Reed,
J.:—This
is
an
appeal
by
way
of
trial
de
novo
from
a
decision
of
the
Tax
Court
dated
September
9,
1987.
That
decision
upheld
the
Minister
of
National
Revenue's
assessment
of
the
income
tax
payable
by
the
plaintiff
for
the
1979
and
1980
taxation
years.
The
plaintiff
claims,
with
respect
to
the
1979
taxation
year,
that
a
taxable
stock
option
benefit
he
received
should
be
valued
at
$104,400
and
not
$286,400
as
asserted
by
the
Minister.
With
respect
to
the
1980
taxation
year,
he
claims
that
$146,533.37
which
he
received
as
reimbursement
for
legal
expenses
he
incurred
defending
criminal
charges
should
not
be
treated
as
income
to
him.
Facts—stock
option
The
plaintiff
was
at
the
relevant
time
president
and
chief
executive
officer
of
B.X.
Developments
Ltd.
("B.X.").
He
was
also
a
member
of
the
board
of
directors
of
that
corporation.
In
1974,
the
chairman
of
the
board,
Murray
Pezim,
saw
an
opportunity
to
purchase
what
is
referred
to
as
the
Paul
Lime
Plant.
That
plant
was
eventually
acquired
by
B.X.
through
a
wholly
owned
subsidiary
Can-AM
Lime
Inc.
The
purchase
price
was
approximately
2.2
million.
Approximately
$900,000
of
this
was
paid
in
cash,
the
rest
was
paid
in
shares
of
B.X.
The
plaintiff
played
a
significant
role
in
this
purchase
including
finding
financing
for
the
purchase.
Consequent
upon
those
efforts
a
stock
option
agreement
was
entered
into
by
B.X.
and
the
plaintiff.
This
agreement
was
dated
March
1,
1977.
It
granted
the
plaintiff:
.
.
.
the
sole
and
exclusive
right
and
option
to
purchase
Sixty
Thousand
(60,000)
fully
paid
and
non-assessable
freely
trading
shares
of
the
capital
of
the
Company
at
a
price
of
one
dollar
sixty-four
cents
($1.64)
per
share,
such
option
to
be
exercisable
at
any
time
up
to
and
including
the
28th
day
of
February,
1978
.
.
.
[Emphasis
added.]
Time
was
expressed
to
be
of
the
essence
in
the
agreement.
On
January
17,
1977,
shortly
before
the
issuance
of
this
option,
the
plaintiff,
two
other
directors,
the
accountant
and
the
lawyer
of
B.X.
were
charged
with
three
counts
of
conspiracy
to
defraud
B.X.
and
one
count
of
theft
of
the
property
of
B.X.
These
charges
related
to
the
acquisition
of
the
Paul
Lime
Plant.
It
was
alleged
that
the
share
portion
of
the
purchase
price
was
a
"sham"
and
that
the
plaintiff
and
his
co-accused
had
arranged
to
carry
out
the
transaction
to
the
detriment
of
B.X.
and
its
shareholders.
B.X.
was
a
publicly
traded
company;
its
shares
were
listed
on
the
Vancouver
Stock
Exchange.
In
early
1978,
the
plaintiff
decided
to
take
up
the
stock
option
he
held
for
the
purchase
of
the
B.X.
shares.
On
January
5,
1978,
counsel
for
the
plaintiff,
Mr.
George
Scott
wrote
on
the
plaintiff's
behalf
to
the
superintendent
of
brokers
(British
Columbia’s
Securities
Commission)
requesting
a
section
56
determination
to
allow
the
plaintiff
to
trade
15,000
of
the
option
shares.
Section
56
of
the
British
Columbia
Securities
Act,
1967
states:
(1)
Where
doubt
exists
whether
a
trade
proposed
or
intended
to
be
made
in
a
security
would
be
in
the
course
of
primary
distribution
to
the
public
of
the
security,
the
Commission
may,
upon
the
application
of
an
interested
party,
determine
whether
the
proposed
or
intended
trade
would
be
in
the
course
of
primary
distribution
to
the
public
of
the
security
and
rule
accordingly,
and
the
ruling
is
final
and
there
is
no
appeal
therefrom.
(2)
Where
the
Commission
determines
under
subsection
(1)
that
a
proposed
or
intended
trade
would
not
be
in
the
course
of
primary
distribution
to
the
public
of
the
security,
the
Commission
may
rule
that
registration
is
not
required
in
respect
of
the
trade.
(3)
Where
doubt
exists
whether
a
primary
distribution
to
the
public
of
any
security
has
been
concluded
or
is
currently
in
progress,
the
Commission
may
determine
the
question
and
rule
accordingly,
and
the
ruling
is
final
and
there
is
no
appeal
therefrom.
[Emphasis
added.]
On
January
12,
1978
a
reply
was
sent,
to
the
plaintiff's
request
for
a
section
56
determination
to
allow
the
plaintiff
to
trade
the
15,000
shares,
stating
that
such
a
determination
would
not
be
given
because
a
section
56
determination
had
not
been
given
covering
the
granting
of
the
option
by
the
company
to
the
plaintiff.
The
letter
asked
whether
the
company,
B.X.,
intended
to
apply
for
this
prior
determination.
The
plaintiff's
lawyer
at
that
time,
Mr.
Scott,
was
called
as
a
witness
and
explained
that
he
had
been
of
the
view
that
the
position
the
superintendent
of
brokers
was
taking
was
wrong
and
he
had
so
informed
the
superintendent:
the
stock
option
in
question
was
an
employee
stock
option
and
therefore
exempt
from
the
need
to
obtain
a
section
56
determination.
He
also
notes
that
the
plaintiff
as
a
director
and
chief
executive
officer
of
the
company
had
no
need
of
the
safeguards
which
the
public
disclosure
of
information
in
conjunction
with
share
issues
is
designed
to
ensure.
In
any
event,
the
position
being
taken
by
the
superintendent
of
brokers
delayed
the
possibility
of
a
section
56
determination
being
given
with
respect
to
the
trading
of
the
option
shares.
On
January
19,
1978
counsel
for
B.X.,
Lawrence
Page,
wrote
to
the
superintendent
of
brokers
on
behalf
of
that
company
seeking
a
section
56
determination
with
respect
to
the
grant
of
the
stock
option
to
the
plaintiff
as
well
as
with
respect
to
the
grant
of
a
stock
option
to
the
chairman
of
the
board.
On
February
1,
1978
a
reply
was
received:
In
as
much
as
Messrs.
Pezim
and
Clemiss
are
involved
in
criminal
proceedings
with
respect
to
the
acquisition
of
the
Paul
Lime
Plant
we
are
not
prepared
to
consider
a
section
56
determination
covering
the
issuance
of
stock
options
to
them
until
the
outcome
of
the
criminal
proceedings
has
been
determined.
Any
determination
issued
prior
to
the
completion
of
the
criminal
proceedings
would
of
necessity
be
unfavourable.
The
request
for
a
section
56
determination
for
the
issuance
of
the
stock
options
was
withdrawn.
No
section
56
determination
allowing
trading
of
the
option
shares
had
been
given.
Thus
as
of
the
date
of
the
expiry
of
the
option,
B.X.
was
not
in
possession
of
and
could
not
deliver
to
the
plaintiff
"freely
trading
shares"
as
required
by
the
terms
of
the
option
agreement.
The
plaintiff
gave
evidence
that,
in
any
event,
in
order
to
exercise
his
option
and
on
the
advice
of
his
lawyer,
he
tendered
a
certified
cheque
to
the
company
in
the
amount
of
$98,400.
The
plaintiff
says
he
did
this
through
his
lawyer
and
that
it
was
done
on
February
23,
1978.
His
counsel
at
that
time
says
that
his
usual
practice
in
such
circumstance
is
to
see
that
the
cheque
is
delivered
in
person
and
that
a
receipt
is
obtained.
There
is
no
documentary
record
of
this
transaction.
The
cheque
would
not
appear
to
have
been
cashed.
No
cancelled
cheque
is
in
evidence.
No
receipt
for
the
cheque
was
available.
On
July
13,
1978,
a
filing
statement
was
prepared
by
B.X.
and
filed
with
the
Vancouver
Stock
Exchange.
It
referred
to
the
option
agreement
with
the
plaintiff
and
stated:
On
February
23rd,
1978,
Clemiss
exercised
his
option
pursuant
to
the
provisions
of
the
Clemiss
option
agreement
by
tendering
to
the
company
the
sum
of
$98,400
and
requested
delivery
of
60,000
shares
of
the
capital
of
the
company.
The
company
acknowledged
receipt
of
notice
of
exercise
of
the
option
and
tender
of
moneys
and
has
not
yet
issued,
allotted
nor
delivered
the
shares
to
Clemiss.
Clemiss
has
entered
into
an
agreement
with
Mr.
Isadore
Rotterman
("Rotterman"),
a
Director
of
the
Company,
agreeing
to
sell
to
Rotterman
20,000
shares
acquired
by
Clemiss
pursuant
to
his
exercise
of
the
option
contained
in
the
Clemiss
option
agreement
at
a
price
of
$1.64
per
share.
The
agreement
with
Mr.
Rotterman
has
not
yet
been
accepted
for
filing
with
the
Vancouver
Stock
Exchange
and
may
also
be
subject
to
obtaining
a
favourable
section
56
determination
from
the
superintendent
of
brokers.
[Emphasis
added.]
On
July
31,
1978,
B.X.
issued
its
annual
report
together
with
notice
of
the
annual
general
meeting
and
an
information
circular.
The
information
circular
showed
the
plaintiff
as
holding
NIL
shares
of
the
company.
The
circular
also
stated:
On
February
23,
1978,
Clemiss
exercised
his
option
pursuant
to
the
provisions
of
the
Clemiss
option
Agreement
by
tendering
to
the
company
the
sum
of
ninetyeight
thousand,
four
hundred
dollars
($98,400)
and
requested
delivery
of
the
sixty
thousand
(60,000)
shares
of
the
capital
of
the
company
which
are
by
the
terms
of
the
Clemiss
option
Agreement
to
be
issued
as
"freely
trading
shares".
The
company
acknowledged
receipt
of
notice
of
exercise
of
the
option
and
tender
of
moneys
and
has
not
yet
issued,
allotted
nor
delivered
the
shares
to
Clemiss
pending
clarification
of
the
need
to
qualify
the
issuance
of
such
shares
from
treasury
and,
further,
the
obligation
of
the
Company
to
qualify
the
shares
as
"freely
trading
shares"
for
distribution
to
the
public.
In
the
same
circular,
notice
of
a
proposed
ordinary
resolution
to
be
presented
at
the
annual
general
meeting
on
Friday,
September
29,
1978
was
given:
There
is
no
material
contract
to
be
presented
to
the
meeting
other
than
considering
and
adopting
with
or
without
amendment
the
following
ordinary
resolution:
Resolved
as
an
ordinary
resolution
that
the
company
do
amend
those
stock
option
agreements
granted
to
employees
to
provide
that
there
be
included
in
such
agreements
the
covenant
of
the
company
that
unless
waived
by
the
employee,
payment
of
the
purchase
price
for
the
optioned
shares
be
conditional
upon
the
company
first
qualifying
the
shares
for
distribution
to
the
public
or,
in
the
alternative,
obtaining
a
trading
exemption
for
the
employee
or
a
determination
pursuant
to
section
56
of
the
Securities
Act,
British
Columbia,
that
a
proposed
or
intended
trade
by
such
employee
would
not
be
in
the
course
of
a
primary
distribution
to
the
public
of
the
security.
On
December
1,
1978,
a
filing
statement
filed
by
the
management
of
the
company
with
the
Vancouver
Stock
Exchange
explained
the
then
current
state
of
affairs:
Payment
by
Mr.
Clemiss
for
the
shares
being
purchased
by
him
pursuant
to
the
exercise
of
his
option
is
conditional
upon
the
company
first
qualifying
such
shares
for
distribution
to
the
public
or,
alternatively,
obtaining
a
determination
from
the
superintendent
of
brokers
for
British
Columbia
pursuant
to
section
56
of
the
Securities
Act,
British
Columbia,
that
trades
in
such
shares
would
not
be
trades
in
the
course
of
a
primary
distribution
to
the
public.
The
company
had
not
at
this
date
been
able
to
secure
the
necessary
qualification
or
section
56
determination
with
respect
to
these
shares.
In
an
information
circular
dated
December
19,
1978
which
accompanied
a
notice
of
a
general
meeting
of
the
company,
management
for
the
company
again
described
the
status
of
the
matter:
The
members
of
the
company
at
its
annual
general
meeting
held
on
September
29,
1978
approved
an
ordinary
resolution
further
clarifying
the
Clemiss
option
agreement
by
providing
that
there
be
included
in
the
Clemiss
option
agreement
the
covenant
of
the
Company
that
unless
waived
by
Clemiss,
payment
of
the
purchase
price
for
the
optioned
shares
be
conditional
upon
the
company
first
qualifying
the
shares
for
distribution
to
the
public
or,
in
the
alternative,
obtaining
a
trading
exemption
for
him
or
a
determination
pursuant
to
section
56
of
the
Securities
Act
(British
Columbia)
that
a
proposed
or
intended
trade
by
him
would
not
be
in
the
course
of
a
primary
distribution
to
the
public
of
the
security.
On
August
30,
1979
the
directors
of
B.X.
passed
a
resolution
to
issue
60,000
fully
paid
and
non-assessable
shares
to
the
plaintiff:
AND
THAT
the
secretary
of
the
company
be
and
she
is
hereby
authorized
to
deliver
the
executed
treasury
order
to
the
transfer
agent
with
instructions
to
deliver
to
Mr.
Clemiss
or
his
order
share
certificates
in
his
name
representing
the
60,000
shares
of
the
company
in
exchange
for
a
certified
cheque
or
bank
draft
payable
to
the
company
in
the
amount
of
$98,400.
On
the
same
day
the
treasury
order
was
executed,
the
plaintiff
was
registered
by
the
transfer
agent
on
the
registry
of
the
company
as
the
shareholder
of
the
60,000
shares
and
share
certificates
were
issued
to
the
plaintiff.
I
would
note
that
the
shares
which
were
issued
on
August
30,
1979
were
not
free
trading.
It
was
only
later
on
October
15,
1979
that
a
section
56
determination
was
given
with
respect
to
15,000
of
those
shares
and
on
February
20,
1980
with
respect
to
20,000
shares,
which
were
being
conveyed
to
Mr.
Rotterman,
and
lastly
on
July
31,
1980
with
respect
to
the
remaining
25,000
shares.
The
plaintiff
and
his
co-accused
were
acquitted
of
the
criminal
charges
on
November
9,
1979.
In
the
various
insider
trading
reports
which
the
plaintiff
filed
with
the
Vancouver
Stock
Exchange
between
March
14,1977
and
August
1979,
he
did
not
list
himself
as
owner
of
any
of
the
60,000
shares.
In
the
insider
trading
report
filed
on
September
5,
1979,
he
indicated
that
he
had
become
the
owner
of
60,000
shares
on
August
30,
1979.
The
plaintiff
did
not
declare
any
stock
benefit
with
respect
to
the
shares
in
his
1978
tax
return.
His
accountant-tax
adviser
gave
evidence
that
the
status
of
the
shares
vis-a-vis
the
plaintiff
had
been
discussed
but
because
of
the
uncertainty
surrounding
whether
or
not
the
benefit
would
in
fact
arise
it
was
decided
that
it
was
not
appropriate
to
include
any
amount
with
respect
thereto
in
the
taxpayer's
return
for
the
1978
taxation
year.
The
benefit
was
declared
in
the
1979
tax
return.
Date
shares
acquired—value
of
stock
option
benefit
Subsection
7(1)(a)
of
the
Income
Tax
Act
as
it
read
in
1979
states:
.
.
.
where
a
corporation
has
agreed
to
sell
or
issue
shares
of
the
capital
stock
of
the
corporation.
..
(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.]
The
plaintiff
asserts
that
he
acquired
the
60,000
shares
on
February
23,
1978
because
on
that
date
a
binding
agreement
was
formed
which
gave
him
the
right
to
require
the
company,
if
he
so
wished,
to
deliver
the
shares.
The
Minister
argues
that
the
shares
were
acquired
on
August
30,
1979
when
the
shares
were
allotted,
apparently
paid
for,
transferred
to
the
plaintiff
and
share
certificates
issued.
On
February
23,
1978
the
market
value
of
the
shares
was
$4.25
per
share.
On
August
30,
1979
the
market
value
was
$8.80
per
share.
Thus
on
February
23,
1978
the
market
value
of
40,000
of
the
60,000
shares
was
$170,000.
On
August
30,
1979
it
was
$352,000.
The
cost
of
the
shares
to
the
plaintiff
was
$65,600.
Thus,
if
the
acquisition
date
is
February
23,
1978,
the
stock
option
benefit
to
the
plaintiff
is
$104,400.
If
the
acquisition
date
is
August
30,
1979
the
benefit
is
$286,400.
Only
40,000
and
not
60,000
shares
are
involved
because
the
plaintiff
transferred
20,000
to
a
Mr.
Rotterman
at
the
plaintiff's
cost
in
accordance
with
the
agreement
which
existed
between
them.
The
question
then
is
when
did
the
plaintiff
acquire
the
shares
as
that
term
is
used
in
paragraph
7(1)(a)
of
the
Income
Tax
Act.
It
is
agreed
that
the
date
of
the
issuance
of
share
certificates
is
not
itself
determinative.
See
for
example,
Welling,
Corporate
Law
in
Canada
(1991)
at
page
602
for
a
description
of
the
distinction
between
a
share
and
a
share
certificate.
A
share
certificate
is
merely
evidence
of
the
bundle
of
property
rights
which
a
share
constitutes.
The
fact
situation
in
this
case
however
is
not
one
in
which
the
shareholder
became
an
owner
of
the
share
at
a
different
time
from
the
issuance
of
the
share
certificate.
More
than
just
the
issuance
of
the
share
certificates
happened
on
August
30,
1979.
Counsel
for
the
plaintiff
argues
that
the
shares
were
acquired
on
February
23,
1978
because
on
that
day
the
plaintiff
accepted
the
offer
set
out
in
the
company's
option
agreement
and
the
company
was
thereupon
obligated
to
issue
the
shares.
Counsel
for
the
defendant
argues
that
while
the
plaintiff
accepted
the
company's
offer
on
that
date,
the
plaintiff
did
not
acquire
the
shares
on
that
date.
What
he
acquired
was
the
right
to
the
shares
and
since
they
did
not
exist
(that
is
free
trading
shares
did
not
exist)
there
was
a
fundamental
breach
upon
which
the
plaintiff
could
have
elected
to
sue
for
damages.
Specific
performance
would
have
been
difficult
to
obtain
given
the
nonexistence
of
the
subject
matter
of
the
contract.
It
is
argued
that
the
plaintiff's
acceptance
of
the
company's
offer,
set
out
in
the
option
agreement,
could
not
constitute
a
binding
agreement
when
the
subject
matter
of
the
contract
was
not
in
existence.
The
plaintiff's
acceptance
of
the
company's
offer
does
not
mean
that
the
plaintiff
acquired
the
shares
as
a
result
of
that
acceptance.
I
agree
with
that
legal
analysis
of
the
fact
situation.
Counsel
for
the
plaintiff
argues
that
the
offer
and
acceptance
evidenced
by
the
option
agreement
and
the
plaintiff's
notification
on
February
23,
1978
that
he
intended
to
exercise
that
option,
comprises
two
promises:
the
promise
to
issue
60,000
shares
and
the
promise
that
they
be
free
trading.
He
notes
that
the
shares
which
were
issued
on
August
30,1979
were
not
free
trading
and
that
the
company
was
in
a
position
to
issue
non-free
trading
shares
on
February
23,
1978.
He
argues
that
the
condition
that
the
shares
be
free
trading
was
an
obligation
of
the
company
which
the
plaintiff
could
waive
and
that
the
court
should
interpret
his
conduct
as
implicitly
demonstrating
a
waiver.
With
respect
to
conditions
precedent
the
decision
in
Turney
v.
Zhilka,
[1959]
S.C.R.
578,
18
D.L.R.
(2d)
447
was
cited.
Counsel
also
cited
Fridman,
The
Law
of
Contracts
(2nd
ed.,
1986),
at
pages
415-19,
and
with
respect
to
waiver,
pages
510-11:
Two
important
methods
of
changing
the
original
duty
to
perform
created
under
a
contract
are
by
variation
of
the
contract
and
waiver
of
rights
arising
thereunder.
These
two
methods
must
be
carefully
distinguished.
In
cases
of
variation,
what
happens
is
that,
by
mutual
agreement,
for
the
benefit
or
convenience
of
both
parties
there
is
a
later
alteration
of
an
original
agreement.
Where
waiver
is
alleged
to
have
occurred,
however,
the
change
is
for
the
benefit
or
convenience
of
one
party
only
and
the
other
party
is
said
to
acquiesce
in
such
change
in
the
original
terms
of
their
contract..
.
.
Where
waiver
is
alleged,
the
suggested
alteration
is,
at
most,
implicit
from
what
has
occurred.
Furthermore,
where
the
original
agreement
has
been
varied
by
the
later
one,
then,
to
the
extent
to
which
such
variation
is
operative,
the
first
agreement
must
now
be
considered
to
have
been
completely
changed
in
respect
of
the
variation
in
question.
If
waiver
is
alleged,
however,
the
Original
rights
and
duties
of
the
parties
remain
unchanged.
.
.
It
is
argued
that
from
February
23,
1978
the
plaintiff
had
a
binding
enforceable
right
to
60,000
shares
whether
free
trading
or
not.
I
cannot
draw
that
conclusion
from
the
facts.
There
is
nothing
around
the
February
23,1978
date
or
for
the
seventeen
months
thereafter
which
can
lead
to
a
conclusion
that
the
plaintiff
was
interested
in
having
the
shares
if
they
were
not
free
trading.
There
is
nothing
that
indicates
prior
to
August
30,
1979
that
the
plaintiff
waived
the
condition
that
the
shares
be
free
trading.
Indeed
even
as
of
that
later
date,
it
seems
clear
from
subsequent
events,
that
acquisition
of
the
shares
occurred
with
the
full
expectation
that
they
would
become
free
trading.
Counsel
argues
that
the
Tax
Court
judge
erred
because
he
thought
that
the
shares
issued
on
August
30,
1979
were
free
trading
when
they
were
not:
.
.
.
the
appellant
chose
to
wait
until
B.X.
was
in
a
position
to
secure
a
favourable
ruling
from
the
Superintendent
of
Brokers.
He
refused
to
treat
the
breach
of
the
contract
as
a
discharge
of
it
and
the
parties
tacitly
extended
the
time
for
performance
by
B.X.
of
its
obligation.
As
soon
as
B.X.
received
a
favourable
ruling,
the
freely
trading
shares
were
delivered.
That
happened
in
August
of
1979.
There
is,
therefore,
no
basis
for
saying
that
the
appellant
acquired
the
shares
prior
to
August
of
1979.
The
appellant
therefore
fails
on
this
issue
as
well.
While
that
decision
contains
a
factual
error
this
does
not
affect
the
result.
Indeed,
I
understand
that
the
Tax
Court
judge
did
not
have
all
the
information
in
front
of
him
which
was
filed
in
this
Court.
It
is
clear
that
the
plaintiff
decided
on
August
30,1979
to
accept
shares
which
were
not
free
trading.
There
is
no
evidence
as
to
why
this
occurred
but
this
does
not
support
a
conclusion
that
the
plaintiff
had
been
ready
to
do
so
on
February
23,
1978
or
at
some
time
prior
to
August
30,
1979.
When
the
company
was
unable
on
February
23,
1978
to
deliver
free
trading
shares,
the
parties
simply
delayed
doing
anything.
They
in
effect
eventually
varied
the
contract.
I
could
not
conclude
that
the
plaintiff
on
February
23,
1978,
had
waived
the
requirement
that
the
shares
be
free
trading.
All
the
facts
lead
to
the
conclusion
that
the
shares
were
acquired
on
August
30,
1979.
The
decision
in
Steen
v.
The
Queen,
[1988]
1
C.T.C.
256,
88
D.T.C.
6171
(F.C.A.)
does
not
assist
the
plaintiff.
While
in
that
case
the
Court
held
that
the
shares
were
acquired
at
the
time
the
option
was
exercised,
there
was
no
dispute
that
some
later
date
was
relevant.
The
issue
was
whether
the
shares
should
be
valued
as
of
the
date
the
option
was
issued
or
as
of
the
date
the
option
was
exercised.
It
is
in
the
context
of
that
argument
that
the
Federal
Court
of
Appeal
decision
must
be
read.
The
trial
judge's
decision,
[1986]
2
C.T.C.
394,
86
D.T.C.
6498,
reads
at
pages
399-400
(D.T.C.
6502):
Thus
the
key
factor
.
.
.
was
not
the
date
on
which
the
shares
were
fully
paid
nor
the
date
on
which
the
share
certificates
were
issued
but
the
date
on
which
the
taxpayer
established
a
binding
proprietary
right
in
the
legal
ownership
of
the
shares.
.
.
.
I
am
satisfied
that
a
taxpayer
is
deemed
to
have
received
a
benefit,
if
any,
at
the
moment
he
obtains
legal
ownership
or
the
incidence
of
legal
ownership
in
and
to
the
shares
subscribed.
In
the
present
case
all
the
incidence
of
legal
ownership
flowed
to
the
plaintiff
on
August
30,
1979,
not
before.
The
decision
in
Grant
v.
The
Queen,
[1974]
C.T.C.
332,
74
D.T.C.
6252
is
of
no
assistance
to
the
plaintiff.
In
that
case
there
was
a
binding
completed
agreement
with
respect
to
the
sale
of
the
shares.
That
case
dealt
with
an
employee
benefit
plan
under
which
employees
offered
to
purchase
a
certain
number
of
shares.
A
resolution
was
passed
approving
of
the
plan.
The
Court
held
at
pages
336-37
(D.T.C.
6255)
that
while
the
plaintiff
did
not
pay
for
the
shares
until
a
later
date
(one
year
later)
the
acquisition
of
the
shares
had
really
occurred
at
the
earlier
date:
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
have
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.
And
on
pages
335-36
(D.T.C.
6254),
it
was
said:
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
11,
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.
In
the
present
case
the
conduct
of
the
parties
demonstrates
that
a
binding
contract
for
the
purchase
of
the
shares
was
not
entered
into
until
August
30,
1979.
The
plaintiff
did
not
pay
for
the
shares
on
the
February
23
date.
He
did
not
consider
himself
to
be
a
shareholder
with
respect
to
those
shares
on
that
date.
He
did
not
include
the
taxable
benefit
in
his
tax
return
for
the
1978
year
because
he
was
uncertain
as
to
whether,
in
fact,
he
would
end
up
getting
the
shares.
Prior
to
August
30,
1979,
no
resolution
had
been
passed
by
the
company
allotting
the
shares,
the
plaintiff
did
not
describe
himself
in
the
insider
reports
as
a
shareholder
of
the
company,
the
parties
were
not
acting
as
though
the
plaintiff
was
a
shareholder
of
the
company.
It
was
not
merely
a
question
of
the
purchase
price
not
having
been
made
but
a
completed
contract
having
been
agreed
upon.
In
the
present
case,
agreement
with
respect
to
the
plaintiff's
potential
purchase
of
the
shares
was
simply
held
in
abeyance
until
August
1979.
Counsel
for
the
plaintiff
also
relies
on
Reynolds
v.
The
Queen,
[1975]
C.T.C.
85,
75
D.T.C.
5042
and
Falconer
v.
M.N.R.,
[1962]
S.C.R.
664,
[1962]
C.T.C.
426,
62
D.T.C.
1247.
A
passage
in
the
Reynolds
case,
at
page
87
(D.T.C.
5044),
describes
paragraph
85A(1)(a)
(now
paragraph
7(1)(a))
as
referring
to
a
situation
where
the
employee
"has
exercised
his
option
to
purchase
shares
from
a
corporation”.
It
would
be
drawing
too
much
from
that
passage
to
treat
it
as
a
considered
interpretation
dispositive
of
the
present
case.
Mr.
Justice
Gibson
was
merely
paraphrasing
the
import
of
the
section
in
a
general
way.
The
issue
of
the
paragraph's
application
in
a
situation
such
as
the
present
was
not
before
him.
The
Falconer
case
dealt
with
an
appellant
who
was
a
member
of
a
syndicate
of
four
persons
who
acquired
an
interest
in
a
farm-out
agreement
with
respect
to
certain
oil
lands.
The
syndicate
of
four
members
sold
75
per
cent
of
their
interest
in
the
farm-out,
and
then
agreed
to
form
a
company
to
take
over
their
remaining
1/4
interest.
The
four
members
agreed,
at
that
time,
that
the
consideration
for
the
transfer
of
their
rights
under
the
farm-out
to
the
company
would
be
748,000
fully
paid
shares
of
the
company.
The
appellant
was
to
receive
166,000
of
those
shares.
In
May
of
1985,
the
shares
were
not
issued,
nor
was
any
formal
agreement
signed
relating
to
the
transfer
of
the
property
and
issuance
of
the
snares.
However,
on
September
25,
1951,
a
formal
agreement
was
signed
which
was
stated
to
be”
"effective
from
June
15,1951",
which
was
the
date
the
parties
had
said
their
interest
in
the
farm-out
agreement
was
transferred
to
the
company
in
consideration
for
shares.
In
the
interim,
the
company
had
gone
public
and
the
farm-out
agreement
proved
to
be
a
success.
The
value
of
the
shares
of
the
company
had
therefore
increased
substantially
between
June
15,
1951
and
September
25,
1951.
The
shares
were
not
actually
“
allotted
or
issued”
by
the
company
to
the
four
members
of
the
syndicate
until
September
25,
1951.
The
Supreme
Court
came
to
the
conclusion,
in
a
majority
decision,
that
a
binding
agreement
had
been
entered
into
on
June
15,
1951
and
that
that
was
when
the
shares
had
been
acquired.
In
coming
to
this
decision,
the
majority
placed
heavy
emphasis
on
the
finding
of
fact
that
the
company
in
question
obtained
possession
of
the
assets
and
rights
of
the
syndicate
on
June
15,
1951
and
discharged
the
syndicate's
obligations
under
the
farm-out
agreement
from
that
date.
The
Court
indicated
that
if
specific
performance
had
been
sought
to
obtain
issuance
of
the
shares,
it
would
have
been
granted.
The
decision
held
that
the
subsequent
formal
documentation
of
the
transaction
simply
had
lagged
behind
the
actual
agreement
which
was
already
in
existence.
For
the
reasons
given
above
I
cannot
draw
the
conclusion,
in
the
present
case,
that
a
completed
agreement
was
in
existence
on
February
23,
1979
with
respect
to
the
purchase
of
non
free-trading
shares.
As
I
have
noted,
what
the
plaintiff
wanted
to
acquire
was
shares
he
could
sell.
When
he
gave
notice
that
he
wanted
to
exercise
the
option
on
February
23,
1979,
he
knew
the
company
could
not
provide
free
trading
shares.
He
did
not
pay
for
the
shares
at
that
point.
He
did
not
assume
any
of
the
incidences
of
ownership
such
as
the
right
to
vote
the
shares.
He
did
not
describe
himself
as
a
shareholder
of
those
shares.
The
company
did
not
describe
him
as
a
shareholder
of
the
shares.
As
I
have
already
indicated,
my
conclusion
on
the
basis
of
the
facts
is
that
the
shares
were
acquired
by
the
shareholder
on
August
30,
1979.
Facts—reimbursement
of
legal
fees
As
has
been
noted,
the
plaintiff
and
others
were
charged
with
several
counts
of
conspiracy
to
defraud
B.X.
and
one
count
of
theft.
The
facts
giving
rise
to
these
charges
were
outlined
in
the
unreported
judgment
of
Judge
H.L.
McGivern
of
the
Provincial
Court
of
British
Columbia
(quoted
in
Clemiss
v.
M.N.R.,
[1987]
2
C.T.C.
2275,
87
D.T.C.
569,
at
page
2277
(D.T.C.
570-71)):
In
a
simplified
form
the
case
for
the
Crown
may
be
summarized
as
follows:
Pezim,
[chairman
of
the
board
of
B.X.],
in
the
spring
of
1974
saw
the
opportunity
to
acquire
a
lime
plant
known
as
the
Paul
Lime
Plant
in
Arizona.
Pezim
started
to
discuss
the
matter
with
one
Sherwood
Owens
who,
in
turn,
knew
the
trustee
in
bankruptcy
of
a
company
known
as
Homestake.
The
Paul
Lime
Plant
was
eventually
acquired
by
Owens
from
the
trustee
and
sold
to
a
subsidiary
company
of
B.X.
Developments
Ltd.
The
acquisition
price
consisted
of
cash,
the
assumption
of
certain
debts
and
shares
of
the
parent
company,
B.X.
Developments
Ltd.
The
Crown
submits
that
the
share
portion
of
the
consideration
was
a
sham
from
the
beginning
or
became
a
sham
when
Pezim
and
his
co-accused
arranged
to
receive
approximately
350,000
shares
of
B.X.
Developments
Ltd.
from
Owens.
The
Crown
submits
that
an
agreement
existed
among
the
accused
to
carry
out
the
transaction
to
the
detriment
of
B.X.
Developments
and/or
its
shareholders.
The
Crown
further
submits
that
a
second
conspiracy
consisted
which
dealt
with
a
fraud
on
B.X.
Developments
Ltd.
of
$50,000.
This
allegation
which
is
count
4
in
the
information,
concerns
two
payments
of
$25,000
to
Shillingford
Investments
Ltd.
which
were
covered
up
and
treated
as
acquisition
costs
of
the
Paul
Lime
Plant.
The
Crown's
theory
is
that
the
accused
Clemiss,
Pezim
and
Rotterman
agreed
to
acquire
these
funds
in
an
illegal
fashion
for
their
own
use
and
benefit
and
that
they
were
assisted
by
the
accused
Leverant.
Thus,
in
the
first
count
the
plaintiff
was
charged
with
conspiracy
with
others
to
defraud
B.X.
of
350,000
shares
of
its
capital.
In
the
second
count
the
plaintiff
was
charged
with
conspiring
to
defraud
the
shareholders
of
the
company
with
respect
to
the
350,000
shares.
In
the
third
count
the
plaintiff
was
charged
with
conspiring
to
steal
350,000
shares
of
the
company
from
the
company.
Finally,
in
the
fourth
count
the
plaintiff
was
charged
with
conspiring
to
defraud
the
company
of
$50,000
paid
to
Shillingford
Investments.
As
has
also
been
noted
on
November
9,
1979
the
plaintiff
and
his
coaccused
were
acquitted.
Article
117
of
B.X.'s
constitution
states:
INDEMNIFICATION
AND
PROTECTION
OF
DIRECTORS,
OFFICERS,
EMPLOYEES
AND
CERTAIN
AGENTS
117.
The
company
shall
indemnify
any
person
who
was
..
.
a
party
.
.
.
to
any
completed
action
or
proceeding,
whether
or
not
brought
by
the
company
or
by
a
corporation
or
other
legal
entity
or
enterprise
as
hereafter
mentioned
and
whether
civil,
criminal
or
administrative
by
reasons
of
the
fact
that
he
is
or
was
a
director,
.
.
.
of
the
company
or
is
or
was
serving
at
the
request
of
the
company
as
a
director
.
.
.
of
another
corporation
.
.
.
against
all
costs,
charges
and
expenses,
including
legal
fees
and
any
amount
paid
to
settle
the
action
or
proceeding
or
satisfy
a
judgment,
if
he
acted
honestly
and
in
good
faith
with
a
view
to
the
best
interests
of
the
corporation
or
other
legal
entity
or
enterprise
as
aforesaid
of
which
he
is
or
was
a
director
.
.
.
as
the
case
may
be,
and
exercised
the
care,
diligence
and
skill
of
a
reasonably
prudent
person,
and
with
respect
to
any
criminal
or
administrative,
action
or
proceeding,
he
had
reasonable
grounds
for
Relieving
that
his
conduct
was
lawful;
and
provided
that
no
indemnification
of
a
director
.
.
.
of
the
company,
or
director
or
former
director
of
a
corporation
in
which
the
company
is
or
was
a
shareholder,
shall
be
made
except
to
the
extent
approved
by
the
Court
pursuant
to
the
Company
Act
or
any
other
statute.
The
determination
of
any
action,
suit
or
proceeding
by
judgment,
order,
settlement,
conviction
or
otherwise
shall
not,
of
itself,
create
a
presumption
that
the
person
did
not
act
honestly
and
in
good
faith
and
in
the
best
interests
of
the
company
and
did
not
exercise
the
care,
diligence
and
skill
of
a
reasonably
prudent
person
and,
with
respect
to
any
criminal
action
or
proceeding,
did
not
have
reasonable
grounds
to
believe
that
his
conduct
was
lawful.
Section
151
of
the
British
Columbia
Company
Act
states:
(1)
A
company
may,
with
the
approval
of
the
Court,
indemnify
a
director
or
former
director
of
the
company
or
a
director
or
former
director
of
a
corporation
of
which
it
is
or
was
a
shareholder.
.
.
against
all
costs,
charges
and
expenses,
including
an
amount
paid
to
settle
an
action
or
satisfy
a
judgment
actually
and
reasonably
incurred
by
him,
including
an
amount
paid
to
settle
an
action
or
satisfy
a
judgment
in
a
civil,
criminal,
or
administrative
action
or
proceeding
to
which
he
is
made
a
party
by
reason
of
being
or
having
been
a
director,
including
an
action
brought
by
the
company
or
corporation,
if
(a)
he
acted
honestly
and
in
good
faith
with
a
view
to
the
best
interests
of
the
corporation
of
which
he
is
or
was
a
director;
and
(b)
in
the
case
of
a
criminal,
or
administrative,
action
or
proceeding,
he
had
reasonable
grounds
for
believing
that
his
conduct
was
lawful.
(2)
The
Court
may,
upon
the
application
of
a
company,
director
or
former
director,
make
an
order
approving
an
indemnity
under
this
section
and
the
Court
may
make
any
further
order
it
considers
appropriate.
.
.
.
On
March
24,
1980,
a
notice
was
issued
for
the
purpose
of
calling
an
extraordinary
meeting
of
the
shareholders.
The
purpose
of
that
meeting
was
to
authorize
reimbursement
to
the
plaintiff
for
the
legal
fees
he
had
incurred
in
defending
the
criminal
charges.
Management
recommended
reimbursement
pursuant
to
article
117
of
the
company's
article
and
section
151
of
British
Columbia’s
Company
Act.
The
information
circular
which
accompanied
this
notice
stated:
Three
of
the
individuals
claiming
indemnification,
namely,
Messrs.
Pezim,
Clemiss
and
Rotterman,
are
currently
directors
of
the
company
and,
accordingly,
it
was
a
decision
of
the
Board
of
Directors
that
before
indemnification
of
these
directors
could
be
considered,
the
matter
should
first
be
referred
to
shareholders
for
approval
or
direction.
.
.
Messrs.
Pezim
and
Clemiss
have
advised
that
they
have
instructed
counsel
on
their
behalf
to
apply
under
section
151
of
the
Company
Act
for
approval
of
the
Court
to
payment
of
the
indemnification
requested
by
them.
Both
Mr.
Pezim
and
Mr.
Clemiss
have
agreed,
however,
to
withhold
their
proposed
application
to
the
Court
until
the
company
has
had
an
opportunity
to
seek
the
approval
or
direction
of
its
shareholders
at
an
extraordinary
general
meeting
to
be
called
for
such
purpose.
Should
any
or
all
of
the
claims
not
be
approved
by
the
shareholders
and,
in
the
case
of
Messrs.
Pezim
and
Clemiss
not
be
approved
by
the
Court,
then
the
Board
of
Directors
will
deny
the
claims
and
the
claimants
may
then
seek
redress
through
the
Courts.
In
any
event,
it
is
not
the
intention
of
the
directors
to
approve
payment
of
any
of
the
claims
until
such
time
as
the
claims
of
Messrs.
Pezim
and
Clemiss
have
been
considered
by
the
Court
and
a
decision
rendered
concerning
such
claims.
At
the
extraordinary
general
meeting
of
shareholders
on
May
5,
1980
reimbursement
of
the
plaintiff
was
approved:
It
was
resolved
that
the
Directors
be
authorized
to
approve
payment
to
Arthur
Clemiss
of
the
sum
of
$146,555.35
and
to
pay
such
sum
in
satisfaction
of
his
claim
against
the
company
for
indemnity,
subject
to
approval
of
the
British
Columbia
Supreme
Court.
Court
approval
of
this
payment
was
obtained
from
the
Supreme
Court
of
British
Columbia
on
June
13,
1980.
Reimbursement
of
legal
fees—benefit
from
office
or
employment
Section
6(1)
of
the
Income
Tax
Act
provides:
There
shall
be
included
in
computing
the
income
of
a
taxpayer
for
a
taxation
year
as
income
from
an
office
or
employment
such
of
the
following
amounts
as
are
applicable:
(a)
The
value
of
board,
lodging
and
other
benefits
of
any
kind
whatever.
.
.
received
or
enjoyed
by
him
in
the
year
in
respect
of,
in
the
course
or,
or
by
virtue
of
an
office
or
employment.
.
.
.
[Emphasis
added.]
The
Minister
characterized
the
$146,555.35
as
a
benefit
received
by
the
plaintiff
falling
under
the
terms
of
paragraph
6(1)(a).
The
plaintiff
argues
that
no
benefit
was
received
because
the
payment
was
a
reimbursement
for
expenses
he
had
incurred
and
there
was
no
net
benefit
to
him.
Counsel
for
the
plaintiff
referred
to
the
decision
in
Ransom
v.
M.N.R.,
[1967]
C.T.C.
346,
67
D.T.C.
5235
(Ex.
Ct.)
where
it
was
held
that
the
paying
of
moving
expenses
for
an
employee
was
not
a
benefit.
It
was
held
that
reimbursement
of
an
employee
by
an
employer
for
expenses
or
losses
incurred
by
reasons
of
employment
was
neither
remuneration
as
such,
nor
a
benefit
"of
any
kind
whatsoever".
The
payment
was
money
disbursed
by
reason
of
but
not
in
the
course
of
employment
and
it
"puts
nothing
in
the
pocket
but
merely
saves
the
pocket"
(see
page
361
(D.T.C.
5244)).
A
number
of
cases
have
been
cited
in
which
the
reimbursement
of
expenses
incurred
as
a
result
of
moving
at
the
behest
of
an
employer,
were
held
not
to
be
a
paragraph
6(1)(a)
benefit.
The
reimbursement
of
such
expenses
was
dealt
with
in:
McNeil!
v.
The
Queen,
[1986]
2
C.T.C.
352,
86
D.T.C.
6477
(F.C.T.D.);
Greisinger
v.
M.N.R.,
[1986]
2
C.T.C.
2441,
86
D.T.C.
1802
(T.C.C.);
Phillips
v.
M.N.R.,
[1990]
1
C.T.C.
2372,
90
D.T.C.
1274
(T.C.C.);
Splane
v.
Canada,
[1990]
2
C.T.C.
199,
90
D.T.C.
6442
(F.C.T.D.).
See
also
Huffman
v.
Canada,
[1990]
2
C.T.C.
132,
90
D.T.C.
6405
(F.C.A.)
for
a
case
in
which
a
clothing
allowance
was
held
not
to
be
income.
The
Court
held
that
there
was
no
element
of
economic
"benefit"
to
the
taxpayer
involved.
The
employer
was
merely
restoring
the
taxpayer
to
the
economic
situation
he
had
been
in
before
he
was
required
by
the
employer
to
incur
the
clothing
expenses.
In
Rendell
v.
Went
(1963),
41
T.C.
641
(Ch.
D.),
[1963]
3
All
E.R.
325,
var'd
41
T.C.
650
(C.A.);
aff'd
[1964]
2
All
E.R.
464,
41
T.C.
654
(H.L.),
a
taxpayer
was
held
to
have
received
a
benefit
when
his
employer
paid
legal
fees
which
arose
as
a
result
of
the
taxpayer
having
been
charged
with
causing
the
death
of
another
by
reckless
or
dangerous
driving.
At
the
time
in
question
the
employee
was
driving
the
company
car
in
the
course
of
his
employment.
The
legal
fees
were
not
paid
as
a
reimbursement
to
the
taxpayer
but
not
much
turns
on
that
fact.
The
company
simply
took
over
the
employee's
defence
and
paid
the
fees
directly.
It
allegedly
spent
more
for
legal
services
than
the
employee
would
himself
have
done.
It
was
held
that
the
amount
spent
was
a
benefit
to
be
treated
as
income
in
the
hands
of
the
employee.
Counsel
for
the
plaintiff
argues
that
the
Rendell
case
is
of
limited
value
because
it
was
decided
by
reference
to
the
Income
Tax
Act
of
the
United
Kingdom
and
that
that
Act
uses
a
broader
category
of"
benefits"
than
applies
under
our
law.
In
any
event,
for
the
purpose
of
Canadian
jurisprudence,
the
question
is
whether
the
legal
fees
paid
by
the
plaintiff
were
losses
incurred
by
reason
of
his
employment
or
his
office
of
director
or
whether
they
were
expenses
of
a
predominantly
personal
nature.
In
Pellizzari
v.
M.N.R.,
[1987]
1
C.T.C.
2106,
87
D.T.C.
56
(T.C.C.)
it
was
held
that
the
reimbursement
of
legal
expenses
which
a
taxpayer
incurred
defending
criminal
charges
associated
with
the
business
activities
of
the
company,
of
which
she
was
a
director
and
an
employee,
constituted
a
paragraph
6(1)(a)
benefit.
It
was
held
that
the
payment
of
the
legal
fees
had
been
personal
expenses
of
the
taxpayer
and
consequently
that
their
reimbursement
by
the
corporation
constituted
a
benefit
to
her.
The
company
had
also
been
charged
and
both
charges
were
subsequently
withdrawn.
Counsel
seeks
to
distinguish
this
decision
on
the
ground
that
the
taxpayer
in
that
case
was
acting
for
herself
and
therefore
did
not
refer
the
court
to
the
reimbursement
type
cases.
The
Tax
Court
decision
in
the
present
case
placed
considerable
reliance
on
the
decisions
in
The
Queen
v.
Savage,
[1983]
2
S.C.R.
428,
[1983]
C.T.C.
393,
83
D.T.C.
5409
and
The
Queen
v.
Poynton,
[1972]
C.T.C.
411,
72
D.T.C.
6329,
at
page
420
(D.T.C.
6335-36).
In
the
Savage
case
it
was
said
at
440
S.C.R.
(C.T.C.
399,
D.T.C.
5414):
Our
Act
contains
the
stipulation,
not
found
in
the
English
statutes
referred
to,
"benefits
of
any
kind
whatever.
.
.
.
in
respect
of,
in
the
course
of,
or
by
virtue
of
an
office
or
employment”.
The
meaning
of
“
benefit
of
whatever
kind”
is
clearly
quite
broad;
..
.
Further,
our
Act
speaks
of
a
benefit
"in
respect
of"
an
office
or
employment.
In
Nowegijick
v.
The
Queen,
[1983]
C.T.C.
20,
83
D.T.C.
5041
this
Court
said,
at
page
25
(D.T.C.
5045),
that:
The
words
“in
respect
of”
are,
in
my
opinion,
words
of
the
widest
possible
scope.
They
import
such
meanings
as
“in
relation
to",
"with
reference
to”
or
“in
connection
with”.
The
phrase
'in
respect
of”
is
probably
the
widest
of
any
expression
intended
to
convey
some
connection
between
two
related
subject
matters.
In
Poynton
the
following
interpretation
was
given
at
page
420
(D.T.C.
6335-36):
I
do
not
believe
the
language
to
be
restricted
to
benefits
that
are
related
to
the
office
or
employment
in
the
sense
that
they
represent
a
form
of
remuneration
for
services
rendered.
If
it
is
a
material
acquisition
which
confers
an
economic
benefit
on
the
taxpayer
and
does
not
constitute
an
exemption,
e.g.,
loan
or
gift,
then
it
is
within
the
all-embracing
definition
of
section
3.
I
find
the
reasoning
in
the
Pellizzari,
Savage
and
Poynton
cases
convincing.
In
the
reimbursement
cases
there
is
a
nexus
between
the
expense
and
the
requirements
of
the
job.
In
the
present
case
the
expenses
were
incurred
by
the
plaintiff
not
in
order
to
do
the
job
but
to
answer
criminal
charges
laid
against
him
personally.
The
charges
did
not
even
involve
charges
against
the
company.
The
company
was
alleged
to
have
been
the
victim.
While
the
actions
which
gave
rise
to
the
criminal
charges
took
place
in
the
context
of
the
plaintiffs
employment
with
the
company
and
his
membership
on
the
board
of
directors
I
could
not
find
that
there
is
the
close
nexus
between
their
outlay
and
the
plaintiff's
position
as
an
employee
and
director
of
the
corporation,
in
order
to
conclude
that
they
were
incurred
by
reason
of
that
employment
or
directorship.
Reference
to
the
Rendell
case
is
useful.
In
that
case
while
the
employee
may
have
been
required
to
drive
the
car
in
the
place
where
the
accident
occurred
for
the
purposes
of
his
employment,
he
was
not
required
to
do
so
in
a
careless
or
reckless
manner.
The
expenses
incurred
in
defending
the
charges
against
him
were
not
incurred
by
reason
of
his
employment
but
were
in
the
nature
of
personal
expenses.
For
the
reasons
given,
in
this
case,
the
$146,555.35
was
properly
included
in
the
plaintiff's
income.
Conclusion
The
plaintiff
acquired
the
40,000
shares
of
B.X.
on
August
30,
1979.
Accordingly
the
taxable
benefit
he
received
was
$286,400.
The
reimbursement
of
the
legal
fees
he
paid
defending
himself
against
the
criminal
charges
which
arose
out
of
the
dealings
with
the
Paul
Lime
Plant
constituted
a
paragraph
6(1)(a)
benefit
and
therefore
was
properly
included
as
income.
The
plaintiff's
appeal
is
accordingly
dismissed
and
the
defendant
shall
have
her
costs
of
the
action.
Appeal
dismissed.
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