Kerr,
J:—This
is
an
appeal
by
Branlyn
Management
Ltd
from
a
judgment
of
the
Tax
Review
Board
that
a
gain
realized
by
the
said
company
on
the
sale
of
shares
in
Allied
Development
Corporation
Ltd
was
a
gain
from
an
adventure
in
the
nature
of
trade,
thereby
affirming
in
respect
of
that
gain
a
reassessment
made
by
the
Minister
of
National
Revenue.
This
appeal
was
heard
together
with
an
appeal
No
T-1359-72
by
Jomas
Management
Ltd
from
a
judgment
of
the
Tax
Review
Board
that
a
like
gain
realized
by
the
latter
company
on
the
sale
of
shares
in
Allied
Development
was
likewise
a
gain
from
an
adventure
in
the
nature
of
trade.
The
appeals
were
heard
on
common
evidence.
Both
appellants
contend
that
the
gains
in
issue
were
capital
gains,
and
that
is
the
issue
in
each
appeal.
The
parties
agreed
to
certain
facts
set
forth
in
an
agreed
statement
(Exhibit
P-1)
as
follows:
1.
By
its
Notices
of
Reassessment,
dated
the
8th
day
of
April,
1969,
the
Defendant
assessed
income
tax
in
the
sum
of
$6,479.85
in
respect
of
the
Plaintiff
Jomas
Management
Ltd’s
1967
taxation
year.
2,
By
its
Notices
of
Reassessment,
dated
the
8th
day
of
April,
1969,
the
Defendant
assessed
income
tax
in
the
sum
of
$6,674.61
in
respect
of
the
Plaintiff
Branlyn
Management
Ltd’s
1967
taxation
year.
3.
The
Plaintiff,
Jomas
Management
Ltd,
is
beneficially
owned
by
Mr
and
Mrs
Maurice
Sunderland,
both
of
the
City
of
Calgary,
in
Alberta.
4.
The
Plaintiff,
Branlyn
Management
Ltd,
is
beneficially
owned
by
Mr
and
Mrs
Jack
Abugov,
both
of
the
City
of
Calgary,
in
Alberta.
5.
Maurice
Sunderland
and
Jack
Abugov,
of
Calgary,
aforesaid,
carry
on
a
professional
architectural’
and
engineering
practice
in
partnership
under
the
name
of
“Abugov
and
Sunderland’’.
6.
In
1964
the
Plaintiffs
each
acquired
a
3%
interest
in
Allied
Development
Corporation
Ltd,
a
corporation
formed
to
build
a
large
office
building
In
the
City
of
Edmonton,
in
the
Province
of
Alberta,
known
as
the
“Canadian
National
Tower’’.
•?.
7.
During
the
taxation
year
in
question
(1967),
the
common
shareholders
of
Allied
Development
Corporation
Ltd
and
their
respective
interests
were:
|
Branlyn
Management
Ltd
|
-.
|
3%
|
|
Jomas
Management
Ltd
|
|
3%
|
|
Sam
Hashman
Management
Ltd
|
|
42%
|
|
Cal-Mor
Management
Ltd
|
|
13%
|
|
Riback
Management
Ltd
|
|
39%
|
|
100%
|
8.
Fifty.
percent
of
the
shares
of
Cal-Mor
Management
Ltd
were
owned
by
Mr
Maurice
Kowall.
9.
Sam
Hashman
Management
Ltd
was
controlled
by
Mr
Sam
Hashman
during
the
taxation
year
in
question.
10.
The
Plaintiffs’
interests
in
Allied
Development
Corporation
Ltd
were
respectively
as
follows:
|
Jomas
Management
Ltd
|
|
|
By
way
of
share
purchase
|
—
$
|
60.00.
|
|
By
way
of
loan
|
—
$24,047.04"
|
|
$24,107.04
|
|
Branlyn
Management
Ltd
|
|
|
By
way
of
share
purchase
|
|
|
—
$
60.00
|
|
By
way
of
loan
|
|
|
—
$24,047.04
|
|
$24,107.04
|
11.
The
firm
of
Abugov
and
Sunderland
were
the
architects
and
engineers
for
the
“Canadian
National
Tower’’.
12.
In
the
Plaintiffs’
1967
taxation
year
all
shares
in
Allied
Development
Corporation
Ltd,
including
the
shares
owned
by
the
respective
Plaintiffs,
were
sold
to
the
Maxwell
Cummings
Group
of
Montreal,
except
the
39%
owned
by
Riback
Management
Ltd
which
were
sold
in
1968.
At
the
same
time
all
of
the
shares
of
the
company
known
as
the
12th
Avenue
Building
Ltd,
including
the
shares
owned
by
the
respective
Plaintiffs,
were
also
sold
to
the
said
Maxwell
Cummings
Group.
13.
The
net
gains
made
by
the
Plaintiffs
on
the
sale
of
their
respective
interests
in
Allied
Development
Corporation
Ltd
are
as
follows:
|
Jomas
Management
Ltd
|
—
|
$75,549.99
|
|
Branlyn
Management
Ltd
|
—
|
$75,549.99
|
14.
The
Defendant
has
assessed
the
said
gains
as
being
of
an
income
nature,
and
assessed
tax
accordingly.
15.
The
Defendant
also
assessed
the
gains
on
the
sale
of
the
shares
of
the
respective
Plaintiffs
in
the
said
12th
Avenue
Building
Ltd
as
being
of
an
income
nature,
and
assessed
tax
accordingly.
16.
In
assessing
the
Plaintiffs
on
the
gains
made
on
the
sale
of
their
respective
interests,
because
payment
for
the
shares
in
Allied
Development
Corporation
Ltd
was
being
made
in
the
subsequent
3
succeeding
taxation
years,
the
Defendant
deducted
a
reserve
under
the
provisions
of
Section
85B(1)(d)(i)
of
The
Income
Tax
Act
(as
it
then
was)
for
the
full
amount
of
the
unpaid
alleged
taxable
profit.
17.
By
Notice
of
Objection
dated
the
3rd
day
of
July,
1969,
the
Plaintiffs
objected
to
the
reassessments
mentioned
in.
paragraphs
1
and
2
hereof,
which
reassessments
were
confirmed
by
the
Minister
of
National
Revenue.
18.
By
Notice
of
Appeal
dated
the
7th
day
of
August,
1970,
the
Plaintiffs
appealed
the
reassessments
to
the
Tax
Review
Board.
19.
By
Judgment
dated
January
22nd,
1972,
mailed
to
the
Plaintiffs
by
the
Registrar
of
the
Tax
Review
Board,
their
appeal
was
allowed
as
it
related
to
the
gains
made
on
the
sale
of
the
shares
in
12th
Avenue
Building
Ltd.
The
respective
gains
on
the
sales
of
the
shares
in
Allied
Development
Corporation
Ltd
in
the
amount
of
$75,549.00
was
held
to
be
a
gain
realized
from
a
venture
in
the
nature
of
trade.
It
is
that
part
of
the
Tax
Review
Board’s
decision
disallowing
the
Plaintiffs’
appeal
in
respect
of
the
sale
of
their
interests
in
Allied
Development
Corporation
Ltd
which
is
being
appealed
from
hereunder.
Paragraph
11
of
the
statement
of
claim
in
this
appeal
reads
as
follows,
and
there
is
a
similar
paragraph
in
the
statement
of
claim
in
the
other
appeal:
11.
In
1967
the
majority
shareholders
in
Allied.
Development
Corporation
Ltd,
who
were
also
the
Plaintiff's
and
Jomas
Management
Ltd’s
co-share-
holders
in
12th
Avenue
Building
Ltd,
without
the
knowledge
or
acquiescence
of
the
Plaintiff
or
Jomas
Management
Ltd,
arranged
for
the
sale
of
all
of
the
issued
and
outstanding
shares
in
12th
Avenue
Building
Ltd
and
Allied
Development
Corporation
Ltd
to
an
arm’s
length
purchaser
as
part
of
a
larger
sale
to
that
purchaser,
which
included
other
investments
owned
by
such
majority
shareholders.
The
Plaintiff
and
Jomas
Management
Ltd
at
first
refused
to
participate
in
the
transaction,
desiring
to
retain
ownership
of
their
respective
shareholdings
in
each
of
12th
Avenue
Building
Ltd
and
Allied
Development
Corporation
Ltd.
The
purchaser
was
adamant
in
its
position
that
it
would
not
proceed
with
the
purchase
of
any
of
the
properties
it
had
agreed
to
purchase
from
the
majority
shareholders
unless
it
could
acquire
100%
ownership
thereof
and
not
have
minority
positions
to
contend
with
or
account
to.
In
other
words,
the
purchaser’s
offer
was
a
“package
deal”,
and
failure
of
the
Plaintiff
and
Jomas
Management
Ltd
to
concur
and
participate
therein
would
have
frustrated
the
whole
transaction.
Under
the
circumstances,
and
with
considerable
reluctance,
the
Plaintiff
and
Jomas
Management
Ltd
were
eventually
prevailed
upon
to
sell
their
respective
shares
in
12th
Avenue
Buildings
Ltd
and
Allied
Development
Corporation
Ltd
to
the
purchaser.
In
answer
to
the
statement
of
claim
in
each
appeal
the
Deputy
Attorney
General
of
Canada
on
behalf
of
Her
Majesty
filed
a
statement
of
defence
and
paragraph
3
thereof
reads
in
part
as
follows:
3.
In
so
assessing
the
Plaintiff
the
Minister
of
National
Revenue
relied
upon
the
following
assumptions
of
fact:
(g)
that
at
and
subsequent
to
the
acquisition
of
the
shares
of
Allied
Development
Corporation
Ltd
the
Plaintiff
and
its
associates
intended
to
turn
them
to
account
either
immediately
or
in
such
other
manner
as
might
be
advisable
as
part
of
a
venture
in
the
nature
of
trade,
or
a
profit
making
undertaking
or
concern;
(h)
that
Mr
Sam
Hashman
and
Mr
Maurice
Kowall
are
persons
whose
transactions
in
real
estate,
either
directly
or
indirectly,
or
by
means
of
intermediaries
are
on
income
account
and
any
gains
therefrom
are
to
be
included
in
income;
(i)
that
the
Plaintiff
sold
the
shares
in
question
during
its
1967
taxation
year
when
it
became
profitable
to
do
so.
Through
newspaper
advertisements
Canadian
National
Railway
Company
sought
proposals
for
design
and
construction
of
a
highrise
office
building,
the
Canadian
National
Tower,
to
be
used
for
railway.
station
and
other
purposes.
In
due
course
Allied
Development
Corporation
Ltd,
hereinafter
called
“Allied”,
was
incorporated
in
January
1964
to
construct
the
building
and
it
did
so
pursuant
to
an
agreement
with
Canadian
National
which
provided,
inter
alia,
for
construction
and
ownership
of
the
building
by
Allied
and
for
a
ground
lease
of
the
land
by
Canadian
National
to
Allied
for
a
term
of
99
years.
Construction
of
the
building
was
commenced
in
mid-1964
and
completed
late
in
1966.
The
project
was
brought
to
the
attention
of
the
partners
Abugov
and
Sunderland
by
Maurice
Kowall,
previously
referred
to
herein,
who
suggested
that
they
prepare
a
design
for
the
building,
which
they
did.
Sam
Hashman,
also
previously
mentioned
herein,
and
Ted
Riback,
of
Riback
Management
Ltd,
mentioned
in
the
agreed
statement
of
facts,
were
other
persons
interested
in
taking
part
in
the
project.
The
result
was
that
the
design
prepared
by
the
partners
was
accepted,
and
Allied
was
incorporated
to
carry
the
project
through.
Its
principal
shareholders
were
Sam
Hashman
Management
Ltd,
Cal-More
Management
Ltd
and
Riback
Management
Ltd.
The
Abugov
and
Sunderland
firm
became
the
architects
and
engineers
of
the
building
and
supervised
its
construction,
and
received
a
fee
of
$200,000
therefor;
and
their
personal
companies,
Branlyn
Management
and
Jomas
Management
(hereinafter
sometimes
referred
to
simply
as
“Branlyn”
and
“Jomas”),
each
acquired
a
3%
share
interest
in
Allied.
It
was
this
interest
that
they
sold
in
1966,
giving
rise
to
the
gains
in
issue.
The
building,
shown
in
Exhibit
P-2,
has
26
stories
above
the
ground
floor.
Its
total
construction
cost
was
about
$8,000,000.
The
cost
was
financed
mostly
by
bank
borrowings
and
first
mortgage
bonds,
and
by
some
shareholders’
loans,
which
were
provided
on
a
pro
rata
basis
according
to
shareholdings.
Particulars
of
the
bank
and
bond
financing
are
in
a
loan
agreement
with
the
Royal
Bank
of
Canada
(Exhibit
P-5)
and
a
mortgage
indenture
with
the
Royal
Trust
Company
(Exhibit
P-14).
The
Royal
Bank
agreed
to
lend
Allied
amounts
not
exceeding
$7,500,000.
Allied’s
shareholders
and
the
several
individuals,
Hashman,
Kowall,
Riback,
Abugov
and
Sunderland
severally
gave
guarantees
to
the
bank
to
repay
the
loans
to
specified
amounts,
in
the
case
of
Abugov
and
Sunderland
to
the
extent
of
$113,000
each,
and
they
also
jointly
and
severally
guaranteed
certain
other
obligations
of
Allied
as
set
forth
in
the
agreement,
and
pledged
their
shares
as
collateral
security
to
the
bank.
The
investment
of
Branlyn
and
Jomas
in
Allied
was
$24,107.24
each,
as
shown
in
paragraph
10
of
the
agreed
facts,
of
which
$60
each
was
by
way
of
share
purchase
and
$24,047.04
was
by
way
of
shareholders’
loans.
These
loans
were
covered
by
a
promissory
note
of
Allied
payable
on
demand,
and
they
were
repaid
when
Branlyn
and
Jomas
sold
their
shares.
A
chartered
accountant,
Ross
P
Alger,
a
member
of
a
firm
that
was
acting
as
auditors
for
those
companies
and
for
Allied,
said
that
he
regarded
the
loans
as
capital
investments
made
under
long-term
financing
arrangements
that
subordinated
these
loans
to
the
bank
loans;
and
he
said
that
the
method
of
financing
adopted
by
Allied,
ie,
by
mortgage
money,
shareholders’
loans
and
a
nominal
amount
of
share
capital,
is
common
and
is
recommended
by
accountants
and
lawyers,
one
advantage
of
such
loans
being
that
the
money
can
be
more
easily
withdrawn,
if
need
be,
as
compared
with
share
capital
money.
The
audited
financial
statements
of
Branlyn
Management
for
its
taxation
year
1967
show
the
company’s
shares
in
Allied
and
the
loans
to
Allied
as
assets
in
its
balance
sheet;
and
the
net
gain
on
the
sale
of
the
shares
is
shown
with
auditor’s
notes
to
the
effect
that
the
gain
is
of
a
capital
nature
and
consequently
is
non-taxable.
The
financial
statements
of
Jomas
Management
do
likewise.
Evidence
was
given
by
Abugov
and
Sunderland
as
to
their
professional
and
business
activities.
In
1954
they
formed
their
architectural
and
engineering
partnership,
engaging
mainly
in
design
and
engineering
of
buildings,
and
are
still
in
partership.
Branlyn
Management
is
a
personal
company
owned
by
Abugov
and
his
wife
in
equal
shares,
in
which
they
have
put
their
home
and
other
personally
owned
assets.
Jomas
Management
is
a
similar
company
owned
by
Sunderland
and
his
wife.
They
knew
Hashman,
Kowall
and
Riback
prior
to
the
time
of
the
Canadian
National
Tower
project
and
they
had
previously
designed
buildings
for
each
of
those
persons,
including
a
motel
and
apartments
for
Hashman,
a
shopping
centre
for
Kowall,
and
offices,
warehouse
and
trailers
for
Riback.
Their
personal
companies,
Branlyn
and
Jomas,
had
shareholdings
in
several
real
estate
enterprises
besides
Allied,
the
principal
ones
being
the
following:
Century
Leaseholds
Ltd,
which
built
a
16-suite
apartment
building
in
1962
and
later
sold
it
to
raise
capital
for
a
larger
apartment
building.
Branlyn
and
Jomas
have
retained
their
investments
in
this
company.
11th
Avenue
Building
Ltd,
in
which
Kowall
or
his
company
was
also
a
shareholder.
Branlyn
and
Jo-mas
held
their
interests
for
a
couple
of
years
and
then
sold
them.
Glenmore
Joint
Venture,
which
was
a
venture
in
which
a
group,
including
Kowall
and
several
others,
bought
a
parcel
of
land
as
a
hotel
site,
but
were
unable
to
obtain
a
construction
permit
so
they
sold
the
land.
12th
Avenue
Building
Ltd,
incorporated
in
1962,
in
which
Branlyn,
Jomas,
Hashman
and
Kowall
were
shareholders
each
having
a
25%
interest.
This
company
constructed
an
office
building,
which
was
designed
by
Abugov
and
Sunderland,
the
design
incorporating
offices
for
their
firm,
which
they
occupied
for
some
years.
Branlyn
and
Jomas
sold
their
shares
in
this
company
at
the
same
time
as
they
sold
their
shares
in
Allied.
About
a
year
and
a
half
later
the
partnership
moved
its
office
elsewhere.
They
said
that
the
sale
of
the
shares
in
this
company
and
in
Allied
was
a
package
deal
that
was
unsolicited
and
unwanted
by
them.
Abugov
and
Sunderland
testified
that
the
sale
by
Branlyn
and
Jomas
of
their
shares
in
Allied
and
12th
Avenue
Building
came
about
in
this
way.
Hashman
got
in
financial
difficulties
in
1966
while
the
CN
Tower
was
being
constructed
by
one
of
his
companies,
Sam
Hashman
Construction,
and
he
therefore
decided
to
“package”
and
sell
a
number
of
his
various
holdings,
including
his
interests
in
Allied
and
12th
Avenue
Building,
to
the
Maxwell
Cummings
Group,
of
Montreal,
referred
to
in
paragraph
12
of
the
agreed
statement
of
facts.
That
group
was
insisting
on
acquiring
100%
ownership
of
the
various
companies.
Hashman
approached
Abugov
and
Sunderland
with
a
proposal
for
the
sale
of
all
shares
in
Allied
and
12th
Avenue
to
Cummings.
They
at
first
objected
and
refused
to
sign
preliminary
papers
at
a
lawyer’s
office.
Then
they
attended
a
meeting
of
the
interested
persons
and
Mr
Cummings
in
Hashman’s
house
on
the
following
Sunday,
and
after
discussion
and
pressure
from
their
associates
they
were
persuaded
to
agree
to
sell
their
shares,
influenced
by
the
fact
that
refusal
on
their
part
to
sell
could
frustrate
Hashman’s
deal
to
dispose
of
his
package
of
interests
to
the
Cummings
Group.
Cummings
was
annoyed
at
their
resistance
to
selling
their
shares,
and
he
was
hostile
to
them
and
later
showed
his
displeasure
by
having
a
Royal
Bank,
Calgary,
commission
taken
away
from
their
firm.
They
testified
that
their
preference
was
to
retain
their
shares
in
12th
Avenue
and
Allied;
their
offices
were
established
in
the
12th
Avenue
building
and
they
had
designed
them
for
their
purposes;
the
CN
Tower
was
close
to
completion,
it
had
excellent
prospects
as
the
first
major
office
building
in
rapidly
developing
downtown
Edmonton,
and
it
had
major
tenants
and
long-term
leases;
their
shares
had
been
acquired
as
an
investment
for
the
future,
for
they
wanted
to
create
a
real
estate
portfolio
in
their
personal
company
holdings.
They
said
they
had
never
sought
sale
of
their
shares,
and
they
did
not
negotiate
for
the
price
at
which
they
were
sold,
and,
having
regard
to
their
relationships
with
Hashman,
Kowall:
and
Riback,
they
had
no
feasible
alternative
but
to
sell.
Once
agreement
to
sell
was
reached
with
Cummings
the
matter
progressed
quickly
to
completion
of
the
sale
in
the
summer
or
fall
of
1966.
The
Tower
had
not
been
advertised
for
sale.
At
the
time
of
the
sale
there
was
no
discussion
as
to
tax
implications.
There
was
evidence
as
to
construction
strikes
in
Edmonton
while
the
Tower
was
being
built,
and
as
to
problems
related
to
obtaining
leases
for
occupancy
of
it,
other
than
by
Canadian
National
for
its
own
purposes,
including
a
newspaper
report
that
Edmonton
City
would
not
be
a
tenant
although
it
had
previously
advised
Allied
on
May
20,
1964
that
it
would
rent
three
floors
for
10
years
(Exhibit
P-11).
Abugov
said
that
if
the
City
would
not
be
a
tenant,
it
would
mean
that
other
tenants
would
have
to
be
found
but
that
the
success
of
the
project
would
not
be
jeopardized.
Abugov
and
Sunderland
said
that
in
addition
to
supervising
the
construction
of
the
Tower
they
were
involved
in
management
of
Allied
and
attended
meetings
for
that
purpose,
but
each
member
of
the
group
of
shareholders
had
particular
major
responsibilities,
for
example,
Kowall
was
looking
after
leasing,
and
one
of
Hashman’s
companies,
Sam
Hashman
Construction,
was
constructing
the
Tower.
They
also
said
that
they
had
the
commission
for
design
and
supervision
of
the
construction
of
the
Tower
before
they
invested
in
the
company,
that
they
regarded
their
investment
as
a
good
investment
for
the
future
and
it
was
separate
and
apart
from
their
commission
for
design
and
supervision,
and
was
part
of
a
real
estate
portfolio
for
each
of
their
personal
companies.
The
main
thrust
of
the
argument
on
behalf
of
the
Crown
is
(1)
that
the
appellants
have
not
demolished
the
assumptions
of
fact
that
are
set
forth
in
paragraph
3
of
the
statement
of
defence
in
each
appeal,
upon
which
the
Minister
relied
in
making
the
assessments,
especially
the
several
assumptions
that
Hashman
and
Kowall
are
real
estate
traders
and
promoters
whose
transactions
in
real
estate
are
on
income
account,
and
that
at
and
subsequent
to
the
acquisition
of
shares
in
Allied
the
appellants
and
their
associates
intended
to
turn
them
to
account
as
part
of
a
venture
in
the
nature
of
trade
or
a
profit-making
undertaking
or
concern,
and
in
that
respect
counsel
referred
to
the
onus
on
the
appellants
indicated
in
the
following
passage
from
the
judgment
of
the
majority
of
the
Supreme
Court
of
Canada
in
R
W
S
Johnston
v
MNR,
[1948]
SCR
486
at
489;
[1948]
CTC
195
at
202;
3
DTC
1182,"
and
(2)
that
the
evidence
supports
those
assumptions
of
fact;
Abugov
and
Sunderland
were
active
in
the
real
estate
field,
and
had
previously
been
associated
in
real
estate
projects
with
the
principal
shareholders
of
Allied,
and
went
along
with
and
relied
upon
the
business
acumen
and
intentions
of
those
principal
shareholders
in
respect
of
Allied:
this
transaction
was
one
of
a
series
of
real
estate
ventures
in
the
nature
of
trade,
including
Century
Leaseholds,
11th
Avenue
Building,
and
the
Glenmore
Joint
Venture;
the
investments
of
the
appellants
in
Allied
were
only
the
nominal
amounts
paid
for
the
shares;
the
money
they
lent
to
Allied
was
easily
recoverable
shareholders’
loans;
the
personal
liability
and
obligations
of
Abugov
and
Sunderland
in
the
financing
of
Allied
were
not
unusual
in
a
promotional
venture
involving
bank
borrowings
and
bond
issues,
and
they
are
not
inconsistent
with
the
venture
being
in
the
nature
of
trade;
and
at
the
request
of
the
majority
shareholders
the
shares
of
the
appellants
were
sold
and
their
loans
were
repaid
even
before
the
building
was
completed.
Counsel
for
the
appellant
argued
that
Branlyn
Management
and
Jomas
Management
are
respectively
personal
companies
of
Abugov
and
Sunderland,
and
each
of
them
directed
the
affairs
and
made
the
decisions
for
his
own
company;
they
were
offered
a
chance
to
purchase
shares
in
Allied
and
they
bought
them
as
a
long-term
investment
as
part
of
a
build-up
of
a
real
estate
portfolio
for
each
company;
they
had
no
intention
to
buy
them
as
part
of
a
venture
in
the
nature
of
trade:
their
intention
to
hold
the
shares
indefinitely
as
an
investment
was
frustrated
when
social
and
professional
considerations
left
them
no
feasible
alternative
but
to
accommodate
Hashman
in
his
plan
to
package
his
interests
and
sell
them
to
the
Cummings
Group
when
he
got
in
financial
difficulties;
they
resisted
the
sale
of
their
shares,
which
involved
not
only
their
shares
in
Allied
but
also
their
shares
in
the
12th
Avenue
Building
where
they
had
permanent
offices;
the
CN
Tower
had
not
been
advertised
for
sale,
the
sale
of
their
shares
was
unsolicited
and
unwanted
by
them;
the
Tower
was
a
major
building
with
excellent
prospects,
and
their
investments
in
it
appeared
to
be
foreseeably
sound;
they
gave
personal
guarantees
and
commitments
involving
large
sums;
their
loans
were
postponed
to
the
bank’s
loans;
their
evidence
is
uncontradicted
and
proves
that
their
investments
in
Allied
were
capital
in
nature
and
the
gains
realized
on
the
sale
of
the
shares
were
gains
from
the
sales
of
investments.
Counsel
for
the
appellants
disagreed
that
there
is
any
onus
on
the
appellants
to
demolish
the
assumptions
that
Hashman
and
Kowall
were
traders
in
real
estate
and
engaged
in
a
venture
in
the
nature
of
trade
in
the
Allied
project,
or
to
call
Hashman
and
Kowall
as
witnesses
to
show
that
such
assumptions
by
the
Minister
were
not
warranted,
but
even
if
they
were
such
traders
or
so
engaged
in
Allied,
the
intentions
of
the
appellants
were
distinct
and
not
of
that
nature
and
were
to
make
long-range
investments
in
what
appeared
to
them
to
be
a
viable
and
successful
project.
Abugov
and
Sunderland
impressed
me
favourably
in
giving
their
testimony,
and
there
is
nothing
to
suggest
that
they
are
not
reputable
and
credible,
and
their
evidence
is
uncontradicted,
but
even
so
their
evidence
must
be
considered
and
weighed
with
all
other
evidence
objectively.
The
business
of
the
Abugov
and
Sunderland
architectural
and
engineering
partnership
through
a
period
of
almost
twenty
years,
commencing
in
1954,
was
such
that
they
probably
would
have
close
contacts
and
business
dealings
with
persons
engaging
in
rea!
estate
projects
and
transactions,
and
they
would
have
opportunities
to
engage
in
speculative
ventures
and
to
make
capital
Investments.
But
the
evidence
as
to
several
real
estate
transactions
in
which
they
participated
prior
to
the
Allied
project
does
not,
in
my
opinion,
show
a
pattern
or
a
series
of
real
estate
trading
ventures
on
their
part,
for
they
still
retain
their
interests
in
Century
Leaseholds
or
its
successor,
they
designed
and
had
their
offices
and
a
long-term
tenancy
in
the
12th
Avenue
building,
the
Glenmore
Venture
was
one
in
which
the
purpose
was
frustrated
when
a
building
permit
for
the
proposed
hotel
was
refused,
and
the
11th
Avenue
Building
was
one
from
which
they
withdrew
after
a
year
or
two.
Abugov
and
Sunderland
had
a
personal
interest
in
the
Tower
project,
for
their
design
for
the
building
was
accepted
in
a
competition,
and
they
engineered
and
supervised
construction.
Allied
had
a
99-year
ground
lease,
and
the
building
had
the
CNR
as
an
initial
major
tenant
and
excellent
prospects
for
other
major
tenancies.
I
accept
as
credible
and
reasonable
their
evidence
that
the
project
appeared
to
them
to
be
viable
and
to
have
a
successful
future
financially
and
that
they
thought
a
share
interest
in
Allied
would
be
a
good
investment
for
their
personal
companies,
even
to
the
relatively
minor
extent,
3%,
which
was
offered
to
each
of
them;
and
that
they
had
their
companies,
purchase
the
shares
as
an
investment
and
not,
as
far
as
they
were
concerned,
as
part
of
an
operation
in
the
carrying
on
of
a
business
or
of
a
venture
in
the
nature
of
trade.
I
accept
likewise
their
testimony
that
they
did
not
want
to
sell
their
shares
but
were
pressured
into
doing
so
when
Hashman
got
into
financial
difficulties
and
made
a
package
deal
with
the
Cummings
Group.
In
my
opinion,
the
sales
by
Branlyn
Management
and
Jomas
Management
of
their
shares
in
Allied
were
not
made
in
the
carrying
on
by
either
of
them
of
a
business
or
a
venture
in
thenature
of
trade,
and
the
gains
realized
on
the
sales
were
capital
gains.
In
the
result
this
appeal
will
be
allowed
and
the
reassessment
will
be
referred
back
to
the
Minister
for
a
further
reassessment
on
the
basis
that
the
gain
in
question
in
this
appeal
was
not
a
profit
from
a
business
within
the
meaning
of
that
word
in
the
Income
Tax
Act.
The
plaintiff
herein
is
entitled
to
its
costs
to
be
taxed,
but
as
both
of
the
said
appeals
were
heard
together
on
common
evidence
there
will
be
only
one
set
of
counsel
fees
at
trial.
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