Claude Tousignant v. Minister of National Revenue, [1993] 1 CTC 2250, [1993] DTC 522, [1993] 1 CTC 2461, [1993] DTC 530

Tremblay, T.C.C.J.:— This appeal was heard in Quebec City on April 28, 1992.

1. Point at issue

According to the originating proceedings, the question is whether the appellant was correct in calculating his income for the 1985 taxation year not to treat as a loan to a shareholder the sum of $33,335 paid to the company Les Panneaux T. Thermo Briques Inc. (hereinafter referred to as “P.T.B. Inc.”) by Gestion C. Tousignant Inc. (hereinafter referred to as “G.C.T. Inc."), in which the appellant is the sole shareholder, on October 15, 1985.

The respondent contended that the said payment of $33,335 was made to the appellant as a G.C.T. Inc. shareholder and he was therefore correct in adding $33,335 to the appellant's income for the 1985 taxation year, 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"). Further, in computing income for the 1987 taxation year the respondent granted the appellant a deduction pursuant to paragraph 20(1)(j) for an amount of $36,283 paid to G.C.T. Inc. as reimbursement of advances. Alternatively, the respondent argued that the sum of $33,335 may be taxed in the appellant's hands pursuant to subsections 15(1) or 56(2) of the Act.

2. Burden of proof

2.01 The appellant has the burden of showing that the respondent's assessment is incorrect. This burden of proof results from several judicial decisions, including a judgment of the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182

2.02 In that judgment, the Court held that the facts assumed by the respondent in support of an assessment or reassessment were also deemed to be true until there is evidence to the contrary. In the instant case, the facts assumed by the respondent are described in paragraph 11(a) to (r) of the respondent's reply to the notice of appeal. That paragraph reads as follows:

11. In reassessing for the appellant’s 1985 taxation year the respondent assumed inter alia the following facts:

(a) in 1985 and 1986, the appellant was the sole shareholder in the company "Isolation C. Tousignant Inc.”, which since April 15, 1986 has been known as

"Gestion C. Tousignant Inc.” (hereinafter "G.C.T. Inc."); [fact admitted]

(b) before September 30, 1985 the appellant was one of the three equal partners in the partnership "Les Revêtements de briques St-Agapit Enr.” (hereinafter “R.B.A. Enr.”), the two other partners being Messrs. Philippe Normand and Bertrand Têtu; [fact admitted]

(c) the partnership ceased operation on September 30, 1985 and on that date the partners' assets were $112,768, namely:

Share of	Amount
Appellant	$37,589
Bertrand Têtu	$37,589
Philippe Normand	$37,590
	$112,768
	[fact admitted]

(d) on October 3, 1985, «Les Panneaux T. Thermo Briques Inc.» (hereinafter "P.T.B. Inc.”) was incorporated pursuant to the Canada Business Corporations Act; [fact admitted]

(e) on October 3, 1985 P.T.B. Inc. issued 99,999 shares as follows:

	Ordinary	Preferred	Total	Total
	shares	shares
Appellant	100	33,233		33,333
Bertrand Têtu	100	33,233		33,333
Philippe Normand	100	33,233		33,333
	300	99,699		99,999
			[fact admitted]

(f) Mr. Bertrand Têtu paid for his shares by a cheque for $33,335 dated October 21, 1985; [fact admitted]

(g) Mr. Philippe Normand paid for his shares by a cheque for $33,335 dated October 21, 1985; [fact admitted]

(h) on October 15, 1985 G.C.T. Inc. made out a cheque to P.T.B. Inc. for $33,335; [fact admitted]

(i) this G.C.T. Inc. cheque was used to pay for the purchase by the appellant, its

sole shareholder, of 33,333 shares bought from P.T.B. Inc.; [fact denied]

(j) P.T.B. Inc.’s accounting ledgers and financial statements at February 28, 1986 indicate that the said company had received advances from its shareholders totalling $122,774; [fact admitted]

(k) this amount corresponds to the amounts representing the shares of the three shareholders at September 30, 1985 in the partnership R.B.A. Enr., in addition to certain adjustments, and which they advanced to the company P.T.B. Inc., as follows:

		Bertrand	Philippe
	Appellant	Têtu	Normand	Total
Share in partnership	$37,589	$37,589	$37,590	$112,768
Transfer of a building pur
chased by shareholders and
transferred to company				$ 10,000
Adjustment when capital
stock paid for	$2	$2	$2	$	6
stock paid for	$2	$2	$2
				$122,774
			[fact admitted]

(l) P.T.B. Inc.’s accounting ledgers and financial statements to February 28, 1986 indicate that the shareholders’ assets were $99,999, that is $33,333 for each shareholder; [fact admitted]

(m) P.T.B. Inc.’s accounting ledgers and financial statements nowhere mention that the amount paid by G.C.T. Inc. on October 15, 1985 was paid as a loan; [fact admitted]

(n) the appellant did not show that his 33,333 shares in the company P.T.B. Inc. were acquired from his share in the partnership R.B.A. Enr.; [fact admitted, but evidence in court will establish it]

(0) on November 3, 1986 Mr. Philippe Normand sold the appellant and Bertrand Têtu in equal shares his 33 /a share in P.T.B. Inc., for a total consideration of $25,625; [fact admitted, but not relevant]

(p) the appellant’s portion in purchasing these shares, mainly $12,812.50, was paid by G.C.T. Inc.; [fact admitted, but not relevant]

(q) the appropriate part of this amount was added to the appellant's income for his 1986 taxation year as a loan made by G.C.T. Inc. to a shareholder pursuant to subsection 15(2) of the Income Tax Act; [fact admitted]

(r) in accordance with the changes made to the amount of advances given by G.C.T. Inc. to the appellant, the respondent granted the latter a deduction in calculating his income for the 1987 taxation year as reimbursement of advances totalling $36,283 pursuant to paragraph 20(1)(j) of the Income Tax Act. [fact admitted]

3. Facts

Briefly, the essential facts of the instant appeal are as follows:

3.01 The company Les Panneaux T. Thermo Briques Inc. (P.T.B. Inc.) was created on October 3, 1985 pursuant to the Canada Business Corporations Act (Exhibit A-4).

3.02 Les Revêtements de Briques St-Agapit Enr. (R.B.A. Enr.), a partnership, ceased operations on September 30, 1985 and on October 1, 1985 transferred all its assets and debts to P.T.B. Inc. The R.B.A. Enr. partners were Messrs. Claude Tousignant (the appellant), Bertrand Têtu and Philippe Normand, each holding one-third of the capital stock (Exhibit A-5).

3.03 There was no written deed of transfer noting the transfer of assets and debts from R.B.A. Enr. to P.T.B. Inc. on October 1, 1985. The witness, Mr. Lafleur, a chartered accountant, management consultant and auditor for the appellant for the fiscal ending February 28, 1987, testified to this effect.

However, P.T.B. Inc.'s opening balance sheet (Exhibit A-6-1) makes no reference to the transfer. In his testimony, Mr. Lafleur explained this by the fact that in professional practice very little importance is placed on the opening balance sheet. Errors are therefore frequently made at that stage.

3.04 In the transfer, the value of assets transferred exceeded debts assumed by P.T.B. Inc. in the amount of $112,768 (Exhibit A-5).

R.B.A. Enr.'s balance sheet at September 20, 1985 was as follows:

PARTNERS’ ASSETS

FIVE-MONTH PERIOD ENDING SEPTEMBER 30, 1985 (NOT AUDITED)

3.05 P.T.B. Inc.'s opening balance sheet on October 3, 1985 indicates that 99,999 ordinary shares were issued for a consideration of $99,999 (Exhibit A-6-1). Further, a resolution of the board of directors dated October 3, 1985 does indicate the issuing of 99,999 shares for a consideration of $99,999 (Exhibit A-7).

The error made in the opening balance sheet (99,999 ordinary shares) was subsequently corrected. They were actually issued in the following manner: 300 ordinary shares and 99,699 preferred shares, divided equally among the three company shareholders, namely the appellant, Bertrand Têtu and Philippe Normand (2.02(e), A-6-2, A-7).

3.06 The certificates for ordinary and preferred shares having Nos. 1, 2, 3, 4, 5 and 6 are dated October 3, 1985 (Exhibit A-8).

3.07 P.T.B. Inc.'s accounting ledgers at October 31, 1985 indicate $100,005 as preferred shares. On February 28, 1986 the sum of $300 was assigned to ordinary shares.

The six dollar difference between the amount of $100,005 and the total value of the shares, namely $99,999, was debited to the preferred shares and credited to the shareholder's "advance" account (Exhibit A-6-2).

3.08 The same ledgers, though they give no details as to the advance of $33,335, indicate inter alia the following:

5. Long-term debt

Shareholders’ advances, interest-free, with no specified reimbursement: $122,774.

The appellant argued that this was the total advances for all shareholders made following the transfer (3.03). He contended that this also included the advance of $33,335 made by G.C.T. Inc.

3.09 Mr. Bertrand Têtu and Mr. Philippe Normand each paid for their shares by cheques for $33,335 dated October 21, 1985 (2.02(f) and (g), A-11 page 8). On October 15, 1989, Isolation C. Tousignant Inc., now Gestion C. Tousignant Inc. (G.C.T. Inc.), issued a cheque for $33,335 to P.T.B. Inc. (Exhibit A-9-1).

3.10 G.C.T. Inc.'s financial statements dated May 31, 1987 (Exhibit A-10), prepared by the Laberge Lafleur firm, indicate for "financing activities" the sum of $33,335 as an advance to an affiliated company.

3.11 P.T.B. Inc.’s financial statements to February 28, 1986 show $122,774 as an advance to shareholders (Exhibit A-6-2).

The company's financing is shown as follows:

3.12 At February 28, 1986 the financial statements and accounting ledgers of P.T.B. Inc. indicated that the shareholders’ assets were $99,999, that is $33,333 for each shareholder. However, these do not mention that the amount paid by G.C.T. Inc. on October 15, 1985 was paid as an advance.

3.13 In the accounting ledgers of P.T.B. Inc. (Exhibit A-11 page 8), there can be seen inter alia three successive entries of $33,335 paid by each of the shareholders to P.T.B. Inc., namely on October 16, 1985 for Isolation C. Tousignant Inc. and on the 21st for Bertrand Têtu and Philippe Normand.

In cross-examination on this point, Mr. Lafleur said the following:

Mr. TREMBLAY: Yes. Which corresponds strangely to the cheque issued by Gestion Tousignant. . . .

A. There were perhaps also sales invoices which were issued for $33,233.

Q. But I am simply asking you whether that strangely resembles the cheque made out by Gestion Tousignant to Panneaux?

A. Yes, it strangely resembles it, but it is not— I am not in a position to determine that matter.

Accordingly, Mr. Lafleur indicated concerning this ledger (Exhibit A-11) that, strictly speaking, it should include the majority of transactions but as this was done by internal bookkeeping it often happened that recording errors occurred in these accounting ledgers.

3.14 Exhibit 1-1 shows the three $30,000 cheques issued as invested capital by each of the P.T.B. Inc. shareholders to the latter (Exhibit A-5, 3.04). These cheques are dated September 5 and 6, 1985. The appellant argued that they cannot have been issued to P.T.B. Inc. since at that time it had no legal existence whatever (3.01).

However, the cashing in of these cheques indicates that they were in fact received by P.T.B. Inc.

The appellant argued that this is in accordance with his claim that there were several transactions made without proper controls which definitely did not correspond to what was indicated by the documentation before the Court (4.03.3 below).

4. Act — analysis

4.01 The provisions relevant to the instant case are subsection 15(2) of the Income Tax Act and subsection 25(3) of the Canada Business Corporations Act (CBCA). They read as follows:

15(2). Shareholder debt. Where a person (other than a corporation resident in Canada) or a partnership (other than a partnership each member of which is a corporation resident in Canada) is a shareholder of a particular corporation, is connected with a shareholder of a particular corporation or is a member of a partnership, or a beneficiary of a trust, that is a shareholder of a particular corporation and the person or partnership has in a taxation year received a loan from or has become indebted to the particular corporation, to any other corporation related thereto or to a partnership of which the particular corporation or a corporation related thereto is a member, the amount of the loan or indebtedness shall be included in computing the income for the year of the person or partnership, unless

(a) the loan was made or the indebtedness arose

(i) in the ordinary course of the lender's or creditor's business and, in the case of a loan, the lending of money was part of its ordinary business,

(ii) in respect of an employee of the lender or creditor or the spouse of an employee of the lender or creditor to enable or assist the employee or his spouse to acquire a dwelling for his habitation,

(iii) where the lender or creditor is a corporation, in respect of an employee of the corporation to enable or assist the employee to acquire from the corporation fully paid shares of the capital stock of the corporation, or to acquire from a corporation related thereto fully paid shares of the capital stock of the related corporation, to be held by him for his own benefit, or

(iv) in respect of an employee of the lender or creditor to enable or assist the employee to acquire an automobile to be used by him in the performance of the duties of his office or employment,

and bona fide arrangements were made, at the time the loan was made or the indebtedness arose, for repayment thereof within a reasonable time; or

(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.

25. (3) Consideration. A share shall not be issued until the consideration for the share is fully paid in money or in property or past services that are not less in value than the fair equivalent of the money that the corporation would have received if the share had been issued for money.

4.02 Analysis

4.02.1 The question in the instant case is whether the shares issued to the appellant on October 3, 1985 (3.05) were issued in consideration for his percentage interest in the assets transferred from R.B.A. Enr. (3.03) to P.T.B. Inc., or whether they were on the contrary issued, as the respondent maintains, in consideration for the cheque for $33,335 issued by G.C.T. Inc. on October 15, 1985 to P.T.B. Inc. (Exhibit A-9).

4.03 Appellant's argument

4.03.1 In his notice of appeal the appellant set out the reasons in support of his argument that the $33,335 paid by G.C.T. Inc. was in fact an advance made to P.T.B. Inc. In his submission, this was in no way paid in consideration for shares issued to him. In the course of his argument he repeated the same reasons; they may be summarized essentially as follows:

— P.T.B. Inc. was incorporated on October 3, 1985;

— the transfer of assets and debts from R.B.A. Enr. was made on October 1, 1985;

— the difference in value of the assets transferred over the debts undertaken by P.T.B. Inc. was credited to the invested capital account;

— the shares were issued on October 3, 1985;

— the ordinary and preferred share certificates were dated October 3, 1985;

— the advance by G.C.T. Inc. was made on October 15, 1985 (Exhibit A-9-1);

— The company P.T.B. Inc.'s minutes book and accounting ledgers contain no precise reference to any advances of money (Exhibit 1-2);

— in view of the errors of presentation in the P.T.B. Inc. financial statements regarding the various classes of shares issued (opening balance sheet 3.05) and the information on the balances owing in the financial statements of February 28, 1986 (Exhibit A-6-2);

— in view of the fact that the G.C.T. Inc. financial statements correctly set out the advance to P.T.B. Inc. (3.11).

The appellant argued that the ordinary and preferred shares issued to him by P.T.B. Inc. on October 3, 1985 were issued in consideration of his percentage interest in the assets transferred by P.T.B. Inc. on October 1, 1985.

4.03.2 The appellant relied in particular on provision 25(3) of the CBCA (4.01) the shares cannot be issued until the consideration has been fully paid in money or in assets which fair value cannot be inferior than the money that the partnership would have received if the share had been issued for money [sic].

Accordingly, the only consideration existing at October 3,1985 which could have been considered in issuing the shares was his percentage interest in the assets transferred to R.B.A. Enr. Consequently, the amount of $33,335 paid to P.T.B. Inc. on October 15, 1985 could only have been an advance to that company and not the consideration for the shares issued to him.

4.03.3 As to the P.T.B. financial statements prepared for the fiscal period ending February 28, 1986, the appellant maintained that they did not correspond to the facts, based on the various documents entered in evidence in this Court.

In Exhibit A-12, entitled “ Figures supporting appellant’s argument", therefore, he illustrated as follows the situation which he said should have been shown in the P.T.B. Inc. financial statements. [Not reproduced.]

4.04 Respondent's argument

4.04.1 Essentially, the respondent maintained that the appellant Claude Tousig- nant did not succeed in showing that the $33,335 payment by G.C.T. Inc. to P.T.B. Inc. on October 15, 1985 was actually made as an advance. On the contrary, he argued that the facts in the instant case establish that the said payment was made as an advance to the appellant as a G.T.C. Inc. shareholder. He maintained that he was therefore justified in adding the sum of $33,335 to the appellant's income for his 1985 taxation year pursuant to subsection 15(2) of the Act.

4.04.2 Contrary to what was argued by the appellant, the respondent maintained first that no evidence was presented to support the inaccuracy of the P.T.B. Inc. financial statements (4.03.3) and that although the opening balance sheet may have been wrong, the evidence showed that everything was subsequently corrected (Exhibits A-6-2, A-7).

4.04.3 Secondly, the respondent submitted that the amount of the cheque issued by G.C.T. Inc. corresponded exactly to the value of the capital stock held by the appellant. He based his argument on what appeared from certain documents entered in evidence, those being respectively the audited report of P.T.B. Inc. for the period from October 5, 1985 to February 28, 1986 (Exhibit A-6-2) and the accounting ledgers of P.T.B. Inc. (Exhibit A-11).

4.04.4 The respondent further maintained that nothing in the P.T.B. Inc. financial statements indicates any advance whatever of $33,335 paid by G.C.T. Inc. (Exhibits A-6-2, A-11). It therefore follows that, in his submission, the $30,000 (Exhibit 1-1) which was the appellant's invested capital in R.B.A. Enr. and which was later transferred to P.T.B. Inc. (3.03, 3.04) was still in fact invested capital. Accordingly, this was certainly not used, as the appellant maintained, as payment for the shares issued to him.

4.04.5 To be more precise, the respondent's argument was that the appellant had in fact done exactly what his co-shareholders did. This means that the 33,333 shares issued to the appellant were paid for after October 3, 1985 (the date of their issue), namely on October 15, 1985 (Exhibit A-9-1), regardless of the appellant's percentage interest transferred to P.T.B. Inc. on October 1, 1985 (3.03, 3.04).

4.04.6 It will be recalled that the appellant's argument was that the $30,000 (namely his percentage interest in the assets transferred) was definitely not paid to P.T.B. Inc. as invested capital but in consideration for shares issued in his name on October 3, 1985 (4.03.1, 4.03.2). The cheque made out by G.C.T. Inc. thus represented, he submitted, an advance to P.T.B. Inc.

The respondent consequently argued that if the amount of $30,000 (invested capital) was actually what was used to pay for the shares, an amount of $3,335 would then be missing from the payment for them.

To that the appellant responded that it was his percentage interest of the amount transferred of $112,768 which was used to pay for the shares issued to him, and not only of the $90,000 (3.04).

4.04.7 The respondent also sought support in the P.T.B. Inc. financial statements prepared by the firm Laberge Lafleur (Exhibit 1-2), which do not in fact indicate an advance being made by G.T.C. Inc. to P.T.B. Inc.

With respect to subsection 25(3) of the Canada Business Corporations Act and the appellant's argument (4.03.2(i)), the respondent maintained that the fact the shares might have been paid for subsequently to their issue has no relevance in the instant case.

In fact, he argued, a subsequent payment has no bearing on the validity of the shares but will have much more of an impact on their value if an action is ever brought against the shareholders in, for example, a bankruptcy situation, when the trustee can then recover the unpaid amounts. Their significance was thus solely as regards the shareholders' liability.

4.05 Analysis of the Court

4.05.1 It seems to me from what emerges from the pleadings and arguments of the parties that the principal questions the Court must answer in order to resolve the instant appeal are as follows:

1. Does the evidence submitted allow this Court to treat the P.T.B. Inc. financial statements as not relevant (Exhibit A-6-2, 4.03.3) on the ground, as the appellant maintained, that they do not correspond to the facts and the documents submitted to this Court? (4.05.2)

2. Second, are the requirements of subsection 25(3) of the CBCA such that the respondent's argument (4.04.1) is necessarily refuted? Also, what is the impact of that provision in the instant case? (4.05.3)

3. Finally, the Court must rule on the fundamental question in the instant case, namely was the $33,335 cheque paid by G.C.T. Inc. to P.T.B. Inc. in consideration for shares issued by the latter to the appellant? (4.05.4)

The Court will accordingly set out its conclusion by analyzing the foregoing questions.

4.05.2 Does the evidence submitted allow this Court to treat the P.T.B. Inc. financial statements as not relevant on the ground that they do not correspond to the facts and the documents submitted to this Court by the appellant?

4.05.2(1) The answer to this question necessarily requires that reference be made to certain documents filed in this Court. They are the following:

1. Exhibit A-5: photocopy of R.B.A. Enr.’s financial statements prepared by the accounting firm Maheu Noiseux for the fiscal period ending September 30, 1985 (3.04);

2. Exhibit A-6-1: P.T.B. Inc. opening balance sheet prepared by the accounting firm Maheu Noiseux (3.05);

3. Exhibit A-6-2: audited report of P.T.B. Inc. for the period from October 5, 1985 to February 28, 1986, also prepared by the accounting firm Maheu Noiseux (3.08, 3.11):

4. Exhibit A-10: G.T.C. Inc.'s financial statements for May 31, 1987 prepared by the accounting firm Laberge Lafleur (3.10);

5. Exhibit A-11: part of P.T.B. Inc.’s accounting ledgers (3.13);

6. Exhibit A-12: figures supporting the appellant's argument (4.03.3);

7. Exhibit 1-2: P.T.B. Inc.'s financial statements for the fiscal period ending February 28, 1987, prepared by the firm Laberge Lafleur.

4.05.2(2) After reviewing the foregoing documents the Court did not find any indication to support the respondent's argument (4.03.3) on this specific point. The evidence is actually to the contrary.

4.05.2(3) The appellant's argument (A-12,4.03.3) unquestionably puts forward a logical accounting process. It seems usual for assets transferred to be used to pay for the shares issued by the new company. However, in the instant case the evidence indicated that a different route was taken. The respondent's argument in fact emerged from this (A-9, A-6-2).

4.05.2(4) If the appellant was right that the P.T.B. Inc. financial statements were incorrect, he did not in the Court's opinion present evidence of this.

I am unable to simply deduce from the figures what the appellant is seeking to establish. The evidence of one of the accountants with Maheu Noiseux who was involved in preparing the financial statements prior to 1987 might undoubtedly have thrown considerable light on the actual interpretation to be given to the financial statements disputed by the appellant. The testimony of Mr. Lafleur alone certainly could not suffice, as he was in no way involved in preparing the P.T.B. Inc.'s financial statements for 1985 and 1986. Certain questions necessarily remain unanswered, as he was not in a position to interpret them (3.13).

4.05.2(5) The difficulty the Court has in accepting the appellant's argument results from the fact that this question necessarily requires consideration of the documents which the appellant claims were in error. However, they disclose no anomalies. They seem to be correct, although once again the argument put forward by the appellant and summarized in Exhibit A-12 appeared at least as logical.

However, it must be repeated that the documents submitted do not in any way confirm this argument: on the contrary, they refute it. The Court cannot accept an argument contradicted by the evidence.

4.05.2(6) I am therefore unable in the instant case to conclude that the facts and evidence allow the Court to accept the appellant's argument. Accordingly, the Court must answer this first question in the negative.

4.05.3 Are the requirements of subsection 25(3) of the CBCA such that the respondent's argument is necessarily refuted?

4.05.3(1) It is apparent that the shares issued by federal corporations can only be issued when they have been fully paid for. Consequently, their holders incur no liability for them. Further, I referred to the excellent text by Messrs. Maurice and Paul Martel, La compagnie au Québec: les aspects juridiques [1] .

Commenting on shareholder's liability, the authors say the following at page 252 of the text:

The Canada Business Corporations Act short-circuits all discussion by requiring that the shares of federal business corporations not be issued until fully paid for, that is paid for 100 per cent. Shareholders in such companies therefore incur no liability on this head.

[Translation.]

4.05.3(2) Having said that, does this requirement of the Act necessarily prove the appellant's argument that on October 3, 1985 the only possible consideration was his share in the assets transferred? (4.03.2)

4.05.3(3) The evidence probably establishes that as of October 3, 1985 the appellant's percentage interest in the assets transferred to P.T.B. Inc. (3.02, 3.04) was in fact the only possible consideration for payment for the shares.

However, this was also true for the appellant's two co-shareholders at that particular time, yet it was admitted by the parties that Bertrand Têtu and Philippe Normand did not pay (2.02(f) and (g)) for the shares issued to them until October 21, 1985 and so subsequently to the issue of their shares (Exhibit A-8).

How is this possible? What is the impact of this provision in the instant case? Despite what was said earlier, this Court is of the view that the material evidence submitted to it must first be looked at. Once again, this in no way contradicts the respondent's argument. On the contrary, it supports it.

In the instant case the Court considers that the requirement of subsection 25(3) of the CBCA and the consequences that result cannot contradict the evidence presented to it (Exhibits A-6-2, A-9-1, A-11).

4.05.4 Finally, was the $33,335 cheque paid by G.T.C. Inc. to P.T.B. Inc. paid in consideration for shares issued by the latter to the appellant? The answer must be positive.

Once again, I am unable to conclude that the facts in the instant case allow this Court to come to a contrary conclusion. It seems clear to me that the appellant has not been able to discharge the burden of proof upon him. The evidence supports the appellant's [sic] argument.

However, the Court wishes to say that the requirement in subsection 25(3) of the CBCA has more importance than what the respondent attributed to it. However, in the instant case, in view of the conclusion given to the first question, the Court cannot subscribe to the appellant's reasoning to the effect that the cheque made out by I.C.T., which subsequently became G.C.T., was an advance to P.T.B. Inc.

5. Conclusion

For the foregoing reasons the appeal must be dismissed.

Appeal dismissed.