Bouchard v. The Queen, 83 DTC 5193, [1983] CTC 173 (FCTD)

Cattanach, J:—The plaintiff is a man of homely philosophy and elemental ethics and principles, who has appealed decisions of the Tax Review Board whereby his appeals from assessments to income tax for his 1976 and 1977 taxation years were disallowed.

The system which the plaintiff formed for the conduct of life was dictated by his disadvantages which were overcome by his philosophies.

The plaintiff did not go beyond grade IV in school but despite that handicap he achieved success by energetic application to hard work.

He entered into a modest business of the supply of bearings which he developed into some fourteen retail outlets in the Ottawa Valley and adjacent to Quebec. He is no longer young but his ambition is undiminished. He hopes to extend his business from coast to coast in Canada.

That he achieved the success he has results from his continuing devotion to his business and giving the utmost service and satisfaction to his customers. He is available to them twenty-four hours in every day of the week.

When the business premises are closed the telephone is switched over to the plaintiff's home telephone where he, the president of the company, receives the telephone calls from customers and immediately undertakes to give them satisfaction. That is the service provided to the customers of the plaintiff’s company, by the plaintiff himself, to which he no doubt requires that his employees shall likewise conform. While this may be old fashioned it is refreshing to realize that some instances of business conducted on this base still survive and prosper.

The plaintiff’s philosophy is simply that nothing is acquired without working for it. He has sought to inculcate the like attributes in his family of seven.

This he has done by withholding of largesse. If one of his children wanted something the request did not automatically result in bountiful bestowal. Rather the suppliant was required to work for what was wanted. Nothing was freely given. It must be earned. Working to earn, in the plaintiff’s philosophy, builds character, self-discipline, moral strength, perseverance and self-confidence — a commendable objective. This the plaintiff did with all his children without discrimination.

The plaintiff is also averse to endorsing promissory notes as guarantor or acting as a guarantor “in any respect”. He was stuck once by such an endorsement and resolved that the experience would never be repeated. If he guarantees nothing he cannot be found liable as a guarantor — a simply straightforward solution.

That the plaintiff is opinionated and holds strong views cannot be disputed but neither can it be disputed that he is entitled to hold such views.

The plaintiff resents being put upon contrary to what he considers to be his just rights.

In the furtherance of that view he does not meekly submit to what he considers to be unjust assessments to income tax because it is easier to do so than to buck the system bolstered as it is by a statute designed by the tax collectors to make their basic task easier and supported by the judgment of an inflexible bureaucracy.

Rather if the plaintiff conceives an injustice to be wrought upon him he resists. He does not bare his neck to the guillotine of the arrogance of office. That is his right.

Naturally he does not hold the tax collector in high regard, a widespread attitude which has existed since the payment of taxes became the penalty for living in an organized society.

He does not accept the plaintive wail of the tax collector who meets with opposition that he is merely doing his job.

On the contrary he feels it is obvious that the tax collector takes a sadistic delight in exacting the maximum from the unwary taxpayer in that they are more competent in filching nickels and dimes from waitresses while incapable of attacking multinational corporations secure behind the ramparts of their tax havens.

But more vehemently the plaintiff resents what he considers] to be the unwarranted intrusion into purely a family affair and transaction.

It was just such a family transaction which gave rise to the reassessment by the Minister of the plaintiff for his 1976 taxation year.

The explanation anonymously proferred is reproduced:

Capital Gain on Sale of 84 Range Rd

Fair Market Value	$62,500
Less: Value at Dec 31, 1971	40,230
Capital gain	$22,270
Taxable portion of capital
gain—one half	$11,135

There are further reassessments for the plaintiff’s 1976 and 1977 years, giving rise to another issue which will be considered later and separately.

Of course the transaction which gave rise to the 1976 reassessment was most certainly an exclusively family transaction but the issue which will arise from the facts to be found and the law applicable thereto is whether that family transaction is such as attracts income tax.

Should that be so or is susceptible of being so then the tax collector would have been justified in his unwelcomed intrusion.

In 1963 the plaintiff’s son, Claude, who was married and had a family of two little girls, was walking with his wife in the fall of the year in Strathcona Park, bordering on the Rideau River as it flows through the City of Ottawa, Ontario and Range Road.

They met a friend, then a young lawyer but who is now a Provincial Court Judge, who knew that the young couple were anxious to purchase a home that was within their means, and who told them that 84 Range Road was for sale.

Mrs Mary Elizabeth Unger, who was the owner of 84 Range Road, had recently become a widow and was willing to sell her home. In fact there was a real estate agent’s For Sale sign on the premises.

Claude Bouchard and his wife, Pauline, forthwith presented themselves at the door of 84 Range Road which was close by, and were shown through the house by Mrs Unger.

Pauline Bouchard was greatly impressed with the house. It fulfilled all her expectations as her “dream home”.

Claude, conscious of his financial circumstances, as he still had two more years at university before he embarked upon the career for which he was preparing, ascertained that the price acceptable to Mrs Unger for the house was $23,000.

He suggested to Mrs Linger a down payment of $3,000 and a twenty-year mortgage for the balance of $20,000. Such an arrangement was agreeable to Mrs Unger but she was dubious of Claude’s ability to pay because of his youth and not being engaged in a paying occupation as yet.

Accordingly she would be willing to sell the property to the young couple if the husband came forward with a guarantor of sound financial worth.

The next day, a Sunday, the young couple were attending a family dinner with the plaintiff, his father, and other members of the family.

The subject of the purchase of 84 Range Road was raised and discussed at length in family conference.

True to his principles of endorsing a loan for no one, not even his son, the plaintiff countered with the proposal that he and his wife, Eva, would purchase the house from Mrs Unger for their son, Claude, and their daughter- in-law, Pauline, for their immediate occupancy and that the plaintiff and his wife would transfer the house to them when they were able to pay or had paid the purchase price of $23,000. The plaintiff’s wife was in full agreement.

The plaintiff, in company with his son, attended upon Mrs Unger and completed the sale from Mrs Unger to the plaintiff and his wife, (as joint tenants as the printed form relates) at the price of $23,000.

By instrument dated November 20, 1963 Mrs Unger conveyed title to 84 Range Road to the plaintiff and his wife as joint tenants and not as tenants in common in accordance with the printed short form of conveyance used to do so (see Exhibit D2).

As recited in the affidavit appended thereto the total consideration was $23,000 of which $3,000 was the down payment and the balance of $20,000 was secured by a mortgage back from the plaintiff and his wife, as mortgagors, to Mrs Unger, as mortgagee, with interest at 6 /2 per cent per annum payable in monthly instalments of $133.97 beginning on January 1, 1964 and ending December 1, 1973. The balance of the principal sum became due and payable on December 1, 1973 (see Exhibit D 7).

This was the arrangement negotiated by Claude with Mrs Unger except that the mortgage back for $20,000 was to be for a period of 25 years not 10 years. However in all likelihood upon the expiry of the period a new mortgage could be negotiated at the then prevailing interest rate.

Mrs Unger testified at trial to the above effect but she specifically added that the plaintiff stated to her unequivocably that he and his wife were purchasing the house for their son and daughter-in-law and that it would be transferred to them immediately upon the parents being reimbursed for the purchase price.

The down payment of $3,000 was paid to Mrs Unger by Claude. The plaintiff loaned his son that amount to make the down payment but of course it was included in the amount of $23,000 the son was obliged to repay his father, the plaintiff.

This was a somewhat unusual gesture by the plaintiff.

Thus the plaintiff and his wife became the registered or legal owners of 84 Range Road on December 2, 1963 pursuant to the conveyance (Exhibit D 2) dated November 20, 1963.

Claude and Pauline Bouchard, with their two children moved into 84 Range Road the same month, that is December, 1963.

But in accordance with his principles the plaintiff did not lay out $23,000 without the prospect of his son paying therefor.

The plaintiff got out an amortization book of tables and computed thereby that a monthly payment of $210 would cover interest and principal on the amount of $23,000 over a twenty-year period. The amount applicable to principal began at $76 per month but that would increase in each month corresponding to the decrease in the amount first attributable to interest. The amount of $76 was also the excess in each month of what the plaintiff received from his son over that he paid to Mrs Unger.

The plaintiff described the monthly amount as rent and included it as income in his tax returns throughout the relevant taxation years. He also claimed therein capital cost allowance on the premises.

When the couple moved into 84 Range Road they immediately assumed the mantle of ownership. Their friends and neighbours were so informed and considered the couple as owners. Certainly Claude and Pauline Bouchard considered themselves as the owners from the outset and both so testified.

In the latter part of the decade of 1960 the couple made extensive improvements to the house when they were in the financial position to do so.

The initial project was to remodel and modernize the kitchen at a cost in excess of $2,500 followed by the construction of a playroom in the basement at a cost of $6,000. Shortly thereafter a retaining wall had to be built at the driveway and incidentally, in addition to that necessary work, the single car garage was demolished to give a larger back garden and play area at a cost of a further $6,000. In addition to these expenditures which total $14,500 all made in the late 60s, ie, 1968-69 the interior of the house had been twice redecorated previously.

At the same time the son began to make substantial cash payments to his father, the plaintiff, to reduce the principal. He made payments in cash to his father in the amounts of $3,000 (that was the initial cash loan) plus other payments of $5,000 and $6,000 for a total of $14,000 although he was not specific when those payments were made nor the exact amount. He left it to his father to do the accounting.

Claude testified that there was no agreement reduced to writing to record this understanding. He was adamant that the house was theirs from December 1963 forward and that his father was helping them but it was mutually agreed and understood that when the principal of $23,000 had been paid in full a deed of transfer would be executed transferring the title to them. This was done on December 1, 1976 free and clear of all encumbrances (see Exhibit D1). The affidavit appended thereto indicates that the amount of $23,000 had been paid in full.

In the meantime the young couple prospered to the extent that after expending a substantial sum in excess of $14,500 upon remodelling, improving and maintaining 84 Range Road and making cash payments on account of principal of at least $14,000, they were able to take a holiday in Paris, France.

Mrs Pauline Bouchard testified that this holiday was taken in the spring of 1971.

While she was well aware of the verbal agreement made by herself and her husband with the plaintiff and her mother-in-law in both of whom she had implicit confidence, nevertheless she was concerned for the welfare of her two infant daughters if, during their impending vacation, she and her husband should meet with a common disaster or the unanticipated demise of the plaintiff. The equity in the home at 84 Range Road was their major asset and she wished to ensure that in the event of such possible tragedies as concerned her, the children would succeed to that asset.

Accordingly, while she fully understood the verbal arrangement, she wished something to be placed in writing indicative of their ownership or right to ownership of 84 Range Road.

The plaintiff and his wife were understandably prepared to relieve the anxieties of their daughter-in-law.

This resulted in the preparation and execution of an agreement of sale and purchase prepared by St Jacques and St Jacques, Barristers and Solicitors of Ottawa, Ontario on the instructions of the plaintiff, to achieve that end (Exhibit P 1).

This instrument was dated April 1, 1970 whereas the date of actual execution was April 1, 1971 just prior to the couple leaving for their vacation in France. That event fixed the date in Pauline Bouchard’s mind which she sought to relieve by the execution of some document in writing indicative of their ownership of an interest in the property.

Thus the salient facts which came to the attention of the employees of the Department of National Revenue were that in the fall of 1963 the plaintiff and his wife purchased 84 Range Road from the owner, Mrs Unger, for the purchase price of $23,000 and became the registered owners of that property.

That on April 1, 1971 (not April 1, 1970) the plaintiff and his wife entered into an agreement of purchase and sale with their son and daughter-in-law, Claude and Pauline Bouchard for that same property at the same purchase price of $23,000.

On December 1, 1976 in consideration of the payment of $23,000 the property at 84 Range Road was conveyed by the plaintiff and his wife as grantors to their son and daughter-in-law, Claude and Pauline Bouchard, as transferees and the deed was registered.

On the acceptance of those stark and unadorned facts the Minister assessed the plaintiff as he did on the basis of the explanation previously quoted by the addition of $11,350 as a capital gain realized in the plaintiff's 1976 taxation year by application of subparagraph 69(1 )(b)(i) of the Income Tax Act.

That paragraph reads:

69. (1) Except as otherwise expressly provided in this Act.

(b) where a taxpayer has disposed of anything

(i) to a person with whom he was not dealing at arm’s length for the proceeds or for proceeds or for proceeds less than the fair market value thereof at the time he so disposed of it,

he shall be deemed to have received proceeds of disposition therefor equal to that fair market value;

The object of subsection 69(1) is that where anything changes hands between persons not dealing with each other at arm’s length it shall be deemed to be at a consideration equal to the full fair market value of the thing transferred.

But by the transitional provisions 69(1 )(b) does not apply to deem a taxpayer by whom anything was disposed of at any time before the 1972 taxation year to have received the proceeds of disposition therefor equal to its fair market value at that time.

Thus the market value was fixed, probably by an assessor or a like employee in the Department, at $62,500 in 1976 and at December 31, 1971 (the cut-off date) as at $40,230. The subtraction of $40,230 from $62,500 gave the result of a capital gain of $22,270 and a capital gain of one-half of that amount was added to the plaintiff’s income in 1976.

The computation of the amounts is not in issue between the parties, only the taxability thereof is in issue.

Simply put, the position taking the Minister is that:

(1) the plaintiff purchased 84 Range Road from the owner on December 2, 1963 for $23,000.00;

(2) the plaintiff sold the property approximate to December 31, 1971 for $23,000.00;

(3) the plaintiff received the purchase price of $23,000.00 in full and transferred the property on December 31, 1976;

(4) by operation of subparagraph 69(1 )(b)(i) of the Income Tax Act the plaintiff is deemed to have received the fair market value at the time of disposition;

(5) the fair market value at that time was in excess of the purchase price received,

and

(6) as a consequence the plaintiff realized a taxable capital gain.

The first two premises accepted by the Minister are the salient facts upon which the remainder follow as a consequence thereof by operation of the Statute.

In contradiction thereof it is contended on behalf of the plaintiff that there had been no such disposition of the property but that it was held on December 1, 1963 by the plaintiff and his wife in trust for their son and daughter-in-law.

It is true that at that time there was no mention of the word “trust” in discussions among the four principals to the transaction but a trust can be created without the use of the word “trust”. Equity looks to the intent rather than the form and if an intention to create a trust can be unmistakably inferred the court will give effect to that intention.

Despite the difficulty in giving an all-embracing definition of a trust the concept thereof is easy enough to grasp. The general idea of a trust is that one person in whom property is vested is compelled in equity to hold the property for the benefit of another.

Lord Lindley said in Hardoon v Belilios, [1901] AC 118 at 123:

All that is necessary to establish the relationship of trustee and cestui que trust is to prove that legal title was in the plaintiff and equitable title was in the defendant.

Perhaps it might be simpler to say that the trustee is the nominal owner, while the cestui que trust is the beneficial owner, of the property.

In his statement of claim the plaintiff alleges in paragraph 3(i), (ii) and (iv) as follows:

(i) In 1963 the Plaintiff’s son Claude Bouchard and his wife Pauline became interested in purchasing a house at 84 Range Road in the City of Ottawa. The couple sought to have the Plaintiff endorse a loan of $23,000. for the purchase of the property but he refused since, as a matter of business policy, the Plaintiff does not endorse loans for anyone not even members of his immediate family.

(ii) The Plaintiff, however, did agree to purchase the property and hold same for his son and daughter-in-law. The agreement between the parties was that the Plaintiff would advance the funds and have the property registered jointly in his name and that of his wife until his son and daughter-in-law were able to repay the $23,000. which he had advanced on their behalf. In the interim rent would be charged to the Plaintiff’s son and daughter-in-law in order to provide the Plaintiff with some return on the money which he had advanced. In addition to receiving rent the plaintiff deducted capital cost allowances and charged operational expenses.

(iv) The property was held by the Plaintiff and his wife until the beneficial owners thereof should repay the debt. The son and daughter-in-law treated the property as their own making substantial repairs thereto, prior to having it formally deeded to them, on the understanding that they were the beneficial owners thereof.

These allegations of facts, if susceptible of being proven and are proven, are sufficient to establish the creation of an express trust by the plaintiff and his wife as trustees in favour of their son and daughter-in-law as beneficiaries subject only to the repayment of the amount of $23,000 expended by the plaintiff and his wife to purchase the property.

There is no question in my mind that the plaintiff being the initiator of the manner in which the property would be purchased is a person entitled to declare the trust. He is the person entitled to say that there is a trust and what that trust is.

Section 9 of the Statute of Frauds, RSO 1980, c 481 reads:

9. Subject to section 10, all declarations or creations of trusts or confidences of any lands, tenements or hereditaments shall be manifested and proved by a writing signed by the party who is by law enabled to declare such trust, or by his last will in writing, or else they are utterly void and of no effect.

Section 10 provides an exception for trusts arising, transferred or extinguished by implication of law.

If the plaintiff had reduced the trust to writing the difficulties he now faces may not have arisen. But in the light of his concept that family transactions remain transactions within the family it is not surprising that he did not seek legal advice. In this modern age in business and otherwise caution dictates that the income tax implications of transactions should not be overlooked.

The defendant in her defence to the allegations in the statement of claim quoted above, through the Deputy Attorney General, replied as follows:

4. He denies paragraph 3(i) of the Statement of Claim and puts the Plaintiff to the strict proof thereof.

5. With respect to paragraph 3(ii) and 3(iv) of the Statement of Claim, he admits that the Plaintiff purchased the property, rented it to his son and daughter-in-law, deducted capital cost allowances and charged operational expenses thereon but, otherwise, denies said paragraphs.

As I appreciate the contention on behalf of the defendant in this respect it is that upon the principle that the plaintiff herein pleaded that he had agreed to purchase the property and to hold the same for his son and daughter-in- law it is incumbent upon him to prove the special trust which he alleges.

In paragraph 3(ii) the plaintiff pleads a parol agreement or declaration in the initial sentence.

In paragraph 5 of the defence the defendant denies this allegation.

Where a parol agreement is pleaded the adverse party can deny its existence. This is what was done.

Then it is open to the defendant to plead, in the alternative, that if such an agreement exists it is invalid by reason of the Statute of Frauds. This was not done.

Rule 409 of the Federal Court Rules provides:

Rule 409. A party shall plead specifically any matter (for example, performance, release, a statute of limitation, prescription, fraud or any fact showing illegality)

(a) that he alleges makes a claim or defence of the opposite party not maintainable,

(b) that, if not specifically pleaded, might take the opposite party by surprise, or

(c) that raises issues of fact not arising out of the preceding pleading.

The omission to plead the Statute of Frauds precludes the defendant from placing reliance on the Statute (see Wilson, J in Bjorklund v Gillott, [1955] 5 DLR 466 at 469.

The questions that remain, however, are whether the plaintiff is entitled to prove a parol trust in favour of his son and daughter-in-law and if so has he done so.

The law, prior to Rochefoucauld v Boustead, [1897] 1 Ch 207, was as set out when Lord St Leonards wrote in his book on vendors and purchasers, Synder’s Vendors and Purchasers, 14th Ed p 703 pl 15, viz:

Where a man merely employs another person by parol, as an agent to buy an estate, who buys it for himself and denies the trust and no part of the money is paid by the principal and there is no written agreement, he cannot compel the agent to convey the estate to him, as that would be directly in the teeth of the Statute of Frauds.

This statement was relied upon and applied by Kekewich, J in James v Smith, [1891] 1 Ch 384 as was Bartlett v Pickersgill, 1 Eden 515.

In Hull v Allen, [1902] 1 OWN 782, Boyd, C speaking on the question of parol evidence to establish a trust said:

. . .the parol evidence was insufficient to establish a case in the acquisition of land held by the defendant so as to give relief to the plaintiff notwithstanding the Statute of Frauds. Doubtless the law as set forth in James v Smith, (1891) 1 Ch 388, (384 is the correct page) is modified and perhaps changed entirely by Rochefoucauld v Boustead (1897) 1 Ch 207; but it is essential that the evidence of such alleged trust be clear and complete to the satisfaction of the Court.

In Rochefoucauld v Boustead (supra) there had been a conveyance to the defendant absolutely but the plaintiff insisted that the estates were conveyed to the defendant as trustee for the plaintiff subject to the repayment of the amount the defendant had paid for them. (This is a like condition which the plaintiff in the present appeal alleges that he had imposed upon his son and daughter-in-law.)

The Court of Appeal came to the conclusion that the plaintiff had proved that the estates in question were conveyed to the defendant upon trust for her subject to the charge mentioned.

That conclusion rendered it necessary to consider whether the Statute of Frauds affords a defence to the plaintiff's claim.

Lindley, LJ speaking for the Court referred to prior decisions interpreting the Statute of Frauds as requiring the proof of some evidence or writings signed by the defendant not only that the conveyance to him was subject to some trust but also what that trust was.

Consequent upon such proposition Lord Lindley then made the statements which have been cited and followed in the United Kingdom and the Courts in the Provinces of Canada.

He said at 206:

But it is not necessary that the trust should have been declared by such a writing in the first instance; it is sufficient if the trust can be proved by some writing signed by the defendant, and the date of the writing is immaterial.

The statements by authoritative authors on trusts to the effect that a trust operates from the time of its creation, however late the proof, are consistent with this statement by Lindley, LJ who continued to add:

It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself. This doctrine was not established until some time after the statute was passed. In Bartlett v Pickersgill the trust was proved, and the defendant, who denied it, was tried for perjury and convicted, and yet it was held that the statute prevented the Court from affording relief to the plaintiff. But this case cannot be regarded as law at the present day. The case was referred to in James v Smith (2), and was treated as still law by Kekewich J; but his attention does not appear to have been called to Booth v Turle (3), nor to Davies v Otty (No 2) (4), both of which are quite opposed to Bartlett v Pickersgill. (1) So is Haigh v Kaye. (5) The late Giffard LJ, one of the best lawyers of modern times, speaking of Barlett c Pickersgill (1), said: “It seems to be inconsistent with all the authorities of this Court which proceed on the footing that it will not allow the Statute of Frauds to be made an instrument of fraud”: see Heard v Pilley. (6) The case not only seems to be, but is, inconsistent with all modern decisions on the subject.

The plaintiff, Comtesse de la Rochefoucauld, met the defence based upon the Statute of Frauds.

First she said documents signed by the defendant proved the existence of the trust.

Second, if the documents do not prove the trust with sufficient fulness and precision, then the case is one of fraud which lets in parol evidence with the aid of which the plaintiff’s case was established.

The Court agreed. While the Court were by no means satisfied that the letter signed by the defendant did not contain sufficient to satisfy the Statute of Frauds the other evidence admissible to prevent the Statute from being used to commit a fraud proved the plaintiff's case completely.

The question naturally arises as to who may invoke the Statute of Frauds.

In Hodgson v Marks, [1970] 3 All ER 513, Ungoed-Thomas, J said at 521 that:

Whoever relies on the statutory requirement of writing is himself using the statute as an instrument to avoid cognisance being taken as a trust. This might occur in circumstances in which the establishment of a trust would establish fraud. . . . No other defence is in the least affected by thus dispensing with the statutory requirement of writing. . . . The statute is thus only a material defence where there is no other effective defence. So if there is another effective defence the defendant is not defeated: and if there is none, then if he succeeds by relying on the statute, he succeeds only by excluding the evidence of the trust and thus of fraud.

In the light of those remarks I am of the view that the principle stated in Rochefoucauld v Boustead (supra) is not limited to the person who has accepted land as trustee and who nevertheless claims the land free of trust or persons to whom the land was transferred in breach of the trust. The principle is to be understood to be more widely applicable.

In the present instance there is no doubt whatsoever that the plaintiff's son and daughter-in-law may adduce parol evidence to establish a trust in the event that the plaintiff should claim the property as his own, which of course he does not.

But may the plaintiff adduce oral evidence to establish that he holds the land merely as nominal owner for a beneficial owner.

Assuming that the defendant had invoked the Statute of Frauds, which, for the reason previously expressed, it is doubtful if the defendant, in the ab- sence of pleading, has done, then the plaintiff would be at liberty to introduce parol evidence because to do so would be a use of the Statute to avoid cognizance being taken of the trust. That would deprive the plaintiff from establishing what he conceived to be the true nature of the transaction and that would be contrary to the public interest. Further the defence pleaded by the defendant is not defeated.

Accordingly, I accept the premise that the transaction which the plaintiff puts forward as one created a trust in respect of the land and in circumstances such as may be proved by parol the question next arises as to the degree of proof sufficient to do so.

In so concluding I have not overlooked the remarks of Arnup, JA in Winter v Winter (1974), 3 OR (2d) 425 at 434 to which I was referred by counsel for the defendant, where he said:

Section 9 of the Statute of Frauds, now RSO 1970, c 444, is a complete bar, since the alleged trust is entirely oral.

Those remarks were directed to the rights of children to a marriage to an interest in a house purchased by a husband as a matrimonial home and placed in the wife’s name. The children were not entitled to an interest under the doctrine of a resulting trust where they had not contributed to the purchase price, nor under an express trust, the existence of which is doubtful as is evident from the next paragraph on page 434 which would be oral and not in writing so void under the Statute. The necessity for the writing was to identify the children as beneficiaries because in no way could they so qualify.

When a trust may be established by parol despite the Statute of Frauds as I accept as a premise in this appeal sound policy demands that its existence must be brought within reasonable certainty and not left within the realm of conjecture.

In such cases the Court should ask itself:

(1) is the claim supported by probability:

(2) is it supported by writing in any form:

(3) is it supported by any indisputable facts?

(4) is it supported by disinterested testimony?

(5) is the parol evidence quite satisfactory and convincing?

These five questions were posed for answer by Meredith, J A, in McKinnon v Harris, [1909] 14 OWR 876 at 878 and could not be intended as all inclusive but as guides because each case must be decided upon its own facts.

The first question posed is whether the claim is supported by probability.

The plaintiff is a most unusual person, highly opinionated and perhaps domineering in his relationships with his children but, I am convinced, he feels for their own good.

It is conceded by counsel for the parties that had the plaintiff simply loaned his son $23,000 to purchase the property and taken a mortgage for the security of his loan the present issue would not have arisen.

Counsel for the defendant suggests that most fathers would have done so but the plaintiff was a very unusual person and a very astute business man averse to co-signing with anyone, even the members of his own family. Therefore it is in character that the plaintiff should purchase the property outright and to sell it to his son when the son’s finances would permit. In the meantime the son would be paying rent.

Frankly I can see no substantial difference in the end result between the plaintiff lending his son the purchase price and taking a mortgage back with interest at the going rate as security and the plaintiff purchasing the property outright in his own name as nominal owner subject to a written trust agreement providing for monthly payments in a sum sufficient to cover the carrying charges for interest and the like as well as a payment on account of principal.

Had the trust agreement been in writing likewise there would have been no dispute between the parties to this appeal.

It does not follow that the plaintiff was devoid of paternalistic affection. He devised a procedure which to him gave his son the financial help he needed but by a different method, obviating the plaintiff from becoming a guarantor to which he had an aversion.

The second possible course was not followed by the plaintiff because, in his view, it was an exclusively family transaction not subject to scrutiny by strangers including the tax collector.

In the unlikely event that the plaintiff and his wife denied a verbal trust agreement then their son and daughter-in-law could assert the trust agreement by the same parol evidence as is presently adduced less the plaintiff’s admission, and for the purposes of this appeal his contention, that an oral trust agreement existed.

One incident stands out as inconsistent with the plaintiff’s assumed role of a dispassionate father who placed his own interests above those of his children.

When the sale of 84 Range Road was being consummated with Mrs Unger it was the son, Claude, who made the down payment of $3,000 to Mrs Unger. It was made with money advanced by the plaintiff to his son, not for payment as agent for him, but as a token illustrative of the son’s independence and his interest in the property being purchased. It became part of the son’s indebtedness to his father. This was the testimony of the son. It is a straw in the wind showing the way the wind blew.

In contradiction of the plaintiff’s testimony that his avowed purpose was to hold legal title for the benefit of his son and wife as equitable owners counsel for the defendant points to four matters.

First, in the conveyance dated November 20, 1963 (Exhibit D2) from Mrs Unger to the plaintiff and his wife, they are described as ‘joint tenants and not as tenants in common” and not as trustees.

No doubt this instrument was prepared by Mrs Unger’s solicitors. This form was printed by legal stationers for use as a short form of deed to joint tenants under the Conveyances Act. It was treated as a routine conveyance and the plaintiff, who was without legal training, was not likely to protest nor attempt to explain the details of a family transaction to the solicitor for the vendor.

Secondly, the plaintiff reported the monthly payments of $210 received from his son as rental income in his tax returns.

Thirdly, the plaintiff claimed capital cost and maintenance expenses.

The plaintiff has admitted both the second and third circumstances in paragraph 5 of the statement of claim.

The plaintiff’s income tax returns were prepared by chartered accountants retained by him. The monthly income received was income to which the adjective “rental” was applied as was logical to do rather than embark upon an explanation, as the chartered accountant sought to do later after the fact of assessment without a-full appreciation of the legal implications involved in reaching the result they did (see Exhibit DS).

With respect to the claim for capital cost allowance it is logical that such should be claimed by the plaintiff in his income tax returns. He (with his wife) was the registered and legal owner of the property and entitled to claim capital cost allowance as such. That does not detract from the possibility that as legal owner he held the property in trust for the equitable owner.

The fourth circumstance is that in the instrument of conveyance dated December 1, 1976 from the plaintiff and his wife to his son and daughter-in- law (see Exhibit D 1) the plaintiff is described as a “joint tenant” with his wife and not as a tenant in common or trustee and that in a supporting affidavit as to age and marital status in the printed allegation, “We held the land as Joint tenants/Trustees/Partnership Property” the words “Trustees/Partner- ship Property were crossed out. That is understandable and is draftsmanship consistent with the preceding documents (eg, Exhibit DZ) whereby the conveyance to the plaintiff and his wife was as joint tenants. For the reasons previously stated no particular significance can be attributed to the obliteration of the word “Trustee” in this instance (Exhibit D1).

There is no doubt that the arrangement was communicated to the plaintiff’s son and daughter-in-law and that it was understood and accepted by them. Likewise the plaintiff and his wife accepted their responsibilities of the agreement.

Upon the basis of that agreement the son and daughter-in-law expended substantial moneys to permanently improve the property.

That is not consistent with the relationship of tenant and landlord between the plaintiff’s son and the plaintiff. Rather it is more consistent with the relationship of beneficiary of a trust and the trustee.

It is a principle of equity that a beneficiary who is induced to change his position in reliance on a trust as reason for incurring an expense may well be entitled to a lien for compensation on the property or a right to the conveyance of the legal title.

This is particularly so if the person in the position of beneficiary did so in the belief that he owned the property, that he was encouraged in that belief by the person in the position of nominal owner, or such owner stood by and let such beneficiary make the expenditure without disabusing his mind.

This may well result in an equitable interest arising where none was present before.

The plaintiff did not enlighten his son before the expenditures were made or after he became aware of the first of three substantial expenditures being made. That he did not do so is consistent with the plaintiff’s belief that an equitable interest already existed as the son’s action is inconsistent with him being merely a tenant of his father.

Thus the response to the first question posed by Meredith, JA whether the Claim is supported by probability must be in the affirmative.

The second question posed by Meredith, JA in the McKinnon case (supra) is whether the existence of a trust is supported by writing in any form.

There is in existence an agreement for sale and purchase from the plaintiff and his wife to his son and his wife executed and sealed by the parties which instrument bears the date of April 1, 1970 whereas the actual execution took place April 1, 1971.

This instrument came into being at the behest of Pauline Bouchard prior to the departure on a European holiday in the circumstances to which she testified and which have already been related.

I appreciate that this instrument is precisely what on its face it is.

The general rule is clear that extrinsic parol testimony is inadmissible to contradict, vary, add to or subtract from the terms of a valid written instrument, subject to five well known exceptions, one of which is the existence of any separate oral agreement as to any matter on which the document is silent and which is not inconsistent with its terms if it can be inferred from the circumstances of the case that the parties did not intend the document to be the complete and final statement of the whole of the transaction between them.

I received the evidence of Mrs Bouchard because first it did not contradict, vary, add to or subtract from the written instrument. It explained the reason why the written instrument came into being on her insistence and secondly it is the next to final instrument in the implementation of the oral agreement between the plaintiff and his wife and his son and his wife of which both were well cognizant as well.

Thus in the circumstances Pauline Bouchard’s testimony was admissible also as to the separate oral agreement in the form of an express trust and the agreement for purchase and sale was the second final implementation of that trust, the final implementation being the deed of conveyance dated December 1, 1976.

The agreement of sale and purchase is therefore part of the overall transaction and bearing in mind the broad language in which the second question is framed, ie, “evidence in writing in any form” it follows that the agreement dated April 1, 1970 so qualifies.

The fact that the agreement of purchase and sale is antedated to April 1, 1970 whereas it was actually executed about a year later triggered the suspicious instincts of the tax collectors who read into that fact sinister implications.

The learned Chairman of the Tax Review Board considered that the incorrect dating of the agreement seriously affected the credibility of the plaintiff and declined to accept the plaintiff’s testimony that the property was purchased in trust for his son and daughter-in-law. Rather he concluded that it was an outright purchase in the names of the plaintiff and his wife followed by a subsequent sale to his son and his wife as was contended before me.

I do not read out the fact of antedating these sinister implications.

The document was prepared by a reputable firm of solicitors. It would be contrary to the standards and integrity of a member of the profession to misstate a material fact for an ulterior or dishonest purpose. It may have been a typographical error but no other dates appear in the instrument to check against.

Had it been antedated deliberately even then I find nothing reprehensible in this but if it had been deliberately antedated it should have been antedated to November 20, 1963 or thereabouts. Neither would it have been reprehensible in the circumstances as I conceive them to have been, to have executed the agreement of purchase and sale in 1976 had it not been that Pauline Bouchard was anxious to have some written indication of her interest in the property before leaving on a long journey in 1971.

I say this because of the statement in Lewin on Trusts (16th Ed at page 25) that, “The trust, however late the proof, operated retrospectively from the time of its creation”, and the remarks of Lindley, LJ in Rochefoucauld v Boustead (Supra) already quoted but here repeated that “it is sufficient if the trust can be proved by some writing signed by the defendant, and the date of the writing is immaterial”.

The Chairman placed reliance on the circumstance that “trust” was not mentioned by the plaintiff until the assessment was contested. I attach no particular significance to the plaintiff’s failure to do so. There is ample authority for the proposition that equity looks at the intent rather than at the form. It is quite clear that a trust can be created without the use of the word “trust”. Intention is a question of fact to be proven as any other fact is to be proven. If from the facts the interest that the plaintiff intended to give to his son is clear then that is the interest he gave.

Even if the agreement for purchase and sale, dated April 1, 1970, supplemented as it is by the testimony of Pauline Bouchard does not prove the trust with sufficient fulness and precision then the parol evidence does so completely.

The third question posed to be answered is whether the claim is supported by any indisputable facts.

The facts as outlined at the outset are not in dispute between the parties. The dispute lies in the inference to be drawn from those facts, whether there was a trust created as contended on behalf of the plaintiff or whether there was a purchase and subsequent sale by the plaintiff as contended on behalf of the Minister.

The fourth question posed for answer is whether the claim of the existence of the trust is established despite the Statute of Frauds, and if so, is it supported by disinterested testimony.

The Chairman of the Tax Review Board characterized Mrs Pauline Bouchard as an “impartial” witness. The word “disinterested”, used by Meredith, JA together with such other adjectives as “independent” and “credible” modifying the noun “witness” all have like overtones of indicating that such witnesses are readily worthy of belief.

A “disinterested witness”, in my concept of the meaning of those words, is one who has no interest in relation to the matter in question and an “independent witness” is one who is not subject to control.

I would characterize Mrs Pauline Bouchard as an impartial, disinterested, independent and credible witness.

So too would I characterize Claude Bouchard as a disinterested, independent and credible witness. He is not under the “control” of his father in relation to the assessment of his father to income tax. The property transaction between them has ended. The question in issue here is between the plaintiff and the Minister of National Revenue to which the son is not a party. Therefore, he is disinterested. However I do not overlook that he is the son of his father with whom his sympathies lie but that does not destroy his competence, compellability, nor his credibility.

Both Claude and Pauline Bouchard testified as to facts concerning the transaction which are compatible with the creation of a trust with themselves as beneficiaries and the plaintiff and his wife as the nominal owners, holding the title to the property as trustees for their benefit — all the essential elements of a trust.

Added to this before me Mrs Mary Elizabeth Unger testified. She has the attributes of impartiality, disinterest, independence and creditiblity, added to which she has as well the atribute of courage. She attended to give evidence under difficult and trying personal circumstances.

She was the owner of the property to whom Claude Bouchard spoke about its sale to him. The sale price was agreeable to both purchaser and vendor but Mrs Unger asked for a guarantor of financial stability to the buyer. The plaintiff undertook to buy the property in the names of himself and his wife for his son and his wife. That is precisely what the plaintiff told Mrs Unger and Mrs Unger so testified. That is a repetition of the evidence given by the plaintiff, Claude Bouchard and Pauline Bouchard by a witness whose credibility is unimpeachable.

There was disinterested testimony.

From this point I go fifth and last to the question posed by Meredith, JA, ie, is the claim that a trust should be considered as established and enforced notwithstanding the Statute of Frauds, supported by parol evidence that is satisfactory and convincing.

In my view that evidence is overwhelming to that effect.

I believe the plaintiff. I acknowledge his aggressive and pugnacious attitude to those charged with the collection of taxes no doubt inspired by the unrelenting stance of the tax collector. His testimony was given in an unrestrained and opinionated manner but it had the ring of veracity.

That testimony is supported by that of his son, Claude, and daughter-in- law, Pauline, but it is climaxed by the testimony of Mrs Unger.

It is fatal as it was wrong for the officers of the Department of National Revenue to blink facts because they were not to their liking. None is so blind as those who will not see. None is so deaf as those who will not hear.

In exculpation of those employees it may be that the satisfactory and convincing testimony before me was not presented to them so they did not hear it for that reason but the letter dated March 26, 1979 from the plaintiff’s accountants to the Department of National Revenue (Exhibit DB) while not presented with the full legal implications as were presented to me nevertheless bore the germ of the existence of a trust in the first two paragraphs but not developed and obviously not investigated or considered by the taxing officers or if it was it was disregarded in favour of an interpretation consistent with tax liability.

Since the trust, which I find to have existed, came into being in 1963 the plaintiff was merely the nominal owner for his son and daughter-in-law as beneficial owners so that there was no disposition of the property to which paragraph 69(1 )(b) of the Income Tax Act, invoked by the Minister, can apply.

For the foregoing reasons the plaintiff's appeal from that portion of the assessment for the year 1976 is allowed.

There remains for consideration the additional issue in the plaintiff’s appeal from his assessment to income tax for his 1976 taxation year and the like issue as the sole basis in his appeal from his assessment for his 1977 taxation year.

The Minister added to the plaintiff’s income in his 1976 taxation year an amount of $1,930 and in the 1977 taxation year an amount of $7,158, in each instance as a standby charge of 1% per month of the capital cost of a Rolls Royce automobile pursuant to paragraph 6(1 )(e) of the Income Tax Act.

The benefit that an employee derives from the private use of an automobile made available to him by his employer may be brought into the computation of the employee’s income under paragraph 6(1 )(a) as a benefit received or enjoyed by the employee in respect of, in the course of or by virtue of an office or employment.

As was to be expected the valuation of such a benefit to the taxpayer was a constant source of dispute between him and the tax collector.

Paragraph 6(1 )(e) is designed to ease the task of the tax collector by providing a simplified statutory formula to determine an amount which would be a reasonable standby charge for the automobile for the number of days in the year during which it was made available to the employee.

The minimum standby charge for an automobile owned by the employer is determined by the cost of the automobile to the employer multiplied by 1% per month for the number of months it was made available to the employee in accordance with subsection 6(2), paragraph (a). But if a standby charge so computed exceeds the amount of a benefit in this respect brought into the employee’s income under paragraph 6(1 )(a) as a benefit then only the excess is added to the employee’s income.

This to me provides for an incongruity which should not arise. It has been laid down as a rule for the construction of statutes that where a special provision and a general provision are inserted which cover the same subject matter falling within the words of the special provision then the matter or case must be governed thereby, and not by the terms of the general provision.

The converse may be so. If a case does not fall within the special provision, ie, if the plaintiff in this instance is not within the four corners of paragraph 6(1 )(e) then it may be that the case is to be governed by paragraph 6(1)(a).

I am absolved by the pleadings from the necessity of deciding that, if the facts do not bring the plaintiff within the precise operation of paragraph 6(1 )(e), the appeals must be dismissed.

In assessing the plaintiff as he did the Minister “assumed that General Bearing Service Ltd made a Rolls Royce available to him (the plaintiff) in the years in question for his personal use”.

The defendant relies on section 6 of the Statute for the contention that the standby charges were properly included in the plaintiff’s income as benefits received or enjoyed by him “in respect of, in the course of or by virtue of an office or employment”.

The plaintiff does not deny that the Minister made the assumptions that he alleges he did.

In paragraph 7 of the statemen tof claim the plaintiff submits paragraph 6(1 )(e) is not applicable because the plaintiff used the automobile for business purposes with minimal personal use. In the claims for relief sought the plaintiff prays that the appeals be allowed and the reassessments be referred back to the Minister for “reassessment in accordance with the declaration of this Honourable Court”.

The entire thrust of the plaintiff's contention in this respect has been the standby charges were not properly imposed under paragraph 6(1 )(e) but rather should have been assessed as a benefit under paragraph 6(1 )(a) which, in accordance with the departmental practice, is predicated upon the proportion of the operating cost the employee’s personal use bears to the total use.

That being so, should the contention by the plaintiff on this issue be successful, section 177 of the Income Tax Act dictates that the disposition of the appeals in such circumstance, shall be that they are “allowed and referred back to the Minister for reconsideration and reassessment” of the benefits received by the plaintiff in accordance with paragraph 6(1 )(a) of the Act as the plaintiff claims.

The issue in these two present appeals, (1) that against the assessment for the plaintiff’s 1976 taxation year and (2) that against the assessment for his 1977 taxation year, is whether paragraph 6(1 )(e), the special provision, is to be applied in computing the plaintiff’s income for each taxation year as contended by the Minister or whether the benefit of the automobile is to be calculated by resort to the general provision, paragraph 6(1 )(a).

Paragraphs 6(1 )(a) and 6(1 )(e) and subsection 6(2) read:

6. (1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:

(a) the value of board, lodging and other benefits of any kind whatever (except the benefit he derives from his employer’s contributions to or under a registered pension fund or plan, group sickness or accidence insurance plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy) received or enjoyed by him in the year in respet of, in the course of, or by virtue of an office or employment;

(e) where his employer made an automobile available to him in the year for his personal use (whether for his exclusive personal use or otherwise), the amount, if any, by which an amount that would be a reasonable standby charge for the automobile for the aggregate number of days in the year during which it was made so available (whether or not it was used by the taxpayer) exceeds the aggregate of

(i) the amount paid by him in the year to his employer for the use of the automobile, and,

(ii) any amount included in computing his income for the year by virtue of paragraph (a) in respect of the use by him of the automobile in the year; and

(2) For the purposes of paragraph (1)(e) “an amount that would be a reasonable standby charge for the automobile” for the aggregate number of days in a taxation year during which it was made available by an employer shall be deemed not to be less than,

(a) where the employer owned the automobile at any time in the year, an amount in respect of its capital cost to the employer equal to the percentage thereof obtained when 1% is multiplied by the quotient obtained when such of the aggregate number of days hereinbefore referred to as.. .were days during which the employer owned the automobile is divided by 30 (except that if the quotient so obtained is not a full number it shall be taken to be the nearest full number, then to the full number next below it), and

(b) where the employer leased the automobile from a lessor at any time in the year, an amount equal to / of the cost incurred by the employer for the purpose of leasing the automobile for the aggregate number of days hereinbefore referred to.

There does not appear to be agreement between the parties as to the facts.

In paragraph 4(i) of the statement of claim the plaintiff alleges:

(i) The Vehicle in question, a Rolls Royce whose capital cost was $59,650.56, was made available to the Plaintiff for business purposes. The Plaintiff is president of General Bearing Service Ltd a company which has numerous outlets in Ontario and Quebec that he personally visits on a regular basis utilizing the vehicle in question. In addition the Plaintiff during the period in question regularly visited customers and made emergency deliveries utilizing the said vehicle. The only after hours telephone number listed in the Ottawa telephone book is the Plaintiff's home number. The Plaintiff had another vehicle at his residence which he used during the period in question for personal purposes.

In paragraph 9 of the statement of defence the defendant alleges:

9. With respect to paragraph 4 of the Statement of Claim, he admits that the Plaintiff is President of General Bearing Service Ltd and that a Rolls Royce, whose capital cost was $59,650.56, was made available to him but, otherwise, denies said paragraph.

In paragraph 10, already referred to, the Minister assumed that General Bearing Service Ltd made a Rolls Royce available to the plaintiff during the taxation years in question “for his personal use”.

The phrase, “for his personal use” is susceptible, by virute of the maxim, expressio unius est exclusio alterius of the meaning that the automobile was made available to the plaintiff “for his personal use” to the exclusion of business use in which even, in accordance with the jurisprudence with which counsel for both parties are familiar as is the Minister and his employees that the principle outlined in paragraph 6(1 )(e) is not applicable by reason of the decisions in Queen v Harman culminating in the decision of the Appeal division reported in [1980] CTC 83; 80 DTC 6052.

Following the decision of the Court of Appeal dated January 31, 1980 confirming the decision of my borth Walsh, the Minister issued a special release dated April 14, 1980 to the effect that a prior information bulletin no longer reflects the application of paragraph 6(1 )(e) concerning the treatment of standby charges for automobiles. Where automobiles are made available to an employee predominantly for business purposes and only incidentally for personal use, the Department will not consider that a benefit arises under paragraph 6(1 )(e). However a benefit may arise under paragraph 6(1 )(a).

This bulletin is merely a discretion to the employees of the Department to disregard a prior policy and implement that in the special release.

This is no magnanimous gesture on the part of the Department but is its understanding of the decision in Queen v Harman which will be considered later.

The unwritten constitution of Canada provides for the supremacy of the law and the Department is obeying the law as stated in the Harman case as it is obliged to do.

The question which will arise is whether the facts of the present appeals are within the law as laid down in the Harman case.

Apparently it is not agreed by the defendant that the automobile is used for business purposes. That is implicit in the contention by counsel for the defendant that the test laid down by the Court of Appeal in that the Rolls Royce falls within paragraph 6(1 )(e) and the example put forward by Walsh, J of the use by an executive of a one-man company provided for personal use with some busness use as resulting in inequities.

The learned Chairman of the Tax Review Board pointed out in his reasons for judgement that the plaintiff was the president and principal shareholder of General Bearing Service Ltd.

He was uncertain whether the automobile was made available to the plaintiff as a principal shareholder or as an officer of the company. I fail to appreciate what difference would result. A principal shareholder is a shareholder and the standby charges with respect to an automobile made available to a shareholder are identical as too are the statutory provisions giving rise thereto. Subsection 15(5) must only apply to a shareholder who is not an officer or an employee otherwise there is no difference between the provisions.

In any event before the evidence left no doubt that the Rolls Royce was made available to the plaintiff as the President, an officer of the company, and as General Manager, a post he also held, and so is an employee of the company. He is both an officer and an employee of the company.

The Chairman of the Tax Review Board made specific reference to the plaintiff’s testimony before the Tax Review Board, “that he had ordered the company to purchase the Rolls Royce for business use”. That evidence, unexplained, could mean that the automobile was for use by the company through use by any officer or employee and not exclusively by the plaintiff for company use. The next sentence states that the automobile was made available to the plaintiff “for that purpose”, ie, corporate business use and “was used 95% of the time for business”. What is lacking in the quoted language used by the Chairman was that it was used by the plaintiff for 95% of the whole 100% business use to which the Rolls Royce was put and that 5% was personal use by the plaintiff and not business use by other employees.

Before me there was no doubt that it was the plaintiff who made the business use for 90% of the time and the 10% remaining was the plaintiff’s personal use. The business use was reduced by 5% and there was no business use by other officers or employees.

The plaintiff did not “order” the company to purchase the automobile. In response to a question from myself the plaintiff testified that there was a board of directors and the corporate decision to purchase the Rolls Royce was that made by the board.

The Chairman could not accept that the plaintiff, a successful business man in a company with 22 salesmen and some 71 employees, “would personally and regularly deliver bearings to his customers in a Rolls Royce”. He added, “It is not logical, reasonable or within the bounds of common sense to suggest that the Rolls Royce was acquired by the company and was made available to the appellant, its President and principal shareholder, for that purpose and I place no credence on the evidence given by the appellant.”

The same thought was echoed in the submission on behalf of the defendant when it was said:

In the case at hand General Bearing Services provided a luxury car to its general manager and major shareholder. It is submitted that the car was provided for the personal enjoyment and prestige of the Plaintiff and not to carry bearings.

The evidence before me must have differed from that adduced before the Tax Review Board.

The plaintiff testified before me that the Rolls Royce was purchased to be utilized in the company’s business and had been made available to him for that purpose.

In his capacity as President and General Manager of the company he was in constant supervision of the fourteen retail outlets throughout the Ottawa Valley and Eastern Quebec and to do so he drove the Rolls Royce to make those visits which were time consuming.

This, I should think, was the business use contemplated by the Board for which the Rolls Royce was bought and not to regularly deliver bearings to customers. Paragraph 4(i) of the statement of claim does not allege that the Rolls Royce was “regularly” used to deliver bearings to customers. It is alleged that it was used by the plaintiff to visit the numerous outlets on a regular basis and to visit customers on a regular basis but goes on to say “and made deliveries” which words are not modified by the word “regularly”.

The plaintiff made himself available to the conduct of business twenty- four hours in every day of the week. After normal business hours the telephone calls to the business premises were transferred to the plaintiff’s home number by mechanical device. The after-hours telephone number listed in the telephone directory was that of the plaintiff’s home.

Having observed and heard the plaintiff testify it does not surprise me in the least that, if he had received a telephone call at his home that a customer’s machine had broken down for need of a bearing, the plaintiff would forthwith personally deliver the replacement bearing in the Rolls Royce but I do not accept that this was a regular occurrence.

I also accept, as stated by counsel for the defendant, that the use of the Rolls Royce by the plaintiff was designed to enhance his prestige but it does not follow from that fact that the use made of the automobile was personal use and not business use.

It is not the function of the Minister of National Revenue nor any employees authorized by him to be engaged to administer the Income Tax Act to dictate to a taxpayer that he shall conduct his business more efficiently to generate more income and consequently more tax.

Therefore if the management of General Bearing Service Ltd sees fit to deliver bearings in Rolls Royce automobiles that is its business uneconomic though it may be.

The use of the Rolls Royce by the plaintiff as he described it, that is for the inspection and supervision of the fourteen retail outlets, to visit customers and deliver a bearing in emergency situations is not so illogical, unreasonable and beyond common sense as it may appear to be.

The plaintiff has dedicated his life to the business he has created and its success is based upon service to its customers. Doubtless the plaintiff expects and demands the employees to give the high standard of service as he does himself.

Thus, like an Inspector-General, when the plaintiff appears on his tours of inspection in a Rolls Royce, indicative of the prestige following on success, the troops snap to attention. They are alert and anxious to please.

So too a customer, if he calls at a late hour and a bearing is delivered expeditiously by the President and General Manager of the Company in a Rolls Royce, cannot be other than impressed by the calibre of service given to him. He will likely continue his custom and advise others to deal with the Company.

The plaintiff explained that the inspection trips he took each week were long and tiring. When he returned home he wished to rest and if he was obligated to go out he did not drive the Rolls Royce. Rather he and his wife drive in a Cadillac which the plaintiff had bought for his wife’s private and personal use as well as his own when need arose.

After the taxation years in question the plaintiff added another Cadillac for his exclusive personal use so not to appropriate his wife’s car or the Rolls Royce.

During and after the taxation years in question the plaintiff had little need for the Rolls Royce for personal use since another less expensive car, but still a prestigious one, was available for that use.

Accordingly I accept the plaintiff’s testimony that the Rolls Royce was used by him predominantly for business purposes and he has successfully demolished the assumption by the Minister that General Bearing Service Ltd made the Rolls Royce available to the plaintiff for his personal use by the plaintiff as may be the case.

I accept the plaintiff's testimony as establishing that the Rolls Royce was made available to the plaintiff and was used primarily and predominantly for business purposes and with a minimum of personal use as was the intention of the company, the intention of the Board being that of the company.

Counsel for the defendant submitted that the conditions precedent to the applicability of paragraph 6(1 )(e) were present, that is:

(1 ) the automobile was made available to the plaintiff as employee or officer by his employer, and

(2) the automobile could be used for the plaintiff’s personal use should he so desire since the employer placed no restrictions on its use.

He argued further that paragraph 6(1 )(e) provides a scheme of taxation whereby the actual use of the automobile is to be disregarded in favour of the more convenient approach namely the “availability” of the automobile for personal use.

This is the precise argument which was advanced before my brother Walsh in The Queen v Harman (supra) and on appeal before the Appeal Division also cited previously.

After careful analysis Walsh, J rejected that interpretation of paragraph 6(1 )(e) advanced by the Minister. He pointed to extraordinary inequities which could result which Parliament could not have intended.

He concluded that the wording of the paragraph was ambiguous at best and ought to be limited to the case of an employee whose company makes a car available to him primarily for personal use.

However he concluded that the words “or otherwise” in the language in parentheses reading: “(whether for his exclusive personaluse or otherwise)” following on the initial words “where the employer made an automobile available to him in the year for his personal use” do not mean business use and he reached that conclusion by a comparison of the identical English words in paragraph 6(1 )(e) and subsection 15(5) with the French translations thereof.

On the basis that personal use was identical and business use was not included in the words “or otherwise” Walsh, J concluded that the automobile was not “an automobile available to him in the year for his personal use” and accordingly paragraph 6(1 )(e) was not applicable when availability was for business use as well.

The finding of Walsh, J was confirmed by the Appeal Division of this Court.

Kerr, DJ, speaking for the Court concurred with Walsh, J that the language of subsection 6(1) paragraph (e) was arguable and I therefore conclude not clear.

He also rejected the contention advanced by the Minister that the “availability” was the key element regardless of the use when he said: “In my opinion, availability of an automobile is not the sole or determining consideration in this section or in the comparable section 15(5).”

He added: “The purpose for which the employer provides the automobile is a relevant consideration also.”

In the Harman case the employer provided an automobile for the employee which was necessarily used predominantly in the employer’s business but personal use was perfmitted if opportunity arose.

On such facts Kerr, DJ concluded by saying:

Thus I doubt that section 6(1 )(e), properly construed, applies to the automobile here under consideration and I believe that section 6(1)(a) more aptly applies to the circumstances of this case.

The material facts in the present appeals do not differ from those in the Harman case.

In each instance an automobile was made available by an employer to an officer or an employee for business use with personal use ancillary thereto.

Accordingly the appeal for the plaintiff’s 1967 taxation year with respect to the issue involving benefit from use of an automobile and his appeal from the assessment for his 1977 taxation year in which the like use of the automobile was the only issue are both allowed and are referred back to the Minister for reconsideration and reassessment on the basis that paragraph 6(1 )(e) of the Income Tax Act is not applicable and the benefit received by the plaintiff falls to be assessed under paragraph 6(1 )(e) thereof on the proportion of the operating cost the personal use bears to the total use of the automobile.

With respect to the assessment for the plaintiff’s 1976 taxation year whereby an amount of $11,135 was deemed to be a capital gain pursuant to subparagraph 69(1 )(b)(i) of the Income Tax Act and taxed accordingly is allowed for the reasons outlined above.

The plaintiff shall be entitled to his costs on the appeals from the assessments for both his 1976 and 1977 taxation years.