Bowman,
T.C.C.J.:—
In
this
appeal,
Mr.
Hugh
Simpson
challenges
a
reassessment
of
income
whereby
the
Minister
of
National
Revenue
included
in
his
income
for
1986
the
amount
of
$433,333
which
the
Minister
alleges
that
Mr.
Simpson
appropriated
from
two
companies
in
which
he
was
the
principal
shareholder:
H.M.
Simpson
Ltd.
and
R.H.
Business
Machines
&
Systems
Inc.,
previously
known
as
Wizard
Business
Machines
&
Systems
Inc.
(hereinafter
collectively
referred
to
as
the
"company").
The
events
that
gave
rise
to
the
reassessment
can
be
stated
briefly.
The
company,
which
carried
on
the
business
of
selling
business
machines,
furniture
and
commercial
stationery,
was
founded
by
Mr.
Simpson's
father.
Mr.
Simpson
joined
the
company
at
the
age
of
17
in
1946
and
it
was
his
life’s
work.
The
business
grew
and
prospered
until
1982.
It
had
borrowed
money
from
a
large
Canadian
bank
under
debentures
which
were
personally
guaranteed
by
Mr.
Simpson.
1982
was
a
period
of
difficult
economic
times
in
which
high
interest
rates
were
being
charged.
In
November,
1982,
the
company
owed
money
to
the
bank.
On
November
8,
1982,
the
bank
demanded
payment
of
the
indebtedness
owing
by
the
company
and
Mr.
Simpson
pursuant
to
his
guarantee.
Without
further
notice,
two
days
later,
on
November
10,
the
bank
appointed
a
receiver-manager
of
the
property
and
assets
of
the
company,
caused
the
assets
of
the
company
to
be
sold
and
petitioned
it
into
bankruptcy.
By
this
act
it
destroyed
Mr.
Simpson's
life
work,
his
fortune
and
his
company.
Mr.
Simpson
retained
counsel,
a
Mr.
Alan
Scales,
who
sued
the
bank
on
behalf
of
Mr.
Simpson,
the
company
and
the
other
shareholders
of
the
company
alleging
that
the
bank
had
committed
an
illegal
act
in
failing
to
give
reasonable
notice
before
seizing
and
selling
the
company's
assets.
He
claimed
special
damages
for
loss
of
potential
future
income
resulting
from
the
destruction
of
the
business,
general
damages,
exemplary
and
punitive
damages.
The
statement
of
claim
was
amended
at
least
twice
and
the
final
amendment
included
a
claim
for
general
damages
to
the
plaintiff
Hugh
Simpson
and
a
claim
for
mental
anguish.
The
bank
resisted
the
claim
with
vigour.
The
firm
of
management
consultants
Laventhol
&
Horwath
were
retained
and
a
report
dated
August
8,
1985,
was
prepared.
The
opening
two
paragraphs
of
their
report
addressed
to
Mr.
Scales
read
in
part
as
follows:
You
have
asked
us
to
quantify
the
loss,
if
any,
suffered
by
H.M.
Simpson
Ltd.
(Simpson)
as
a
result
of
certain
alleged
actions
by
.
.
.[the
bank],
namely,
that
the
bank
failed
to
provide
Simpson
with
sufficient
time
to
make
alternate
financial
arrangements
with
respect
to
the
term
loan
and
line
of
credit
that
the
bank
had
demanded
be
repaid.
Specifically,
you
haved
asked
us
to
determine
the
fair
market
value
of
H.M.
Simpson
Ltd.
and
Wizard
Business
Machines
&
Systems
Inc.
on
the
assumption
that
the
redundant
assets
were
sold,
the
business
was
consolidated
and
the
operations
continued
from
the
Longworth
Avenue
location.
Their
conclusion
was:
Based
on
the
projected
financial
statements
in
Scenarios
I
and
II
on
the
assumption
that
the
redundant
assets
were
sold,
the
business
was
consolidated
and
the
operations
continued
from
the
Longworth
Avenue
location,
we
believe
the
fair
market
value
of
H.M.
Simpson
Ltd.
and
Wizard
Business
Machines
System
Inc.
on
or
about
October
31,
1982
to
be
between
$600,000
and
$675,000.
Mr.
Simpson
paid
personally
for
the
Laventhol
&
Horwath
report.
In
the
negotiations
between
Mr.
Scales
and
the
bank's
solicitor
there
was
considerable
correspondence,
each
putting
forward
his
position
with
vigour.
In
his
letter
of
November
27,
1985,
to
the
solicitors
for
the
bank,
Mr.
Scales
stated
at
page
10:
I
am
sure
you
can
appreciate
that
there
are
some
real
differences
between
us
with
respect
to
this
claim.
The
purpose
of
this
letter
is
to
attempt
to
point
out
what
I
perceive
to
be
basic
errors
in
your
case
or
how
you
and
your
client
perceive
your
own
case.
If
I
am
in
error
on
any
of
my
submissions,
I
would
be
most
grateful
if
you
would
so
advise
me.
This
case
is
a
most
serious
one
for
my
client
since
Mr.
Simpson
has,
in
effect,
been
put
out
of
business
as
a
result
of
your
clients
actions
and
is
without
funds.
It
goes
without
saying
that
one
does
not
simply
re-establish
himself
again
in
business
at
the
age
that
Mr.
Simpson
now
is.
Should
it
be
that
the
bank
is
deliberately
attempting
to
thwart
Mr.
Simpson's
claim
or
to
throw
obstacles
at
Mr.
Simpson
or
to
delay
the
whole
process
so
as
to
deter
him
because
of
his
circumstances
in
going
to
court,
then
I
want
to
assure
you
and
your
client
that
nothing
could
be
more
further
from
the
truth.
He
is
not
able
to
pay
our
account
on
an
ongoing
basis
but
I
am
fully
prepared
and
committed
to
carry
his
case
to
the
end.
Further,
I
do
not
intend
to
make
any
recommendation
to
him
for
a
settlement
other
than
what
I
consider
to
be
a
fair,
just
and
reasonable
settlement
simply
to
get
rid
of
the
case.
In
my
judgment,
the
bank
committed
a
very
serious
error
on
a
reputable
citizen
in
the
community
and
ought
to
be
prepared
to
make
compensation
for
doing
such.
Quite
frankly
up
to
now,
I
have
seen
nothing
to
indicate
that
the
bank
feels
any
responsibility
based
on
the
law.
On
February
28,
1986,
Mr.
Scales
again
wrote
to
the
bank
as
follows:
My
understanding
of
the
damage
claim
is
that
the
damages
are
for
wrongful
seizure
and
found
in
trespass
and
conversion.
The
Court
of
Appeal
in
Lister
v.
Dunlop
(1982),
135
D.L.R.
(3d)
1,
states
that
the
damages
should
be
the
higher
of
(a)
the
value
of
the
assets
at
the
date
converted,
or
(b)
the
actual
business
loss.
Furthermore,
a
setoff
is
to
be
made
as
of
the
date
of
the
wrong
seizure
against
the
debt
owed.
(See
our
letter
to
you
of
November
27,
1985
at
page
9,
final
paragraph).
I
will
attempt
to
explain
to
you
as
simply
as
possible
the
position
of
my
client
with
respect
to
the
damages
being
claimed
and
in
relation
to
the
law
of
conversion.
The
financial
statements
indicate
that
at
the
time
of
the
trespass
there
was
an
equity
in
the
company
plus
capital
stock
of
approximately
$400,000.
If
Mr.
Simpson
was
to
sell
the
shareholders'
interest
in
the
company
as
of
that
date,
then
the
minimum
he
would
be
asking
for
would
be
obviously
the
equity
plus
the
capital
stock.
You
do
not
sell
a
business
for
less
than
book
value
unless
for
some
good
reason.
Simpson
could
have
liquidated
the
company
himself
at
that
time
and
realized
the
equity
value.
If
the
value
of
the
assets
were
in
fact
greater
than
the
value
as
carried
on
the
books
of
the
company,
then
the
value,
based
on
the
book
value,
would
be
greater.
We
have
provided
you
with
a
copy
of
Laventhol
&
Horwath's
report
which
is
based
on
the
capitalization
approach.
We
are
prepared
to
substantiate
this
report
in
Court.
The
bottom
line
of
this
report
is
that
the
shareholders
are
entitled
to
the
sum
for
their
share
interest.
Furthermore,
and
I
have
pointed
this
out
to
you
on
numerous
occasions
before
but
I
feel
that
you
have
not
fully
understood
the
bank
would
be
responsible
for
all
unpaid
creditors
in
the
event
that
claims
are
made.
At
this
time,
I
am
not
certain
of
the
figure
but
I
understand
that
such
unpaid
creditors
could
be
somewhere
in
the
area
of
$300,000
or
more.
Hence,
the
exposure
of
the
bank
is
substantial.
The
bottom
line
is
that
the
bank
did
an
unlawful
act
and
must
reimburse
the
shareholders
and
the
creditors.
The
bank
sold
the
assets
in
a
receivership
situation
and
must
bear
the
responsibility
or
penalty
for
its
own
folly
in
not
realizing
the
full
benefit
of
the
proceeds
from
the
sale
which
otherwise
would
have
been
received.
In
this
circumstance,
therefore,
the
bank
is
entitled
to
keep
the
proceeds
from
the
sale
but
must
pay
the
shareholder
for
the
value
and
must
also
be
responsible
for
the
creditors
in
the
event
that
claims
are
made.
Based
on
the
asset
calculation,
the
Court
would
be
required
to
review
all
the
assets
of
the
company
to
determine
the
actual
value
of
such
assets.
Since
the
assets
are
carried
on
the
books
of
the
company
at
book
value,
we
see
no
reason
why
the
Court
would
reduce
the
value
of
the
assets
below
book
value.
The
company
would
then
receive
the
full
amount
of
the
assets
and
be
responsible
for
the
liabilities
including
the
liability
to
the
bank.
The
net
result
would
be
that
the
shareholders
would
receive
the
equity
or
the
adjusted
equity
based
on
a
readjusted
value
of
the
assets.
In
both
situations,
the
net
result
to
the
bank
would
be
the
same
if
creditors
decided
to
sue
for
their
claims.
If
you
have
any
difficulty
with
respect
to
this
understanding,
then
I
will
amend
the
statement
of
claim
so
as
to
provide
that
your
client
is
to
be
responsible
for
all
creditors
as
well
one
way
or
another.
Ultimately,
after
the
Prince
Edward
Island
Court
of
Appeal
determined
that
the
time
from
which
reasonable
notice
began
to
run
was
November
10,
1982,
a
settlement
was
reached
whereby
the
bank
was
to
pay
to
Mr.
Scales
in
trust
$668,572.68
representing
damages
of
$500,000,
interest
of
$100,000,
costs
of
$50,000
and
disbursements
of
$18,572.68.
Hugh
Simpson
had
personally
guaranteed
the
indebtedness
of
the
company
to
a
buying
group
and
another
company.
It
was
agreed
that
at
any
time
after
November
10,
1988,
if
Mr.
Simpson
was
required
to
pay
under
that
guarantee
or
if
an
action
against
him
were
started
in
respect
of
the
guarantee,
the
bank
would
indemnify
him
for
50
per
cent
of
any
amount
he
was
required
to
pay.
This
would
not
apply
to
any
payment
voluntarily
made
by
Hugh
Simpson.
This
agreement
was
separate
from
the
minutes
of
settlement
that
were
filed
with
the
court.
In
the
result
Mr.
Simpson
was
paid
$433,000
net
of
his
legal
fees.
The
Minister
of
National
Revenue
assessed
on
the
basis
that
this
money
ought
to
have
gone
to
the
company
and
that
the
payment
was
an
appropriation
of
funds
by
Mr.
Simpson
from
the
company
or
alternatively
a
dividend.
The
position
taken
by
counsel
for
the
Minister
is
that
the
settlement
was
in
fact
with
the
company.
Mr.
Simpson
disagrees
with
this
position.
It
is
clear
that
both
the
company
and
Mr.
Simpson
sustained
damages
as
a
result
of
the
bank's
act.
Mr.
Simpson
lost
the
value
of
his
shares
and
he
suffered
mental
anguish.
The
company
as
well
lost
its
business.
It
might
have
been
open
to
the
appellant
to
effect
a
settlement
on
behalf
of
the
company
but
he
chose
not
to
do
so.
Had
he
done
so,
many
things
might
have
been
different.
The
amount
of
the
settlement
would
probably
have
been
different
and
possibly
higher.
The
receipt
by
the
company
of
the
proceeds
of
the
settlement
could
well
have
had
a
variety
of
different
tax
consequences.
The
assessment
proceeds
on
the
somewhat
simplistic
basis
that
the
company
sustained
damages
and
that
it
was
in
fact
the
company's
claim
that
was
settled
and
not
Mr.
Simpson's
and
that
the
amount
recovered
from
the
bank
belonged
to
the
company
and
was
appropriated
by
Mr.
Simpson.
I
hope
that
I
do
no
injustice
to
Mr.
Leslie's
extremely
thorough
and
fair
presentation
of
the
Minister's
position.
He
brought
out
everything
that
could
possibly
be
said
in
favour
of
the
assessment.
He
does
not
dispute
that
both
Mr.
Simpson
and
the
company
sustained
damages
or
that
both
Mr.
Simpson
and
Mr.
Scales
believed
that
it
was
Mr.
Simpson's
claim
that
was
being
settled
and
that
that
was
what
they
intended
to
do.
On
the
evidence,
I
think
that
position
is
incontrovertible.
The
correspondence
between
Mr.
Scales
and
the
bank's
solicitors,
some
of
which
I
have
quoted
in
these
reasons,
is
clear
evidence
that
the
negotiations
proceeded
on
the
footing
that
it
was
Mr.
Simpson's
claim
that
was
being
settled.
Nor
does
counsel
suggest
that
their
belief
and
intentions
are
not
a
factor
to
be
taken
into
account.
He
contends,
however,
that
whatever
they
may
have
meant
to
do
or
thought
they
were
doing,
that
is
not
what
they
in
fact
did.
In
support
of
this
he
points
to
the
somewhat
ambiguous
Laventhol
&
Horwath
report,
the
fact
that
the
company
also
sued
and
the
fact
that
releases
were
given
not
only
by
Mr.
Simpson
but
also
by
the
company.
A
letter
dated
September
19,
1986,
from
Mr.
Scales
to
the
bank
solicitor
is
illustrative
of
the
position
taken
by
Mr.
Scales
in
his
negotiations
with
the
bank.
The
letter
reads
in
part
as
follows:
The
plaintiffs
in
the
action
against
the
bank
included
H.M.
Simpson
Ltd.,
R.H.
Business
Machines
&
Systems
Inc.
and
Hugh
H.
Simpson.
The
claim
for
damages
was
for
wrongful
seizure
of
the
property
of
the
Companies.
We
submitted
to
you
a
report
of
Laventhol
&
Horwath
which
report
indicated
the
damages
for
the
Shareholders'
equity.
I
wrote
a
letter
to
you
on
November
27,
1985,
and
advised
you
at
that
time
that
if
the
matter
went
to
trial
and
Judgment
was
given
in
favour
of
Simpson,
then
the
bank
would
be
responsible
for
other
amounts
over
and
above
that
as
set
forth
in
the
Laventhol
&
Horwath
report.
I
furthermore
had
numerous
telephone
conversations
with
you
at
which
time
I
attempted
to
point
out
to
you
that
I
could
never
understand
the
position
of
the
bank
in
going
to
trial
since
it
was
always
my
opinion
that
the
bank
was
fully
liable
and
the
danger
of
the
bank
being
responsible
for
the
creditors
in
the
event
that
the
matter
went
to
trial.
In
my
conversations,
I
made
it
plain
to
you
that
I
was
attempting
to
settle
the
claim
based
on
the
Laventhol
&
Horwath
report
which
was
for
the
Shareholders’
equity
only.
Quite
frankly,
you
never
seemed
to
understand
our
position.
You
will
recall
that
you
and
I
had
a
meeting
in
my
office
one
evening
with
Jack
Mulligan
of
Coopers
&
Lybrand
at
which
time
I
again
put
to
you
illustrations
of
the
damage
claim
and
the
potential
to
the
bank
in
the
event
that
the
matter
went
to
trial
and
you
were
reouired
to
pay
the
creditors.
In
my
illustrations,
I
pointed
out
to
you
that
we
were
only
collecting
for
the
Shareholder
Simpson.
You
were
frank
enough
to
admit
that
you
did
nat
appear
to
understand
what
we
were
driving
at
until
we
had
the
meeting
in
the
office.
I
refer
you
to
your
letter
to
me
of
February
10,
1986
wherein
you
made
an
offer
to
settle
for
the
sum
of
$200,000,
all-inclusive,
by
a
payment
to"
Hugh
Simpson”.
In
the
correspondence,
you
required
a
Discontinuance
of
the
actions.
Obviously,
at
this
time
we
were
talking
only
of
settling
Hugh
Simpson's
claim.
Reference
is
made
as
well
to
my
letter
of
February
28,
1986,
to
yourself
wherein
I
again
attempted
to
explain
the
position
of
Simpson
with
respect
to
the
damage
claim.
I
again
pointed
out
to
you
that
were
looking
for
the
Shareholders’
interest
in
settlement.
I
further
stated
“..
.I
have
pointed
this
out
to
you
on
numerous
occasions
before
but
I
feel
that
you
have
not
fully
understood
the
bank
would
be
responsible
for
all
unpaid
creditors
in
the
event
that
claims
are
made.
At
this
time
I
am
not
certain
of
the
figure
but
I
understand
that
such
unpaid
creditors
could
be
somewhere
in
the
area
of
$300,000
or
more.
Hence,
the
exposure
of
the
bank
is
substantial."
A
meeting
was
held
at
my
office
with
yourself
and
Mr.
Potvin,
the
regional
vice-
president
of
the
bank,
which
meeting
was
held
on
April
23.
At
this
meeting,
I
fully
indicated
to
both
yourself
and
Mr.
Potvin
the
extent
of
the
accounts
payable
in
that
the
accounts
payable
by
H.
M.
Simpson
Ltd.
were
$211,572
and
Wizard
Business
Machines
in
the
sum
of
$53,200.
I
also
advised
that
Mr.
Simpson
had
personally
guaranteed
the
Surfcan
account
of
$135,972.64
and
the
account
of
Savin
in
the
approximate
amount
of
$18,000.
You
and
Mr.
Potvin
had
asked
me
as
to
what
was
required
to
settle
the
claim.
I
pointed
out
that
we
would
be
prepared
to
settle
out
of
court
based
on
the
Laventhol
&
Horwath
report
with
respect
to
the
Shareholders'
interest.
No
other
reports
were
provided
to
indicate
anything
different.
I
advised
both
of
you
at
the
meeting
that
I
was
fully
convinced
that
Simpson
was
entitled
to
succeed
at
trial
and
I
could
not
see
any
reason
as
to
why
he
should
take
anything
less
than
what
was
provided
for
in
the
report.
Discussions
took
place
with
respect
to
settlement
and
a
figure
was
agreed
upon.
This
figure
was
to
be
for
Simpson
only,
being
the
Shareholders’
interest.
I
indicated
to
you
that
I
was
not
collecting
anything
for
the
creditors
and
indeed
the
bank
was
itself
concerned
about
the
creditors.
The
bank
knew
fully
well
that
creditors
were
not
being
reimbursed.
The
bank
was
quite
aware
that
there
could
be
a
possible
claim
by
Surfcan
and
Savin
since
I
had
initially
insisted
that
the
bank
be
fully
responsible
for
these
particular
creditors
in
the
event
that
claims
were
made
against
Simpson
on
the
guarantees.
We
eventually
agreed
upon
a
50/50
division.
There
was
no
misunderstanding
whatsoever
between
ourselves
with
respect
to
the
position
of
the
creditors,
otherwise,
the
bank
should
never
have
agreed
to
assume
part
responsibility
for
the
claims
of
Surfcan
and
Savin.
Following
the
meeting
in
our
office,
you
did
have
conversations
with
me
with
respect
to
the
terms
of
the
settlement
and
I
did
indicate
to
you
that
you
could
make
the
funds
payable
directly
to
our
office
and
we
would
disburse
the
funds
and
there
would
be
a
release
from
all
plaintiffs.
There
was
no
question
in
my
mind
but
that
you
fully
understood
that
all
the
funds
were
to
go
to
Simpson.
If
you
were
to
say
otherwise,
then
I
have
no
hesitation
in
stating
that
you
would
be
misleading
or
misinterpreting
the
whole
situation.
I
find
it
somewhat
regrettable
that
we
should
now
be
in
this
position
but
I
simply
want
to
set
forth
my
own
views
to
you
in
case
you
should
now
feel
that
the
funds
or
at
least
some
of
the
funds
were
meant
to
go
to
the
Companies.
If
such
should
be
your
position,
then
quite
frankly
I
believe
that
you
would
not
be
fairly
stating
the
case.
Mr.
Simpson
was
entitled
to
settle
his
own
claim.
That
is
indeed
what
he
did
and
what
he
and
his
counsel
believed
they
were
doing.
Nothing
in
the
income
tax
law
of
Canada
compelled
him
to
settle
the
company's
claim
to
the
exclusion
of
his
own.
The
Laventhol
&
Horwath
report
admittedly
is
a
little
ambiguous.
There
was,
however,
admitted
in
evidence
a
letter
from
Laventhol
&
Horwath
dated
June
29,
1988,
to
Matheson
&
Murray,
solicitors
for
Mr.
Simpson
(Mr.
Scales
having
been
obliged
to
withdraw
from
the
matter
for
reasons
that
are
not
germane
to
this
case).
The
letter
states
as
follows:
Further
to
your
letter
of
June
1988,
I
confirm
that
our
report
dated
August
8,
1985
set
out
a
value
for
the
shares
of
the
relevant
companies.
The
value
of
the
shares
can
be
defined
as
the
value
of
all
assets
including
goodwill,
minus
liabilities.
I
do
not
regard
as
determinative
the
fact
that
the
company
gave
releases
and
was
a
party
to
the
settlement
documents.
The
solicitor
for
the
bank
would
have
been
remiss
had
he
not
insisted
that
any
possible
claimant
give
releases
to
the
bank.
Nor
does
anything
turn
in
my
view
on
the
fact
that
the
company
was
one
of
the
plaintiffs
in
the
action
against
the
bank.
The
company
had
a
claim
against
the
bank,
having
suffered
a
loss
as
a
result
of
the
bank's
action
and
it
would
have
been
surprising
if
it
had
failed
to
sue
the
bank.
Where
it
is
clear
that
both
Mr.
Simpson
and
Mr.
Scales
intended
to
settle
Mr.
Simpson's
claim
and
not
that
of
the
company
and
the
evidence
is
not
inconsistent
with
their
having
carried
out
that
intention,
it
would
require
far
more
convincing
evidence
than
that
which
was
adduced
here
to
persuade
me
that
they
had
inadvertently
done
the
very
thing
that
they
intended
not
to
do.
The
surrounding
evidence
supports
the
view
that
it
was
Mr.
Simpson's
claim
that
was
being
settled
with
the
bank
and
not
that
of
the
company.
The
fact
that
Mr.
Simpson
personally
was
liable
to
pay
the
claims
referred
to
in
the
side
agreement
and
that
the
bank
was
obliged
to
indemnify
him
as
to
50
per
cent
confirms
that
it
was
his
claim
that
was
being
settled.
Moreover,
the
company's
liabilities
would
have
been
dealt
with
in
an
agreement
had
the
company
been
the
person
whose
claims
were
settled.
There
appears
to
be
very
little
law
on
this
point.
This
is
not
surprising
given
the
rather
unique
set
of
facts
involved
in
this
matter.
I
do
not
think,
however,
that
I
need
to
cite
any
authority
for
the
proposition
that
where
both
the
shareholder
and
the
company
sustain
damages
as
a
result
of
the
actions
of
a
third
party,
it
is
entirely
the
right
of
the
shareholder
to
decide
whether
he
or
she
will
settle
the
personal
claim
or
the
claim
of
the
company.
This
is
particularly
true
where
the
individual
and
corporate
losses
are
inextricably
connected
and
are
essentially
conterminous.
If,
on
the
facts,
the
shareholder's
own
personal
claim
is
settled,
the
Minister
of
National
Revenue
is
not
entitled
to
interfere
in
that
business
decision.
A
matter
that
caused
me
some
concern
was
that
Mr.
Simpson,
as
well
as
being
a
shareholder,
was
also
an
officer
and
director
of
the
company
and
as
such
might
have
had
an
obligation
to
the
company
to
settle
its
claim
to
the
exclusion
or
detriment
of
his
own.
Such
indeed
was
the
substance
of
a
claim
made
by
two
creditors
of
the
company,
Jenkins
Transfer
Ltd.
and
S-Narque
Ltd.,
in
an
action
commenced
in
May,
1987
against
the
companies,
their
shareholders,
including
the
appellant,
the
bank,
an
officer
of
the
bank,
the
appellant's
firm
of
solicitors
and
Mr.
Scales.
A
number
of
bases
for
the
claim
were
advanced,
including
an
allegation
that
the
settlement
sum
paid
by
the
bank
was
as
a
matter
of
law
the
rightful
property
of
the
company
and
that
the
company
paid
the
settlement
amount
to
the
appellant
with
intent
to
defeat,
hinder
delay
or
prejudice
its
creditors.
The
matter
was
ultimately
settled.
I
considered
recalling
counsel
and
I
would
have
done
so
had
the
possible
obligation
if
any,
to
the
company
and
the
creditors
by
a
director,
officer
and
shareholder
in
the
position
of
Mr.
Simpson
been
likely
to
affect
my
disposition
of
the
case.
I
concluded
that
it
did
not.
The
issues
before
me
are
essentially
the
following:
Was
the
settlement
with
Mr.
Simpson
and
was
he
entitled
to
the
settlement
amount
in
respect
of
damages
that
he
sustained
or
was
the
settlement
with
the
company
and
did
the
settlement
amount
belong
to
the
company?
It
is
not
this
Court's
action
to
attempt
to
decide
what
the
Supreme
Court
of
Prince
Edward
Island
might
have
decided
in
an
action
by
the
company
or
its
creditors
against
the
appellant.
It
would
have
been
presumptuous
of
me
to
attempt
to
do
so.
On
the
evidence
before
me
there
would
have
been
no
basis
upon
which
I
could
have
made
any
determination
of
the
complex
questions
of
fact
and
law
involved
in
such
an
issue
between
the
appellant
and
parties
who
were
not
before
the
court.
Moreover,
whatever
conclusion
I
might
have
reached
on
an
issue
that
was,
in
my
view
quite
properly,
not
raised
by
counsel
for
the
Minister
in
argument
or
pleaded
as
a
basis
for
assessing,
would
have
been
irrelevant
to
the
issue
before
this
court
which
was,
as
stated,
what
the
appellant
in
fact
did,
not
what
the
civil
consequences
of
his
actions
might
have
been
if
challenged
by
third
parties.
I
find
as
a
fact
that
the
settlement
was
with
Mr.
Simpson,
that
he
was
entitled
to
the
proceeds
of
settlement
and
that
there
was
no
appropriation
of
funds
of
the
company
and
no
dividend
or
deemed
dividend.
Accordingly
the
sum
of
$433,333
should
be
deleted
from
his
income
for
1986.
Appeal
allowed.
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