Marceau,
J.A.:—This
appeal
is
from
a
judgment
of
the
Trial
Division
which
vacated
an
assessment
made
by
the
Minister
of
National
Revenue
for
the
1972
taxation
year
of
the
late
Nathan
Cesser,
whose
rights
are
exercised
here
by
his
widow
in
her
capacity
as
executrix
of
his
estate.
As
the
facts
were
all
admitted,
there
are
no
problems
of
evidence
and
the
question
raised
can
be
easily
defined:
did
the
late
Nathan
Cesser
purchase
from
his
employer
in
1972
shares
in
the
capital
stock
of
a
corporation
pursuant
to
an
agreement
giving
him
a
taxable
profit
under
paragraph
7(1)(a)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act"),
which
provides
as
follows:
7.
(1)
Subject
to
subsection
(1.1),
where
a
corporation
has
agreed
to
sell
or
issue
shares
of
the
capital
stock
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm's
length
to
an
employee
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm's
length,
(a)
if
the
employee
has
acquired
shares
under
the
agreement,
a
benefit
equal
to
the
amount
by
which
the
value
of
the
shares
at
the
time
he
acquired
them
exceeds
the
amount
paid
or
to
be
paid
to
the
corporation
therefor
by
him
shall
be
deemed
to
have
been
received
by
the
employee
by
virtue
of
his
employment
in
the
taxation
year
in
which
he
acquired
the
shares
.
.
.
.
However,
it
is
of
great
importance
not
only
because
of
the
amount
involved
but
because
it
is
representative
of
23
other
similar
assessments
made
against
fellow
employees
of
the
late
Nathan
Gesser,
and
its
solution
requires
the
analysis
of
the
numerous
and
complex
provisions
of
a
contract
concluded
in
stages
so
as
to
determine
its
legal
nature
and
its
consequences
in
law.
I
feel
that
the
appeal
should
be
allowed,
as
the
approach
I
take
differs
from
that
of
the
trial
judge,
and
to
explain
my
viewpoint
I
would
first
like
to
review
the
facts
surrounding
the
contract
under
consideration
and
then
define
the
problem
it
raises,
finally
proceeding
to
analyze
it.
Surrounding
facts
In
1970
Claridge
Investments
Ltd.
was
a
management
company
looking
after
a
number
of
corporations
belonging
to
members
of
the
Bronfman
family
of
Montreal
and
Nathan
Gesser
was
one
of
its
senior
officers.
Among
the
corporations
subject
to
control
by
Claridge
Investments
Ltd.
were
Cemp
Investments
Ltd.
and
its
subsidiary,
Cemp
Holdings
Ltd.
The
contract
which
the
Court
must
now
consider
was
made
in
1970
between
certain
key
employees
of
the
Bronfman
Group
corporations,
including
Nathan
Gesser,
and
members
of
the
Bronfman
family.
This
contract
was
to
be
implemented
in
two
stages,
the
first
to
be
completed
in
1970
and
the
second
later,
at
an
as
yet
unspecified
time,
which
proved
to
be
1972.
As
in
the
introduction,
I
again
speak
of
two
stages
in
which
the
contract
was
carried
out,
as
on
analysis
that
is
how
I
see
the
situation;
but
counsel
for
the
respondent
did
not
use
such
language
and
in
fact
referred
to
two
separate
agreements.
Perhaps,
but
what
is
clear
from
the
outset
is
that
the
two
agreements
were
connected
with
each
other,
and
one
cannot
be
analyzed
without
the
other.
I
will
accordingly
say
that
in
implementing
this
contract
made
between
the
Bronfman
family
ana
some
of
its
employees,
an
initial
agreement
was
made
in
1970.
No
document
was
drawn
up
to
record
the
agreement.
What
we
have
is
a
long
letter,
dated
November
24,
1970
and
signed
by
Nathan
Gesser,
purporting
to
confirm
the
existence
of
the
agreement
with
all
its
details.
The
letter
is
addressed
to
Cemp
Investments
Ltd.
and,
after
the
signature,
contains
a
certification
signed
on
behalf
of
Cemp
Investments
Ltd.
by
C.R.
Bronfman
which
simply
says:
"Agreed".
For
the
moment,
I
will
quote
from
this
long
letter
confirming
the
conditions
of
this
first
agreement,
which
was
called
the
base
agreement
or
"Purchase
Agreement”,
only
the
first
paragraph:
November
24,
1970
Cemp
Investments
Ltd.,
Thirty-Second
Floor,
60
Dorchester
Blvd.
West,
Montreal
101,
Quebec.
Dear
Sirs:
This
will
confirm
my
purchase
from
you
and
your
sale
to
me
of
8,400
common
shares
of
Cemp
Holdings
Ltd.
(hereinafter
called
“the
Company")
without
nominal
or
par
value
for
and
in
consideration
of
a
purchase
price
of
$21
per
share
aggregating
$176,400
whereof
$100
has
been
paid
on
account
as
herewith
acknowledged
by
you,
and
the
balance
shall
be
payable
ten
(10)
years
from
date
hereof.
I
should
say
at
once
that
the
second
paragraph
undertakes
to
explain
that
the
agreed
price
corresponds
to
the
fair
market
value
of
the
shares,
calculated
according
to
the
rules
accepted
by
the
Department
of
National
Revenue,
but
it
adds
that
in
any
case
if
the
Department
happens
not
to
be
in
agreement
the
price
will
be
adjusted
accordingly
so
that,
obviously,
the
agreement
cannot
be
interpreted
as
concealing
any
gratuitous
benefit
for
one
or
other
of
the
parties.
Ten
other
paragraphs
then
follow
setting
out
the
conditions
of
the
agreement
and
circumscribing
its
application.
The
necessary
analysis
will
of
course
deal
with
the
meaning
to
be
given
to
these
conditions
and
qualifications;
but
I
suggest
that
they
not
be
considered
until
after
we
have
reviewed
the
facts
surrounding
this
first
agreement
or,
to
use
my
phraseology,
relating
to
this
first
stage
of
conclusion
of
the
contract.
It
appears
from
the
documents
entered
in
the
record
that
this
base
agreement
mentioned
in
the
letter
of
November
24,
1970
led
to
a
number
of
formal
approvals
by
Cemp
Holdings
Ltd.
They
were
all
given
the
same
day,
namely
December
4,
1970.
The
minutes
of
a
meeting
of
the
directors
of
Cemp
Holdings
Ltd.
contain
a
notation
approving
the
transfer
by
Cemp
Investments
Ltd.
of
a
total
of
61,500
ordinary
shares
from
the
corporation
to
a
number
of
employees
named
on
a
list,
and
the
name
of
Nathan
Cesser
is
on
the
list
for
8,400
shares.
Copies
of
the
pages
of
the
shareholders'
register
and
the
register
of
share
transfers
of
Cemp
Holdings
Ltd.
indicate
that
the
names
of
employees
receiving
share
transfers
were
entered
in
them,
including
of
course
that
of
Nathan
Cesser
for
8,400
shares.
A
share
certificate
issued
by
Cemp
Holdings
Ltd.
in
the
name
of
Nathan
Cesser
for
8,400
shares
was
also
filed,
with
the
following
notation
on
the
back
of
it:
The
shares
represented
by
this
certificate
are
subject
to
the
provisions
of
an
agreement
between
Cemp
Investments
Ltd.
and
the
registered
holder
thereof.
Such
agreement
provides,
inter
alia,
for
restriction
on
the
rights
of
the
registered
holder
hereof
to
deal
with
such
shares
and
also
grants
to
Cemp
Investments
Ltd.
the
right
under
certain
circumstances
to
purchase
such
shares.
And
finally,
on
the
copies
of
three
minutes
of
meetings
of
Cemp
Holdings
Ltd.
shareholders,
one
held
on
December
15,
1971
and
the
other
two
on
June
1,
1972,
the
name
of
Nathan
Cesser
appears
among
the
shareholders
present.
The
second
agreement
(or
once
again,
what
I
have
called
the
second
stage
of
implementation
of
the
contract
made
between
the
Bronfman
family
and
certain
of
its
employees)
was
concluded
shortly
after
supplementary
letters
patent
dated
June
1,
1972
were
issued:
first,
to
replace
the
name
of
Cemp
Holdings
Ltd.
with
that
of
The
Fairview
Corporation
of
Canada
Ltd.,
and
second,
to
confirm
the
subdivision
of
each
of
the
issued
shares
of
Cemp
Holdings
Ltd.
into
5.6
ordinary
shares
of
The
Fairview
Corporation
of
Canada
Ltd..
Here
again,
this
was
not
a
written
agreement:
again,
it
is
referred
to
in
a
letter
from
Nathan
Cesser.
The
letter
was
dated
July
14,
1972
and
the
same
notation
"Agreed"
was
placed
at
the
end
of
it.
It
is
as
well
to
reproduce
it
in
its
entirety:
July
14,
1972
Cemp
Investments
Ltd.,
Thirty-Second
Floor,
630
Dorchester
Blvd.
West,
Montreal
101,
Quebec.
Dear
Sirs:
This
will
confirm
my
sale
to
you
and
your
purchase
from
me
of
5,600
common
shares
of
The
Fairview
Corporation
of
Canada
Ltd.
(the
"Company")
without
nominal
or
par
value
for
an
aggregate
consideration
of
$84,000.
I
hereby
represent
and
warrant
to
you
that
I
have
good
and
marketable
title
to
such
5,600
shares,
free
and
clear
of
any
liens,
encumbrances,
equities
and
claims
whatsoever.
Your
obligation
to
purchase
the
said
shares
is
subject
to
the
fulfilment
by
Wood
Gundy
Ltd.
and
Dominion
Securities
Corporation
Ltd.
of
their
obligations
to
purchase
the
1,800,000
common
shares
offered
by
the
prospectus
of
the
Company
dated
July
5,
1972,
on
July
25,
1972
and
the
issue
by
the
Company
to
the
said
underwriters
of
such
shares
on
such
date.
In
the
event
that
the
said
conditions
are
not
satisfactorily
fulfilled
on
July
25,
1972,
you
shall
have
no
obligation
to
purchase
the
said
common
shares
from
me.
In
the
event
that
the
aforesaid
conditions
are
satisfactorily
fulfilled
on
July
25,
1972,
I
shall
deliver
to
you
upon
the
said
date
suitably
endorsed
share
certificates
for
5,600
common
shares
with
signatures
guaranteed
by
a
Canadian
chartered
bank,
and
you
shall
pay
me
the
purchase
price
of
the
said
common
shares
minus
an
amount
equal
to
$3.75
per
common
share
to
be
used
to
reduce
the
balance
of
price
payable
by
me
pursuant
to
that
certain
agreement
between
us
dated
November
24,
1970
not
later
than
July
27,
1972.
I
hereby
name
and
appoint
irrevocably
as
my
attorneys
Nathan
Gesser,
Arnold
M.
Ludwick
and
Alvin
S.
Schacter
or
any
one
of
them
for
and
on
my
behalf
to
accept
delivery
of
the
present
agreement,
to
deliver
to
you
the
share
certificates
of
the
Company
representing
5,600
common
shares
and
to
accept
payment
of
any
sums
payable
to
me
pursuant
hereto.
Yours
very
truly,
Nathan
Gesser
On
July
17,
1972,
Nathan
Gesser
signed
a
new
letter
to
Cemp
Investments
Ltd.
providing
for
the
implementation
of
a
whole
series
of
new
stipulations
applicable
to
the
41,440
shares
of
The
Fairview
Corporation
of
Canada
Ltd.
(8,400
shares
of
Cemp
Holdings
Ltd.
less
1,000
x
5.6)
which
would
remain
in
his
name
after
the
sale
referred
to
by
the
letter
of
July
14
was
finalized.
For
the
moment,
it
will
only
be
necessary
to
quote
the
first
two
paragraphs,
which
describe
the
situation
quite
clearly:
July
17,
1972
Cemp
Investments
Ltd.,
Thirty-Second
Floor,
630
Dorchester
Boulevard
West,
Montreal
101,
Quebec.
Dear
Sirs:
Reference
is
made
to
that
certain
letter
agreement
(the"
Purchase
Agreement")
between
us
dated
November
24,
1970
pursuant
to
which
I
purchased
from
you
8,400
common
shares
of
Cemp
Holdings
Ltd.
which
have
been
subdivided
into
47,040
common
shares
of
The
Fairview
Corporation
of
Canada
Ltd.
(the
“
Fairview
Shares”),
the
supplementary
letters
patent
of
Cemp
Holdings
Ltd.
dated
June
1,
1972
changing
inter
alia
its
name
to
the
Fairview
Corporation
of
Canada
Ltd.
(the
"Company")
and
subdividing
each
issued
common
share
into
5.6
common
shares,
the
prospectus
of
the
Company
dated
July
5,
1972
and
our
agreement
dated
July
14,
1972
pursuant
to
which
I
agreed
to
sell
to
you
5,600
common
shares
of
the
Company.
The
balance
of
41,440
common
shares
of
the
Company
owned
by
me
are
hereinafter
referred
to
as
the
“Remaining
Fairview
Shares".
In
view
of
the
proposed
public
issue
of
the
shares
of
the
Company,
this
will
confirm
our
agreement
to
supplant
the
Purchase
Agreement
save
and
except
for
the
second
paragraph
thereof
by
the
present
letter
agreement.
It
is
agreed
that
you
hereby
waive
your
option
rights
pursuant
to
subparagraphs
(a)
and
(c)
on
Page
2
of
the
Purchase
Agreement,
but
that
you
shall
have
an
irrevocable
option
to
purchase
all
or
any
part
of
the
Remaining
Fairview
Shares
within
the
thirty
(30)
days
next
following
the
hereinafter
enumerated
event
which
gives
rise
to
such
option
rights:
We
will
look
at
the
other
ten
paragraphs
below
when
we
proceed
with
the
analysis.
On
July
25,1972
proceedings
were
completed
for
a
public
issue
of
Cemp
Holdings
shares
(the
time
set
for
implementing
the
agreement
contained
in
the
letter
of
July
17),
the
transfer
of
5,600
shares
from
Nathan
Gesser
to
Cemp
Investments
Ltd.
was
entered
in
the
register
of
transfers
of
The
Fairview
Corporation
of
Canada
Ltd.
and
Nathan
Gesser
received
a
letter
including
a
cheque
for
$63,000.
This
of
course
was
the
difference
between
the
value
of
the
shares
in
1970
as
indicated
in
the
first
agreement,
namely
$21
for
each
of
the
1,000
shares
not
yet
subdivided,
and
their
value
in
1972
after
subdivision,
as
indicated
in
the
second
agreement,
namely
$15
for
each
of
the
5,600
new
shares.
It
is
worth
reading
this
letter
accompanying
the
cheque:
July
26,
1972
N.
Cesser,
Esq.,
5012
Roslyn
Avenue,
Montreal,
Quebec.
Dear
Mr.
Cesser:
Please
find
enclosed
an
original
copy
of
your
July
14,
1972
letter
to
Cemp
Investments
Ltd.
("Cemp")
offering
to
sell
5,600
common
shares
of
the
Fairview
Corporation
of
Canada
Ltd.
and
your
letter
of
July
17,
1972
concerning
the
terms
and
conditions
applicable
to
the
remaining
41,440
common
shares
of
the
Fairview
Corporation
of
Canada
Ltd.
which
you
purchased
from
Cemp
on
November
24,
1970
which
has
been
executed
by
the
duly
authorized
officers
of
Cemp
pursuant
to
a
meeting
of
its
Board
of
Directors
held
July
21,
1972
at
Montreal,
Quebec.
I
have
delivered
on
your
behalf
and
as
your
attorney
your
endorsed
share
certificate
representing
41,440
common
shares
of
the
Fairview
Corporation
of
Canada
Ltd.
to
Cemp,
and
have
received
their
cheque
in
the
amount
of
$63,000
which
is
enclosed
herewith.
Yours
very
truly,
Alvin
S.
Shatter
Problem
for
solution
Naturally,
it
is
the
tax
treatment
of
this
$63,000
which
is
at
issue.
In
his
tax
return
for
1972
Nathan
Cesser
treated
the
total
selling
price
of
the
5,600
shares
transferred
by
the
letter
of
July
14,
namely
$84,000,
as
the
proceeds
of
disposition
of
property
with
an
adjusted
cost
base
equal
to
the
selling
price,
which
thus
resulted
in
no
taxable
capital
gain.
In
his
view,
of
course,
the
documents
should
be
taken
literally,
so
that
the
purpose
of
the
1972
agreement
was
simply
the
sale
of
shares
which
he
had
bought
in
1970
and
had
owned
for
two
years.
The
Minister
saw
matters
otherwise.
In
the
Minister's
opinion,
by
the
1970
agreement
Nathan
Cesser
was
only
given
an
option
or
a
right
to
purchase
8,400
Cemp
Holdings
Ltd.
shares,
and
by
the
1972
agreement
he
had
bought
at
the
1970
agreed
price,
and
at
once
resold
at
the
1972
market
price,
1,000
of
the
8,400
mentioned,
thereby
gaining
a
benefit
of
$63,000,
one
which
was
covered
directly
by
paragraph
7(1)(a)
of
the
Income
Tax
Act.
Accordingly,
as
I
have
said,
the
problem
that
arises
is
to
determine
the
legal
nature
and
actual
effect
of
the
agreements
concluded
by
the
contracting
parties.
It
is
a
classic
problem
of
taxation,
as
can
be
seen,
the
difficulty
of
which
arises
from
the
fact
that
its
solution
often
requires
us
to
go
beyond
the
form
and
words
that
the
parties
may
have
used
to
give
effect
to
their
intended
agreement;
however,
on
this
occasion
the
problem
is
especially
acute
because
of
the
complexity
of
the
documents
involved
and
the
obvious
professional
care
taken
in
preparing
them.
It
is
clear
that
the
purpose
of
the
operation
which
the
Court
must
examine
here
was
to
give
effect
to
the
Bronfman
family’s
wish
in
1970
to
compensate
a
number
of
its
senior
employees
by
giving
them
an
opportunity
to
participate
in
the
ready-made
profits
which
the
transformation
of
Cemp
Holdings
Ltd.
into
a
public
corporation
(which
was
undoubtedly
accepted
in
principle
at
this
time)
could
make
for
its
owners;
and
it
is
also
clear
that
the
technique
for
giving
effect
to
this
wish
of
the
Bronfman
family
was
worked
out
with
the
greatest
possible
care
for
its
tax
implications.
This
can
be
seen
from
the
record
as
a
whole,
and
indeed
the
judge
who
heard
the
case
in
the
Tax
Court
of
Canada
made
a
point
of
mentioning
it
with
reference
to
actual
statements
by
one
of
the
counsel
of
record.
I
felt
that
these
last
observations
should
be
made
to
give
an
adequate
account
of
the
circumstances
in
which
the
problem
for
solution
arose.
That
is
their
only
purpose,
as
the
rules
to
be
applied
to
a
problem
of
this
nature
are
the
same
under
all
circumstances
and
I
do
not
think
it
is
possible
to
state
them
more
Clearly
than
in
the
words
of
Urie,
J.
in
Atinco
Paper
Products
Ltd.
v.
The
Queen,
[1978]
C.T.C.
566,
78
D.T.C.
6387,
at
page
577
(D.T.C.
6395):
I
do
not
think
that
I
should
leave
this
appeal
without
expressing
my
views
on
the
general
question
of
transactions
undertaken
purportedly
for
the
purpose
of
estate
planning
and
tax
avoidance.
It
is
trite
law
to
say
that
every
taxpayer
is
entitled
to
so
arrange
his
affairs
as
to
minimize
his
tax
liability.
No
one
has
ever
suggested
that
this
is
contrary
to
public
policy.
It
is
equally
true
that
this
court
is
not
the
watch-dog
of
the
Minister
of
National
Revenue.
Nonetheless,
it
is
the
duty
of
the
Court
to
carefully
scrutinize
everything
that
a
taxpayer
has
done
to
ensure
that
everything
which
appears
to
have
been
done,
in
fact,
has
been
done
in
accordance
with
applicable
law.
It
is
not
sufficient
to
employ
devices
to
achieve
a
desired
result
without
ensuring
that
those
devices
are
not
simply
cosmetically
correct,
that
is
correct
in
form,
but.
in
fact,
are
in
all
respects
legally
correct,
real
transactions.
If
this
Court,
or
any
other
Court,
were
to
fail
to
carry
out
its
elementary
duty
to
examine
with
care
all
aspects
of
the
transactions
in
issue,
it
would
not
only
be
derelict
in
carrying
out
its
judicial
duties,
but
in
its
duty
to
the
public
at
large.
Analysis
of
agreements
I
set
out
earlier
only
the
first
part
of
the
letter
of
November
24,
1970
dealing
with
the
first
agreement,
and
did
likewise
for
the
letter
of
July
17,
1972
which,
with
that
of
the
previous
July
14,
set
out
the
second
agreement.
The
time
has
now
come
to
look
at
the
remainder
of
each
letter.
The
text
of
the
letter
of
November
1970
is
long
and
difficult
to
read,
but
as
it
is
the
crux
of
the
matter
1
do
not
think
that
I
can
avoid
setting
out
in
full
the
ten
paragraphs
following
paragraph
1
cited
above,
and
paragraph
2
which
I
said
undertook
to
explain
for
the
Department
of
National
Revenue
how
the
selling
price
was
arrived
at.
For
ease
of
reading
and
to
facilitate
possible
references,
I
will
take
the
liberty
of
introducing
and
numbering
each
one.
Paragraphs
3
and
4
of
the
letter
provide
for
pledging
the
share
certificates:
Until
full
payment
of
the
purchase
price,
the
share
certificates
for
the
shares
hereby
sold
shall
be
pledged
to
you
as
continuing
collateral
security
for
the
fulfilment
of
my
obligations
to
pay
the
purchase
price
and
to
comply
with
all
of
the
provisions
of
the
present
agreement.
Upon
payment
in
full
for
the
shares,
the
certificates
for
such
shares
will
be
released
to
me
but,
in
any
event,
they
will
contain
an
endorsation
thereon
relative
to
the
restrictions
on
transfer
embodied
in
the
present
agreement.
Paragraph
5
gives
Cemp
Investments
Ltd.
an
option
to
purchase
the
shares:
You
shall
have
an
irrevocable
option
to
purchase
my
shares
in
the
Company
in
the
event
of:
(a)
you
or
the
Company
making
a
public
issue
of
any
of
your
or
the
Company's
shares;
or
(b)
my
retirement
from
the
services
of
your
Company
or
any
of
its
subsidiaries,
for
any
reason
or
cause
whatsoever;
or
(c)
the
efflux
of
ten
years
from
date
hereof;
or
(d)
my
death.
Paragraphs
6
and
7
give
Nathan
Cesser
the
right,
after
a
certain
length
of
time
and
on
certain
conditions,
to
compel
Cemp
Investments
Ltd.
to
purchase
the
shares:
Conversely,
I
shall
be
entitled
on
the
fifth
anniversary
of
the
present
agreement
to
call
upon
you
to
purchase
up
to
Fifty
per
cent
(50%)
of
my
shares
in
the
Company,
and
on
each
succeeding
anniversary
of
the
present
agreement
a
number
of
shares
in
the
Company
not
exceeding
Ten
per
cent
(10%)
of
the
original
number
of
shares
in
the
Company
held
by
me
before
implementation
of
any
calls,
in
which
event
you
shall
be
obliged
to
do
so.
In
the
application
of
the
present
paragraph
any
rights
to
call
upon
you
to
purchase
shares
in
the
Company
which
are
not
actually
exercised
by
me
shall
accumulate
and
be
added
to
the
rights
of
all
available
to
me
on
the
next
following
anniversary
of
the
agreement.
This
right
to
call
upon
you
to
purchase
my
shares
shall
also
avail
and
enure
in
favour
of
my
heirs,
executors
and
successors
on
the
same
basis
and
on
the
same
anniversary
dates
as
aforesaid
in
the
event
of
my
death.
In
either
event,
the
exercise
of
your
option
to
purchase
or
my
right
to
call
upon
you
to
effect
purchase
shall
be
effected
at
any
time
by
written
notice
within
six
months
from
the
date
when
the
respective
option
or
right
enures,
except
only
that
your
rights
of
purchase
arising
on
my
retirement
from
the
services
of
the
Company
or
any
Of
its
affiliates
shall
continue
irrevocably
(if
not
previously
exercised)
until
my
death
and
a
period
of
six
months
thereafter.
In
any
case,
the
purchase
price
for
your
re-acquisition
of
the
shares
shall
be
such
amount
as
will
be
determined
by
the
auditors
of
the
Company
on
the
basis
of
the
original
purchase
price
for
the
shares
(either
as
originally
determined
under
this
agreement,
or
as
subsequently
revised
pursuant
thereto
on
the
fair
market
value
criterion
above
mentioned),
plus
or
minus
such
accretions
or
diminutions
in
value
from
date
hereof
measured
and
applied
on
the
same
basis
as
such
original
or
revised
determination
up
to
the
date
of
exercise
by
you
of
the
option
to
purchase
or
up
to
the
date
of
my
obliging
you
to
effect
purchase
except
only
that,
in
the
event
of
my
retirement
from
the
employ
of
your
Company
or
of
its
subsidiaries
at
any
time
prior
to
ten
years
from
date
hereof,
you
shall
be
entitled
to
exercise
your
right
of
option
to
purchase
at
the
lower
of
the
value
as
thus
determined
as
at
the
date
of
my
retirement
(plus
an
amount
in
such
case
equal
to
the
equivalent
of
5%
per
annum
on
the
excess,
if
any,
of
the
price
as
thus
calculated
over
any
amount
still
owing
by
me
for
the
shares
from
date
of
my
retirement
to
date
of
your
exercise
of
the
option
to
purchase)
or
as
of
the
date
when
you
actually
exercise
such
option
at
any
time
subsequent
thereto.
In
calculating
valuations,
for
purposes
of
the
foregoing,
the
auditors
of
the
Company
shall
be
entitled,
but
not
obliged,
to
rely
on
the
latest
then
available
financial
statements
of
the
Company
immediately
preceding
the
date
of
fixation
of
value.
In
any
event
the
determination
of
value
as
established
by
such
auditors
shall
be
final
and
binding
and
free
from
any
challenge
or
question.
Paragraph
8
provides
that
any
division,
distribution
or
consolidation
affecting
the
shares
concerned
shall
apply
to
Nathan
Gesser's
account
together
with
any
dividend
payment
relating
thereto,
except
that
Cemp
Investments
Ltd.
is
to
have
the
right
to
retain
the
money
and
deduct
it
from
the
balance
of
the
price:
Any
share
divisions,
stock
dividends,
stock
distributions
or
consolidations
in
respect
of
the
shares
hereby
sold
shall
enure
and
apply
to
my
account
in
respect
of
the
shares
and
shall
be
governed
correspondingly
by
all
of
the
provisions
of
the
present
agreement.
Any
cash
dividends
on
the
shares
sold
during
the
period
of
time
when
II
am
the
owner
shall
similarly
enure
to
my
account,
but
they
may
be
retained
by
you
on
account
of
and
in
deduction
of
the
balance
of
the
purchase
price
that
may
be
then
outstanding.
Paragraph
9
deals
with
possible
default
in
payment
of
the
balance
of
the
price
after
ten
years:
In
the
event
of
my
failure
to
meet
the
obligations
for
the
balance
of
price
when
it
becomes
due,
and
my
failure
to
correct
such
default
within
60
days
of
written
notice
thereof,
all
my
right,
interest
and
title
in
and
to
the
shares
shall
thereupon
become
forfeited
to
you
by
way
of
a
"dation
en
paiement”
and
any
payments
made
on
account
of
the
purchase
price
shall
thereupon
be
forfeited
as
liquidated
damages
without
any
further
recourse
by
either
party
towards
the
other.
Paragraph
10
confers
certain
subscription
rights
for
shares
which
Cemp
Investments
may
issue
to
the
public:
In
the
event
that
you
exercise
your
option
to
purchase
by
reason
of
you
or
the
Company
making
a
public
issue
of
any
of
your
or
the
Company's
shares,
I
will
be
given
an
opportunity
to
subscribe
for
such
shares
at
a
price
no
less
favourable
than
the
price
for
which
these
shares
are
being
offered
to
the
public,
such
right
being
available
at
least
to
the
extent
of
a
value
equivalent
to
the
original
purchase
price
to
me
of
the
shares
in
the
Company
which
are
being
acquired
by
virtue
of
the
present
agreement.
Paragraph
11
provides
that
Nathan
Gesser
shall
have
no
right
to
dispose
of
any
of
the
shares:
The
present
agreement
shall
be
binding
upon
the
parties
hereto
and
their
heirs,
executors
and
successors.
It
is
mutually
acknowledged
that,
apart
from
transmissions
of
my
rights
arising
by
death,
I
shall
not
be
entitled
to
assign,
transfer,
pledge,
hypothecate
or
convey
any
of
my
rights
in
and
to
the
said
shares.
There
will
be
no
need
to
reproduce
at
such
length
the
paragraphs
of
the
July,
1972
letter
following
the
first
two
quoted
above,
first
because
they
are
only
important
in
connection
with
the
1970
letter,
and
second
because
the
tone
is
now
set
and
the
wording
often
overlaps
that
of
1970.
Paragraphs
3,
4,
5
and
6
of
the
July,
1972
letter
redefine
the
Cemp
Investments
Ltd.
purchase
option
in
a
manner
similar
to
that
of
paragraph
5
of
the
1970
letter.
I
set
out
paragraph
7
because
it
is
fundamental
and
I
shall
need
to
return
to
it:
I
acknowledge
my
debt
of
$176,300,
payable
on
November
24,
1980
with
respect
to
the
shares
which
I
acquired
pursuant
to
the
Purchase
Agreement.
Until
a
full
payment
of
the
said
balance
of
price
and
save
and
except
for
a
sale
to
a
bona
fide
third
party
pursuant
to
the
terms
and
conditions
of
the
following
paragraph
hereof,
the
share
certificates
for
the
Remaining
Fairview
Shares
shall
be
pledged
to
you
as
continuing
collateral
security
for
the
fulfilment
of
my
obligations
to
pay
the
said
balance
of
price
and
to
comply
with
all
of
the
provisions
of
the
present
agreement,
and
all
voting
rights
in
respect
of
the
said
Remaining
Fairview
Shares
shall
remain
with
you
and
my
right
to
said
shares
and
under
this
Agreement
shall
not
be
assignable.
Paragraph
8
purports
to
give
Nathan
Gesser
the
right
to
dispose
of
50
per
cent
of
his
shares
before
1976
and
10
per
cent
per
annum
thereafter,
while
retaining
a
preemption
right
for
Cemp
Investments
Ltd.
Paragraph
10
is
to
the
same
effect
as
paragraph
eight
of
the
1970
letter.
As
we
have
seen,
the
latter
provided
that
any
division,
distribution
or
consolidation
affecting
the
shares,
as
well
as
any
dividend
payment
relating
thereto,
would
apply
to
Nathan
Gesser's
account,
except
that
Cemp
Investments
Ltd.
would
have
the
right
to
retain
the
money
and
deduct
it
from
the
balance
of
the
price.
Paragraph
11
reproduces
paragraph
9
of
the
1970
letter
verbatim
with
reference
to
the
non-payment
of
the
balance
of
the
price.
The
last
paragraph
is
the
same
as
the
last
paragraph
of
the
1970
letter:
it
provides
that
Nathan
Gesser
shall
have
no
right
whatever
to
dispose
of
the
shares
other
than
in
accordance
with
the
foregoing
provisions.
My
analysis
of
these
two
letters
confirming
the
two
successive
agreements
has
convinced
me
that
the
form
and
the
words
used
did
not
correspond
to
the
substance
of
what
the
parties
intended
to
accomplish,
that
they
did
not
express
the
actual
situation.
The
intention
was
to
pay
substantial
bonuses
to
senior
employees
in
the
coming
years,
and
to
exempt
this
bonus
payment
from
the
usual
fiscal
consequences
the
operation
was
given
the
appearance
of
successive
agreements
to
sell
and
purchase
shares
of
the
company
that
would
appreciate
considerably
in
value
when
placed
on
the
open
market.
I
draw
the
following
two
conclusions
from
my
general
analysis.
(a)
Cemp
Investments
Ltd.
transferred
nothing
and
Nathan
Gesser
acquired
nothing
tangible
in
1970;
in
other
words,
in
1970
Cemp
Investments
gave
up
nothing
and
Nathan
Gesser
was
not
in
any
way
enriched.
There
was
not
any
actual
transfer
of
property
or
value
from
the
estate
of
one
to
the
estate
of
the
other.
Control
of
the
shares
and
all
privileges
and
benefits
associated
therewith
never
left
Cemp
Investments
Ltd.,
and
Nathan
Cesser
acquired
nothing
in
this
regard.
The
actual
situation
was
concealed
by
the
words
used
in
paragraphs
three,
four,
eight
and
eleven
of
the
letter
of
November
24,1970.
I
am
aware
that
the
three
minutes
of
shareholders'
meetings
mention
the
presence
of
Nathan
Cesser;
but
first,
there
is
no
indication
that
Nathan
Cesser
exercised
any
particular
voting
right,
as
the
few
resolutions
were
all
apparently
adopted
unanimously;
second,
the
first
of
these
meetings
was
held
on
December
15,
1971,
more
than
a
year
after
the
1970
agreement,
so
that
the
question
arises
as
to
what
happened
in
the
meantime;
finally,
Nathan
Cesser
was
a
senior
officer
of
the
organization
and
his
being
entered
as
a
shareholder
was
a
simple
and
inconsequential
matter.
Moreover,
the
1972
agreement
is
singularly
instructive
in
this
respect.
As
we
have
seen,
it
contains
a
prohibition
on
disposing
of
the
remainder
of
the
shares
after
the
sale
of
the
5,600,
unless
under
the
close
control
of
Cemp
Investments
Ltd.,
and
paragraph
seven
quoted
above
adds
the
further
clarification
that
I
repeat,
underlining
two
words:
“all
voting
rights
in
respect
of
the
said
remaining
Fairview
shares
shall
remain
with
you
and
my
right
to
said
shares
and
under
this
agreement
shall
not
be
assignable”:
this
surely
states
what
was
understood
in
the
matter
from
beginning
to
end.
(b)
Further,
the
1970
agreement
imposed
no
obligation
on
Nathan
Gesser's
estate
(apart,
of
course,
from
the
nominal
amount
supposedly
paid).
What
is
at
issue
here,
of
course,
is
the
interpretation
that
should
be
given
to
the
clause
contained
in
paragraph
9,
which
it
will
be
remembered
reads:
In
the
event
of
my
failure
to
meet
the
obligations
for
the
balance
of
price
when
it
becomes
due,
and
my
failure
to
correct
such
default
within
60
days
of
written
notice
thereof,
all
my
right,
interest
and
title
in
and
to
the
shares
shall
thereupon
become
forfeited
to
you
by
way
of
a"
dation
en
paiement”
and
any
payments
made
on
account
of
the
purchase
price
shall
thereupon
be
forfeited
as
liquidated
damages
without
any
further
recourse
by
either
party
towards
the
other.
It
is
this
paragraph
which
the
trial
judge
saw
as
the
heart
of
the
matter.
In
his
opinion,
this
“forfeiture
clause”,
as
he
called
it,
only
gave
Cemp
Investments
Ltd.
a
further
remedy
in
addition
to
those
available
to
any
creditor
under
art.
1065
of
the
Civil
Code.
Like
the
giving
in
payment
clauses
stipulated
in
hypothecary
loan
deeds,
its
purpose
was
not
to
replace
the
other
remedies
but
to
add
to
them,
and
the
judge
regarded
as
proof
of
this
the
fact
that
to
take
effect
two
conditions
had
to
be
met,
one
of
which
was
at
the
discretion
of
Cemp
Investments
Ltd.
The
clause
required
not
only
failure
to
make
payment
but
also
notice.
As
the
judge
said,
"there
is
nothing
in
the
clause
that
suggests
that
the
seller
(Cemp
Investments
Ltd.)
is
required
to
provide
that
notice.
The
seller
may
therefore
choose
not
to
do
so,
and
thereby
waive
the
forfeiture
in
its
favour,
while
preserving
all
of
the
rights
conferred
on
it
by
article
1065
of
the
Civil
Code".
It
seems
to
me
that
the
judge
forgot,
with
respect,
that
other
provisions
of
the
Quebec
Civil
Code
(such
as
arts.
1067
and
1068)
create
a
condition
precedent
to
exercise
of
the
right
to
enforce
an
obligation
to
pay
in
court,
and
that
condition
is
"putting
in
default”,
which
is
nothing
more
or
less
than
notice.
The
way
in
which
the
clause
was
written,
including
the
punctuation
used
(especially
the
lack
of
a
comma
before
the
words
“without
any
other
recourse"),
its
place
in
the
text
as
a
whole,
its
repetition
in
the
letter
of
July
17,
1972
(when
at
that
time
the
shares
had
acquired
their
increased
value,
and
contrary
to
the
statement
in
paragraph
7
the
pseudo-debt
was
certainly
a
different
entity,
since
1,000
of
the
8,400
(1970
shares)
were
covered
by
the
letter
of
the
14th
and
payment
for
them
had
been
made)
are
in
my
opinion
all
indications
that
the
idea
behind
the
clause
was
not
simply
to
provide
an
additional
remedy.
Moreover,
if
this
were
not
the
case,
the
skilled
professionals
who
prepared
the
documents
with
so
much
care
would
undoubtedly
have
expressed
themselves
differently
in
order
to
remove
all
doubt;
but
then,
it
may
be
asked
why
this
technique
was
used.
I
suggest
that,
first,
it
was
to
complete
the
picture
by
introducing
a
concept
which
is
in
practice
reserved
for
the
field
of
real
estate
sales
and
mortgage
lending,
but
most
importantly,
I
think,
to
make
the
overall
operation
watertight
and
capable
of
functioning
automatically
in
all
situations,
without
any
outside
intervention.
This,
it
seems
to
me,
is
the
most
striking
aspect
of
the
technique
used.
Everything
was
done
internally:
preparation
of
documents,
registration
in
the
books
and
minutes.
The
employees
clearly
had
to
be
given
a
tangible
role
and
letters
of
confirmation
signed
by
them
were
decided
on.
I
accordingly
consider
that
the
Tax
Court
of
Canada,
and
before
it
the
Minister,
were
right
in
saying
that
Nathan
Gesser
did
not
acquire
shares
in
1970.
It
is
not
easy
to
define
exactly
and
in
technical
terms
what
the
1970
agreement
represented:
an
option,
a
promise
to
sell
or
purchase,
or
something
else;
what
can
be
said
is
that
it
probably
gave
Nathan
Gesser
the
right
to
compel
Cemp
Investments
Ltd.
after
five
years
to
pay
him
the
difference
between
the
value
of
the
shares
of
Cemp
Holdings
Ltd.
as
established
in
the
1970
agreement
and
their
value
after
the
company
went
public,
for
50
per
cent
of
the
block
of
8,400,
and
the
same
thereafter
for
an
additional
10
per
cent
per
annum;
but
no
specific
ruling
in
this
regard
is
required.
What
matters
is
that
in
1972,
there
was
a
pseudo
transfer
of
an
initial
group
of
shares
by
a
purchase
sale
which
concealed
a
benefit
that
was
clearly
taxable
under
paragraph
7(1)(a)
of
the
Income
Tax
Act.
I
would
accordingly
allow
the
appeal,
set
aside
the
subject
judgment
and
restore
the
Minister’s
assessment,
with
costs.
Des
jardins,
J.A.:—1
concur
in
the
conclusion
arrived
at
by
my
brother
judge
Marceau,
J.A.
In
the
document
of
November
24,
1970,
signed
by
Nathan
Cesser
and
accepted
by
CEMP
Investments
Ltd.
("the
Company")
paragraphs
1,
3
and
4
deal
with
the
purchase
by
the
respondent
of
8,400
ordinary
shares
of
the
company
(A.C.,
at
page
16):
This
will
confirm
my
purchase
from
you
and
your
sale
to
me
of
8,400
common
shares
of
Cemp
Holdings
Ltd.
(hereinafter
called
“the
Company”)
without
nominal
or
par
value
for
and
in
consideration
of
a
purchase
price
of
$21
per
share
gg
8
’
g
$176,400
whereof
$100
has
been
paid
on
account
as
herewith
acknowledged
by
you
and
the
balance
shall
be
payable
ten
(10)
years
from
date
hereof.
Until
full
payment
of
the
purchase
price,
the
share
certificates
for
the
shares
hereby
sold
shall
be
pledged
to
you
as
continuing
collateral
security
for
the
fulfilment
of
my
obligations
to
pay
the
purchase
price
and
to
comply
with
all
of
the
provisions
of
the
present
agreement.
Upon
payment
in
full
for
the
shares,
the
certificates
for
such
shares
will
be
released
to
me
but,
in
any
event,
they
will
contain
an
endorsation
thereon
relative
to
the
restrictions
on
transfer
embodied
in
the
present
agreement.
[Emphasis
added.]
These
are
followed
by
paragraphs
5
to
7,
which
give
the
company
an
irrevocable
option
to
repurchase
the
shares
under
certain
circumstances,
and
a
duty
to
repurchase
certain
blocks
of
shares
in
other
circumstances.
You
shall
have
an
irrevocable
option
to
purchase
my
shares
in
the
Company
in
the
event
of:
(a)
you
or
the
Company
making
a
public
issue
of
any
of
your
or
the
Company's
shares;
or
(b)
my
retirement
from
the
services
of
your
Company
or
any
of
its
subsidiaries,
for
any
reason
or
cause
whatsoever;
or
(c)
the
efflux
of
ten
years
from
the
date
thereof;
or
(d)
my
death.
Conversely,
I
shall
be
entitled
on
the
fifth
anniversary
of
the
present
agreement
to
call
upon
you
to
purchase
up
to
fifty
per
cent
(50%)
of
my
shares
in
the
Company,
and
on
each
succeeding
anniversary
of
the
present
agreement
a
number
of
shares
in
the
Company
not
exceeding
ten
per
cent
(10%)
of
the
original
number
of
shares
in
the
Company
held
by
me
before
implementation
of
any
calls,
in
which
event
you
shall
be
obliged
to
do
so.
In
the
application
of
the
present
paragraph
any
rights
to
call
upon
you
to
purchase
shares
in
the
Company
which
are
not
actually
exercised
by
me
shall
accumulate
and
be
added
to
the
rights
of
all
available
to
me
on
the
next
following
anniversary
of
the
agreement.
This
right
to
call
upon
you
to
purchase
my
shares
shall
also
available
and
enure
in
favour
of
my
heirs,
executors
and
successors
on
the
same
basis
and
on
the
same
anniversary
dates
as
aforesaid
in
the
event
of
my
death.
In
either
event,
the
exercise
of
your
option
to
purchase
or
my
right
to
call
upon
you
to
effect
purchase
shall
be
effected
at
any
time
by
written
notice
within
six
months
from
the
date
when
the
respective
option
or
right
enures,
except
only
that
your
rights
of
purchase
arising
on
my
retirement
from
the
services
of
the
Company
or
any
Of
its
affiliates
shall
continue
irrevocably
(if
not
previously
exercised)
until
my
death
and
a
period
of
six
months
thereafter.
In
any
case,
the
purchase
price
for
your
re-acquisition
of
the
shares
shall
be
such
amount
as
will
be
determined
by
the
auditors
of
the
Company
on
the
basis
of
the
original
purchase
price
for
the
shares
(either
as
originally
determined
under
this
agreement,
or
as
subsequently
revised
pursuant
thereto
on
the
fair
market
value
criterion
above
mentioned),
plus
or
minus
such
accretions
or
diminutions
in
value
from
the
date
hereof
measured
and
applied
on
the
same
basis
as
such
original
or
revised
determination
up
to
the
date
of
exercise
by
you
of
the
option
to
purchase
or
up
to
the
date
of
my
obliging
you
to
effect
purchase
except
only
that,
in
the
event
of
my
retirement
from
the
employ
of
your
Company
or
of
its
subsidiaries
at
any
time
prior
to
ten
years
from
date
hereof,
you
shall
be
entitled
to
exercise
your
right
of
option
to
purchase
at
the
lower
of
the
value
as
thus
determined
as
at
the
date
of
my
retirement
(plus
an
amount
in
such
case
equal
to
the
equivalent
of
5%
per
annum
on
the
excess,
if
any,
of
the
price
as
thus
calculated
over
any
amount
still
owing
by
me
for
the
shares
from
date
of
my
retirement
to
date
of
your
exercise
of
the
option
to
purchase)
or
as
of
the
date
when
you
actually
exercise
such
option
at
any
time
subsequent
thereto.
In
calculating
valuations,
for
purposes
of
the
foregoing,
the
auditors
of
the
Company
shall
be
entitled,
but
not
obliged,
to
rely
on
the
latest
then
available
financial
statements
of
the
Company
immediately
preceding
the
date
of
fixation
of
value.
In
any
event
the
determination
of
value
as
established
by
such
auditors
shall
be
final
and
binding
and
free
from
any
challenge
or
question.
Paragraph
8
dealing
with
share
divisions,
stock
dividends
and
cash
dividends
follows:
Any
share
divisions,
stock
dividends,
stock
distributions
or
consolidations
in
respect
of
the
shares
hereby
sold
shall
enure
and
apply
to
my
account
in
respect
of
the
shares
and
shall
be
governed
correspondingly
by
all
or
the
provisions
of
the
present
agreement.
Any
cash
dividends
on
the
shares
sold
during
the
period
of
time
when
II
am
the
owner
shall
similarly
enure
to
my
account,
but
they
may
be
retained
by
you
on
account
of
and
in
deduction
of
the
balance
of
the
purchase
price
that
may
be
then
outstanding.
Finally,
there
is
paragraph
9
which
is
at
the
heart
of
the
issue
(A.C,
at
page
18):
In
the
event
of
my
failure
to
meet
the
obligations
for
the
balance
of
price
when
it
becomes
due,
and
my
failure
to
correct
such
default
within
60
days
of
written
notice
thereof,
all
my
right,
interest
and
title
in
and
to
the
shares
shall
thereupon
become
forfeited
to
you
by
way
of
a“
dation
en
paiement”
and
any
payments
made
on
account
of
the
purchase
price
shall
thereupon
be
forfeited
as
liquidated
damages
without
any
further
recourse
by
either
party
towards
the
other.
[Emphasis
added.]
By
the
effect
of
this
paragraph
9,
and
though
it
was
earlier
stated
that
the
respondent
purchased
8,400
ordinary
shares
of
the
company
for
$21
a
share,
making
a
total
of
$176,400
payable
in
ten
years,
as
long
as
the
total
amount
had
not
been
paid
the
company
kept
the
shares
as
security,
and
any
share
division,
payment
of
stock
dividends
and
so
on
was
credited
to
the
respondent
and
governed
by
the
terms
of
the
agreement,
any
cash
dividend
on
shares
sold
during
the
period
in
which
the
respondent
was
owner
would
be
credited
to
his
account
and
might
be
applied
as
a
deduction
from
the
selling
price
then
owed,
the
fact
remains
under
the
language
of
the
agreement
itself
that
the
respondent
could
not
be
compelled
to
pay
any
amount
whatever.
She
paid
only
the
sum
of
$100
cash.
Any
future
payment
would
have
to
be
made
voluntarily.
The
transfers
following
this
agreement
and
appearing
in
the
share
register
(A.C.,
page
70),
the
shareholders'
register
(A.C.,
page
76)
and
that
of
the
respondent
(A.C.,
page
79)
do
not
in
any
way
alter
this
situation.
I
interpret
paragraph
9
as
it
reads:
in
the
event
of
failure
by
the
respondent
to
pay
the
balance
of
the
selling
price
when
it
became
due
and
failure
to
pay
the
price
within
60
days
of
notification,
the
company
could
retake
the
shares
and
attach
to
its
own
benefit
money
paid
into
the
respondent's
account,
without
more:
“without
any
further
recourse
by
either
party
towards
the
other”.
The
company
could
not
retake
or
attach
without
first
giving
prior
notice.
It
had
no
other
remedies,
after
completing
the
necessary
formality.
With
respect,
I
cannot
interpret
paragraph
9
as
my
brother
Decary,
J.A.
does.
The
quotation
he
takes
from
the
text
by
Therese
Rousseau-Houle,
to
be
applicable,
assumes
that
there
was
a
term
sale.
Was
there
in
fact
such
a
sale?
The
expression
“without
any
further
recourse
by
either
party
towards
the
other"
contained
in
paragraph
nine
of
the
agreement,
read
together
with
the
two
definitions
in
the
Oxford
and
Webster
dictionaries
quoted
by
Decary,
J.
A.,
has
the
meaning
of
"not
more
extended,
not
going
beyond
what
has
been
dealt
with”,
“
not
going
or
extending
beyond
what
exists"'.
In
the
event
of
nonpayment
of
the
balance
by
the
respondent,
the
company
has
only
one
choice:
recovering
the
shares
and
the
money
in
the
respondent's
account.
It
cannot
do
anything
else.
All
ordinary
legal
remedies
are
precluded.
Unless
there
are
provisions
of
public
order
to
the
contrary,
(Articles
13
and
990
C.C.L.C.)
the
contract
is
the
law
of
the
parties.
The
precedents
cited
by
my
brother
judge
contain
none
of
the
limiting
aspects
of
the
case
at
bar,
in
particular
a
clause
containing
the
words
“
without
any
further
recourse
by
either
party
towards
the
other".
Gagnon
v.
Lemay
(1918),
27
Que.
K.B.
59;
aff'd.
(1917),
54
S.C.R.
365.
Halcro
v.
Gray
(1916),
50
C.S.
350
(Court
of
Revision),
Holt
v.
Maher
(1918),
55
C.S.
266
(Court
of
Revision)
and
Raginsky
v.
Pilon
(1926),
64
C.S.
155,
have
nothing
in
common
with
the
case
at
bar.
In
each
of
those
cases,
the
purchaser
had
undertaken
to
pay
the
price
of
the
thing
purchased
and
there
was
no
other
clause
in
the
contract
to
neutralize
that
undertaking.
Thus,
in
Gagnon
v.
Lemay
the
parties
signed
a
promise
of
sale
on
June
14,
1910
by
which
the
appellant
leased
a
piece
of
land
to
the
respondent
for
a
term
of
ten
years.
As
a
condition
of
the
lease,
the
respondent
reserved
the
option
to
purchase
and
the
appellant
promised
to
sell
him
the
property
for
$1,000
an
acre,
payable
as
$5,000
in
cash
when
the
contract
was
concluded
and
the
balance
in
annual
instalments.
On
July
2,
1914
a
deed
of
transfer
was
made
by
which
the
respondent
reassigned
to
the
appellant
all
the
rights
which
the
respondent
had
under
the
deed
of
June
14,
1910
for
the
sum
of
$60,000,
which
the
appellant
undertook
to
pay
in
instalments.
When
the
appellant
failed
to
make
his
payments,
he
was
sued
by
the
respondent
for
the
price.
He
argued
that
he
no
longer
owed
the
respondent
anything
because
the
clause
that
follows
had
terminated
the
contract
(Gagnon
v.
Lemay,
at
59-60):
If
Mr.
Gagnon
(the
debtor)
fails
to
make
the
first
payment
of
$13,000
or
any
other
payment
of
interest
and
capital,
this
conveyance
shall
be
void
ipso
facto
without
any
notice
being
given
and
the
promise
of
sale
shall
revive
in
favour
of
Mr.
Lemay
(the
creditor)
with
full
effect.
Mr.
Lemay
shall,
without
notice
being
given,
retain
the
aforementioned
payment
of
$2,000,
made
in
cash,
and
any
subsequent
payment
in
the
event
that
Mr.
Gagnon
is
more
than
thirty
days
in
arrears
in
making
any
payment
of
capital
or
interest.
His
argument
was
dismissed.
Archambault
C.J.A.
said
(at
65):
.
.
.
The
clause
in
question
was
stipulated
exclusively
in
the
seller’s
interest.
.
.
it
was
inserted
in
the
contract
to
protect
the
seller;
and
only
he
can
take
advantage
of
it.
The
purchaser
may
not
rely
on
this
clause
to
avoid
his
obligation
to
pay
the
purchase
price,
by
relinquishing
to
the
seller
the
property
he
purchased
from
him.
In
other
words,
the
seller
has
the
option
to
choose
between
rescission
of
the
contract
and
its
performance;
but
the
purchaser's
obligation
remains
absolute
and
without
alternative.
[Emphasis
added.]
However,
he
went
on
to
say:
The
stipulation
could
certainly
have
been
made
in
the
purchaser's
interest
as
well
that
of
the
seller;
but
that
would
have
to
be
stated
in
clear
and
unambiguous
language.
The
other
court
decisions,
Halcro
v.
Gray,
Holt
v.
Mayer
and
Raginsky
v.
Pilon,
contain
clauses
which
are
worded
differently
but
the
principle
of
which
is
the
same;
and
while
Faribault's
comment
that
this
type
of
clause
“is
a
stipulation
in
favour
of
the
seller
only,
and
the
purchaser
cannot
take
advantage
of
it”
(L.
Faribault,
Traits
de
droit
civil
du
Québec,
t.
7a,
Montreal:
Wilson
and
Lafleur,
1957,
at
page
272)
applies
to
the
clauses
discussed
in
all
these
decisions,
that
is
not
true
in
the
case
at
bar.
Under
paragraph
9
of
the
agreement
of
November
24,
1970,
Cemp
Investments
Ltd.
had
no
choice
but
to
recover
its
shares
and
the
money
in
the
account.
By
signing
the
document
of
November
24,
1970,
the
respondent
took
no
financial
risk.
To
use
the
language
of
the
Chief
Justice
in
Gagnon
v.
Lemay,
cited
above,
the
contracting
parties
in
the
case
at
bar
expressed
themselves
in
“clear
and
unambiguous
language”;
the
stipulation
was
made
in
the
interests
of
the
purchaser.
Nowhere
in
this
document
of
November
24,
1970
is
there
any
mention
of
the
purchaser's
essential
obligation
to
pay
the
price,
in
accordance
with
arts.
1472
and
1532
of
the
Civil
Code
of
Lower
Canada,
which
read
as
follows:
1472.
Sale
is
a
contract
by
which
one
party
gives
a
thing
to
the
other
for
a
price
in
money
which
the
latter
obliges
himself
to
pay
for
it.
It
is
perfected
by
the
consent
alone
of
the
parties,
although
the
thing
sold
be
not
then
delivered;
subject
nevertheless
to
the
provisions
contained
in
article
1027
and
to
the
special
rules
concerning
the
transfer
of
registered
vessels.
1532.
The
principal
obligation
of
the
buyer
is
to
pay
the
price
of
the
thing
sold.
[Emphasis
added.]
Despite
the
language
used,
the
agreement
of
November
24,
1970
did
not
constitute
a
term
sale.
I
concur
in
all
respects
in
the
conclusion
arrived
at
by
the
Tax
Court
of
Canada
judge
in
the
case
at
bar
(N.
Gesser
Estate
v.
M.N.R.,
[1984]
C.T.C.
2751,
at
2759;
(1984),
84
D.T.C.
1570,
at
1577)
:
The
Estate
therefore
did
not
feel
it
necessary
to
obligate
itself
in
the
November
24,
1970
contract
to
pay
the
$176,300
purchase
price
of
the
CEMP
shares
in
1970
or
in
any
other
taxation
year
and
Cemp
under
the
1970
agreement
had
no
legal
recourse
against
the
appellant
for
the
payment
of
the
purchase
price
of
the
said
shares.
What
then
was
achieved
on
July
14,
1972
by
the
document
signed
by
the
respondent
and
accepted
by
the
company
following
a
division
of
the
shares
on
a
5.6
basis?
The
first
paragraph
of
that
agreement
reads
as
follows
(A.C.
page
23):
This
will
confirm
my
sale
to
you
and
your
purchase
from
me
of
5,600
common
shares
of
The
Fairview
Corporation
of
Canada
Ltd.
(the
“Company”)
without
nominal
or
par
value
for
an
aggregate
consideration
of
$84,000.
I
hereby
represent
and
warrant
to
you
that
I
have
good
and
marketable
title
to
such
5,600
shares,
free
and
clear
of
any
liens,
encumbrances,
equities
and
claims
whatsoever.
At
that
time,
the
respondent
took
advantage
of
the
commitments
made
to
him
by
the
company
which
had
the
effect
of
reserving
for
him
a
block
of
shares.
He
sold
the
company
5,600
of
the
new
ordinary
shares.
For
him
to
be
able
to
sell
them
he
must
have
bought
them.
That
is
what
he
did.
In
view
of
the
difference
of
the
amounts
involved
between
November
24,
1970
and
July
14,
1972,
the
respondent
did
not
have
anything
to
pay
but
in
due
course
received
a
cheque
for
$63,000.
The
Tax
Court
of
Canada
judge
concluded
(N.
Gesser
Estate
v.
M.N.R.,
[1984]
C.T.C.
2751
at
2760;
84
D.T.C.
1570
at
1578)
:
In
the
case
at
bar,
although
the
form
of
agreement
may
appear
to
be
a
purchase
and
sale
agreement
and
is
referred
to
as
such
by
the
appellant,
the
substance
of
the
transactions
and
rights
and
obligations
of
the
parties
to
the
agreement
are
in
fact
a
stock
option
which
Cemp
offered
in
1970
and
which
the
Estate
exercised
in
1972
in
order
to
be
able
to
transfer
back
to
Cemp
5,600
shares
of
Fairview.
Personally,
I
have
no
doubt
that
the
agreement
of
November
24,
1970
did
not
constitute
a
transfer
of
ownership.
On
the
contrary,
it
was
in
1972
that
the
respondent
“acquired
shares
under
the
agreement”,
in
the
wording
of
paragraph
7(1)(a)
of
the
Income
Tax
Act.
Paragraph
7(1)(a)
reads
as
follows:
7.
(1)
Where
a
corporation
has
agreed
to
sell
or
issue
shares
of
the
capital
stock
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm's
length
to
an
employee
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm's
length,
(a)
if
the
employee
has
acquired
shares
under
the
agreement,
a
benefit
equal
to
the
amount
by
which
the
value
of
the
shares
at
the
time
he
acquired
them
exceeds
the
amount
paid
or
to
be
paid
to
the
corporation
therefor
by
him
shall
be
deemed
to
have
been
received
by
the
employee
by
virtue
of
his
employment
in
the
taxation
year
in
which
he
acquired
the
shares
.
.
.
[Emphasis
added.]
In
Grant
v.
The
Queen,
[1974]
C.T.C.
332,
74
D.T.C.
6252,
Bastin,
J.
of
the
Federal
Court
of
Canada
said
regarding
the
same
legislation
(paragraph
85A(1)(a)):
I
consider
that
the
word
“
acquire”
as
used
in
Sec.
85A(1)(a)
of
the
Income
Tax
Act
has
its
ordinary
meaning
of
to
gain
or
to
get
and
this
would
occur
when
something
was
purchased
whether
for
cash
or
on
credit.
The
issue
in
this
case
is
on
what
date
did
a
binding
agreement
for
the
sale
of
the
shares
in
question
to
the
plaintiff
come
into
existence.
[Emphasis
added.]
I
adopt
the
passage
from
the
judgment
of
Urie
J.
in
Atinco
Paper
Products
Ltd.
v.
The
Queen,
[1978]
C.T.C.
566,
78
D.T.C.
6387,
at
pages
577-78,
(D.T.C.
6395)
also
cited
by
the
Tax
Court
of
Canada
judge:
.
.
.
The
only
course
for
the
Court
to
take
is
to
apply
the
law
as
the
Court
sees
it
to
the
facts
as
found
in
the
particular
transaction.
If
the
transaction
can
withstand
that
scrutiny,
then
it
will,
of
course,
be
supported.
If
it
cannot,
it
will
fall.
I
would
dispose
of
the
case
as
my
brother
Marceau,
J.A.
does.
Décary,
J.A.
(dissenting):—1
am
unable
to
subscribe
to
the
opinion
of
my
brother
Marceau,
J.A.
for
the
reasons
that
follow.
To
indicate
the
background
to
the
case
at
bar,
a
number
of
preliminary
observations
must
be
made.
(a)
The
Court
has
before
it
a
transaction
the
validity
of
which
whether
in
terms
of
corporate
or
tax
law
is
not
in
any
way
questioned
by
the
appellant.
It
is
not
the
share
sale
as
such
that
the
appellant
is
challenging,
but
the
date
on
which
that
sale
was
supposedly
concluded.
The
appellant
admitted
that
the
only
point
at
issue
was
as
to
whether
the
shares
were
purchased
in
1970
or
purchased
in
1972.
(b)
The
transaction
at
issue
is
governed
by
paragraph
7(1)(a)
of
the
Income
Tax
Act
("the
Act”).
This
paragraph
applies
to
cases
in
which
a
corporation
sells
or
issues
to
one
of
its
employees
the
shares
of
a
corporation
with
which
it
does
not
deal
at
arm's
length.
In
the
case
at
bar,
the
corporation
in
question
set
up
a
share
sale
scheme
which
some
23
employees,
including
the
respondent
taxpayer,
took
advantage
of
in
the
period
at
issue.
It
was
therefore
not
an
isolated,
sudden,
secret
or
discretionary
transaction.
Additionally,
the
case
at
bar
concerns
the
particular
tax
provisions
applicable
when
shares
are
purchased
by
an
employee,
and
not
the
general
tax
provisions
applicable
to
the
sale
of
shares
by
a
taxpayer.
It
is
not
the
profits
made
in
the
sale
of
shares
in
1972
which
is
at
issue,
but
those,
if
any,
made
at
the
time
of
the
purchase
of
the
said
shares
in
1970
or
1972.
(c)
If
the
purchase
date
is
taken
as
1970,
the
appellant
would
be
barred
by
the
lapse
of
time
from
making
a
reassessment
for
the
1970
taxation
year.
(d)
Paragraph
7(1)(a)
refers
to
the
amount
which
the
employee
has
"paid
or
[is]
to
[pay]
to
the
corporation
therefor”,
which
suggests
that
there
may
be
an
“acquisition”
of
shares
even
where
the
payment
does
not
take
place
until
after
the
date
of
the
acquisition.
This
is
what
led
Judge
Cardin
of
the
Tax
Court
of
Canada
to
say
that
"The
non-payment
of
the
snares
by
the
Estate
in
1970
is
therefore
not
the
issue
here"
(A.C.,
Appendix
I,
page
43).
(e)
The
good
faith
of
the
respondent
taxpayer
and
the
corporation
is
not
questioned
by
the
appellant.
There
is
no
allegation
here
of
a
sham
or
artificial
transaction.
I
think
it
is
appropriate
to
cite
some
observations
made
recently
by
Linden
J.A.
in
Canada
v.
Friedberg,
[1992]
1
C.T.C.
1,
92
D.T.C.
6031:
In
tax
law,
form
matters.
A
mere
subjective
intention,
here
as
elsewhere
in
the
tax
field,
is
not
by
itself
sufficient
to
alter
the
characterization
of
a
transaction
for
tax
purposes.
If
a
taxpayer
arranges
his
affairs
in
certain
formal
ways,
enormous
tax
advantages
can
be
obtained,
even
though
the
main
reason
for
these
arrangements
may
be
to
save
tax
(see
The
Queen
v.
Irving
Oil,
[1991]
1
C.T.C.
350,
91
D.T.C.
5106,
per
Mahoney
J.A.).
If
a
taxpayer
fails
to
take
the
correct
formal
steps,
however,
tax
may
have
to
be
paid.
If
this
were
not
so,
Revenue
Canada
and
the
courts
would
be
engaged
in
endless
exercises
to
determine
the
true
intentions
behind
certain
transactions.
Taxpayers
and
the
Crown
would
seek
to
restructure
dealings
after
the
fact
so
as
to
take
advantage
of
the
tax
law
or
to
make
taxpayers
pay
tax
that
they
might
otherwise
not
have
to
pay.
While
evidence
of
intention
may
be
used
by
the
Courts
on
occasion
to
clarify
dealings,
it
is
rarely
determinative.
In
sum,
evidence
of
subjective
intention
cannot
be
used
to
"correct"
documents
which
clearly
point
in
a
particular
direction.
and
to
note,
as
my
brother
judge
did,
these
observations
by
Urie,
J.A.
in
Atinco
Paper
Products
Ltd.
v.
The
Queen
at
pages
577-78
(D.T.C.
6395):
It
is
trite
law
to
say
that
every
taxpayer
is
entitled
to
so
arrange
his
affairs
as
to
minimize
his
tax
liability.
No
one
has
ever
suggested
that
this
is
contrary
to
public
policy.
It
is
equally
true
that
this
Court
is
not
the
watch-dog
of
the
Minister
of
National
Revenue.
Nonetheless,
it
is
the
duty
of
the
Court
to
carefully
scrutinize
everything
that
a
taxpayer
has
done
to
ensure
that
everything
which
appears
to
have
been
done,
in
fact,
has
been
done
in
accordance
with
applicable
law.
It
is
not
sufficient
to
employ
devices
to
achieve
a
desired
result
without
ensuring
that
those
devices
are
not
simply
cosmetically
correct,
that
is
correct
in
form,
but,
in
fact,
are
in
all
respects
legally
correct,
real
transactions.
If
this
Court,
or
any
other
Court,
were
to
fail
to
carry
out
its
elementary
duty
to
examine
with
care
all
aspects
of
the
transactions
in
issue,
it
would
not
only
be
derelict
in
carrying
out
its
judicial
duties,
but
in
its
duty
to
the
public
at
large.
It
is
for
this
reason
that
I
cannot
accede
to
the
suggestion,
sometimes
expressed,
that
there
can
be
a
strict
or
liberal
view
taken
of
a
transaction,
or
series
of
transactions
which
it
is
hoped
by
the
taxpayer
will
result
in
a
minimization
of
tax.
The
only
course
for
the
Court
to
take
is
to
apply
the
law
as
the
Court
sees
it
to
the
facts
as
found
in
the
particular
transaction.
If
the
transaction
can
withstand
that
scrutiny,
then
it
will,
of
course,
be
supported.
If
it
cannot,
it
will
fall.
This
Court,
then,
is
not
a
watchdog
for
the
Minister
of
National
Revenue
or
a
protector
of
the
taxpayer.
Its
function
is
to
determine,
on
the
facts
and
documents
entered
in
evidence
and,
of
course,
the
relevant
legislation
and
regulations,
and
in
accordance
with
the
arguments
made
by
the
parties,
what
the
real
scope
of
a
transaction
is
and
to
ensure
the
legality
of
the
means
adopted
to
give
effect
to
a
taxpayer's
wish
to
arrange
his
affairs
so
as
to
pay
as
little
tax
as
possible.
(f)
The
case
at
bar
must
be
looked
at
solely
in
terms
of
the
documents
filed
by
the
parties.
No
witnesses
were
heard
except
for
the
purposes
of
filing
these
documents.
The
issue
is
one
of
law
and
this
is
how
it
was
dealt
with
by
Pinard,
J.,
who
refrained
from
making
any
comment
whatever
on
the
conduct
of
the
parties
to
the
agreement
not
indicated
by
one
of
the
documents
filed
and
not
argued
by
the
appellant.
There
is
no
basis
in
the
circumstances
for
attributing
to
the
respondent
taxpayer
or
to
the
corporation
in
question
intentions
which
were
not
the
subject
of
argument
in
this
Court.
In
this
connection,
with
the
utmost
respect,
I
do
not
think
that
there
was
evidence
of
the
fact
that
the
agreement
“was
to
be
implemented
in
two
stages”,
the
first
in
1970
and
the
second
in
1972,
or
that
it
is
relevant
to
the
issue
as
it
was
joined
in
this
Court;
or
of
the
fact
that
the
employees
to
whom
the
share
purchase
scheme
applied
were
"key
employees”
or
"senior
employees”;
or
the
fact
that
"the
principle"
of
the
transformation
of
Cemp
Holdings
Ltd.
into
a
public
corporation
“was
undoubtedly
established
at
that
time”;
or
the
fact
that
“the
purpose
of
the
operation
was
to
give
effect
to
the
Bronfman
family’s
wish
in
1970
to
compensate
a
number
of
its
senior
employees
by
giving
them
an
opportunity
to
participate
in
the
ready-made
profits
which
the
transformation
of
Cemp
Holdings
Ltd.
into
a
public
corporation
.
.
.
could
make
for
its
owners”.
I
do
not
deny
that
the
Court
may
seek
the
real
intent
of
the
parties
in
their
agreement
and
conduct,
but
the
Court
must
still
do
so
at
the
Minister's
invitation
and
the
real
intent
must
have
some
basis
other
than
speculation.
The
"description
of
the
context”
given
by
my
brother
judge
does
not
in
my
opinion
really
correspond
to
the
issue
as
it
seems
to
me
to
have
been
joined
and
is
a
form
of
extrapolation
which
I
do
not
recall
having
been
put
forward
by
the
appellant
in
her
very
short
submission,
containing
only
allegations
of
law.
(g)
At
the
corporate
level,
what
had
to
be
done
to
confirm
and
complete
the
transaction
of
November
24,
1970
was
done
in
the
days
that
followed.
At
a
meeting
of
the
corporation's
board
of
directors
held
on
December
4,
1970,
the
chairman
of
the
board
told
the
meeting
that
a
total
of
61,500
shares
of
the
corporation
had
been
distributed
to
23
employees,
including
the
respondent
taxpayer,
"who
participated
in
its
Employees
Purchase
Plan
whereby
certain
of
Cemp
Investments
Ltd.
shareholdings
in
Cemp
Holdings
Ltd.
had
been
made
available
to
them"
(A.C.,
page
70).
The
register
of
share
transfers
(A.C.,
page
76),
the
shareholders’
register
(A.C.,
page
79)
and
the
register
of
shares
held
By
the
respondent
taxpayer
(A.C.,
page
83),
all
record
the
purchase
of
the
shares
by
the
latter
on
December
4,
1970;
the
last
record
puts
the
value
of
the
shares
on
that
date
at
$176,400,
an
amount
which
coincides
with
that
set
in
the
agreement
of
November
24,
1970.
A
share
certificate
was
issued
in
the
name
of
the
respondent
taxpayer
on
December
4,
1970
(A.C.,
page
21).
The
respondent
taxpayer
attended
and
apparently
voted
at
an
annual
shareholders'
meeting
held
on
December
15,
1971
(A.C.,
page
85),
and
at
the
one
held
on
June
1,
1972
(A.C.,
page
88),
as
well
as
at
the
special
general
meeting
of
shareholders
held
on
June
1,
1972
(A.C.,
page
92).
The
foregoing
registers
also
recorded
the
sale
of
the
respondent
taxpayer's
shares
on
July
25,
1972,
and
the
prospectus
published
by
the
Fairview
Corporation
of
Canada
Ltd.
on
July
5,
1972
mentions
the
prospective
purchase
on
July
25,1972
of
shares
held
by
employees
(A.C.,
page
113).
Further,
in
his
tax
return
for
1972
the
respondent
taxpayer
listed
the
sale
of
his
shares
in
Fairview
Corporation
for
$84,000
(A.C.,
Appendix
I,
page
24).
In
short,
judging
from
the
corporation's
registers
and
other
documents
as
well
as
the
respondent
taxpayer's
actions,
the
latter
was
clearly
the
owner
of
the
shares
in
question
as
of
December
4,
1970
and
exercised
the
rights
pertaining
to
his
shares.
(h)
The
Court
is
required
to
interpret
the
words
"at
the
time
he
acquired
them"
in
paragraph
7(1)(a)
of
the
Act.
As
the
term
"acquired"
is
not
defined
in
the
Act,
it
must
be
given
its
ordinary
meaning
in
the
context
in
which
it
is
used.
The
trial
judge
said
that
he
was
of
the
"opinion
that’
acquire’
means'to
become
the
owner'
(A.C.,
page
131).
Counsel
for
the
parties
indicated
that
they
were
Satisfied
with
this
definition,
which
I
adopt.
Consequently,
it
is
the
specific
point
at
which
the
taxpayer
became
owner
of
the
shares
that
must
be
determined.
(i)
As
the
transaction
was
concluded
in
Quebec
and
the
share
transfer
took
place
in
Quebec,”
it
is
basically
necessary”,
Pinard,
J.
pointed
out,"to
consider
any
relevant
requirements
or
agreements
in
light
of
the
civil
law".
The
argument
in
this
Court
was
essentially
one
of
civil
law,
and
as
she
did
before
Pinard,
the
appellant
devoted
most
of
her
energy
to
interpreting
the
ninth
of
the
eleven
paragraphs
of
the
agreement
at
issue,
which
reads
as
follows
(A.C.,
page
18):
In
the
event
of
my
failure
to
meet
the
obligations
for
the
balance
of
price
when
it
becomes
due,
and
my
failure
to
correct
such
default
within
60
days
of
written
notice
thereof,
all
my
right,
interest
and
title
in
and
to
the
shares
shall
thereupon
become
forfeited
to
you
by
way
of
a"
dation
en
paiement”
and
any
payments
made
on
account
of
the
purchase
price
shall
thereupon
be
forfeited
as
liquidated
damages
without
any
further
recourse
by
either
party
towards
the
other.
Counsel
for
the
appellant
submitted
to
the
Court
a
list
of
tax
law
decisions
to
persuade
it
that
a
share
purchase
option
was
not
the
same
as
a
purchase
of
shares.
There
is
no
need
to
persuade
the
Court
of
this
proposition,
which
is
self-evident.
However,
there
must
still
have
been
a
purchase
option
rather
than
a
purchase,
and
I
fail
to
see
how
the
decisions
cited
assist
the
appellant
in
this
regard.
In
Robertson,
the
agreement
was
one
for
a
purchase
option,
yet
the
Court
held
in
the
circumstances
that
the
provisions
of
paragraph
7(1)(a)
did
not
apply.
In
Steen,
there
was
an
agreement
for
a
share
purchase
option
which
provided
that
the
employee
would
exercise
no
rights
relating
to
the
shares
so
long
as
he
had
not
exercised
his
option
and
paid
cash
for
the
shares
he
was
purchasing.
In
Taylor,
the
issue
turned
on
whether
a
director
was
an
employee
within
the
meaning
of
paragraph
7(1)(a)
and
the
agreement
was
prima
facie
a
true
purchase
option.
In
Lintott,
the
agreement
provided
that
the
share
transfer
would
not
occur
until
the
end
of
the
fiscal
year
and
after
the
shares
had
been
paid
for.
In
Clemiss,
it
was
held
that
payment
did
not
mean
purchase
because
the
agreement
provided
that
the
shares
would
first
have
to
be
offered
to
the
public,
and
this
had
not
yet
taken
place
at
the
time
of
the
payment.
In
Rindress,
the
issue
was
the
valuation
made
by
accounting
firms
of
the
shares
sold
by
the
plaintiff;
the
other
shareholders
undertook
to
purchase
these
shares
in
accordance
with
a
clause
reading
as
follows:
"There
will
be
an
undertaking
on
behalf
of
the
other
shareholders
to
purchase
Mr.
Rindress's
shares
at
a
price
which
will
either
be.
.
."
(note
22,
at
page
898)
and
the
Court
held,
at
page
899,
that
this
clause
"contains
all
the
elements
of
a
contract
of
sale
(1472
C.C.)
and
its
legality
is
not
in
question".
The
decision
of
Judge
Bastin
in
Grant
v.
The
Queen,
[1974]
C.T.C.
352,
74
D.T.C.
6252
seems
to
me
to
be
much
more
applicable
at
pages
336-37
(D.T.C.
6255):
There
are
no
rigid
formalities
required
to
create
a
contract.
If
the
parties
intend
to
enter
into
a
binding
agreement
and
arrive
at
a
consensus
ad
idem,
the
Court
will
give
effect
to
it.
The
whole
transaction,
both
words
and
conduct
of
the
parties,
will
be
looked
at
and
it
is
immaterial
when
the
various
steps
leading
to
a
consensus
took
place
if
from
all
the
facts
it
can
be
determined
that
a
contract
was
intended.
The
Company
decided
to
make
available
1,267
shares
to
its
senior
employees
and
then
carried
out
its
plan
in
two
stages.
The
terms
of
the
plan
were
set
out
in
the
resolution
of
the
Executive
Committee
passed
on
July
T1,
1968.
At
its
meeting
on
July
25,
1968,
the
Board
of
Directors
received
the
employees'
applications
for
shares
made
pursuant
to
the
plan
and
confirmed
their
sale.
It
was
on
that
date
that
plaintiff
acquired
835
shares
and
it
was
the
market
value
of
the
shares
on
that
date
which
is
to
be
considered.
There
can
be
no
question
but
that
the
directors
of
the
Company,
and
the
employees
who
participated
in
this
plan
for
acquiring
shares,
intended
that
their
submission
of
written
applications
for
a
specified
number
of
shares
and
the
acceptance
by
the
directors
of
these
applications,
and
the
passing
of
the
resolution
approving
of
the
plan
to
sell
1,267
shares
to
such
employees
would
constitute
a
binding
agreement
enforceable
by
either
party.
The
plaintiff
acquired
the
right
to
847
shares
on
July
25,
1968
and
became
trustee
for
MacKinnon
for
12
of
them,
subject
to
MacKinnon
paying
the
price
of
the
shares.
The
Company
held
his
application
which
contained
an
enforceable
promise
to
pay
for
the
shares.
If
the
shares
had
fallen
in
value,
plaintiff
could
not
nave
repudiated
his
promise
and
the
Company
had
no
right
to
cancel
its
agreement
because
the
shares
had
appreciated
in
value.
In
accordance
with
the
intention
of
the
Company
and
the
employees,
the
latter
acquired
the
shares
they
had
applied
for
when
the
director
passed
the
resolution
confirming
the
plan
on
July
25,
1968.
In
Lintott,
Judge
Brulé
later
approved
the
decision
of
his
brother
Judge
Bastin
as
follows
(supra,
note
22,
at
page
565
(D.T.C.
2276)):
Although
the
shares
were
not
to
be
issued
until
paid
for
in
full,
the
Court
concluded
that
all
the
evidence
indicated
that
the
parties
had
entered
into
a
binding
contract
as
of
the
date
of
the
agreement
and
it
was
their
intention
that
the
appellant
acquire
legal
title
to
the
shares
as
of
that
date.
I
can
find
no
such
intention
in
the
present
case
to
indicate
that
the
appellants
intended
to
acquire
a
legal
interest
in
their
shares
as
of
the
date
of
the
respective
Directors’
meetings.
On
the
contrary,
the
documents
entered
into
evidence
indicate
a
clear
intention
on
the
part
of
the
parties
to
defer
legal
ownership
until
year
end
in
each
case.
In
the
case
at
bar,
since
it
is
apparent
from
reading
the
record
that
there
was
a
meeting
of
minds
followed
by
the
parties’
signatures,
determination
of
the
subject-matter
of
the
contract,
agreement
of
the
parties
on
a
determinate
and
real
price,
payment
of
an
instalment
on
the
price,
an
undertaking
to
pay
the
balance
of
the
price
at
a
given
date,
transfer
of
shares
to
the
purchaser,
a
pledge
by
the
purchaser
of
the
said
shares
to
the
seller,
crediting
of
any
dividends
to
the
purchaser,
the
exercise
by
the
purchaser
of
rights
relating
to
the
shares,
everything
suggests
that
on
November
24,
1970
there
was
indeed
a
contract
of
sale
binding
on
the
parties
and
a
transfer
of
ownership
(see
articles
1025,
1472,
1532
and
1966
of
the
Civil
Code
of
Lower
Canada—
the
Code").
However,
counsel
for
the
appellant
submitted
to
the
Court
with
reference
to
the
rules
of
civil
law,
paragraph
9
of
the
agreement
changes
the
apparent
nature
of
the
contract
and
transforms
it
into
a
simple
promise
to
sell
or
a
mere
purchase
option.
There
was
no
sale,
he
suggested,
since
one
of
the
essential
conditions
of
such
a
contract,
namely
the
obligation
to
pay
a
price,
had
not
been
met.
I
am
unable
to
accept
this
suggestion.
The
price
of
the
shares
in
the
case
at
bar
was
set
on
November
24,
1970;
a
deposit
of
$100
was
paid
on
that
day;
the
balance
was
payable
ten
years
later,
namely
on
November
24,
1980.
There
is
nothing
unusual
in
this.
In
arts.
1496,
1533
and
1534
the
Code
permits
the
payment
of
a
price
to
be
deferred.
A
term
contract
of
sale
is
a
contract
of
sale.
As
Miss
Thérèse
Rousseau-Houle,
now
a
judge
of
the
Quebec
Court
of
Appeal,
observed,
(The
term
sale)
is
one
in
which
the
purchaser
has
a
period
of
time
to
pay
the
price,
though
he
becomes
owner
of
the
thing
purchased
at
the
time
of
the
sale.
Unlike
what
takes
place
in
an
instalment
sale,
the
term
sale
transfers
ownership
when
it
is
made.
Counsel
for
the
appellant
argued
that
there
was
not
even
a
term
sale
as
the
obligation
to
pay
simply
did
not
exist,
the
corporation's
only
remedy
(his
wording)
in
the
event
of
non-payment
of
the
price
being
“to
deprive
the
late
Nathan
Cesser
of
all
rights
relating
to
these
shares
by
‘giving
in
payment'".
(Appellant's
statement
of
facts
and
law,
page
8.)
This
proposition
appears
untenable
to
me.
First,
even
the
possibility
of
a
giving
in
payment
assumes
that
the
person
is
owner
of
what
he
gives
in
payment
(article
1592
of
the
Code).
Such
a
possibility
is
inconsistent
with
the
appellant's
arguments
that
the
respondent
taxpayer
did
not
own
the
shares.
The
present
“giving
in
payment"
clause
only
becomes
involved
if
the
purchaser
fails
“to
meet
the
obligations
for
the
balance
of
the
price
when
it
becomes
due”,
and
this
assumes
the
existence
of
an
obligation
to
pay
the
price
which
the
appellant
was
at
pains
to
deny
on
the
basis
of
this
clause,
though
it
serves
to
confirm
the
obligation.
Finally,
the
addition
of
such
a
clause
to
a
contract
in
no
way
precludes
the
other
remedies
available
to
a
seller
under
the
ordinary
law.
What
is
really
involved
is
a
type
of
commissoria
lex,
which
gives
the
seller
the
right
to
rescind
the
contract,
or
a
type
of
penal
clause,
which
is
defined
in
article
1131
of
the
Code
as
"a
secondary
obligation
by
which
a
person,
to
assure
the
performance
of
the
primary
obligation,
binds
himself
to
a
penalty
in
case
of
its
inexecution";
it
follows
from
article
1133
that
"the
creditor
may
enforce
the
performance
of
the
primary
obligation,
if
he
elect
to
do
so,
instead
of
demanding
the
stipulated
penalty”.
The
courts
have
considered
clauses
of
the
kind
at
issue
here
many
times,
though
no
case
is
similar
to
the
instant
case
in
all
respects.
In
this
field,
each
case
is
Sui
generis
and
it
is
dangerous
to
blindly
apply
to
a
given
clause
an
interpretation
made
in
a
different
context.
Having
said
that,
the
fact
remains
that
one
constant
rule
may
be
deduced
from
the
case
law,
which
Faribault
10
summarized
as
follows:
such
a
clause
"is
a
stipulation
in
favour
of
the
seller
only,
and
the
purchaser
cannot
take
advantage
of
it".
In
this
connection,
it
seems
very
useful
to
refer
to
the
observations
of
Anglin,
J.
in
Gagnon,
at
page
373:
It
is
quite
unnecessary,
and,
in
my
opinion,
unwarranted,
to
attribute
them
(the
parties)
the
extraordinary
purpose
of
enabling
the
purchaser
to
relieve
himself
of
his
contractual
obligations
by
making
default
in
fulfilling
them.
[Emphasis
added.]
and
those
of
Sir
Horace
Archambeault
C.J.
of
the
Court
of
Appeal,
at
page
65:
A
stipulation
may
well
be
made
in
the
interests
of
the
purchaser
as
well
as
the
seller;
but
this
has
to
be
stated
in
clear
and
unambiguous
language.
The
commissoria
lex
cannot
be
presumed
to
have
been
stipulated
in
the
interests
of
the
contracting
party
who
fails
to
meet
his
commitments;
on
the
contrary,
it
must
be
presumed
to
have
been
stipulated
against
him.
The
contract
would
be
at
the
mercy
of
the
purchaser
if
he
was
allowed
to
extinguish
it
by
refusing
to
perform.
In
my
view,
all
that
the
clause
at
issue
means
is
that
if
on
November
24,
1980
the
purchaser
had
still
not
paid
the
agreed
price,
and
if
the
seller
preferred
for
reasons
of
its
own
not
to
request
payment
of
the
price
and
instead
obtain
payment
by
retaking
the
thing
sold,
then
the
seller
would
not
be
required
to
repay
the
purchaser
the
instalments
paid,
but
would
have
to
be
content
with
the
confiscation
of
those
instalments
as
damages.
The
effect
of
this
clause
is
first
to
enable
the
seller,
quite
legally
(see
Levasseur
v.
St-Onge,
[1979]
C.A.
587)
to
have
the
sale
automatically
rescinded
if
the
purchaser
fails
to
meet
his
obligations
(thus
preventing
the
purchaser
from
relying
on
the
provisions
of
article
1538
of
the
Code
and
paying
the
price"at
any
time
before
the
rendering
of
the
judgment”)
and
not
to
repay
the
purchaser
the
instalments
paid
(despite
the
provisions
of
article
1539
of
the
Code,
which
impose
on
a
seller
who
recovers
possession
of
the
thing
sold
a
duty
to
repay
to
the
purchaser
such
part
of
the
price
as
he
has
received),
and
second,
to
prevent
the
seller
from
bringing
the
action
for
damages
he
would
otherwise
be
entitled
to
bring
under
article
1065
of
the
Code,
which
provides
that
every
obligation
makes
the
debtor
liable
in
damages
in
the
event
of
a
breach
of
it
on
his
part
(see
T.
Rousseau-
Houle,
supra,
note
26,
at
pages
206-207).
Aside
from
the
fact
that
the
appellants
position
seems
to
me
to
be
wrong
in
law,
I
consider
that
it
is
based
on
a
misreading
of
the
clause
at
issue.
The
expression
"without
any
further
recourse”
does
not
mean
that
the
recourse
to
giving
in
payment
is
the
only
one
open
to
the
seller,
but
that
once
that
remedy
has
been
used
in
preference
to
the
remedy
of
performance
of
the
contract
and
payment
of
the
price,
the
seller
may
no
longer
use
these
other
remedies
against
the
purchaser,
nor
may
he
bring
any
other
action
for
damages.
The
appellant
suggests
that
it
should
read
"other"
rather
than
“further”.
Though
I
am
not
convinced
that
the
use
of
the
word
"other"
would
alter
the
interpretation
I
have
made
of
this
clause,
the
fact
remains
that
the
use
of
the
word
"further"
is
consistent
with
my
interpretation.
If
there
were
any
doubt
as
to
the
meaning
to
be
given
to
this
clause,
I
cannot
see
on
what
basis
it
should
be
given
the
meaning
'^extraordinary",
to
use
the
word
of
Anglin,
J.
attributed
to
it
by
my
brother
judge,
rather
than
the
meaning
of
“
ordinary”
which
I
would
attribute
to
it.
In
support
of
his
argument,
counsel
for
the
appellant
suggested
at
the
hearing
that
an
employer
so
obviously
generous
as
the
corporation
in
question
would
not
require
its
employee
to
repay
the
balance
of
the
purchase
price
of
the
shares
when
the
due
date
of
November
24,
1980
arrived.
This
is
merely
a
gratuitous
speculation
which,
in
the
absence
of
any
question
as
to
the
validity
of
the
agreement
and
allegation
or
evidence
of
bad
faith
or
deceit,
I
am
completely
unable
to
use
as
a
basis
for
an
interpretation
at
variance
with
the
language
used
by
the
parties,
the
avowed
intent
of
the
parties
and
their
subsequent
conduct.
Unlike
my
brother
judge,
I
see
nothing
in
the
agreement
of
July
17,
1972
by
which
the
respondent
taxpayer
relinquished
part
of
the
shares
(1,000
out
of
8,400)
he
had
purchased
18
months
before,
so
as
to
alter
the
nature
of
the
agreement
concluded
on
November
24,
1970.
Once
the
interpretation
suggested
by
the
appellant
for
the
giving
in
payment
clause
is
rejected,
everything
in
the
agreement
of
November
24,
1970
points
in
the
direction
of
a
true
purchase
of
the
shares
by
the
purchaser
at
the
very
time
the
transaction
was
made.
Unquestionably,
the
clause
is
an
unusual
one
in
this
type
of
contract,
but
it
is
not
illegal.
The
transaction
is
not
simply
"cosmetically
correct",
to
use
the
expression
of
Urie
J.A.
in
Atinco
Paper
Products
Ltd,
(supra,
note
6);
it
is
an
agreement
that
may
be
described
as"in
all
respects
[a]
legally
correct,
real
transaction".
Even
if,
as
my
brother
judge
suggests,
it
were
established
that
"the
technique
for
giving
effect
to
this
wish
of
the
Bronfman
family
was
worked
out
with
the
greatest
possible
care
for
its
tax
implications”
nothing
less
was
to
be
expected
in
a
tax
planning
situation—
the
success
of
the
technique
used
does
not
of
itself
make
the
latter
suspect
or
illegal.
In
these
circumstances,
I
consider
that
Pinard,
J.
was
right
in
response
to
the
only
question
presented
to
him,
based
on
the
only
evidence
before
him
and
in
terms
of
the
specific
argument
as
circumscribed
by
the
parties,
to
conclude
that
the
shares
were
purchased
in
1970
and
not
1972.
I
would
dismiss
the
appeal
with
costs.
Appeal
allowed.
Email this Content