This
appeal
is
from
a
reassessment
for
the
appellant’s
1988
taxation
year.
It
has
to
do
with
the
inclusion
by
the
Minister
of
National
Revenue
of
the
sum
of
$20,000
pursuant
to
subsection
15(2)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
facts
are
relatively
undisputed.
The
appellant
is
the
wife
of
John
Meeuse,
the
sole
shareholder
of
John
Meeuse
Limited,
a
corporation
that
formerly
carried
on
a
farming
business.
She
was
therefore
"connected
with"
John
Meeuse
for
the
purposes
of
subsection
15(2).
The
corporation's
fiscal
period
in
1988
and
1989
was
April
30.
On
August
31,
1988
the
corporation
loaned
Mrs.
Meeuse
$20,000
for
the
purpose
of
erecting
a
storage
building
on
a
parcel
of
land
owned
by
her.
She
in
fact
used
the
money
for
that
purpose.
On
January
10,
1989,
within
the
corporation's
same
fiscal
period,
she
repaid
the
loan
by
cheque
and
the
money
was
deposited
to
the
corporation's
bank
account
with
Lloyd’s
Bank.
The
Minister
assessed
her
for
1988
on
the
$20,000
under
subsection
15(2)
of
the
Income
Tax
Act
on
two
alternative
premises:
(a)
that
the
loan
was
not
repaid
within
one
year
from
the
end
of
the
taxation
year
of
the
corporation
in
which
the
loan
was
made;
or
(b)
in
any
event
the
repayment
was
part
of
a
series
of
loans
or
other
transactions
and
repayments.
Subsection
15(2)
requires
the
inclusion
in
income
of
amounts
of
corporate
loans
to
shareholders
or
persons
connected
with
them
unless
certain
conditions
are
met.
It
is
common
ground
that
the
specific
conditions
in
paragraph
15(2)(a)
have
not
been
fulfilled.
This
appellant
contends,
however,
that
the
conditions
in
paragraph
15(2)(b)
have
been
met.
That
subsection
excludes
the
operation
of
subsection
15(2)
where:
15(2)(b)
the
loan
or
indebtedness
was
repaid
within
one
year
from
the
end
of
the
taxation
year
of
the
lender
or
creditor
in
which
it
was
made
or
incurred
and
it
is
established,
by
subsequent
events
or
otherwise,
that
the
repayment
was
not
made
as
part
of
a
series
of
loans
or
other
transactions
and
repayments.
In
order
to
understand
the
respondent's
position,
it
is
necessary
that
I
set
out
in
somewhat
greater
detail
the
facts
relating
to
Mrs.
Meeuse’s
dealings
with
the
company.
It
appears
that
in
February
of
1987
she
borrowed
$20,000
from
the
company
and
repaid
it
in
August
of
1987.
The
evidence
does
not
disclose
the
purpose
of
the
loan.
In
1987
the
company
was
seeking
to
sell
a
1978
Corvette,
which
it
owned,
for
$12,000.
It
was
unsuccessful
in
obtaining
the
price
it
wanted.
Mrs.
Meeuse
wanted
to
buy
a
Toyota
and
the
dealer
was
prepared
to
allow
$12,000
for
the
Corvette
as
a
trade-in.
The
Corvette
was
traded
in
as
part
of
the
price
of
the
Toyota
that
Mrs.
Meeuse
bought
giving
rise
to
a
further
indebtedness
of
$12,000
by
her
to
the
company
for
a
total
indebtedness
of
$32,000.
Toward
the
end
of
1988,
or
the
beginning
of
1989,
Mrs.
Meeuse
sold
her
own
house
and
on
January
10,
1989
repaid
the
entire
indebtedness
of
$32,000
to
the
company
out
of
the
proceeds.
On
January
31,
1989,
she
borrowed
a
further
$70,000
from
the
company
as
part
of
the
amount
of
$210,000
required
to
purchase
a
franchise
for
a
purveyor
of
coffee
known
as
"Second
Cup".
The
balance
of
the
amount
needed
for
this
purchase
came
from
whatever
was
left
from
the
proceeds
of
the
sale
of
her
house,
as
well
as
a
loan
from
her
father-in-law.
Mrs.
Meeuse
testified
that
the
$70,000
has
since
been
repaid
to
the
company,
although
the
evidence
does
not
disclose
just
when
this
was
done.
On
these
facts
the
Crown
contends
that
the
repayment
of
the
$20,000
on
January
10,
1989
was
not
a
bona
fide
repayment
at
all,
or
alternatively
that
it
was
part
of
a
series
of
loans
and
repayments
within
the
meaning
of
subsection
15(2).
The
first
contention
that
it
was
not
a
bona
fide
repayment
at
all
appears
to
be
based
on
paragraph
21
of
Interpretation
Bulletin
IT-119R3
which
reads
as
follows:
It
is
the
Department's
view
that
a
bona
fide
repayment
has
not
been
made
where
a
loan
or
debt
is
"repaid"
near
the
end
of
the
year
and
shortly
after
the
end
of
that
year
is
reborrowed
from
the
same
or
a
related
lender
or
reincurred
with
the
same
or
a
related
creditor.
Interpretation
Bulletins
are
a
useful
indication
of
Departmental
practice
but
they
are
of
course
not
law.
While
one
might
conceive
of
a
set
of
facts
where
the
views
in
paragraph
21
might
be
warranted,
that
is
not
the
case
here.
There
would
need
to
be
evidence
of
dissimulation,
or
sham,
or
artificiality
and
none
of
these
exist
here.
The
$20,000
loan
was
a
bona
fide
loan
made
and
used
for
a
genuine
business
purpose.
It
was
paid
back
out
of
Mrs.
Meeuse's
own
funds
derived
from
a
source
—
the
sale
of
her
house
—
that
was
wholly
independent
of
the
company.
I
have
no
difficulty
in
concluding
that
the
loan
was
genuinely
repaid
on
January
10,
1989
at
a
time
that
was
within
the
company's
fiscal
period
in
which
the
loan
was
made
and
well
over
a
year
before
the
end
of
the
company's
1990
taxation
year.
The
second
question
is
whether
the
repayment
was
part
of
a
“series
of
loans
and
repayments"
within
the
meaning
of
paragraph
15(2)(b).
The
word
"series"
is
susceptible
of
a
number
of
meanings
depending
on
the
context.
It
implies
a
numerical,
spatial
or
temporal
sequence
of
things
that
are
logically
or
factually
related
or
connected.
It
can,
for
example,
mean
a
sequence
of
numbers
in
logical
order.
A
simple
example
would
be
1,
4,
9,
16,
25,
36.
It
could
mean
a
sequence
of
related
or
connected
events.
The
definition
in
the
Random
House
Dictionary
is
instructive:
Series.
A
group
or
number
of
related
or
similar
things,
events
etc.
arranged
or
occurring
in
temporal
spatial
or
other
order
of
succession.
.
.
.
That
is
the
only
part
of
the
definition
I
propose
to
read.
The
courts
of
both
British
Columbia
and
Ontario
have
commented
on
the
meaning
of
the
word
"series".
For
example
in
Allan
v.
McLennan
(1916),
31
D.L.R.
617,
23
B.C.R.
515,
the
British
Columbia
Court
of
Appeal
said
at
page
622
(B.C.R.
531):
A
succession
of
disconnected
transactions
of
the
same
kind,
each
complete
in
itself,
is
not,
legally
speaking,
turned
into
a
''series"
simply
because
the
representation
in
each
case
was
the
same,
because
[of]
the
necessary
thread
of
continuity
"from
beginning
to
end".
Similarly,
in
Mason
v.
Grand
Trunk
Railway
Co.
(1904),
3
O.W.R.
810,
8
O.L.R.
28
(Ch.),
Mr.
Justice
Anglin
said
at
page
811
(O.L.R.
29):
There
is
no
succession
of
things
or
events
such
as
the
word
"series"
usually
implies.
Webster
defines
"series"
as
"a
number
of
things,
or
events,
standing,
or
succeeding,
in
order
and
connected
by
a
like
relation".
.
.
.
Here
the
only
semblance
of
connection
by
relation
between
the
several
transactions
or
occurrences,
upon
which
the
separate
rights
to
relief
are
alleged
to
arise,
is
the
motive
or
design
imputed
to
the
defendants.
This
is
not
an
ingredient
essential
to
the
cause
of
action
of
any
of
the
plaintiffs,
whether
viewed
as
founded
upon
tort
or
arising
out
of
contract,
and
in
my
opinion
does
not
suffice
to
form
of
the
transactions
or
occurrences
set
forth
in
the
statement
of
claim,
otherwise
wholly
independent
and
unconnected,
a
"series"
so
as
to
justify
the
joinder
in
this
action.
.
.
.
I
do
not
think
that
a
mere
succession
of
loans
is
sufficient
to
constitute
them
a
series
without
more.
This,
I
think,
is
a
mechanical
and
simplistic
interpretation
of
paragraph
15(2)(b)
of
the
Income
Tax
Act
that
ignores
its
purpose.
It
must
be
borne
in
mind
that
the
purpose
of
subsection
15(2)
is
to
prevent
corporate
funds
to
be
paid
out
to
shareholders
or
persons
connected
with
them
otherwise
than
by
way
of
dividend
under
the
guise
of
loans.
Where
a
loan
is
made
to
a
shareholder
and
is
repaid
near
to
the
ena
of
the
expiry
of
the
year
mentioned
in
paragraph
15(2)(b)
and
then
immediately
a
similar
amount
is
reloaned
to
the
shareholder
after
the
year-end,
and
this
process
is
repeated
year
after
year
it
is
obvious
that
this
rolling
forward
of
the
obligation
constitutes
a
perpetual
deferral
of
the
tax
obligation
and
defeats
the
purpose
of
subsection
15(2).
Where
we
have
a
bona
fide
borrowing
for
a
genuine
business
purpose
a
repayment
of
the
funds
from
an
independent
source
and
a
unrelated
subsequent
borrowing
for
a
wholly
different
purpose
I
do
not
think
that
this
is
the
type
of
abuse
at
which
the
concluding
words
of
paragraph
15(2)(b)
are
aimed.
It
must
be
recognized
that
a
finding
that
the
repayment
of
a
loan
is
part
of
a
series
of
loans
ana
repayments
has
serious
implications
to
a
taxpayer
who
is
in
effect
punished
by
being
unable
to
deduct
a
repayment
of
a
subsequent
loan
taxed
under
subsection
15(2)
and
forming
part
of
a
series
in
a
later
year
under
paragraph
20(1
)(j).
For
this
reason
a
Court
should
be
reluctant
to
adopt
the
sweeping
interpretation
of
the
word
"series"
urged
by
the
respondent
where
one
that
is
more
consonant
both
with
the
ordinary
and
accepted
meaning
of
the
term
and
with
the
scheme
of
the
Act
as
a
whole
is
available.
In
this
I
find
support
in
the
judgment
of
Mr.
Justice
Cartwright
in
the
Supreme
Court
of
Canada
in
Highway
Sawmills
Ltd.
v.
M.N.R.,
[1966]
S.C.R.
384,
[1966]
C.T.C.
150,
66
D.T.C.
5116,
a
judgment
of
the
Supreme
Court
of
Canada.
Mr.
Justice
Cartwright
said
at
page
393
(C.T.C.
157-58,
D.T.C.
5120):
The
answer
to
the
question
what
tax
is
payable
in
any
given
circumstances
depends,
of
course,
upon
the
words
of
the
legislation
imposing
it.
Where
the
meaning
of
those
words
is
difficult
to
ascertain
it
may
be
of
assistance
to
consider
which
of
two
constructions
contended
for
brings
about
a
result
which
conforms
to
the
apparent
scheme
of
the
legislation.
Similarly,
Mr.
Justice
Cameron
in
a
decision
of
the
Exchequer
Court,
TransCanada
Investment
Corp.
v.
M.N.R.,
[1953]
C.T.C.
353,
53
D.T.C.
1227
(Ex.
Ct.),
(and
his
judgment
was
affirmed
in
[1956]
S.C.R.
29,
[1955]
C.T.C.
275,
55
D.T.C.
1191),
said
at
page
299
(C.T.C.
360,
D.T.C.
1231):
But
in
my
view,
there
is
another
interpretation
that
may
be
put
upon
it,
an
interpretation
which
I
think
is
more
consonant
with
the
intention
of
Parliament
as
I
deem
it
to
be
from
the
language
itself.
Again
in
Shannon
Realties
v.
St.
Michel
(Ville),
[1924]
A.C.
85,
[1924]
1
D.L.R.
119
it
was
stated
at
pages
192-93
(D.L.R.
124):
.
.
.where
alternative
constructions
are
equally
open,
that
alternative
is
to
be
chosen
which
will
be
consistent
with
the
smooth
working
of
the
system
which
the
statute
purports
to
be
regulating.
More
recently
we
have
the
guidance
of
the
Supreme
Court
of
Canada
in
Fries
v.
The
Queen,
[1990]
2
S.C.R.
1322,
[1990]
2
C.T.C.
439,
90
D.T.C.
6662,
where
Mr.
Justice
Sopinka,
speaking
for
the
Court
said
at
page
1323
(C.T.C.
439,
D.T.C.
6662):
We
are
not
satisfied
that
the
payments
by
way
of
strike
pay
in
this
case
come
within
the
definition
of
“income.
.
.from
a
source"
within
the
meaning
of
section
3
of
the
Income
Tax
Act.
In
these
circumstances
the
benefit
of
the
doubt
must
go
to
the
taxpayers.
The
appeal
is
therefore
allowed
and
the
decision
of
the
Tax
Review
Board
is
restored.
The
appellants
are
to
have
their
costs
throughout.
Here,
if
there
were
any
doubt
as
to
the
meaning
of
the
word
series,
the
doubt
of
that
must
necessarily
go
to
the
taxpayer
and
the
narrower
interpretation
adopted.
For
these
reasons
and
notwithstanding
Mr.
Bourgeois’
able
and
lucid
argument,
I
am
allowing
the
appeal
with
costs
and
referring
the
matter
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
on
the
basis
that
the
sum
of
$20,000,
included
in
the
appellant's
income
for
1988
under
subsection
15(2)
of
the
Income
Tax
Act,
is
not
to
be
included
in
her
income
for
that
year.
Appeal
allowed.
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