Martin,
J.:
—The
plaintiff,
Desrochers
Development
Corporation,
appeals
the
October
11,
1983
reassessment
by
the
Minister
of
National
Revenue
in
which
the
gain
made
on
a
sale
of
property
in
Saskatoon
was
classified
as
income
rather
than
as
a
capital
gain
as
had
been
reported
by
the
plaintiff
in
its
income
tax
return
for
its
1982
taxation
year.
The
Minister
alleges
that
one
of
the
major
motivating
factors
which
induced
the
plaintiff
to
acquire
the
property
was
the
possibility
of
turning
the
property
to
account
by
means
of
a
resale
or,
alternatively,
that
the
property
was
purchased
with
a
dual
or
alternative
intention
to
do
so.
The
plaintiff
asserts
that
the
property
was
purchased
exclusively
for
a
long-term
investment
and
at
no
time
prior
to
its
purchase
was
any
thought
given
to
reselling
the
property
at
a
profit.
Although
there
is
only
one
plaintiff
in
this
action,
the
property
was
held
by
a
trustee
company,
Greentree
Plaza
Corporation,
in
trust
for
a
group
of
approximately
11
individuals
and
companies
under
the
terms
of
a
joint
venture
agreement.
The
group
was
led
by
the
plaintiff
company
which
acted
as
manager
of
the
property
through
its
principal
officer
and
shareholder
Mr.
Ronald
Desrochers.
Counsel
for
both
parties
have
agreed
that
I
am
to
determine
the
intention
of
the
group
in
the
acquisition
of
the
property
by
the
intention
of
Desrochers
exclusively
and
that
his
intention,
so
determined
by
me,
will,
for
all
purposes,
be
deemed
to
be
the
intention
of
each
member
of
the
Greentree
group.
Desrochers,
a
chartered
accountant,
practised
his
profession
for
a
short
period
after
qualifying
in
1973,
and
then
joined
a
Saskatoon
construction
firm
as
comptroller.
He
remained
with
the
firm
until
1980
during
which
period
he
was
responsible
for
developing
the
company's
long-term
real
estate
investment
portfolio.
When
he
left
the
firm
in
1980
to
establish
his
own
real
estate
investment,
management
and
development
business
he
was
the
vice-president
—
Finance
of
the
construction
firm
which,
at
the
time,
had
a
real
estate
portfolio
consisting
of
some
400
houses
and
250,000
sq.
ft.
of
commercial
property.
Since
establishing
his
own
business
Desrochers
has
participated
in
some
23
real
estate
projects,
21
of
which
are
still
held
by
the
original
investors
and
two
of
which
he
disposed
of
in
the
first
year
of
his
business.
He
says
he
made
these
dispositions
contrary
to
his
intended
policy
of
long-term
invest-
ments,
because
he
required
the
capital,
they
were
not
in
Saskatoon
and
at
least
one
of
them
was
built
for
the
owner
for
sale
upon
completion.
The
profits
of
those
two
sales
were
reported
as
income
on
his
tax
returns.
Desrochers
also
sold
an
interest
which
he
personally
held
in
a
residential
property
which
for
some
reason
had
become
undesirable.
Desrochers
was
insistent,
and
I
accept
his
evidence
in
this
respect,
that
he
was
not
in
the
business
of
buying
and
selling
real
estate.
His
interest
was
and
is
in
the
acquisition
and
development
of
real
estate
as
a
long-term
investment
which
he
does
jointly
with
other
persons
and
companies
that
he
is
able
to
interest
in
a
given
project.
As
a
part
of
his
usual
development
plan
he
offers
his
services,
through
his
company,
as
a
manager
of
the
project
when
it
is
completed.
In
July
of
1980
Desrochers
saw
that
Chrysler
Canada
Ltd.
was
offering
its
Saskatoon
dealership
property
for
sale.
The
property
was
comprised
of
four
lots,
three
of
which
were
in
the
downtown
area
and
the
other
on
the
outskirts
of
the
city.
Chrysler
was
asking
$2.7
million
for
the
properties,
and
had
set
as
a
condition
of
the
sale
that
the
purchaser
lease
the
properties
back
to
it
until
December
31,
1982
for
which
Chrysler
would
pay
rent
at
an
annual
rate
of
$315,240.
Because
the
properties
were
just
on
the
edge
of
Saskatoon's
prime
commercial
area,
were
properly
zoned
for
commercial
development,
and
the
existing
buildings
on
them
were
relatively
of
little
value,
Desrochers
saw
it
as
an
opportunity
for
a
major
real
estate
development
project
and
instructed
his
solicitor
to
make
an
offer
to
purchase
it.
Although
the
offer
was
made
by
the
plaintiff
alone,
Desrochers
had
no
intention
of
carrying
on
the
development
exclusively
through
his
company
but
intended
to
do
so
through
a
joint
venture
group.
The
offer
of
$2,350,000
was
made
on
August
1,
1980
and,
subject
to
approval
by
Chrysler's
board
of
directors,
was
accepted
on
August
27,
1980.
Desrochers
immediately
set
out
to
interest
other
investors
in
the
development
of
the
property.
He
prepared
a
four-page
analysis
of
the
financial
feasibility
of
the
development
noting
that
the
lease-back
arrangement
until
December
31,
1982
would
be
adequate
to
service
the
proposed
mortgage
debt
and
allow
a
return
of
10.6
per
cent
on
the
investor's
equity.
This
lease-
back
arrangement
was
particularly
attractive
to
potential
investors
because,
as
Desrochers
pointed
out
in
his
analysis,
it
allowed
a
return
on
the
investment
for
the
initial
two-year
period
during
which
plans
for
the
development
could
take
place
and
existing
available
office
and
commercial
space
in
the
city
could
be
absorbed.
He
discounted
completely
any
use
for
the
property
on
the
outskirts
of
the
city
and
recommended
that
it
be
sold.
For
the
remaining
three
downtown
properties,
two
of
which
were
adjacent
and
the
other
on
the
opposite
side
of
the
street,
he
suggested
a
development
consisting
of
either
three
office
buildings
at
a
cost
of
$23
million
or,
alternatively,
two
office
buildings
and
a
parkade
at
a
cost
of
$18
million.
In
both
cases
he
prepared
pro
forma
statements
showing
the
cost,
revenue
and
funds
available
to
service
the
debt
and
to
allow
for
a
return
on
the
investor's
equity.
He
concluded
his
analysis
by
listing
the
advantages
and
disadvantages
of
the
plan
in
the
following
terms:
Advantages
of
Redevelopment
Plan
are
as
follows:
(1)
The
separate
pieces
of
land
involved
are
ideal
for
phasing
the
development
scheme,
especially
in
financing.
(2)
The
parcels
are
still
close
enough
together
to
provide
comprehensive
development
appeal
including
common
facilities
such
as
parkades.
(3)
Development
would
probably
generate
first
time
development
costs
in
excess
of
$2,000,000
to
the
investor.
These
could
be
used
to
shelter
other
income.
(4)
Not
all
lands
need
be
developed,
some,
or
all
may
be
sold
off
if
desired
or
required.
(5)
The
leverage
capabilities
of
the
development
should
not
require
further
significant
cash
injections,
but
in
fact
should
provide
a
fairly
quick
return
of
initial
capital.
(6)
The
location
of
the
development
is
attractive
and
in
the
core
of
downtown.
Disadvantages
(1)
Development
plans
would
require
approval
of
the
Meewasin
Valley
Authority
which
would
mean
another
bureaucratic
step
in
obtaining
development
approval.
(2)
Should
redevelopment
not
take
place
or
as
certain
parcels
are
awaiting
phasing
of
the
development
it
is
unlikely
that
economic
rental
levels
would
be
attainable.
During
September
and
October
of
1980
Desrochers,
on
the
strength
of
his
analysis
and
presumably
on
the
soundness
of
the
proposed
development
of
the
properties,
was
successful
in
gathering
a
sufficient
number
of
co-inves-
tors
to
form
the
joint
venture
group.
The
project
was
divided
into
14
shares,
each
of
which
required
a
cash
investment
of
$45,000
and
a
guarantee
of
the
mortgage
financing
of
$125,000.
In
order
to
secure
the
financing
Desrochers
had
a
detailed
appraisal
of
the
properties
prepared
which
appraisal
was
completed
on
September
30,
1980.
He
approached
two
trust
companies
and
a
bank
to
obtain
the
financing.
In
all
cases
he
was
looking
for
interim
financing
for
the
purchase
of
the
property
until
December
31,
1982
when
the
lease-back
arrangement
with
Chrysler
was
to
terminate.
He
also
discussed
his
long-term
development
plans
with
the
lenders
who
understood
that
the
first
financing
would
only
be
an
interim
measure
until
the
properties
were
developed
in
accordance
with
Desrochers'
plans.
The
interim
financing
of
$1,762,500
was
eventually
provided
by
the
Canadian
Imperial
Bank
of
Commerce,
the
local
manager
of
which
who
looked
after
the
account
in
1980
confirmed
his
understanding
that
the
group
intended
to
develop
the
property.
The
manager
of
Royal
Trust
Corporation,
Mr.
Dean
Roder,
was
also
called
as
a
witness.
He
confirmed
that
Desrochers'
intention,
as
expressed
to
him
in
October
of
1980,
was
the
acquisition
of
the
property
for
development.
He
specifically
recalled
that
Desrochers
had
a
high
rise
office
building
in
mind
and
was
sufficiently
confident
the
development
would
proceed
that
he
asked
Desrochers
for
and
obtained
a
commitment
from
him
that
Royal
Trust
Corporation
would
have
the
first
refusal
to
become
lender
to
the
proposed
development.
The
plaintiff
also
called
Mr.
Ronald
Pellegrini,
the
real
estate
agent
for
the
company
which
acted
for
Chrysler
on
the
sale
of
the
property.
Pellegrini
dealt
only
with
Desrochers
on
the
sale
and
confirmed
his
understanding
that
Desrochers
was
interested
in
the
downtown
properties
for
development
purposes.
He
said
Desrochers
never
raised
with
him
the
possibility
of
selling
the
downtown
properties.
Pellegrini
also
said
it
was
a
condition
of
the
sale
with
Chrysler
that
there
be
a
single
purchaser
for
all
four
properties
and
that
the
purchaser
could
not
purchase
the
downtown
properties
unless
the
property
on
the
outskirts
of
the
city
was
also
purchased
at
the
same
time.
During
this
period
of
September
and
October
1980,
Desrochers'
co-inves-
tors
met
with
him
from
time
to
time
to
discuss
the
planned
development.
Desrochers
says
the
possibility
of
selling
the
property
(except
for
the
piece
on
the
outskirts
of
the
city)
was
never
considered.
He
says
all
of
the
investors
were
of
one
mind
and
that
was
to
participate
in
the
development
which
he
had
proposed
as
a
long-term
investment.
The
husband
of
one
of
the
investors,
Mr.
David
H.
Wright
(now
Mr.
Justice
Wright
of
the
Court
of
Queen's
Bench
for
Saskatchewan)
who
was
a
director
and
the
secretary
of
the
plaintiff
company,
participated
in
several
of
the
meetings
and
confirms
Desrochers'
evidence
that
the
possibility
of
selling
the
downtown
properties
was
never
considered
and
that
the
investors
were
all
interested
in
a
long-term
investment.
Wright
also
acted
as
solicitor
for
the
group
in
the
preparation
of
a
detailed
joint
venture
agreement
which
he
suggests
would
not
be
necessary
if
the
investors
were
acquiring
the
property
for
the
purpose
of
trading
in
it
or
for
purely
speculative
purposes.
The
agreement
does
not
deal
with
the
development
of
the
properties
in
any
specific
terms
but,
as
is
normal
in
such
agreements,
it
is
in
the
nature
of
a
set
of
by-laws
setting
out
the
procedures
for
operating
the
venture
in
general
terms
and
governing
the
relationship
between
the
parties
to
the
agreement.
I
agree
with
Wright
that
the
detailed
agreement
tends
to
indicate
the
parties
to
it
contemplated
a
long-term
relationship
in
the
venture,
but
that
is
quite
different
from
tending
to
indicate
that
the
investment
of
the
venture
will
be
a
long-term
one
for,
having
regard
to
the
terms
of
the
agreement,
it
would
apply
equally
to
a
series
of
short-term
projects.
In
my
view
the
existence
of
the
agreement
is
a
neutral
fact
in
ascertaining
whether
the
resale
of
the
property
was
a
factor
which
motivated
its
purchase.
As
already
mentioned
Desrochers'
offer
was
conditionally
accepted
by
Chrysler
subject
to
the
approval
of
its
board.
This
was
given
in
September
and
the
closing
date,
originally
set
for
November
3,
was
extended
to
November
14,
1980.
On
that
date
the
investors
signed
the
joint
venture
agreement,
made
the
required
cash
contributions
and
obtained
a
deed
to
the
properties.
Just
three
days
after
the
Chrysler
properties
were
transferred
to
the
Greentree
Plaza
Corporation
the
Land
Manager
for
the
city
of
Saskatoon,
Mr.
Barry
Markham,
was
called
to
a
meeting
with
the
mayor
and
commissioners
of
the
city
and
was
instructed
to
acquire
options
on
the
land
comprising
the
entire
city
block
#146
of
which
one
of
the
Chrysler
pieces
of
property
(lot
#2)
formed
a
portion.
To
Markham,
this
came
as
a
complete
surprise.
He
said
there
had
been
no
indication
whatsoever
prior
to
November
17,
1980
that
the
city
had
any
plans
for
this
area.
It
was
all
the
more
surprising
to
him
because
even
then,
on
November
17,
the
city
had
no
agreement
with
the
provincial
Government
with
respect
to
the
development
of
that
area.
The
mayor,
Markham
said,
told
him
he
hoped
he
would
be
able
to
reach
some
agreement
with
the
province
in
the
future.
The
fact
that
the
city
moved
suddenly
and
unexpectedly
to
acquire
the
property
is
further
confirmed
by
Pellegrini,
the
real
estate
agent.
Although
the
property
had
been
publicly
advertised
for
sale
since
July
of
1980
he
confirmed
that
Desrochers
was
the
only
one
who
had
expressed
any
interest
in
acquiring
it.
There
had
not
been
any
offer
or
even
interest
in
the
property
expressed
by
the
Government
or
the
city
of
Saskatoon
while
it
was
listed
with
Pellegrini's
real
estate
employer.
Markham,
acting
on
his
instructions,
arranged
to
meet
with
Desrochers
about
a
week
later.
When
Desrochers
told
him
he
was
not
interested
in
selling
the
property,
Markham
made
it
perfectly
clear
to
him
that
the
city
would
acquire
it.
He
told
Desrochers
he
hoped
he
could
reach
an
agreement
with
him
on
a
price
but
even
if
they
could
not
come
to
an
agreement
the
city
would
eventually
become
the
owner.
To
both,
Markham
and
Desrochers,
it
was
clear
that
the
city
would
expropriate
the
property
if
necessary.
Desrochers
met
with
his
group
to
consider
the
alternatives.
Acting
on
Wright's
advice
they
quickly
and
wisely
decided
that
an
expropriation
should
be
avoided
if
possible.
As
a
result
of
the
meeting
Desrochers
wrote
to
Markham
on
November
28,
1980
as
follows:
November
28,
1980
City
of
Saskatoon,
City
Hall,
Saskatoon,
Saskatchewan.
Attention:
Mr.
Barry
Markham
Dear
Sir:
Following
your
inquiries
as
to
the
possibilities
of
obtaining
an
option
to
purchase
lots
36-40
inclusive
in
Block
146,
Plan
Q2,
known
as
361
-
2nd
Avenue
South,
I
called
a
directors'
meeting
in
order
to
obtain
some
direction.
The
directors
are
not
enthusiastic
about
offering
the
property
for
sale,
as
it
affects
the
long
term
development
plans
envisaged
when
the
acquisition
was
undertaken.
It
is
the
consensus
of
the
directors
that
if
the
property
is
necessary
to
provide
suitable
civic
and
cultural
facilities
that
we
should
not
be
the
stumbling
block
to
such
plans.
It
is
the
directors'
wishes
however,
not
to
be
in
a
decreased
net
land
holding
position
in
the
downtown
core,
and
accordingly
we
hereby
offer
the
following
two
alternatives:
Alternative
#1
—
We
would
entertain
any
proposal
which
the
city
may
wish
to
offer
in
the
form
of
a
land
exchange
for
our
parcel.
The
land
offered
would
have
to
be
downtown
land
with
equivalent
zoning
and
value.
Alternative
#2
—
We
would
option
the
parcel
to
the
city
for
a
three
month
period
for
$10,000.00;
such
option
could
be
extended
for
a
further
three
months
by
paying
a
further
$15,000.00.
Should
the
option
to
purchase
be
taken
up,
all
option
monies
would
be
applied
to
the
purchase
price.
Should
the
option
not
be
exercised,
of
course
all
option
monies
would
be
forfeited.
The
option
would
allow
the
city
to
purchase
the
land
for
a
price
of
$962,500.00,
payable
upon
exercising
the
option
to
purchase.
A
condition
of
the
option
and
sale
would
be
however,
that
the
vendor
be
allowed
to
lease
back
from
the
city
the
property
at
a
net
rental
to
the
city
of
$25,000.00
per
annum;
such
lease
to
expire
on
December
31,
1982.
As
previously
mentioned,
in
arriving
at
the
offer
the
director's
primary
consideration
in
arriving
at
the
option
price
was
the
cost
of
reinstating
their
land
holding
position.
Inquiries
as
to
currently
listed
properties
and
recent
transactions
(see
enclosed
schedule)
clearly
indicate
that
replacing
the
property
will
require
at
least
$55.00
per
square
foot,
especially
considering
the
fact
that
we
are
dealing
with
a
corner
property
which
generally
command
approximately
a
10%
premium
over
similar
non-corner
properties.
This
offer
shall
expire
at
twelve
o'clock
noon
December
17,
1980
Should
you
wish
to
discuss
this
matter,
or
clarify
any
matters
in
this
letter,
please
contact
the
writer
at
your
convenience.
Yours
truly,
Ron
Desrochers,
President
GREENTREE
PLAZA
CORP.
Although
Markham
had
told
Desrochers
to
fix
a
price
for
the
sale
of
the
land,
Desrochers
reasoned
that
an
option
would
be
preferable
on
the
grounds
that
the
city
might
decide
not
to
acquire
the
property.
In
such
an
event
the
group
would
simply
retain
ownership
rather
than,
had
the
land
been
sold
to
the
city,
negotiate
the
repurchase
of
it.
In
any
event
the
city
accepted
Desrochers'
terms.
A
formal
option
agreement
was
executed
on
June
28,
1981
and
the
city
purchased
the
property
at
the
agreed
price
on
July
16,
1981.
The
sale
gave
rise
to
a
gain
of
$299,390,
the
plaintiff's
share
of
which
was
reported
as
a
capital
gain
and
subsequently
reclassified
by
the
Minister
as
income
In
the
pleadings
there
are
set
out
several
assumptions
made
by
the
Minister
which,
taken
together,
impute
to
the
group
foreknowledge
of
the
city's
plans
to
acquire
the
land
which
it
eventually
purchased
from
the
group.
Those
assumptions
are
contained
in
paragraph
12
of
the
defence
and
are
as
follows:
(c)
that
the
subject
land
was
in
an
area
of
the
City
of
Saskatoon
covered
by
government
plans
for
downtown
revitalization;
(d)
that
the
participants
in
the
Greentree
Group
were
knowledgeable
individuals
familiar
with
the
redevelopment
plans
for
this
area
of
the
City
of
Saskatoon;
(g)
that
the
participants,
as
reasonable
business
persons,
knew
or
should
have
known
of
the
City's
interest
in
the
property;
The
clear
implication
to
be
drawn
from
these
assumptions
is
that
prior
to
or
at
the
time
of
the
purchase
of
the
Chrysler
properties
the
group
was
aware
of
the
government's
and
the
city’s
plans
for
the
downtown
area
of
Saskatoon,
that
those
plans
included
the
acquisition
of
a
portion
of
the
Chrysler
property,
and
that
the
group
acquired
the
property
with
a
view,
not
of
developing
it,
but
of
immediately
selling
it
to
the
city
at
a
quick
profit.
As
these
assumptions,
in
the
form
of
allegations,
reflect
poorly
upon
the
integrity
of
the
individuals
in
the
group
I
would
think
the
Minister
should
have
had
some
evidence
to
support
them.
Not
only
was
there
no
such
evidence
but
all
of
the
evidence
introduced
was
to
the
contrary.
Desrochers
denied
that
he
had
any
knowledge
of
city
or
government
plans
for
the
development
of
the
area.
The
real
estate
agent
who
attended
to
the
Chrysler
property
listing
was
not
aware
of
any
city
or
provincial
interest
in
the
property
and
Markham,
the
city
Land
Manager,
was
taken
completely
by
surprise
when,
on
November
17,
1980,
he
was
first
informed
of
the
city's
plan.
Even
then,
according
to
Markham,
there
was
no
government
plan
for
the
downtown
revitalization
but
only
a
hope
on
the
part
of
the
mayor
that
he
would
reach
some
agreement
with
the
province
in
the
future.
In
fact,
according
to
Markham,
who
remained
with
the
city
until
April
of
1986,
there
was
still
no
agreement
between
the
city
and
the
provincial
Government
on
the
downtown
redevelopment
as
of
that
date.
As
the
assumptions
referred
to
are
without
foundation
in
fact
and
as
the
plaintiff's
evidence
clearly
supports
a
primary
intention
to
acquire
the
property
for
the
purpose
of
its
development
as
a
long-term
investment,
the
defendant's
allegation
that
a
major
motivating
factor
in
the
acquisition
of
the
property
was
the
possibility
of
reselling
it
at
a
profit
cannot
be
supported.
Counsel
for
the
Crown
recognized
the
weakness
of
the
Minister's
primary
motivation
allegation
when,
in
her
opening
statement,
she
informed
me
that
the
Minister
was
relying
upon
the
principle
of
secondary
intention.
I
understand
that
principle
to
mean
that
if
one
of
the
motivating
factors
leading
to
the
acquisition
of
a
property
is
its
resale
and
there
is
a
subsequent
resale
at
a
gain
that
gain
will
be
in
the
nature
of
income
rather
than
a
capital
gain.
I
also
understand
that
it
is
not
sufficient
for
the
purpose
of
characterizing
the
gain
as
income
to
show
that
a
purchaser
merely
considered
the
possibility
of
a
resale
at
the
time
of
the
acquisition
of
the
property,
but
it
must
be
shown
that
the
resale
or
the
possibility
of
a
resale
was
a
motivating
factor
which
lead
to
the
acquisition.
In
support
of
this
argument
counsel
for
the
Crown
points
to
the
following
circumstances:
1.
In
Desrochers'
analysis
of
the
financial
feasibility
of
the
development
of
the
property
he
names
as
one
of
the
six
advantages
the
fact
that
not
all
the
properties
have
to
be
developed,
that
some,
or
all
of
them,
may
be
sold
off
if
desired
or
required.
2.
The
plaintiff
had
in
its
first
two
years
of
operation
sold
two
properties
and
Desrochers
personally
had
sold
a
property
in
which
he
had
an
interest.
Presumably
I
should
conclude
from
this
that
Desrochers
was
in
the
business
of
buying
and
selling
properties
and
that
the
sale
of
the
Chrysler
property
to
the
city
was
a
part
of
that
business.
3.
The
property
was
in
an
area
where
land
values
were
escalating
rapidly.
The
property
sold
to
the
city
had
risen
in
value
from
$37
to
$55
a
sq.
ft.
in
a
few
months
and
thus
was
ripe
for
speculation
at
the
time
of
the
purchase.
4.
The
joint
venture
agreement
addressed
the
question
of
the
sale
of
the
property.
5.
The
group
had
no
plans
for
the
development
of
the
property
at
the
time
of
its
acquisition
and
was
prepared
to
sell
all
or
portions
of
it
if
a
suitable
price
could
be
obtained.
6.
A
subsequent
development
proposal
for
the
remaining
property
granted
the
proposed
tenant
an
option
to
purchase
the
property
which
confirmed
the
group's
willingness
to
sell.
7.
The
fact
of
the
quick
sale,
almost
immediately
following
the
purchase,
is
a
further
indication
of
the
group's
intention
and
willingness
to
sell.
In
my
view
none
of
these
circumstances
taken
individually
or
cumulatively
is
sufficient
to
establish
that
the
possibility
of
a
resale
of
the
property
was
a
motivating
factor
in
its
acquisition.
Counsel
for
the
Crown
says
that
of
all
the
circumstances
named
the
Minister
relies
primarily
upon
the
first
i.e.
the
reference
in
Desrochers'
analysis
to
the
sale
of
the
property
if
desired
or
required.
In
my
view
this
reference,
like
the
reference
to
a
sale
of
the
property
in
the
joint
venture
agreement,
is
simply
information
to
be
put
before
the
investors
as
a
statement
of
fact
in
the
analysis
document
and
as
a
procedure
to
be
followed
in
the
joint
venture
agreement.
It
is
apparent
to
me
that
the
reference
in
Desrochers'
analysis
to
the
possibility
of
selling
the
property
was
simply
conveying
to
the
potential
investors
information
which
was
obvious
to
them
in
any
event.
Had
that
possibility
been
surrounded
with
an
analysis
of
the
rising
values
of
land
in
Saskatoon,
the
expenses
of
keeping
the
property
in
inventory,
and
estimates
of
the
likely
profits
to
be
made
from
the
sale
of
the
property
at
given
dates
in
the
future,
I
would
accept
that,
or
like
evidence,
as
tending
to
show
an
intention
to
resell.
In
this
case,
however,
a
single
sentence
in
a
four-page
analysis,
the
bulk
of
which
was
devoted
to
the
proposed
development
of
the
property,
which
merely
stated
the
obvious
does
not
persuade
me
that
there
was
a
secondary
intention
to
sell
the
property
which
motivated
the
group
to
purchase
it.
Indeed
I
would
find
it
strange
that
anyone
purchasing
property
for
a
long-term
investment
would
not
consider
the
possibility
of
selling
it
if
the
offered
price
was
sufficiently
high.
However,
of
itself,
that
would
not,
in
the
circumstances
of
this
case,
be
sufficient
for
me
to
find
that
a
resale
or
possiblity
of
a
resale
was
a
factor
which
influenced
or
motivated
the
group
to
acquire
the
property.
I
have
already
indicated
that
I
consider
the
provisions
for
the
possible
sale
of
the
property
in
the
joint
venture
agreement
as
a
neutral
fact
in
determining
the
group's
intention
with
respect
to
the
resale
of
the
property.
Wright,
who
prepared
the
document,
like
any
competent
solicitor
would
provide
for
such
an
eventuality.
Of
more
importance
is
his
evidence
that
at
no
time
at
the
several
meetings
of
the
group
which
he
attended
prior
to
the
acquisition
of
the
property,
was
the
subject
of
a
resale
ever
discussed.
The
fact
that
the
plaintiff
and
Desrochers
personally
had,
around
the
time
of
the
acquisition
of
the
Chrysler
property,
made
several
sales
of
real
estate
is
of
some
significance
but
in
my
view
is
offset
by
the
fact
that,
by
far,
21
of
23
of
the
plaintiff's
projects
were
long-term
investments.
Desrochers'
explanations
for
these
early
sales,
in
any
event,
tended
to
show
that
he
was
not
in
the
business
of
buying,
selling
and
speculating
in
real
estate,
and
his
subsequent
conduct
confirmed
it.
It
is
true
that
the
property
did
escalate
in
value
in
a
few
short
months
and
it
would
follow
that
it
was
ripe
for
speculation.
On
the
other
hand
Pellegrini's
evidence
was
that
property
in
that
area
of
Saskatoon
was
not
generally
bought
for
resale
but
was
bought
for
development.
The
fact
that
the
property
had
to
be
leased
back
to
Chrysler
for
a
two-year
period
would
be
a
limiting
factor
on
the
possibility
of
resale
and
runs
contrary
to
the
suggestion
that
the
group
was
interested
in
a
short-term
gain.
Furthermore,
the
fact
that
a
property
is
rapidly
escalating
in
value
is
not
at
all
inconsistent
with
the
purchase
of
it
for
development
as
a
long-term
investment.
The
suggestion
that
the
group
had
no
plans
for
the
development
of
the
property
at
the
time
of
its
acquisition
is
true,
in
a
sense,
but
it
is
also
misleading
given
the
conditions
under
which
Chrysler
sold
the
property.
There
were
no
firm
plans
in
the
form
of
architectural
renderings
or
drawings
or
committed
tenants
for
the
proposed
buildings
because,
as
Desrochers
explained
it,
the
actual
development
could
not
start
until
after
December
31,
1982
until
which
time
Chrysler
would
remain
in
possession.
It
was
one
of
the
attractions
of
the
purchase
that
the
group
would,
for
a
period
of
two
years
after
acquiring
the
property,
obtain
a
return
on
its
investment
and
be
able
to
take
its
time
to
plan
an
orderly
development
of
the
property.
In
my
view
the
group
did
have
firm
plans
for
the
development
of
the
property
as
office
and
commercial
space.
That
intention
is
evidenced
not
only
by
the
group's
investment
in
the
scheme
outlined
in
Desrochers'
analysis,
the
direct
evidence
of
Desrochers
as
confirmed
by
his
lawyer,
real
estate
agent,
banker
and
trust
company
manager,
but
also
by
Desrochers'
subsequent
actions
in
attempting,
albeit
unsuccessfully,
to
carry
out
the
development
commencing
in
1981.
In
this
respect
Desrochers
prepared
a
detailed
report
on
office
space
absorption
and
vacancy
levels
in
the
city
of
Saskatoon.
He
prepared
an
impressive
coloured
brochure
showing
an
artist's
conception
of
the
main
13-storey
office
tower,
a
365-car
parkade
and
a
proposed
condominium
tower
together
with
an
accompanying
text
outlining
many
of
the
architectural
features
of
the
development.
When,
later
in
1982,
there
was
a
downturn
in
the
economy
and
the
viability
of
the
development
became
less
certain
he
prepared
and
circulated
proposals
whereby
the
group
would
join
with
other
groups
for
the
joint
development
of
the
property.
When
this
was
unsuccessful
he
proposed
and
submitted
a
detailed
proposal
to
the
Potash
Corporation
of
Saskatchewan
for
the
construction
and
leasing
of
an
office
tower
for
that
corporation.
The
proposal
to
the
Potash
Corporation
contained
a
provision
granting
the
corporation
the
right
to
purchase
the
property
at
any
time
during
the
term
of
the
lease.
Counsel
for
the
Crown
cites
this
as
evidence
of
a
willingness
or
an
intention
on
the
part
of
the
group
to
sell
the
property.
Desrochers'
explanation
is
that
Potash
required
the
option
as
a
condition
of
considering
the
proposal.
I
accept
that
explanation
and
find
no
inconsistency
with
that
and
my
finding
that
the
resale
of
the
property
was
not
a
motivating
factor
in
its
acquisition.
By
the
time
the
Potash
proposal
was
made
the
original
proposed
development
had
degenerated
to
a
practical
impossibility
and
the
group,
by
that
time,
if
it
wanted
any
development
of
the
property,
had
no
alternative
but
to
accept
the
terms
which
were
thrust
upon
it
by
Potash.
Finally,
when
none
of
its
proposals
met
with
success
and
Chrysler
had
vacated
the
property,
the
group,
at
a
cost
of
about
$1
million,
remodeled
the
old
buildings
on
the
property
and
leased
them.
The
planned
development
did
not
take
place
because
of
any
lack
of
effort
or
intention
on
Desrochers'
part
to
undertake
it
but
because
rental
values
in
Saskatoon
had
collapsed
between
the
time
the
group
acquired
the
property
and
the
time
they
obtained
the
possession
of
it.
The
plans
which
the
group
had
for
the
development
of
the
property
were
as
firm
as
they
could
be
expected
to
be
at
the
time
of
the
acquisition
and
were
developed
over
the
next
two
years
in
a
manner
entirely
consistent
with
the
original
expressed
intention
for
development
and
to
a
degree
entirely
consistent
with
the
circumstances
as
they
occurred
over
that
period.
Given
Desrochers'
frustrated
efforts
at
development
it
would
not
have
been
unreasonable
to
expect
that
the
group
might
want
to
sell.
However
not
only
did
the
group
retain
the
property
but
there
was
never
any
suggestion
that
it
be
sold.
Even
if
it
had
been
sold
it
would
not
[have]
altered
my
view
that
the
original
intention
to
develop
the
property
was,
at
the
time
of
its
acquisition,
the
sole
and
exclusive
motivating
factor
which
gave
rise
to
its
purchase.
The
Minister's
allegation
that
the
group
was
prepared
to
sell
all
or
parts
of
the
property
if
a
suitable
price
could
be
obtained
leads
nowhere.
No
doubt
almost
every
holder
of
property
is
prepared
to
sell
it
if
a
suitable
price
is
obtained
but
that
does
not
support
the
contention
that
the
resale
of
the
property
is
a
motivating
factor
giving
rise
to
its
purchase.
If
the
resale
of
the
property
was
a
motivating
consideration
one
would
expect
to
find
some
effort
to
test
the
market
after
its
acquisition.
In
this
case
there
was
no
such
effort
even
when
the
proposed
development
became
impossible.
In
fact
the
evidence
all
points
to
a
contrary
conclusion.
When
Desrochers
was
first
approached
by
Markham
on
behalf
of
the
city
his
instant
response
was
that
the
property
was
not
for
sale.
When
he
was
forced
to
accept
the
inevitable,
that
the
city
would
expropriate
if
necessary,
his
first
request
was
for
an
exchange
of
property
rather
than
a
sale.
If
that
proved
impossible,
as
it
did,
he
put
off
the
sale
by
way
of
an
extended
option
to
cover
the
possibility
that
the
city
fathers
might
have
a
change
of
heart
and
he
would
be
able
to
keep
the
property.
The
sale
of
the
property
to
the
city
shortly
after
its
acquisition,
in
my
view,
is
not
evidence
of
an
intention
to
sell
it
at
the
time
of
its
acquisition.
Markham
made
it
clear
that
unless
the
group
offered
the
property
to
the
city,
the
city
would
expropriate
it.
Having
accepted
that
position
Desrochers
had
no
alternative
but
to
name
a
price
for
the
forced
sale.
In
doing
so
he
asked
for
an
exchange
of
property,
delayed
the
sale
and
set
the
price
sufficiently
high
to
discourage
the
city
from
buying
it.
Notwithstanding
his
efforts
the
city
accepted
his
price
and
bought
the
property.
The
evidence
surrounding
the
sale
is
more
consistent
with
an
intention
to
keep
the
property
than
to
dispose
of
it.
The
only
evidence
of
an
intention
to
sell
the
property
at
the
time
of
its
acquisition
is
the
evidence
relating
to
the
property
located
on
the
outskirts
of
the
city.
It
was
proposed
in
Desrochers'
original
analysis
that
this
property
be
sold.
That
expressed
intention
was
carried
out
after
Chrysler
had
vacated
the
property.
There
was
a
small
capital
gain
on
the
sale
which
was
duly
reported
as
income
and
taxed
accordingly.
For
the
foregoing
reasons
I
allow
the
plaintiff's
appeal
with
costs
and
direct
thta
the
Minister's
reassessment
of
October
11,
1983
be
vacated.
Counsel
for
the
plaintiff
is
asked
to
submit
a
draft
judgment
for
signature,
in
accordance
with
these
reasons,
pursuant
to
paragraph
2(b)
of
rule
337
of
the
Federal
Court
Rules
and
approved
as
to
form
by
counsel
for
the
defendant.
I
am
grateful
to
both
counsel
for
bringing
to
my
attention
the
jurisprudence
applicable
to
the
present
case.
Although
I
have
not
referred
to
any
of
the
cases
cited
I
have
read
all
of
them.
The
common
thread
throughout
the
authorities
is
that
the
question
of
a
party's
intention
in
acquiring
a
piece
of
property
is
a
question
of
fact
and
thus
depends
upon
the
particular
facts
in
each
case.
In
this
case
the
facts
are
sufficiently
unique
that
I
did
not
consider
it
necessary
to
distinguish
or
apply
any
of
the
precedents
cited.
Appeal
allowed.
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