Sweet,
DJ:—The
Crown
granted
to
the
plaintiff,
Jackson
Brothers
Logging
Company
Limited
(herein
referred
to
as
Jackson)
and
Phillips
and
Lee
Logging
Limited
(herein
referred
to
as
Phillips
and
Lee)
timber
sale
harvesting
licence
A
00044
dated
October
2,
1967
which,
subject
to
what
was
therein
contained,
permitted
the
licensees
to
cut
and
remove
quantities
of
timber
from
Crown
lands
within
the
Quadra
Public
Sustained
Yield
Unit
in
British
Columbia
being
in
the
Chapman
Creek
area.
That
licence
will
be
herein
referred
to
as
the
licence.
In
1967
the
plaintiff
sold
its
interest
in
the
licence
to
Jackson.
From
that
sale
the
plaintiff
realized
$100,000.
That
was
the
total
cash
consideration
for
the
interest
in
the
licence
of
both
the
plaintiff
and
Phillips
and
Lee.
Apparently,
on
agreement,
the
parties
to
this
litigation
treated
the
matter
as
though
the
plaintiff
was
entitled
to
and
did
receive
all
of
the
$100,000
and
so
it
is
dealt
with
here.
The
plaintiff
did
not
include
that
$100,000
in
the
computation
of
its
income
in
its
1967
taxation
year.
In
assessing
the
plaintiff
the
defendant
included
all
of
it.
The
plaintiff
seeks
to
have
that
item
of
$100,000
declared
not
taxable.
Wording
in
the
statement
of
claim
is:
The
Plaintiff
therefore
claims
as
follows
(a)
A
declaration
that
the
profit
derived
from
the
sale
of
the
quota
position
was
a
Capital
gain
and
not
taxable
pursuant
to
any
of
the
provisions
of
the
Income
Tax
Act;
(b)
An
order
that
the
said
Notice
of
Assessment
be
set
aside
and
vacated;
(c)
Such
further
and
other
relief
as
to
this
Honourable
Court
might
seem
just;
(d)
Costs.
In
the
statement
of
claim
the
plaintiff
calls
what
was
sold
to
Jackson
its
“quota
position”.
The
following
is
a
summary
of
what
the
plaintiff
in
its
statement
of
claim
alleges
to
be
“facts”
and
the
position
taken
by
the
plaintiff:
In
1932
the
plaintiff
commenced
business
as
a
logging
company
and
since
then
has
at
no
time
engaged
in
trading
or
dealing
in
timber
cutting
rights
or
quota
positions.
Pursuant
to
a
decision
to
terminate
the
plaintiff’s
logging
operations
it
sold
its
quota
position
in
the
Chapman
Creek
area.
As
the
British
Columbia
Department
of
Forestry
would
not
recognize
the
assignment
of
a
quota
position
per
se
the
only
way
the
plaintiff
could
transfer
the
Chapman
Creek
quota
was
to
acquire
and
then
assign
the
licence.
In
1967
the
plaintiff
sold
the
Chapman
Creek
quota
position
to
Jackson
for
$100,000.
For
the
reason
given
the
sale
of
the
quota
position
took
the
form
of
a
sale
to
Jackson
of
the
plaintiff’s
interest
in
the
licence.
That
quota
position
was
acquired
by
the
plaintiff
as
an
intangible
capital
asset
and
accordingly,
a
non-taxable
capital
gain
was
realized
on
the
sale.
In
the
statement
of
defence
there
is
a
statement
to
the
effect
that
in
assessing
the
plaintiff
with
respect
to
its
1967
taxation
year
the
defendant
inter
alia
assumed
that:
(a)
prior
to
March
1966
the
plaintiff
carried
on
the
business
of
logging
involving
inter
alia
cutting
timber
for
its
own
account,
contract
logging
and
dealing
in
beach
combed
logs;
(b)
in
or
about
March
1966
the
plaintiff
decided
to
discontinue
its
operations
of
cutting
timber
for
its
own
account
as
soon
as
the
timber
under
its
existing
timber
sales
contracts
had
been
exhausted;
(c)
in
or
prior
to
June
1967,
at
a
time
when
the
plaintiff
terminated,
or
was
about
to
terminate
its
operations
of
cutting
timber
for
its
own
account,
the
plaintiff
acquired
an
interest
in
the
licence;
(d)
the
plaintiff
acquired
its
interest
in
the
licence
for
the
purpose
of
trading
and
turning
the
same
to
account
at
a
profit;
(e)
the
plaintiff
sold
its
right,
title
and
interest
in
the
licence
immediately
upon
its
acquisition
by
it
to
Jackson
at
a
profit
to
the
plaintiff
of
$100,000;
(f)
the
said
profit
was
income
to
the
plaintiff
from
a
business
within
the
meaning
of
sections
3
and
4
and
paragraph
139(1)(e)
of
the
Income
Tax
Act,
RSC
1952,
c
148,
as
amended.
It
is
easier
to
understand
the
positions
taken
by
the
parties
if
regard
is
had
to
something
of
the
history
of
the
logging
industry
in
British
Columbia,
practices
in
that
industry
and
attitudes
of
those
engaged
in
it.
A
witness
called
by
the
plaintiff
was
Mr
Francis
F
Lloyd,
a
British
Columbia
registered
forester.
According
to
him
the
Government
of
British
Columbia
set
up
geographical
areas
for
lumbering.
According
to
Mr
Lloyd
the
unit
which
includes
the
area
covered
by
the
licence
contains
something
in
the
order
of
20,000
square
miles.
Prior
to
the
delineating
of
these
units
there
had
been
operators
logging
in
those
areas.
According
to
that
witness
the
government
took
measures
to
assure
established
operators
that
they
would
have
a
continual
supply
of
timber
available.
Mr
Lloyd
defined
such
“established
Operators”
as
those
who
had
been
logging
within
a
specific
unit
for
a
number
of
years.
Apparently
in
the
attempt
to
have
timber
available
in
perpetuity
the
Forest
Service
established
annual
allowable
cuts
of
timber
for
whole
units
respectively
in
the
hope
that
if
no
more
than
the
respective
annual
allowable
cut
were
taken
off
each
year
the
processes
of
reforestation,
both
natural
and
with
planting,
would
be
such
that
that
annual
allowable
cut
could,
subject
to
exigencies,
be
made
forever.
Portions
of
this
annual
allowable
cut
would
be
allocated
to
specific
operators
or
licensees.
The
portion
of
the
annual
allowable
cut
for
the
entire
unit
allocated
to
an
operator
became
known
in
the
trade
as
that
operator’s
“quota”.
Once
an
operator
had
an
allocation
made
to
him
through
the
medium
of
a
licence
he
attained
a
preferred
position
with
definite
and
important
advantages
over
those
who
did
not
have
licences
in
the
public
sustained
yield
unit
in
which
he
was
licensed.
Relevant
legislation
is
the
Forest
Act,
RSBC
1960,
c
153,
as
amended.
The
following
are
portions
of
that
Act:
2.
In
this
Act,
unless
the
context
otherwise
requires,
“Minister”
means
the
Minister
of
Lands
and
Forests:
16.
Crown
timber
which
is
subject
to
disposition
by
the
Crown
shall
be
disposed
of
only
by
the
Minister
in
accordance
with
this
Act
and
the
regulations.
17.
(1)
The
Minister
or
any
officer
of
the
Forest
Service
authorized
so
to
do
by
the
Minister
may
from
time
to
time,
at
the
instance
of
any
applicant,
or
otherwise,
advertise
for
sale
and
sell
by
public
competition
in
the
manner
prescribed
in
the
regulations
a
licence
to
cut
and
remove
any
Crown
timber
which
is
subject
to
disposition
by
the
Crown.
(1a)
When
the
extent
of
the
prospective
harvest
for
the
next
year
within
the
perimeter
of
a
unit
administered
by
the
Forest
Service
for
the
purpose
of
growing
and
sustaining
crops
of
timber
continuously
thereon
is
equal
to
the
allowable
annual
harvest,
an
applicant
under
subsection
(1)
above
may
request
in
writing
that
the
sale
of
timber
for
which
he
has
applied
be
made
by
tender
in
sealed
containers;
and
if
the
applicant’s
tender
does
not
contain
the
highest
offer
for
the
timber
amongst
those
received
by
the
Minister,
he
may
forthwith,
or
within
such
time
as
the
Minister
may
fix,
submit
a
further
tender
containing
an
offer
not
lower
than
the
highest
offer
received
from
any
person;
and
if
the
applicant
submits
the
further
tender,
the
sale
shall
be
made
to
him.
(3a)
Where
a
sale
is
conducted
under
subsection
(1a)
or
(2),
every
person
who
submits
a
tender,
with
the
exception
of
the
applicant
for
the
sale
by
tender,
shall
pay
to
the
Minister
a
bidding
fee
in
an
amount
prescribed
by
the
Minister.
The
Minister
may
refund
all
or
any
part
of
the
bidding
fee
paid
by
a
person
whose
tender
is
accepted.
(7)
The
Minister
may,
in
his
discretion,
reject
any
or
all
offers
made
for
the
purchase
of
the
licence.
146.
(1)
The
Lieutenant-Governor
in
Council
may
make
such
regulations
not
inconsistent
with
the
spirit
of
this
Act
as
he
considers
necessary
or
advisable
for
carrying
out
the
purpose
and
provisions
of
this
Act,
including
matters
in
respect
of
which
no
express
or
only
partial
or
imperfect
provision
has
been
made.
The
handbook
apparently
for
the
guidance
and
instruction
of
persons
in
the
British
Columbia
Forest
Service
contains:
19.3
FULLY
COMMITTED
PUBLIC
SUSTAINED
YIELD
UNITS
19.31
Definition
As
set
out
in
subsection
(1)(a)
of
section
17
of
the
Forest
Act,
a
fully
committed
public
sustained-yield
unit
may
be
defined
as
an
area
of
Crown
land
administered
by
the
Forest
Service
for
the
purpose
of
growing
and
sustaining
crops
of
timber
continuously
thereon
and
wherein
the
extent
of
the
prospective
harvest
for
the
next
year
is
equal
to
the
allowable
annual
harvest.
Timber
sale
applications
will
only
be
considered
from
established
licensees
in
the
unit
in
which
the
application
is
made.
(See
sections
2.121,
2.143,
and
2.25.)
19.32
Established
Licensees
Within
a
fully
committed
public
sustained-yield
unit
there
may
be
one
or
more
established
licensees.
An
established
licensee
may
be
defined
as
a
person
or
company
who
holds
or
has
held
licences
to
cut
Crown
timber
in
a
given
public
sustained-yield
unit
and
has
become
a
recognized
applicant
because
of
holding
or
having
held
a
valid
and
subsisting
licence
or
licences
within
the
perimeter
of
that
public
sustained-yield
unit
and
has
qualifications
deemed
by
the
Minister
to
be
sufficient
to
entitle
the
person
or
company
to
be
a
recognized
applicant.
A
recognized
applicant
has
the
privilege
of
applying
for
Crown
timber
to
the
extent
of
his
individual
allowable
annual
cut
established
by
the
Chief
Forester.
However,
the
individual
allowable
annual
cut
may
vary
through
the
acquisition
or
loss
of
timber
sales
at
public
auction
or
through
assignment,
or
as
a
result
of
reduction
in
the
allowable
annual
cut
for
other
reasons.”’
According
to
the
evidence
that
handbook
is
not
a
regulation
made
by
the
Lieutenant-Governor
in
Council
but
does
set
out
practice
followed
by
the
Forest
Service.
Presumably
it
is
satisfactory
to
the
Minister
and
since
the
Minister
has
such
wide
discretion
it
would
seem
that
the
logging
industry
would
be
justified
in
treating
it
as
having
definite
significance.
When
subsections
(1),
(1a),
(8a)
and
(7)
of
section
17
of
the
Forest
Act
and
sections
19.31
and
19.32
of
the
handbook
are
all
read
together
it
is
apparent
that
a
person
or
company
who
or
which
holds
or
has
held
a
licence
to
cut
Crown
timber
in
a
public
sustained
yield
unit
and
is
“an
established
licensee”
and
a
“recognized
applicant”
has
advantages
over
and
is
in
a
preferred
position
as
compared
with
others.
The
plaintiff
had
been
in
that
preferred
position
for
some
years.
It
had
been
a
licensee
and
so
had
had
a
portion
of
the
annual
allowable
cut
(known
in
the
industry
as
its
quota)
allocated
to
it.
A
“quota”,
uncertain
and
even
nebulous
as
it
is,
does
have
substantial
value
in
the
market
place
of
the
logging
industry.
It
has
been
the
practice
of
the
Forest
Service
to
allocate,
subject
to
certain
conditions,
to
an
assignee
of
a
licence
the
individual
annual
allowable
cut
of
the
assignor
of
that
licence.
It
is
this
quota
which
the
plaintiff
claims
is
“an
intangible
capital
asset”.
It
is
also
the
position
of
the
plaintiff
that
the
assignment
of
its
interest
in
the
licence
was
the
vehicle
whereby
it
assigned
to
Jackson
what
the
plaintiff
submits
was
that
intangible
capital
asset.
I
am
satisfied
on
the
evidence
that
if
Jackson
was
not
entirely
motivated
in
joining
in
an
application
for
the
licence
and
then
taking
an
assignment
of
the
interest
of
the
plaintiff
and
Phillips
and
Lee
in
the
licence
by
the
expectation
that
it
would,
as
a
result,
have
enlarged
its
then
already
existing
individual
annual
allowable
cut
that
expectation
played
a
large
part
in
motivating
Jackson
to
enter
into
the
transaction.
I
am
satisfied,
too,
that
even
if
Jackson
would
have
paid
something
for
the
assignment
without
that
expectation
it
would
not
have
paid
$100,000.
However,
I
do
not
agree
with
the
submission
made
on
behalf
of
the
plaintiff
that
that
transaction
resulted
in
the
realization
by
the
plaintiff
of
a
non-taxable
capital
gain.
It
is,
of
course,
a
commonplace
that
merely
because
someone
pays,
and
substantially,
for
something
which
another
person
has
that
circumstance
does
not
make
that
something
capital.
It
is
my
opinion
that
what
the
plaintiff
sold
to
Jackson
was
its
interest
in
the
licence
and
nothing
more.
In
my
opinion
it
did
not
and
could
not
sell
its
preferred
position
whether
it
be
called
that;
whether
it
be
called
its
quota;
or
whether
it
be
called
its
annual
allowable
cut.
It
is
my
conclusion
those
were
not
saleable
items
and
that
there
was
no
competence
in
the
plaintiff
to
sell
them.
In
my
view
the
documentation
as
finalized
points
to
and
was
a
sale
of
the
licence
and
did
not
effect
a
sale
of
anything
else.
There
was
produced
a
draft
of
a
contemplated
agreement
dated
August
31,
1966
between
the
plaintiff
and
Phillips
and
Lee
as
vendors
and
Jackson
as
purchaser.
Included
in
the
recitals
are:
And
whereas
the
Vendors
have
or
will
have
the
right
to
apply
for
414
mcf
of
timber
in
the
Quadra
Public
Sustained
Yield
Unit
hereinafter
called
the
Timber
Rights
And
whereas
the
Vendors
have
agreed
to
assign
their
right,
title
and
interest
In
and
to
the
Timber
Rights
In
the
operative
portion
there
is:
The
Vendors
covenant
and
agree
to
transfer,
set
over
and
assign
all
their
right,
title
and
interest
in
and
to
the
Timber
Rights.
.
.
.
Thus
there
is
indicated
the
proposed
transfer
of
the
“quota”
per
se.
That
draft
was
not
executed.
Produced
also
was
a
paper
writing
dated
the
[blank]
day
of
June,
1967
wherein
the
plaintiff
and
Phillips
and
Lee
are
called
the
vendors
and
Jackson
was
called
the
purchasers.
One
of
its
recitals
is:
Whereas
the
vendors
have
or
will
have
the
right
to
apply
for
414
mcf
of
timber
in
the
Quadra
Public
Sustained
Yield
Unit
(hereinafter
called
“the
Timber
Rights”).
The
following
are
also
extracts
from
it:
The
vendors
covenant
and
agree
with
the
Purchasers
that
as
soon
as
conveniently
possible
after
the
execution
hereof
but
at
the
cost
and
expense
of
the
Purchasers,
to
make
an
application
to
the
Forest
Branch
jointly
with
the
Purchasers
for
a
timber
sale
contract
or
timber
sale
contracts
or
other
cutting
rights
to
timber
to
take
advantage
of
and
to
secure
the
timber
rights
above
referred
to.
.
.
.
In
consideration
of
the
sale,
assignment
or
transfer
of
the
timber
rights
by
the
Vendors
to
the
Purchasers
as
aforesaid
the
Purchasers
hereby
covenant
and
agree
to
pay
to
the
Vendors
the
total
sum
of
one
hundred
thousand
($100,000.00)
dollars.
...
Here
again
there
is
an
indication
of
the
proposed
transfer
of
the
“quota”
per
se.
This
appears
to
have
been
signed
on
behalf
of
the
vendors
but
not
on
behalf
of
Jackson.
Another
exhibit
is
a
photocopy
of
the
“Application
to
Purchase
Crown
Timber”
in
the
“S.E.
portion
of
X-77764,
Chapman
Creek,
as
shown
on
the
attached
sketch”.
It
is
dated
January
4,
1967.
It
is
made
by
the
plaintiff,
Jackson
and
Phillips
and
Lee.
Then
there
is
a
photocopy
of
an
executed
agreement
dated
the
[blank]
day
of
July
1967
wherein
the
plaintiff
and
Phillips
and
Lee
are
called
“the
Vendors”
and
Jackson
is
called
“the
Purchasers”.
It
contains
the
following
recitals:
Whereas
the
Vendors
and
the
Purchasers
in
or
about
the
month
of
January,
1967
made
a
joint
application
to
the
Forest
Branch
of
the
Province
of
British
Columbia
for
a
Timber
Sale
Contract
in
the
vicinity
of
Chapman
Creek.
And
whereas
the
Vendors
and
the
Purchasers
have
now
been
informed
by
the
Forest
Branch
by
letter
dated
the
6th
day
of
July,
1967
that
because
of
a
change
in
departmental
policy
the
application
for
a
Timber
Sale
Contract
can
no
longer
be
proceeded
with,
and
as
a
result
thereof
the
parties
hereto
have
made
a
joint
application
for
a
Timber
Harvesting
Licence
to
the
said
Forest
Branch
covering
the
similar
area
in
the
vicinity
of
Chapman
Creek.
And
whereas
the
Vendors
desire
to
terminate
their
active
operations
as
logging
companies.
The
following
are
extracts
from
that
agreement:
As
soon
as
may
be
conveniently
possible
after
the
grant
of
any
Timber
Harvesting
Licence
(hereinafter
called
“the
Licence”)
to
the
Vendors
and
the
Purchasers
jointly
as
aforesaid
the
Vendors
covenant
and
agree
with
the
Purchasers
that
they
and
each
of
them
will
assign
their
right,
title
and
interest
in
the
Licence
to
the
Purchasers
subject
always
to
the
consent
of
the
Forest
Branch
thereto,
.
.
.
In
consideration
of
the
sale,
assignment
or
transfer
of
the
Licence
by
the
Vendors
to
the
Purchasers
as
aforesaid
the
Purchasers
hereby
covenant
and
agree
to
pay
to
the
Vendors
the
total
sum
of
One
Hundred
thousand
($100,000.00)
dollars.
.
.
.
That
executed
document,
which
sets
out
the
transaction
and
its
terms,
dealing
as
it
does
with
the
licence
itself,
contains
no
reference
to
annual
allowable
cut
and
contains
no
reference
to
quota
position.
Thus
there
is
a
significant
change
in
the
executed
instrument
from
the
draft
or
proposed
documents.
As
I
understand
it
it
is
common
ground
that
the
Forest
Service
of
British
Columbia
will
not
recognize
a
purported
assignment
of
the
preferred
position
of
a
licensee
nor
any
attempt
to
assign
his
quota.
In
any
event
that
is
my
finding
on
the
evidence.
It
is
the
plaintiff's
submission
that
what
was
actually
sold
by
the
plaintiff
was
its
quota
position
and
that
the
assignment
of
its
interest
in
the
licence
was
merely
the
vehicle
which
accomplished
it.
Counsel
pointed
out
that
the
“quota”
which
Universal
previously
had
was
added
to
Jackson’s
allowable
annual
cut.
However
I
find
that
was
not
done
by
a
transfer
from
the
plaintiff
to
Jackson
but
that
it
was
effected
by
action
of
the
Forest
Service.
Following
the
departmental
practice
the
plaintiff
applied
in
writing
to
have
its
position
transferred
to
Jackson.
It
informed
the
district
forester
that
it
had
transferred
its
logging
interests
to
Jackson.
In
the
same
document
the
plaintiff
stated
that
it
understood
that
if
the
request
for
transfer
was
approved
it
would
no
longer
be
considered
as
a
recognized
applicant
for
the
purpose
of
applying
for
timber
sales
or
timber
sale
harvesting
licences
in
the
Quadra
Public
Sustained
Yield
Unit.
In
my
opinion
this
clearly
indicates
that
the
replacing
of
the
plaintiff
as
an
established
operator
by
Jackson
was
accomplished
not
by
the
plaintiff
but
by
the
Forest
Service.
An
application
for
transfer
is
something
quite
different
than
a
transfer.
As
I
see
it
only
a
request
was
made
by
the
plaintiff.
The
allocation
of
the
plaintiff's
quota
to
Jackson
was
made
by
the
Forest
Service.
In
my
opinion
the
plaintiff
did
not
have
any
right,
power
or
authority
to
transfer
its
preferred
position,
its
annual
allowable
cut
or
its
quota.
It
could
only
transfer
the
licence
per
se
subject
to
the
approval
of
and
on
the
terms
and
conditions
decided
upon
by
the
Forest
Service.
Indeed
in
the
executed
agreement
selling
out
the
transaction
and
its
terms
the
plaintiff
did
not
even
give
any
undertaking
that
Jackson
would
acquire
its
quota
position.
Although
the
deal
was
contingent
upon
the
consent
of
the
Forest
Branch
to
the
assignment
of
the
vendor’s
right,
title
and
interest
in
the
licence
the
agreement
does
not
stipulate
that
the
deal
was
contingent
upon
Jackson
acquiring
the
quota
position.
For
that,
it
would
appear
Jackson
depended
upon
the
grace
of
the
government.
A
case
referred
to
was
Metropolitan
Taxi
Limited
v
MNR,
[1967]
2
Ex
CR
32;
[1967]
CTC
88;
67
DTC
5073,
before
Cattanach,
J.
On
appeal
from
that
decision
Cartwright,
CUC,
[1968]
CTC
163:
68
DTC
5098,
inter
alia
at
page
164
[5098]
said:
After
a
consideration
of
the
arguments
of
counsel
and
the
authorities
to
which
they
made
reference
I
find
myself
so
fully
in
agreement,
not
only
with
the
conclusion
of
the
learned
Exchequer
Court
Judge
but
also
with
his
reasons,
that
I
am
content
simply
to
adopt
them.
A
taxicab
company
acquired
the
assets
of
another
taxicab
company
for
a
total
consideration
of
$104,441.65,
of
which
the
taxpayer
allocated
$93,550
to
14
licensed
taxicabs.
The
Minister
in
assessing
the
appellant
allocated
$18,590
of
the
purchase
price
to
the
14
taxicabs
and
$72,031.65
to
consideration
not
attributable
to
depreciable
property.
What
was
to
be
decided
was
the
extent
to
which
the
taxpayer
was
entitled
to
a
capital
cost
allowance.
The
Taxicab
Board
had
limited
the
number
of
taxicabs
that
could
be
operated
to
400.
Because
the
quota
of
400
had
been
filled
and
a
long
waiting
list
existed,
the
only
practical
way
in
which
a
person
might
become
eligible
to
operate
a
taxicab,
or
if
already
engaged
in
the
taxicab
business
to
increase
the
number
of
taxicabs
which
he
might
operate,
was
to
buy
the
shares
of
the
corporate
taxicab
operator
or
to
succeed
to
the
position
of
an
already
licensed
operator
by
buying
from
that
operator
one
or
more
vehicles
with
respect
to
which
a
licence
had
been
issued.
Because,
said
the
learned
trial
judge,
of
the
circumstances
outlined
in
his
judgment,
it
was
quite
obvious
that
the
licences
to
operate
taxicabs
in
greater
Winnipeg
had
acquired
a
considerable
value.
The
appeal
was
dismissed.
Although
what
was
to
be
decided
in
the
Metropolitan
Taxi
case
was
the
amount
of
the
consideration
applicable
to
depreciable
property
and
not
as
here
whether
the
realization
was
capital
or
income,
which
makes
that
case
distinguishable
from
this,
there
is,
I
think,
an
analogy
to
be
drawn
between
the
following
comment
by
Cattanach,
J
in
the
Metropolitan
Taxi
case
(p
99
[5080])
and
the
situation
existing
here,
namely:
In
view
of
my
conclusion
that
the
licences
granted
by
the
Taxicab
Board
are
personal
to
the
owner,
although
with
respect
to
a
specific
vehicle,
it
follows
that
they
are
not
transferable
In
themselves
and
are
not
the
subject
matter
of
barter
or
sale.
Therefore,
the
appellant
did
not
buy
the
licences
in
question
but
by
its
purchase
of
fourteen
licensed
taxicabs
placed
itself
in
a
better
position
from
which
to
apply
to
the
Taxicab
Board
for
licences
on
its
own
behalf.
Similarly,
it
seems
to
me,
when
Jackson
purchased
the
plaintiff’s
interest
in
the
licence
it
did
not
purchase
its
preferred
position
as
an
established
licensee.
Jackson
merely
placed
itself
in
a
better
position
for
which
to
apply
to
the
competent
authorities
for
those
benefits.
Another
case
referred
to
was
Tabor
Creek
Sawmills
Ltd
v
Minister
of
Finance
in
which
there
was
an
appeal
from
the
British
Columbia
Court
of
Appeal
to
the
Supreme
Court
of
Canada.
On
the
appeal
to
the
Supreme
Court
of
Canada
([1973]
3
WWR
14),
delivering
the
judgment
of
the
Court,
Martland,
J
said:
We
are
all
in
agreement
with
the
view
expressed
by
Davey,
CJBC,
in
the
Court
of
Appeal
that
the
enhanced
price
paid
by
the
purchaser
for
the
timber
cutting
licences,
in
order
to
obtain
a
preferred
position
in
an
application
for
more
timber,
was
part
of
a
net
profit
on
the
appellant’s
sale
of
the
right
to
cut
standing
timber
and
was
taxable
under
The
Logging
Act,
RSBC
1960,
c
225.
The
appeal
is
dismissed
with
costs.
Obviously
that
case
differs
from
this
inasmuch
as
it
deals
with
different
legislation
and
by
a
different
jurisdiction
than
is
the
situation
here.
Nevertheless
it
is
of
assistance
in
connection
with
the
matters
at
issue
here,
and
this
particularly,
because
that
case
also
deals
with
“so-
called
quota
replacement
privilege”
and
“timber
sale
contracts”.
The
following
are
extracts
from
the
judgment
of
Davey,
CJBC
when
the
matter
came
before
the
British
Columbia
Court
of
Appeal
([1972]
3
WWR
622):
At
one
time
during
the
argument,
I
was
inclined
to
think
that
the
so-called
quota
replacement
privilege
was
a
quality
or
attribute
of
the
timber
sale
contracts,
ie
the
right
to
cut
standing
timber,
that
enhanced
their
value.
However,
a
closer
study
of
the
Logging
Tax
Act,
RSBC
1960,
c
225,
and
the
Regulations
and
the
judgment
of
Cattanach,
J
in
Metropolitan
Taxi
Ltd
v
Minister
of
National
Revenue,
[1967]
2
Ex
CR
32;
[1967]
CTC
88;
67
DTC
5073,
as
adopted
by
the
Supreme
Court
of
Canada,
[1968]
SCR
496;
[1968]
CTC
163;
68
DTC
5098;
68
DLR
(2d)
1,
has
convinced
me
that
that
is
a
faulty
analysis
of
the
relationship
of
quota
replacement
privileges
to
the
timber
sale
contracts.
I
do
not
think
the
quota
is
a
quality
or
characteristic
of
the
timber
sale
contracts
or
a
right
appurtenant
thereto
passing
with
them.
It
is,
I
think,
a
personal
right
vested
in
an
owner
or
former
owner
of
a
timber
sale
contract
to
apply
to
buy
more
timber
in
a
sustained
yield
unit
under
the
Forest
Act,
RSBC
1960,
c
153,
s
17(1)
and
(1a)
(en.
1961,
c
20,
s
2(a)).
To
the
extent
that
the
right
to
apply
for
more
timber
is
a
statutory
right,
the
reasoning
on
the
first
branch
of
the
Metropolitan
Taxi
Ltd
case
applies
a
fortiori.
The
fact
that
the
right
to
apply
is
not
appurtenant
to
the
timber
sale
contract,
but
is
personal,
is
further
demonstrated
by
Regs
19.31
and
19.32
specifying
that
applications
under
s
17(1
a)
of
the
Forest
Act
will
only
be
considered
from
an
established
licensee,
and
defining
an
established
licensee
as
a
person
or
company
who
holds
or
has
held
licences
to
cut
Crown
timber
in
a
public
sustained
yield
unit,
and
has
qualifications
deemed
by
the
Minister
to
be
sufficient
to
entitle
him
to
be
a
recognized
applicant.
.
.
.
So
the
right
to
apply
is
not
appurtenant
to
a
timber
sale
contract.
Moreover
the
Minister
must
be
satisfied
with
the
personal
qualifications
of
the
applicant
to
allow
him
to
be
recognized
as
such
and,
even
if
the
Minister
is
satisfied
he
is
not
obliged
to
sell.
The
importance
of
a
timber
sale
contract
to
a
prospective
applicant
is
that
the
ownership
of
it
is
one
of
the
two
things
that
gives
him
the
right
to
apply
for
more
timber
if
he
possesses
the
necessary
personal
qualifications,
and
undoubtedly
greatly
improves
his
chances
of
being
able
to
buy
more
timber
in
the
unit,
if
the
Minister
is
willing
to
sell,
especially
since
competition
from
former
owners
of
the
timber
sale
contract
is
eliminated
by
the
practice
of
the
Minister
of
requiring
assignors
of
timber
sale
contracts
to
relinquish
their
claims
to
quota
before
approving
the
assignment.
However,
I
cannot
see
how
that
practice
of
the
Minister
unsupported
by
Act
or
Regulation
can
change
the
essential
character
of
a
quota.
The
unconditional
evidence
is
quite
clear
that
prospective
purchasers
will
pay
substantial
sums
over
and
above
the
value
of
the
standing
timber
in
order
to
buy
a
timber
sale
contract
and
thereby
get
in
that
favoured
position
to
apply
for
more
timber
in
the
unit.
In
that
same
case
Taggart,
JA
said:
It
is
of
prime
importance
to
the
present
appeal
to
appreciate
that
“quota
replacement
privilege’’
has
no
existence
separate
from
a
timber
sale
licence
which
authorized
the
cutting
of
standing
timber
in
a
PSYU.
The
privilege
cannot
be
bought
or
sold
in
whole
or
in
part
separate
from
the
timber
sale
licences
held
by
the
licensee.
And
again:
The
argument
advanced
on
behalf
of
the
appellant,
it
seems
to
me,
ignores
the
fact
that
quota
replacement
privilege
has
no
existence
separate
from
a
timber
sale
licence
conferring
cutting
rights.
Accordingly
“the
protection
taking
the
form
of
the
likelihood,
but
not
certainty,
that
as
the
timber
in
those
areas
wihin
the
P.S.Y.U.
in
respect
of
which
an
operator
holds
timber
sale
licences
from
the
Crown
is
depleted,
he
will
be
able
to
have
put
up
for
sale,
and
acquire,
future
timber
sale
licences”
(per
Taggart,
JA)
is
not
an
entity.
As
I
see
it
the
finding
in
the
Tabor
case
to
the
effect
that
the
“quota
replacement
privilege”
has
no
existence
separate
from
the
licence
coupled
with
the
circumstance
that
the
British
Columbia
Forest
Service
does
not
recognize
a
purported
sale
of
the
“quota
position”
and
reserves
to
itself,
as
it
is
entitled
to
do,
the
matter
of
allocation
of
annual
allowable
cut
following
the
sale
of
a
licence
impels
the
conclusion
that
the
so-called
“quota
position”
is
not
a
saleable
item
and
cannot
be
the
subject
of
sale
and
purchase.
The
quota
position
simply
does
not
exist
apart
from
the
licence.
Accordingly
it
is
only
the
licence
itself
that
is
sold.
In
this
case
only
the
interests
of
the
plaintiff
and
Phillips
and
Lee
in
the
licence
were
sold
to
Jackson.
The
fact
that
the
expectation
and
even
the
likelihood
that
the
Forest
Service
will
place
the
purchaser
of
a
licence
in
the
same
favoured
position
as
was
the
seller
to
buy
the
licence
or
pay
a
higher
price
for
it
does
not
change
the
fact
that
only
the
licence
itself
is
sold.
In
this
case
the
documentation
is
consistent
with
the
interests
of
the
plaintiff
and
Phillips
and
Lee
in
the
licence
only
being
sold.
That
being
so
the
matter
comes
down
to
a
determination
as
to
whether
the
amount
realized
by
the
plaintiff
from
the
sale
of
its
interest
in
the
licence
was
a
capital
gain
and
not
taxable
or
was
taxable
income.
lt
is
apparent
that
the
purpose
of
Crown
licences
is
to
provide
Crown
timber
for
logging
companies
carrying
on
logging
operations.
It
is
also
apparent
and
I
find
that
the
plaintiff
did
not
join
in
the
application
to
purchase
Crown
timber
dated
January
4,
1967,
which
resulted
in
the
licence,
in
order
that
it
would
have
a
supply
of
Crown
timber
with
which
to
carry
on
the
business
of
logging.
I
find
that
when
the
plaintiff
joined
in
that
application
it
had
already
decided
to
terminate
operations
as
a
logging
company.
I
find
that
the
plaintiff
sought
a
licence
and
accepted
the
licence
for
the
sole
and
only
purpose
of
immediately
assigning
its
interest
in
the
licence
to
Jackson
for
a
consideration
and
that
the
cash
consideration
received
for
the
assignment
of
the
interests
of
the
plaintiff
and
Phillips
and
Lee
in
the
licence
was
$100,000.
Even
though
this
may
have
been
an
isolated
transaction
that
would
be
immaterial
under
the
circumstances.
What
occurred
here
was
an
adventure
or
concern
in
the
nature
of
trade.
I
find
and
declare
that
the
plaintiff’s
realization
of
$100,000
on
the
transaction
was
not
a
capital
gain.
I
find
and
declare
that
it
was
income
within
the
meaning
of
sections
3
and
4
and
paragraph
139(1
)(e)
of
the
Income
Tax
Act,
RSC
1952,
c
148,
and
that
it
is
taxable
as
such.
The
plaintiff’s
action
is
dismissed
with
costs.
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