable
must
be
registered.
In
default
of
such
registration,
the
title
of
conveyance
cannot
be
invoked
against
any
third
party
who
has
purchased
the
same
property
from
the
same
vendor
for
a
valuable
consideration
and
whose
title
is
registered.
It
would
hardly
appear
however
that
this
article
is
applicable
since
there
is
no
question
of
the
defendant
having
purchased
the
property
from
the
Sisters,
nor
any
dispute
between
defendant
and
plaintiffs
as
to
the
title
to
the
property.
In
the
Supreme
Court
judgment
respecting
the
indemnities
payable
for
the
expropriation
of
the
property
in
question
in
the
case
of
Place
Versailles
Inc
et
al
v
Minister
of
Justice
of
the
Province
of
Quebec
(supra)
Pigeon,
J
states
at
1128:
There
is
therefore
no
necessity
to
consider
the
effect
of
the
first
two
paragraphs
of
Article
2098.
It
is
sufficient
to
note
that
this
article
does
not
go
so
far
as
to
say
that
an
unregistered
document
may
never
be
invoked
against
third
parties.
While
it
was
entirely
proper,
and
in
fact
necessary
for
the
Minister
of
Justice
of
the
Province
of
Quebec
to
take
the
expropriation
proceedings
against
the
Sisters
who
were
still
the
registered
owners
of
the
property
and
to
pay
the
indemnity
to
them
as
he
would
be
unaffected
by
the
unregistered
agreement
between
the
Sisters
and
plaintiffs,
this
does
not
mean
to
say
that
for
taxation
purposes
we
should
not
look
at
the
realities
of
the
situation
which
were
that
any
amounts
payable
as
a
result
of
the
expropriations
to
‘the
Sisters
would
be
credited
against
the
purchase
price
and
the
lands
expropriated
would
of
course
not
then
form
part
of
lands
sold
to
plaintiffs.
Plaintiffs
refer
to
the
leading
case
of
the
Duke
of
Westminster
v
Commissioners
of
Inland
Revenue,
19
TC
490
in
which
Lord
Russell
of
Killowen
stated
at
524:
.
.
.
If
all
that
is
meant
by
the
doctrine
is
that
having
once
ascertained
the
legal
rights
of
the
parties
you
may
disregard
mere
nomenclature
and
decide
the
question
of
taxability
or
non-taxability
in
accordance
with
the
legal
rights,
well
and
good.
That
is
what
this
House
did
in
the
case
of
Secretary
of
State
in
Council
of
India
v
Scoble
(1903)
AC
299;
4
TC
618;
that
and
no
more.
If,
on
the
other
hand,
the
doctrine
means
that
you
may
brush
aside
deeds,
disregard
the
legal
rights
and
liabilities
arising
under
a
contract
between
parties,
and
decide
the
question
of
taxability
or
non-taxability
upon
the
footing
of
the
rights
and
liabilities
of
the
parties
being
different
from
what
in
law
they
are,
then
I
entirely
dissent
from
such
a
doctrine.
The
fact
that
nearly
98¢
a
foot
was
realized
for
the
expropriated
portion
of
the
property
as
against
the
66¢
a
foot
paid
for
the
entire
property
should
not,
it
would
appear
to
me,
have
the
effect
of
reducing
the
cost
base
of
the
remaining
land
to
some
630
a
foot
as
defendant
contends.
Rather
this
was
a
profit
realized
by
plaintiffs
on
the
sale
of
the
expropriated
land
and
should
have
been
treated
as
such
and,
if
not
tax-free
as
capital
gain,
on
which
there
was
no
tax
at
the
time,
have
been
taxed
accordingly.
This
is
all
the
more
true
since
it
was
some
of
the
best
portions
of
the
property
which
was
expropriated,
fronting
on
Sherbrooke
Street
and
the
Montée
St
Léonard.
Although
the
expropriation
indemnity
was
payable
to
the
Sisters
as
registered
owners
of
the
land
the
reality
of
the
situation
is
that
it
was
for
the
credit
of
Place
Versailles
Inc
representing
the
plaintiffs
herein.
The
parties
appear
to
agree
that
the
development
lands
remaining
after
the
expropriations
amounted
to
1,039,958
square
feet
of
which
340,148
square
feet
were
sold
to
Eastmere.
I
find
that
the
cost
of
acquisition
by
plaintiffs
of
the
land
so
sold
should
be
660
a
square
foot
to
which
of
course
would
be
added
certain
additions
to
cost
as
per
the
taxpayers’
records
as
allowed
by
the
Minister
for
the
purpose
of
establishing
the
cost
base.
Plaintiffs
would
therefore
succeed
on
this
second
subsidiary
argument
even
if
I
had
not
reached
the
conclusion
that
the
profits
on
the
dispositions
to
Eastmere
Investment
Corporation
constituted
capital
gain.
Costs
are
in
favour
of
plaintiffs
with
however
only
one
set
of
fees
being
allowed,
costs
of
the
other
action
being
limited
to
actual
disbursements.
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