Addy, J:—The trial involved four separate actions which the plaintiff instituted against the defendant arising out of the assessments of the plaintiff for income tax purposes for the taxation years 1970 to 1973 inclusively.
The sole issue between the parties regarding each of the four assessments is the date at which, for income tax purposes, an apartment complex is to be considered as having been effectively either sold or disposed of by the plaintiff. The four cases were therefore, on consent, tried together on common evidence.
No witnesses were called at trial as all of the allegations of fact, contained in the first 15 paragraphs of the statement of claim, were admitted at trial by the defendant, with the exception of the allegation in the first three lines of paragraph 15 to the effect that the apartment complex was disposed of by the plaintiff on May 15, 1974.
The aforementioned paragraphs of the statement of claim read as follows:
1. The Plaintiff is a corporation incorporated under the laws of Ontario and carries on business in Canada as a real estate developer and as a merchandiser of building products.
2. The fiscal period of the Plaintiff ends on July 31 in each relevant year.
3. On or about the 1st day of April, 1969 the Plaintiff purchased for valuable consideration certain immovable property consisting of land and three buildings in the City of Montreal known as “The Place Cremazie Complex” at an aggregate consideration (including legal fees) of $15,062,734 of which $1,495,600 was paid for land and other non-depreciable property and $13,567,134 was paid for the buildings, assets described in class 3 of Schedule B of the Income Tax Regulations.
4. By memorandum of agreement (hereinafter called “said agreement”) entered into as of August 31,1969 the Plaintiff agreed, subject to the terms and conditions set out in the agreement, to sell, transfer and convey The Place Cremazie Complex to First General Real Estate & Resources Trust, a Massachusetts Trust organized pursuant to a declaration of trust dated July 31, 1962 as amended and reconstituted on August 9, 1962 and as further amended on September 30, 1968 and April 28, 1969 (hereinafter called “First General”).
5. The said agreement required First General to assume mortgages aggregating $8,325,662 and to pay to the Plaintiff $8,775,000 as follows:
(a) $1,150,000 concurrently on the execution of the agreement;
(b) $1,350,000 on or before November 1, 1969;
(c) interest on the said sum of $1,350,000 accrued as and from August 31, 1969 computed at the rate of 8% per annum to November 1, 1969;
(d) $6,275,000 on or before August 31, 1970 with the right of First General to request the deferment of the payment of $2,562,500 of the said $6,275,000 until February 28, 1971 and $3,712,500 until August 31, 1971 which the Plaintiff was required to grant unless during the period August 31, 969 and terminating August 31, 1970 First General shall have filed a registration statement with the Securities and Exchange Commission of the United States and shall have fulfilled all requirments to enable it to sell or issue to the public or otherwise its shares, securities or other obligations and shall have received the proceeds of the sale of such shares;
(e) interest on the said sum of $6,275,000 accrued from August 31, 1969 computed up to and including August 31,1970 at 4.27% per annum and thereafter at the prevailing prime rate from time to time charged by Canadian chartered banks but in any event not less than 8% per annum.
6. The said agreement provided that First General had a right to obtain the Deed of Sale to vest title to and ownership of The Place Cremazie Complex in it upon either of the following events: (a) forthwith upon the receipt by the Plaintiff or its assigns of all of the amounts referred to in paragraph 5 of this Statement of Claim, or (b) provided First General had fulfilled all of the obligations contained in the agreement, upon payment to the Plaintiff of an amount sufficient to reduce the balance owing to $3,075,000.
7. The said agreement specifically provided that notwithstanding the delivery to and actual possession by First General of The Place Cremazie Complex, the said agreement was not to be the equivalent of a sale and was not to give First General any rights of ownership in the properties, title to which continued to vest in the Plaintiff until the execution of the Deed of Sale referred to in paragraph 6 of this Statement of Claim.
8. First General was financially unable to make the payment due on the execution of the said agreement of $1,150,000 and accordingly, in order to keep the potential sale of The Place Cremazie Complex as a live contract, the Plaintiff, through a nominee, on or about September 29, 1969, received a first debenture in the amount of $1,150,000 due March, 1971 secured on First General’s interests in certain oil and gas leases in Western Canada. In December 1969 First General obtained a bank loan of $800,000 which was paid to the Plaintiff through its nominee in reduction of the principal amount owing under the debenture to $350,000.
9. First General was financially unable to make the second payment of $1,350,000 under the said agreement on November 1, 1969. The Plaintiff, again in order to keep the potential sale as a live contract, through its nominee in February 1970 received convertible notes of First General due September 1, 1972 in the principal amount of $1,250,000 (United States currency), the equivalent of $1,341,406.25 (Canadian currency) and a cheque for $8,593.75.
10. First General was financially unable to pay on February 28, 1971 the sum of $2,562,500 required to be paid on that date and also was unable to pay the principal amount of $350,000 due on that date on its debenture secured by its oil and gas leases in Western Canada. Because the Plaintiff still wanted to keep the potential sale of The Place Cremazie Complex to First General as a live contract, on or about June 9, 1971 (effective as of January 1, 1971) the Plaintiff purchased the said oil and gas leases from First General for a price of $2,454,000 which was Satisfied:
(a) by the assumption of the liability of First General under a first debenture secured on the leases in the principal amount of $617,310;
(b) in form, by the assumption of and, in fact, by the discharge of the liability of $350,000 due on the second debenture;
(c) the discharge of the convertible note in the principal amount of $1,250,000 (United States currency) which on June 9, 1971 was the equivalent of $1,273,438 (Canadian funds); and
(d) the payment of $213,252. The said payment of $213,252 was concurrently repaid to the Plaintiff by First General as a prepayment of interest due under the Said agreement.
11. On or about June 9, 1971 the said agreement was amended for the purpose, among other things, of deferring payment of the entire sum of $6,275,000 payable under the said agreement referred to in subparagraph (d) of paragraph 5 of this Statement of Claim to February 28, 1974.
12. On or about May 17, 1972 a second amendment was made to the said agreement for the purpose, among other things, of having the Plaintiff waive existing defaults by First General in respect of its obligations to pay real estate taxes under the said agreement and to provide that First General would be required to pay $100,000 as an additional deposit.
13. On or about January 31, 1974 the said agreement was further amended to provide a further postponement in the closing date to September 30, 1974 and for a further deposit of $1,175,000 payable on or about January 31, 1974 with the balance of the purchase price of $5,000,000 payable on closing.
14. First General never had the financial ability to pay the purchase price for The Place Cremazie Complex and on or about January 31, 1974 assigned to Century Plaza Limited all of its rights under the said agreement as amended and received from Century Plaza Limited the sum of $1,175,000 which was paid to the Plaintiff as an additional deposit on that date as referred to in paragraph 13 of this Statement of Claim.
15. The Place Cremazie Complex was disposed of by the Plaintiff to Century Plaza Limited on or about May 15, 1974 by execution and delivery to Century Plaza Limited of a Deed of Sale of The Place Cremazie Complex and the payment by Century Plaza Limited of the sum of $5,000,000 due on closing.
Also produced on consent at trial were some 25 exhibits, the most important of which being Exhibit 1, the agreement for sale of August 31, 1969, referred to in the above-quoted paragraphs of the statement of claim. It must be stated also at the outset that both parties agree, and I am fully satisfied, that the sale was in all repects an arms-length transaction and, furthermore, that, whenever it did take place, it was in effect a sale in the course of business as defined in subclause 85(B)(1)(d) of the Income Tax Act* referred to as the former Act and in corresponding paragraph 20(1 )(n) of RSC 1952, c 148 as amended by SC 1970-71-72, c 63, hereinafter referred to as the new Act.
The specific issue before the court is whether the real property consisting of three buildings known as "Place Cremazie Complex,” in Montreal, was sold or disposed of by the plaintiff to Century Plaza on May 15, 1974, as evidenced by the agreement between Century Plaza and First General and by the deed granting the lands to Century (refer Exhibits 11 and 12) as alleged by the plaintiff or whether it had in fact been sold or disposed of to First General on September 29,1969, as alleged by the defendant. The plaintiff argued that the formal contract of August 31 between it and First General, produced as Exhibit 1 at trial and hereinafter referred to as the "agreement,” did not constitute a sale to First General but merely a promise to sell and as First General had been unable to fulfill the conditions therein contained, it acquired no ownership interest in the complex.
The defendant, in addition to pleading that Place Cremazie Complex was, on September 29, 1969, either sold or is to be considered as having been "disposed of” within the meaning of paragraph 20(5)(b) of the former Act, pleaded alternatively that, in any event, as it had originally acquired Place Cremazie Complex for the purpose of gaining or producing income therefrom, it commenced at that time to use the asset for another purpose and must be deemed to have disposed of it at that time pursuant to paragraph 20(6)(a) of the aforesaid former Act. This alternative plea based on change of use was abandoned at trial.
Should I find that there was a sale in 1969 pursuant to the aforesaid agreement, then, obviously the plaintiff’s claim must fail. Should I find, however, that although there was no sale at that time, there was, however, under paragraph 20(5)(b) a disposition within the meaning of that subsection, then, the plaintiff would succeed in part because there would have been a disposition for capital cost depreciation purposes as of that time even though the profit actually realized on the transaction for the purposes of the capital gains would in fact be reported in 1974 and not in 1969, as section 20 of the former Act refers only to capital cost allowances. Should I find that there was neither a sale nor a disposition in 1969 then, of course, the plaintiff will be fully successful in its claim.
It is evident that the rights of the parties to the contract and all matters governing various agreements and legal relations arising from the actions of the parties to those agreements must be determined in accordance with the law of the Province of Quebec.
The rights of the parties arise out of the agreement filed as Exhibit 1 and full consideration must be given to its terms. Since there is no special definition of the word "sale” or any special meaning to be attached to it in the Income Tax Act, one must consider that word in the light of the law of the Province of Quebec as applied to the relationship created by the agreement Exhibit 1.
It was pointed out that, in support of the proposition that a sale had not taken place, one could rely on several expressions within the agreement for sale. For instance, at the very outset it is stated that the vendor has "agreed to sell” and the purchaser has “agreed to purchase,” that there is therefore no statement that the real estate is actually being sold but an implication that it will be sold in the future. Similarly, in clause 1, the vendor promises, undertakes and agrees to sell and the purchaser promises, undertakes and agrees to purchase, it being argued from this that the parties are contemplating a future sale. Against this, of course, the defendant argues that the parties are described as vendor and purchaser, that the statement that one has agreed to sell means in effect that the property is being sold.
The first part of clause 3 at p 6 of the agreement reads as follows:
3. THAT the Vendor represents and warrants that, upon the signing of the Deed of Sale, as hereinafter provided, the title to the Properties shall be good and marketable and free and clear of any and all charges, mortgages, hypothecs or other encumbrances of any nature whatsoever (including any privileges contemplated by Articles 2013 and following of the Civil Code of Quebec), save and except for the hypothecs and mortgages presently affecting the Properties and referred to in Schedule “B” which is annexed hereto.
The plaintiff argues that this constitutes a condition that the sale is not to take place until the deed is executed. The defendant, on the other hand, argues that this is a specific warranty and not a condition which one might expect to find if this were a mere agreement to Sell in the future. The plaintiff’s view is the better one.
The most important clause, however, pertaining to reservation of both ownership and sale is the first part of clause numbered 9 at p 12 which reads as follows:
9. THAT the purchaser shall be entitled to and shall have legal possession of the properties forthwith. Notwithstanding the delivery to and actual possession by the Purchaser, the present memorandum of Agreement shall not be equivalent to a sale and shall not give the Purchaser any right of ownership in the Properties, title to which shall vest in the Vendor until the execution of the Deed of Sale as herein provided.
As to the right to collect rents, it is interesting to note that the purchaser in the agreement for sale transferred and assigned all leases to the vendor as security for payment (see clause 15 p 18 of Exhibit I). Since the purchaser, First General, was actually by this specific clause transferring the leases in Olympia, First General must have become the owner of these leases pursuant to a preceding clause numbered 11 of the said agreement wherein it is stated “THAT the Vendor hereby subrogates and substitutes the Purchaser in and to all of his rights, actions and privileges under all leases. ...”’ There would otherwise be no question of the purchaser transferring them to Olympia & York Developments Limited (hereinafter called “Olympia”) as security for payment. They would simply have remained Olympia’s property as they were before the execution of the agreement. The transfer and assignment of leases as security for payment is a provision which is normally required of an owner from a lender when the former executes a mortgage or a hypothec in favour of the lender. These clauses, in my view, constitute evidence that the parties considered that clause 11 transferred not only the right to collect rents, which were in fact collected throughout by the purchaser, but the actual property of the leases themselves, and not, as was argued by counsel for the plaintiff, evidence that the leases were never considered to have been transferred.
Although the actual rentals were collected and retained by First General as a purchaser, the mortgage payments, both principal and interest, made by it on account of the mortgages to which the property was subject, were shown in the books of the vendor plaintiff as “deemed rental income.’’ In view of the position adopted by the plaintiff as to ownership, this would be the only way of showing the income since the rents themselves remained to the property of First General. These book entries, in my view, are not evidence of much except as to the apparent view which the plaintiff took of its own position following the signing of the agreement. Against this of course, one might cite the fact that on September 29, 1969, the vendors, in writing to their agent, referred to the “sale by us of the premises known as Place Cremazie. ...” (Refer Exhibit 2)
Clause 16 of the agreement prevented the purchaser, without leave of the vendor, from entering into any new lease extending beyond August 31,1971, being the final date to which the vendor could postpone the balance of $8,775,000 which was to be paid directly to the vendor and which date was also when the deed was to be executed and delivered. Similarly to an assignment of rents to secure payment of a debt on real estate, a prohibition against long-term leases, and more specifically against leases extending beyond the term of the payment of the balance of the monies owing, is something which one would normally expect a mortgagee to impose upon a mortgagor of property used for rental-income purposes. Although it does limit the right of the purchaser to deal with the property, it is not for that reason a provision which would contradict ownership of the res. It is quite simply a restriction which goes directly to the protection of the monies owing for which the res is pledged and is mainly a device ensuring to the creditor who might ultimately be obliged to realize on the security, that its value would not in the meantime have been diminished by long-term leases granted for unduly low rents or subject to conditions unreasonably favouring any leases. The clause does not, as argued by counsel for the plaintiff, prove that a sale has not taken place.
There was also a complete prohibition against registration of the agreement or a notice of any of its provisions, accompanied by a penalty clause expressed as liquidated damages in default of compliance by the purchaser with this prohibition. These two provisions, in my view, do not prevent a sale from having taken effect. The decision of the Supreme Court of Canada is authority for this view. It was held in Dulac v Nadeau,  1 S.C.R. 164, (Taschereau and Fauteux, J J, as they then were, dissenting) that, notwithstanding these provisions, since there was a transfer of possession, the purchaser, by virtue of article 1478 of the Code, became in effect the owner of the lands and was entitled to give a third party a clear title to the buildings which had been removed from the lands in question.
The purchaser, First General, had an immediate right to a deed on making the payments provided for in the agreement and also enjoyed the right to prepay the purchase price due the vendor at any time. The plaintiff had the corresponding absolute obligation to convey upon payment. This is clearly stated at p 14, clause 13, of Exhibit I which reads:
Notwithstanding the foregoing, the Purchaser shall have the right at any time, provided he has fulfilled all the obligations herein stipulated, to pay to the Vendor by anticipation an amount sufficient to reduce the balance owing to the Vendor to the sum of $3,975,000, and to secure the execution of a Deed of Sale, which will vest title to and right of ownership of the Properties in the Purchaser.
Following the stipulation that the title would only vest in the purchaser after registration of the deed, there was a provision that the latter would nevertheless have to keep the property in a good state of repair and not allow it to deteriorate, etc. This, coupled with the obligation of the purchaser to insure the buildings in order “to secure payment” with loss payable to the vendor “according to his interest,” would appear to indicate that the parties intended the property to be at the risk of the purchaser, although there is no clear statement either way on this issue. According to the law of the Province of Quebec, the risk of loss falls on the owner. Jean- Louis Baudoin in his part entitled LES OBLIGATIONS* had this to say on the subject at p 191:
360—Principe général—Le droit civil québécois, suivant en cela la tradition française moderne, fait reposer sur le propriétaire d’un objet le risque de perte ou destruction de celui-ci par cas fortuit. Le risque est donc lié, non à la détention ou possession de l’objet mais au lien et au droit de propriété. Il devient donc particulièrement important dès lors, de déterminer avec précision le moment exact du transfert du droit de propriété, puisque de ce transfert dépend également le transfert du risque de la perte de l’objet aliéné.
One might also refer to Marler’s text on The Law of Real Property] at p 179 paragraph 410 (3rd) and at p 184 paragraph 418.
To summarize, it has been established to my full satisfaction that, except for the right to obtain and register a deed to the property, which right would accrue to him on payment of the amounts due the vendor, the purchaser, following its entering into full possession of the property on September 30, 1069, enjoyed all of the rights of an owner whose property might have been Subject to a hypothec in favour of a mortgagee enjoying the benefit of the normal undertakings protecting the security. The purchaser was from that moment fully entitled to enjoy the rents and and profits of the property and, upon payment of all amounts due to the vendor, would have been entitled to sell the property with a clear title subject only to pre-existing mortgages in favour of third parties to which the property and the sale had been subject. It also had to bear the normal burdens of ownership for not only was it obliged to pay out wages, taxes, insurance premiums and charges of every kind but it had to make all repairs and look after the general administration of the property. I also find that the parties formally declared and in all probability intended that, notwithstanding possession, the agreement would not be equivalent to a sale and would not create the purchaser the owner of the property to give him any right to title, the latter remaining vested in the vendor. (Refer clause 9 of agreement quoted, supra.)
It now remains to be considered whether, in the light of these findings, a sale has taken place according to the laws of the Province of Quebec.
I have considered without applying them the following cases: Cornwall v Henson,  2 Ch 710; Trinidad Lake Asphalt Operating Company, Limited v Commissioners of Income Tax for Trinidad and Tobago,  H of L AC 1; Buchanan v Oliver Plumbing & Heating Ltd,  OR 238, together with the passages in 19 CED, c IX and Halsbury’s, Third Edition, Volume 34 referred to by counsel. These, of course, constitute exclusively English common law jurisprudence on the subject. The law of real property is one of the areas where common law and civil law principles are most likely to be at variance or at least to flow from different fundamental premises. At common law, the nature of the relationship existing between a vendor and purchaser of real estate under given circumstances is governed to a large extent by the distinctions between legal and equitable ownerships, estates and remedies and by the principles applicable to various catagories of trusts and trustees. None of these concepts even exists in civil law. To seek by way of common law jurisprudence to reach a solution to the present issue would be to venture out on a perilous journey over rocky and tortuous roads, fraught with pitfalls, which would lead to a mere cul-de-sac, if one were fortunate.
The following articles of the Civil Code were referred to by counsel during argument and are textually reproduced here for ease of reference:
406. Ownership is the right of enjoying and of disposing of things in the most absolute manner, provided that no use be made of them which is prohibited by law or by regulation.
1079. An obligation is conditional when it is made to depend upon an event future and uncertain, either by suspending it until the event happens, or by dissolving it accordingly as the event does or does not happen.
When an obligation depends upon an event which has actually happened, but is unknown to the parties, it is not conditional. It takes effect or is defeated from the time at which it is contracted.
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.
[Article 1027 is not applicable.]
1473. The contract of sale is subject to the general rules relating to contracts and to the effects and extinction of obligations declared in the title Of Obligations, unless it is otherwise specially provided in this code.
1476. A simple promise of sale is not equivalent to a sale, but the creditor may demand that the debtor shall execute a deed of sale in his favor according to the terms of the promise, and, in default of so doing, that the judgment shall be equivalent to such deed and have all its legal effects; or he may recover damages according to the rules contained in the title Of Obligations.
1478. A promise of sale with tradition and actual possession is equivalent to sale.
Article 406 states quite clearly that ownership comprises two distinct rights: the right of enjoyment of the thing and the right to dispose of it absolutely. When dealing with these concepts, Marler in his treatise on The Law of Real Property, supra, states:
Ownership is perhaps better defined as the right in virtue of which a thing is subject in an absolute and exclusive manner to the will and power of a person: Aubry & Rau, II, No 190; Planiol, I, No 1027. It has thus two characteristics: it is absolute, and it is exclusive.
63. Complete and incomplete ownership:—The owner can exercise all of the above powers when his ownership is complete, or, as it is usually but not so correctly called, absolute, for there is no absolute ownership. At the same time, ownership is the most complete of all real rights, it is the sum of all the real rights, that may exist in respect to a thing. Yet, the owner’s right is not always complete. To be so, it must be perpetual, and the thing owned must not be subject to any real right in it in favour of another. It is incomplete, when it is temporary or when the thing owned is subject to a real right in favour of another.
68. The ownership of a thing can never be in suspense:—The ownership of a thing must reside at any given time in some person or group of persons, or in a legal entity. A thing must have an owner. A thing which has no owner is held to belong to the Crown, CC 584, 401.
420. The seller must convey the thing itself:—In a sale, the seller do more than convey to the purchaser his right in the thing or the possession of it as before the Code; he must convey to him the thing itself.
It is clear that enjoyment of the thing can be conveyed separately from the right of disposition and that for a sale to take place the res itself must be disposed of and not merely the right to enjoy it.
Although article 1478 of the Civil Code states that a promise of sale coupled with the transfer of actual possession is the equivalent of a sale, that article is subject to some interpretation. Merler in his text on The Law of Real Property, supra, states:
443. Promise of sale with delivery:—When a promise of sale is accompanied by delivery, which is an act of the debtor, and actual possession, implying the intention of the creditor to become owner, it is equivalent to a sale, CC 1478 (Greaves et al v Cadieux, 50 SC 361). A promise of sale is never the same thing as a Sale, but in this case it has the effect of a sale, as the ownership is transmitted. There is on the one side the will to sell manifested by the act of delivery, and the will to buy evidenced by the creditor taking possession as owner. The ownership passes; the thing is at the creditor’s risk; nothing is lacking except the formal deed to be executed as the evidence of the contract, and its registration as a notice to third parties.
440. The bilateral promise:—When the promise of sale is bilateral, one party promising to sell and the other to buy a certain immovable at a stated price, the contract to be implemented on the demand of either by the execution of a deed, at any time, or within a certain delay, or after a certain time, the contract is not of sale so as to transfer the ownership immediately. There can be no sale if there is an intention that the ownership and the risks shall not pass until the obligation contracted by either is fulfilled voluntarily by the execution of the deed of sale, or by either of them compelled to carry it out by a judgment having the effect of a deed McIntyre v Birchenough, 35 RL, ns 14, supra No 417.
Faribault, Traité de Droit Civil du Québec, Volume XI, article 116, contains the following statement:
Remarquons que Même lorsqu’elle est accompagnée de tradition, la promesse de vente n’équivaut pas à vente lorsqu’elle est accompagnée d’une condition suspensive, ou lorsque les parties ont convenue que le promettant vendeur devait retenir la propriété de la chose jusqu’au paiement intégral du prix ou jusqu’à ce que le bénéficiaire ait rempli toutes ses obligations. Notre jurisprudence est constante dans ce sens (183).
see also the case of Laflamme v Croteau (1920), 57 QLR 318.
The same principle was also applied in the following cases: Desautels v Parker et al (1894), 6 QLR 419; L’hon William Henry Chaffers v Joseph Merrier et al (1896), 2 RJ 103; Lalonde v DeHoule et vir (1927), 33 RL 255 ns; Labelle v Paquette (1932), 40 RL 380 ns; Lussier v Paquette,  SC 74; and Héroux v Héroux,  RL 449. On this subject the statement of MaKay, J in Penaud v Archand et al (1869), QLR 102 is worthy of note. He States:
Bien que l’art. 1478 du Code Civil du Bas-Canada, d’accord en cela avec le sentiment de presque tous les auteurs, établisse que “la promesse de vente avec ‘‘tradition et possession actuelle équivaut à vente,” cependant il ne faut pas donner à cette disposition plus d’étendue que n’a voulu lui en donner le législateur. Qu’un semblable acte ait plusieurs des caractères de la vente, et soit effectif en ce sens que le vendeur se trouve lié par cet acte à passer titre si l’acheteur remplit toutes les conditions stipulées, et ne puisse vendre à une autre, cela est incontestable. C’est ce qu’on voulu exprimer tous les auteurs et après eux notre code civil.
Mais que les effets d’un tel acte soient tellement absolus qu'ils dépouillent le prometteur d’acheter une propriété parfaite, c’est ce qui ne peut pas se supposer. Il ne faut pas donner à un tel acte des effets plus étendus que les parties n’ont voulu lui en donner.
These numerous authorities on the law of the Province of Quebec all seem to lead to the same conclusion, namely, that even though all the benefits and all the charges of ownership which might have passed to the purchaser in possession, if the vendor has not been paid in full and in addition the parties have expressly agreed that title would not pass but remains in the vendor and also that there would be no sale until the purchase price has been paid, then, although under article 1408 what has transpired is “equivalent to” a sale it still does not constitute a sale at law.
On the other hand one finds what appears to be a completely contrary view expressed by the following authorities. Mazeaud, Leçons de Droit Civil, Second Edition, Volume 3 and Mignault, Le Droit Civil Canadien, Third Edition, Volume 8 (1906). Mazeaud states at p 753 of his text:
Mais ni l’une ni l’autre de ces analyses ne peut être retenue. L’événement qui se trouve choisi comme condition, est, en effet, le paiement du prix; or il n’est pas possible de choisir comme condition l’élément essentiel d’un contrat (cf t II, 2 éd, n° 1039); vendre sous la condition que le prix sera payé, ce n’est pas conclure une vente conditionnelle, mais une vente pure et simple, car, dans toute vente, l’acheteur est tenu de payer le prix.
Le vente à tempérament avec réserve de propriété est, en réalité, une vente pure et simple, mais assortie, à la fois, d’un pacte commissoire ou clause résolutoire (cf t Il 2 éd, n° 1104) et d’une convention retardant le transfert de la propriété jusqu’au paiement de la totalité du prix: les parties ont convenu que le vendeur restera propriétaire jusqu’au paiement intégral du prix, et que la vente sera résolue de plein droit par le non-paiement d’une échéance du prix (cf trib civ Valenciennes 30 nov 1956, Gaz Pal 1957 1 461).
[Mazeaud is of course here stating the civil law of France as opposed to the civil law of the Province of Quebec.]
One finds, however, the following statements in Mignault’s text at pp 4 and 5:
Dans notre droit, la vente n’est point seulement productive d’obligations, le plus souvent elle est en même temps translative de propriété, ainsi que nous le verrons bientôt. On peut donc la définir: la convention par laquelle l’une des parties transfère ou s’engage à transférer la propriété d’une chose moyennant un prix que l’autre s’engage à payer (c).
Il résulte de la définition de la vente que trois éléments sont de son essence, savoir:
1° Une chose qui en fait l’objet;
2° Un prix;
3° L’accord des volontés des parties sur la chose et sur le prix.
Quand ces trois éléments concourent, la vente est perfecta en droit romain et dans notre droit, c’est-à-dire qu’elle est formée, qu’elle existe. Ainsi, elle existe dès que les parties sont convenues de la chose et du prix.
and also pp 11 and 12:
Dans notre droit, la vente conclue peut produire jusqu’à trois effets. Elle peut: 1° créer des obligations; 2° transférer la propriété; 3° mettre les risques de la chose vendue à la charge de l’acheteur.
Mais ces trois effets ne se trouvent pas toujours réunis. La vente est quelquefois seulement productive d’obligations, d’autres fois translative de propriété en même temps que créatrice d’obligations, avec ou sans les risques pour l’acheteur.
Les trois effets sont réunis quand la vente, pure ou à terme, a pour objet un corps certain dont le vendeur était propriétaire.
Cette vente oblige le vendeur à livrer et à garantir la chose vendue, l’acheteur à payer le prix.
De plus, elle rend l’acheteur propriétaire. La translation de propriété est alors un effet aussi direct, aussi immédiat, que la création des obligations. La propriété passe du vendeur à l’acheteur par la seule puissance de la vente, sans qu'il y ait besoin ni de la tradition ni du paiement du prix (a). On est alors aliénateur en même temps que vendeur, acquéreur en même temps qu’acheteur (art 583, 1025).
Le terme accordé à l’une ou à l’autre partie n’empêche pas la vente d’être ins- tanément translative de propriété: car le simple terme suspend, non pas l’acquisition des droits que le contrat peut produire, mais seulement leur exécution (art 1089).
Toutefois, il en serait différemment si les parties avaient, par une clause expresse, renvoyé à une époque ultérieure la translation de la propriété. (Voy supra, note (a), p 6).
Enfin, lorsque l’acheteur devient propriétaire, les risques de la chose vendue sont à sa charge. On disait en droit romain: res périt domino (art 1025, 1200).
Mignault seems to be confining his consideration in these paragraphs mainly to the sale of moveables, but the same principle would apparently apply to immoveables.
It would seem to follow from the statement of these two last-mentioned authorities that, where a purchaser has entered into possession and enjoys all of the fruits and rights of ownership, the contract authorizing this can be considered a final contract of sale at law even though the sale price has not been completely paid and the parties have expressly agreed that title would not pass and the agreement would not create a sale until the full price has been paid.
Having regard to the great preponderance of authority, which includes opinions of many learned civil law judges, in support of the first view, I am rejecting that of the authors Mazeaud and Mignault on the subject.
It is true that where all of the essential requirements exist to create and establish legal relationship and where that relationship is described by a legally recognized and accepted word or expression, any agreement between the parties to the relationship purporting to establish that the relationship does not exist or will not be described or recognized by that term cannot in any way change or affect the situation as it does exist in fact and in law nor the legal terms which describe it. In the case at Bar, however, the civil law itself recognizes that if the purchaser and the unpaid vendor have agreed that, until payment a sale would not have taken place between them, there is no sale at law but merely an executory contract that at some future date upon payment being received a sale will then take place.
For the above reasons, I must therefore conclude in the case at Bar that there never was a sale between the Plaintiff and First General and that the Plaintiff first sold the property in May 1974 to Century Plaza.
As previously stated, the second issue to be determined is whether there was, in August 1969, a “disposition” within the meaning of paragraph 20(5)(b) of the former Act which would in turn then render effective paragraph 20(1)(a) and subclauses 20(5)(e)(ii)(A) and (B). (These sections now being numbered paragraphs 13(21)(c), 13(1)(a) and subclauses 13(21)(f)(ii)(A) and (B) in the new Act.) These provisions read as follows:
20. Excess of proceeds over undepreciated capital cost.
(1) Where depreciable property of a taxpayer of a prescribed class has, in a taxation year, been disposed of and the proceeds of disposition exceed the undepreciated capital cost to him of depreciable property of that class immediately before the disposition, the lesser of
(a) the amount of the excess, or
shall be included in computing his income for the year.
(5) Idem. In this section and regulations made under paragraph (a) of subsection (1) of section 11,
(b) “disposition of property’ includes any transaction or event entitling a taxpayer to proceeds of disposition of property;
(e) “undepreciated capital cost’’ to a taxpayer of depreciable property of a prescribed class as of any time means the capital cost to the taxpayer of depreciable property of that class acquired before that time minus the aggregate of
(ii) for each disposition before that time of property of the taxpayer of that class, the least of
(A) the proceeds of disposition thereof,
(B) the capital cost to him thereof, or
Paragraph 20(5)(c) states that “disposition” includes sale and several other types of payment such as compensation for damage, amounts payable under a policy of insurance, etc, but does not purport to be exhaustive of the definition of “disposition” contained in paragraph 20(5)(b) which I have quoted. In fact, paragraph 20(5)(b) itself, which uses the word “includes” is not itself an exhaustive or restrictive definition. In this respect, in delivering judgment on behalf of the Supreme Court of Canada, Pratte, J in Her Majesty The Queen v Compagnie Immobilière BCN Limitée,  1 S.C.R. 865;  CTC 71; 79 DTC 5068 stated:
The substantive definitions of “disposition of property” and “proceeds of disposition” in s 20(5)(b) and (c) are a clear indication that the words “disposed of” should be given their broadest possible meaning.
The word “acquired” used in paragraph 20(5)(e) is obviously the direct opposite of “disposed” (or disposition) as used in the same section and must contain substantially the same elements viewed from the side of the person acquiring the asset as opposed to the person disposing of it. The meaning of the word “acquired” as used in subsection 20(5) was fully considered by my brother Cattanach, J in MNR v Wardean Drilling Limited,  2 Ex CR 166;  CTC 265; 69 DTC 5194 at 172 [271, 5197] of the report he states:
With all deference I cannot accede to that view.
In my opinion the proper test as to when property is acquired must relate to the title to the property in question or to the normal incidents of title, either actual or constructive, such as possession, use and risk.
and again at 173 [271, 5198] he states:
As I have indicated above, it is my opinion that a purchaser has acquired assets of a class in Schedule B when title has passed, assuming that the assets exist at that time, or when the purchaser has all the incidents of title, such as possession, use and risk, although legal title may remain in the vendor as security for the purchase price as is the commercial practice under conditional sales agreements. In my view the foregoing is the proper test to determine the acquisition of property described in Schedule B to the Income Tax Regulations.
That view is followed and approved by Bastin, DJ, in Her Majesty The Queen v Henuset Bros Ltd [No 2],  227; 77 DTC 5169. He stated at 5170 [229, 5170]:
It follows that all the incidents of ownership other than the legal title reserved in the vendor by the conditional sales agreements such as possession, risk and the right to use the tractors were acquired by the buyer on December 30, 1971. In my opinion the reservation of the legal title to the tractors in the vendor as security did not affect the issue any more than the taking of security on the tractors in the form of a chattel mortgage would have done. This opinion is supported by the judgment of Mr Justice Chattanach in the case of MNR v Wardean Drilling Limited,  CTC 265; 69 DTC 5194.
In the case at Bar, the plaintiff had, after executing the agreement and upon delivering possession of the property to First General in September 1969, completely divested itself of all of the duties, responsibilities and charges of ownership and also all of the profits, benefits and incidents of ownership, except the legal title. It was absolutely and irrevocably obliged to execute and deliver a clear deed to the purchaser upon receipt of the balance of the purchase price which was payable to it. Any additional rights to which it was entitled under the agreement were solely and exclusively for the protection of that balance of purchase price and are rights which would normally be granted to a mortgagee to protect his security.
Having regard to what the Supreme Court of Canada said in Her Majesty The Queen v Compagnie Immobilière BCN Limitée, supra, as to how the concepts of “disposition of property’’ and “proceeds of disposition’’ must be interpreted and having regard also to the statement of Cattanach, J in MNR v Wardean Drilling Limited, supra (with which I fully agree) I find that there was in the circumstances of the present case, in September 1969, a “disposition’’ of Place Cremazie Complex by the plaintiff within the meaning of section 20 of the former Act (section 13 of the new Act).
The assessments of the plaintiff by the Minister of National Revenue for the taxation years 1970, 1971, 1972 and 1973 will therefore be referred back to him for reassessment on the basis that there was no sale of Place Cremazie Complex by the taxpayer any time previous to or during those years but that there was a “disposition’’ of the property within the meaning of paragraph 20(5)(b) of the former Act and paragraph 13(21)(c) of the new Act in September 1969.
The plaintiff will be entitled to its costs.