The
Chairman
(orally):—This
is
an
appeal
by
the
taxpayer,
Bernard
R
Axmith,
from
a
reassessment
by
the
Minister
for
the
taxation
year
1967
involving
two
specific
sets
of
transactions.
One
transaction
involved
the
Northville
Explorations
Limited
and
Copperville
Mining
Corporation
Limited
which
resulted
in
a
reassessment
adding
$36,734.24
to
the
income
of
the
appellant.
The
second
item
dealt
with
the
sale
of
shares
of
North
American
Research
and
Development
Corporation
for
the
sum
of
$81,899.57,
which
said
sum
was
also
added
back
to
the
income
of
the
appellant
in
the
1967
taxation
year.
After
the
opening
of
the
hearing
counsel
on
behalf
of
the
appellant
indicated
that
the
appeal
with
respect
to
Northville
Explorations
Limited
and
Copperville
Mining
Corporation
Limited
was
being
abandoned
and
accordingly
the
appeal
with
respect
to
the
sum
of
$36,734.24
is
thereby
dismissed.
The
second
matter
has
taken
up
a
considerable
period
of
time
and
is
not
an
easy
matter
to
resolve.
I
am
grateful
to
both
counsel
for
the
manner
in
which
the
hearing
has
been
conducted
and
the
assistance
they
have
given
to
the
Board
in
helping
it
to
reach
its
final
decision.
The
facts
briefly
are
that
Bernard
R
Axmith,
also
known
as
Robert
Axmith,
is
a
shoe
merchant
carrying
on
a
long-established
family
business
at
117
Yonge
Street
in
the
City
of
Toronto.
He
is
now
president
of
the
company
and
apparently
attained
that
position
as
a
result
of
succeeding
his
father,
who
is
now
apparently
deceased.
He
gave
evidence
on
his
own
behalf
in
this
appeal,
which
was
the
only
evidence
called
on
behalf
the
appellant.
This
is
not
unusual
in
a
case
such
as
this.
He
stated
that
all
his
life
he
has
been
in
the
shoe
business
and
like
most
people
has
dealt
to
some
extent
in
stocks,
starting
as
he
said
when
his
father
started
and
later
purchasing
stocks
on
his
own
behalf.
It
was
indicated
that
in
1965
the
appellant
promoted
two
companies,
Northville
and
Copperville,
which
I
had
previously
referred
to
as
being
disposed
of.
In
this
he
was
guided
by
the
advice
and
direction
of
his
brother-in-law,
one
Sam
Freeman,
originally
described
as
a
financial
consultant
but
later,
I
think
as
the
evidence
unfolded,
more
accurately
described
as
a
mining
promoter.
Freeman
had
also
advised
the
appellant’s
wife
in
the
purchase
of
some
Bank
of
Nova
Scotia
shares
which
she
purchased
in
1968
or
1969
and
subsequently
sold.
The
facts
from
which
this
reassessment
arose
occurred
when
Freeman
advised
the
appellant
to
buy
some
shares
in
a
corporation
that
was
then
known
apparently
as
Utah
Fortuna
Gold
Mines
Limited,
which
subsequently
changed
its
name
to
North
American
Research
and
Development
Corporation.
The
appellant’s
evidence
was
that
Freeman
told
him
to
buy
these
shares
as
they
would
be
a
good
investment,
to
put
them
away,
and
I
take
from
that
the
appellant
was
to
buy
them
and
hold
on
to
them
until
such
time
as
they
appreciated
in
value.
He
had
been
dealing
in
previous
promotions
with
a
broker
by
the
name
of
Lars
Hagglof
and
Company
Limited,
a
broker
in
the
City
of
Toronto.
He
says
he
’phoned
his
broker
and
told
him
to
buy
him
$1,000
worth
of
Utah
Fortuna.
He
says
that
in
the
course
of
discussion
about
this
stock
he
had
been
advised
by
Freeman
that
they
were
acquiring
certain
rights
in
the
Northwest
Territories.
So
far
as
he
knew
they
had
acquired
those
rights
but
he
really
had
no
knowledge,
according
to
his
evidence,
of
what
or
where
this
speculative
stock
was
that
he
was
purchasing.
This
took
place,
according
to
the
evidence,
in
April
1967,
as
shown
by
the
evidence
of
Mr
Axmith
and
also
by
respondent’s
Exhibit
R6,
which
is
a
copy
of
the
account
of
Robert
Axmith
on
the
ledger
sheet
of
the
Lars
Hagglof
and
Company.
The
shares
cost
a
total
of
$1,075
and
Exhibit
R6
shows
that
$1,163
was
paid
and
the
balance
was
subsequently
transferred
by
a
journal
entry,
according
to
the
evidence
of
Mr
Helliker
called
on
behalf
of
the
respondent
on
the
account
of
the
broker.
As
Mr
Helliker
says,
it
would
be
assumed
that
the
difference
was
the
brokerage
fees
or
the
charges
on
the
purchase.
Mr
Axmith
indicated
in
his
evidence
that
he
did
not
know
very
much
about
the
operations
of
the
stock
market,
that
he
did
not
know
the
difference
between
listed
and
over-the-counter
stocks.
He
said
that
he
simply
’phoned
his
broker
and
asked
him
to
purchase
shares
for
him.
Within
a
couple
of
months,
it
would
appear
from
the
evidence,
he
was
called
by
his
broker
and
exhorted
to
sell
these
shares.
He
said
that
he
was
reluctant
to
do
so
and
that
he
did
not
discuss
it
with
his
brother-in-law
who
had
originally
advised
him.
After
the
broker
being
persistent
for
awhile
he
did
agree
to
sell
the
shares
and
approximately
28,900
shares
were
sold
which
resulted
in
the
figure
with
which
we
are
concerned
in
the
reassessment.
The
total
came
to
a
figure
less
than
$81,899.57
but
the
evidence
of
Mr
Helliker
is
that
the
difference
was
probably
as
a
result
of
adjustments
between
United
States
and
Canadian
funds.
I
find
as
a
fact,
since
that
evidence
is
not
contradicted,
that
the
amount
for
which
the
shares
of
Mr
Axmith
were
sold
resulted
in
his
receiving
this
amount
of
money.
The
Minister
subsequently
reassessed
the
taxpayer
and
in
doing
so
relied
on
several
assumptions.
It
is
not
surprising
that
the
Minister
would
be
drawn
to
this
large
profit
because
the
facts
surrounding
it
were
facts
that
would
certainly
at
first
glance
lead
one
to
suspect
that
the
taxpayer
had
done
more
than
make
a
very
fortuitous
profit
in
a
short
period
of
time.
He
has
been
associated
in
two
previous
promotions
with
Freeman.
He
had
been
an
officer
and
director
of
two
companies
for
a
period
of
one
day.
He
said
that,
as
soon
as
he
found
out
he
was
an
officer
and
director
of
Colleen
Copper
Mines
Limited
and
V
I
“Production
and
Arts
Limited”,
he
resigned
because
he
could
not
afford
the
time.
He
says
Freeman
was
the
man
that
put
him
on
as
a
director.
The
other
facts
surrounding
it
which
formed
the
basis
of
the
assumptions
made
by
the
Minister,
as
shown
by
the
evidence
of
Mr
Helliker,
are
that
certain
persons
named
in
the
Reply
obviously
conspired
to
promote
the
shares
of
what
became
North
American
Research
and
Development
Corporation,
and
to
do
this
promotion
in
the
United
States.
The
indications
in
the
assumptions
are
that
certain
people
in
the
year
1967
acquired
a
large
number
of
shares
of
Utah
Fortuna
Gold
Mines
Limited.
One
group
headed
by
Edward
White
acquired
1.2
million
of
approximately
1.8
million
outstanding
shares.
Another
group,
including
Freeman,
acquired
750,000
shares.
The
allegations
in
the
assumptions
by
the
Minister
are
that
both
these
groups
intended
to
promote
trading
in
the
shares
to
increase
the
over-the-counter
price
of
shares;
in
other
words,
to
create
a
market
whereby
they
could
resell
their
shares
at
a
substantial
profit.
There
is
no
doubt
in
my
mind
thai
that
is
probably
correct
because
certainly
on
the
shares
that
the
appellant
acquired
he
made
a
substantial
profit.
There
is
not
much
doubt
in
my
mind
as
to
the
manner
in
which
the
promotion
was
to
take
place
because
subsequently
the
United
States
SEC
obtained
an
interim
injunction
which
stopped
trading
in
these
shares
and
apparently
litigation
is
still
pending.
All
of
these
things
may
be
very
true,
and
I
suspect
that
for
the
most
part
of
the
facts
as
set
out
in
the
Minister’s
assumptions
are
true,
but
the
question
before
me
is:
how
do
they,
if
they
do,
affect
the
appellant?
If
I
start
with
the
various
assumptions,
beginning
on
page
4
of
the
Reply
and
following
through,
many
of
the
assumptions
are
based
on
facts
that
would
not
be
within
the
knowledge
of
the
appellant,
if
I
accept
his
evidence
as
it
was
presented
in
the
witness-box
at
this
hearing.
He
comes
before
this
Board
and
says
that
he
had
nothing
other
than
tips
from
his
brother-in-law
to
buy
these
shares;
that
he
was
never
an
officer
or
a
director
of
North
America;
that
he
was
never
privy
to
its
internal
information
or
operations;
that
he
was
never
a
broker
of
any
of
the
shares
or
never
a
promoter
of
any
of
the
shares;
that
he
had
no
knowledge
of
the
United
States
proceedings
except
that
he
did
learn
that
trading
had
been
stopped.
Of
course
this
took
place
subsequent
to
his
sale
of
the
shares,
the
stock
order
apparently
being
effective
as
of
July
20,
1967.
He
was
recalled
at
the
request
of
counsel
for
the
respondent
and
indicated
that
he
had
never
been
served
with
any
document
with
reference
to
the
Securities
and
Exchange
Commission
action
in
the
United
States,
and
so
far
as
he
knew
he
was
never
a
defendant.
If
I
believe
the
evidence
of
this
witness
I
think
he
has
sufficiently
rebutted
the
assumptions
of
the
Minister
so
far
as
they
relate
to
matters
that
would
be
within
his
knowledge.
In
my
view
he
cannot
be
held
taxable
on
assumptions
made
from
information
solely
within
the
knowledge
of
persons
other
than
himself
and
to
which
he
was
not
privy
and
when
there
is
no
evidence
that
he
had
such
knowledge.
I
have
observed
him
in
the
witness-box
and
have
considered
his
demeanour
in
answering
questions.
I
have
considered
the
considerable
interest
he
has
in
the
outcome
of
this
appeal.
There
are
some
discrepancies
in
his
evidence.
He
said
in
examination-in-chief
that
he
was
not
a
promoter
of
Copperville
or
Northville,
and
yet
in
the
prospectus
which
was
filed
in
each
case
he
signed
or
was
shown
as
the
promoter,
although
it
is
also
pointed
out
that
in
the
prospectus,
I
suppose
in
compliance
with
the
requirements
of
the
Ontario
Securities
Commission,
paragraph
3(b)
it
states:
(b)
Promoter—there
is
no
promoter
as
such
but
Robert
Axmith,
the
vendor
(see
paragraph
12
herein)
may
be
regarded
as
the
promoter
In
my
view
the
appellant
gave
his
evidence
in
a
manner
that
would
lead
me
to
the
conclusion
that
he
was
not
an
extremely
brilliant
man
capable
of
falsifying
and
hiding
the
truth
from
this
tribunal
or
any
other.
He
struck
me
as
a
man
who
was
what
he
said
he
was,
a
businessman,
inexperienced
in
dealing
with
over-the-counter
stocks,
in
dealing
with
stock
markets
generally.
I
accept
his
evidence
unhesitatingly
that
he
received
this
tip
from
his
brother-in-law;
that
he
ordered
the
shares
through
his
broker;
that
he
did
not
know
where
the
shares
were
being
purchased
although
the
evidence
of
the
respondent’s
witness
indicated
the
shares
came
from
a
brokerage
house
in
the
United
States;
that
subsequently
at
the
insistence
of
his
broker
he
authorized
the
sale
of
28,900
shares
and
that
those
shares
were
sold
as
set
out
in
respondent’s
Exhibit
R6;
that
it
was
all
done
without
any
complicity
on
the
part
of
the
appellant
in
the
actions
of
Freeman
or
any
other
of
the
persons
named
in
the
assumptions
of
the
Minister.
I
accept
the
proposition
that
the
onus
is
upon
the
appellant
taxpayer
in
these
cases
to
satisfy
the
Board
that
the
assumptions
are
wrong,
but
I
do
not
believe
that
this
is
intended
to
mean
that
it
is
an
onus
that
can
never
on
the
evidence
of
the
appellant
himself
be
re-
butted
where
the
Board
is
prepared
to
accept
that
evidence
as
factual,
to
accept
the
veracity
of
the
evidence
as
given.
Therefore
on
all
the
evidence,
the
evidence
of
the
appellant
himself,
the
evidence
of
Mr
Helliker
and
the
evidence
of
the
exhibits
filed,
with
respect
to
the
assessment
of
$81,899.57
and
with
respect
to
the
North
American
Research
and
Development
Corporation
shares
sale
the
appeal
should
succeed
and
the
matter
be
referred
back
to
the
Minister
for
reassessment
on
that
basis.
In
summary
the
result
of
this
appeal
is
that
it
will
be
allowed
in
part
and
referred
back
to
the
Minister
for
the
deletion
of
the
sum
of
$81,899.57.
Appeal
allowed
in
part.
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