Dubé,
J.:—In
a
nutshell,
the
issue
in
this
matter
is
whether
the
sum
of
$250,000
paid
to
the
plaintiff
was”
on
account
of
special
management
services"
provided
by
it,
as
assumed
by
the
defendant,
or
part
of
the
proceeds
of
disposition
of
its
shares
as
claimed
by
the
plaintiff.
The
key
transaction
is
a
memorandum
of
agreement
dated
March
17,1978,
wherein
Blake
Investments
Ltd.
(”
Blake"),
a
predecessor
of
the
plaintiff,
sold
its
25,000
class
A
shares
in
Taiga
Wood
Products
Ltd.
("Taiga")
back
to
Taiga
through
an
intermediary
company,
800
E.
7th
Ave.
Group
Ltd.
The
most
relevant
paragraphs
of
the
agreement
are
as
follows:
2.1
Subject
to
the
terms
and
conditions
hereinafter
set
forth,
the
Vendors
covenant
and
agree
on
the
Closing
Date
to
sell,
assign
and
transfer
to
the
Purchaser
and
the
Purchaser
covenants
and
agrees
to
purchase
from
the
Vendors
the
Shares
and
the
Debenture
and
all
other
rights
including
accrued
interest
on
the
Debenture
which
the
Vendors,
or
any
of
them,
now
or
at
any
time
prior
to
the
completion
of
the
sale
herein
provided,
may
have
against
the
Company,
for
a
purchase
price
(the"Purchase
Price”)
of:
a)
for
the
Shares—$1,000,000;
and
b)
$81,932.90
for
the
Debenture
and
all
other
rights;
2.2
The
Purchase
Price
shall
be
payable
as
follows:
a)
$100,000
on
the
execution
and
delivery
of
this
Agreement
by
way
of
a
deposit
to
be
held
in
trust
by
the
Vendors'
solicitors,
Owen,
Bird,
and
paid
to
the
Vendors
on
the
Closing
Date
unless
the
sale
herein
is
not
completed
by
reason
of
any
default
of
the
Vendors
under
any
of
their
obligations
herein
contained
in
which
event
it
will
be
returned
to
the
purchaser;
and
b)
the
balance
of
the
Purchase
Price
on
the
Closing
Date;
in
cash
or
by
negotiable
certified
cheque
drawn
on
a
chartered
Bank
of
Canada;
3.3
The
entering
into
of
this
Agreement
and
the
transactions
contemplated
hereby
will
not
result
in
the
violation
of
any
of
the
terms
and
provisions
of
any
indenture
or
other
agreement,
written
or
oral,
to
which
any
of
the
Vendors
may
be
a
party
or
whereunder
any
of
them
is
constituted;
3.4
This
Agreement
has
been
duly
executed
and
delivered
by
the
Vendors
and
is
a
valid
and
binding
obligation
of
the
Vendors
enforceable
in
accordance
with
its
terms;
4.3
The
Vendors
shall
deliver
to
the
Purchaser
at
the
Time
of
Closing:
a)
a
favourable
opinion
of
the
Vendors’
counsel,
in
form
satisfactory
to
counsel
for
the
Purchaser,
that:
c)
a
copy
of
a
special
resolution
of
Blake
certified
correct
by
the
secretary
thereof
approving
the
sale
of
the
Shares
and
the
Debenture
and
other
rights
hereunder;
8.2
Each
of
the
Vendors
and
Jones
shall
have
complied
with
all
covenants
and
agreements
herein
agreed
to
be
performed
or
caused
to
be
performed
by
them;
9.2
At
the
Time
of
Closing,
upon
fulfillment
of
all
of
the
conditions
set
out
in
Article
8
which
have
not
been
waived
in
writing
by
the
Purchaser:
b)
the
Vendors
shall
cause
the
"A"
Directors
to
sign
a
resolution
of
the
Directors
of
the
Company
approving
the
transfer
of
the
Shares
and
the
Debenture
from
Blake
to
the
Purchaser
or
its
nominee
or
nominees;
c)
the
Vendors
shall
deliver
or
shall
cause
to
be
delivered
to
the
Purchaser:
(i)
the
resignations
dated
as
of
the
Closing
Date
of
the
"A"
Directors
as
directors
and
officers
of
the
Company;
d)
Taiga
shall
pay
by
negotiable
certified
cheque
to
the
Vendors
the
sum
of
$250,000
on
account
of
special
management
services
which
the
Company
acknowledges
have
been
performed
by
the
Vendors
for
the
Company
and
which
has
already
been
authorized;
14.1
This
Agreement,
including
the
Schedules
hereof,
constitutes
the
entire
agreement
between
the
parties.
There
are
not
and
shall
not
be
any
verbal
statements,
representations,
warranties,
undertakings
or
agreements
between
the
parties
and
this
Agreement
may
not
be
amended
or
modified
in
any
respect
except
by
written
instrument
signed
by
the
parties.
[Emphasis
added.]
The
agreement
was
duly
signed
by
all
the
parties
involved
after
due
consultation
with
their
respective
accountants
and
legal
advisors.
All
the
consequential
steps
referred
to
in
the
agreement
were
subsequently
carried
out
by
the
parties
involved.
The
following
certified
cheques
were
issued
by
Taiga
to
the
order
of
Blake
in
accordance
with
paragraphs
2.1
and
2.2
of
the
agreement:
$81,932.90
for
the
Debenture,
$100,000
on
the
execution
of
the
agreement
and
$900,000,
the
balance
of
the
purchase
price
on
the
closing
date.
A
fourth
cheque
in
the
amount
of
$250,000
was
also
issued
in
accordance
with
paragraph
9.2(d)
aforementioned.
The
four
cheques
were
cashed
by
Blake.
In
accordance
with
paragraph
4.3
all
necessary
actions
and
proceedings,
corporate
or
other,
were
taken
to
authorize
the
vendors
to
enter
into
the
agreement.
It
is
to
be
noted
that
Blake's
solicitor
objected
to
the
first
two
drafts
of
the
agreement
mostly
on
account
of
possible
conflicts
with
the
British
Columbia
Company
Act
R.S.B.C.
1979,
c.
59
but
was
agreeable
to
the
final
version
of
the
agreement.
I
shall
return
to
that
later.
Pursuant
to
paragraph
4.3(c),
Blake
provided
a
copy
of
a
special
resolution
approving
the
sale
of
the
shares
and
the
debenture.
Each
of
the
vendors,
including
Richard
Jones,
complied
with
all
covenants
and
agreements
agreed
to
be
performed
as
provided
under
paragraph
8.2.
The
evidence
also
shows
that
the
parties
fulfilled
all
the
conditions
referred
to
in
paragraph
9.2,
including
the
resolutions,
the
resignations,
the
endorsement
of
share
certificates,
the
release
of
the
guarantees,
and
more
importantly,
as
mentioned
earlier,
Taiga
paid
by
negotiable
certified
cheque
to
Blake
the
amount
of
$250,000
stipulated
in
the
crucial
paragraph
9.2(d).
Finally,
the
agreement
was
neither
amended
nor
modified
in
any
respect
by
any
written
instrument
signed
by
the
parties,
as
provided
under
paragraph
14.1.
The
plaintiff
contends
that
it
is
the
substance
and
reality
of
the
transaction
that
should
be
considered,
rather
than
the
form
in
which
it
was
expressed
(The
Horse
Co-operative
Marketing
Association
v.
M.N.R.,
[1956]
C.T.C.
115,
56
D.T.C.
1064).
He
refers
to
Viscount
Simon's
statement
that
the
name
given
to
a
transaction
does
not
necessarily
decide
the
nature
of
the
transaction
and
the
question
always
is
the
real
character
of
the
payment
(C./.R.
v.
Wesleyan,
[1948]
1
All
E.R.
555,
30
T.C.
H
(H.L.)
at
pages
24-25).
He
submits
that,
on
the
evidence,
it
should
be
found
that
the
sum
of
$250,000
although
described
as
being
payable
“on
account
of
special
management
services"
performed
by
the
vendor
was
in
substance
additional
consideration
for
the
purchase
of
the
share.
He
claims
that
there
is
no
evidence
of
such
management
services
rendered
which
would
justify
the
payment
of
a
fee
of
$250,000.
However,
the
agreement
is
clear
and
unambiguous
on
its
face.
The
several
signatories
are
competent
and
experienced
businessmen.
The
main
spokesman
and
most
interested
person
on
behalf
of
the
plaintiff,
Richard
Jones,
applied
his
signature
on
the
agreement
three
times:
once
as
vice-president
of
Blake,
once
on
his
own
behalf
as
a
vendor,
and
again
as
a
party
of
the
third
part.
Mr.
Jones
appeared
as
the
key
witness
for
the
plaintiff.
Another
witness
for
the
plaintiff,
John
Mohammed,
also
signed
as
one
of
the
partners,
collectively
called“
the
Vendors".
The
other
two
partners
signing
as
vendors
were
Walter
A.
Dawson
and
Donald
J.
Gordon,
two
Fort
Nelson
businessmen
who
did
not
appear
as
witnesses.
Obviously,
the
plaintiff
has
a
very
heavy
onus
to
overcome.
Why
would
all
these
highly
responsible
businessmen
willingly
sign
a
document
which
does
not
reflect
the
true
nature
of
the
transaction?
It
is
trite
law
that
where
there
are
several
ways
of
completing
a
transaction
a
taxpayer
is
free
to
choose
the
one
that
will
minimize
his
tax
burden.
Clearly,
that
is
the
one
selected
in
this
instance
by
Taiga,
the
purchaser.
All
the
vendors,
after
extensive
bargaining,
endorsed
the
agreement.
The
vendors
now
seek
to
repudiate
their
endorsements
so
as
to
obtain
a
more
favourable
assessment
for
the
taxation
year
in
question.
As
my
former
colleague
Walsh,
J.
said
in
Lakeview
Garden
Corporation
v.
M.N.R.,
[1973]
C.T.C.
586,
73
D.T.C.
5437
(F.C.T.D.),
at
paages
591
(D.T.C.
5440):
"However,
as
has
frequently
been
pointed
out
it
is
not
what
the
taxpayer
might
have
done
to
minimize
taxation
that
determines
the
issue
but
the
taxpayer
must
abide
by
the
position
which
it
has
taken.”
In
a
very
recent
decision
of
the
Federal
Court
of
Appeal,
Canada
v.
Albert
D.
Friedberg,
[1992]
1
C.T.C.
1,
92
D.T.C.
6031,
the
first
issue
to
be
resolved
was
whether
two
collections
given
to
the
Royal
Ontario
Museum
were
"gifts"
so
as
to
qualify
as
deductions
under
paragraph
110(1)(b.1)
of
the
Income
Tax
Act.
This
paragraph
of
the
reasons
of
Linden,
J.A.
(at
pages
2-3
(D.T.C.
6032))
bears
reproduction.
In
tax
law,
form
matters.
A
mere
subjective
intention,
here
as
elsewhere
in
the
tax
field,
is
not
by
itself
sufficient
to
alter
the
characterization
of
a
transaction
for
tax
purposes.
If
a
taxpayer
arranges
his
affairs
in
certain
formal
ways,
enormous
tax
advantages
can
be
obtained,
even
though
the
main
reason
for
these
arrangements
may
be
to
save
tax
(see
Canada
v.
Irving
Oil
Ltd.,
[1991]
1
C.T.C.
350,
91
D.T.C.
5106,
per
Mahoney,
J.A.).
If
a
taxpayer
fails
to
take
the
correct
formal
steps,
however,
tax
may
have
to
be
paid.
If
this
were
not
so,
Revenue
Canada
and
the
courts
would
be
engaged
in
endless
exercises
to
determine
the
true
intentions
behind
certain
transactions.
Taxpayers
and
the
Crown
would
seekto
restructure
dealings
after
the
fact
so
as
to
take
advantage
of
the
tax
law
or
to
make
taxpayers
pay
tax
that
they
might
otherwise
not
have
to
pay.
While
evidence
of
intention
may
be
used
by
the
Courts
on
occasion
to
clarify
dealings,
it
is
rarely
determinative.
In
sum,
evidence
of
subjective
intention
cannot
be
used
to
"correct"
documents
which
clearly
point
in
a
particular
direction.
[Emphasis
added.]
As
Linden,
J.A.
said,
evidence
of
subjective
intention
to
correct
unambiguous
documents
is
"rarely
determinative".
As
mentioned
earlier,
in
the
case
at
bar,
evidence
was
heard.
Two
of
the
signatories,
Messrs.
Jones
and
Mohammed,
and
a
Vancouver
solicitor,
William
E.
Ireland,
testified
on
behalf
of
the
plaintiff.
The
National
Revenue
auditor,
Mr.
I.A.
Evelyn,
and
Patrick
E.
Hamill,
the
president
and
signatory
for
Taiga
gave
evidence
for
the
defendant.
The
evidence
as
a
whole
is
somewhat
complex
as
Messrs.
Jones
and
Hamill
both
described
in
detail
the
many
transactions
involving
Blake
and
the
subsequent
formation
of
Taiga
going
back
to
the
early
1970s.
However,
for
purposes
of
clarity
and
brevity,
the
most
relevant
facts
may
be
reduced
as
follows.
In
the
early
70s,
Mr.
Jones,
a
former
bank
manager
who
had
become
a
financial
consultant,
joined
with
Patrick
Ballantine,
a
venture
capital
investor.
In
March
1971
Blake
Investments
Ltd.
was
incorporated
under
the
British
Columbia
Company
Act.
All
issued
shares
were
owned
by
Mr.
Ballantine.
At
that
time
a
limited
partnership
known
as
Blake
Investments
&
Company
was
also
formed:
its
members
were
Patrick
Ballantine
85
per
cent,
Blake
Investments
Ltd.
5
per
cent
and,
at
a
later
date,
Richard
Jones
10
per
cent.
In
1973
the
partnership
of
Blake
Investments
&
Company
purchased
60
per
cent
of
the
shares
of
Taiga
for
a
total
consideration
of
$25,000.
In
January
1978,
Mr.
Ballantine
moved
to
Toronto
and
Mr.
Jones
made
an
offer
to
purchase
all
of
Mr.
Ballantine's
interests
in
the
partnership
and
all
of
the
shares
owned
by
Mr.
Ballantine
in
Blake
for
a
total
purchase
price
of
$325,000.
In
order
to
finance
the
purchase,
Mr.
Jones
formed
a
partnership
with
John
Mohammed
('/3
interest),
Donald
Gordon
C/6
interest),
Walter
Dawson
C/6
interest)
and
himself
C/3
interest).
These
facts
are
obtained,
not
only
from
the
evidence
of
Mr.
Jones,
but
also
from
a
letter
addressed
to
him
on
March
15,
1979,
by
his
own
solicitor
(of
the
firm
Thorsteinsson,
Mitchell,
Little,
O'Keefe
&
Davidson)
in
connection
with
Mr.
Jones’
tax
position
in
his
company.
The
letter
goes
on
to
say
that
on
March
17,
1978,
Blake
sold
the
shares
owned
by
it
in
Taiga
for
$1,000,000
to
a
company
known
as
800
E.
7th
Ave.
Group
Ltd.,
acting
as
a
nominee
for
Taiga.
In
addition
to
the
$1,000,000
received
by
Blake
for
the
sale
of
the
shares
in
Taiga,
"the
company
also
received
$250,000
from
Taiga
in
connection
with
management
services
to
be
rendered".
In
1978
Blake
changed
its
name
to
Inshore
Investments
Ltd.,
the
plaintiff
in
this
action.
In
the
course
of
its
operations
before
the
departure
of
Mr.
Ballantine
in
1978,
Blake
had
invested
venture
capital
in
several
small
companies
in
which
it
became
a
shareholder:
Creekhouse
Industries
Ltd.,
Millar
Building
Syndicate,
False
Creek
Marinas
Ltd.,
Pac-Com
Holdings
Ltd.,
Mantle
Industries
Ltd.
and,
of
course,
Taiga
Wood
Products
Ltd.
The
shares
in
Taiga
are
the
shares
that
the
Jones
group
(as
owners
of
Blake)
wanted
to
sell
back
to
Taiga.
Negotiations
began
between
the
vendors
and
the
purchasers,
the
two
main
actors
being
Mr.
Jones
and
Mr.
Tamill.
Both
men
proved
to
be
self-confident,
astute,
and
articulate
witnesses.
Taiga,
formed
in
1973,
was
to
be
a
wholesale
lumber
company
purchasing
from
B.C.
sawmills
and
selling
throughout
Canada
and
the
United
States
mostly
by
rail
cars.
The
original
agreement
was
that
Blake
would
buy
the
25,000
class
A
shares
at
$1
per
share
and
$325,000
in
debentures
payable
in
ten
years
but
redeemable
by
Taiga
after
five
years.
Mr.
Jones
is
adamant
that
no
discussion
of
management
fees
and
no
agreement
as
to
the
payment
of
management
fees
took
place
at
that
time
or
at
any
other
time
until
the
resale
of
the
shares
back
to
Taiga
in
1978.
Both
parties
obtained
expert
valuations
of
the
shares.
On
January
17,
1978,
Mr.
Jones
sent
a
circular
letter
to
all
Taiga
shareholders
offering
them
two
alternatives
for
the
sale
of
the
25,000
class
A
shares:
either
$1,250,000
payable
cash
before
February
28,
1978,
or
the
price
of
$1,500,000
payable
over
three
years.
On
March
1,
1978,
Mr.
Hamill
met
with
Messrs.
Dawson
and
Gordon
at
Fort
Nelson
and
signed
a
draft
handwritten
agreement
for
a
total
pay-out
of
$1,225,000,
including
a
“bonus”
to
Blake
of
"$225,000-$250,000".
Mr.
Jones
claims
that
his
two
partners
at
Fort
Nelson
were
not
authorized
to
sign
the
agreement.
However,
Mr.
Jones’
evidence
at
discovery
indicates
that
Messrs.
Dawson
and
Gordon
phoned
Messrs.
Jones
and
Mohammed
that
Mr.
Hamill
was
coming
up
to
Fort
Nelson
to
make
an
offer
and
Mr.
Mohammed
would
have
replied:
“Well,
get
what
you
can
in
writing
from
them.”
Asked
by
the
Court
why
he
signed
the
March
17,
1978
agreement
if
he
felt
that
the
sum
of
$250,000
was
part
and
parcel
of
the
purchase
price
of
the
shares
and
not
for
special
management
services
as
provided
under
subsection
9.2(d)
of
the
agreement,
Mr.
Jones
answered
that
time
was
of
the
essence
because
Taiga
was
about
to
redeem
the
debentures
thus
diluting
the
position
of
his
group.
As
far
as
he
was
concerned,
the
amount
of
$1,250,000
was
the
right
amount
for
the
re-purchase
of
the
shares,
whatever
description
was
put
on
it:
there
had
been
no
management
fees
involved.
In
his
evidence,
Mr.
Mohammed
acknowledged
that
he
received
a
fax
of
the
Fort
Nelson
handwritten
agreement
signed
by
Mr.
Dawson
but
said
that
he
informed
Mr.
Dawson
that
he
rejected
the
offer.
The
witness
met
with
Mr.
Hamill
who
mentioned
a
$250,000"
bonus”
(not
management
fees).
He
thought
that
this
description
was
for
Mr.
Hamill’s
own
purposes.
Thereafter,
Mr.
Mohammed
informed
Mr.
Jones
of
the
$250,000
bonus
and
the
latter
said:
"Let's
go".
Mr.
Hamill's
lawyer
then
prepared
the
March
17,
1978
agreement.
Mr.
Ireland,
of
the
Vancouver
firm
Owen,
Bird,
who
had
been
Mr.
Ballantine's
solicitor
since
1970,
signed
the
March
17,1978
Agreement
both
as
secretary
of
Blake
and
as
secretary
of
Taiga.
He
had
a
number
of
concerns
respecting
the
earlier
drafts
of
the
agreement,
more
particularly
because
a
numbered
company
was
involved
as
purchaser
and
that
section
125
of
the
British
Columbia
Company
Act
might
be
offended
with
regards
to
a
company's
assistance
to
its
shareholders.
He
objected
to
some
of
the
clauses
in
the
earlier
drafts,
but
accepted
the
final
one.
In
a
memo
he
prepared
the
next
day
for
one
of
his
legal
partners,
he
opined
that
the
payment
under
9.2(d)
"has
been
somewhat
contentious”.
He
considered
that
clause
"to
be
vain
tax-planning
reasons
by
Hamill".
In
his
view,
the
management
fee
was
unearned.
He
added:
“
Jones
appreciates
that
in
this
form
it
will
be
taxable
income
to
Blake
and
that
does
not
concern
him".
Patrick
E.
Hamill,
a
former
Noranda
general
manager,
decided
to
form
his
own
wholesale
lumber
company.
In
late
1972
he
met
with
Mr.
Jones
and-
worked
out
an
agreement
with
Blake
to
finance
Taiga.
In
1973
he
had
started
Taiga
directly
out
of
Blake's
offices
which
provided
the
secretariat.
Both
companies
employed
the
same
solicitor
and
the
same
accountant.
Eventually,
Taiga
did
extremely
well.
According
to
Mr.
Hamill,
Blake
did
indeed
provide
substantial
management
services.
Not
only
did
it
provide
a
working
place,
it
also
offered
its
staff
and
secretarial
services.
Mr.
Jones
was
extremely
helpful
with
reference
to
bank
negotiations.
Mr.
Hamill
consulted
Mr.
Jones
often.
The
latter
would
accompany
him
to
bank
meetings,
helped
him
to
establish
a
line
of
credit.
Mr.
Hamill
was
not
knowledgeable
in
bank
matters.
Mr.
Jones
accompanied
him
to
Calgary
as
a
helpful
consultant.
Mr.
Hamill
produced
as
an
exhibit
a
list
of
meetings
with
Blake
between
1973
and
1978,
mostly
with
Mr.
Jones.
He
listed
some
35
such
meetings
duly
recorded
during
that
period.
At
the
request
of
the
plaintiff,
he
produced
the
diaries
from
which
these
extracts
were
taken
and
stood
firm
upon
an
exhaustive
cross-examination
with
respect
to
many
of
the
entries.
According
to
the
witness,
the
practice
of
giving
bonuses
to
high
performers
is
common
in
the
wholesale
lumber
industry.
It
is
crystal
clear
from
Mr.
Hamill's
evidence,
oral
and
written,
that
Mr.
Jones
provided
considerable
assistance
to
him
over
the
years,
which
services
were
not
limited
to
financial
help.
The
Court
was
not
provided
with
any
technical
definition
of
the
words
"special
management
services",
but
it
is
undeniable
that
Blake
and
Mr.
Jones
provided
services
to
Mr.
Hamill
in
his
operation
of
Taiga,
over
and
above
the
strict
financing
of
the
company.
There
was
no
contract,
written
or
oral,
to
the
effect
that
Blake
or
Mr.
Jones
or
both
would
provide
such
administrative
services
and
clearly
no
legal
obligation
on
the
part
of
Taiga
to
pay
for
such
services.
Such
past
consideration
may
not
have
provided
the
basis
for
a
legal
contractual
obligation
on
the
part
of
Taiga
or
a
legal
contractual
right
on
the
part
of
Blake
before
the
parties
agreed
to
it.
However,
all
parties
concerned
did
agree
that
the
sum
of
$250,000
would
be
paid
on
account
of
such
services
“
which
the
Company
acknowledges
have
been
performed
by
the
Vendors
for
the
Company
and
which
has
already
been
authorized”.
The
Court
does
not
know
if
the
services
in
question
are
worth
$250,000,
but
that
is
the
amount
agreed
to
by
the
parties.
All
the
parties
involved
and
their
solicitors
and
accountants
knew
exactly
what
they
were
doing.
Obviously,
what
they
signed
provided
a
tax
advantage
to
Taiga,
but
that
was
a
transparent
consequence
of
the
written
agreement.
The
plaintiff
now
has
to
live
with
it.
It
may
not
repudiate
its
endorsement
so
as
to
obtain
a
more
favourable
assessment
for
the
taxation
year
in
question.
Consequently,
the
appeal
is
denied
with
costs.
Appeal
dismissed.