Birmount Holdings Limited v. Her Majesty the Queen, [1977] CTC 34

Sweet, DJ:—The plaintiff is a private company incorporated under The Corporations Act, 1953 (Ontario) by letters patent dated Septem- ber 16, 1960. The location of its head office as stated in its letters patent was Toronto, Ontario.

The plaintiff appeals from a notice of assessment dated December 4, 1972 for the taxation year 1972 wherein a tax of $644,373.55 was assessed on a profit from the sale of 74.43 acres of land with some building on it (sometimes herein referred to as the realty) in Scarborough, Ontario.

The plaintiff’s 1972 taxable income was assessed at $1,765,407. According to Schedule 1 attached to the notice of assessment, that figure was arrived at as follows:

(1) that the plaintiff’s dealing with the realty was not an adventure in the nature of trade, the submission being that it was acquired as an investment which resulted in a capital gain;

(2) that the plaintiff was neither a resident of Canada nor a nonresident which carried on business in Canada and so was not taxable.

In the Statement of Claim another position was also taken, namely that the fair market value of the lands at the date of the sale did not exceed the fair market value thereof on Valuation Day. This was not gone into at the trial. No relevant evidence in that connection was adduced.

Mr Wright, counsel for the plaintiff, also submitted, at least originally, that if the transaction was found to be an adventure in the nature of trade, the Crown must still establish that the plaintiff was taxable either on the basis of it being a resident or a non-resident carrying on business in Canada. I am not sure if Mr Wright subsequently conceded that the onus rested upon the plaintiff, not the Crown. Accordingly, I deal first with onus.

The onus throughout rests upon the plaintiff, which is here attacking the assessment.

Thurlow, J (as he then was) in Pashovitz v MNR, [1961] CTC 288; 61 DTC 1167, made it clear that the onus of proof that there is error in an assessment falls on the taxpayer. In that case, he quoted from R W S Johnston v MNR, [1948] SCR 486; [1948] CTC 195; 3 DTC 1182.

It is, as I understand it, beyond controversy that the only person who was ever beneficially and financially interested in the plaintiff company and in its issued capital stock is Andre Mentzelopoulos though he was never one of its officers or directors, and though all of the issued shares of its capital stock were at all times held not in his own name, but in trust for him.

Mr Wright, counsel for the plaintiff, urged upon me that I take into consideration the background and personality of Mr Mentzelopoulos and the general culture of and the viewpoints of people such as he in the parts of the world in which his seemingly remarkable business talents were displayed and in which he apparently now plays an important role in business.

According to his evidence, the following are circumstances concerning Mr Mentzelopoulos. He was born in Greece. He is a resident of France. His investments, other than his personal residences, but including his shares of the capital stock of the plaintiff corporation (other than directors’ qualifying shares) are held in trust for him by Banque La Roche of Switzerland. He has held important executive positions in business in different countries. He has a factory in Pakistan. He is the chairman and managing director of and the owner of the majority of the issued shares of Felix Potin, a French food distributing organization. It has 1,600 stores and sales of nearly a billion dollars. He was honoured by his Church and decorated by the Government of France. He has three homes: a flat in Paris, a country house about 11 miles from the heart of Paris, and a vacation house in Greece, with much land about It.

From his evidence, he appears to be a man of wealth and of business experience in different parts of the world on a scale, if not reaching magnitude, at least approaching it.

Whatever else might be said about Mr Mentzelopoulos’ evidence, there emerges from it a picture of a person ambitious, mentally very energetic, of great business acumen, shrewd and with nothing about him of the naive.

In the paragraph immediately following, I assemble Mr Mentzelopoulos’ statements concerning circumstances relating to and his reasons and motivation for acquiring the realty as he claimed them to be.

He first came to Canada in 1960. He had a sister living in Port Credit. He saw an official of the Bank of Montreal. He told him he would like a permanent investment in Canada because of what he called the geographical and political security in Canada. He wanted a permanent investment with geographical and political security. For him, in 1960, geographical and political security meant Canada or Australia. To his mind, Canada was, is and will be one of the safest areas. The Bank of Montreal official and he concluded he should buy a big plot of land in Canada and keep it for his children and grandchildren. An object of his was to send his children here to grow up in Canada. His son wanted to become a farmer in Canada. In buying land he made an investment for ensuing generations without worrying about nominal rental. If the object is a permanent investment, the immediate income, big or small, is immaterial. He never thought of appreciation in the value of the land. He bought it for a century. His family goes back to 1712 and he makes investments for maybe three or four centuries. His intention when the land was bought was to hold it forever. When he bought something he never sold it. His understanding of what the Birmount Company was to do in Canada was nothing but to hold the land and facilitate a splitting among his children and his wife when he died. For at least the last many centuries people in Europe had distrusted currencies and cash because wars occurred every 20 or 30 years. History has proven that stocks and currency are not an investment and that land and gold remain permanently. It was considered that the only safe investments were real estate and gold. He, himself, has held gold for the last 20 years.

The official of the Bank of Montreal introduced Mr Mentzelopoulos to an official of The Royal Trust Company. He suggested a piece of land of about 80 acres and about 20 miles from Toronto. After some negotiation an agreement of purchase and sale was entered into with Mr Mentzelopoulos being named the purchaser. He signed in Montreal.

Mr R A Cranston, a lawyer, called as a witness by the plaintiff, said that in 1960 Mr Mentzelopoulos sought an opinion from him as to what to do with the land, that he said he had children whom he wanted to get involved in Canada and that he wanted to keep the land for his children. Mr Cranston said that he recommended the formation of a corporation. It was indicated at the trial that the plaintiff took title of the realty pursuant to a direction.

According to the agreement for sale, it was made in August 1960. It shows the purchase price to be $390,757, with the following provision:

It is understood that the sale price is based on a price of Five Thousand Two Hundred and Fifty Dollars ($5,250.00) per acre and that the total sale price will be adjusted accordingly when the exact acreage is ascertained.

The agreement provides for payments in cash; the assumption of three mortgages; and the giving back of a fourth mortgage for the balance, bearing interest at the rate of 6% per annum payable semiannually and providing for partial discharges on a pro rata basis and with the privilege of paying all or part without notice or bonus at any time and having five years to run.

Mr Mentzelopoulos said that in 1971 he received telephone calls asking if he would like to sell the land, that he inquired as to how those calling got his name and telephone number, that he did not get a reply and told them he would not sell the land. Then a Mr Allan telephoned him. Mr Allan appears to have been a real estate broker representing a potential purchaser.

He said Mr Allan met him in Paris and told him it would be better for him to sell the land because by the spring of 1972 he would have to produce plans showing what he wanted to do with the land and unless he wanted to come often and defend his plans he “might get bad surprises’’. He said that he telephoned Lang, Michener (his solicitors in Toronto) regarding the matter. He said the matter worried him because he is a very busy man in Paris, being in charge of about 10,000 people and did not have time for the preparation of plans nor for flying to Toronto often.

Mr W R S Seyffert, a solicitor associated with Messrs Lang, Michener, giving evidence, said he inquired as to what Scarborough had in mind. Apparently, Mr Seyffert was informed that there was an official plan designating most of Scarborough for urban development but that Scarborough was about to release, in draft form, a secondary plan and the landowners would then be given two or three weeks to reply to the plan and make submissions to Scarborough. Mr Seyffert consulted firms regarding preparing material for this type of situation, received prices from them, and informed Mr Mentzelopoulos regarding them.

Mr Mentzelopoulos indicated, in effect, that this situation was inconsistent with his objects in connection with the acquisition of the realty.

Another reason offered by him for the sale had to do with currency. He said that from the summer of 1971 onwards an “international conversation’’ broke out in the press regarding dollar devaluation and that he thinks that both the Canadian and United States dollar were devalued in 1971. In his evidence he indicated that in 1972 there was, in Canada, a monetary crisis in the dollar area.

Mr Seyffert said Mr Mentzelopoulos told him to indicate to Allan that if he had a bona fide purchaser he was now willing to consider it and that he passed the information on to Mr Allan.

According to his evidence, Mr Seyffert dealt with the solicitors for the purchaser.

Mr Mentzelopoulos said, as a result of negotiations, there was an agreement as to price and documents were prepared.

Mr Mentzelopoulos, according to Mr Seyffert, insisted on a cash deal and asked him if he could solve that problem. Mr. Seyffert approached the Bank of Montreal and ascertained that it would make a loan to the purchaser and take a security mortgage provided that, as back-up security to the mortgage, a guarantee was lodged with them. Also, according to Mr Seyffert, such a guarantee was given by the Union Bank of Switzerland.

An offer, dated January 26, 1972, was received from Immobilien Investments Limited to purchase the property for $2,307,330.

Up to this time the plaintiff's directors had been residents of Canada and were associated with either The Royal Trust Company or the plaintiff’s Toronto solicitors.

Filed as exhibits are copies of what purport to be three transfers dated January 28, 1972, each of one share of capital stock of Birmount Holdings Limited and being respectively from R A Cranston to H B La Roche, from J B MacVicar to Dr H Wiki and from J M Smith to E Reichmuth. The transferees were apparently residents of Switzerland. Also, among the documents filed is what purports to be a copy of minutes of a meeting of the shareholders of Birmount Holdings Limited held at Toronto on January 27, 1972, containing:

The Chairman advised the meeting that Banque La Roche had instructed that new directors be appointed and accordingly, it was unanimously resolved that the following persons be and the same are elected as directors of the company to hold office until their successors or assigns are elected:

H B La Roche Dr H Wiki E Reichmuth

It is noted that the transfers are dated one day after the indicated date of the shareholders’ meeting and that there is no evidence of the consent of the majority of the directors signified by a resolution passed by the board to the transfers as required by the plaintiff’s letters patent.

Mr Seyffert took the offer to purchase to Europe and met with Mr Mentzelopoulos and the three ‘‘new directors”. He said that he produced the offer, that there was a discussion as to whether the land should be sold or the matter put off and the land not sold at that particular time, that Mr La Roche urged that the property be sold, indicating concern about the value of the dollar, that Dr Wiki agreed and that it was decided to accept. He said a formal meeting was convened and the resolution was passed on Mr Mentzelopoulos’ instructions.

Among the documents is what purports to be a copy of minutes of a meeting of the board of directors of Birmount Holdings Limited held in Zurich, Switzerland on January 31, 1972, which contains:

The Chairman advised the meeting that a Mr William Allan had in the month of November of last year approached the Company and advised that he acted for a person whose name he could not disclose, but who was interested in purchasing the property the title of which is in the name of the Company. In view of the monetary crisis which existed in November and currently exists, it was the Chairman’s opinion that the land should be sold and this asset converted into a currency which would not be devalued in the near future. The Chairman presented to the meeting an offer prepared by Mr William Allan and the solicitors for the purchaser and which offer has been reviewed by a Canadian law firm.

Also included is a form of resolution regarding the acceptance of the offer and the completion of the sale.

The sale was completed.

Portions of the Income Tax Act, as amended by 1970-71-72, c 63, are:

2. (1) An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year.

(3) Where a person who is not taxable under subsection (1) for a taxation year

(a) was employed in Canada,

(b) carried on a business in Canada, or

(c) disposed of a taxable Canadian property,

at any time in the year or a previous year, an income tax shall be paid as hereinafter required upon his taxable income earned in Canada for the year determined in accordance with Division D.

248. (1) In this Act,

“business” includes a profession, calling, trade, manufacture or undertaking

of any kind whatever and includes an adventure or concern in the nature of trade but does not include an office or employment;

250. (4) For the purposes of this Act, a corporation shall be deemed to have been resident in Canada throughout a taxation year if

(c) in the case of a corporation incorporated before April 27, 1965 (other than a corporation to which subparagraphs (b)(i) to (iv) apply), it was incorporated in Canada and, at any time in the taxation year or at any time in any preceding taxation year of the corporation ending after April 26, 1965, it was resident in Canada or carried on business in Canada.

I now deal with the plaintiff’s position that the transaction in the realty was not an adventure in the nature of trade and that the realty was acquired as an investment, which resulted in a capital gain.

One starts with the principle that the intention of the purchaser is a material factor and the time as of which that intention is material is the time of acquisition (Warnford Court (Canada) Limited v MNR, [1964] CTC 175; 64 DTC 5103; MNR v Lawee, [1972] CTC 359; 72 DTC 6342).

Evidence to be considered in deciding as to the purchaser’s intention is what he himself says it was. However, the purchaser’s declaration of intention is only one of the factors to be considered. In some cases there may be other evidence more cogent by far than the purchaser’s statement. In this connection, Cattanach, J, in MNR v Lawee (Supra), said [p 370 [6350]]:

Declarations of intention by persons assessed to income tax will not secure immunity therefrom. A professed intention cannot be considered as determining what it is that the concrete acts amount to. It is only part of the evidence. Statements made as to what the respondents’ intention was at the time of acquisition of the land must be considered along with all the objective facts.

Accordingly, if there be circumstances which are supportive of the purchaser’s declaration of intention or contradictory to or inconsistent with it, they, too, must be taken into consideration.

Supportive to some degree is the evidence of Mr Cranston to the effect that Mr Mentzelopoulos said he wanted to keep this land for his children and that he recommended a corporation.

On the other hand, there is much which, in my view, is quite inconsistent with Mr Mentzelopoulos’ statements of intention regarding the holding of the land, and much which contradicts those statements.

One sees this at the very beginning, in the agreement for the purchase of the realty in 1960.

There, in the offer to purchase, is:

The real property is represented as being of a level nature and suitable for subdivision and residential development, after the provision of services as required by the Municipal Authorities and the real property contains no land which is waste land or unsuitable for such purposes.

Then, there is a clause in the purchase agreement that the fourth mortgage to be given back for the balance of the purchase price was to provide for partial discharges on a pro rata basis.

Those requirements would, as I see it, be ones upon which a purchaser who had in mind either developing the land for residential use and selling parcels of it from time to time or selling it to a purchaser who would acquire it for such purposes, would insist, rather than a purchaser who really contemplated having the land held as it was for a century or more.

When, on cross-examination, Mr Mentzelopoulos was asked about the clause in the offer to the effect that the real property was represented as being suitable for subdivision and residential development, he said that all papers were prepared in his absence, that he read the price, the acreage and the unit price and that was all he read and he did not apply his mind to that clause.

I do not accept his statement to the effect that he read only parts of the offer which he signed. I do not think that Mr Mentzelopoulos is the kind of man who would sign a document such as that offer involving the amount of money that it did without reading all of it.

Furthermore, his answer at the trial was inconsistent with his answers on his examination for discovery. The depositions of his examination for discovery contain the following:

MR CHALMERS: Fine. On the first page there is a paragraph: “The real property is represented as being of a level nature and suitable for subdivision and residential development, after the provision of services as required by the Municipal Authorities and the real property contains no land which is waste land or unsuitable for such purposes.’’ Why was that provision included in that contract? A. This came to me from Toronto. I signed it either in Montreal or New York, I think in Montreal I signed this paper.

Q. To make sure I understand your answer, you are telling me that you did not apply your mind to that provision of the contract? A. Naturally, I applied my mind. I am a businessman. I would not buy rocks, neither river. I will buy some usable investment land. This Mr Hobson and Mr Scott knew, and they tried, I presume, to protect my interests. They had some moral responsibility towards me. Mr Hobson moral responsibility because I was introduced to him by the National City Bank, and Mr Scott professional responsibility. The Royal Trust for acting as my representatives there.

This variation between his evidence at the trial and his answers at his examination for discovery is not such as to Inspire confidence in his evidence.

Then there is his evidence to the effect that in buying land he made an investment for ensuing generations without worrying about nominal rental and if the object is a permanent investment, the immediate income, big or small, is immaterial. If that ever was his attitude it does not seem to have been his attitude when he wrote to The Royal Trust Company by letter dated January 29, 1963 and, among other things, said:

What a pity that an absent proprietor should experience lots of trouble in addition to loss of income.

By a letter dated October 24, 1960 Mr Mentzelopoulos wrote to Messrs Lang, Michener and Cranston, his solicitors, saying, among other things, “I have no objection to the Royal Trust’s finding another tenant, provided it does not create any fiscal or other complications and it being clearly understood that the tenant is a temporary one, ready to vacate the property on a maximum 6-month notice.”

His explanation of this was that he wanted a temporary tenant because, he said, in France a tenant could remain permanently after six months and, in France, if a tenant has created a good will he can be paid for it, and in six months nobody can prove he created good will.

He did not give any such explanation in his letter to his solicitors. I am satisfied that he would know that what was the law in France would not necessarily be the law in Canada. If he really feared that such was the law in Canada he had only to inquire from his solicitors. He said he did not consult with his lawyers to see if that was the case.

It seems to me that a much more likely reason for his insistence that the tenancy be on a temporary basis would be that if the opportunity for sale of the property arose he would not have the same problem of giving vacant possession as he would if there were a longer term to the tenancy.

It seems to me that another improbability was Mr Mentzelopoulos’ implication that he envisioned the possibility that his son would farm this land. This was not a location in which a farmer would be likely to seek land to pursue his calling. As I see it, Mr Mentzelopoulos would realize and know that, in Ontario, there was much land where farming could much more practically, economically and advantageously be done than some 75 acres in the Township of Scarborough, costing, in 1960, about $390,000.

It would also seem to me that if it were true that Mr Mentzelopoulos acquired the realty to be held for so long as he said and perhaps forever because he had so high an opinion of land as a permanent investment in an economically uncertain world, he would, with his financial resources, have previously acquired other land as well. Notwithstanding this, according to his evidence, this was the only realty he ever bought other than his personal residences.

Highly inconsistent, too, was his decrying of shares of the capital stock of corporations as investments as compared with land and his own substantial purchases of stock.

There is the glaring contradiction of his avowed purpose of holding the realty indefinitely without selling it and causing it to be sold at what appears to have been the first real opportunity to sell at a handsome profit. To me, neither of the reasons he gave for selling ((1) the matter of representations to be made to Scarborough regarding land use and (2) claimed concern about Canadian currency) are convincing. I consider them to be specious.

Regarding the first-mentioned of these, it is my view that because of the state of development in the Township of Scarborough at the time of purchase, and its proximity to the City of Toronto, Mr Mentzelopoulos, experienced entrepreneur as he was, would have then anticipated further planning of land use by the Township of Scarborough. A prudent man, and I think he is a prudent man, would be aware that this would require the attention of landowners in the then not distant future. Furthermore, he had available to him the services of his Toronto solicitors and of The Royal Trust Company. It would have been unrealistic for an owner to have thought that this natural and logical development would not occur and in matters of business Mr Mentzelopoulos could not be said to have been unrealistic. I do not think that this situation came to him as a shock or even a surprise. He would be expected to have known that when it did occur, it would be an occasion and an opportunity for the owner of this valuable land to take steps, reasonably and fairly, to have put before the proper authority, the owner’s views and, if desired, with professional assistance.

As to his statements to the effect that he was too busy to give the matter attention, I think he knew that it would not be necessary for him continually to shuttle back and forth across the Atlantic Ocean to have his views adequately presented. If he wished, those views could have been presented by professionals. In any event it would be difficult to believe that, busy as he might have been, the amount involved would not have justified his spending some time on it.

Mr Mentzelopoulos said that there was a monetary crisis in Canada in 1972. The evidence did not, in my opinion, substantiate that statement.

Called as a witness by the plaintiff was Mr Thomas S O’Hara, an employee of the Bank of Montreal and manager of its foreign exchange and money market division of Ontario. He told of a change in United States monetary policy on August 15, 1971 whereby the US dollar would no longer be convertible to gold at $35 per ounce. This, he said, resulted in a decline in the value of the US dollar as against other major currencies.

Mr O’Hara produced foreign exchange quotation sheets of the Bank of Montreal extending over a considerable period. According to those sheets: On January 31, 1972 (the date of the acceptance by the plaintiff of the offer to purchase) the equivalents of the Canadian dollar to Switzerland francs and United States dollars were, respectively, $.25968 and $1.0059. On August 31, 1971 they were $.25829 and $1.0156. On February 26, 1971 they were $.23382 and $1.0069. I do not see in these statistics of exchange fluctuations a crisis situation for Canadian funds.

The sale by the plaintiff points up a pronounced inconsistency. As previously mentioned, Mr Mentzelopoulos stated that his motivations in acquiring the realty included what he termed geographical and political security in Canada, the advantages he claimed in holding land as a permanent asset and the risks he indicated were inherent in European currency. On the other hand, the opportunity having arisen for sale, he caused the sale to be made with the result that land was no longer an asset of the plaintiff. Not only that, but a reason given for the sale was so that the proceeds would be taken out of Canada and converted into a European currency. To say the least, this does strain credibility.

Although the intention of the purchaser at the time of purchase is the material factor, concrete facts subsequent to purchase can be evidence and cogent evidence of what the intention actually was at the time of purchase.

The conclusion which I reach is and I find that the realty was acquired with the intention of selling it when that could advantageously be done. I find that that purchase would not fall into the category of “investment”, that it was not an investment of a capital nature but that the transaction was in the nature of trade.

I have not overlooked the statements of Cattanach, J in MNR v Lawee (supra). As I interpret Lawee in this connection, it does no more than state that land may be the subject matter of an investment, that all purchases of land bought in the hope of making a profit are not necessarily adventures in the nature of trade and whether such a purchase would be an adventure in the nature of trade would depend upon the circumstances of each case.

I now deal with the matter of residence of the plaintiff.

It is only if the plaintiff was resident in Canada or in its taxation year 1972 it is deemed to have been resident in Canada that it Is subject to the income tax assessed.

The plaintiff is to be deemed to have been resident in Canada throughout a taxation year if, at any time in that taxation year or at any time in any preceding taxation year of the corporation ending after April 26, 1965 it carried on business in Canada (para 250(4)(c) of the Act).

It was in the taxation year 1972 that the offer to purchase the realty was accepted.

I have already found that the transaction in the realty was in the nature of trade. A matter which is still to be determined is whether the dealing in the land, even though in the nature of trade, is carrying on business within the meaning of paragraph 250(4)(c) of the Act.

The plaintiff denies that there was an adventure in the nature of trade but submits that even if the dealing did constitute such an adventure it was not carrying on business in Canada within the meaning of paragraph 250(4)(c) and, therefore, is not to be deemed to be resident in Canada in the taxation year 1972, with the result that no tax is payable by the plaintiff (subsec 2(1)).

Tne plaintiff stresses that there was only one property involved, that it never acquired any other land, and submits that the element of singleness is a governing factor. Counsel for the plaintiff cited Tara Exploration and Development Co Ltd v MNR, [1970] CTC 557; 70 DTC 6370.

There, Jackett, P (as he then was) said [at p 567 [6376]]:

With great doubt as to the correctness of my conclusion, I am of opinion that Section 139(1)(e) does not operate to make a non-resident person subject to Canadian income tax in respect of a profit from an adventure that otherwise does not amount to, and is not part of. a “business”. With considerable hesitation, I have concluded that the better view is that the words “carried on” are not words that can aptly be used with the word “adventure”. To carry on something involves continuity of time or operations such as is involved in the ordinary sense of a ‘‘business’’. An adventure is an isolated happening. One has an adventure as opposed to carrying on a business.

Paragraph 139(1)(e) there referred to is the same as the definition of “business” in subsection 248(1) of the Act.

However, that case is, in my opinion, clearly distinguishable from this case on the facts. There is a basic, fundamental difference in the circumstances here from the circumstances which existed in Tara.

In dealing with the activities of Tara Exploration and Development Company Limited the judgment contains [p 559 [6371]]:

During the years in question, the appellant’s sole business was that of exploring for minerals in Southern Ireland and it had raised capital on the Canadian market for this purpose, some of which in 1964 had not yet been put to work in that business. The profits in question were made by the appellant by using some of that capital to acquire shares in a company (Gortdrum) that had just been incorporated to develop an Irish mining property adjoining its own mining properties and by selling such shares at a profit.

Here, the situation is quite different. This is not a situation where the realty was acquired with funds awaiting use in connection with some other business of the company. Here, the plaintiff had no business other than business associated with the realty. Neither is it the case of a company, having surplus funds acquired in the conduct of its business, seeking an investment for those funds in a field other than that in which the company usually operated. Here, the evidence does not disclose any asset of the plaintiff except the realty out of which the assessment arose and possibly some increment from it. The funds with which the realty was acquired were not generated by the business of the plaintiff. They were supplied by Mr Mentzelopoulos and were so supplied only for the purchase of the realty.

According to the wording of the letters patent of the plaintiff its only stated object was ‘‘to acquire by purchase’’ the lands in question. So far as the wording of the “objects” of the corporation is concerned the plaintiff had no function to perform, no business to pursue and nothing to do except in connection with the realty. The business of the plaintiff was dealing in and with the realty and that was the plaintiff’s only business.

In my opinion, the result is that the plaintiff did more than just engage in an adventure in the nature of trade. It carried on business in and with the land. In doing so, it performed the very business function anticipated by the wording of its letters patent.

However far flung or diversified Mr Mentzelopoulos’ assets may have been, it is not Mr Mentzelopoulos who is assessed. The plaintiff corporation is the entity assessed. The distinction between the corporation and the owners of the shares of the capital stock of that corporation has been so well established for so long that it needs no comment here.

My finding is that the plaintiff’s activities in connection with the realty constituted carrying on business within the meaning of paragraph 250(4)(c) of the Act..

In my opinion, it is not open to a person to have a corporation controlled by him acquire only one parcel of land, and no other asset, have that corporation perform no function other than something associated with that land, and then, that land having been sold by the corporation in one piece, claim that the corporation having had only one purchase and sale, is entitled to a tax advantage merely because there was a single transaction. I do not think that the cases wherein a single transaction has been held not to be carrying on business are necessarily in conflict with that view.

In Tara, the distinguished President of the Court made reference to Irrigation Industries Limited v MNR, [1962] SCR 346; [1962] CTC 215; 62 DTC 1131. In my opinion that case is also distinguishable. The difference between that case and this appears from the following extract from the judgment of Taschereau, Locke and Martland, JJ, delivered by Martland, J:

The issue in this appeal is as to whether an isolated purchase of shares from the treasury of a corporation and subsequent sale thereof at a profit, not being a part of the business carried on by the purchaser of the shares, or in any way related to it, constitutes an adventure in the nature of trade so as to render such profit liable to income tax.

The dealing by Birmount with the land was not merely part of the business carried on by it. It was all of it.

MNR v Valclair Investment Co Ltd, [1964] CTC 22; 64 DTC 5014, another case cited, is also distinguishable. It deals with a company which had activities other than the purchase of land in respect of which the assessment was made. There, the company invested a large part of its funds in revenue-producing shares and to diversify its investments purchased the land.

In my opinion, the fact that the formal authorization for the acceptance of the offer to purchase was made in Switzerland is of no significance in this case. In this I have not overlooked jurisprudence to the effect that a contract is made where the offer is accepted.

In my opinion, the changing of the directors from Canadian residents to residents of Switzerland, if indeed there was an effective change, was without substance or effect as far as the matters at issue here are concerned. Whether the directors were Canadian or Swiss, whether they were in Canada or in Switzerland, they were, I find, merely surrogates to Mr Mentzelopoulos to do his bidding in the carrying out of policy laid down by him and to implement his decisions.

I do not consider the evidence regarding discussions said to have taken place in Switzerland regarding the advisability of sale to be impressive.

I find that the price and all the other terms and conditions of sale in the offer to purchase which was accepted, and which Mr Seyffert took with him to Europe, were negotiated and arranged for in Canada and pursuant to Mr Mentzelopoulos’ instructions and to his satisfaction. I find that Mr Mentzelopoulos had decided to have the sale made on those terms and conditions before Mr Seyffert left Canada for Europe with the signed offer to purchase. The meeting in Zurich, in my opinion, was no more than a technical formality to implement a decision already made by Mr Mentzelopoulos. Mr Seyffert even said he had a draft form resolution already prepared. He said the form of resolution set out in the minutes differed slightly from the one he brought with him because Mr La Roche wanted it to say something that would indicate that Mr La Roche did not know who the purchaser was. My conclusion is that the only purpose in Mr Seyffert going to Zurich was to make sure that documentation would be in order in connection with the deal which had been worked out in Canada and in respect of which Mr Seyffert was at least a principal negotiator on instructions of Mr Mentzelopoulos.

I consider that the wording in the minutes regarding “monetary crisis’’ is nothing more than self-serving.

In my opinion, Mr Seyffert’s negotiations in Canada on behalf of the plaintiff on Mr Mentzelopoulos’ instructions regarding the terms of sale of the realty and including his contact with the Bank of Montreal regarding the loan to the purchaser so ihat the sale would be for all cash constituted carrying on business in Canada within the meaning of paragraph 250(4)(c) of the Act and so doing, either in the plaintiff's taxation year 1972 or in a preceding taxation year of the plaintiff ending after April 26, 1965, or both.

Finding as I do that the plaintiff so carried on business in Canada, the result is that the plaintiff must, in my opinion, be deemed to have been a resident of Canada throughout its taxation year 1972 within the meaning of section 250 of the Act and so is chargeable for tax by virtue of section 2 of the Act.

There is another situation which I think may constitute carrying on business in Canada by the plaintiff in a taxation year ending after April 26, 1965.

Among the documents filed there is what purports to be a copy of a proposal by one Harold Patton to Birmount Holdings Limited to the effect that in consideration of $1,350 he is to obtain the right to utilize the lands for the period from March 1, 1970 until February 28, 1973 for the purposes of farming, subject to certain provisions set out in the proposal. One of these provisions is that in the event of a bona fide sale of the lands while the agreement is in effect Patton agrees that all his rights granted thereunder may be cancelled by the giving of three months prior written notice subject to certain provisions also contained in the document. The document filed makes it appear that a copy of the proposal was sent by The Royal Trust Company to Mr Mentzelopoulos by a letter dated October 7, 1969 which contains:

If you concur to the Agreement being given to Mr Patton again, and Mr Cranston sees no points of concern, we shall proceed to have the agreement signed.

The copy of the agreement filed indicated that there was an acceptance signed by The Royal Trust Company as managers for Birmount Holdings Limited.

It is not without interest to note that in 1969, The Royal Trust Company apparently had in mind the possibility of a sale.

Undoubtedly, the sum of $1,350 is small compared with the value of the realty. Nevertheless, the transaction was in the way of business and the transaction was carried on in Canada, although apparently instructed by Mr Mentzelopoulos from outside. Relatively small as the amount involved was, I do not think that it was so trifling as to fall within the principle expressed de minimis non curat lex. However, I do not base my decision on this dealing, my decision having been reached for the reasons previously given.

The appeal will be dismissed.

The defendant will have costs payable by the plaintiff.

Counsel for the defendant may prepare a draft of an appropriate judgment to implement the Court’s conclusion and move for judgment accordingly pursuant to the General Rules and Orders of the Court.