Muldoon,
J.:—This
is
a
dispute
about
the
interpretation
of
certain
provisions
in
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act"),
which
respective
counsel
for
the
parties
say
raises
a
case
of
first
impression.
Counsel
are
to
be
commended
for
having
agreed
upon,
and
included
in
the
trial
record
(Exhibit
1)
an
agreed
statement
of
facts,
Exhibit
1(c),
together
with
a
supplemental
agreed
statement
of
facts,
Exhibit
2.
The
latter
adds
a
paragraph
7A
to
be
inserted
into
Exhibit
1(c).
Here,
then,
subject
to
conditions
of
use
expressed
therein,
is
the
complete
statement
of
agreed
facts
including
the
above
mentioned
insertion:
1.
O.
Mustad
&
Son
A.S.,
("Musnor")
of
Oslo,
Norway,
is
a
multi-national
company
with
operations
throughout
the
world.
The
operations
of
Musnor
in
the
various
countries
are
conducted
either
through
branch
offices
or
subsidiary
companies
located
in
the
countries.
Its
operations
consist
of
the
manufacture
and
supply
of
deck
machinery,
fishing
equipment,
and
other
items
in
the
fishing
and
shipping
industry.
2.
In
or
about
the
latter
part
of
the
1970s,
Musnor
elected
to
establish
operations
in
Canada.
In
accordance
with
this
intent,
Musnor
engaged
the
services
of
the
appellant,
Jan
Silden
("plaintiff")
as
an
employee
to
carry
on
the
operations
of
the
Canadian
market.
At
the
time,
the
plaintiff
was
a
resident
of
Norway
and
was
hired
by
Musnor
to
establish
and
conduct
Musnor's
business
in
Canada.
3.
At
all
times
relevant
to
this
appeal,
it
was
the
policy
of
Musnor
to
offer
housing
assistance
to
assist
employees
in
obtaining
housing
on
relocation.
This
was
a
general
policy
which
was
applied
to
employees
relocating
both
within
Norway
and
to
foreign
countries.
4.
This
policy
was
discussed
with
the
plaintiff
prior
to
his
relocation
to
Canada
and
it
was
agreed
that
Musnor
would
provide
housing
assistance
to
the
plaintiff
to
assist
him
with
obtaining
housing
in
Canada.
5.
In
accordance
with
instructions
from
Musnor,
a
subsidiary
company,
O.
Mustad
&
Son
(Can.)
Ltd.
("Muscan")
was
incorporated
in
Canada
on
June
27,
1979,
with
two-thirds
of
the
capital
being
owned
by
Musnor
and
one-third
being
held
by
the
plaintiff,
and
the
plaintiff
moved
to
Canada
in
August
of
1979.
6.
Musnor
and
the
plaintiff
had
discussions
concerning
the
purchase
of
a
private
house
by
the
plaintiff
in
Nova
Scotia.
These
discussions
were
reflected
in
a
letter
dated
March
11,
1980
from
Jon
Erik
Saugen,
on
behalf
of
Musnor,
to
the
plaintiff
in
which,
among
other
things,
Musnor:
(i)
declined
the
approach
of
guaranteeing
a
minimum
sales
price
to
the
appellant
and
advanced
an
option
of
Musnor's
purchasing
a
house
and
renting
it
to
the
appellant;
(ii)
indicated
that
the
house
would
be
selected
with
the
purpose
of
being
a
future
residence
for
the
Muscan
manager;
(iii)
requested
the
appellant
to
check
into
the
possibility
of
local
financing
of
the
purchase.
7.
In
or
about
April
of
1980,
the
plaintiff
found
a
house
and
had
further
discussions
with
Musnor
whereby
Musnor
agreed
to
provide
a
loan
or
a
guarantee
or
some
other
form
of
assistance
to
aid
with
the
acquisition
of
a
house.
7A.
In
or
about
April
of
1980,
the
plaintiff
found
a
house
and
had
further
discussions
with
Musnor
whereby
Musnor
agreed
to
provide
a
loan
or
a
guarantee
to
assist
with
the
acquisition
of
the
house;
however,
whereas
there
was
an
existing
mortgage
on
the
house
at
a
reasonable
rate
of
interest
and
whereas
there
was
a
penalty
for
prepayment
of
the
mortgage,
it
was
agreed
that
the
existing
mortgage
would
be
first
allowed
to
expire.
8.
In
April
1980,
the
plaintiff
purchased
a
dwelling
and
assumed
the
existing
mortgage
payable
to
Canada
Trust
[Exhibit
4].
9.
In
1981,
Musnor
and
the
plaintiff
had
discussions
concerning
salary
and
remuneration
for
the
plaintiff.
These
discussions
are
reflected
in
a
letter
dated
June
22,
1981,
in
which
Musnor,
among
other
things,
indicated
that
Muscan
would
loan
[sic]
$55,000
to
the
plaintiff
at
interest
of
7%
per
annum
to
be
secured
by
a
first
mortgage
on
the
plaintiff's
house.
This
loan
was
to
be
repaid
if
the
plaintiff
took
an
appointment
outside
the
Company
or
if
he
wished
to
terminate
the
loan
for
any
other
reason.
Otherwise,
the
loan
was
to
be
repaid
on
a
quarterly
basis.
10.
In
August
or
September
of
1981,
Musnor
agreed
to
advance
the
amount
of
$55,000
to
Muscan,
which
amount
was
to
be
advanced
to
the
plaintiff
as
employee
housing
assistance
for
the
purpose
of
paying
out
the
existing
mortgage
on
the
plaintiff's
house.
The
plaintiff,
in
turn,
was
to
provide
a
first
mortgage
on
his
house
as
security
for
the
loan.
11.
On
or
about
September
30,
1981,
Musnor
advanced
the
amount
of
$55,000
to
the
subsidiary
company,
Muscan,
which,
in
turn,
advanced
the
moneys
to
the
plaintiff
to
enable
him
to
pay
off
the
pre-existing
mortgage
on
his
dwelling
on
the
following
terms:
(a)
The
loan
would
be
secured
by
a
first
mortgage
on
the
plaintiff's
personal
dwelling;
(b)
Interest
would
be
payable
at
the
rate
of
seven
(7)
percent
per
annum;
(c)
The
loan
would
be
repayable
if
the
plaintiff
left
the
employ
of
Musnor
for
whatever
reason
or
in
the
event
of
a
resale
or
transfer
in
any
manner
of
the
property.
12.
The
mortgage
document
was
executed
on
September
30,
1981
and
was
recorded
on
October
5,
1981
in
Book
3525
at
page
415
at
the
Registry
of
Deeds,
Halifax,
Nova
Scotia
[Exhibit
3].
13.
The
plaintiff
discharged
the
mortgage
payable
to
Canada
Trust
during
the
month
of
June
1982.
14.
The
plaintiff
continued
to
make
the
interest
payments
pursuant
to
the
terms
of
the
mortgage.
Muscan
declared
the
interest
payments
in
its
taxable
income.
15.
By
letter
dated
November
19,
1985,
the
defendant
notified
the
plaintiff
that
adjustments
to
his
income
were
being
considered,
including,
among
other
things,
the
inclusion
in
his
1981
income
of
the
$55,000
loan.
This
inclusion
was
proposed
on
the
basis
that
the
money
was
used
to
refinance
and
not
to
enable
or
assist
the
appellant
to
purchase
a
home
in
which
he
resided
and,
therefore,
that
the
loan
was
specifically
excluded
under
subsection
15(2)
of
the
Income
Tax
Act
and
taxable
as
discussed
with
the
Appellnat
[sic].
16.
Following
representations
by
the
plaintiff,
by
letter
dated
February
7,
1986,
the
defendant
stated,
among
other
things,
that
its
position
remained
unchanged
as
to
the
loan
being
taxed
under
the
provisions
of
subsection
15(2)
of
the
Income
Tax
Act
as
the
defendant
considered
the
time
for
repayment
unreasonable
and
that
the
appellant
received
the
loan
as
a
company
shareholder
rather
than
as
an
employee.
17.
A
Notice
of
Reassessment
dated
May
28,
1986
was
issued
to
the
plaintiff
informing
him
that
the
defendant
had
reassessed
his
income
tax
liability
for
his
1981
taxation
year
by
including
in
his
income
the
amount
of
$55,000
loaned
[sic]
to
him
by
Muscan.
18.
A
Notice
of
Objection
was
filed
by
the
plaintiff
on
the
9th
day
of
July
1986.
Reassessment
was
confirmed
by
the
defendant
by
Notice
dated
the
9th
day
of
September
1986.
19.
The
plaintiff
filed
a
Notice
of
Appeal
dated
October
6,1986
with
respect
to
the
confirmation
of
the
assessment.
A
Reply
to
the
Notice
of
Appeal
dated
the
17th
day
of
February
1987
was
filed
on
behalf
of
the
defendant.
20.
The
plaintiff
was
asked
by
the
defendant
to
execute
a
waiver
for
his
1982
and
1983
taxation
years
so
that,
if
the
plaintiff
was
successful
in
the
present
appeal,
the
defendant
could
reassess
the
plaintiff
on
the
basis
that
Section
80.4
of
the
Income
Tax
Act
applied
to
the
loan
for
the
1982,
1983
and
1984
taxation
years.
The
plaintiff
refused
to
execute
the
waiver,
and
Notices
of
Reassessment
have
been
issued
to
the
plaintiff
informing
him
that
the
defendant
has
reassessed
his
income
tax
liability
for
his
1982,
1983
and
1984
taxation
years
by
including
in
income
deemed
interest
benefits
which
the
plaintiff
received
from
Muscan
pursuant
to
section
80.4
of
the
Income
Tax
Act.
21.
By
decision
of
the
Tax
Court
of
Canada
dated
the
19th
day
of
December
1988,
.
.
.
[it]
dismissed
the
plaintiff's
appeal.
22.
By
Statement
of
Claim
filed
the
10th
day
of
April
1989,
the
plaintiff
has
appealed
the
decision
of
the
Tax
Court
of
Canada
to
the
Federal
Court,
Trial
Division.
The
existing
mortgage
which
the
plaintiff
assumed,
mentioned
in
paragraph
8
of
the
agreed
facts
[Exhibit
1(c)]
is
copied,
and
filed
at
trial
as
Exhibit
4.
The
subsequent
mortgage,
dated
September
30,
1981,
in
favour
of
O.
Mustad
&
Son
(Can.)
Ltd.
(Muscan)
is
copied
and
filed
as
Exhibit
3.
It
is
mentioned
in
the
agreed
facts
Exhibit
1(c),
paragraph
12.
The
parties,
by
their
counsel,
agreed
that
the
following
statutory
text
(with
Court's
own
designated
critical
path
emphasized)
is
a
pertinent
provision
of
the
Act
in
these
circumstances.
15.(2)
[Loan
to
shareholder,
etc.]
Where
a
particular
corporation,
a
corporation
to
which
the
particular
corporation
is
related
or
a
partnership
of
which
either
or
both
of
the
corporations
is
a
member
has
in
a
taxation
year
made
a
loan
to
a
person
(other
than
a
corporation
resident
in
Canada)
who
is
a
shareholder
of
the
particular
corporation
or
who
is
connected
with
a
shareholder
of
the
particular
corporation,
the
amount
thereof
shall
be
included
in
computing
the
income
for
the
year
of
the
person
to
whom
the
loan
was
made
unless
(a)
the
loan
was
made
(i)
in
the
ordinary
course
of
the
lender's
business
and
the
lending
of
money
was
part
of
its
ordinary
business,
(ii)
to
an
employee
of
the
lender
or
to
the
spouse
of
an
employee
of
the
lender
to
enable
or
assist
the
employee
or
his
spouse
to
acquire
a
dwelling
for
his
habitation,
(iii)
where
the
lender
is
a
corporation,
to
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
to
the
corporation
fully
paid
shares
of
the
capital
stock
of
the
related
corporation,
to
be
held
by
him
for
his
own
benefit,
or
(iv)
to
an
employee
of
the
lender
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
for
repayment
thereof
within
a
reasonable
time;
or
(b)
the
loan
was
repaid
within
one
year
from
the
end
of
the
taxation
year
of
the
lender
in
which
it
was
made
and
it
is
established,
by
subsequent
events
or
otherwise,
that
the
repayment
was
not
made
as
a
part
of
a
series
of
loans
and
repayments.
[Emphasis
added.]
According
to
counsel
for
each
party
the
citation
and
legislative
history
for
the
provision
above
recited
are:
Subsection
15(2)
of
the
Income
Tax
Act,
as
enacted
by
S.C.
1977-78
(26-27
Eliz.
ll),
c.
1,
s.
8;
am.
S.C.
1977-78
(26-27
Eliz.
II),
c.
32,
s.
4;
am.
S.C.
1980-81-82-83,
c.
48,
s.
7.
Counsel
appear
to
be
correct
and
to
have
found
their
ways
through
a
horrendously
difficult
and
bewilderingly
rapidly
amended
statute.
The
last
cited
amendment
in
its
subsection
7(2)
provides
that
the
last
and,
for
present
purposes,
final
version
of
subsection
15(2)
“is
applicable
to
the
1979
and
subsequent
taxation
years."
The
mortgage
with
which
title
to
the
dwelling
was
already
encumbered
when
title
was
conveyed
to
the
plaintiff,
was
"recorded
in
the
Registry
of
Deeds
Office
at
Halifax,
.
.
.
N.S.
.
.
.
on
the
14
day
of
June,
A.D.
1977
in
Book
Number
3123
at
Pages
277-281"
according
to
the
certificate
of
one,
A.
Geraldine
Keefe,
Registrar.
A
copy
is
Exhibit
4
herein.
It
provides
that
the
balance
of
the
principal
sum
of
$60,000
with
interest
shall
become
due
and
payable
on
the
10th
day
of
June
1982.
It
further
provides:
And
the
said
Mortgagor
Covenants
with
the
said
Mortgagee
that
in
the
event
of
non-payment
of
the
said
principal
moneys
at
the
time
or
times
above
provided,
then
he
shall
not
require
the
Mortgagee
to
accept
payment
of
the
principal
moneys
without
first
giving
six
months'
previous
notice
in
writing,
or
paying
a
bonus
equal
to
three
months'
interest
in
advance
upon
the
said
principal
moneys.
This
provision
prevents
the
mortgagor
from
unilaterally
according
to
himself
or
herself
the
privilege
to
pay
off
the
mortgage
without
notice
or
bonus,
and
thereupon
to
demand
its
discharge,
by
the
sly
contrivance
of
deliberately
defaulting
on
one
periodic
payment.
The
mortgage
instrument
appears
to
be
specially
drafted
to
secure
loans
granted
by
the
mortgagee,
The
Canada
Trust
Company.
It
confirms
paragraph
7A
of
the
agreed
statement
of
facts
in
regard
to
the
existence
of
"a
penalty
for
prepayment
of
the
[above
mentioned]
mortgage".
Exhibit
3
in
these
proceedings
is
a
copy
of
the
mortgage
which
the
plaintiff,
with
his
spouse,
executed
in
favour
of
Muscan,
the
mortgagee
therein,
for
$55,000
on
the
security
of
the
dwelling
property,
the
same
described
in
Exhibit
4.
The
exact
pertinent
provisions
of
the
mortgage
run
thus:
.
.
.
the
full
sum
of
$55,000.00
with
interest
at
7%
per
annum,
calculated
quarterly
not
in
advance,
in
the
following
manner,
that
is
to
say:
(a)
Interest
upon
the
said
sum
of
Fifty-five
Thousand
Dollars
shall
be
paid
quarterly,
first
of
such
quarterly
instalments
to
be
made
on
the
first
day
of
January
A.D.
1982
and
thereafter
on
the
first
days
of
April,
July,
October
and
January
in
each
succeeding
year
so
long
as
this
mortgage
shall
be
in
full
force
and
effect.
(b)
The
principal
sum
hereby
secured
shall
immediately
become
due
and
payable
in
the
event
the
Mortgagor
shall
leave
the
employment
of
the
Mortgagee,
O.
Mustad
&
Son
A.S.
of
Oslo,
Norway
or
any
other
subsidiary
of
O.
Mustad
&
Son
A.S.
for
any
reason
whatsoever.
(c)
The
principal
sum
hereby
secured
shall
immediately
become
due
and
payable
in
the
event
the
Mortgagor
shall
not
pay
off
the
balance
outstanding
on
the
present
first
mortgage
on
the
said
lands
held
by
The
Canada
Trust
Company
on
or
before
the
10th
day
of
June
A.D.
1982
in
order
that
this
mortgage
shall
become
a
first
charge
upon
the
said
lands.
(d)
The
principal
sum
hereby
secured
shall
become
due
and
payable
upon
the
sale
or
transfer
in
any
way
of
the
lands
described
in
Schedule
"A"
hereto.
(e)
The
principal
sum
hereby
secured
may
be
paid
in
full
or
in
part
at
any
time
whatsoever
without
notice
or
bonus
of
interest.
The
Mortgagor
[the
plaintiff]
covenants
with
the
Mortgagee
THAT
:
4.
The
Mortgagor
will
insure
the
buildings
on
the
lands
against
fire
to
the
amount
of
not
less
than
One
Hundred
Thousand
Dollars
($100,000.00)
for
the
benefit
of
the
Mortgagee,
and
in
default
thereof
the
Mortgagee
may
effect
insurance
and
charge
it
against
the
Mortgagor,
and
will
further
carry
personal
death
risk
insurance
in
the
amount
of
$55,000.00
during
the
currency
of
this
mortgage,
with
loss
payable
to
the
Mortgagee.
The
Releasor
[Sonja
Silden,
the
plaintiff's
spouse]
hereby
consents,
pursuant
to
the
Matrimonial
Property
Act,
to
the
within
Mortgage
and
hereby
conveys
any
and
all
estate,
right,
title
and
interest
which
the
Releasor
may
have
with
respect
to
the
lands
described
in
Schedule
“A”.
The
above
recited
provisions
are
confirmatory
of
paragraphs
11
and
12—and
more—of
the
agreed
statement
of
facts,
Exhibit
1(c).
The
facts
of
this
case
most
likely
place
it
legally
within
the
contemplation
of
subparagraph
15(2)(a)(ii)
of
the
applicable
version
of
the
Income
Tax
Act,
and
not
within
the
contemplation
of
sections
80.4
and
6
of
the
Act.
Some
analysis
is
needed,
for
the
plaintiff's
counsel
stated
that
there
are
unique
facts
here;
and
the
defendant's
counsel
averred
that
this
is
a
case
of
first
impression
in
terms
of
factual
precedents,
so
that,
he
believed,
the
cases
cited
by
both
counsel
“are
not
really
on
point”.
One
would
be,
at
first
blush,
inclined
to
place
the
facts
of
this
casedepending
somewhat
on
whether
Musnor
or
Muscan
be
the
lender,
and
whether
the
plaintiff
acts
in
the
role
of
officer,
employee
or
shareholder—with
the
contemplation
of
section
80.4,
thus:
80.4
(1)
Where
an
individual
(a)
is
an
officer
or
employee.
.
.and
has
received
a
loan
by
virtue
of
his
office
or
employment
.
.
.
(a.1)
.
.
.
(b)
is
a
shareholder
of
a
particular
corporation
[Muscan]
.
.
.
and
has
received
a
loan
(other
than
an
excluded
loan)
from
the
particular
corporation
[Muscan
or],from
a
corporation
[Musnor]
related
to
the
particular
corporation
[Muscan]
he
shall
be
deemed
to
have
received
a
benefit
in
a
taxation
year
equal
to
the
amount,
if
any,
by
which
the
aggregate
of
(c)
the
amount,
if
any,
by
which
interest
in
respect
of
the
taxation
on
all
housing
loans
received
by
him.
.
.
.
This
is
[as]
far
as
one
can
go
with
the
plaintiff
because
“housin
loans"
is
an
integral
part
of
the
ideas
being
formulated
in
section
80.4
and
by
paragraph
80.4(2)(b),
"housing
loan”
is
[a]
term
defined
to
include
the
notion
of
being
“entitled
to
a
deduction
under
section
62”.
The
pertinent
base
of
section
62
is
a
taxpayer
who
has
ceased
to
reside
at
one
location
in
Canada
at
which
he
was
ordinarily
employed
and
has
commenced
to
be
employed
at
another
location
in
Canada.
This
provision
does
not
contemplate
the
plaintiff
who
moved
from
Norway
to
Canada.
Since
the
plaintiff
is
ignored
by
subsection
80.4(1),
subsections
6(9)
and
15(9)
do
not
operate
in
regard
to
him.
In
this
regard
the
case
at
bar
bears
a
remote
relationship
to
that
of
Cooper
v.
Canada,
[1989]
1
C.T.C.
66;
88
D.T.C.
6525
(F.C.T.D.)
in
which
Mr.
Justice
Rouleau
allowed
the
taxpayer's
appeal
in
that
the
loan
which
the
taxpayer
received,
having
been
disbursed
out
of
trust
moneys,
could
not
be
classified
as
a
taxable
benefit
pursuant
to
section
80.4
since
the
latter
section
makes
no
reference
to
trust
benefits.
So,
here,
the
loan
which
the
plaintiff
received
and
with
which
he
paid
off
the
mortgage
on
his
dwelling
house,
eludes
the
definition
of
"housing
loan”
expressed
in
paragraph
80.4(2)(b).
The
judgment
of
Rouleau,
J.
in
Cooper,
supra,
is
a
veritable
tour
de
force
of
jurisprudential
reasoning.
The
Crown's
appeal
therefrom
was
withdrawn
on
July
29,
1989.
The
judgment
of
Mr.
Justice
Rouleau
in
Cooper
is
cited
among
the
defendant's
authorities
on
the
subject,
an
indication
of
the
high
degree
of
ethical
professionalism
on
the
part
of
the
defendant's
counsel,
if
not
the
Minister.
Nevertheless,
as
that
counsel
indicated,
precious
few
of
the
judgments
cited
on
both
sides
here
bear
on
the
very
matters
in
issue.
It
is
subsection
15(2),
then,
which
bears
most
closely
upon
the
matters
in
issue.
It
is
to
be
analyzed
closely.
In
so
doing
it
must
be
noted
that
according
to
paragraph
2
of
Exhibit
1(c),
the
plaintiff
was
an
employee
of
Musnor
before
Muscan
was
incorporated
in
Canada
on
July
27,
1979,
as
stated
in
paragraph
5
thereof.
Upon
its
being
established
in
Canada,
one-third
of
Muscan's
shareholdings
were
accorded
into
the
plaintiff's
ownership,
with
the
rest
reposing
in
Musnor's
ownership.
Thus,
the
plaintiff
always
remained
an
employee
of
the
Norwegian
principal,
but,
at
its
behest
he
became
a
shareholder
of
its
Canadian
subsidiary,
and
probably
an
officer,
if
not
also
an
employee,
thereof.
It
seems
that,whereas
one
may
speculate
that
the
plaintiff
may
have
been
treated
as
an
employee
of
Muscan
for
pay
and
benefits
purposes,
would
it
be
technically
unlikely
that
he
would
really
be
an
employee
of
the
principal
corporation
and
of
its
subsidiary,
too,
at
one
and
the
same
time?
What
is
the
evidence?
The
parties
did
not
clarify
that
point
in
their
agreed
statement
of
facts,
and
the
only
evidence
from
which
an
inference
can
legitimately
be
drawn
is
Exhibit
3,
the
mortgage
executed
by
the
plaintiff
in
Muscan's
favour.
Clause
(b)
clearly
characterizes
the
plaintiff
as
being
in
"the
employment
of
the
mortgagee,
O.
Mustad
&
Son
A.S.
of
Oslo,
Norway".
Now,
despite
the
designation
of
Muscan
as
the
legal
mortgagee,
the
Court
finds
that
the
above
recited
passage
shows
the
true,
uncontrived
and
therefore
bona
fide,
intention
of
the
parties
was
that
the
equitable
mortgagee,
the
real
lender
of
the
$55,000,
was
Musnor.
This
fact,
so
plainly
expressed
in
the
mortgage
document,
Exhibit
3,
is
amply
corroborated
by
the
plain
meaning
of
paragraphs
3,
4,
6,
7,
7A,
9,
10,
11,
12,
13
and
14
of
the
agreed
statement
of
facts,
Exhibits
1(c)
and
5.
Returning
to
the
mortgage
document,
Exhibit
3,
it
may
be
noted
the
aforementioned
clause
(b)
leaves
quite
open
the
possibility—and
in
the
circumstances,
the
strong
probability—
that
the
plaintiff
is
also
the
employee
of
“any
other
subsidiary
of
O.
Mustad
&
Son
A.S.”,
which
of
course
includes
the
legal
mortgagee,
Muscan.
Why
is
Muscan
merely
the
legal
mortgagee
and
not
the
equitable
mortgagee?
Two
very
good
reasons
can
be—and
are,
hereby—inferred
from
the
evidence.
The
first
reason
is
that
Muscan
did
not
advance
the
principal
sum
secured
by
the
mortgage.
Musnor
advanced
it
according
to
paragraph
10
of
Exhibit
1(c),
and
is,
therefore,
the
true
lender,
and
hence,
the
equitable
mortgagee.
The
second
reason
is
that
it
would
be
infinitely
more
convenient
for
enforcement
of
mortgagee's
remedies
to
nominate
Musnor's
subsidiary,
a
resident
Canadian
corporation
to
be
the
legal
owner
of
the
mortgage.
Both
reasons
strongly
buttress
the
genuineness
or
bona
tides
of
the
transaction.
So,
now
one
can
trace
the
meaning
of
subsection
15(2)
of
the
Income
Tax
Act
in
regard
to
the
facts,
at
least
as
an
alternative
conclusion
herein:
15.(2)
Where
a
particular
corporation
[Muscan]
(or)
a
corporation
[Musnor]
to
which
the
particular
corporation
is
related
.
.
.
has
in
a
taxation
year
made
a
loan
to
a
person
[the
plaintiff]
who
is
a
shareholder
of
the
particular
corporation
[Muscan]
the
amount
thereof
shall
be
included
in
computing
the
income
for
the
year
of
the
person
[the
plaintiff]
to
whom
the
loan
was
made
[not
described
here
as
a
shareholder]
unless
(a)
the
loan
was
made
(ii)
to
an
employee
[the
plaintiff]
of
the
lender.
.
.
[Musnor—note:
not
the
particular
corp'n]
to
enable
or
assist
the
employee
.
.
.
[the
plaintiff]
to
acquire
a
dwelling
[the
mortgaged
property]
for
his
habitation,
and
bona
fide
arrangements
were
made
at
the
time
the
loan
was
made
[Exhibit
3,
and
paragraphs
10,
11
and
12
of
Exhibit
1(c)]
for
repayment
thereof
within
a
reasonable
time.
[Emphasis
added.]
This
interpretation
of
subsection
15(2)
subparagraph
(a)(ii)
exactly
fits
the
situation
presented
in
the
evidence,
and
it
does
so
because
of
Parliament's
deliberate
switch
of
terminology
from
the
“particular
corporation”
or
"a
corporation
to
which
[it]
is
related"
over
to
"the
lender”
which,
of
course
might
be
either
one
of
the
former
in
the
statutory
context.
The
Tax
Court,
in
the
judgment
([1989]
1
C.T.C.
2122;
89
D.T.C.
75)
from
which
the
present
appeal
by
way
of
trial
de
novo
is
taken,
paying
homage
to
the
"statutory
language”
and
invoking
the
judgment
of
Mr.
Justice
Cattanach
in
M.N.R.
v.
Wardean
Drilling
Ltd.,
[1969]
2
Ex.
C.R.
166;
[1969]
C.T.C.
265;
69
D.T.C.
5194
(Ex.
Ct.),
held
at
2127
(D.T.C.
78):
It
seems
clear
that
the
appellant
acquired
the
house
in
April
of
1980.
It
cannot,
in
my
view,
be
said
that
the
loan
made
in
September
of
1981
enabled
or
assisted
the
appellant
to
acquire
the
house.
The
acquisition
had
by
then
been
made.
It
is
significant
that
the
purchase
of
the
house
was
made
in
April
of
1980
prior
to
any
decision
that
relocation
assistance
would
take
the
form
of
a
loan
to
the
appellant.
The
third
argument
therefore
fails.
One
must
have
due
regard
for
the
language
of
the
statute
indeed,
and
where
it
is
not
subject
to
statutory
limitations,
none
should
be
imposed
in
interpreting
it.
Laws
in
general,
and
the
Income
Tax
Act
in
particular,
are
not
made
for
the
governance
of
stones
or
animals,
but
for
the
governance
of
a
genus
and
species
rightly
known
as
homo
sapiens
composed
in
the
main
of
cognitive
and
conative,
sciential
individuals
with
demonstrated
ability
to
remember,
to
reason
and
to
foresee.
Such
individuals
can
well
endure
present
hardship
or
impecuniosity
knowing
it
to
be
only
temporary,
when
help
is
coming
and,
when
that
foreseen
and
expected
help
finally
materializes,
it
is
no
less
genuine
for
having
come
after
the
event
rather
than
before
or
during
it.
With
foresight
a
human
being—the
plaintiff,
for
example—can
attenuate
his
or
her
resources,
pledge
his
or
her
credit
or
endure
a
setback,
waiting
and
expecting
to
be
helped
later
to
overcome
his
or
her
temporary
difficulty,
because
the
human
person
is
aware
of
more
than
merely
the
present
bleakness
and
can
effectively
plan
to
obtain
genuine
and
effective
help
in
the
future.
The
adage
"short-term
pain
for
long-term
gain”,
is
meaningful
only
to
and
among
humans,
and
is
of
not
uncommon
reality.
So
where
does
subparagraph
15(2)(a)(ii)
provide
that
the
enablement
or
assistance
to
acquire
a
dwelling
for
habitation
must
be
operative
prior
to
or
concurrently
with
the
acquiring
of
the
dwelling?
It
does
not
so
provide.
The
very
notion
of
a
real-property
mortgage
bespeaks
enabling
or
helping
the
borrower
to
acquire
the
property
when
the
borrower
simply
has
no
sufficient
money
to
do
so.
The
fact
of
incurring
and
discharging
the
debt
in
the
future,
or
the
future
debt
in
the
further
future,
does
not,
among
humans,
dilute
the
present
and
genuine
enabling
or
assisting
of
the
person
to
acquire
a
dwelling.
And,
having
"due
regard
.
.
.
for
the
statutory
language"
one
is
not
required
to
exact
the
prior
or
concurrent
making
of
the
loan.
The
borrower
can,
without
statutory
obstacle,
be
truly
enabled
or
assisted
to
acquire
the
dwelling
by
a
mortgage-secured
loan
made
even
after
legal
title
has
passed
to
the
borrower.
The
help
which
is
coming,
when
reified,
is
no
less
real
in
financial
terms
than
that
which
is
concurrent.
Here
it
was
just
as
described
above.
The
loan
from
Musnor
was
used
to
discharge
the
existing
mortgage
(Exhibit
4)
which
the
plaintiff
had
to
assume,
but
which
could
not
be
paid-off,
without
a
penalty,
until
June
10,
1982.
If
the
plaintiff
had
been
obliged
to
pay
it
off
he
would
have
foreseeably
had
to
borrow
or
inherit
the
money
to
do
so,
and
he
well
knew
that,
when
he
acquired
the
mortgage-encumbered
title
to
the
dwelling
in
April
1980.
The
loan,
whose
proceeds
were
earlier
promised
and
subsequently
advanced
(at
interest,
of
course)
in
late
September
1981,
surely
and
genuinely
enabled
or
assisted
the
plaintiff
to
acquire
the
dwelling
because
upon
taking
the
mortgage-encumbered
title
he
could
foresee
and
legitimately
expect
that
such
help
would
be
forthcoming.
In
any
event
the
statute
itself
does
not
prescribe
any
mandatory
sequence
of
events
in
this
quintessential^
human
activity.
One
further
matter
remains
to
be
explored
in
regard
to
the
applicability
of
the
Act's
subparagraph
15(2)(a)(ii)
to
the
plaintiff's
circumstances.
Although
bona
fide
arrangements
were
made
at
the
time
the
loan
was
made
for
repayment
thereof,
was
repayment
to
occur
“within
a
reasonable
time"?
It
clearly
appears
that
such
was
and
is
the
case.
Whenever
a
statute
prescribes
a
"reasonable
time",
or
any
other
"reasonable"
measure
or
conduct,
one
can
be
sure
that
what
is
meant
is
not
a
rigidly
specific,
eternal,
universal
standard
or
verity.
What
is
meant
is
a
situational
concept;
that
is,
"what
time
is
reasonable
in
the
circumstances?"
The
circumstances
here
are
those
of
a
loan
made
in
favour
of
an
employee
in
order
that
he
could
acquire
a
house
in
his
new
posting
from
Norway
to
Canada.
The
employment
relationship
and
the
duration
of
the
posting
are
the
essential
situational
verities.
The
employer
gives
nothing
of
enduring
value
in
this
transaction.
If
the
property
be
sold,
or
otherwise
transferred,
even
while
the
plaintiff
is
in
Musnor’s
employ,
the
mortgage
loan's
whole
principal
sum
must
be
repaid,
undoubtedly
out
of
the
proceeds
of
the
sale
or
the
proceeds
of
the
plaintiff's
borrowing
at
that
time.
This
foregoing
requirement
is
exacted
under
clause
(d)
of
the
mortgage
document,
Exhibit
3.
If
the
plaintiff
should
leave
Musnor's
employ
or
that
of
any
of
its
other
subsidiaries
for
any
reason
whatsoever,
presumably
including
his
death,
the
mortgage
loan's
whole
sum
must
be
"immediately"
.
.
.
"due
and
payable”,
meaning
paid
forthwith,
(clause
(a)),
as
it
must
also
have
been,
if
the
plaintiff
had
not
paid
off
the
balance
outstanding
on
the
existing
first
mortgage
due
June
10,
1982
(clause
(c)).
Musnor's
plan
is
related
to
employment
of
a
relocated
employee,
in
which
circumstances
it
advanced
a
loan
to
enable
or
assist
the
plaintiff
to
acquire
a
dwelling
for
his
and
his
spouse's
habitation.
The
terms
for
repayment
of
the
principal
sum
are
also
related
to
the
plaintiff's
inhabiting
that
dwelling
during
the
course
of
his
employment
by
Musnor.
The
purpose
of
the
loan,
always
carried
at
reasonable
interest
of
$3,850
every
year,
so
fits
the
terms
of
repayment,
that
the
Court
finds
that
the
transaction
does
indeed
provide
for
repayment
within
a
reasonable
time.
It
is
manifestly
a
reasonable
time
in
the
circumstances.
Musnor
was
giving
no
unreasonable
favours
or
benefits
thereby,
for
paragraph
4
of
the
plaintiff's
mortgage
covenants
requires
that
he,
at
his
own
expense,
keep
not
only
the
premises
insured,
for
$100,000,
but
also
his
life
insured,
for
$55,000,
"for
the
benefit
of
the
mortgagee"
and
"with
loss
payable
to
the
mortgage".
It
is
well
understood
that
the
beneficiary
of
all
of
these
terms
and
conditions
exacted
of
the
plaintiff
was
and
would
be
the
equitable
mortgagee,
Musnor.
Subparagraph
15(2)(a)(ii)
benefits
Silden.
In
sum,
the
Court
finds
without
doubt
that
"bona
fide
arrangements
were
made
at
the
time
the
loan
was
made
for
repayment
thereof
within
a
reasonable
time”
in
all
the
circumstances
evinced
by
the
evidence.
That
is
unqualified
in
this
case,
and
so
therefore
is
the
Court's
finding.
Here
now
is
an
alternative
finding,
in
the
event
that
the
Court
has
misinterpreted
which
of
Musnor
and
Muscan
is
the
“particular
corporation"
and
which
is
the
"corporation
to
which
[it]
is
related",
or
whether
the
plaintiff
received
the
loan
as
a
shareholder
of
Muscan
(but,
as
the
defendant
pleads,
also
its
employee)
or
as
an
employee
of
Musnor.
Here,
the
Court
harkens
to
what
was
expressed
by
Mr.
Justice
Cattanach
in
M.N.R.
v.
Pillsbury
Holdings
Ltd.,
[1965]
1
Ex.
C.R.
676;
[1964]
C.T.C.
294;
64
D.T.C.
5184
(Ex.
Ct.),
at
300
(D.T.C.
5189).
The
defendant,
having
cited
the
Pillsbury
judgment
as
one
bearing
on
the
matters
in
issue,
yet
never
did
plead
in
the
statement
of
defence,
and
in
particular
in
paragraph
10
thereof,
where
subparagraphs
(c),
(e)
and
(f)
are
hereby
found
to
be
wrong
assumptions,
nor
in
paragraph
12
thereof,
where
all
subparagraphs,
(i),
(ii)
and
(iii)
are
hereby
found
to
be
wrong,
that
this
"quite
ordinary
type
of
transaction
between
a
debtor
and
lender
is
a
mere
subterfuge
whereby
the
lender
corporation
is
conferring
a
benefit
or
advantage
on
the
borrower
qua
shareholder".
At
most,
the
defendant
pleads
in
paragraph
12(i)
merely
"a
loan
made
by
a
corporation
to
one
of
its
shareholders".
It
was
surely
no
subterfuge
whatsoever.
Indeed,
the
defendant
does
not
attack
the
loan
as
being
a
device
or
arrangement
merely
for
conferring
a
benefit.
Paragraph
10(e)
stops
short
of
so
averring.
Here,
as
an
alternative
assumption,the
Court
has
found
that
neither
subparagraph
15(2)(a)(ii)
nor
section
80.4
of
the
Act
applies
to
the
plaintiff.
On
this
alternative
basis,
then,
the
Court
holds
that
the
Minister's
reassessment
dated
May
28,
1986,
with
its
confirmation
dated
September
9,
1986,
cannot
therefore
stand.
There
is
simply
no
basis
for
it
in
fact
or
in
pleading.
The
Minister's
confirmed
reassessment
is
accordingly
vacated
and
the
matter
is
returned
to
the
Minister,
who
is
hereby
directed
to
reassess
the
defendant's
income
tax
liability
for
his
1981
taxation
year
in
conformity
and
compliance
with
these
reasons
for
judgment,
by
deducting
from
his
income
the
sum
of
$55,000
lent
to
him
by
Musnor,
equitable
mortgagee,
through
and
by
means
of
Muscan,
legal
mortgagee.
The
plaintiff
shall
be
paid
his
party-and-party
costs—including
two
counsel
fees
at
trial—by
the
defendant,
forthwith
after
taxation
thereof
or
agreement
thereon.
The
plaintiff's
counsel
or
solicitors
are
directed
to
prepare
a
draft
judgment
pursuant
to
Rule
337(2)(b),
to
give
proper
expression
to
the
dispositions
of
the
issues
herein
which,
after
canvassing
the
defendant's
solicitors'
opinion
in
order
to
secure
their
approval
as
to
form
and
accurate
expression,
shall
be
submitted
to
the
Court
for
effective
execution
and
filing.
The
parties
have
leave
to
refer
any
difficulties
or
questions
to
the
Court
for
resolution.
Appeal
allowed.
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