Freda Feldstein v. Minister of National Revenue, [1969] CTC 441, 69 DTC 5298

SHEPPARD, D. J.:—This appeal is from an assessment by the Minister of National Revenue for the years 1962 and 1963, on the ground that the sums realized were not taxable income of the appellant but capital. The opening alleges that the sums from three transactions as follows, are in issue:

1. Comox Street Transaction: This was a loan of $5,000 by the Appellant to Emerald Apartments Ltd. (President, Arthur Bennet) repayable $5,750 (including a bonus of $750) and 7 per cent per annum secured by an assignment of an agreement of sale, dated February 2, 1956, on which the appellant made a profit of $3,946.15.

2. The David mortgage: In June 1959 the appellant purchased at discount the Vendor’s interest in an agreement of sale. The purchaser paid out the balance owing whereby the appellant obtained a profit of $1,374.32.

3. The Robbins loan: On August 7; 1959 the appellant loaned to Robbins Construction Co. Ltd. $5,000 repayable $6,100 by $200.00 per month plus 7% per annum and the balance repayable on October 10, 1960. The appellant received three securities, two of which were released during the currency of the loan and the third security was the borrowers’ equity as a purchaser under an agreement of sale of land which land was subject to first and second mortgages. Ultimately, the appellant received a quit claim deed from the borrower and from a resale of the property obtained a profit of $3,497.

Those sums were assessed as income but the appellant contends the sums were not taxable income but capital.

The onus is on the appellant to prove an error in the assessment, Dezura v. M.N.R., [1948] Ex. C.R. 10 at 15; [1947] C.T.C. 375 at 380. That onus has not been discharged as the appellant alone gave evidence and under the circumstances her evidence is not sufficient to discharge the onus of proof.

As to the Comox Street transaction, the appellant filed a Statement of Claim (Ex. Al) which is not proof of the facts alleged therein. The appellant filed a statement of account (Ex. A2) made in the handwriting of her husband, which statement is not proof of the contents of the document. The appellant testified that her husband had looked after the details of the transaction. She signed a cheque for the amount and what she knew of any security obtained by her was told her by her husband.

As to the David mortgage, the appellant’s knowledge was acquired from her husband, her husband looked after the details of the transaction. The appellant put in a ledger (Ex. A3) in his handwriting, which is not proof of the transactions recorded.

As to tthe Robbins loan, the appellant’s evidence was that she was told by her husband that a tenancy was arranged on the terms of a letter dated March 22, 1962 signed by her husband and again ledger sheets were put in evidence (Ex. A6) which were in the husband’s handwriting.

The transactions were looked after by her husband and entered in the ledger sheets which she was not sure of having even checked. The onus therefore has not been discharged and under the circumstances the appellant’s evidence is not sufficient to do so. The statements of the husband to her orally or in writing (as Ex. A2, A3, A6) are essentially hearsay and are not proof of the facts therein stated as against this respondent.

The documents as put in evidence by the appellant are at least evidence against her and these statements of ledger sheets (Ex. A2, A3, AG) which were in her husband’s handwriting are some evidence against this appellant as to the nature of the transaction. On each sheet she has been assigned a number (Ex. A2) — Freda/1494 (Ex. A3 No. 1494 (Ex. A6) Account No. 1494.

Under (Ex. R7) was recited the bonuses which she received from 1952 to 1961. There is some evidence, therefore, that the appellant’s husband was in business and that the appellant through the agency of her husband may have been engaged in ‘ ‘ an adventure or concern in the nature of trade ’ ’ within Section 139(1) (e).

The extent to which the appellant may be bound by the acts of her husband as her agent is indicated in the following judgments :

In Cragg v. M.N.R., [1952] Ex. C.R. 40 at 46; [1951] C.T.C. 322 at 327, the President states: ‘‘The question in each case is what is the proper deduction to be drawn from the taxpayer’s whole course of conduct viewed in the light of all the circumstances. The conclusion in each case must be one of fact.”

In M.N.R. v. Beatrice Minden, [1962] C.T.C. 79, the President at p. 91 states: “The reality of the matter is that what Mr. Minden did for his wife and on her behalf as her agent with her full authority in that behalf was ‘an operation of business in carrying out a scheme of profit-making’ with the result that the profits realized by the respondent constituted a gain made in such an operation.’’

In West Coast Parts Co. Ltd. v. M.N.R., [1964] C.T.C. 519 at 921, Cattanach, J. stated: “It follows that in my view, when a person embarks on an adventure in the nature of a money lender’s trade and earns a similar profit the profit he acquired is a profit from an adventure in the nature of trade. ’ ’

In the present case, the appellant’s husband, who entered into the transactions as the appellant’s agent, was not called as a witness to prove the transactions, their nature, the nature of his business and the extent to which the appellant’s transactions were intermingled in his business. As the onus of proof of error in the assessements is on the appellant, she cannot discharge that onus without having called her agent as a witness.

Moreover, in view of the exhibits filed by the appellant there is some evidence against her, that is, there is some evidence that the appellant may have been engaged in an adventure or concern in the nature of trade or that her husband as an experienced business man may have been using his experience on her behalf. Hence in the absence of her agent being called she has failed to discharge the onus of proving an error.

Under the circumstances of this case the appellant has left open the possibility that she has been engaged in an adventure or concern in the nature of trade through the actions of her husband as her agent and in the absence of that evidence the appellant has not discharged the onus of proof. The appeal is therefore dismissed with costs.