Décary,
J:—The
issue
in
this
matter
is
to
determine
if
the
share
of
plaintiff
in
an
amount
of
$65,000
received
by
a
real
estate
partnership
when
a
deposit
was
forfeited,
is
a
taxable
capital
gain
under
the
provisions
of
the
Income
Tax
Act.
The
facts
were
agreed
upon
by
the
parties
and
are
described
in
the
Declaration:
1.
During
the
1977
taxation
year,
Plaintiff
was
one
of
the
partners
of
Grovedale
Realty
Co.
2.
On
March
3,
1977,
an
offer
to
purchase
certain
immoveable
property
located
in
the
City
of
Lachine
was
addressed
by
Administration
Guipar
Inc
to
Grovedale
Realty
Co.
3.
The
purchase
price
indicated
in
the
said
offer
was
one
miliion
three
hundred
and
fifty
thousand
dollars
($1,350,000).
4.
The
offer
to
purchase
was
open
for
acceptance
until
5:00
pm
on
March
3,1977.
5.
The
purchase
price
was
to
be
paid
by
means
of:
(a)
a
deposit
accompanying
the
offer,
payable
to
the
order
of
Canada
Permanent
Trust
“In
Trust”,
in
the
amount
of
sixty-five
thousand
dollars
($65,000),
which
deposit
was
to
be
held
“In
Trust"
until
the
signing
of
the
deed
of
sale
and
to
be
applied
on
account
of
the
purchase
price
at
that
time;
(b)
cash
upon
execution
of
a
valid
deed
of
sale
in
the
amount
of
eight
hundred
and
twenty-nine
thousand
two
hundred
and
one
dollars
and
sixty-five
cents
($829,201.65);
and
(c)
by
the
assumption
of
an
existing
mortgage,
in
the
amount
of
four
hundred
and
fifty-five
thousand
seven
hundred
and
ninety-eight
dollars
and
thrity-five
cents
($455,798.35).
6.
At
the
time
of
the
offer,
a
certified
cheque
in
the
amount
of
sixty-five
thousand
dollars
($65,000)
was
drawn
by
Administration
Guipar
Inc,
payable
to
Canada
Permanent
Trust
“In
Trust”.
7.
A
photcopy
of
this
cheque
accompanying
the
offer
bears
the
following
notation:
“This
is
a
xerox
copy
of
the
$65,000
deposit
which
accompanies
this
offer.
If
the
purchaser
fails
or
refuses
to
sign
the
deed
of
sale
on/or
before
April
18,
1977,
under
the
conditions
stipulated
in
this
offer,
this
offer
shall
become
null
and
void,
ipso
facto,
and
the
$65,000
shall
be
forfeited
to
the
vendor
as
partial
liquidated
damages.
Canada
Permanent
Trust
shall,
upon
demand
by
the
vendor,
immediately
remit
the
$65,000
to
the
vendor.
The
vendor
need
not
give
notice
or
advice
for
such
forfeiture
to
take
place,
and
the
vendor
shall
have
the
right
to
claim
additional
damages.”
8.
The
offer
was
duly
accepted
by
the
vendor,
Grovedale
Realty
Co
and
a
letter
was
addressed
to
Canada
Permanent
Trust
indicating
that
the
property
had
been
sold
and
that
the
purchaser
had
issued
the
deposit
cheque,
payable
to
the
order
of
Canada
Permanent
Trust,
and
further
stating
the
following:
“If
any
interest
accrues
on
this
deposit,
it
should
be
credited
to
the
account
of
Administration
Guipar
Inc.”
9.
Subsequently,
the
prospective
purchaser
failed
to
carry
out
the
transaction.
10.
In
consequence
of
the
purchaser’s
failure
to
complete
the
transaction,
the
amount
deposited
with
the
Canada
Permanent
Trust
was
forfeited
to
Grovedale
Realty
Co,
pursuant
to
the
agreement
between
the
parties,
as
liquidated
damages.
It
was
also
agreed
that
the
evidence
in
the
present
case
would
be
the
evidence
of
two
other
cases:
the
one
of
Maxine
Wise
v
The
Queen,
T-3435-
80
and
the
one
of
Sandra
Lippman
v
The
Queen,
T-3436-80,
as
these
three
defendants
are
partners
of
Grovedale
Realty
Co.
The
documents
filed
under
quote
of
D-1
are
the
offer
to
purchase
and
description
of
property,
the
acceptance
of
the
offer,
the
annotation
at
the
verso
of
the
cheque
being
the
deposit
of
$65,000
and
a
letter
to
Canada
Permanent
Trust
dated
March
3,
1977.
There
are
discrepancies
as
to
the
dates
and
the
amount
in
some
of
these
documents
but
as
the
facts
have
been
admitted
these
discrepancies
have
no
bearing
in
the
case.
The
acceptance
of
the
offer
to
purchase
reads
as
follows:
ACCEPTANCE
BY
VENDOR:
I
accept
the
present
Offer
to
Purchase
the
property
described
on
the
reverse
side
of
this
document.
I
agree
to
pay
to
Canada
Permanent
Trust
a
commission
of
FOUR
(4)
per
cent
of
the
agreed
sale
price,
provided
the
Purchaser
signs
a
valid
Deed
of
Sale
on
or
before
April
30,1977.
It
is
to
be
noted
that
the
acceptance
that
completes
the
meeting
of
the
minds
refers
not
to
the
18th
of
April
but
to
the
30th
of
April.
In
a
transaction
of
an
amount
of
$1,350,000
such
different
dates
for
the
closing
should
have
called
for
an
explanation.
The
notation
on
the
verso
of
the
$65,000
deposit
cheque
was
as
follows:
This
is
a
xerox
copy
of
the
$65,000
deposit
which
accompanies
this
Offer.
If
the
Purchaser
fails
or
refuses
to
sign
the
Deed
of
Sale
on
or
before
April
18,
1977
under
the
conditions
stipulated
in
this
Offer,
this
Offer
shall
become
null
and
void,
ipso
facto,
and
the
$65,000.00
shall
be
forfeited
to
the
Vendor
as
partial
liquidated
damages.
Canada
Permanent
Trust
shall
upon
demand
by
the
Vendor,
immediately
remit
the
$65,000.00
to
the
Vendor.
The
Vendor
need
not
give
notice
or
advice
for
such
forfeiture
to
take
place,
and
the
Vendor
shall
have
the
right
to
claim
additional
damages.
That
notation
refers,
inter
alia,
like
the
offer,
to
the
18th
of
April
and
to
the
fact
that
the
$65,000
shall
be
forfeited
to
the
partnership
without
giving
notice
or
advice
to
the
Trust
Company.
One
has
to
note
that
the
deposit
for
such
event
of
forfeiture
is
labelled
“partial
liquidated
damages”.
The
last
document
is
a
letter
dated
March
3,
1977,
from
Grovedale
Realty
Co,
to
Canada
Permanent
Trust:
March
3,
1977.
Canada
Permanent
Trust,
1091
Decarie
Blvd,
St
Laurent,
Que.
Gentlemen:
We
have
today
sold
through
your
agents
properties
on
45th
Avenue,
Lachine,
Que.
The
Purchaser
Administration
Guipar
Inc
has
issued
a
deposit
cheque
payable
to
your
order
“in
trust”
for
the
sum
of
$65,000.
If
any
interest
accrues
on
this
deposit
it
should
be
credited
to
the
account
of
Administration
Guipar
Inc.
Such
interest
however,
shall
not
run
beyond
30
days
from
the
date
hereof.
Notwithstanding,
we
want
it
clearly
understood
that
the
$65,000
you
are
holding
in
trust
is
for
our
account
to
be
applied
to
the
purchase
price
and
in
effect
this
is
now
our
money
which
will
be
physically
transferred
to
us
upon
the
formal
conveyance
of
the
property
to
Administration
Guipar
Inc.
Furthermore,
if
there
is
a
default
on
the
part
of
the
Purchaser,
we
will
ask
you
to
forward
these
monies
to
us
without
a
conveyance
taking
place.
Yours
truly
GROVEDALE
REALTY
CO.
Per:
cc
Mr
Yvan
Soulard
Mr
Yvon
Robert
Jr.
We,
the
undersigned,
Yvan
Soulard
and
Yvon
Robert,
hereby
acknowledge
receipt
of
a
copy
of
this
letter.
Feb.
18,
1977
(and
signed
by
Messrs
Yvan
Soulard
and
Yvon
Robert
Jr).
That
letter
shows
that
the
date
and
the
amount
of
the
deposit
were
changed
without
being
initialled.
The
Act
includes,
at
clause
54(c)(ii)(B),
as
being
a
disposition:
54.
In
this
subdivision,
(a)
.
..
(b)
...
(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,
(ii)
any
transaction
or
event
by
which
(A)
.
.
.
(B)
any
debt
owing
to
a
taxpayer
or
any
other
right
of
a
taxpayer
to
receive
an
amount
is
settled
or
cancelled,
(C)
..
.
(D)
..
.
It
is
my
opinion
that
on
the
3rd
of
March
1977,
by
its
acceptance
of
the
offer
to
purchase,
the
partnership
had
a
debt
owing
to
it
or
a
right
to
an
amount
totalling
$1,350,000;
that
there
being
no
completion
of
the
sale,
no
closing,
then
on
the
18th
of
April
there
was,
ipso
facto,
forfeiture
of
the
deposit
that
had
then
to
be
remitted
to
the
partnership;
that
the
forfeit
had
been
provided
for
in
the
notation
on
the
deposit
cheque;
that
in
the
letter
to
the
Canada
Permanent
Trust
Company
it
is
stated
that
in
case
of
default
the
moneys
shall
be
transmitted
to
the
partnership
without
conveyance;
that
the
letter
of
Grovedale
Realty
Co,
to
the
Canada
Permanent
Trust
Company
establishes
that
moneys
of
the
deposit
are
moneys
of
the
partnership.
It
is
well
established
that
the
Defendant
cannot
be
bound
by
an
error
of
her
servants
in
a
document
like
an
explanation
in
a
notice
of
assessment.
The
solution
of
the
problem,
as
I
see
it,
does
not
require
to
deal
with
the
matter
of
the
damages
the
Plaintiff
has
alleged.
It
is
my
considered
opinion
that
the
facts
of
the
case
fall
within
the
ambit
of
clause
54(c)(ii)(B)
of
the
Act.
Indeed,
there
was
a
debt
of
an
amount
of
$1,350,000
that
was
owed
to
the
partnership
and
was
subject
to
certain
conditions
and
the
said
debt
was
cancelled
by
the
receipt
of
the
deposit
that
has
been
forfeited.
Furthermore,
the
right
to
the
amount
of
either
$1,350,000
or
$65,000
was
settled
by
the
receipt
of
the
latter
amount.
In
either
event,
the
receipt
of
$65,000
is
a
disposition
within
the
meaning
of
clause
54(c)(ii)(B)
of
the
Act.
The
amount
forfeited
being
included
in
the
definition
of
disposition,
it
is
therefore
a
taxable
capital
gain
under
the
provisions
of
clause
40(i)(a)
of
the
Act
and
plaintiff
has
been
properly
assessed
on
her
share
of
the
capital
gain
of
the
partnership
under
the
provisions
of
sections
38
and
39
of
the
Act.
The
case
shall
be
dismissed
with
costs.
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