DUMOULIN,
J.:—This
is
an
appeal
from
a
decision
of
the
Income
Tax
Appeal
Board,
dated
September
20,
1962
(30
Tax
A.B.C.
8),
in
respect
of
the
assessment
for
taxation
year
1956,
of
one
Harry
Hortick,
of
4960
Glencairn
Avenue,
Montreal;
the
above-mentioned
decision
affirmed
a
re-assessment
by
the
Minister
of
National
Revenue
which
dealt
with
a
$450,000
real
estate
transaction
as
income
for
the
pertinent
year
and
not
as
a
realization
of
a
capital
asset.
At
the
start
of
the
hearing,
it
was
agreed
by
all
parties
that
the
two
other
cognate
appeals,
Harry
Shafter
v.
M.N.R.
(p.
163)
and
Charles
Shafter
v.
M.N.R.
(p.
161),
should
also
be
decided
according
to
the
evidence
presently
adduced.
The
facts
of
the
case
offer
no
great
complexity.
Mr.
Harry
Hortick,
the
appellant,
is
president
of
the
Harry
Hortick
Machinery
&
Supply
Co.,
dealing
in
machinery
and
machinery
supplies.
At
no
time
the
requirements
of
his
business
needed
any
larger
space
than
7,500
square
feet.
In
1956,
for
instance,
the
appellant’s
commercial
premises
were
located
on
Notre
Dame
St.,
with
a
floor
space
of
only
600
square
feet,
plus
some
open
air
storage
in
a
neighbouring
yard.
Harry
Hortick
was
not
the
owner
but
the
lessee
of
his
office
and
storage
facilities.
Mr.
Hortick,
in
his
evidence,
relates
that
during
1956,
having
purchased
a
certain
quantity
of
material
from
B.S.A.
(Birmingham
Small
Arms)
Company,
he
came
in
touch
with
one
Victor
Bull,
then
manager
of
this
firm’s
Montreal
branch,
who
inquired
whether
or
not
he
would
be
interested
in
buying
their
stock
of
machinery
and
also
the
entire
B.S.A.
property
consisting
of
approximately
15,000
feet
of
factory
space,
2,000
feet
of
office
space,
a
railway
siding,
30,000
feet
of
paved
exterior
space
and
300,000
feet
of
vacant
land,
for
a
total
price
of
$275,000.
Mr.
Bull
told
Hortick
that
B.S.A.
had
decided
to
give
up
their
business
pursuits
at
that
particular
place
and
were,
therefore,
desirous
of
liquidating
their
assets,
moveable
and
immoveable.
Hortick
declined
the
suggestion
but,
some
time
after,
he
was
asked
to
quote
a
price
and
agreed
to
offer
$55,000
for
the
stock
in
trade
and
$100,000
for
all
of
the
real
estate,
which
submissions,
in
turn,
were
refused
by
the
B.S.A.
people.
Eventually,
Harry
Hortick
tendered
a
price
of
$120,000
for
the
land
and
$55,000
for
the
machinery
and
this
met
the
approval
of
the
company.
On
October
6,
1956,
B.S.A.’s
acceptance
was
evidenced
in
a
letter
also
acknowledging
receipt
from
Harry
Hortick
Machinery
&
Supply
Co.,
of
a
$5,000
cheque
as
a
guarantee
of
good
faith
and
a
bond
of
sale
(cf.
Ex.
A-2).
I
may
note
immediately
that
the
appellant,
in
his
testimony,
emphatically
stated
his
intention
of
entering
into
this
transaction
merely
as
a
long-term
investment,
proposing,
at
least
so
he
said,
to
install
his
office
in
part
of
the
B.S.A.
buildings
and
to
rent
the
residue
accommodation
both
inside
and
outside
on
the
300,000
feet
of
land.
Until
then,
Hortick
had
occupied
an
office
of
600
square
feet
and
concluded
arrangements
with
the
J.
B.
Baillargeon
Express
Co.,
for
storage
up
to
a
limit
of
15,000
square
feet,
a
maximum
capacity
which
was
never
attained.
Hortick’s
only
concern
was,
next,
to
devise
ways
and
means
of
obtaining
indispensable
financial
assistance,
since
he
practi-
cally
possessed
no
monetary
means.
In
his
quest
for
money,
he
first
aproached
one
of
his
brothers-in-law,
Mr.
Jack
Cohen,
who
was
interested
and,
with
the
prospective
borrower,
inspected
the
B.S.A.
property.
Shortly
after
this
initial
talk,
Mr.
Cohen
was
confronted
with
the
obligation
of
moving
his
offices
elsewhere,
having
received
notification
that
the
expiring
lease
would
not
be
renewed.
He
still
would
have
advanced
up
to
$150,000
or
$160,000
on
condition
that
the
land
be
sold
over
to
his
own
company,
a
proposal
to
which
Hortick
could
not
accede.
Subsequently,
the
appellant
met
one
of
his
clients,
Meyer
Levine,
suggesting
a
partnership
on
an
equal
50-50
footing.
Levine
showed
interest
in
the
proposal,
although
he
did
not
require
more
than
some
8,000
square
feet
for
storage
purposes,
but
insisted
on
Hortick
investing
dollar
for
dollar
with
him,
a
requirement
totally
impossible
in
Hortick’s
actual
financial
straits.
The
people
subsequently
contacted
by
the
appellant
were
two
well-to-do
brothers,
Messrs.
Charles
and
Harry
Shafter,
dealers
in
heating
supplies.
Four
or
five
months
before
the
date
of
purchase,
November
8,
1956,
Charles
Shafter
had
carefully
looked
over
the
B.S.A.
property
with
the
view
of
installing
his
business
there.
A
couple
of
years
previously
the
Shafters’
place
of
business
on
Dorchester
Blvd,
had
been
expropriated
by
the
City
of
Montreal
and
they
were
faced
with
the
necessity
of
moving
to
more
spacious
quarters
than
their
actual
ones.
The
interior
storage
space
needed
amounted
to
40,000
or
50,000
square
feet
and
approximately
100,000
feet
of
outdoor
storage.
Mr.
Charles
Shafter,
who
testified
at
some
length,
stated
that
he
and
his
brother
were
willing
to
obtain
the
open
space
at
the
B.S.A.
property
and
eventually
agreed
on
a
loan
to
Hortick
of
$160,000
on
a
50-50
ownership
basis.
This
sum
included
both
machinery
valued
by
Hortick
at
$55,000
and
the
land
set
at
$120,000.
The
residue,
$15,000,
was
provided
by
Hortick
personally,
this
being
his
only
contribution
in
the
deal
.
At
this
point,
some
contradiction
between
Shafter’s
and
Hortick’s
evidence
crept
in,
but
can
nowise
influence
the
issue.
According
to
Shafter,
the
appellant’s
only
objective
was
the
buildings,
for
which
the
Shafter
brothers
wanted
a
monthly
rental
of
$3,000,
much
over
and
above
Hortick’s
offer
of
$1,000.
44
And
therefore’’,
continues
Mr.
Shafter,
‘‘a
certain
degree
of
friction
between
ourselves
could
not
be
avoided’’.
Hortick,
in
his
testimony,
had
denied
the
intrusion
of
any
friction
whatsoever
and
insisted
upon
the
smooth
unity
of
views
between
himself
and
the
Shafters.
The
deed
of
sale
entered
into
with
B.S.A.
Ltd.
apportioned
the
interests
in
the
property
as
follows:
Charles
Shafter
30%,
Harry
Shafter
20%,
and
Harry
Hortick
50%,
and
bears
date
November
8,
1956
(Ex.
A-3).
Shortly
after,
the
appellant
took
possession
of
the
buildings
and,
wishing
to
dispose
of
some
machinery,
telephoned
one
of
the
superintendents
of
the
Peacock
Co.
Ltd.
in
Montreal,
Mr.
Fred
MacKay,
who
hastened
to
meet
him.
Called
as
a
witness,
MacKay
stated
that
in
the
course
of
their
conversation
Hortick
told
him
the
plant
was
for
sale.
Mr.
MacKay
immediately
relayed
this
information
to
the
president
of
his
company,
Mr.
William
Ferguson,
adding
that
a
large
quantity
of
machinery
and
tools
was
also
up
for
sale.
William
Ferguson,
also
a
witness,
declared
that
Peacock
Ltd.
hoped
to
expand
its
business
facilities,
especially
in
the
Ville
La
Salle
area.
‘‘That
same
afternoon’’
(November
14,
1956)
continues
this
witness,
‘‘Mr.
Lucas
and
1
went
on
the
grounds.
I
asked
Mr.
Hortick
if
he
would
consider
selling
the
property
;
this
gentleman
replied
that,
first
of
all,
he
must
consult
his
partners.
1
arranged
an
interview
for
10
o’clock
the
following
morning
at
my
office.
Charles
Shafter
and
Harry
Hortick
duly
showed
up
the
next
day.
I
consulted
with
the
vice
president
of
Peacock
Bros.,
Mr.
Lucas,
and
we
took
the
initiative
of
inquiring
about
a
price
for
the
entire
B.S.A.
property,
land
and
buildings.
Shafter
and
Hortick
spoke
of
a
price
of
$500,000.
A
discussion
ensued
and
this
was
reduced
to
$450,000.
On
behalf
of
Peacock
Ltd.,
Lucas
and
myself
accepted
;
written
offers
and
acceptances
were
at
once
prepared.’’
Mr.
Ferguson,
in
cross-examination,
remained
unshaken
in
his
statement
that
‘‘my
company’’
(Peacock
Ltd.)
‘‘had
no
intention
whatever
of
renting
space
so
that
any
mention
of
this
would
have
quickly
been
passed
off.
I
opened
the
conversation
with
Hortick
on
the
possibility
of
buying”.
Mr.
Frank
Lucas,
the
next
witness,
corroborates
Mr.
Ferguson
on
the
point
that
their
only
motive
for
visiting
the
B.S.A.
establishment
was
an
eventual
purchase
of
the
entire
property.
Lucas
goes
on
to
say:
“At
the
November
15
meeting
in
Mr.
Ferguson’s
bureau,
I,
at
once,
told
our
two
visitors
that
our
company
was
decidedly
concerned
in
buying
the
B.S.A.
holdings
and
not
at
all
in
machine
tools.’’
This
same
witness
adds
that
at
the
first
meeting,
November
14,
Mr.
Hortick
said
‘‘
Would
you
be
interested
to
rent
the
property?”.
The
conclusion
of
this
bargaining
was
promptly
reached
‘‘on
or
about
December
14,
1956,
when
the
aforesaid
property
was
sold
to
Peacock
Bros.
Ltd.
for
a
price
of
$450,000’’,
a
profit
of
$330,000
(the
tools
and
machinery
estimated
at
$55,000
were
retained
by
Hortick)
realized
in
the
short
period
of
some
five
weeks,
November
8-December
14
(cf.
Notice
of
Appeal,
para.
7).
The
problem
consists
in
elucidating
the
true
nature
of
this
transaction:
enhancement
of
a
capital
asset
or
an
adventure
in
the
nature
of
trade,
or
a
scheme
for
profit
making,
as
envisaged
by
Section
139(1)
(e)
of
the
Income
Tax
Act,
R.S.C.
195
2,
c.
148.
Insofar
as
Hortick
is
concerned,
two
decisive
factors
are
ever
present
throughout
the
deal
:
(a)
his
lack
of
available
money,
making
him
dependent
upon
interest
bearing
loans,
imperatively
impelled
him
to
seek
for
the
quickest
possible
way
of
reaping
a
profit
that
payment
of
interest,
civic
taxes
and
sundry
other
obligations
of
proprietorship,
would
whittle
away
as
time
passed
on;
(b)
the
unbridgeable
vacuum
between
the
requirements
of
his
trade,
namely,
600
feet
of
office
floor
plus
an
un
reached
maximum
of
15,000
feet
of
storage
allotted
to
him
at
Baillargeon
Express
Ltd.,
and
the
much
more
considerable
interior
and
exterior
space
afforded
by
the
B.S.A.
offices,
and
vacant
land,
previously
mentioned
in
these
notes.
It
is
unnecessary
to
discuss
at
length
Hortick’s
declaration
of
intent.
A
long
list
of
precedents
in
the
matter
of
income
tax
cases
prove
that
assertions
of
this
sort
are
given
but
slight
importance,
especially
so
when,
as
presently,
the
facts
materially
contradict
such
a
statement.
Hortick
may
have
entertained
the
notion
of
a
long-term
investment
upon
entering
into
this
bargain.
and
shortly
afterwards
changed
his
mind
at
the
alluring
prospect
of
the
huge
$330,000
gain,
thereby
fully
agreeing
to
pursue
a
profit-making
scheme.
For
the
reasons
above,
the
Court
is
of
opinion
that
Hortick’s
participation
in
the
matter
at
bar
falls
in
the
category
of
financial
ventures
foreseen
by
Section
139(1)
(e)
of
the
Act
and
that
his
appeal
from
the
decision
of
the
Income
Tax
Appeal
Board,
dated
September
20,
1962,
in
respect
of
taxation
year
1956,
should
be
dismissed.
The
respondent
is
entitled
to
obtain’
all
costs
after
taxation.
Judgment
accordingly.,
Email this Content