Cattanach,
J:—These
are
appeals
by
the
plaintiff
from
its
assessments
to
income
tax
by
the
Minister
for
the
plaintiff’s
1968,
1969,
1970,
1971
and
1972
taxation
years
whereby
the
Minister
included
in
the
plaintiff’s
income
gains
realized
by
it
in
those
years
on
the
sale
of
real
property.
The
contention
on
behalf
of
the
plaintiff
is
that
the
parcels
of
real
estate
here
in
question
were
acquired
as
a
capital
asset
to
carry
on
the
business
of
raising,
developing,
scientifically
breeding
and
selling
trees,
shrubs,
plants
and
like
horticultural
products
thereon
and
that
the
sale
of
one
such
parcel
so
acquired
resulted
from
an
enhancement
in
value
of
that
capital
asset
and
that
the
sale
of
a
portion
of
a
second
parcel
acquired
for
a
like
purpose
was
also
a
capital
gain.
In
contradiction
thereof
it
is
contended
on
behalf
of
the
Minister
that
the
parcels
of
real
estate
in
question
were
acquired
speculatively
by
the
plaintiff
with
a
view
to
dealing
in,
trading
in
or
otherwise
turning
the
same
to
account
for
profit
and
that
the
profit
realized
was
income
from
a
business
or
an
adventure
in
the
nature
of
trade
within
the
meaning
of
sections
3,
4
and
paragraph
139(1)(e)
of
the
Income
Tax
Act,
SC
1970-71-72,
chapter
63
[s/c].
I
have
not
reproduced
the
sections
quoted
verbatim
because
they
are
so
well
known
but
since
it
may
be
expedient
to
do
so
I
shall
summarize
the
effect
thereof.
Under
section
3
of
the
1948
statute
the
income
of
a
taxpayer
for
a
taxation
year
is
his
income
from
all
sources,
inside
or
outside
of
Canada
including
income
for
the
year
from
all
businesses.
Under
section
4
income
from
a
business
is
the
profit
therefrom
for
the
year.
By
virtue
of
paragraph
139(1)(e)
“business”
is
defined
as
including
an
adventure
or
concern
in
the
nature
of
trade.
Sections
3,
9
and
subsection
248(1)
in
the
subsequent
reference
to
the
statute
are
to
the
identical
effect.
Thus
the
issue
between
the
parties
resolves
itself
into
what
has
been
frequently
categorized
in
the
parlance
as
a
“trading
case”
and
in
such
cases
which
of
the
rival
contentions
is
to
prevail
in
turn
resolves
itself
into
a
question
of
fact
and
the
proper
inferences
to
be
drawn
from
the
facts.
The
question
in
this
case
is
whether
the
purpose
for
which
the
plaintiff
acquired
the
two
parcels
of
land
was
to
conduct
a
nursery
farm
thereon.
If
that
was
its
exclusive
purpose
at
the
time
of
acquisition,
profits
from
the
sale
of
one
parcel
and
a
portion
of
the
second
would
not
be
profits
from
a
business
or
an
adventure
in
the
nature
of
trade.
If
that
was
not
its
exclusive
purpose
at
that
time
there
can,
in
the
circumstances,
be
no
doubt
that
the
acquisition
of
these
two
parcels
had
for
its
purpose,
or'
one
of
its
possible
purposes,
subsequent
disposition
at
a
profit
and
the
resulting
profits
are,
therefore,
taxable.
The
onus
of
disproving
the
Minister’s
assumption,
when
assessing
the
plaintiff
as
he
did,
that
the
latter
was
the
case,
falls
on
the
plaintiff.
Therefore
the
question
of
fact
to
be
decided
is
what
was
the
plaintiff’s
purpose
in
acquiring
these
two
parcels
of
real
property
and
that
is
to
be
decided
after
considering
all
of
the
evidence
and
the
inferences
to
be
drawn
from
that
evidence.
.
The
dominant
person
and
principal
witness
in
this
matter
was
Mr
Balys
Kronas.
Mr
Kronas
is
a
real
estate
broker
and
agent,
and
apparently
a
very
successful
one,
plying
his
trade
in
Hamilton,
Ontario
and
the
immediate
environs.
In
1958
and
1959
he
and
Joseph
Valevicius
jointly
acquired
two
adjoining
farms
in
the
Hamilton
area
on
the
Hamilton
escarpment.
These
farms
are
known
as
the
“Rubenstein”
farm
and
the
“Pottruff”
farm.
Valevicius
acquired
his
interest
in
the
properties
to
establish
a
retirement
residence
thereon
and
Balys
Kronas
to
establish
a
family
horticultural
farm
and
nursery
business.
Because
the
Rubenstein
farm
was
the
more
suitable
for
horticultural
purposes
it
was
agreed
in
1961
that
Kronas
would
acquire
Valevicius’
interest
in
the
Rubenstein
farm
and
vice
versa.
In
1962
Martin
Sernas,
an
engineer,
approached
Balys
Kronas
who
suggested
that
the
Rubenstein
farm
might
form
a
part
of
a
residential
subdivision.
Mr
Sernas
was
beginning
the
practice
of
his
profession
on
his
own
account.
He
did
not
know
Mr
Kronas
personally
but
only
by
his
reputation
as
an
experienced
real
estate
broker
and
developer
and
as
the
owner
of
the
Rubenstein
farm.
This
was
Mr
Sernas’
means
of
generating
business
for
himself.
If
Mr
Kronas
was
amenable
to
his
suggestion
of
a
residential
subdivision
he
foresaw
and
expected
his
engagement
by
Kronas
to
do
the
professional
engineering
work
involved.
Mr
Kronas
was
amenable
to
Mr
Sernas’
suggestion
and
requested
him
to
prepare
a
map
or
sketch
of
the
proposed
subdivision.
A
rough
sketch
was
so
prepared
predicated
upon
the
drainage
area
to
be
served
by
a
sanitary
sewer.
That
sewer
must
pass
through
the
Rubenstein
farm
and
so
that
farm
was
a
key
to
the
subdivision.
For
the
five
years
subsequent
to
1962
Mr
Kronas
gathered
conditional
contracts
to
sell
from
the
neighbouring
landowners
and
succeeded
in
interesting
a
number
of
local
investors
in
providing
financial
backing
for
the
project
but
he
was
not
successful
in
enlisting
major
financial
backing
from
any
of
the
larger
institutions,
foreign
or
otherwise,
which
major
financing
was
essential
to
the
creation
of
a
serviced
land
subdivision.
In
late
1966
or
early
1967
Mr
Kronas
sent
a
prospectus
to
the
Minister
of
Commerce
for
the
Province
of
Ontario
which
Mr
Servas
helped
to
prepare
and
if
my
recollection
is
correct
Mr
Kronas
also
had
a
meeting
with
the
Minister.
However
those
representations
produced
no
response
favourable
to
Mr
Kronas
and
his
project.
In
February
1967
Messrs
Ennis
and
Schneiderman,
officers
of
a
company
known
as
Jon-Enco
Limited,
advised
Mr
Kronas
of
their
interest,
purportedly
on
behalf
of
undisclosed
foreign
principals,
in
the
proposed
development
and
acquired
from
him
the
options
that
he
had
secured
and
sought
and
obtained
other
options.
In
other
words,
Jon-Enco
Limited
(hereinafter
referred
to
as
“Jon-Enco”)
began
and
completed
a
land
assembly.
Jon-Enco
obtained
from
Kronas
the
options
held
by
him
for
some
700
acres.
Jon-Enco
purchased
the
Rubenstein
farm
from
Balys
Kronas,
but
conditional
upon
the
subdivision
coming
into
existence.
If
it
did
not
then
the
Rubenstein
farm
would
revert
to
Kronas.
It
did
not
so
revert.
The
gain
realized
upon
the
sale
of
the
Rubenstein
farm
was
the
subject
of
litigation
before
the
Tax
Review
Board.
That
decision
has
not
been
appealed
and
accordingly
that
matter
is
not
before
me.
Mention
is
made
of
the
Rubenstein
farm
only
to
complete
the
understanding
of
what
transpired
subsequently.
On
December
15,
1967
the
plaintiff
was
incorporated
pursuant
to
the
laws
of
the
Province
of
Ontario
under
its
corporate
name
as
appears
in
the
style
of.
cause
for
objects
which
essentially
are
those
authorizing
the
company
to
carry
on
the
business
of
a
nurseryman,
that
is
“to
plant,
grow,
nurture
and
develop
flowers,
trees,
shrubs,
seedlings
and
plants
of
all
kinds
and
descriptions”
and
to
buy
and
sell
such
products.
The
corporate
name
is
not
consistent
with
the
objects.
The
inclusion
of
the
word
“enterprises”
in
the
name
signifies
nothing
other
than
that
a
company
‘so
called
will
engage
in
multitudinous
enterprises
and
the
word
“developments”
standing
alone
and
unmodified
would
convey
the
impression
that
a
company
so
named
is
engaged
in
land
development
and
not
the
development
of
horticultural
products.
However
the
objects
for
which
a
company
is
incorporated
will
generally
determine
the
nature
of
the
operations
to
be
undertaken,
inconsistent
as
those
objects
may
be
with
an
implication
as
to
what
the
company’s
objects
might
be
in
a
misleading
corporate
name.
If
a
company
pursues
objects
that
are
not
authorized
does
not
prevent
those
objects
as
being
operations
of
a
business
nature
and
profits
therefrom
as
being
taxable
as
income.
The
shareholders
in
the
plaintiff
became
Elvira
Kronas,
wife
of
Balys
Kronas,
who
held
3,595
shares,
Patricia
Dalia,
daughter
of
Balys
Kronas,
who
held
100
shares
(formerly
held
by
Eugene
Kronas,
son
of
Balys
Kronas,
in
trust
for
his
sister),
Patricia
Frances
Kronas,
née
Pullin,
divorced
wife
of
Eugene
Kronas,
who
held
100
shares,
Joseph
Svilas,
a
stranger,
who
held
5
shares,
Ignas
Kaunelis,
brother-
in-law
of
Balys
Kronas,
who
held
100
shares
and
Stephanie
Kaunelis,
wife
of
Ignas
and
sister
to
Balys,
who
held
100
shares.
The
only
stranger
in
the
shareholding
was
Joseph
Svilas
who
testified
that
he
purchased
shares
to
acquire
business
experience
in
a
field
he
was
interested
in
with
Balys
Kronas
as
his
teacher
for
whose
astuteness
in
business
he
must
have
had
high
regard
and
who
testified
that
he
was
willing
to
advance
a
further
$30,000.
Patricia
Kronas
testified
that
her
father,
a
naval
architect,
was
prepared
to
advance
a
substantial
undisclosed
sum
to
further
the
horticultural
business
of
the
company
and
that
this
commitment
held
despite
her
divorce
from
Eugene
but
that
she
still
considered
herself
a
member
of
the
family.
Balys
Kronas
was
not
a
shareholder
of
the
plaintiff.
He
was
its
manager
and
adviser
to
the
shareholders
and
directors.
As
such
he
attended
all
directors
and
shareholders
meetings
where
he
proffered
his
advice
freely
and
which
advice
was
invariably
acted
upon.
It
was
he
who
advised
the
shareholders
to
incorporate
first
for
the
usual
advantages
of
incorporation
and
secondly
to
remove
the
stigma
from
the
corporate
entity
which
attached
to
himself
as
a
speculator
and
trader
in
real
estate
with
consequent
tax
implications
of
which
he
was
well
aware.
However
because
a
person
is
an
acknowledged
trader
in
real
estate
does
not
prevent
that
person
from
becoming
an
investor
in
real
estate
as
contrasted
with
a
trader
therein
if
the
circumstances
so
establish.
A
corporation,
being
a
fictitious
entity,
can
only
express
its
intention
through
its
officers,
board
of
directors
and
shareholders.
Their
intentions
are
necessarily
those
of
the
corporation.
Despite
the
fact
that
Balys
Kronas
was
not
a
shareholder
or
director
of
the
plaintiff
nevertheless
he
was
the
manager
and
adviser
and
because
of
the
unique
position
he
held
as
head
of
the
family,
it
follows
that
his
intentions,
transmitted
through
the
directors
and
shareholders,
became
the
intentions
of
the
plaintiff.
The
Kronas
family
background
has
a
material
bearing
in
these
appeals.
Balys
Kronas
and
most
of
his
family
emigrated
to
Canada
in
1951
or
thereabouts
from
Lithuania
which
had
become
one
of
the
Soviet
States.
Prior
thereto
Lithuania
had
a
predominantly
agricultural
economy
and
remained
so
under
Russian
influence
but
with
an
introduction
of
some
industry.
It
is
an
historical
fact
that
land
holdings
in
excess
of
75
acres
were
broken
up
and
ownership
of
much
smaller
areas
transferred
to
the
individual
tenant
farmers
and
a
number
of
collective
farms
were
established.
Balys
Kronas
was
a
graduate
horticulturist
there,
having
studied
the
subject
in
Holland
and
Germany,
but
on
settling
in
Hamilton
he
became
a
real
estate
broker
and
salesman.
He
intends
to
continue
in
that
occupation
but
on
his
retirement
his
professed
intention
is
to
return
to
his
original
occupation
in
a
family
business
he
would
set
up
in
Hamilton.
His
father
attended
the
Academy
of
Horticulture
in
Leningrad
and
was
engaged
in
horticulture
and
continued
in
that
occupation
on
emigration
to
the
United
States.
He
wished
to
participate
in
a
family
business
in
Hamilton
to
be
set
up
by
his
son
in
Canada.
He
retired
in
1959
but
his
experience
was
available
to
the
contemplated
family
business.
He
died
in
1968
and
I
assume
he
was
succeeded
as
head
of
the
family
by
his
son
Balys
who
most
certainly
acted
as
such.
■j.
Balys’
mother
had
been
engaged
in
the
horticulture
business
as
her
husband’s
helpmate
from
1926
to
1943
mainly
in
the
marketing
end
of
the
business.
She
lives
in
Chicago,
Illinois,
but
is
anxious
to
come
to
Canada
and
give
her
talents
to
a
family:
business
when
in
full
operation.
Ludwig
Kronas
is
Balys’
brother
(I
think
he
is
an
older
brother).
He
has
been
engaged
in
horticulture
since
1933.
He
is
the
general
manager
of
the
largest
horticultural
firm
in
Chicago
but
will
abandon
that
position
and
is
anxious
to
come
to
Hamilton
and
work
full-time
in
a
family
business
when
it
is
operational,
most
likely
as
general
manager.
Eugene
Kronas
is
the
son
of
Balys.
He
is
a
graduate
in
forestry
from
the
University
of
New
Brunswick
but
is
now
a
barrister
and
solicitor
in
Ontario.
His
legal
advice
and
academic
and
practical
knowledge
in
forestry
will
be
available
to
a
family
business
in
an
advisory
capacity.
His
testimony
emphasized
the
close
family
ties
existing
in
the
Kronas
family
and
that
these
family
ties
are
carried
into
their
business
endeavours
and
that
all
members
are
most
anxious
to
participate
in
a
family
horticultural
business
in
Hamilton.
This
I
accept
without
question.
Ignas
Kaunelis
is
the
brother-in-law
of
Balys,
having
married
his
sister,
Stephanie.
He
is
a
graduate
of
the
Academy
of
Horticulture
in
Kaunas,
one
of
the
principal
cities
of
Lithuania.
He
is
practising
his
trade
in
Detroit,
Michigan
and
is
willing
and
anxious
to
move
to
Hamilton
to
participate
in
a
family
nursery
business
when
it
is
in
full
swing.
From
this
background
it
is
abundantly
clear
that.
the
individual
members
of
the
Kronas
family
each
possess
a
wealth
of
experience
and
capability
in
the
nursery
business
and
that
each
and
every
one
of
them
wish
to
pool
those
capabilities
in
a
family
business
which,
with
their
demonstrated
industry,
augurs
well
for
success
and
it
is
obvious
that
the
success
of
such
a
business
depends
upon
the
acquisition
of
a
sufficient
area
of
arable
land
in
close
proximity
to
a
market.
This
was
a
purpose
which
influenced
the
acquisition
by
Balys
of
the
Rubenstein
farm
about
1959
but
I
am
not
called
upon,
in
these
appeals,
to
determine
if
that
was
his
exclusive
purpose
at
that
time.
As
previously
recited
Jon-Enco
purchased
the
Rubenstein
farm
from
Balys
Kronas,.
conditional
upon
a
subdivision
coming
into
being,
otherwise
the
farm
would
revert
to
Kronas.
Balys
Kronas
granted
an
easement
over.
the
Rubenstein
farm
for
the
construction
of
a
sewer.
It
was
essential
that
the
sewer
be
constructed
through
the
Rubenstein
farm
and
that
fact
was
made
clear
to
him
by
Mr
Sernas
when
he
prepared
his
map
of
the
area
of
some
900
acres
which
could
be
subdivided
and
served
by
the
sewer.
There
is
no
question
in
my
mind
that
if.
the
subdivision
developed
Mr
Kronas
had
no
reasonable
expectation
that
the
Rubenstein
farm
would
be
available
as
a
nursery
farm
despite
the
easement
he
had
obtained.
When
Mr
Sernas
first
appeared
his
map
of
the
area
which
could
be
served
by
a
sewer
and
so
suitable
for
subdivision
that
area
was
comprised
of
about
900
acres.
The
rough
map
that
he
prepared
is
Exhibit
P1
and
the
original
area
is
outlined
in
orange.
Jon-Enco,
when
it
began
its
land
assembly,
wished
to
extend
those
boundaries.
On
Mr
Kronas’
instruction
Mr
Sernas
re-thought
the
area
that
could
be
served
by
the
sewer
and
concluded
that
it
would
be
practical
to
extend
that
area.
The
boundaries
of
the
extended
area
are
outlined
in
red
on
Exhibit
P1.
This
extension
may
have
been
done
by
Jon-Enco
engineers
but
Mr
Sernas-
outlined
the
extended
area
for
Mr
Kronas
and
for
Jon-Enco.
Included
in
the
original
area,
outlined
in
orange,
and
abutting
the
extreme
easterly
and
southerly
boundaries,
were
parcels
8
and
9
in
the
Township
of
Saltfleet.
Those
are
the
two
parcels
which
I
have
previously
referred
to
as
the
first
parcel
which
is
slightly
inaccurate
but
I
consider
parcels
8
and
9
together
as
comprising
the
first
parcel
which
gives
rise
to
these
appeals.
On
February
10,
1967
and
February
12,
1967
agreements
were
entered
into
by
Kronas
to
acquire
parcels
8
and
9
from
the
owners
in
trust
for
the
plaintiff.
The
chronography
is
as
follows:
About
February
1,
1967
Jon-Enco
approached
Kronas
and
acquired
his
option
for
the
subdivision
and
granted
an
easement
over
the
Rubenstein
farm.
On
February
10
and
12,
1967
Kronas
acquired
parcels
8
and
9
as
he
testified
as
a
replacement
for
the
Rubenstein
farm.
In
mid-February
1967
Jon-Enco
advised
Kronas
a
larger
area
would
be
required
for
the
subdivision
and
Kronas
instructed
Sernas
to
ascertain
what
larger
area
could
be
served
by
sewer.
At
the
beginning
of
March
1967
Jon-Enco
advised
Kronas
that
the
Rubenstein
farm
was
required
for
the
subdivision
but
that
parcels
8
and
9
might
not
be
required
and
Mr
Kronas
could
keep
them.
In
mid-March
1967
Jon-Enco
advised
that
parcels
8
and
9
were
required
for
the
subdivision.
Accordingly
Mr
Kronas
did
not
know
when
he
acquired
parcels
8
and
9
that
the
Rubenstein
farm
was
required
for
the
subdivision;
at
the
most
he
had
but
an
expectation
bordering
on
a
certainty
that
it
would
be
so
required.
He
knew
when
he
acquired
parcels
8
and
9
that
these
parcels
were
within
the
original
area
of
the
subdivision,
but
at
the
outer
limits.
He
also
knew
that
the
original
area
was
extended
and
that
parcels
8
and
9
were
well
within
that
extended
area.
In
mid-March
1967,
after
parcels
8
and
9
were
acquired
by
him,
he
was
told
that
he
might
keep
these
parcels
but
within
two
weeks
or
less
he
was
told
by
Jon-Enco
that
parcels
8
and
9
were
required
for
the
subdivision.
If
Mr
Kronas
knew
with
almost
certainty
that
the
Rubenstein
farm
would
be
required,
it
is
equally
logical
to
assume
that
parcels
8
and
9
would
not
be
available
to
him
indefinitely
and
there
was
every
likelihood
that
it
would
be
required
eventually.
The
most
he
could
assume
by
being
told
by
Jon-Enco
that
parcels
8
and
9
were
not
required
for
the
subdivision
was
that
they
were
not
immediately
required.
What
was
uncertain
was
the
immediacy
of
the
requirement
and
that
was
soon
resolved.
It
was
about
two
weeks.
Mr
Kronas
sold
parcels
8
and
9
to
Jon-Enco
on
March
28,
1967
thereby
realizing
gains
of
$23,941.91
and
$106,924.65
which
the
Minister
has
assessed
as
income
to
the
plaintiff
and
exacts
tax
accordingly.
Parcels
8
and
9
having
been
disposed
of,
Balys
Kronas
assembled
those
members
of
his
family
who
were
to
become
the
first
shareholders
of
the
plaintiff
on
organization.
It
will
be
recalled
that
the
plaintiff
was
not
incorporated
until
December
15,
1967
and
that
the
acquisition
of
parcels
8
and
9
was
done
by
Balys
Kronas
in
trust
for
a
company
to
be
incorporated.
The
meeting
agreed
and
authorized
Balys
Kronas
to
seek
other
lands
in
substitution
and
funds
were
available
having
been
generated
by
the
sale
of
parcels
8
and
9.
When
Kronas
was
in
the
process
of
acquiring
options
or
agreements
for
sale
on
conditions,
he
had
acquired
an
option
on
Lots
33
and
34
also
in
the
Township
of
Saltfleet.
That
option
had
long
since
expired.
These
lands
were
well
beyond
the
western
boundaries
of
the
original
area
and
the
extended
area
as
well
except
for
a
very
small
area
to
the
south
which
is
included
in
the
extended
area
capable
of
being
serviced
by
sewer
facilities.
The
land
is
zoned
agricultural
except
for
a
very
small
portion
which
is
zoned
industrial
and,
if
I
recall
correctly,
the
industrial
area
coincides
with
the
portion
included
in
the
extended
Subdivision
area.
The
original
expired
option
was
acquired
before
Kronas
had
the
benefit
of
the
Sernas
map.
On
April
6,
1967
pursuant
to
his
instructions
from
the
then
proposed
shareholders
of
the
plaintiff
to
acquire
Lots
33
and
34
he
did
so
in
trust
for
the
plaintiff
under
a
conditional
contract
for
sale
as
had
been
the
case
in
other
acquisitions
hedged
with
the
subdivision
being
proceeded
with.
In
that
month
the
shareholding
in
the
plaintiff
when
incorporated
was
agreed
upon
being
proportionate
to
the
money
to
be
invested
in
the
plaintiff
with
room
for
rearrangement
in
the
event
of
further
investment
by
the
proposed
shareholders.
In
October
1967
Jon-Enco
announced
that
all
conditions
had
been
fulfilled
and
all
purchases
and
sales
became
firm
and
closing
would
begin.
On
January
2
and
3,
1968
Ontario
Housing
Corporation
(referred
to
as
“OHC”
which
is
an
agency
of
the
Province
of
Ontario)
became
the
owner
of
all
land
assembled
for
the
subdivision.
Obviously
Jon-
Enco
had
been
acting
for
OHC
as
undisclosed
principal
throughout
and
not
for
some
vague
foreign
interests
as
had
been
hinted.
This
is
a
device
frequently
resorted
to
by
OHC,
that
is
to
engage
a
real
estate
firm
to
assemble
the
land
for
an
undisclosed
principal
to
avoid
rampant
speculation
and
unnaturally
inflated
prices.
On
January
2,
1968
with
the
Rubenstein
farm
moved
from
Kronas
to
Jon-Enco
to
OHC
where
it
remained.
At
the
same
time
title
of
parcels
8
and
9
moved
from
the
original
owners,
to
Kronas
in
trust
for
the
plaintiff
to
Jon-Enco
to
OHC
where
title
vested
(I
think
there
were
some
shortcuts).
Neither
Kronas
nor
Jon-Enco
were
ever
in
actual
possession
and
as
recited
above
the
plaintiff’s
equitable
ownership
only
lasted
a
very
short
time,
ie,
from
the
beginning
of
March
to
mid-March
1967
when
Jon-Enco
demanded
and
obtained
an
assignment
of
parcels
8
and
9
as
well.
At
that
date
title
to
Lots
33
and
34
moved
from
the
original
owners
to
the
plaintiff
through
Kronas,
its
trustee.
Now
at
long
last
the
plaintiff
is
in
a
position
to
embark
upon
concrete
steps
to
bring
to
ultimate
fruit
the
horticultural
business
for
the
benefit
of
its
shareholders,
the
Kronas
family,
but
obstacles
remained.
Lots
33
and
34
had
not
been
under
cultivation
for
some
time.
The
land
was
badly
run
down
with
an
overgrown
tangle
of
weeds.
There
was
no
housing
on
the
land.
Shortly
after
January
2,
1968
the
plaintiff
purchased
a
small
lot
adjoining
Lots
33
and
34,
80
feet
by
200
feet
on
which
there
was
a
dilapidated
house
unfit
for
habitation
for
$7,800.
A
further
$4,000
was
expended
to
make
the
house
habitable
including
the
laying
of
a
pipe
to
supply
water
to
it.
Meanwhile
OHC
engaged
engineering
and
urban
planning
help
to
plan
the
subdivision.
Kronas,
because
of
his
interest,
followed
the
progress.
Through
his
acquaintance
with
a
senior
person
in
this
professional
group
he
saw
the
early
sketches
and
the
developing
plans.
This
becomes
significant
later.
In
the
spring
of
1968,
some
63,000
seedling
trees
were
planted
on
Lots
33
and
34
to
ascertain
the
growing
characteristics,
the
most
suitable
trees
the
soil
would
nurture
and
to
provide
a
cash
crop.
At
this
point
I
should
mention
incidentally
that
this
was
not
the
first
venture
into
the
nurseryman
business
by
Mr
Balys
Kronas.
He
had
acquired
land
in
the
Mississauga
area
where
he
grew
evergreens
and
sold
them.
That
business
still
continues
but
it
is
some
distance
from
Hamilton
where
the
family
plans
to
assemble.
I
think
some
of
the
63,000
seedling
trees
planted
on
Lots
33
and
34
came
from
that
tree
farm.
Eugene
Kronas,
who
holds
a
degree
in
forestry,
invited
a
lecturer
in
forestry
at
Guelph
University
whom
he
knew
to
visit
Lots
33
and
34
and
give
his
opinions
and
advice
and
through
him
an
experienced
field
husbandry
machine
operator
was
engaged
to
cultivate
the
land
and
to
restore
it
to
productivity.
Most
of
the
63,000
seedling
trees
were
destroyed
by
mice
which
infested
the
land
because
they
bred
prolifically
in
the
weed
overgrowth.
A
pear
orchard
on
the
land
was
pruned
and
cleaned
up
but
proved
uneconomical
to
operate.
It
was
essential
to
subdue
the
weeds
and
rid
the
land
of
rodents.
This
was
done
by
cultivation
and
planting
crops
such
as
corn.
A
tenant
farmer
who
occupied
the
restored
house
on
the
lot
purchased
was
hired
to
look
after
the
property,
particularly
27
head
of
cattle
acquired
by
the
plaintiff
for
a
twofold
purpose:
(1)
to
provide
a
cash
income,
and
(2)
to
control
the
weed
growth
and
fertilize
the
land.
About
a
year
after
the
acquisition
of
Lots
33
and
34
and
the
house
and
lot
the
plaintiff
was
approached
by
Terence
O’Neill,
a
real
estate
agent,
who
sought
to
purchase
26.2
acres
of
Lot
33
as
designated
in
a
sketch
attached
to
the
offer.
Mr
Kronas
recognized
this
sketch
as
coinciding
with
part
of
the
plan
of
subdivision
he
had
seen
in
the
early
sketches
and
developing
plans
with
the
professional
group
responsible
for
the
planning
of
the
subdivision
which
I
have
mentioned.
He
recognized
it
as
part
of
a
proposed
shopping
plaza.
With
good
reason
he
assumed
(and
as
it
turned
out,
correctly)
that
the
undisclosed
principal
for
whom
O’Neill
was
acting
was
OHC.
While
no
threat
of
expropriation
was
made
Kronas
knew
that
OHC
had
the
power
to
do
so.
Accordingly
Kronas
recommended
to
the
directors
of
the
plaintiff
that
the
O’Neill
offer
be
accepted.
Mr
Svilas,
the
only
unrelated
shareholder
and
director
but
a
friend
of
the
family,
and
Mrs
Patricia
Kronas
testified
that
they
brought
their
own
independent
judgment
to
bear
upon
Mr
Balys
Kronas’
recommendation
and
agreed.
The
O’Neill
offer
was
accepted
but
conditionally
upon
the
plaintiff
retaining
the
growing
trees
on
the
acreage
and
an
application
for
severance
being
approved
by
the
municipality.
The
application
for
severance
was
refused.
The
municipality
did
not
know
that
OHC
was
the
undisclosed
principal
which
might
have
had
a
bearing.
The
offer
came
to
naught.
Some
six
months
later
the
offer
was
renewed,
this
time
by
a
different
real
estate
agent
who
disclosed
that
OHC
was
the
principal.
The
offer
was
in
the
identical
terms
as
the
prior
O’Neill
offer.
The
price
was
the
same
and
considered
by
the
plaintiff,
on
advice
from
Balys
Kronas,
to
be
fair.
The
likelihood
of
expropriation
in
the
event
of
refusal
was
present
in
stronger
terms
than
in
the
O’Neill
offer
and
approval
of
severance
was
immediately
forthcoming
from
the
municipality.
Again
the
offer
was
accepted
by
the
plaintiff
for
the
same
reasons
as
the
O’Neill
offer
was
accepted
but
this
time
the
sale
was
consummated.
At
the
same
time
OHC
purchased
further
small
portions
of
Lot
33
and
the
house
and
lot
adjoining
Lot
33
being
two
parcels
of
about
7
and
3.91
acres
respectively
from
the
plaintiff.
The
acquisition
of
these
three
portions
of
the
plaintiff’s
land
by
OHC
was
necessary
to
straighten
up
the
boundaries
and
roads
to
the
26.2-acre
shopping
plaza
site.
On
the
sale
of
the
26.2-acre
portion
of
Lot
33
in
1969
the
plaintiff
realized
a
gain
of
$115,386.76.
On
the
sale
of
the
house
and
lot
and
two
portions,
totalling
10.91
acres,
the
plaintiff
realized
a
gain
of
$68,877.55
in
1970.
This
is
what
I
have
referred
to
above
as
the
second
transaction.
Again
the
Minister
included
the
gains
so
realized
as
income
to
the
plaintiff
in
the
taxation
years
1969
and
1970
and
assessed
the
plaintiff
accordingly.
The
amounts
realized
as
gains
in
what
I
have
referred
to
as
the
first
transaction,
that
is
parcels
8
and
9
and
the
second
transaction,
that
is
37.11
acres
of
Lots
33
and
34
and
the
house
and
lot
are
not
disputed
between
the
parties.
The
only
dispute
between
them
is
the
taxability
thereof.
After
the
sale
of
the
house
and
lot,
the
cattle
had
to
be
disposed
of.
The
plaintiff
was
deprived
of
37.11
acres
of
its
land
which
totalled
83
acres.
Thus
it
was
left
with
only
48
acres.
To
supplement
its
diminished
acreage
the
plaintiff
entered
a
lease
or
licence
with
Ontario
Hydro
of
some
17
acres
of
Hydro’s
right-of-way
adjoining
Lots
33
and
34
for
the
maximum
available
period
of
3
years
which
can
be
renewed.
Thus
the
plaintiff
has
increased
its
remaining
acreage
to
63
acres
which
the
plaintiff
considers
adequate
for
its
purposes
when
supplemented
by
greenhouses
and
like
facilities.
The
17
acres
leased
from
Hydro
has
been
cultivated,
the
weeds
reduced
and
some
13,000
seedling
trees
have
been
planted
thereon.
Of
the
63,000
trees
planted
on
Lots
33
and
34
lost
to
rodents,
the
plaintiff
has
replaced
the
loss
by
planting
some
12,000
trees
in
carefully
selected
areas
of
the
property,
some
to
serve
as
wind
control,
some
to
grow
into
mature
trees
for
future
sale
and
some
are
being
harvested
currently.
The
offers
emanating
from
OHC
were
unsolicited
by
the
plaintiff.
The
plaintiff
has
received
unsolicited
offers,
not
too
many
in
number,
from
persons
other
than
OHC
for
parts
of
Lots
33
and
34
especially
that
zoned
industrial.
One
that
I
particularly
recall
was
for
a
bowling
alley.
The
offers
so
received
have
been
consistently
refused
by
the
plaintiff.
However
the
plaintiff
is
willing
to
construct
a
building
on
the
small
portion
of
its
land
zoned
industrial
to
the
specifications
of
a
prospective
lessee
and
to
lease
that
building
to
derive
rental
income
therefrom.
That
is
consistent
with
the
plaintiff
retaining
the
land
as
a
Capital
asset.
A
sign
erected
on
the
land
proclaims
the
plaintiff’s
willingness
to
construct
and
lease
a
building
on
the
industrial
site.
In
1974
the
plaintiff
entered
into
negotiations
with
Braun
Landscaping
and
Nursery
Limited,
one
of
the
largest
merchandisers
of
horticultural
products,
as
the
corporate
name
indicates,
in
the
Hamilton
area.
Those
negotiations
culminated
in
a
letter
of
intent
dated
November
5,
1974.
Mr
Braun,
the
president
and
managing
director
of
that
company,
testified
that
he
considered
himself
bound
by
that
commitment
(although
legally
he
might
not
be)
and
extolled
the
advantages
to
the
plaintiff
and
to
his
company.
He
holds
the
Kronas
family
in
high
esteem
as
experienced
and
proven
growers
of
horticultural
products
and
a
constant
source
of
those
products.
The
project
is
to
be
conducted
as
a
joint
venture
with
a
retail
Outlet
on
Lots
33
and
34
to
serve
the
landscaping
and
other
like
needs
of
the
residents
of
the
development
which
has
been
described
in
evidence
as
a
Satellite
city.
In
response
to
a
question
from
myself
I
learned
that
a
very
substantial
number
of
houses
have
been
built,
sold
and
occupied.
However
the
location
of
main
arterial
and
improved
roads
and
highways
has
not
been
resolved.
Different
views
prevail
among
the
municipality,
groups
of
ratepayers
and
most
likely
OHC
but
it
is
anticipated
where
the
roads
and
highways
will
be
located,
and
what
lands
will
be
required
for
their
construction
will
be
resolved
in
1978.
Mr
Balys
Kronas
is
in
constant
touch
with
the
municipality
to
learn
when
the
existing
uncertainties
will
become
certainties.
When
this
has
been
done
that
will
enable
the
further
development
of
the
development,
the
construction
of
the
shopping
plaza
and
the
extension
of
housing
to
much
closer
proximity
to
the
plaintiff’s
lands.
Because
of
the
stage
of
the
present
development
of
residential
housing
it
follows
that
shopping,
educational
and
like
facilities
will
be
required
for
the
population.
But
until
this
present
uncertainty
is
resolved
the
time
is
inauspicious
for
the
plaintiff
to
embark
upon
the
construction
of
greenhouses
and
like
necessary
facilities
which
are
estimated
to
cost
about
$250,000
and
the
implementation
of
its
arrangement
with
Braun’s.
In
the
meantime
the
plaintiff
has
done
most
of
what
it
can
by
way
of
cultivation,
the
planting
of
trees,
the
provision
of
a
water
supply,
other
than
the
construction
of
greenhouses,
and
at
considerable
expense.
As
counsel
for
the
plaintiff
said
in
argument,
the
plaintiff
has
put
its
money
where
its
mouth
is.
The
members
of
the
Kronas
family
resident
other
than
in
Hamilton
have
not
as
yet
moved
to
Hamilton
to
participate
in
the
family
business.
That
is
understandable.
The
time
is
not
yet
ripe
for
Ludwig
Kronas
to
give
up
his
employment
in
Chicago
and
the
same
applies
to
Ignas
Kaunelis
in
Detroit.
What
has
been
done
is
to
prepare
the
business
for
complete
and
full-time
operation.
In
the
light
of
the
facts
and
circumstances
outlined
above,
in
my
view
the
plaintiff
has
not
discharged
the
onus
cast
upon
it
with
respect
to
parcels
8
and
9
to
establish
that,
at
the
time
of
the
acquisition
of
that
land,
the
plaintiff's
exclusive
purpose
was
to
conduct
a
nursery
farm
thereon.
For
the
reasons
I
have
expressed
the
intention
of
the
plaintiff,
which
had
not
come
into
being
at
that
time,
must
be
taken
to
be
that
of
Balys
Kronas,
who
acquired
the
land
in
trust
for
a
company
to
be
formed
which
was
the
plaintiff.
I
have
no
doubt
whatsoever
that
to
conduct
a
nursery
farm
on
the
land
was
the
preferred
purpose
but
because
of
the
peculiar
circumstances
applicable
it
cannot
be
said
that
the
preferred
purpose
was
the
exclusive
purpose
and
the
possible
purpose
of
disposition
at
a
profit
was
not
present.
Mr
Kronas
was
not
oblivious
of
the
fact
that
a
vigorous
land
assembly
was
in
progress
by
Jon-Enco
for
a
residential
subdivision.
He
knew
that
parcels
8
and
9
were
within
the
Original
boundaries
of
that
subdivision
and
well
within
the
extended
boundaries.
He
had
assigned
all
options
that
he
had
acquired
on
his
own
initiative
to
Jon-Enco
for
$10,000
and
Jon-Enco’s
undertaking
to
pay
$3,100
an
acre
for
land
under
option
and
that
Jon-Enco
was
in
a
position
to
exercise
that
assignment.
It
is
true
that
the
options
were
conditional
upon
the
subdivision
being
developed
but
there
must
also
be
ascribed
to
Mr
Kronas
the
knowledge
of
the
likelihood
of
a
successful
subdivision
being
imminent.
It
is
true
that
Jon-Enco
indicated
that
parcels
8
and
9
would
not
be
required
for
the
subdivision
but
that
indication
was
countermanded
within
less
than
two
weeks
after
it
was
given
and
Mr
Kronas’
option
on
parcels
8
and
9
was
demanded
by
Jon-Enco
and
assigned
by
him
to
Jon-Enco.
To
a
person
possessed
of
the
business
acumen
and
real
estate
experience
as
Mr
Kronas
possessed,
the
possibility
of
the
events
occurring
which
did
occur
could
not
be
disregarded.
Furthermore
if
the
residential
development
was
successful,
and
because
Mr
Kronas
was
willing
to
undertake
that
development
on
his
own
account
he
must
have
been
convinced
of
its
success,
then
a
110-acre
nursery
farm
surrounded
by
a
residential
development,
which
would
enhance
the
value
of
that
land,
would
be
uneconomic.
It
is
for
these
reasons
that
I
have
concluded
that
the
plaintiff
has
not
discharged
the
onus
cast
upon
it
to
establish
that
parcels
8
and
9
were
acquired
for
the
exclusive
purpose
of
conducting
a
nursery
farm
at
the
time
of
acquisition
from
which
it
follows
that
the
Minister
was
warranted
in
assessing
the
plaintiff
as
he
did.
Accordingly
the
appeal
with
respect
to
the
gain
realized
upon
the
sale
of
parcels
8
and
9
is
dismissed.
I
have
reached
a
contrary
conclusion
with
respect
to
Lots
33
and
34.
Radically
different
considerations
apply
to
the
acquisition
of
Lots
33
and
34
than
those
applying
to
parcels
8
and
9.
First
and
foremost
the
greater
bulk
of
Lots
33
and
34
were
beyond
the
boundaries
of
the
residential
development
and
could
not
be
served
by
the
sewer
essential
to
residential
development.
At
the
time
of
the
acquisition
of
Lots
33
and
34
the
plaintiff
could
not
have
known
that
OHC
would
require
a
substantial
portion
of
Lot
33
as
a
site
for
a
shopping
centre
because
the
closing
of
the
land
assembly
had
not
taken
place
at
that
time
and
OHC
had
not
appointed
its
planners
nor
were
the
plans
completed.
I
accept
as
a
premise
for
the
reasons
I
have
expressed
based
upon
the
facts
outlined
that
the
shareholders
of
the
plaintiff
had
concluded
the
firm
purpose
of
establishing
a
nursery
farm
in
the
Hamilton
area
and
in
close
proximity
to
the
residential
development
because
of
the
market
provided
thereby.
In
my
view
that
resolute
purpose
is
confirmed
by
the
acquisition
of
Lots
33
and
34.
Of
course
parcels
8
and
9
were
more
Suitable
for
a
nursery
farm
than
Lots
33
and
34.
Parcels
8
and
9
contained
110
acres.
Lots
33
and
34
contained
83
acres.
Parcels
8
and
9
had
good
buildings
and
clean,
cultivated
land
whereas
Lots
33
and
34
had
no
buildings,
which
obligated
the
plaintiff
to
purchase
an
adjoining
lot
with
a
house
on
it
and
arrange
for
a
water
supply.
The
land
had
been
neglected
and
infested
by
weeds.
The
cost
of
parcels
8
and
9
was
about
$177,000
whereas
the
cost
of
Lots
33
and
34
and
adjoining
lot
was
about
$240,000,
a
difference
of
about
$73,000.
But
in
the
opinion
of
the
plaintiff,
transmitted
through
Balys
Kronas,
Lots
33
and
34
were
the
best
available
in
the
area
and
while
the
plaintiff
fully
recognized
the
disadvantages
it
was
prepared
to
accept
and
surmount
them
to
achieve
its
ultimate
end.
The
land
was
zoned
agricultural,
except
for
a
small
portion
zoned
industrial,
and
was
beyond
the
drainage
area.
Accordingly
there
were
no
prospects
of
resale
at
a
profit
at
the
time
of
acquisition
and
in
so
saying
I
do
not
overlook
the
subsequent
sales
to
OHC
but,
for
the
reasons
I
have
expressed,
that
possibility
was
not
present
at
the
time
of
acquisition.
This
was
not
so
with
respect
to
parcels
8
and
9.
The
plaintiff
refused
unsolicited
offers
to
purchase
portions
of
Lots
33
and
34
in
the
small
area
zoned
industrial.
The
plaintiff
was
prepared
to
erect
a
building
thereon,
lease
the
building
to
derive
rental
income.
That
is
consistent
with
the
land
being
retained
as
a
capital
asset.
When
the
O’Neill
offer
for
portions
of
Lots
33
and
34
on
behalf
of
an
undisclosed
principal
was
made,
Mr
Kronas
had
good
reason
to
suspect
that
the
principal
was
OHC
and
to
refuse
the
offer
would
be
to
invite
expropriation.
Similar
considerations
prevailed
with
respect
to
the
repeated
offer
by
a
different
agent
in
which
OHC
was
disclosed
as
the
offerer
and
that
offer
was
accepted
and
closed.
It
is
for
these
reasons
that
I
have
concluded
that
the
plaintiff
has
discharged
the
onus
of
establishing
that
Lots
33
and
34,
and
the
adjoining
lot
with
house,
were
acquired
for
the
exclusive
purpose
of
operating
a
nursery
farm
thereon
and.
that
the
subsequent
sales
of
the
lot
with
house
and
portions
of
Lots
33
and
34
were
unforeseeable.
It
follows
that
the
plaintiff’s
appeal
from
the
assessment
by
the
Minister
including
the
gains
realized
On
these
sales
as
income
to
the
plaintiff
must
be
allowed.
In
the
result
the
plaintiff
has
been
unsuccessful
with
respect
to‘
the
gains
realized
on
the
sale
of
parcels
8
and
9
but
has
been
successful
with
respect
to
the
gains
realized
on
the
sales
of
portions
of
Lots
33
and
34
and
the
adjoining
property.
Since
success
has
been
divided,
and
because
the
costs
with
respect
to
the
appeals
from
the
respective
assessments
will
be
approximately
the
same,
each
party
shall
bear
its
own
costs.
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