Bastin,
DJ:—This
is
an
action
by
a
taxpayer
to
set
aside
a
reassessment
of
his
income
tax
for
the
year
1969,
which
increased
his
tax
by
$8,247.71
with
interest
of
$1,505.20
based
on
the
assumption
that
he
should
be
deemed
to
have
received
in
that
taxation
year
a
taxable
benefit
under
paragraph
85A(1)(a)
equal
to
the
amount
by
which
the
value
of
certain
shares
he
purchased
from
the
Nova
Scotia
Trust
Company
on
that
date
exceeded
the
amount
paid
to
the
company
therefor
by
him.
Paragraph
85A(1)(a)
reads
as
follows:
85A.
(1)
Where
a
corporation
has
agreed
to
sell
or
issue
shares
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm’s
length
to
an
employee
of
the
corporation
or
of
a
corporation
with
which
it
does
not
deal
at
arm’s
length,
(a)
if
the
employee
has
acquired
shares
under
the
agreement,
a
benefit
equal
to
the
amount
by
which
the
value
of
the
shares
at
the
time
he
acquired
them
exceeds
the
amount
paid
or
to
be
paid
to
the
corporation
therefor
by
him
shall
be
deemed
to
have
been
received
by
the
employee
by
virtue
of
his
employment
in
the
taxation
year
in
which
he
acquired
the
shares;
I
consider
that
the
word
“acquire”
as
used
in
paragraph
85A(1)(a)
of
the
Income
Tax
Act
has
its
ordinary
meaning
of
to
gain
or
to
get
and
this
would
occur
when
something
was
purchased
whether
for
cash
or
on
credit.
The
issue
in
this
case
is
on
what
date
did
a
binding
agreement
for
the
sale
of
the
shares
in
question
to
the
plaintiff
come
into
existence.
The
contention
of
the
defendant
is
that
the
written
application
for
shares
dated
July
24,
1968
was
an
offer
which
was
not
accepted
by
the
company
until
it
issued
the
stock
certificate
for
the
shares
to
the
plaintiff
on
July
24,
1969.
I
do
not
agree.
The
plaintiff
was
the
president
and
general
manager
of
the
Nova
Scotia
Trust
Company.
He
testified
that
in
July
1968
the
directors
of
the
company
decided
to
sell
shares
in
the
company
to
senior
employees
on
credit
to
strengthen
the
relationship
between
such
employees
and
the
company
to
prevent
them
from
being
lured
away
by
other
companies.
A
similar
plan
had
been
tried
in
1963
when
3,000
shares
had
been
offered
but
only
2,296
had
been
sold.
The
executive
committee,
consisting
of
the
plaintiff
and
five
other
directors,
passed
a
resolution
on
July
11,
1968
to
effectuate
the
plan.
The
form
of
the
resolution
was
the
joint
composition
of
the
plaintiff
and
several
other
directors
and
was
in
the
following
terms:
Resolution
passed
at
a
meeting
of
the
Executive
Committee
of
The
Nova
Scotia
Trust
Company
on
Thursday,
July
11,
1968:
The
Executive
Committee
approved
a
plan
to
be
submitted
to
the
next
meeting
of
the
Board
of
Directors
whereby
704
shares
of
unsubscribed
Company
stock
out
of
an
original
allotment
of
3,000
made
in
1963
be
made
available
to
employees
of
the
Company
with
a
minimum
of
15
years’
service
augmented
by
a
further
allotment
of
563
shares
for
a
total
of
1,267
shares.
This
will
result
in
a
total
Issued
Capital
Stock
of
76,500
shares.
A
resolution
terminating
the
original
plan
as
passed
by
the
Executive
Committee
on
January
7,
1966
was
on
motion
rescinded.
Subscriptions
are
to
be
based
on
the
following
conditions:—
1.
Shares
will
be
made
available
to
those
with
15
or
more
years
of
service
at
the
price
of
$35
per
share
which
is
approximately
the
current
market
price.
2.
Payment
will
be
made
over
a
period
of
three
years
from
the
subscription
date
with
an
immediate
down
payment
of
10%
of
the
purchase
price
and
the
balance
at
the
rate
of
30%
a
year
but
payments
may
be
accelerated.
3.
A
share
certificate
will
not
be
issued
until
the
shares
subscribed
are
paid
for
in
full
and,
if
paid
before
the
three-year
period
will
not
be
sold
or
transferred
on
the
books
of
the
company
under
three
years
from
the
subscription
date,
the
only
exception
to
this
being
the
sale
or
exchange
of
shares
based
upon
any
merger
or
amalgamation
approved
by
the
shareholders.
4.
In
the
event
of
the
death
of
a
subscriber
before
his
or
her
certificate
is
issued,
a
certificate
shall
be
issued
to
the
subscriber’s
estate
for
the
number
of
shares
paid
for
in
full
at
the
date
of
death
of
the
subscriber.
5.
No
dividend
will
be
paid
until
the
subscribed
shares
are
paid
for
in
full.
Following
the
passing
of
this
resolution
the
plaintiff
prepared
a
form
of
application
for
shares,
approached
five
employees
who
had
been
in
the
company
for
over
15
years
and
had
each
of
them
complete
a
form
indicating
the
number
of
shares
each
wished
to
buy.
As
the
five
employees
agreed
to
purchase
a
total
of
520
shares,
the
plaintiff
signed
an
application
to
buy
847
shares,
being
the
remainder
of
the
1,267
shares
which
were
to
be
made
available.
The
same
form
was
used
in
each
case.
The
plaintiff’s
form
of
application
was
as
follows:
The
Executive
Committee
To:
Board
of
Directors
The
Nova
Scotia
Trust
Company
The
Nova
Scotia
Trust
Company
I
hereby
apply
for
847
shares
of
the
Capital
Stock
of
The
Nova
Scotia
Trust
Company.
I
agree
to
pay
$35.00
per
share
and
to
adhere
to
the
following
conditions:
1.
That
payment
will
be
made
over
a
period
of
three
years
from
the
subscription
date
with
an
immediate
down
payment
of
10%
of
the
purchase
price
and
the
balance
at
the
rate
of
30%
a
year
but
payments
may
be
accelerated.
2.
That
I
will
not
sell,
assign
or
transfer
my
right
to
any
part
of
my
subscription
until
a
share
certificate
is
issued
to
me
on
my
subscription
being
paid
in
full
and
in
no
case
before
May
15,
1971.
3.
That
I
shall
not
be
entitled
to
any
dividend
on
my
subscribed
shares
until
paid
for
in
full.
DATED
at
Halifax,
NS,
this
24th
day
of
July,
1968.
Donald
G
Grant
At
a
meeting
of
the
board
of
directors
held
on
July
25,
1968
plaintiff
presented
the
six
applications
for
shares.
One
of
the
directors
mentioned
that
another
employee,
LC
MacKinnon,
was
qualified
through
15
or
more
years
of
service
to
participate
in
the
plan.
As
MacKinnon
was
then
on
vacation,
plaintiff
undertook
to
hold
for
him
out
of
the
847
shares
he
had
applied
for
whatever
number
of
shares
MacKinnon
might
wish
to
purchase.
On
his
return
from
vacation
MacKinnon
agreed
to
take
12
shares.
Plaintiff
testified
that
the
shares
of
the
company
were
widely
distributed
among
500
shareholders.
They
were
not
listed
and
had
sold
over
the
counter
at
$45
a
share
prior
to
the
amendment
to
the
Bank
Act
eliminating
the
ceiling
on
bank
interest
of
6%
and
permitting
chartered
banks
to
invest
in
mortgages.
When
this
change
in
the
law
occurred
their
market
price
fell
to
$35
a
share.
Plaintiff
admitted
that
he
had
only
paid
$1,000
into
the
deposit
account.
On
July
24,
1969
he
had
his
bank
pay
the
full
amount
of
the
price
of
the
shares.
By
then
their
market
value
had
risen
to
$70
a
share
as
a
result
of
a
takeover
bid
by
another
trust
company,
the
Central
Trust
Company,
which
in
the
spring
of
1969
published
an
offer
in
the
newspapers
to
buy
a
specified
number
of
the
shares
of
the
Nova
Scotia
Trust
Company
at
a
price
of
$70
a
share.
There
is
no
evidence
that
plaintiff
on
July
25,
1968,
the
date
he
applied
for
the
shares,
had
any
knowledge
that
this
development
would
occur.
An
employee
of
the
company,
Mr
L
C
Cameron,
who
acted
as
secretary
at
the
meeting
of
the
board
of
directors
on
July
25,
1968,
made
a
list
of
the
employees
participating
in
the
scheme
and
on
this
list
placed
the
deposit
account
number
to
be
used
for
the
payment
for
the
shares.
No
such
number
was
inserted
for
Mr
MacKinnon.
The
list
in
its
final
form
is
as
follows:
|
Employees’
Stock
Savings
|
Deposit
Account
|
|
847
|
835
|
D
G
Grant
|
20-0358
|
|
12
|
|
L
C
MacKinnon
|
|
|
100
|
|
R
B
Blight
|
20-0359
|
|
100
|
|
A
MacBean
|
20-0360
|
|
20
|
|
R
M
Gordon
Winnifred
Gordon
|
20-0361
|
|
100
|
|
E
K
Davison
|
20-0362
|
|
100
|
|
J
M
Camerson
|
20-0363
|
|
The
directors
passed
the
following
resolution:
|
|
Resolution
passed
at
a
meeting
of
the
Board
of
Directors
of
The
Nova
Scotia
Trust
Company
on
July
25,1968:
The
Executive
Committee
approved
a
plan
to
be
submitted
to
the
next
meeting
of
the
Board
of
Directors
whereby
704
shares
of
unsubscribed
Company
stock
out
of
an
original
allotment
of
3,000
made
in
1963
be
made
available
to
employees
of
the
Company
with
a
minimum
of
15
years’
service
augmented
by
a
further
allotment
of
563
shares
for
a
total
of
1,267
shares.
This
will
result
in
a
total
issued
Capital
Stock
of
76,500
shares.
Subscriptions
are
to
be
based
on
the
following
conditions:—
1.
Shares
will
be
made
available
to
those
with
15
or
more
years
of
service
at
the
price
of
$35
per
share
which
is
approximately
the
current
market
price.
2.
Payment
will
be
made
over
a
period
of
three
years
from
the
subscription
date
with
an
immediate
down
payment
of
10%
of
the
purchase
price
and
the
balance
at
the
rate
of
30%
a
year
but
payments
may
be
accelerated.
3.
A
share
certificate
will
not
be
issued
until
the
shares
subscribed
are
paid
for
in
full
and,
if
paid
before
the
three-year
period
will
not
be
sold
or
transferred
on
the
books
of
the
Company
under
three
years
from
the
subscription
date,
the
only
exception
to
this
being
the
sale
or
exchange
of
shares
based
upon
any
merger
or
amalgamation
approved
by
the
shareholders.
4.
In
the
event
of
the
death
of
a
subscriber
before
his
or
her
certificate
is
issued,
a
certificate
shall
be
issued
to
the
subscriber’s
estate
for
the
number
of
shares
paid
for
in
full
at
the
date
of
death
of
the
subscriber.
5.
No
dividend
will
be
paid
until
the
subscribed
shares
are
paid
for
In
full.
Upon
motion
of
Mr
Robertson,
seconded
by
Mr
Piercey
and
unanimously
carried,
the
plan
was
approved
as
presented.
There
are
no
rigid
formalities
required
to
create
a
contract.
If
the
parties
intend
to
enter
into
a
binding
agreement
and
arrive
at
a
consensus
ad
idem,
the
court
will
give
effect
to
it.
The
whole
transaction,
both
words
and
conduct
of
the
parties,
will
be
looked
at
and
it
is
immaterial
when
the
various
steps
leading
to
a
consensus
took
place
if
from
all
the
facts
it
can
be
determined
that
a
contract
was
intended.
The
company
decided
to
make
available
1,267
shares
to
its
senior
employees
and
then
carried
out
its
plan
in
two
stages.
The
terms
of
the
plan
were
set
out
in
the
resolution
of
the
executive
committee
passed
on
July
11,
1968.
At
its
meeting
on
July
25,
1968
the
board
of
directors
received
the
employees’
applications
for
shares
made
pursuant
to
the
plan
and
confirmed
their
sale:
It
was
on
that
date
that
plaintiff
acquired
835
shares
and
it
was
the
market
value
of
the
shares
on
that
date
which
is
to
be
considered.
Counsel
for
the
defendant
argued
that
for
a
contract
to
be
made
by
the
tender
of
the
application
for
shares
and
the
passing
by
the
board
of
directors
of
the
resolution,
both
documents
must
be
in
exactly
the
same
terms.
Condition
3
of
the
resolution
reads
as
follows:
3.
A
share
certificate
will
not
be
issued
until
the
shares
subscribed
are
paid
for
in
full
and,
if
paid
before
the
three-year
period
will
not
be
sold
or
transferred
on
the
books
of
the
Company
under
three
years
from
the
subscription
date,
the
only
exception
to
this
being
the
sale
or
exchange
of
shares
based
upon
any
merger
or
amalgamation
approved
by
the
shareholders.
The
application
contains
the
following
paragraph:
2.
That
I
will
not
sell,
assign
or
transfer
my
right
to
any
part
of
my
subscription
until
a
share
certificate
is
issued
to
me
on
my
subscription
being
paid
in
full
and
in
no
case
before
May
15,
1971.
The
resolution
contains
as
condition
4
the
following:
4.
In
the
event
of
the
death
of
a
subscriber
before
his
or
her
certificate
is
issued,
a
certificate
shall
be
issued
to
the
subscriber’s
estate
for
the
number
of
shares
paid
for
in
full
at
the
date
of
death
of
the
subscriber.
The
application
for
shares
made
no
reference
to
this
condition.
The
answer
to
this
argument
is
that
the
applications
for
shares
were
made
in
pursuance
of
and
subject
to
the
conditions
of
the
two
resolutions
authorizing
this
employee
stock
savings
plan.
The
two
conditions
were
therefore
implied
in
the
form
of
application.
It
is
a
reasonable
inference
that
plaintiff
inserted
clause
2
in
the
form
of
application
to
emphasize
that
the
plan
was
intended
to
give
the
employees
a
permanent
interest
in
the
company
and
not
to
encourage
short-term
speculation.
In
my
opinion
the
use
of
May
15,
1971,
instead
of
the
exact
wording
of
the
resolution,
was
a
purposeless
variation
by
the
plaintiff
when
drawing
the
document
which
is
of
no
legal
significance.
This
difference
has
no
effect
on
the
consensus
which
created
a
binding
agreement
to
sell
the
shares.
There
can
be
no
question
but
that
the
directors
of
the
company,
and
the
employees
who
participated
in
this
plan
for
acquiring
shares,
intended
that
their
submission
of
written
applications
for
a
specified
number
of
shares
and
the
acceptance
by
the
directors
of
these
applications,
and
the
passing
of
the
resolution
approving
of
the
plan
to
sell
1,267
shares
to
such
employees
would
constitute
a
binding
agreement
enforceable
by
either
party.
The
plaintiff
acquired
the
right
to
847
shares
on
July
25,
1968
and
became
trustee
for
MacKinnon
for
12
of
them,
subject
to
MacKinnon
paying
the
price
of
the
shares.
The
company
held
his
application
which
contained
an
enforceable
promise
to
pay
for
the
shares.
If
the
shares
had
fallen
in
value,
plaintiff
could
not
have
repudiated
his
promise
and
the
company
had
no
right
to
cancel
its
agreement
because
the
shares
had
appreciated
in
value.
In
accordance
with
the
intention
of
the
company
and
the
employees,
the
latter
acquired
the
shares
they
had
applied
for
when
the
directors
passed
the
resolution
confirming
the
plan
on
July
25,
1968.
Since
on
that
date
the
shares
were
worth
no
more
than
the
price
to
be
paid
by
them,
the
company
conferred
no
benefits
on
them
by
selling
the
shares.
I
give
judgment
for
the
plaintiff
with
costs
to
be
taxed.
Plaintiff’s
assessment
for
the
year
in
question
is
referred
back
to
the
Minister
for
reassessment
not
inconsistent
with
the
reasons.
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