Muldoon,
J:—This
action
is
by
way
of
an
appeal
from
certain
notices
of
reassessment
issued
by
the
Minister
of
National
Revenue
with
regard
to
both
the
1972
and
1973
taxation
years.
The
Minister’s
grounds
are
that
the
deceased,
Cleo
Elmer
Reilly
(herinafter,
Reilly),
did
not
report
any
capital
gain
on
the
disposition
of
certain
real
property
which
he
sold
by
way
of
agreement
for
sale
with
Carma
Developers
Ltd
(hereinafter,
Carma).
Counsel
for
each
of
the
parties
most
helpfully
submitted
an
agreed
statement
of
facts
and
matters
in
order
to
limit
the
matters
in
issue
and
to
expedite
the
proceedings.
That
agreed
statement,
with
its
exhibits
identified
alphabetically,
was
receivd
and
marked
as
Exhibit
1
at
the
trial.
Therefore,
exhibits
referred
to
by
alphabetic
designation
are
attached
to
and
form
part
of
the
trial’s
Exhibit
1,
“Agreed
Statement
of
Facts
and
Matters’’.
In
order
to
appreciate
the
facts,
one
can
do
no
better
than
to
repreat
here
the
contents
of
that
agreed
statement,
with
some
judicial
commentary
within
square
brackets
where
it
is
helpful
and
timely
to
insert
such
commentary.
Exhibit
1
1.
Cleo
E
Reily
died
at
High
River,
Alberta
on
April
20,
1976
naming
Iris
M
Reilly
as
his
sole
Executrix
and
Trustee
for
which
Letters
Probate
were
granted
by
the
Surrogate
Court
of
Southern
Alberta
Judicial
District
of
Calgary
on
May
31,
1976.
A
court
certified
copy
of
the
said
Letters
Probate
are
[sic]
attached
hereto
and
marked
as
Exhibit
“A”.
2.
Cleo
E
Reilly
as
Vendor
and
Carma
Developers
Ltd.
as
Purchaser
agreed
to
sell
real
property
legally
described
as
the
North
Half
of
Section
Fourteen,
all
of
Section
Twenty-Three,
the
East
half
of
Section
Twenty-Two,
and
a
portion
of
the
East
Half
of
Section
Fifteen
and
a
road
allowance
adjoining
the
said
East
Half
of
Section
Fifteen,
all
in
Township
Twenty-Five,
Range
Two,
West
of
the
Fifth
Meridian
in
the
Province
of
Alberta.
Documentation
to
indicate
the
transaction
is
as
follows:
(i)
A
letter
from
Carma
Developers
Ltd
to
Cleo
E
Reilly
dated
November
24th,
1972
the
original
of
which
is
attached
hereto
and
as
Exhibit
“B.
[This
“letter”
purports
to
confirm
an
earlier
discussion
between
Carma
&
Reilly
of
even
date,
expresses
the
basic
legal
descriptions
of
the
approximately
1,240
acres
to
be
sold,
the
purchase
price,
the
amounts
and
December
1st
due
dates
of
annual
instalment
payments,
the
price
of
$1,613
per
acre
and
provisions
regarding
transfer
of
title
and
gravel
rights.
Signed
on
behalf
of
Carma,
and
personally
by
Reilly,
this
“letter”
is
a
form
of
agreement
for
sale
of
the
land
mentioned
therein.]
(hereinafter
the
letter
agreement).
(ii)
A
caveat
registered
against
the
title
to
the
property
by
Carma
Developers
Ltd
dated
December
6th,
1972
and
registered
on
December
8th,
1972
a
certified
copy
being
attached
hereto
and
marked
as
Exhibit
“C“.
(iii)
An
agreement
dated
January
19th,
1973
between
Cleo
E
Reilly
as
Vendor
and
Carma
Developers
Ltd
as
Purchaser
for
an
amount
of
$2,018,630.15
payable
as
follows:
“(a)
The
sum
of
Two
Hundred
and
Fifty
Thousand
($250,000.00)
Dollars
shall
be
paid
on
or
before
execution
of
this
agreement.
(b)
The
balance
of
the
purchase
price
being
the
sum
of
One
Million
Seven
Hundred
and
Sixty-Eight
Thousand
Six
Hundred
Thirty
Dollars
and
Fifteen
($1,768,630.15)
Cents
shall
be
payable
by
payment
of
the
sums
of
Seventy-Five
Thousand
($75,000.00)
Dollars
each
on
the
1st
day
of
December,
in
each
consecutive
year
commencing
on
the
1st
day
of
December,
AD
1973
and
continuing
yearly
thereafter
until
the
1st
day
of
December
in
the
year
AD
1987,
or
the
earlier
year
in
which
the
total
purchase
price
shall
have
been
fully
paid
and
satisfied,
and
the
balance,
if
any,
of
the
entire
balance
of
the
total
purchase
price
then
unpaid
shall
become
due
and
payable
on
the
1st
day
of
December,
AD
1987.
together
with
interest
calculated
from
the
1st
day
of
December,
AD
1972
until
the
30th
day
of
November,
AD
1975
on
so
much
of
the
principal
purchase
price
as
remains
from
time
to
time
unpaid
at
the
rate
of
Three
(3%)
per
cent
per
annum,
and
which
shall
be
paid
on
the
1st
day
of
December
in
the
years
AD
1973,
AD
1974,
and
AD
1975,
and
thereafter
with
interest
calculated
from
the
1st
day
of
December,
AD
1975
on
so
much
of
the
principal
purchase
price
as
remains
from
time
to
time
unpaid
at
the
rate
of
Six
(6%)
per
cent
per
annum
and
which
shall
be
paid
on
the
1st
days
of
December
in
each
consecutive
year
commencing
on
the
1st
day
of
December
AD
1976
and
continuing
yearly
thereafter
until
the
earlier
of
the
1st
day
of
December,
AD
1987,
or
the
date
on
which
the
total
purchase
price
shall
be
fully
paid
and
satisfied
.
.
.”.
[Pursuant
to
paragraph
5(j),
the
agreed
date
for
adjustment
of
taxes,
rates,
levies,
assessments
and
such
outlays
is
fixed
at
December
1st,
1972.
“The
Vendor
will
be
responsible
for
payment
of
all
such
outlays
levied
in
respect
of
the
period
up
to
but
not
after
the
date
for
adjustment
and
the
Purchaser
will
be
responsible
for
all
such
outlays
levied
in
respect
of
the
period
commencing
on
such
date
of
adjustment”.
Pursuant
to
Schedule
“A”
a
fourth
parcel
of
land,
consisting
of
approximately
11.55
acres,
is
brought
into
the
bargain,
in
addition
to
the
land
contemplated
by
Carma
and
Reilly
on
November
24,
1972.
A
signed
form
of
Consent
of
Spouse,
with
accompanying
Certificate
of
Acknowledgement
by
Spouse,
is
attached
to
and
included
in
this
agreement.]
(hereinafter,
the
formal
agreement).
The
original
of
the
said
agreement
is
attached
hereto
and
marked
as
Exhibit
“D”.
(iv)
A
caveat
registered
against
the
title
of
the
property
by
Carma
Developers
Ltd
dated
January
22nd,
1973
and
registered
on
January
23rd,
1973
a
certified
copy
being
attached
hereto
and
marked
as
Exhibit
“E”.
(v)
Certified
copies
of
the
Certificates
of
Title
mentioned
in
the
said
caveats
the
same
being
Certificates
of
Title
133P
119,
133P
117
and
133P
118,
all
of
which
are
marked
as
Exhibit
“F”.
3.
In
the
1972
and
1973
taxation
years
Cleo
E.
Reilly
did
not
report
any
capital
gains
on
the
disposition
of
the
property,
true
copies
of
his
1972
and
1973
T-1
Tax
Returns
being
attached
hereto
and
marked
as
Exhibits
“G”
and
“H”.
4.
By
Notice
of
Reassessment
dated
August
4,
1978
the
Minister
of
National
Revenue
has
reassessed
the
taxpayer
in
respect
of
the
1973
taxation
year
by
adding
a
capital
gain
of
$457,380.00
which,
after
allowing
for
a
“loss
on
other
properties
claimed’’
of
$44,094.00
results
in
a
taxable
capital
gain
of
$206,643.00.
5.
The
Plaintiff
filed
a
Statement
of
Claim
on
December
5th,
1980
in
response
to
the
said
Notice
of
Reassessment
and
the
Defendant
filed
a
Defence
theeto
on
August
20th,
1981.
6.
Due
to
the
Plaintiffs
allegation
that
the
disposition
herein
took
place
in
the
1972
taxation
year
and
in
order
to
have
all
the
matters
in
issue
before
this
Honourable
Court
at
one
time,
by
Notice
of
Reassessment
dated
March
19th,
1981
the
Minister
of
National
Revenue
has
reassessed
the
taxpayer
in
respect
to
the
1972
taxation
year
by
reflecting
a
capital
gain
of
$457,380.00
in
that
year
thereby
adding
to
the
taxpayer’s
1972
income
the
resultant
taxable
capital
gain
of
$228,690.00.
It
is
understood
that
this
reassessment
is
in
the
alternative
to
the
said
reassessment
in
respect
to
the
1973
taxation
year.
7.
The
plaintiff
filed
a
Notice
of
Objection
on
July
15th,
1981
in
response
to
the
said
Notice
of
Reassessment
which
Notice
of
Objection
initiated
the
action
in
this
Honourable
Court
pertaining
to
the
1972
taxation
year
pursuant
to
S.
175(4)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63
as
amended
(hereinafter
called
“the
Act’’)
and
the
Defendant
filed
a
Defence
thereto
on
August
20th,
1981.
8.
Consistent
with
the
foregoing,
at
the
outset
of
the
trial
of
the
issues
herein
the
Plaintiff
and
the
Defendant
shall
make
a
joint
application
to
join
the
actions
herein.
9.
The
issues
submitted
to
this
Honourable
Court
for
determination
are
the
following:
(a)
Did
the
disposition
of
the
said
real
property
take
place
in
the
1972
or
the
1973
taxation
years?
(b)
If
the
disposition
took
place
in
the
1972
taxation
year,
is
the
Notice
of
Reassessment
pertaining
to
that
year
out
of
time
pursuant
to
S.
152(4)
of
the
Act?
10.
The
said
trial
of
the
issues
herein
shall
not
be
in
fact,
or
deemed
to
be,
with
respect
to
any
other
issues
arising
out
of
the
said
pleadings.
Accordingly,
if
the
disposition
is
found
to
have
taken
place
in
the
1973
taxation
year,
or
if
it
is
found
to
have
taken
place
in
the
1972
taxation
year
but
the
Notice
of
Assessment
with
respect
thereto
is
not
out
of
time,
the
Plaintiff
shall
be
at
liberty
to
enter
for
trial
at
a
later
date
the
question
of
quantum
of
gain
and
the
availability
of
a
reserve
pursuant
to
S.
40(
l)(a)(iii)
of
the
Act.
During
the
trial
it
was
noticed
that
the
legal
decription
of
the
first
mentioned
parcel
of
land
in
the
reference
line
of
the
letter
agreement,
Exhibit
1
“B”,
is
“S
Sec
14-25-2-5”,
whereas
in
Schedule
“A”
of
the
formal
agreement,
Exhibit
1
“D”,
it
is
“The
North
Half
of
Section
Fourteen
(14)
in
Township
Twenty-five
(25),
Range
Two
(2),
West
of
the
Fifth
Meridian
in
the
Province
of
Alberta
.
.
.”.
Both
counsel
considered
this
disparity
to
amount
to
nothing
more
than
a
typographical
error,
and
both
agreed
that
nothing
turns
on
it.
Therefore
it
is
simply
to
be
ignored.
It
appears
that
it
is
the
north
half
of
section
14-25-2-5
of
which
Reilly
was
the
registered
owner
pursuant
to
Certificate
of
Title
133
P
119.
Issue
(a)
in
paragraph
9
of
the
“Agreed
Statement
of
Facts
and
Matters”,
Exhibit
1,
requires
a
judicial
determination
of
the
year,
1972
or
1973,
in
which
a
disposition
of
the
real
property
occurred.
In
neither
Exhibit
1,
nor
in
the
presentations
and
arguments
of
either
counsel,
was
the
absence
of
a
signed
consent
of
spouse
from
the
letter
agreement
mentioned.
Such
a
document
or
its
absence
might,
or
might
not,
have
pertinent
consequences
in
regard
to
the
making
of
a
disposition
of
real
property
in
Alberta.
However,
since
no
evidence
was
led,
no
law
was
cited
or
invoked
and
no
argument
was
presented
before
the
Court
on
that
matter;
and
since
the
parties
by
their
respective
counsel
have
framed
the
issues
and
argued
them
accordingly
to
the
limitations
which
they
themselves
defined
for
adjudication:
it
follows
that
the
matter
of
spousal
consent
is
to
be
disregarded
in
construing
the
Income
Tax
Act
in
regard
to
the
disposition
of
property
in
this
case.
It
is
worthwhile
to
note,
too,
that
some
evidence
was
adduced
through
cross-examination
of
the
plaintiffs
witness,
Donald
S
Tetz,
to
the
effect
that
the
deceased
never
lived
on
the
land
in
this
case,
it
being
“capital
property”.
The
letter
agreement
must
be
scrutinized
most
carefully
because,
in
terms
of
issue
(a),
if
it
were
not
the
instrument
of
the
disposition
of
the
real
property
in
1972,
then
that
disposition
must
perforce
have
occurred
in
1973.
The
letter
agreement
produced
as
Exhibit
1
“B”
reveals
handwritten
insertions
of
text
and
obliterated
deletions
of
text
within
its
three
full
typewritten
pages.
In
the
reproduction
below,
the
insertions
are
shown
in
italics
and
the
deletions
are
represented
by
dots.
All
of
those
amendments
to
the
original
text
were
initialled
by
the
hands
of
the
signatories.
Here
is
Exhibit
1
“B”,
the
letter
agreement:
|
Carma
|
Suite
263,
1632
14th
Avenue
NW
|
|
Developers
Ltd
|
Calgary
42,
Alberta.
Tel
(403)
289-1951
|
|
November
24,
1972
|
|
Mr
Cleo
Reilly
|
|
|
Site
8,
Box
20,
|
|
|
RR
4,
|
|
|
Calgary,
Alberta
|
|
|
Dear
Sir:
|
|
Reference:
Land
Purchase
—
S
/:
Sec.
14-25-2-5
Sec.
23-25-2-5
E
/
Sec.
22-25-2-5
(less
40
acres)
Total
Acreage
—
1,240
Excepting
throughout
all
mines
and
minerals
As
per
our
discussion
this
morning
we
understand
that
you
are
prepared
to
sell
to
Carma
Developers
Ltd.
the
above
land
on
the
basic
terms
as
outlined
below:
1.
Total
purchase
price
—
$2,000,000
2.
Down
payment
—
$250,000
to
be
deposited
in
trust
with
Fenerty
et
al
until
a
final
legal
document
in
accordance
with
the
terms
hereof
has
been
drawn
up
and
signed
by
both
parties.
3.
Payment
on
the
balance
of
$1,750,000
to
ne
as
follows:
(a)
$75,000
on
December
1,
1973
and
each
December
1
thereafter
until
December
1,
1987
when
the
total
outstanding
balance
shall
be
due
and
payable.
On
the
first
December
1,
1987
when
the
total
outstanding
balance
shall
be
due
and
payable.
On
the
first
December
1
after
the
appropriate
approving
authorities
have
given
Carma
Developers
Ltd
approval
for
subdivision
of
any
portion
of
the
above
lands,
the
annual
payment
of
principal
shall
increase
to
$125,000
from
$75,000.
(b)
In
any
event,
whether
or
not
approval
for
subdivision
is
obtained,
total
payment
of
the
outstanding
balance
shall
be
made
on
or
before
December
1,
1987
with
annual
payments
on
the
outstanding
balance
not
being
less
than
$75,000.
(c)
The
purchaser
shall
have
the
privilege
to
accelerate
payments
at
any
time.
(d)
The
purchaser
shall
pay
the
vendor
3%
interest
on
the
outstanding
balance
from
the
date
of
execution
of
the
Agreement
referred
to
in
Para
2
as
calculated
on
December
1,
1973,
December
1,
1974,
and
December
1,
1975
in
conjunction
with
the
payments
on
the
principe/
as
described
above.
Thereafter
the
purchaser
shall
pay
the
vendor
6%
interest
on
the
outstanding
balance
as
calculated
each
December
1
until
the
total
$2,000,000
purchase
price
has
been
paid.
4.
Land
Takedown
(a)
The
purchaser
shall
be
allowed
to
take
title
to
one
LSD
with
every
annual
payment
of
$75,000
and
two
LSD’s
with
every
annual
payment
of
$125,000.
(b)
Takedown
shall
be
in
a
contiguous
manner.
(c)
If
payments
on
the
outstanding
balance
are
accelerated
at
any
time,
the
purchaser
shall
be
entitled
to
take
title
to
lands
(at
the
rate
of
$1,613/acre)
paid
for.
(d)
The
$250,000
down
payment
shall
go
toward
takedown
of
the
last
lands
paid
for.
5.
Gravel
Rights
The
Vendor
will
retain
gravel
excavation
rights
on
two
sites
presently
surveyed
and
being
used
as
pits
as
well
as
a
third
site
located
on
the
west
slope
of
the
prominent
hill
on
SE
/4
of
Section
22.
Locations
to
be
designated
on
final
legal
agreement
to
be
drawn
up
as
per
Sec.
2
hereof.
Costs
of
surveying
related
to
excavation
of
gravel
to
be
the
vendor’s
cost.
The
vendor
agrees
to
vacate
and
quit
any
gravel
excavation
pit
if
the
purchaser
requires
such
lands
for
development
on
6
months
notice
thereof.
The
vendor
also
agrees
to
restore
to
the
reasonable
satisfaction
of
the
Municipality
of
Rocky
View,
the
City
of
Calgary,
and
Carma
Developers
Ltd
those
areas
used
for
gravel
excavation
purposes
at
his
sole
expense.
6.
Carma
to
engage
Fenerty
et
al
to
prepare
legal
documents
on
behalf
of
the
purchaser
outlining
the
agreement
in
full.
7.
Taxes
payable
by
the
purchaser
from
the
date
of
the
final
agreement
as
outlined
in
para
2
hereof.
8.
Purchaser
to
give
the
vendor
thirty
(30)
days
notice
to
vacate
lands
which
are
to
be
prepared
for
development.
9.
Purchaser
to
have
right
to
enter
the
lands
for
the
purpose
of
testing,
surveying,
etc
at
the
mutual
convenience
of
the
Vendor
and
Purchaser.
10.
Costs
of
moving
buildings
and
fences
as
development
progresses
shall
be
borne
equally
by
the
vendor
(while
enjoying
the
surface
rights)
and
the
purchaser.
Any
maintenance
on
fences
or
buildings
shall
be
at
the
expense
of
the
vendor
so
long
as
he
is
enjoying
the
surface
rights.
11.
It
is
understood
that
neither
party
has
reason
to
believe
that
a
commission
to
a
third
party
is
payable
on
the
sale
of
the
above
lands.
12.
Carma
Developers
Ltd
understands
that
the
vendor
has
applied
to
become
a
Canadian
citizen
and
is
deemed
to
be
a
Canadian
resident
as
of
the
.
.
.
date
of
sale.
13.
The
purchaser
recognizes
that
the
sale
of
the
NE
“%
of
Sec
22-25-2-5
(less
40
acres)
is
subject
to
the
deferred
reserve
covenant
agreement
registered
as
1608
JL
and
then
caveat
registered
as
5767
JG.
14.
The
vendor
agrees
to
pay
Carma
Developers
Ltd
$10,000
annually
each
December
1
(starting
.
.
.
April
1/73)
for
a
lease
of
the
surface
rights
of
the
said
lands
so
long
as
he
requires
the
lands
for
such
purposes.
It
is
agreed
that
this
sum
shall
be
reduced
by
$8/acre
for
every
acre
subsequently
used
for
development
purposes.
|
Yours
very
truly
|
|
|
CARMA
DEVELOPERS
LTD
|
j
agreement
with
the
above:
|
|
Rudy
H
Janzen
|
|
|
District
Manager
|
Signed:
C
E
Reilly
|
|
RHJ:wah
|
|
The
statutory
provisions
upon
which
the
defendant
relies
in
relation
to
this
first
issue,
(a)
in
paragraph
9
of
Exhibit
1,
are
drawn
from
the
Income
Tax
Act,
SC
1970-71-72,
c
63
as
follows:
54.
In
this
subdivision
.
.
.
(c)
.
.
.
“disposition”
of
any
property,
except
as
expressly
otherwise
provided,
includes
(i)
any
transaction
or
event
entitling
a
taxpayer
to
proceeds
of
disposition
of
property,
.
.
.
(h)
.
.
.
“proceeds
of
disposition”
of
property
includes,
(i)
the
sale
of
price
price
of
property
that
has
been
sold,
Counsel
for
the
defendant
argue»
that
the
closing
of
a
transaction
is
the
date
of
disposition,
that
is,
when
the
taxpayer
gets
the
proceeds
—
subject
to
reserves
for
future
proceeds
—
the
taxation
consequences
arise.
She
asserts
that
the
signing
of
the
letter
agreement
on
November
24,
1972,
(Ex
1
“B”)
was
not
a
transaction
or
event
which
entitled
Reilly
to
the
proceeds:
it
was
merely
an
interim
agreement.
In
support
of
that
assertion,
counsel
for
the
defendant
points
firstly
to
the
difference
in
the
sale
price,
from
the
$2,000,000
price
agreed
in
November,
1972,
to
$2,018,630.15,
an
increase
of
$18,630.15,
provided
by
the
formal
agreement
(Ex
1
“D”)
in
January,
1973.
This
difference
in
price
is
said,
on
behalf
of
the
defendant,
to
be
fundamental.
Some
other
provisions
appear
to
have
been
changed
or
elaborated
when
a
comparison
of
the
two
documents
is
effected.
They
concern
date
of
adjustment
of
taxes,
Carma’s
right
of
entry
at
mutual
convenience
or
upon
15
or
fewer
days’
notice,
gravel
rights
and
subsequent
elaboration
of
lease
—
back
to
Reilly
for
farming
of
the
land.
The
defendant’s
counsel
urges
that
it
was
only
in.
January,
1973,
that
Carma
and
Reilly
dealt
finally
with
the
components
of
this
sale
and
it
was
only
then
that
Reilly
became
entitled
to
the
proceeds
of
the
disposition.
If
it
had
been
all
settled
in
December,
1972,
she
asks,
why
did
Carma
lodge
a
further
caveat
against
Reilly’s
certificates
of
title
in
January,
1973?
The
answer
supplied
by
the
asker
is
that
Carma’s
legal
position
changed
after
the
signing
of
the
letter
of
agreement
of
November,
1972,
and
Carma
had
to
secure
itself
because
of
that.
One
has
but
to
look
at
the
circumstances
in
December,
1972:
Carma
on
its
side
was
receiving
no
rent
from
Reilly,
and
had
to
obtain
his
consent
to
enter
upon
the
property;
Reilly
had
no
down
payment,
and
no
right
to
it
all
during
that
December
and
until
the
final
legal
document
was
drawn
up
and
signed
the
following
January,
as
it
happened.
Reilly
was
then
notionally
paying
the
municipal
taxes
during
December
of
1972.
The
matter
of
a
disposition
is
related
to
Reilly’s
entitlement
to
the
proceeds,
and
it
was
argued,
no
proceeds
were
to
be
forthcoming
from
Carma
until
later,
in
1973.
In
summation,
the
defendant
contended,
the
letter
agreement
(Ex
1
“B”)
of
November
24,
1972,
did
not
fully
deal
with
the
subject,
did
not
provide
a
definitive
date
for
the
down
payment’s
change
of
hands,
and
did
not
state
a
specific
date
for
adjustments.
Such
omissions,
it
was
argued,
are
significant
in
determining
when
the
disposition
was
effected.
In
support
of
the
defendant’s
contentions,
counsel
cited
several
cases.
The
first
is
Victory
Hotels
Ltd
v
MNR
,
[1962]
CTC
614;
62
DTC
1378,
a
judgment
of
Mr
Justice
Noel
in
the
Exchequer
Court
of
Canada.
The
passages
specially
noted
are:
There
is
no
question,
but
that
the
intent
of
the
parties
was
that
the
sale
of
the
properties
of
the
taxpayer
be
effective
January
3,
1955.
However,
what
Mr
Maber,
the
real
estate
agent,
was
trying
to
do
and
what
he
did
do,
appears
to
be
something
quite
different.
The
words
“disposed
of”
in
s
20
of
the
Income
Tax
Act
are
of
the
widest
meaning
and
should,
in
my
opinion,
be
given
their
widest
ordinary
or
popular
meaning
bearing
in
mind,
however,
that
they
are
being
used
in
a
taxation
statute,
in
a
matter
where
the
properties
which
are
to
be
“disposed
of”
are
the
assets
used
to
earn
the
very
income
from
which,
according
to
certain
specified
rates,
depreciation
can
be
charged
off.
Let
me
add
that
they
may
even
be
given
in
an
appropriate
context
a
wider
meaning
than
their
normal
meaning,
unless
of
course,
the
Income
Tax
Act
itself
has
restricted
this
meaning.
It
would
indeed
appear
that
the
meaning
of
“disposition
of
property’’
has
been
somewhat
restricted
by
the
Act
when
a
disposal
of
property
takes
place
by
means
of
a
sale;
in
such
a
case
there
is
a
disposal
of
property
as
soon
as
a
taxpayer
is
entitled
to
the
sale
price
of
the
property
sold.
The
verb
“entitled’’
according
to
the
Shorter
Oxford
English
Dictionary
means
“to
give
a
rightful
claim
to
something’’.
The
French
text
of
the
Act
uses
the
words
donnant
droit"
which
of
course
mean
to
give
a
right
to.
Was
the
taxpayer
here
entitled
to
the
sale
price
of
the
property
sold?
In
the
present
instance
the
agreement
carried
two
conditions,
which,
if
not
fulfilled,
would
prevent
the
transaction
from
being
complete:
(a)
a
liquor
licence,
and
(b)
if
there
was
a
fire
before
possession.
The
next
case
cited
for
the
defendant
on
this
issue
of
the
year
in
which
the
disposition
was
effected
is
Laurentide
Rendering
Inc
c
La
Reine,
[1982]
CTC
400;
83
DTC
5066,
a
judgment
of
Mr
Justice
Décary
of
this
Court.
The
passage
noted
in
particular
is:
A
ce
sujet,
il
y
a
la
décision
de
la
Cour
de
L’Exhiquier
dans
Victory
Hotels
Limited
v
MNR,
([1962]
CTC
614)
où
le
juge
Noel
a
décidé
que
la
récupération
n’était
imposable
que
dans
l’année
où
le
contribuable
avait
droit
au
produit
de
disposition,
à
la
page
628:
It
cannot,
therefore,
be
said
that
the
taxpayer
was
entitled
to
the
monies
or
the
“proceeds
of
disposition’’
until
January
3,
1955,
or
such
time
after
that
date
that
all
the
conditions
of
the
agreement
had
been
fulfilled.
I,
therefore,
find
that
the
properties
of
the
appellant
were
not
disposed
of
in
the
year
1954,
but
only
in
the
year
1955.
The
third
case
cited
on
this
issue
—
paragraph
9.
(a)
in
Exhibit
1
—
is
D
Freeborn
et
al
v
Henry
G
Goodman,
[1969]
SCR
923.
The
passage
cited
is
from
Mr
Justice
Ritchie’s
reasons,
in
which
he
analysed
the
opinion
given
by
Laskin,
JA
in
the
Ontario
Court
of
Appeal
on
the
subject
of
the
equitable
charge
arising
in
favour
of
the
unpaid
vendor
of
an
equitable
estate.
The
plaintiffs
counsel
also
cited
the
Victory
Hotels
case,
but
emphasized
those
passages
of
the
reasons
of
Noel,
J
which
focuses
upon
the
intent
of
the
contracting
parties.
So,
in
addition
to
the
first
passage
earlier
quoted,
plaintiffs
counsel
also
pointed
to
the
following:
The
only
evidence
on
behalf
of
the
contention
of
the
Minister
to
the
effect
that
the
intent
of
the
parties
was
to
have
this
transaction
take
place
in
1954
is
that
of
Mr
Bryant
D
Richards,
CA,
who
drew
up
some
books
and
a
return
indicating
that
the
assets
of
the
taxpayer
were
in
1954,
the
property
of
the
Valleyview
Hotel
Company
Ltd,
the
purchaser,
after
talking
to
the
shareholders
of
this
company
and
its
solicitor.
This,
in
my
opinion,
cannot
override
the
preponderance
of
the
evidence
which
is
to
the
effect
that
the
parties
intended
this
sale
to
take
place
in
the
year
1955.
The
next
case
cited
for
the
plaintiff
is
MNR
v
Wardean
Drilling
Limited,
[1969]
CTC
265;
69
DTC
5194,
a
judgment
in
1969,
of
Cattanach,
J.
That
case
is
concerned
with
the
acquisition
of
chattels
(a
drilling
rig
and
its
substructure),
and
the
learned
judge
rightly
considered
and
construed
Sections
20
and
21
of
the
Alberta
Sale
of
Goods
Act,
RSA
1955,
c
295,
in
relation
to
the
matter.
The
circumstances
of
that
case,
upon
which
Cattanach,
J
pronounced
his
interpréta-
tion
of
the
applicable
law,
differ
so
markedly
from
those
of
the
issue
to
be
determined
here,
that
no
relevance
can
be
accorded
to
it
in
this
present
case.
Finally,
counsel
for
the
plaintiff
referred
to
Scandia
Plate
Ltd
v
The
Queen,
[1982]
CTC
431;
83
DTC
5009,
also
a
judgment
of
Cattanach,
J
which
he
rendered
in
1982.
The
passage
to
which
reference
was
made
is
as
follows:
Accepting
merely
as
a
premise
that
what
was
reached
between
the
parties
was
a
verbal
executory
contract
or
a
verbal
preliminary
contract
according
to
my
view
of
the
law
of
contract,
both
at
common
law
and
in
equity,
that
when
there
is
a
preliminary
contract
in
words
which
is
afterwards
reduced
into
writing,
or
where
there
is
an
executory
contract
to
be
carried
out
by
a
deed
afterwards
executed,
the
rights
of
the
parties
are
covered
in
the
first
case
entirely
by
the
writing,
and
in
the
second
entirely
by
the
deed.
That
is
the
broad
principle
of
law
which
is
well
known
and
acted
upon.
Where
a
preliminary
contract
of
any
description,
whether
verbal
or
otherwise,
is
intended
(as
was
the
case
here)
to
be
superseded
by,
and
is
in
fact
superseded
by,
one
superior
character,
then
the
later
contract
—
the
superior
contract
—
prevails.
No
doubt
the
principle
is
correctly,
stated
and
it
turns
upon
the
intention
of
the
parties,
so
long
as
their
intention
manifests
itself
in
effective
contractual
conduct.
Bearing
in
mind
that
the
issue
to
be
determined
here
is
the
year
in
which
Reilly
made
a
disposition
of
the
land
in
question
to
Carma,
one
should
canvass
the
jurisprudence
on
contracts
and
agreements
for
the
sale
of
land
and
interests
in
land
in
which
the
circumstances
are
the
same
as,
or
highly
similar
to,
those
in
the
instant
case.
One
must
also
bear
in
mind
that
the
instant
case
involves
a
dispute
between
the
successors
to
a
contracting
party
and
the
taxing
authorities:
it
is
not
a
dispute
between
the
contracting
parties
themselves,
who
appear
always
to
have
been
quite
ad
idem
in
regard
to
their
transaction.
The
jurisprudence
reveals
that
both
an
objective
test
and
a
subjective
test
are
invoked
to
aid
in
determining
what
constitutes
a
disposition
of
property
and
when
it
occurs.
Thus,
it
is
both
the
documentary
evidence
or
record
of
the
transaction
in
question
and
the
intention
of
the
parties
during
that
transaction,
if
it
can
be
inferred
from
all
of
the
evidence
and
if
it
be
not
inconsistent
with
the
recorded
terms
of
their
transaction.
In
the
instant
case,
the
law
of
contracts
in
regard
to
sale
of
land
or
interests
in
land
would
appear
to
furnish
the
appropriate
tests
as
to
when
Reilly
made
a
disposition
of
his
land
in
favour
of
Carma.
A
recent
authoritative
judgment
about
the
formation
and
definiteness
of
contracts
(a
letter
agreement
for
a
lease
of
restaurant
premises
atop
a
proposed
building
whose
construction
was
to
be
financed
by
a
stranger
to
the
agreement,
on
land
owned
by
another
stranger
to
the
agreement,)
is
Canada
Square
Corporation
v
V
S
Services
Ltd,
34
OR
(2d)
250,
a
unanimous
decision
of
the
Ontario
Court
of
Appeal.
The
plaintiff
successfully
brought
action
for
damages
for
breach
of
the
agreement
to
lease
the
top
floor
of
the
building,
the
trial
judge
holding
the
letter
agreement
to
have
been
enforceable.
The
Court
of
Appeal
held
that
the
letter
was
an
enforceable
agreement
because,
read
as
a
whole
and
against
the
commercial
background,
it
was
possible
to
determine
the
necessary
elements
of
a
lease.
Such
uncertainty
as
remained
was
insufficient
to
justify
the
conclusion
that
the
whole
contract
should
be
void.
In
particular,
there
were
no
essential
matters
that
were
not
resolved
by
the
letter.
That
Canada
Square
judgment
is
a
carefully
reasoned
and
justifiably
voluminous
opus
by
Morden,
JA
in
which
there
are
several
passages
of
relevance
to
the
case
at
bar.
They
are:
The
appellant
raises
several
issues
with
respect
to
which,
it
submits,
the
trial
judge
erred
in
holding
that
the
October
14,
1969,
document
constituted
a
binding
contract
between
the
parties.
I
shall
deal
with
them
in
the
order
they
were
advanced:
1.
The
trial
judge
erred
in
failing
to
find
that
the
purported
acceptance
by
Moog
on
behalf
of
Canada
Square
was
nothing
more
than
a
conditional
acceptance
which
at
best
constituted
a
counter-proposal
which
was
never
accepted
by
Versafood.
In
support
of
this
ground
the
appellant
can
refer
to
the
language
immediately
preceding
the
execution
by
Canada
Square.
This,
when
read
by
itself
literally,
may
tend
to
support
is
position.
However,
it
cannot
be
read
by
itself.
Its
context
includes,
at
least,
the
whole
document.
This
demonstrates
that
the
parties
had
arrived
at
an
agreement
and
the
the
reference
to
the
approval
of
Occidental
Life
Insurance
Company
is
more
reasonably
interpreted
as
representing
a
condition
of
the
agreement.
Its
insertion
below
the
signature
of
Mr
Baker
tends
to
underline
that
the
provision
was
for
the
benefit
of
Canada
Square,
but,
reading
the
document
as
a
whole
I
do
not
think
that
it
represents
a
counter-proposal
which
had
not
been
accepted
by
Versafood.
Further,
I
am
satisfied
that
this
is
an
issue
with
respect
to
which
evidence
extrinsic
to
the
document
itself
may
be
considered.
We
are
entitled
to
consider
the
state
of
the
document
when
it
was
signed,
(cf
Stewart
Eddowes
et
al
(1874),
LR
9
CP
311)
It
appears
that
Mr
Baker
dictated
the
whole
of
it,
including
the
“acceptance”
part,
and
it
is
quite
clear
that
the
various
copies
of
it
were
signed
simultaneously.
The
conclusion
is
inescapable
that
when
the
document
was
executed
on
behalf
of
Versafood
it
was
assenting
to
the
condition
in
the
acceptance.
2.
In
any
event,
the
condition
was
never
satisfied
by
the
approval
of
Occidental
Life.
With
respect
to
this
point
it
is
relevant
to
know
the
position
of
Ocidental
Life.
It
was
one
of
the
financiers
of
the
proposed
building.
The
exact
terms
of
its
relationship
with
Canada
Square
were
not
introduced
into
evidence.
In
inserting
the
condition
into
the
agreement
Mr
Moog
was
acting
on
something
in
the
back
of
his
mind
that
there
was
something
in
Occidental’s
commitment
to
Canada
Square
for
which
he
needed
an
approval.
He
subsequently
found
out
that
he
needed
the
approval
by
Occidental
Life
of
the
plans
and
specifications
for
the
improvements
before
construction.
Since
the
approval
contemplated
in
the
agreement
was,
in
my
view,
given,
it
is
not
necessary
to
canvass
the
respondent’s
alternative
arguments
based
on
waiver
of
the
condition
by
Canada
Square
(the
condition
being
submitted
to
be
for
its
benefit
alone)
and
on
acceptance
of
the
approval
by
both
parties
after
it
was
given.
3.
The
October
14,
1969,
letter
does
not
represent
a
concluded
contract.
The
parties
were
negotiating
subject
to
contract.
Alternatively,
and
in
any
event,
the
terms
of
the
document
are
so
uncertain
and
impossible
of
performance
as
to
be
unenforceable.
There
is
no
disagreement
between
the
parties
to
this
appeal
on
the
requisite
terms
of
a
valid
agreement
for
lease.
Both
rely
on
the
following
passage
in
Williams,
Canadian
Law
of
Landlord
and
Tenant,
4th
ed
(1973),
at
p
75
as
follows:
To
be
valid,
an
agreement
for
a
lease
must
show
(1)
the
parties,
(2)
a
description
of
the
premises
to
be
demised,
(3)
the
commencement
and
(4)
duration
of
the
term,
(5)
the
rent,
if
any,
and
(6)
all
the
material
terms
of
the
contract
not
being
matters
incident
to
the
relation
of
landlord
and
tenant,
including
any
covenants
or
conditions
exceptions
or
reservations.
I
shall
deal
later
with
requirement
(6),
which
relates
to
material
terms.
It
comes
into
play
only
in
certain
cases.
It
may
be
said
now
that
conditions
(1)
to
(5)
are
invariable
requirements.
In
this
case
the
uncertainties
submitted
on
behalf
of
the
appellant
relate
to
(1)
the
description
of
the
premises
to
be
demised,
(2)
the
commencement
of
the
the
term,
and
(3)
certain
material
terms
of
the
contract.
I
do
not
think
that
the
arguments
respecting
these
issues
can
reasonably
be
separated
from
those
relating
to
the
more
general
argument
that
the
October
14,
1969,
document
represents
nothing
more
than
a
stage
in
the
negotiation
of
a
contract.
I
say
this
because,
it
seems
to
me,
if
there
is
sufficient
certainty
with
respect
to
all
of
the
requisite
terms
of
an
agreement
to
lease
then
this
would
be
a
factor
supporting
the
conclusion
that
the
parties
had
passed
through
the
negotiation
stage
and
had
made
a
binding
contract.
In
addition
to
the
foregoing
circumstances
surrounding
the
execution
of
the
October
14,
1969,
document,
there
are
also
those
following
it
which,
in
my
view,
may
be
taken
into
account
on
the
broad
issue
of
mutual
intention
to
create
a
relationship.
As
Waddams,
The
Law
of
Contracts
(1977)
at
p
193
shows,
there
had
been
a
difference
of
judicial
opinion
as
to
the
relevance
of
the
parties’
conduct
in
interpreting
a
prior
writing.
This
is
an
area
where
it
seems
to
me
it
is
not
sensible
to
think
that
there
should
be
an
absolute
rule
one
way
or
the
other.
Such
evidence,
in
some
cases,
may
be
of
value
in
shedding
light
on
the
parties’
prior
intention
and
in
other
cases
be
useless
and,
possibly,
misleading.
I
think
Waddams
puts
the
matter
fairly
in
the
following
passage
at
p
194:
Often
the
subsequent
conduct
will
not
be
conclusive,
and
it
should
be
treated
with
caution,
but
it
may
be
helpful
in
showing
what
meaning
the
parties
attached
to
the
document
after
its
execution,
and
this
in
turn
may
suggest
that
they
took
the
same
view
at
the
earlier
date.
It
is
suggested
that
caution
is
appropriate
in
drawing
conclusions
from
subsequent
conduct,
for
the
fact
that
a
party
does
not
enforce
his
strict
rights
does
not
prove
that
he
never
had
them.
Corbin
on
Contract
(1963),
vol
I,
at
p
93
observes
that
“[t]he
fact
that
[the
parties]
have
.
.
.
acted
[by
rendering
some
substantial
performance
or
by
taking
other
material
action
1
reliance
upon
their
existing
expressions
of
agreement]
is
itself
a
circumstance
bearing
upon
the
question
of
completeness
of
their
agreement”.
In
this
case,
I
have
already
said,
the
parties
by
their
words
and
actions
following
October
14,
1969,
conducted
themselves
in
a
way
which
showed
that
it
was
more
probable
than
not
that
from
that
date
forward
they
regarded
their
relationship
as
being
of
a
binding
nature
rather
than
one
of
the
two
parties
still
engaged
in
negotiation.
Taking
all
of
the
foregoing
into
account
I
am
satisfied
that
the
trial
judge
was
right
in
finding
that
in
executing
the
October
14,
1969,
document
the
parties
intended
to
make
a
contract.
However,
this
does
not
end
the
matter.
Notwithstanding
that
the
parties
may
have
thought
they
were
bound,
if
the
essential
terms
of
the
alleged
contract
lack
certainty,
either
because
they
are
vague
or
because
they
are
obviously
incomplete,
the
result
will
not
be
a
binding
contract:
9
Hals,
4th
ed,
para
262;
Trietel,
The
Law
of
Contract,
5th
ed
(1979),
at
p
40;
Corbin
on
Contracts
at
p
394.
In
this
case
there
is
no
doubt
that
the
document
of
October
14,
1969,
as
an
agreement
to
lease,
is
crudely
expressed
and
contains
some
very
loose
language.
Further,
a
more
sophisticated
document
would
probably
have
covered
several
other
matters
in
addition
to
those
dealt
with
in
it.
Nonetheless,
accepting
that
the
parties
intended
to
create
a
binding
relationship
and
were
represented
by
experienced
businessmen
who
had
full
authority
to
represent
their
respective
companies,
a
court
should
not
be
too
astute
to
hold
that
there
is
not
that
degree
of
certainty
in
any
of
its
essential
terms
which
is
the
requirement
of
a
binding
contract.
Since
I
base
my
conclusion
on
my
interpretation
of
the
language
of
the
document
or
the
doctrine
of
election,
and
the
common
sense
of
the
situation
(in
Rumble
v
Heggate,
supra,
James
V
C
said
at
p
750
that
the
objections
to
the
agreement
in
that
case
on
the
basis
of
uncertainty
of
quantity
of
land
of
its
site
‘‘are
mere
shadows
which
vanish
when
examined
by
the
light
of
common
sense”)
it
is
not
necessary
to
make
a
final
decision
on
the
admissibility
and
probative
effect
of
the
parties’
subsequent
conduct.
I
would
mention,
however,
that
it
has
been
recognized
that
the
ambiguity
or
uncertainty
of
a
contractual
provision
may
be
resolved
by
the
subsequent
conduct
of
the
parties
(9
Hals
4th
ed,
paras
266,
269
and
270),
and
that
in
this
case
the
evidence
of
what
transpired
after
October
14,
1969,
is
particulary
cogent.
There
is
no
evidence
that
the
parties
took
any
steps
to
“negotiate”
terms
respecting
the
space
on
the
mezzanine
floor
lobby.
The
evidence
merely
disclosed
that
in
March
of
1970
Planned
Food,
on
behalf
of
Versa-
food,
asked
Cooper,
the
architect,
for
information
on
the
location
and
dimension
of
the
takeout
area
and
it
was
promptly
furnished
by
Cooper’s
office
with
a
drawing
containing
the
necessary
information
—
the
space
being
24
by
24
ft,
576
sq
ft.
This
evidence
supports
the
view
that
the
parties
did
not
regard
this
particular
feature
of
the
agreement
as
being
a
matter
requiring
negotiation.
Reference
may
be
made
to
the
judgment
of
Dickson,
J
for
the
Supreme
Court
in
Dynamic
Transport
Ltd
v
O
K
Detailing
Ltd,
supra,
at
p
1082,
where
significance
was
placed
on
the
fact
that
the
vendor,
who
repudiated
an
agreement
of
purchase
and
sale,
did
not
“take
the
position
that
imprecise
formulation
of
the
land
description
made
completion
impossible.
Refusal
to
complete
the
transaction
would
appear
to
have
been
prompted
by
considerations
other
than
difficulty
in
identifying
the
land
agreed
to
be
sold”.
This
was
the
case
in
the
matter
before
us.
The
parties,
of
course,
are
in
agreement
that
a
valid
agreement
for
a
lease
must
state
with
certainty
the
time
from
which
the
lease
is
to
commence.
Versafood
submits
that
the
sentence
in
the
letter
reading
“The
term
of
the
lease
will
be
for
a
good
period
of
thirty
years
(30)
from
the
date
of
substantial
completion
of
the
building,
including
the
Versafood
facilities”
does
not
accomplish
this.
The
trial
judge
held
that
as
a
matter
of
law
that
it
may
be
provided
for
in
an
agreement
that
the
time
for
commencement
of
a
lease
may
be
determined
from
an
event
which
may
happen
in
the
future
and,
further,
accepting
this,
that
the
terms
of
the
October
14,
1969,
document
were
sufficiently
certain
to
meet
the
applicable
test.
I
agree
with
these
conclusions
and,
substantially,
with
the
reasons
therefor.
I
shall
add
one
or
two
observations
to
what
the
trial
judge
has
said.
I
think
that
the
trial
judge
was
right
to
rely
upon
the
statemet
of
Evershed
J
in
Brilliant
v
Michaels,
[1945]
1
All
ER
121
at
pp
127-28,
which
reads
as
follows:
My
opinion,
therefore,
is
that
a
contract
for
a
lease
is
enforceable
notwithstanding
that
the
commencement
of
the
term
may
be
expressed
by
reference
to
the
happening
of
a
contingency
which
is
at
the
time
uncertain
provided
that,
at
the
time
that
the
contract
is
sought
to
be
enforced,
the
event
has
occurred
and
the
contingency
has
happened.
As
a
matter
of
principle
I
can
think
of
no
valid
reason
why,
if
parties
choose
to
agree
that
a
lease
is
to
commence
on
a
future
specified
contingency,
a
court
should
not
uphold
their
bargain.
In
many
cases,
of
course,
there
will
be
sensible
and
practical
reasons
why
parties
would
choose
to
proceed
in
this
way.
There
is
no
suggestion
in
[Mitchell
v
Mortgage
Co
of
Canada,
59
SCR
90,
48
DLR
420,
[1919]
3
WWR
324]
that
had
the
parties
been
in
agreement
on
the
repairs
to
be
done
that
the
agreement
would
have
been
void
for
uncertainty
because
it
was
based
on
the
happening
of
a
future
event.
Indeed,
by
implication,
the
judgment
may
be
regarded
as
holding
that
the
future
event
aspect
alone,
was
not
ground
for
objection.
On
the
next
point,
whether
the
terms
in
this
agreement
were
sufficiently
certain
to
meet
the
applicable
test,
I
agree
with
the
trial
judge’s
implication
of
the
term
that
[p
609
OR]
“the
substantial
completion
of
the
building
including
the
Versafood
facilities”
would
be
determined
by
the
project’s
architect.
Mr
Rolls,
relying
upon
Calvan
Consolidated
Oil
&
Gas
Co
Ltd
v
Manning,
[1959]
SCR
253
at
pp
259-60,
17
DLR
(2d)
1,
submitted
that
the
trial
judge
should
not
have
imposed
this
term.
He
argued
that
if
the
matter
of
the
time
for
commencement
were
to
be
arbitrated
by
the
architect,
this
would
be
a
term
for
which
the
parties
would
have
to
make
express
provision.
In
my
view,
the
term
concerning
the
commencement
time
of
the
lease
was
expressly
agreed
to
by
the
parties.
The
implication
of
a
relatively
minor
term
respecting
the
practical
application
of
the
express
term
can
hardly
be
called
making
a
contract
for
the
parties.
On
the
terms
of
the
document
it
is
reasonably
clear
that
at
the
end
of
the
30-year
lease
(and
in
the
absence
of
a
renewal)
the
landlord
could
re-enter
the
top
floor
premises.
Versafood
may
have
owned
the
walls,
the
ceiling
and
the
roof
but
it
did
not
own
the
floor.
It
may
well
have
been
desirable
for
the
parties
to
have
agreed
upon
terms
respecting
this
and,
possibly,
other
matters
in
their
agreement
for
the
lease,
but
it
is
clear
that
the
parties
made
no
attempt
to
do
so
and
I
cannot
say
that
their
failure
to
do
so
resulted
in
the
absence
of
any
terms
essential
to
their
agreement.
It
was
also
argued
that
the
agreement
was
incomplete
because,
since
the
Toronto
Transit
Commission
owned
the
land
on
which
the
building
was
erected,
some
sort
of
an
agreement
on
its
part
to
the
agreement
between
Versafood
and
Canada
Square
was
needed.
Once
again,
while
this
might
have
been
advisable,
it
was
not
essential
to
the
settling
of
the
rights
and
obligations
of
the
parties
to
the
letter
agreement
of
October
14,
1969,
between
themselves.
Whether
or
not
a
series
of
documents
can
constitute
evidence
of
a
binding
contract
for
the
sale
and
purchase
of
land
and
whether,
in
such
circumstances,
the
later
form
of
agreement
may
be
found
to
be
a
formal
elaboration
of
a
completed
contract
already
embodied
in
the
earlier
informal
document,
depends
upon
the
conclusion
reached
upon
a
reasonable
construction
of
both
documents.
A
western
Canadian
case
of
moderate
“antiquity”
is
that
of
Harris
v
Darroch
(1908),
8
WLR
86,
from
Saskatchewan,
decided
by
Johnstone,
J
in
1908.
The
following
passage
appears
in
the
report:
In
view
of
the
facts
and
law
just
stated,
I
am
clearly
of
the
opinion
that
the
agent
Gilliland
had
full
authority
and
only
to
enter
into
the
contract
prepared
by
him
and
signed
by
the
plaintiff,
but
that
he
also
had
authority
(had
he
so
chosen)
to
have
signed
the
same,
and,
if
such
receipt
and
contract
can
be
read
together,
there
was
a
completed
and
binding
contract
to
satisfy
the
Statute
of
Frauds,
and
one
which
could
be
enforced
by
a
decree
for
specific
performance.
I
am
furthermore
of
opinion
that
the
receipt
referred
to,
together
with
the
writing
signed
by
Harris,
constituted
a
good
and
binding
contract.
In
Shardlow
v
Cotterell,
20
Ch
D
90,
it
was
held
following
Long
v
Millar,
4
CPD
450,
that
several
documents
could
be
joined
and
read
together
so
as
to
constitute
a
contract
between
the
parties.
The
question
then
arises,
did
what
took
place
.
.
.
constitute
a
completed
contract?
I
think
it
did,
and,
in
this
opinion,
I
am
supported
by
the
authority
of
the
Master
of
the
Rolls
in
Gibbins
v
North
Eastern
R
W
Co,
11
Beav
1
.
.
.
The
Master
of
the
Rolls
then
proceeded
to
say:
‘‘So
far
the
matter
is
clear,
for
there
is
a
distinct
offer
and
a
distinct
acceptance
of
that
offer:
and
there
can
be
no
doubt
that,
according
to
the
law
of
this
Court,
this
would
constitute
a
valid
contract,
the
sum
of
£3,000
being
distinctly
offered,
and
distinctly
accepted.
I
do
not
think
that
this
proposition
has
been
denied:
but
the
letter
of
acceptance
proceeds,
‘If
you
approve
of
the
enclosed,
sign
the
same,
and,
on
the
receipt
of
the
deposit,
we
will
sign
you
a
copy’.
What
is
the
meaning
of
this?
Is
it
to
contradict
the
first
part
of
the
letter?
Does
it
mean
that
we
accept
the
offer,
but
reject
it
unless
you
sign
the
enclosed
memorandum?
Or
rather,
is
it
not
an
acceptance
and
a
proposal
of
a
more
formal
mode
of
carrying
the
acceptance
into
execution?
If
the
latter
be
the
meaning,
then,
according
to
the
authority
produced,
this
would
not
destroy
the
contract.
If
it
was
a
mode
of
carrying
a
contract
into
effect,
it
did
not
alter
the
existing
contract,
though
the
proposed
mode
was
different
from
that
which
the
law
would
direct;
for,
where
there
is
a
contract,
the
law
prescribes
the
mode
of
its
performance”.
This
decision
was
followed
in
the
case
of
Bonne-
well
v
Jenkins,
8
Ch
D
70,
at
p
73.
James,
LJ,
lays
down
the
law
in
the
following
way:
“I
am
clearly
of
opinion
that
the
order
of
Mr
Justice
Fry
ought
to
be
affirmed.
Whether
there
is
a
binding
contract
or
not
depends
on
the
construction
of
two
letters.
It
is
settled
law
that
a
contract
may
be
made
by
letters,
and
that
the
mere
reference
in
them
to
a
future
formal
contract
will
not
prevent
their
constituting
a
binding
bargain.
There
are
indeed
cases,
such
as
Rossiter
v
Miller,
where
the
Court
may
hold
that
the
reference
to
the
future
contract
is
such
as
to
show
that
the
parties
did
not
intend
to
be
bound
until
it
was
signed,
but
such
cases
depend
on
their
own
special
circumstances.
Here
there
is
an
unconditional
acceptance
by
the
defendant
of
the
plaintiffs
offer,
and
the
reference
to
the
preparation
of
a
formal
contract
appears
to
me
to
be
immaterial’’.
Although
there
appears
to
have
been
no
dispute
between
Reilly
and
Carma
in
the
instant
case,
it
is
already
obvious
that
not
infrequently
the
tests
of
what
constitutes
a
binding
cotract
are
developed
and
declared
in
cases
of
conflict
between
the
parties
to
the
purported
agreement.
Such
a
case,
at
the
summit
of
judicial
declaration,
was
that
of
Calvan
Consolidated
Oil
&
Gas
Company
Limited
v
Manning,
[1959]
SCR
253.
Here
the
parties
in
their
agreement
made
provision
for
arbitration
as
to
the
terms
of
a
possible,
future
operating
agreement.
There
was
a
question
about
whether
such
a
provision
is
ineffective
as
being
merely
an
“agreement
to
agree”,
but
it
was
held
that
a
provision
that
new
or
modified
terms
be
settled
by
an
arbitrator
can
be
made
enforceable.
In
that
regard,
Judson,
J
wrote
for
the
court:
Even
if
this
were
not
so,
I
would
accept
the
view
of
the
Court
of
Appeal
that
failure
of
a
term
such
as
this
would
not
invalidate
the
transfer
of
property
interests
and
the
rest
of
the
agreement,
the
terms
of
which
had
been
completely
settled.
The
remaining
two
paragraphs
of
the
agreement
deal
first
with
the
preparation
of
a
syndicate
agreement
and
the
obligation
of
each
party
to
keep
his
permit
in
force
until
the
end
of
the
third
year.
There
was
no
suggestion
of
difficulty
on
either
of
these
two
points.
My
conclusion
therefore
is
that
this
contract
is
not
void
for
uncertainty.
There
is
no
need
here
to
invoke
the
principle
of
a
“fair”
and
“broad”
construction
of
this
contract
as
mentioned
by
Lord
Wright
in
Hillas
and
Co
Limited
v
Arcos
Limited,
[1932]
All
ER
494.
The
parties
knew
what
they
were
doing
and
they
expressed
their
intentions
with
certainty
and
a
complete
lack
of
ambiguity.
Only
two
questions
remain
to
be
considered
and
these
arise
from
the
provision
in
the
amending
agreement
for
arbitration
on
the
terms
of
the
formal
agreement.
The
questions
are,
first,
whether
this
indicates
an
intention
not
to
be
bound
until
the
formal
agreement
is
executed,
and,
second,
what
terms
may
be
incorporated
in
the
formal
agreement
by
the
arbitrator.
My
opinion
is
that
the
parties
were
bound
immediately
on
the
execution
of
the
informal
agreement,
that
the
acceptance
was
unconditional
and
that
all
that
was
necessary
to
be
done
by
the
parties
or
possibly
by
the
arbitrator
was
to
embody
the
precise
terms,
and
no
more,
of
the
informal
agreement.
This
is
not
a
case
of
acceptance
qualified
by
such
expressed
conditions
as
“subject
to
the
preparation
and
approval
of
a
formal
contract”,
“subject
to
contract”
or
“subject
to
the
preparation
of
a
formal
contract,
its
execution
by
the
parties
and
approval
by
their
solicitors”.
Here
we
have
an
unqualified
acceptance
with
a
formal
contract
to
follow.
Whether
the
parties
intend
to
hold
themselves
bound
until
the
execution
of
a
formal
agreement
is
a
question
of
construction
and
I
have
no
doubt
in
this
case.
The
principle
is
well
stated
by
Parker
J
in
Hatzfeldt-Wildenburg
v
Alexander,
[1912]
1
Ch
284;
81
LJ,
Ch
194,
in
these
terms:
It
appears
to
be
well
settled
by
the
authorities
that
if
the
documents
or
letters
relief
on
as
constituting
a
contract
contemplate
the
execution
of
a
further
contract
between
the
parties,
it
is
a
question
of
construction
whether
the
execution
of
the
further
contract
is
a
condition
or
term
of
the
bargain,
or
whether
it
is
a
mere
expression
of
the
desire
of
the
parties
as
to
the
manner
in
which
the
transaction
already
agreed
to
will
in
fact
go
through.
In
the
former
case
there
is
no
enforceable
contract
either
because
the
condition
is
unfulfilled
or
because
the
law
does
not
recognise
a
contract
to
enter
into
a
contract.
In
the
latter
case
there
is
a
binding
contract
and
the
reference
to
the
more
formal
document
may
be
ignored.
Whether
or
not
it
is
relevant,
I
am
fully
satisfied
that
the
parties
thought
they
were
bound
until
very
close
to
the
institution
of
this
action.
Compared
with
the
documents
considered
and
construed
in
the
above
mentioned
Calvan
and
Canada
Square
cases,
the
letter
agreement
in
the
instant
case
appears
to
be
a
veritable
model
of
certainty
and
completeness.
It
describes
the
parties,
the
land
being
sold
(except
for
the
typographical
error
upon
which
nothing
turns)
and
the
total
price
as
well
as
the
price
per
acre.
These
matters
of
agreement
are
carried
without
deviation
into
the
formal
agreement.
The
formal
agreement
bears
an
augmented
total
price
as
well
as
an
extra
description
of
land.
Together
they
do
not
constitute
a
deviation
from
the
terms
of
the
letter
agreement,
but
rather
an
additional
transaction
which
serves,
by
reference,
to
confirm
those
terms
and
not
to
invalidate
them.
So,
also,
the
terms
of
payment
remain
unaltered,
although
elaborated
in
solicitor’s
language,
and
even
the
down
payment
provision
accords
with
that
of
the
letter
agreement.
The
rates
of
interest
on
the
outstanding
balance
and
the
manner
of
transferring
title
to
the
purchaser
also
accord
with
the
provisions
of
the
letter
agreement.
The
letter
agreement
is
expressed
in
absolute
and
not
in
conditional
or
qualified
terms.
Thus,
it
is
apparent
that
Carma
sought
title
and
possession
of
Reilly’s
land
in
order
to
subdivide
and
develop
it.
However,
unlike
the
transaction
de-
scribed
in
the
Victory
Hotels
case,
which
was
conditional
upon
issuance
of
a
liquor
licence,
the
letter
agreement
provides
by
paragraph
3(b)
“in
any
event,
whether
or
not
approval
for
subdivision
is
obtained,
total
payment
of
the
outstanding
balance
shall
be
made
on
or
before
December
1,
1987
.
.
.’*
and
that
provision
is
carried
into
section
2
of
the
formal
agreement.
It
is
also
to
be
noted
that
the
letter
agreement’s
provision
for
the
formal
agreement
is,
to
quote
Judson,
J
in
the
Calvan
case,
“not
a
case
of
acceptance
qualified
by
such
expressed
conditions
as
‘subject
to
the
preparation
and
approval
of
a
formal
contract’,
‘subject
to
contract’
or
‘subject
to
the
preparation
of
a
formal
contract,
its
execution
by
the
parties
and
approval
by
their
solicitors’.
Here
we
have
an
unqualified
acceptance
with
a
formal
contract
to
follow’’.
Indeed
in
the
letter
agreement
executed
by
Reilly
and
Carma,
neither
one
nor
the
other
purported
to
do
aught
but
agree
in
an
entirely
unqualified
manner.
Neither
one
nor
the
other
added
a
term,
or
a
qualification,
or
a
conditional
acceptance
or
a
counter-offer
after
offer
and
acceptance,
concerning
the
formal
agreement
.
It
was
incorporated
into
their
letter
agreement
and
the
written-in
provision
that
it
was
to
be
“in
accordance
with
the
terms
hereof’
is
their
agreement
which
is
attested
by
the
signed
initials
of
or
for
both
parties.
Whether
or
not
it
is
relevant,
Reilly
certainly
thought
that
he
was
bound
by
the
letter
agreement,
according
at
least
to
the
testimony
of
Mr
Tetz.
In
so
far
as
a
“disposition’’
of
Reilly’s
land
is
concerned,
it
is
plain
that
he
and
Carma
had
made
a
complete,
unambiguous
and
enforceable
agree'ment
for
sale
and
purchase
in
November,
1972,
according
to
the
terms
of
the
letter
agreement.
Carma
lodged
its
caveat
against
Reilly’s
titles,
as
it
was
entitled
to
do
in
order
to
secure
its
interest
in
the
lands,
pursuant
to
the
Land
Titles
Act,
RS
A
1970,
of
Alberta,
thus
demonstrating
its
belief
in
the
validity
of
the
letter
agreement.
There
is
nothing
to
be
taken
against
that
belief
or
that
validity
from
the
subsequent
withdrawal
of
that
caveat,
after
the
lodging
of
a
new
caveat
upon
execution
of
the
formal
agreement.
Those
actions
are
simply
the
conduct
of
prudent
and
tidy
solicitors
practising
in
and
under
the
Torrens
system
of
land
titles
registration.
Once
the
parties
form
their
binding
contractual
relationship
they
have
something
—
a
metaphysical
something,
to
be
sure
—
which
belongs
to
them
and
which
they
can
augment,
postpone,
vary
or
even
cancel
by
their
agreement.
So
long
as
the
parties
do
not
reduce
or
abort
their
agreement
for
sale
of
land,
it
remains
and
they
are
free
to
merge
other
agreements
and
other
provisions
—
such
as
provisions
relating
to
gravel
pits,
or
removal
of
buildings,
even
one
saying
that
the
document
expresses
all
of
their
contract,
as
Reilly
and
Carma
did
—
with
that
disposition
of
land
without
destroying
or
qualifying
it.
Having
provided
that
annual
payments
in
reduction
of
the
outstanding
balance
of
the
sale
price
should
be
made
by
Carma
to
Reilly
on
December
1
in
each
year,
starting
in
1973
until
that
date
in
1987
at
the
latest,
they
provided
in
section
5(i)
of
their
formal
agreement
that
the
date
for
adjustment
of
taxes
and
in
section
2
thereof
that
commencement
of
interest,
would
be
December
1,
1972.
It
is
true
that
the
date
for
adjustments
and
commencement
of
interest
is
at
variance
with
that
which
is
provided
in
paragraphs
7
and
3(d)
of
the
letter
agreement,
but
it
must
be
remembered
that
this
was
a
variation
of
an
agreement
or
bargain
which
already
“belonged*’
to
the
parties
to
do
with,
by
mutual
agreement,
as
they
pleased.
It
did
not
sterilize,
invalidate
or
destroy
their
existing
bargain,
or
even
render
it
uncertain.
Rather,
it
was
a
reasonable
implication
of
that
bargain.
Such
a
variation
within
the
terms
of
an
existing
contractual
relationship
cannot
be
regarded
as
retrospective,
because
the
date
agreed
upon
was
subsequent
to
the
date
of
November
24,
1972
on
which
the
parties
struck
their
bargain.
Those
provisions
of
the
formal
agreement
provide
a
strong
indication
of
the
intention
of
the
contracting
parties,
which
they
must
have
jointly
formulated
prior
to
the
typing
up
of
the
formal
agreement,
and
the
document
itself
provides
a
cogent
inference
that
their
joint
intention
was
formulated
in
1972.
It
appears
that
the
execution
of
the
formal
agreement
on
January
19,
1973
was
a
mere
accident
of
timing.
If
the
typist
had
prepared
that
document
in
1973,
clearly
the
year
could
have
been
typed
on
its
first
page
and
the
typist
might
even
have
risked
typing
the
month,
“January”.
No
evidence
was
led
as
to
when
instructions
were
taken
for
the
final
agreement
or
when
it
was
typed.
However,
the
document
itself
furnishes
a
solid
basis
of
a
clear
inference
that
it
was
all
ready
for
execution
before
the
end
of
1972,
because
the
month
and
year
were
left
blank,
to
be
recorded
in
handwriting.
It
is
clear
then
that
the
land
contemplated
in
the
letter
agreement
was
the
subject
of
a
disposition
for
$2,000,000
to
which
Reilly
then
became
entitled
according
to
the
terms
agreed,
in
the
1972
taxation
year.
The
additional
land,
described
in
the
fourth
parcel
in
Schedule
“A”
to
the
formal
agreement,
consists
of
11.55
acres.
In
both
the
letter
agreement
and
the
formal
agreement
Reilly
and
Carma
agreed
upon
the
price
of
$1,613
per
acre.
Here,
then,
is
the
additional
$18,630.15
over
and
above
the
price
of
$2,000,000
expressed
for
the
lands
which
were
contemplated
in
the
letter
agreement.
There
is
no
direct
evidence
of
any
agreement
between
the
parties
in
1972
concerning
any
disposition
of
the
parcel
of
11.55
acres.
However,
the
strong
inference
that
they
struck
that
bargain
in
1972
remains
unchallenged.
Reilly
made
an
enforceable
contract
with
Carma
in
regard
to
this
last
parcel
of
land
only
upon
execution
of
the
formal
agreement,
in
which
it
was
included
by
agreement
of
the
parties,
in
January,
1973.
Here
for
the
first
time,
in
regard
to
this
last
parcel
was
a
memorandum
in
writing
signed
by
the
parties
in
contemplation
of
the
Statute
of
Frauds.
The
absence
of
a
memorandum
in
writing
signed
by
the
party
to
be
charged
with
performance
does
not
obviate
the
very
existence
of
any
contract:
it
merely
renders
any
contract
made
by
the
parties
unenforceable.
By
clear
inference,
Reilly
and
Carma
made
their
contract
for
the
parcel
of
11.55
acres
in
1972.
Had
there
been
a
falling-out
between
them
prior
to
January
19,
1973,
their
contract
would
have
been
unenforceable
in
regard
to
the
last
parcel.
A
“disposition”
of
property
under
paragraph
54(c)(i)
and
(h)
of
the
Income
Tax
Act
includes
any
transaction
or
event
entitling
a
taxpayer
to
the
proceeds
or
sale
price
of
property
which
has
been
sold.
The
question
arises
whether
entitlement
to
proceeds
excludes
moral
entitlement
pursuant
to
an
unenforceable
parol
contract,
of
which
there
is
ample
evidence
here,
or
whether
the
statutory
language
contemplates
moral
entitlement
as
well
as
legally
enforceable
entitlement.
Although
no
question
of
actual
enforcement
between
Reilly
and
Carma
arises
in
this
case,
one
must
conclude
that
the
entitlement
to
proceeds
in
the
Income
Tax
Act
means
legally
enforceable
entitlement
in
order
to
avoid
vagueness
and
impart
certainty
in
the
affairs
of
taxpayers.
Therefore,
the
fourth
parcel
of
11.55
acres
described
in
Schedule
“A”
to
the
formal
agreement
was
the
subject
of
a
disposition
for
the
sale
price
of
$18,630.15
to
which
Reilly
became
entitled,
in
the
1973
taxation
year.
The
foregoing
findings
dispose
of
the
issue
submitted
in
paragraph
9(a)
of
Exhibit
1,
the
agreed
statement
of
facts
and
matters.
The
issue
submitted
as
9(b)
asks
if
the
notice
of
reassessment
pertaining
to
the
disposition
in
the
1972
taxation
year
be
out
of
time
pursuant
to
subsection
152(4)
of
the
Income
Tax
Act.
The
subsection
provides:
152.
(4)
Idem.
The
Minister
may
at
any
time
assess
tax,
interest
or
penalties
under
this
Part
or
notify
in
writing
any
person
by
whom
a
return
of
income
for
a
taxation
year
has
been
filed
that
no
tax
is
payable
for
the
taxation
year,
and
may
(a)
at
any
time,
if
the
taxpayer
or
person
filing
the
return
(i)
has
made
any
misrepresentation
that
is
attributable
to
neglect,
carelessness
or
wilful
default
or
has
committed
any
fraud
in
filing
the
return
or
in
supplying
any
information
under
this
Act,
or
(ii)
has
filed
with
the
Minister
a
waiver
in
prescribed
form
within
4
years
from
the
day
of
mailing
of
a
notice
of
an
original
assessment
or
of
a
notification
that
no
tax
is
payable
for
a
taxation
year,
and
(b)
within
4
years
from
the
day
referred
to
in
subparagraph
(a)(ii),
in
any
other
case,
reassess
or
make
additional
assessments,
or
assess
tax,
interest
or
penalties
under
this
Part,
as
the
circumstances
require.
Counsel
stated
that
it
is
the
defendant’s
position
in
this
case
that
there
was
a
misrepresentation,
because
the
dispositions
of
land
were
not
disclosed
in
Reilly’s
returns,
and
the
misrepresentation
was
attributable
to
neglect,
or
carelessness,
or
wilful
default,
but
not
to
fraud.
In
argument,
the
possibility
of
wilful
default
was
not
emphasized
and
the
defendant’s
counsel
concentrated
virtually
entirely
on
neglect
or
carelessness.
The
statutory
underpinning
for
this
issue
begins
with
a
basic
provision
of
the
Income
Tax
Act
which
applied
to
the
1972
and
1973
taxation
years,
thus:
150.
(1)
A
return
of
the
income
for
.
.
.
each
taxation
year
for
which
a
tax
is
payable
in
the
case
of
an
individual
shall,
without
notice
or
demand
therefor,
be
filed
with
the
Minister
in
prescribed
form
and
containing
prescribed
information,
(d)
.
.
.
on
or
before
April
30,
in
the
next
year,
by
that
person
or,
if
he
is
unable
for
any
reason
to
file
the
return,
by
his
guardian,
curator,
tutor,
committee
or
other
legal
representative
.
.
.
For
the
1972
taxation
year
at
least
a
prescribed
form,
Schedule
2
is
shown
on
page
9
in
Exhibit
2,
as
it
was
filled
in
and
annexed
to
Reilly’s
1972
amended
income
tax
return.
Schedule
2
bears
the
title
“Statement
of
Capital
Dispositions’’
together
with
a
paranthetical
note:
“(See
Guide
—
items
57
to
72)”.
A
copy
of
a
pamphlet
“Your
Guide
to
the
1972
Income
Tax
Return”
(the
Guide)
apparently
composed
and
published
by
“National
Revenue,
Taxation”
—
which
is
the
style
in
which
the
Department
of
National
Revenue
appears
to
represent
itself
—
is
Exhibit
4.
The
Schedule
2
form
annexed
to
Reilly’s
amended
1972
income
tax
return
displays
items
under
the
heading:
“Shares”,
with
sums
reported,
a
calculation
and
a
bottom-line
result
opposite
the
printed
direction,
“One-half
of
the
above
Total
Capital
Gain
(or
loss)
(Enter
this
amount
as
‘Taxable
capital
gains
or
allowable
capital
losses’
on
page
2
of
your
return.
If
a
loss,
the
amount
to
be
entered
must
not
exceed
$1,000.)"
No
mention
of
the
disposition
of
land
sold
to
Carma
appears
on
this
Schedule
2
form
or
elsewhere
in
the
returns
prepared
and
filed
for
Reilly
by
Donald
Stanley
Tetz,
CA.
Mr
Test
testified
that
the
particular
schedule
is,
in
effect,
the
amendment
to
the
1972
return.
Mr
Leonard
Gregory
Clark
Fletcher
an
auditor
in
the
estate
and
trust
section
of
the
Calgary
office
of
the
Department
of
National
Revenue
since
October,
1974,
and
an
employee
of
the
Department
since
September,
1967,
also
testified.
The
effect
of
his
testimony
indicated
that
the
Department
of
National
Revenue
was
never
advised
of
Reilly’s
disposition
of
the
land
in
favour
of
Carma
until
after
Reilly’s
death
in
April,
1976.
There
was
no
mention
of
any
oral
or
written
reference
to
Carma
in
the
Department’s
file.
In
1977,
a
clearance
certificate
for
the
deceased’s
estate
was
requested
and
a
departmental
auditor
received
a
copy
of
the
will,
probate
and
a
list
of
assets
as
at
the
date
of
Reilly’s
death,
and
she
wrote
to
the
estate’s
accountant
to
say
that
she
would
be
looking
into
the
Carma
transactions.
So
it
was
that
ultimately
there
came
about
the
notices
of
reassessment
described
in
paragraphs
4
and
6
of
Exhibit
1.
On
the
authority
of
the
decisions
and
reasons
reported
in
Saykaly
v
MNR,
[1976]
CTC
702;
76
DTC
6440,
and
in
The
Queen
v
Columbia
Enterprises
Ltd,
[1973]
CTC
204;
83
DTC
5247,
the
testimony
of
Mr
Tetz
is
most
important
because,
as
was
held
in
Howell
v
MNR,
[1981]
CTC
2241;
81
DTC
230,
and
latterly
in
MD
Glazier
Ltd
v
MNR,
[1983]
CTC
2061;
83
DTC
48,
the
“obtaining
of
professional
advice
in
itself,
and
even
following
that
advice,
does
not
absolve
a
taxpayer
from
his
own
responsibility
in
regard
to
the
preparation
of
his
tax
return’’.
Did
the
fact
of
not
reporting
any
capital
gain
on
the
dispositions
of
his
property
in
the
1972
and
1973
taxation
years,
as
mentioned
in
paragraph
3
of
Exhibit
1
amount
to
misrepresentation?
Clearly
not,
unless
a
capital
gain
had
actually
been
realized
on
those
dispositions.
Whether
such
gain
was
realized,
or
not,
is
not
in
issue
here.
However,
it
would
appear
that
in
agreeing
to
the
particular
formulation
of
that
statement
of
the
facts
and
matters
recited
in
paragraph
3
of
Exhibit
1
(previously
recited
herein)
the
defendant
no
doubt
unintenionally
demonstrated
and
adopted
the
very
same
outlook
and
approach
which
the
plaintiff
avers
in
defence
against
the
defendant’s
allegation
of
misrepresentation.
That
1s,
if
there
were
no
capital
gain
in
relation
to
the
dispositions
of
Reilly’s
lands,
as
the
plaintiff
contends,
then
the
fact
of
not
reporting
any
such
capital
gain
could
never
qualify
as
a
misrepresentation
of
any
sort
at
all.
In
a
very
technical
sense,
then,
the
issue
is
already
determined
against
the
defendant’s
contention
if
the
facts
and
matters
stated
in
paragraph
3
of
Exhibit
1
comprise
the
sole
factual
basis
on
whether
or
not
misrepresentation
can
be
established.
However,
at
the
hearing
of
this
case
counsel
for
the
defendant
adopted
the
position
that
it
is
the
fact
of
not
reporting
a
capital
disposition,
and
not
merely
a
capital
gain,
which
underlines
the
Minister’s
assertion
of
misrepresentation.
Evidence
was
led
and
argument
was
submitted
in
relation
to
latter
fact,
despite
its
having
been
excluded
by
the
restricted
formulation
of
the
agreed
statement
in
paragraph
3
of
Exhibit
1.
Indeed,
this
latter
fact
is
clearly
demonstrated
in
Exhibits
1“G”
and
1“H”.
Since
the
actual
1972
and
1973
returns
which
were
filed
are
no
longer
in
the
possession
of
the
Minister,
these
latters
ones,
photos
of
the
taxpayer’s
copies,
as
are
those
in
Exhibits
2
and
3,
are
the
forms
admitted
in
evidence.
In
order
to
make
any
determination
of
making
“any
misrepresentation
that
is
attributable
to
neglect,
carelessness
or
wilful
default
.
.
.
in
filing
the
return
or
in
supplying
any
information
under
the
Act*’
it
is
necessary
to
have
direct
evidence
of
the
state
of
mind
and
intention
of
“the
taxpayer
or
person
filing
the
return’’
or
other
evidence
upon
which
reasonable
inferences
can
be
drawn
in
regard
to
the
taxpayer’s
or
other
person’s
state
of
mind
and
intention.
Apart
from
the
documentary
evidence
and
the
testimony
of
Mr
Fletcher,
the
only
direct
evidence
and
basis
for
inference
was
the
testimony
of
Mr
Tetz.
Mr
Tetz
testified
that
he
has
been
a
Chartered
Accountant
since
1958
and
has
been
associated
in
practice
with
Tetz,
Broadwell
&
Co
in
Calgary
since
1961.
His
practice
is
conducted
primarily
in
the
field
of
taxation
and
service
to
small
businesses.
He
said
that
he
met
Reilly
around
1963,
was
engaged
by
Reilly,
and
acted
for
him
in
a
professional
capacity
until
Reilly’s
death.
The
relationship
was
not
solely
professional
but
was
also
friendly
and
social.
Mr
Tetz
was
Reilly’s
adviser
in
matters
of
business
and
investments.
Shown
Exhibit
2
(identical
to
Exhibit
1“G”),
Mr
Tetz
recognized
it
as
a
copy
of
the
1972
tax
return,
the
“original”
copy
of
which
is
in
his
file.
The
notation
at
the
bottom
of
the
first
page
“Signed
and
mailed
original
to
tax
ofice
April
30/73”
was
written
by
him.
Shown
Exhibit
3
and
the
copies
of
other
amended
returns
and
schedules
he,
of
course,
acknowledged
the
plain
fact
that
no
capital
disposition
of
the
land
sold
to
Carma
was
reported.
Mr
Tetz
testified
that
the
returns
did
not
reflect
the
Carma
transaction
because
there
was
neither
a
taxable
gain
nor
a
loss
and
so,
he
asserted,
the
transaction
was
not
reportable.
He
testified
also
that
he
would
have
relied
on
Reilly
to
assess
loss
or
gain,
because
Reilly
had
a
good
grasp
of
real
property
values.
Mr
Tetz
said
that
if
he
were
not
preparing
such
a
return
he
would
reflect
the
transaction
even
if
it
were
a
“nil”
return.
He
also
observed
that
1972
was
the
first
year
in
which
capital
gains
were
taxed
and
had
to
be
reported.
In
coming
to
the
decision
in
1973
that
Reilly’s
disposition
of
the
land
sold
to
Carma
did
not
need
to
be
reported,
Mr
Tetz
testified
that
among
the
research,
courses,
commentaries
and
other
sources
which
he
canvassed
in
order
to
advise
clients
on
the
then
new
Income
Tax
Act,
he
relied
principally
on
the
directions
published
in
the
1972
Guide
(Ex
4)
already
mentioned.
Since
he
had
access
to
other
publications
and
sources,
including
the
Act,
to
which
professional
tax
advisers
have
reference
Mr
Tetz
readily
admitted
that
it
is
fair
to
say
that
his
knowledge
of
the
matter
in
issue
was
not
limited
to
the
Guide
alone.
However,
“I
would
have
made
reference
to
this
generally
and
specifically
in
regard
to
this
question”
he
testified.
The
items
in
the
Guide
to
which
Mr
Tetz
referred
in
his
testimony
are:
Page
1
—
Schedules
(2)
Statement
of
Capital
Dispositions
—
If
you
sold
some
property
or
asset,
(other
than
your
home
or
car),
the
profit
from
the
sale
may
be
subject
to
tax.
Otherwise,
ignore
this
schedule.
Page
25
—
Capital
Gains
—
Item
57
Introduction
Most
people
will
not
be
affected
by
the
new
legislation
concerning
capital
gains
or
losses.
This
is
because
the
types
of
property
most
people
own
—
a
home
and
such
personal
effects
as
household
goods
and
automobiles
—
will
not
usually
be
subject
to
capital
gains
provisions.
Your
home
will
not
be
subject
to
capital
gains
as
long
as
you
use
it
only
as
your
principal
residence,
and
personal
effects
do
not
normally
give
rise
to
a
capital
gain
when
sold.
No
capital
gains
or
losses
can
result
from
the
disposition
of
savings
bonds
which
are
acquired
and
redeemed
at
face
value.
A
simple
example
of
capital
gain
you
would
have
to
report
would
be
where
you
have
sold
an
asset,
such
as
a
share
in
a
public
corporation,
for
more
than
its
cost
to
you.
Similarly,
a
loss
would
be
reported
where
you
sold
the
asset
for
less
than
its
cost
to
you.
The
general
rules
to
follow
when
reporting
a
capital
gain
or
loss
depend
upon
the
type
of
asset
sold
during
the
year,
as
shown
on
Schedule
2.
There
will
be
many
exceptions
to
the
rules
outlined
below
for
various
assets.
Contact
your
District
Taxation
Office
if
after
having
read
this
Guide
you
are
in
doubt
about
any
transactions.
Page
26
—
Other
Capital
Properties
—
Item
61
As
Schedule
2
indicates,
Other
Capital
Properties
are
dividend
into
“shares”,
‘‘real
estate”
and
“bonds
and
other
properties”.
(Note
that
real
estate
would
not
include
an
exempt
principal
residence,
nor
a
recreation
property
such
as
a
summer
cottage,
which
is
owned
chiefly
for
personal
use.)
All
gains
and
losses
on
these
assets
should
be
reported,
regardless
of
amount.
Losses
are
offset
against
gains
to
arrive
at
a
net
gain
(or
loss)
for
each
type
—
shares,
real
estate,
bonds
and
other
properties
respectively.
Schedule
2
—
Statement
of
Capital
Dispositions
—
Item
63
You
calculate
your
taxable
capital
gains
and
allowable
capital
losses
for
the
year
by
completing
Schedule
2,
enclosed
with
your
return.
Except
as
previously
indicated,
every
disposition
of
capital
property
must
be
reported
on
Schedule
2.
Page
26
—
Assets
acquired
before
1972
—
Item
67
For
assets
acquired
before
1972,
the
Valuation
Day
value
must
be
considered
when
computing
capital
gains
and
losses.
Valuation
Day
for
shares
liated
in
the
publication
“Valuation
Day
Prices
of
Publicly
Traded
Shares”
(see
your
District
Taxation
Office
for
a
copy)
was
22nd
December,
1971.
Valuation
Day
for
all
other
assets
was
3lst
December,
1971.
To
compute
a
capital
gain
or
loss
on
an
asset
acquired
before
1972,
three
figures
are
required”
—
the
actual
cost,
—
the
Valuation
Day
value,
—
the
Proceeds
of
Disposition
as
described
above.
(Note
that
adjustments
to
the
cost
base
may
change
the
proceeds
of
disposition
for
this
purpose.)
The
median
of
these
three
figures,
that
is,
the
figure
which
is
neither
the
highest
nor
the
lowest,
is
the
base
upon
which
the
capital
gain
or
loss
is
computed,
subject
to
the
election
explained
below.
Where
two
or
more
of
these
three
figures
are
the
same
amount,
that
amount
will
be
the
median.
This
median
figure
is
deemed
to
be
the
adjusted
cost
of
the
asset
and
is
the
amount
to
be
entered
in
column
2
of
Schedule
2
provided
that
there
are
no
adjustments,
contact
your
District
Taxation
Office.
Thus
capital
gains
result
if
the
Proceeds
of
Disposition
exceeds
the
greater
of
cost
and
Valuation
Day
value.
A
capital
loss
result
if
the
Proceeds
of
Disposition
is
less
than
the
lesser
of
cost
and
Valuation
Day
value.
If
the
proceeds
of
Disposition
is
the
median
figure,
no
capital
gain
or
loss
results.
Cross-examined
specifically
in
regard
to
Item
63,
Mr
Tetz
said
that
[at
the
material
times]
he
read
it
in
light
of
the
other
items
to
mean
that
every
disposition
of
capital
property
must
be
reported,
except
dispositions
of
house,
car
or
transactions
resulting
in
no
capital
gain
or
deductible
loss
(“as
previously
indicated”).
It
is
clear,
according
to
this
testimony,
that
at
the
time
Mr
Tetz
was
of
the
opinion
that
such
transactions
were
to
be
ignored
and
therefore
were
not
reportable.
Without
here
sifting
every
question
and
answer
in
Mr
Tetz’
testimony,
the
salient
impression
it
conveys
is
that,
the
Guide’s
guidance
induced
the
opinion
about
which
he
testified
and
that
he
entertained
no
doubt
about
it
at
that
time.
Indeed,
he
testified
that
he
never
came
to
the
conclusion
that
such
transactions
must
be
reported,
but
that
the
“best
wisdom”
has
since
led
him
to
change
his
practice
and
to
report
them
now
for
information
purposes.
Upon
both
examination
in
chief
and
cross-examination,
Mr
Tetz,
in
his
demeanor
and
forthright
answers,
appeared
to
be
a
credible
witness.
The
issue
is
not
whether
Mr
Tetz,
in
forming
his
opinion
at
the
material
time
was
wrong,
but
whether
his
not
reporting
the
disposition
was
attributable
to
neglect,
carelessness
or
wilful
default.
Counsel
for
the
defendant,
on
whom
the
burden
of
proof
according
to
a
balance
of
probabilities
lies,
submitted
extracts
from
two
dictionaries.
The
Shorter
Oxford
Dictionary
—
Third
Edition:
Careless
1.
(now
arch
.
.
.).
2.
Unconcerned;
not
solicitous,
regardless;
having
no
care
of,
about,
to.
3.
Not
taking
due
care,
negligent,
thoughtless;
inaccurate
1579.
4.
Of
things:
Uncared
for;
artless,
négligé
(arch)',
(now
esp)
done,
caused,
or
said
heedlessly.
Neglect
1.
The
fact
of
disregarding,
slighting,
or
paying
no
attention
to,
a
person,
etc;
the
fact
or
conditioin
of
being
so
treated;
a
slight.
b.
Disregard
of,
or
with
respect
to,
something;
indifference
1597.
2.
Want
of
attention
to
what
ought
to
be
done;
negligence.
Also
const
of
1591
b.
An
omission
or
oversight
(now
rare)
1638.
Black’s
Law
Dictionary
—
Fifth
Edition
Neglect.
May
mean
to
omit,
fail,
or
forbear
to
do
a
thing
that
can
be
done,
or
that
is
required
to
be
done,
but
it
may
also
import
an
absence
of
care
or
attention
in
the
doing
Or
omission
of
a
given
act.
And
it
may
mean
a
designed
refusal
or
unwillingness
to
perform
one’s
duty.
In
re
Perkins,
234
Mo
App
716,
117
SW
2d
686,
692.
The
term
is
used
in
the
law
of
bailment
as
synonymous
with
“negligence”.
But
the
latter
word
is
the
closer
translation
of
the
Latin
“negligentia".
Failure
to
pay
money
which
the
party
is
bound
to
pay
without
demand.
An
omission
to
do
or
perform
some
work,
duty,
or
act.
Failure
to
perform
or
discharge
a
duty,
covering
positive
official
misdoing
or
official
misconduct
as
well
as
negligence.
See
also
Excusable
neglect;
Negligence.
Culpable
neglect.
Such
neglect
which
exists
where
the
loss
can
fairly
be
ascribed
to
the
party’s
own
carelessness,
improvidence,
or
folly.
State
ex
rel
Fulton
v
Coburn,
133
Ohio
St
192,
12
NE
2d
471,
477,
10
OO
249.
Willful
neglect.
The
neglect
of
the
husband
to
provide
for
his
wife
the
common
necessaries
of
life,
he
having
the
ability
to
do
so;
or
it
is
the
failure
to
so
by
reason
of
idleness,
profligacy,
or
dissipation.
Counsel
for
the
defendant
referred
as
well
to
the
jurisprudence
which
subsection
152(4)
has
generated.
In
MNR
v
M
Taylor,
[1961]
CTC
211;
61
DTC
1140,
Cameron,
J
held
that
the
omission
of
reportable
information
from
a
return
constitutes
a
misrepresentation,
and
the
pronouncement
was
followed
by
Dumoulin,
J
in
MNR
v
Foot,
[1964]
CTC
317;
64
DTC
5196.
Nowadays,
however,
the
statute
does
not
speak
only
of
making
“any
misrepresentation
or
‘comitting’
any
fraud
in
filing
the
return
or
in
supplying
any
information”
any
fraud
in
filing
the
return
or
in
supplying
any
information’
as
it
did
when
those
cases
were
decided.
In
Saykaly
v
MNR,
[1976]
CTC
702;
76
DTC
6440,
Marceau,
J
found
that
the
taxpayer
in
disassociating
herself
from
fictitious
transactions
invented
by
her
husband
was
negligent
for
not
knowing
or
bothering
to
try
to
know
what
was
going
on
and
in
attesting
personal
income
tax
returns
which
were
presented
to
her
by
her
husband,
his
lawyer
or
his
accountant
without
looking
into
matters
herself.
The
Chairman
of
the
Tax
Review
Board,
in
Froese
v
MNR,
[1981]
CTC
,2282;
81
DTC
240,
held
that
the
appellant,
a
former
farmer
who
had
operated
his
farm
on
a
cash
basis,
was
negligent
in
continuing
to
report
his
later
income
from
selling
land
as
subdivided
lots
instead
of
changing
to
an
accrual
basis;
and
the
chairman
expressed
some
surprise
that
the
appellant
could
not
or
would
not
obtain
professional
advice
in
order
to
proceed
with
care
in
reporting
income
from
a
series
of
transactions
of
some
complexity.
In
the
instant
case,
Reilly
did
obtain
and
rely
on
professional
advice
and,
of
course,
no
fictitious
transactions,
or
fraud,
are
alleged
by
the
defendant.
Much
has
been
written
concerning
the
standards
to
be
achieved
by
taxpayers
in
filing
returns
and
providing
information
lest
the
Minister
reach
back
into
taxation
years
which
Parliament
ordained
would
be
otherwise
foreclosed
against
reassessment.
The
Taylor
case
might
well
have
come
to
the
same
conclusion
if
it
had
been
adjudicated
in
recent
years,
in
view
of
the
facts
found
therein.
But
the
Court
had
to
construe
legislation
there
which
raised
a
barrier
against
any
misrepresentation
on
the
taxpayer’s
part
and
Cameron,
J
no
doubt
correctly
concluded
that
“it
would
be
improper,
therefore,
to
construe
that
term
as
excluding
a
particular
sort
of
misrepresentation
such
as
an
innocent
misrepresentation’’.
That
standard
then
seemed
so
rigid
as
to
condemn
even
honest
mistakes.
Some
eleven
years
later,
Pratte,
J
of
this
Court
came
to
a
different
opinion
while
construing
the
same
legislation
in
MNR
v
Bisson,
[1972]
CTC
446;
72
DTC
6374,
when
he
opined:
In
my
view,
the
fact
that
the
legislator
referred
not
only
to
“misrepresentation”
but
to
“fraud”
indicates
that,
by
the
first
word,
he
meant
innocent
misrepresentation
which,
without
being
fraudulent,
are
still
culpable
in
the
sense
that
they
would
not
have
been
made
if
the
person
committing
them
had
not
been
negligent.
I
therefore
conclude
that
a
taxpayer
who,
without
any
negligence
on
his
part,
commits
an
error
in
declaring
his
income,
does
not
make
a
misrepresentation
within
the
meaning
of
s
46(4)(a)(i).
When
the
Minister
seeks
to
rely
on
this
provision
to
proceed
with
a
re-assessment
after
four
years,
he
must
therefore
not
only
show
that
the
taxpayer
committed
an
error
in
declaring
his
income
but
also
that
that
error
is
attributable
to
negligence
on
his
part.
That
passage
seems
clairvoyant
in
that
it
set
the
stage
for
the
provisions
of
the
new
and
current
legislation
expressed
in
subsection
152(4)
of
the
Act.
According
to
the
interpretation
of
the
former
legislation
enunciated
by
Mr
Justice
Pratte,
the
Minister
could
not
reach
back
beyond
four
years
to
reassess
when
the
taxpayer’s
mistake
was
made
without
negligence.
That
interpretation
appears
to
be
quite
consonant
with
the
provisions
of
subsection
152(4).
So,
when
it
is
now
said
that
the
standard
of
care
is
that
of
a
wise
and
prudent
person,
it
must
be
understood
that
wisdom
is
not
infallibility
and
prudence
is
not
perfection.
In
the
instant
case,
because
Mr
Tetz,
upon
the
careful
and
attentive
reading
of
the
Guide,
which
he
testified
and
demonstrated
that
he
performed,
concluded
that
Reilly’s
disposition
of
land
was
not
reportable,
then
in
not
reporting
it
he
made
no
default,
and
accordingly
no
wilful
default,
because
he
intended
no
such
thing.
It
was
argued
on
behalf
of
the
defendant
that
if
and
when
the
Minister’s
ambiguously
worded
Guide
induces
error
on
the
part
of
a
taxpayer
or
professional
adviser,
it
is
of
no
consequence
in
this
kind
of
litigation
because
the
defendant
is
not
bound
by
that
official
Guide
in
any
event.
That
argument
surely
misses
the
point
of
this
enquiry.
Here
the
issue
is
whether
the
error,
if
any,
be
attributable
to
neglect
or
carelessness.
Mr
Tetz’
demonstrated
diligence
and
care
in
perusing
the
Guide
were
clearly
the
very
antithesis
of
neglect
and
carelessness,
even
if
his
firmly
held
conclusions,
upon
which
he
acted
in
filing
Reilly’s
return
were
wrong.
Therefore,
the
Minister
is
barred
from
making
a
reassessment
back
beyond
the
four-year
limit.
Accordingly,
the
determination
of
the
issue
propounded
in
paragraph
9(b)
of
Exhibit
1,
the
agreed
statement
of
facts
and
matters,
comes
to
this:
the
disposition
by
Reilly
of
the
real
property
described
in
the
letter
agreement
and
repeated
as
parcels
one,
two
and
three
in
the
formal
agreement,
having
taken
place
in
the
1972
taxation
year,
the
notice
of
reassessment
pertaining
to
that
year
is
out
of
time
pursuant
to
subsection
152(4)
of
the
Income
Tax
Act.
Success
in
the
outcome
of
this
action
is
divided,
although
hardly
evenly.
Accordingly,
the
plaintiff
is
entitled
to
recover
from
the
defendant
nine-tenths
of
the
plaintiffs
taxable
costs
of
the
action.
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