Couture,
C.J.T.C.
[Orally]:—This
is
an
appeal
against
assessments
issued
by
the
respondent
pursuant
to
which
taxes
in
the
amount
of
$92,691.36
plus
interest
of
$799.61
were
levied
for
the
taxation
year,
1979,
and
taxes
in
the
amount
of
$143,583.28
plus
interest
of
$1,618.65
for
the
taxation
year
1980.
The
only
issue
in
respect
of
this
appeal
is
whether
the
proceeds
of
disposition
realized
by
Greater
Sarnia
Investment
Corporation
hereinafter
referred
to
as
Greater
Sarnia
or
the
appellant
on
the
sale
of
a
ship
known
as
the
“Seaway
Trader"’
during
the
taxation
year
1979
gave
rise
to
a
capital
gain
as
Claimed
by
the
appellant
or
to
a
taxable
profit
resulting
from
an
adventure
in
the
nature
of
trade
as
assessed
by
the
respondent.
At
the
opening
of
the
hearing
counsel
for
the
appellant
in
accordance
with
the
provisions
of
subsection
165(7)
of
the
Act
moved
to
amend
the
notice
of
appeal
as
filed
to
substitute
therein
the
date
of
December
19,
1985
to
that
of
February
17,
1983
referred
to
in
the
preamble
of
the
notice
in
respect
to
the
taxation
year
1980.
Counsel
for
the
respondent
having
no
objection,
the
motion
was
granted.
There
is
no
need
to
recite
in
detail
all
of
the
facts
that
were
disclosed
in
the
evidence
during
the
hearing
of
this
appeal.
A
brief
outline
of
the
salient
events
which
gave
rise
to
the
gain
in
question
is
sufficient
in
my
opinion
for
the
conclusion
that
is
warranted.
The
main
witness
on
behalf
of
the
appellant
was
Lucio
Sandrin,
its
president.
He
impressed
me
as
a
serious,
knowledgeable
and
astute
businessman,
whose
testimony
I
accept
without
reservation.
Greater
Sarnia
is
a
member
of
a
group
of
companies
which
was
referred
to
as
the
Sandrin
Group.
It
carries
on
the
business
of
an
investment
company
in
Sarnia,
Ontario
and
also
provides
management
and
accounting
services
to
several
subsidiary
and
affiliated
companies
of
the
group.
Some
of
these
companies
are
engaged
in
the
business
of
ship
repair
and
maintenance.
It
was
disclosed
that
some
time
in
early
1979
information
reached
the
appellant
that
Imperial
Oil
Limited
was
interested
in
disposing
of
one
of
its
oil
tankers
known
as
the
“Imperial
Collingwood”.
Upon
receiving
such
information
the
appellant
contacted
some
of
the
major
oil
companies
to
explore
the
possibilities
of
chartering
this
ship
to
them
in
the
event
that
it
could
or
would
purchase
it.
While
no
firm
commitment
was
received
by
the
appellant
at
the
time,
interest
in
this
proposal
was
expressed
by
the
companies
contacted.
Prior
to
submitting
a
bid
for
the
ship
the
appellant
had
obtained
a
computer
print-out
of
Lloyd’s
Register
of
Shipping
describing
the
history
of
the
ship
since
its
construction
and
its
then
present
condition.
In
addition,
the
appellant
was
well
aware
of
these
conditions
as
one
of
its
affiliates
had
completed
annual
repairs
on
it
for
the
last
15
years.
The
appellant
also
had
commissioned
a
marine
surveyor
to
appraise
the
ship
who
had
estimated
its
then
current
market
value
at
$225,000
and
its
residual
scrap
value
at
$75,000.
It
had
also
been
established
that
the
ship
required
some
$100,000
of
repairs
to
bring
its
condition
to
the
standards
necessary
for
sailing.
All
this
information
assisted
the
appellant
in
the
formulation
of
its
decision
to
try
to
acquire
the
ship.
Some
time
in
the
spring
of
1979
the
appellant
made
an
offer
on
the
ship
by
way
of
a
bid
at
$92,500.
The
appellant
was
not
the
only
bidder
for
the
ship.
Its
bid
was
accepted
by
Imperial
Oil
Limited
and
a
bill
of
sale
was
executed
on
May
30,
1979
conveying
ownership
of
the
ship
to
the
appellant.
On
that
same
day
for
reasons
that
were
explained
to
the
Court
and
which
have
no
bearing
on
the
issue
under
discussion
title
to
the
ship
was
transferred
to
a
Bermuda
company
as
trustee
by
the
name
of
L
&
D
Investments
Limited
whose
shareholders
were
the
same
as
those
of
the
appellant.
The
name
of
the
ship
was
also
changed
from
“Imperial
Collingwood”
to
“Seaway
Trader”.
Following
its
acquisition
the
appellant
proceeded
with
having
the
necessary
repairs
effected
to
the
ship
and
while
these
repairs
were
progressing
negotiations
were
carried
on
with
various
potential
charterers
by
its
president.
In
June
of
1979
the
appellant’s
president
was
contacted
by
one
Alonzo
Landry
of
New
Brunswick,
an
individual
he
had
not
known
and
never
heard
of
who
apparently
operated
oil
tankers
on
the
east
coast
of
Canada
among
other
businesses.
According
to
the
evidence
Landry
knew
that
the
appellant
had
purchased
the
“Seaway
Trader”
and
was
interested
in
chartering
the
ship.
He
met
with
Mr.
Sandrin
and
following
negotiations
a
five-year
charter
by
demise
agreement
was
agreed
to
by
both
parties.
Its
terms
and
conditions
were
outlined
in
the
written
document
drafted
by
the
appellant’s
solicitor
on
or
about
June
14,
1979
but
for
reasons
that
were
not
explained
was
not
signed
by
the
parties.
In
summary
it
provided
that
the
charterer
was
to
be
a
company
that
had
been
incorporated
by
Landry
by
the
name
of
Shediac
Bulk
Shipping
Ltd.,
hereinafter
referred
to
as
Shediac,
that
the
agreement
was
for
a
duration
of
60
months
from
the
1st
day
of
July,
1979,
that
a
charter
hire
rate
of
$20,000
a
month
would
be
paid
for
the
first
two
years
reducing
to
$18,000
a
month
for
the
third
year
and
to
$15,000
a
month
for
the
last
two
years
for
a
total
of
$1,056,000.
Shediac
also
had
an
option
to
purchase
the
ship
at
maturity
of
the
agreement
for
the
amount
of
$480,000
or
renew
the
agreement
for
another
term
of
five
years
at
a
rate
of
$12,500
a
month
with
the
right
to
purchase
the
ship
at
the
end
of
the
second
term
for
$75,000.
The
witness
explained
that
his
understanding
at
the
time
was
that
Greater
Sarnia
had
a
firm
agreement
with
Shediac
notwithstanding
that
the
written
agreement
had
not
been
signed.
Nonetheless
he
pursued
his
search
for
available
prospective
charterers
in
case
Shediac
did
not
live
up
to
its
commitment.
On
August
17,
1979
Landry
at
his
request
met
with
the
witness
and
made
him
an
offer
to
purchase
the
"Seaway
Trader”
outright
for
an
amount
of
$1
million.
After
consultation
with
other
officers
of
the
appellant
the
offer
was
accepted
and
a
bill
of
sale
between
Shediac
and
L
&
D
Investments
Ltd.
was
executed
on
August
17,
1979.
The
terms
of
the
sale
was
for
an
immediate
cash
payment
of
$100,000
with
the
balance
of
sale
secured
by
a
mortgage
on
the
ship
of
$900,000
payable
in
varying
amounts
and
at
irregular
intervals
until
fully
paid.
In
addition
Greater
Sarnia
was
invited
by
Landry
to
become
a
50
per
cent
equity
shareholder
of
Shediac,
an
offer
that
was
accepted.
The
witness
asserted
and
repeated
a
number
of
times
in
the
course
of
his
evidence
that
the
sole
and
only
intention
which
motivated
the
purchase
of
the
“Imperial
Collingwood”
from
Imperial
Oil
Limited
was
the
prospect
of
a
long-term
investment.
He
further
insisted
that
at
no
time
was
the
possibility
of
purchasing
the
ship
for
resale
considered.
He
had
seen
the
possibility
as
he
explained
to
acquire
a
ship
as
an
income
producing
asset,
a
dream
he
had
entertained
for
a
long
time,
at
a
relatively
low
cost,
an
investment
that
appeared
highly
promising
in
terms
of
profitability
because
of
the
scarcity
of
ships
of
that
size
in
existence
at
the
time
according
to
his
knowledge
of
the
industry.
The
ship
in
1979
had
a
life
expectancy
of
20
years.
Always
according
to
the
witness
the
appellant
had
the
necessary
financial
resources
on
hand
to
acquire
the
ship
and
in
fact
paid
cash
for
its
acquisition
and
also
subsequent
repairs.
It
was
also
disclosed
that
the
appellant
had
never
sold
a
ship
or
a
barge
or
a
tug
since
it
has
been
carrying
on
business
and
this
was
so
for
all
the
companies
of
the
group
except
one
which
sold
a
barge
in
a
subsequent
year
for
reasons
that
were
particular
and
related
to
its
ownership.
In
argument,
counsel
for
the
appellant
submitted
that
the
evidence
had
clearly
demonstrated
that
Greater
Sarnia
had
purchased
the
“Imperial
Collingwood”
in
June
of
1979
as
an
investment,
that
is,
as
an
income-producing
asset
for
the
sole
purpose
of
a
long-term
investment
and
its
disposition
in
August
of
the
same
year
was
as
a
result
of
an
unexpected
and
unsolicited
offer
which
was
too
good
to
refuse.
He
contended
that
the
facts
as
disclosed
in
evidence
do
not
support
the
proposition
that
at
the
time
of
purchase
the
appellant
had
an
alternative
or
secondary
intention
of
selling
the
ship
if
an
occasion
arose.
Counsel
for
the
respondent
argued
on
his
part
that
the
evidence
indicated
that
the
appellant
did
not
have
at
the
time
of
purchase
an
exclusive
intention
of
acquiring
the
ship
solely
as
an
investment
which
to
me
is
another
way
of
saying
that
the
appellant
entertained
an
alternative
or
secondary
intention
at
the
time
of
purchase.
In
the
light
of
the
evidence
I
cannot
agree
with
the
contention
of
the
respondent's
counsel.
To
accept
his
proposition
would
require
in
my
opinion
an
interpretation
of
the
relevant
facts
which
would
not
be
consistent
with
the
reality
of
the
events
which
gave
rise
to
the
transaction.
It
would
demand
in
my
estimation
the
injection
of
a
purpose
for
the
transaction
that
cannot
be
supported
or
extracted
from
the
oral
or
documentary
evidence
adduced
or
filed
at
the
hearing.
The
only
element
of
the
evidence
that
could
give
rise
to
questioning
the
validity
of
the
alleged
intention
of
the
appellant
as
to
its
long-term
investment
in
acquiring
the
ship
would
be
the
fact
that
it
disposed
of
it
on
the
first
occasion
that
presented
itself
and
within
a
very
short
period
of
time.
However,
the
evidence
of
Mr.
Sandrin
was
logical
and
convincing.
The
offer
to
purchase
from
Landry
was
unexpected
and
unsolicited
and
most
attractive
to
a
serious
businessman
in
terms
of
gain
that
could
be
realized.
Greater
Sarnia
would
receive
$1
million
for
the
ship
and
through
its
equity
position
in
Shediac
would
own
indirectly
50
per
cent
of
it,
thus
maintaining
somehow
an
investment
in
the
“Seaway
Trader"'.
Even
though
the
appellant’s
original
intention
was
frustrated
in
the
process,
I
am
satisfied
that
the
economics
of
the
transaction
considered
by
themselves
provide
a
satisfactory
explanation
for
the
appellant’s
change
of
mind.
As
has
been
said
so
often,
each
case
must
be
appreciated
in
the
light
of
its
own
facts.
I
fully
accept
the
evidence
of
Mr.
Sandrin
and
I
cannot
detect
from
such
evidence
any
element
that
would
support
the
proposition
that
he
had
an
alternative
or
secondary
intention
at
the
time
he
was
acting
on
behalf
of
the
appellant
for
the
purchase
of
the
“Imperial
Collingwood".
For
these
reasons
the
appeal
is
allowed.
The
assessments
for
the
taxation
years
1979
and
1980
are
referred
back
to
the
respondent
for
reconsideration
and
reassessment
on
the
basis
that
the
proceeds
of
disposition
of
the
"Seaway
Trader"
in
1979
gave
rise
to
a
capital
gain.
The
appellant
is
entitled
to
his
costs
on
a
party-to-party
basis.
Appeal
allowed.
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