Décary,
J:—The
issue
is
to
determine
if
outlays
were
made
or
expenses
incurred
for
the
purpose
of
gaining
income
from
property
when
the
defendant,
in
order
to
secure
Domtar
Limited
as
tenant,
agreed
to
indemnify
and
exonerate
Domtar
Limited
up
to
an
amount
of
$700,000
on
account
of
the
cancellation
of
different
leases
and
also
agreed
to
pay
Montreal
Trust
a
fee
of
$90.000
for
having
found
Domtar
as
a
tenant.
On
July
4,
1968.
a
memorandum
of
agreement
was
entered
into
between
defendant
and
Domtar
Limited
and
paragraph
4
therein
concerns
the
obligations
of
Domtar
Limited
to
be
assumed
by
defendant
in
connection
with
the
lease
of
Domtar
Limited
with
Sun
Life
and
the
Canadian
Imperial
Bank
of
Commerce.
which
reads:
(Tenant
is
Domtar
Limited
and
Landlord
refers
to
defendant
and
partners).
4.
The
Landlord
acknowledges
that
the
tenant
presently
leases
certain
premises
in
the
Sun
Life
Building’
and
in
the
Canadian
Imperial
Bank
of
Commerce
Building
(all
of
the
aforementioned
premises
being
herein
called
the
“Old
Premises”).
The
Landlord
covenants
with
the
tenant
that
in
the
event
that
the
tenant
pays
any
amounts
to
the
lessor
or
lessors
of
the
old
premises
in
connection
with
the
early
vacating
by
the
tenant
of
the
old
premises,
the
landlord
will
pay
to
the
tenant
(a)
100%
of
all
amounts
up
received
as
aforesaid
by
the
tenant
shall
be
reimbursed
to
the
landlord;
and
thereafter
(b)
The
next
$300,000
or
any
part
thereof
received
as
aforesaid
by
the
tenant
shall
be
reimbursed
in
whole
by
the
tenant
to
the
landlord;
and
thereafter
to
an
aggregate
of
$300,000
paid
by
the
tenant
to
the
lessor
or
lessors
of
the
old
premises;
50%
of
all
amounts
in
excess
of
$700,000
paid
by
the
tenant
to
the
lessor
or
lessors
of
the
old
premises.
It
is
the
intention
of
the
parties
that
the
maximum
aggregate
amount
payable
by
the
landlord
to
the
tenant
under
this
clause
4
shall
be
$500,000.
The
tenant
covenants
and
agrees
that
it
will
use
its
best
efforts
to
endeavour
to
minimize
the
amounts
payable
by
the
landlord
under
this
clause
4.
The
tenant
shall
not
be
entitled
to
claim
any
amounts
from
the
landlord
under
this
clause
4
unless
the
tenant
shall
have
provided
proof
of
payment
by
the
tenant
to
the
lessor
or
lessors
of
the
old
premises.
The
landlord
agrees
that
it
shall
within
30
days
of
the
tenant
having
provided
proof
of
said
payment
by
the
tenant
reimburse
the
tenant
the
amount
of
such
payment
subject
to
the
provisions
of
this
clause
4.
In
the
event
that
following
the
payment
by
the
landlord
to
the
tenant
of
amounts
under
this
clause
4,
the
tenant
received
in
any
manner
whatsoever
relating
to
the
old
premises
amounts
so
that
the
net
outlays
of
the
tenant
do
not
exceed
$200,000,
in
such
event
the
tenant
agrees
that
it
shall
thereafter
make
restitution
to
the
landlord
as
follows:
(a)
50%
of
the
first
$400,000
or
any
part
thereof
received
as
aforesaid
by
the
tenant
shall
be
reimbursed
to
the
landlord;
and
thereafter
(b)
the
next
$300,000
or
any
part
thereof
received
as
aforesaid
by
the
tenant
shall
be
reimbursed
in
whole
by
the
tenant
to
the
landlord,
and
thereafter
(c)
the
next
$200,000
or
any
part
thereof
received
as
aforesaid
by
the
tenant
shall
be
reimbursed
by
the
tenant
to
the
landlord
in
consideration
of
the
landlord’s
undertaking
set
forth
in
clause
5
of
this
agreement;
and
thereafter
(d)
All
further
amounts
received
as
aforesaid
by
the
tenant
shall
be
retained
by
the
tenant.
It
has
to
be
noted
that
defendant
does
not
assume
any
amount
greater
than
$500,000
and
the
memorandum
of
agreement
also
provides
that
if
Domtar
Limited
receives
any
amount
relating
to
the
old
premises,
the
amount
payable
by
defendant
shall
be
reduced
under
certain
conditions.
In
the
same
memorandum
of
agreement,
we
find
that
the
provisions
of
paragraph
5
deal
with
the
lease
for
the
premises
Domtar
Limited
had
in
Place
Ville
Marie.
The
said
paragraph
reads
as
follows:
5.
The
landlord
agrees
with
the
tenant
that
subject
to
the
terms
hereof,
it
will
assume
to
the
complete
exoneration
of
the
tenant
as
and
from
the
commencement
date
of
the
original
term
all
obligations
of
the
tenant
to
Place
Ville
Marie
Corporation
under
and
in
respect
of
the
lease
between
the
tenant
and
Place
Ville
Marie
Corporation
dated
respectively
the
16th
day
of
July,
1962,
the
18th
day
of
September,
1962
and
the
23rd
day
of
October,
1963.
The
landlord
shall
be
free
to
negotiate
amendments
to,
and
the
cancellation
of,
all
or
any
of
such
leases
with
Place
Ville
Marie
Corporation
provided
that
no
such
amendments
shall
increase
the
obligations
of
the
tenant
thereunder.
If
any
documents
are
required
to
be
entered
into
to
give
effect
to
the
cancellation
or
amendment
of
any
of
such
leases,
the
tenant
agrees
that
it
will,
at
the
landlord’s
cost,
execute
the
same.
The
provisions
of
paragraph
6
of
the
same
memorandum
of
agreement
state
that
the
obligations
of
defendant
set
forth
in
clauses
4
and
5
shall
commence
only
at
the
date
of
the
original
term
and
furthermore
two
conditions
are
to
be
met
before
defendant
has
to
discharge
his
obligations,
that
is:
the
lease
has
to
be
executed
and
the
premises
occupied
by
Domtar
Limited.
6.
The
obligations
of
the
landlord
set
forth
in
clauses
4
and
5
of
this
agreement
shall
commence
on
the
commencement
date
of
the
original
term
of
the
lease
and
be
in
respect
of
the
terms
of
the
leases
of
the
old
premises
and
the
premises
in
Place
Ville
Marie
following
such
commencement
date
save
if
the
same
relate
to
the
early
vacating
of
the
old
premises
or
the
premises
in
Place
Ville
Marie
or
the
termination
of
the
leases
in
respect
thereof.
The
landlord
shall
have
no
obligations
under
the
said
clauses
4
and
5
of
this
agreement
unless
the
tenant
(a)
executes
the
lease
and
also
(b)
occupies
the
premises.
By
virtue
of
the
lease
between
defendant
and
Domtar
Limited,
dated
July
19,
1968,
as
stated
in
paragraph
3,
the
original
term
starts
on
November
1,
1968:
3.
This
lease
is
made
for
an
original
term
(the
“Original
Term’’)
commencing
on
November
1,
1968
and
ending
on
October
31,
1978.
The
landlord
hereby
grants
to
the
tenant
exclusive
and
irrevocable
options
to
renew
the
lease
for
additional
terms
of
ten
years
each
commencing
respectively
on
the
first
day
of
November
in
each
of
the
years
November
1,
1978,
November
1,
1988,
November
1,
1998,
and
November
1,
2008
and
one
additional
term
of
nine
years
and
six
months
commencing
on
November
1,
2018,
and
terminating
on
April
30,
2028.
In
view
of
the
fact
that
the
original
term
of
the
lease
starts
on
November
1,
1968,
it
follows
that,
as
stated
earlier,
the
obligations
commence
on
November
1,
1968.
The
word
“commence”
is
defined
in
The
Oxford
English
Dictionary*
as,
inter
alia:
1.
trans.
To
begin
(an
action);
to
enter
upon;
esp
in
legal
use,
to
commence
an
action,
a
suit,
proceedings,
etc.
3.
intr.
To
make
a
start
or
beginning;
to
come
into
operation.
If
the
obligations
begin,
come
into
operation
on
November
1,
1968,
then
before
that
date
there
being
no
obligations,
defendant
could
not
be
liable
to
incur
any
expense
or
pay
any
outlay.
The
lease
was
executed
on
July
19,
1968,
but
its
term
started
only
on
November
1,
1968
and
consequently
I
think
no
obligations
could
take
effect
before
that
date.
Not
only
could
the
obligations
take
effect
only
after
November
1,
1968,
but
then
the
quantum
of
the
obligations
may
vary
from
a
nil
amount
up
to
the
maximum
of
$500,000.
The
amount
that
may
have
to
be
paid
could
be
much
lower
than
$500,000.
I
do
not
believe
that
an
amount
that
!s
uncertain
can
be
deducted
unless
it
be
by
way
of
reserve
which
is
specifically
provided
for
in
the
Income
Tax
Act.
There
are
no
provisions
in
the
Act
concerning
a
deduction
for
an
uncertain
amount
of
the
present
nature.
Furthermore,
in
the
present
instance,
the
said
commitment
has
been
assumed
as
of
October
31,
1968
under
the
provisions
of
paragraph
4
of
an
agreement
between
defendant
and
Halstead
Holdings
Limited
for
the
sale
of
the
property
being
the
emphyteutic
lease
and
building
thereon.
4.
The
purchaser
acknowledges
having
taken
cognizance
of
the
terms
of
the
emphyteutic
lease
and
of
the
leases
entered
into
between
the
vendors
with
tenants
in
the
building,
including
the
leases
with
The
Royal
Bank
of
Canada
and
Domtar
Limited,
and
the
purchaser
agrees
to
perform
to
the
exoneration
of
the
vendors
all
of
the
respective
obligations
of
the
vendors
under
all
of
such
leases.
If
the
defendant
is
exonerated
of
all
his
obligations
under
the
leases
of
Domtar
Limited
it
seems
that
there
cannot
be
any
doubt
that
they
did
not
have
to
incur
any
expense
or
to
pay
any
outlay
as
that
expense
or
outlay
had
to
be
paid
or
had
to
be
reimbursed
by
Halstead
Holdings
Limited.
The
price
for
the
sale
of
the
property
is
provided
in
the
agreement
of
sale:
(a)
by
the
assumption
of
the
sum
of
$3,500,000,
being
the
amount
outstanding
as
at
October
31,
1968,
under
a
bank
loan
from
The
Royal
Bank
of
Canada;
(b)
by
the
assumption.
of
net
liabilities
owing
by
the
vendors
in
respect
of
the
said
property
aggregating
$854,954;
(c)
by
the
assumption
of
the
sum
of
$120,000
owing
by
the
vendors
to
Marlow
Enterprises
Limited
in
respect
of
the
said
property;
(d)
by
the
delivery
to
the
purchaser
by
the
vendors
of
promissory
notes
aggregating
$1,027,989.
The
price
appears
to
be
$3,446,965,
that
is
a
total
amount
of
liabilities
of
$4,474,954
less
$1,027,989
but
that
price
could
be
lower
if
the
$500,000
do
not
have
to
be
paid
in
full
for
the
cancellation
of
the
leases
of
Domtar
Limited
with
Sun
Life
and
the
Canadian
Imperial
Bank
of
Commerce.
A
deed
of
sale,
in
notarial
form
that
time,
under
date
of
February
18,
1969,
reads
at
pages
4,
5
and
6:
WHEREAS
CUMMINGS
desires
to
transfer
and
assign
unto
HALSTEAD
all
their
rights
under
the
said
emphyteutic
lease
as
well
as
all
their
rights
in
and
to
said
building
erected
on
said
immoveable
property
and
all
their
rights
in,
to
and
under
all
space
leases
affecting
the
said
premises.
NOW,
THEREFORE,
THESE
PRESENTS
WITNESSETH:
For
$1.00
and
other
good
and
valuable
considerations
which
CUMMINGS
acknowledges
to
have
received
from
HALSTEAD
whereof
quit,
CUMMINGS
hereby
transfers
and
conveys
to
HALSTEAD,
thereof
accepting:
(iii)
all
the
right,
title
and
interest
in
and
to
all
space
leases
affecting
the
building
or
buildings
erected
on
the
above-mentioned
immoveable
property,
CUMMINGS
hereby
subrogating
and
substituting
HALSTEAD
in
all
their
rights
and
privileges
thereunder,
with
the
right
to
collect
and
receive
all
rentals
and
other
sums
payable
thereunder
as
of
November
1,
1968.
The
present
transfer
and
conveyance
has
been
thus
made
subject
to
the
following
conditions,
to
the
fulfilment
whereof
HALSTEAD
does
hereby
bind
and
oblige
itself,
namely:
1.
To
pay
the
costs
of
this
deed
and
its
registration.
2.
To
fulfil
the
exoneration
of
CUMMINGS
all
the
obligations
assumed
by
them
and
arising
out
of
the
said
emphyteutic
lease
and
to
be
bound
by
all
the
charges,
terms
and
conditions
upon
and
subject
to
which
the
emphyteutic
lease
was
made.
That
notarial
deed
of
sale
does
not
refer
to
the
exoneration
of
defendant
and
partners
like
the
deed
of
sale
of
October
31,
1968
but
still
that
does
not
change
anything
to
the
commitment
undertaken
by
Halstead
Holdings
Limited
on
October
31,
1968,
there
being
no
need
to
have
that
commitment
included
in
the
notarial
deed
of
sale
because
the
said
commitment
assumed
by
Halstead
Holdings
Limited
was
subsisting.
As
to
the
amount
of
$200,000
paid
to
Trizec
Corporation
for
cancellation
of
the
lease
of
Domtar
Limited,
it
is
referred
to
in
the
agreement
to
that
effect
dated
August
2,
1968.
That
agreement
is
between
Domtar
Limited
and
Place
Ville
Marie
Corporation
and
we
read
therein,
at
p
2:
THAT
with
effect
from
and
after
the
31st
day
of
October
1968,
the
agreements
of
lease
are
hereby
cancelled
and
terminated
for
all
purposes
subject,
however,
to
tenant.
(a)
paying
to
landlord
an
amount
of
$200,000
receipt
whereof
is
hereby
acknowledged.
It
is
quite
amazing
to
find
that
the
copy
of
the
agreement
put
into
the
common
evidence
does
not
bear
the
signatures
of
either
Place
Ville
Marie
Corporation,
Domtar
Limited
or
Montreal
Trust
but
does
bear
the
signatures
of
defendant
and
partners
who
consent
to
the
execution
of
the
cancellation
agreement.
No
remarks
were
made
as
to
the
relevancy
of
such
a
document,
unsigned
by
the
principals
to
the
agreement.
Taken
as
true,
the
document
shows
that
Domtar
Limited
paid
$200,000
to
Place
Ville
Marie
Corporation
in
order
to
cancel
its
leases
and
that
defendant
consented
to
that
payment
taking
place.
By
virtue
of
the
provisions
of
article
4
of
the
agreement
of
sale
dated
October
31,
1968,
quoted
earlier,
Halstead
Holdings
Limited
assumed
the
liability
of
Domtar
Limited
for
the
cancellation
of
the
leases.
The
liability
of
defendant
towards
Domtar
Limited
in
connection
with
all
the
leases
of
Domtar
Limited,
that
is,
with
Place
Ville
Marie
Corporation,
the
Canadian
Imperial
Bank
of
Commerce
and
Sun
Life,
being
assumed
by
Halstead
Holdings
Limited,
the
defendant,
even
if
he
paid
$200,000
to
Place
Ville
Marie
Corporation,
still
had
to
be
reimbursed.
Indeed,
that
amount
was
paid
to
Place
Ville
Marie
Corporation
pursuant
to
an
obligation
that
then
had
created
a
liability
to
be
assumed
by
Halstead
Holdings
Limited.
The
same
remarks
apply
as
to
the
nature
of
the
$90,000
paid
to
Montreal
Trust
because
again
that
amount
relates
to
the
lease
and
therefore
has
to
be
paid
by
Halstead
Holdings
Limited.
In
a
balance
sheet
as
at
October
31,
1968
of
R
&
J
Cummings-
Kennedy
Blvd.,
we
see
that
an
amount
of
$939,270
is
described
as
“accounts
payable
and
sundry
liabilities’’
and
we
find
the
same
amount
in
the
opening
balance
sheet
of
Halstead
Holdings
Limited
on
the
same
date
under
the
same
caption;
these
two
financial
statements
are
signed
by
the
same
auditors.
An
auditors’
schedule
giving
a
detailed
statement
of
the
$939,270
shows
that
the
said
amount
includes
the
one
of
$500,000
for
the
cancellation
of
the
leases
of
Domtar
Limited,
and
the
one
of
$90,000
paid
to
the
Montreal
Trust
as
a
commission,
but
the
amount
of
$200,000
paid
to
Place
Ville
Marie
Corporation
does
not
appear
to
be
there,
at
least
not
as
such.
The
auditors,
in
a
letter
dated
August
15,
1974,
write:
This
is
to
confirm
that
the
amount
of
$939,270
reflected
as
accounts
payable
and
sundry
liabilities
on
the
balance
sheet
of
R
&
J
Cummings-Kennedy
Blvd
as
at
October
31,
1968
were
transferred
to
Halstead
Holdings
Limited
and
appear
in
the
opening
balance
sheet
of
that
company
as
at
November
1,
1968.
The
accounting
treatment
of
that
total
amount
of
$939,270
by
the
auditors
of
defendant
and
his
partners
bears
out
my
interpretation
of
the
various
documents.
In
my
opinion,
the
transfer
referred
to
in
the
letter
corresponds
to
the
situation
created
by
the
fact
that
Halstead
Holdings
Limited
exonerated
defendant
and
his
partners
of
any
liabilities
arising
out
of
the
cancellation
of
the
leases.
If
expenses
were
incurred
or
outlays
made
by
defendant
and
his
partners
on
account
of
the
cancellation
of
the
leases
of
Domtar
Limited,
I
cannot
find
that
these
expenses
were
incurred
or
these
outlays
made
for
the
purpose
of
gaining
income
from
property
because
defendant
and
his
partners
were
to
be
exonerated
by
Halstead
Holdings
Limited
of
any
liabilities
in
that
regard.
An
expense
incurred
that
is
assumed
or
an
outlay
made
that
is
reimbursed
is
no
more
an
expense
or
an
outlay
of
the
person
who
incurred
the
expense
or
made
the
outlay
and
consequently
there
is
no
question
of
finding
if
such
expense
or
outlay
is
deductible
under
the
provisions
of
the
Income
Tax
Act
in
computing
the
income
of
the
person
who
incurred
the
expense
or
made
the
outlay.
The
judgment
shall
also
apply
to
Maxwell
Cummings,
Robert
M
Cummings
and
Victor
Levy.
The
appeal
shall
be
allowed
with
cost
of
only
one
action.
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