Furukawa v. R., 99 DTC 474, [1999] 2 CTC 2095 (TCC), aff'd 2000 DTC 6669 (FCA)

Rip T.C.J.:

The appellant Robert B. Furukawa appealed his assessment for 1992 in which the Minister of National Revenue (“Minister”) disallowed a deduction of $7,500 in respect of a purported Canadian Exploration Expense (“CEE”). [1] The appeal was heard on March 13, 1996 by my late colleague Sobier, J.T.C.C. and judgment was issued on April 17, 1996 allowing the appeal. The case is reported at [1996] 2 C.T.C. 2641. Judge Sobier held that certain shares were not “prescribed shares” under subparagraph 6202.1 (2)(b)(i) of the Income Tax Regulations (“Regulations”) and therefore were flow-through shares within the meaning of paragraph 66(15)(J. 1) of the Income Tax Act (“Act”). The Crown appealed the judgment to the Federal Court of Appeal which, on January 20, 1997, allowed the appeal, set aside the judgment and referred the matter back

to the Tax Court Judge for a continuation of the trial on the basis that he hears and determines the issue of whether the shares in question are “prescribed shares” under subsection 6202.1(1) of the Regulations....

The Court of Appeal permitted Mr. Furukawa, at his election, to adduce any additional evidence in supplementation of the facts agreed to prior to trial. The following are the Agreed Statement of Facts: [2]

1. The Appellant is an individual residing at 8315 Hawkview Manor Link, Calgary, Alberta T3G 3E6.

2. Provident Ventures Corporation (“Provident”) is a corporation incorporated in the province of Alberta and governed by the Alberta Business Corporations Act. Provident was listed on the Alberta Stock exchange in 1989 and ... exhibit “A” is a list of the trading activity for the 1991 calendar year in the shares of the company. The Appellant was a director and officer of Provident since its inception in the late 1980’s but ceased to be a director on January 26, 1994.

3. Bearcat Explorations Ltd. (“Bearcat”) is a corporation incorporated in the province of Alberta and governed by the Alberta Business Corporations Act. The Appellant has been a director of Bearcat since the late 1980’s.

4. The Appellant became a shareholder in Bearcat in the late 1980’s. The Appellant’s holdings in Bearcat were as follows:

Prior to May 1990	58,500 common shares
At June 199]	75,500 common shares
At May 1992	75,500 common shares
At June 1993	75,500 common shares
At August 1994	94,374 common shares
	4,350 preferred shares
At June 1995	137,874 common shares

5. Lumberton Mines Limited (“Lumberton”) is a corporation incorporated in the province of Alberta and governed by the Alberta Business Corporations Act and has at all material times been a subsidiary of Bearcat. The Appellant became a director of Lumberton in the late 1980’s. ...Exhibit “B” (is) the financial statements for Lumberton’s year ended November 30, 1992 together with comparable figures for the year ended November 30, 1991.

6. In early 1991, Lumberton prepared a “Resume” outlining the terms of a $3,000,000 private placement financing (“the private placement financing”) which offered investors the opportunity to participate in the financing of certain oil and gas exploration activities. Investors were offered the opportunity to participate in the venture by acquiring “unit interests”. The particulars of the unit participation are outlined in the Resume attached herewith as Exhibit “C”. [See Appendix to these reasons]

7. In 1991 Lumberton sold units to various subscribers including the Appellant who purchased a one-quarter unit for $7,500. The Appellant acquired his one-quarter unit as part of a joint purchase together with Messrs. Zawatski, Neustater and Maier, wherein the group jointly acquired two units which units were held in trust by Mr. Maier.

8. ...Exhibit “D” is a photocopy of the Appellant’s cheque for $22,500 in respect of his one-quarter unit (for $7,500) and his spouse’s purchase of one unit (for $15,000).

9. ...Exhibit “E” is a copy of the Appellant’s receipt, dated March 26, 1991, in respect of the purchase and a second “Amended Receipt” received under cover of letter dated February 26, 1992. [See Appendix to these reasons]

10. As part of the purchase of the units, Lumberton agreed to issue to the Appellant “certain flow-through shares”^ [3] of Lumberton and “renounce” in favour of the Appellant pursuant to paragraph 66(12.6) of the Income Tax Act (Canada) (the “Ac/”), Canadian Exploration Expense (“CEE”) in the amount equal to the consideration of $7,500. ...Exhibit “F” is a photocopy of the share certificate of Lumberton issued to the Appellant and ... Exhibit “G” (is) the “flow-through share issuance agreement”.^ [4]

1 l. Lumberton allocated the entire purchase price from the sale of the units

to the Lumberton Shares and spent all of the proceeds from the sale of the units in carrying out CEE and renounced all of the CEE to the investors including the Appellant.

12. With respect to the other items that Lumberton undertook, in the Resume, to provide to the investors:

(a) To date, the Palmer Golf Course had not been built and Provident has changed its business to marketing bottled water;

(b) He relinquished his right to be assigned an interest in the pipeline^ [5] to Lumberton (at no cost) as part of the share exchange outlined in paragraph 17 infra.

(c) The Appellant never received the playing privilege at the Palmer Golf Course or the option to the lot and he relinquished his right to receive these items to Lumberton at no cost as part of the share exchange outlined in paragraph 17 infra.

(d) The Appellant received 125 shares of Provident on or about August 10, 1995. ...Exhibit “H” is a copy of the cover letter [See Appendix to the reasons] and share certificate for Provident.

13. Revenue Canada has not verified the “attributed values” in the Resume. It is neither the Appellant’s or the Respondent’s position that the “attributed values” on the Resume are correct.

14. By way of a letter dated May 15, 1992 from Lumberton to the Appellant, the Appellant received a cheque in the amount of $7.81 representing a portion of the Grassy pipeline unit tariff revenue for the months of January, February and March of 1992. ...Exhibit “I” is a copy of that letter. From time to time the Appellant received further amounts in respect of Grassy Hill Pipeline revenues. The total amount received by the Appellant from the time that he acquired the Lumberton shares until the time that he it [sic] relinquished his right to the [sic] receive an interest in the pipeline (May 4, 1995) was slightly in excess of $125.00.

15. In 199] and 1992 Lumberton was subject to an investigation by the Alberta Securities Commission (“ASC”) for alleged breaches of the Securities Act/Regulations/policies resulting from the private placement financing. The breaches in question, which Lumberton maintained were inadvertent were as follows:

(i) inaccurate representations made to subscribers concerning the interests making up the private placement units which Lumberton had not earned and/or was not in a position to deliver at the time of the offering;

(ii) representations made to the subscribers concerning the obtaining of a listing of Lumberton on the Alberta Stock Exchange;

(iii) reliance for private placements on a statutory exemption from prospectus and registration requirements which resulted in trades to purchasers in excess of the maximum number (50) prescribed for this exemption; and

(iv) late filing of certain forms for two private placements.

16. The dispute between the ACS and Lumberton was settled and as part of the settlement Lumberton was required to make an offer of rescission to subscribers who participated in the 1991 placement and pursuant to an offer dated December 3, 1992 Lumberton offered to buy back the Appellant’s shares, and ... Exhibit “J” is a copy of that offer. The Appellant did not accept the said offer.

17. By way of a letter dated April 25, 1994, Bearcat offered inter alia to exchange the shares of Lumberton held by the investors for shares of Bearcat. The Appellant accepted Bearcat’s offer and signed a Release and Discharge dated May 5, 1994, in respect of this offer. A copy of that Release and Discharge is ... Exhibit “K”.

18. By way of a letter dated July 11, 1994 the Appellant received a share certificate for his Bearcat shares. ...Exhibit “L” is a copy of the letter and the Appellant’s share certificate for the Bearcat shares.

19. In computing his income for the 1992 taxation year, the Appellant claimed $7,500 as a deduction from income with respect to CEE renounced to the Appellant by Lumberton.

20. By way of a Notice of Reassessment dated March 24, 1994, the Minister disallowed the deduction in the amount of $7,500 for the Appellant’s 1992 taxation year in respect of CEE renounced to the Appellant by Lumberton. ...Exhibit “M” is a copy of the Notice of Reassessment.

21. The Appellant filed a Notice of Objection to the Reassessment within the time permitted by the Act and the Minister confirmed the Reassessment on January 24, 1995. ...Exhibit “N” is a copy of the Notice of Objection and ... Exhibit “O” is a copy of the Notice of Confirmation.

The only additional evidence adduced at the continuation of the trial was the reading of portions of the examination for discovery of Mr. Purdy, the Revenue Canada assessor.

Counsel agree that the relevant provisions of subsection 6202.1(1) of the Regulations are subparagraphs (£>)(iii) and (iv), which read as follows: 6202 1(1) For the purposes of paragraph 66( 15)(J. 1 ) of the Act, a new share of the capital stock of a corporation is a prescribed share if, at the time it is issued,

(b) any person or partnership has, either absolutely or contingently, an obligation (other than an excluded obligation in relation to the share)

(iii) to transfer property, or

(iv) otherwise to confer a benefit by any means whatever, including the payment of a dividend,

either immediately or in the future, that may reasonably be considered to be, directly or indirectly, a repayment or return by the corporation or a specified person in relation to the corporation of all or part of the consideration for which the share was issued or for which a partnership interest was issued in a partnership that acquires the share;

The status of the flow-through shares under section 6202 of the Regulations was discussed by Bonner, J.T.C.C. in Esplen v. R.. [6] He stated, at p. 1276, that:

... The statutory provisions now in question were enacted with a view to encouraging investment in the exploration and development of mineral resources. The statutory scheme permits an investor to subscribe for flow-through shares of a corporation. It was intended that the subscription funds be used by the corporation for exploration, that the corporation’s exploration expenses be renounced to the investor and that the exploration expenses be treated for purposes of the Act as the expenses of the investor. Plainly the objective of the scheme would not be attained if the subscription price were diverted from exploration and used to make provision for some sort of arrangement designed to permit the investor to recover some or all of his money in the event that the financial performance of the share was disappointing....

Judge Bonner’s comments are in keeping with the submission of the Minister that the purpose underlying subsection 6202.1(1) of the Regulations is to ensure that the monies invested in flow-through shares are actually used as risk capital in the resource industry. Prescribed shares are excluded from the definition of flow-through shares for the purposes of paragraph 66(15)(d. 1 ) of the Act.

In order to qualify as a prescribed share pursuant to subparagraph 6202.1 (l)(/?)(iii) or (iv) of the Regulations several requirements must be met: at the time the shares are issued a person must have an absolute or contingent obligation to transfer property or confer a benefit on the taxpayer, the transfer of property or conferral of a benefit may be immediate or may be performed in the future, and the transfer of property or conferral of a benefit must reasonably be considered a direct or indirect repayment or return of the consideration paid for the shares issued.

The first matter before me is to determine whether Lumberton had an absolute or contingent obligation to transfer property or confer a benefit upon Mr. Furukawa at the time the Lumberton shares were issued. The Minister submitted that the items outlined in the Resume included as Exhibit “C” to the Agreed Statement of Facts (“Resume”) represent such obligations. At times during the trial it was not clear what unit package the appellant acquired and, therefore, what additional property he was to receive with the shares. [7] However, a review of the Agreed Statement of Facts and the evidence adduced at both parts of the trial indicate that the appellant acquired a one-quarter interest of a single unit purchased in conjunction with a group of investors who together purchased two units which is sometimes referred to as a “double unit”. The attachments in issue are those associated with a double-unit purchase. This is indicated in a letter to the ap- pellant from Lumberton, dated August 10, 1995, that in order to resolve an inequity between investors who purchased one unit and those who purchased two, Lumberton would be issuing 1,000 common shares of Provident to investors who purchased two units. Consequently, the appellant received a certificate for 125 Provident shares (1,000 shares/2 x 25 per cent).

The Resume indicates that investors could subscribe for one unit of 60,000 common voting shares or two-units of 120,000 common voting shares. Upon making such an acquisition, the Resume indicates that the investor would receive additional attachments, two lifetime playing privileges at Palmer Bar Golf Course, once it became operational; one one-quarter acre building lot at Palmer Bar Golf Course, once it became operational; and a 1.4 per cent interest in Grassy Pipeline.

The Resume also provides that new shareholders were to “receive additionally at no cost out of the asset holdings of Lumberton Mines Limited...” the attachments described above. It therefore appears that the shareholder was acquiring an investment in 120,000 common voting shares of Lumberton and that the additional attachments were merely add-ons.

But are the attachments an obligation? The appellant has argued that they were not and stated that he did not receive many of the promised items and those he did receive had little intrinsic value. The fact that the appellant did not receive all of these items is irrelevant to the analysis because subsection 6202.1(1)(b) of the Regulations provides that the person must have an obligation existing at the time the Lumberton shares were issued. And the obligation may be absolutely or contingent, immediate or in the future. The Resume is undoubtedly an offer that was intended to cause investors to act in reliance on the representations made therein. The Alberta Securities Commission was apparently of this view since it found that Lumberton had breached the Province’s Securities legislation and made inaccurate representations to investors. The legal obligation created by the Resume is further supported by the receipts issued by Lumberton, which confirms that the appellant would receive the attachments.

Appellant’s counsel submitted that Mr. Furukawa did not think he was entitled to receive the benefits outlined in the Resume because he did not purchase a whole unit. I do not agree. The appellant knew that he was part of a group purchasing two units. He knew the group may receive the attachments associated with a double unit purchase and that he would receive his proportionate share of the attachments. Although he did not enter the trans- action for the purpose of acquiring the attachments, he hoped to receive, if he did not reasonably expect to do so, his share of the attachments.

I do not give much weight to the appellant’s argument that he did not receive some of the attachments such as the golf course lot or the lifetime playing privileges. These were undoubtedly contingent upon the completion of the golf course and hence, were intended to be conferred in the future. Subsection 6202.1(1)(b) of the Regulations provides that the obligation may be contingent and that the transfer of property or conferral of a benefit may occur in the future. The fact that the contingent obligation was only that, does not bring the appellant outside the application of the regulation.

Hence, in my view, there was an obligation to transfer property to the appellant at the time the Lumberton shares were issued. I must now decide whether this was a repayment or return of all or part of the consideration paid by the appellant for the shares.

In his reasons for judgment, Sobier, J.T.C.C. held that the attachments were “sweeteners”, used to market the flow-through shares. Indeed the auditor for Revenue Canada considered them such. Appellant’s counsel argued that this conclusion foreclosed the Minister’s argument that they were a return of consideration. This is not necessarily so. Depending on circumstances a sweetener may or may not be a return of consideration. For example, when a manufacturer offers a rebate to the end consumer of its product upon the consumer mailing a coupon to the manufacturer or its agent indicating he or she purchased the product, the manufacturer is offering a sweetener to its potential customers to promote the product. To the consumer the rebate is a return of a portion of the purchase price; that is, a return of the consideration he or she paid for the product.

The parties acknowledge that the full amount invested by Mr. Furukawa and received by Lumberton on the issuance of the shares was a CEE. This being so, these funds could not be returned to the shareholders. As the Minister’s counsel argued, the attachments would have to be paid for by Lumberton out of its profits or assets and, therefore, the attachments would constitute an indirect return of the consideration. He submitted that it did not matter that the specific funds received as consideration were used to make the repayment as long as the company’s assets or profits were depleted as a result of the repayment. This is true but it is not determinative of the issue before me given all the circumstances surrounding the issuance of the shares and the attachments.

According to paragraph 6202.1(1)(b) of the Regulations the transfer of property or conferral of a benefit must “reasonably” be considered a return of the consideration paid. The term “reasonably” implies an objective, rather than a subjective, examination of the facts. One must ask whether a reasonable person appraised of the circumstances would think that the attachments were a return of the consideration paid for the shares. Although Lumberton was legally obliged to provide these attachments, an examination of its financial statements clearly indicates that Lumberton was not in a position to fulfill the obligation at that time or in the near or reasonable future. Hence, a reasonable person would probably attach little significance in the whole scheme of things to the attachments. Realistically, the person would have very little expectation of getting any of the sweeteners. Further, as Sobier, J.T.C.C. found, the benefits had little intrinsic value. Although Judge Sobier reached his conclusion in considering subsection 6202.1(2) of the Regulations, it is equally applicable to the issue before me. The attachments associated with the Lumberton shares, while they are owed to the appellant, did not appear to influence the appellant’s decision to purchase the shares and cannot reasonably be considered a return of the consideration of the sum of $7,500 paid for the shares. The Lumberton shares are not prescribed shares within the definition of subparagraph 6202.1 ( 1 )0)(iii) or (iv) of the Regulations. The appeal is allowed with costs.

During the continuation of the appeal, appellant’s counsel submitted that the Deputy Attorney General did not allege in the Reply to the Notice of Appeal that in reassessing the appellant the Minister assumed that the property transferred or benefit conferred was a repayment or return to the appellant of the consideration he paid for the Lumberton shares. The reason for this omission, he concluded, was because the Minister did not make that assumption. The Minister did not assess the appellant on the basis that the transfer of the property or the conferral of the benefit was a repayment or return of the consideration. This was the conclusion of Sobier, J.T.C.C. The assessment before the Court, counsel stated, was clearly based on the premise that the mere transfer of property or the conferral of the benefit makes shares prescribed shares and that the property or benefit was a marketing feature.

Counsel referred to the recent decision of the Supreme Court of Canada in Continental Bank of Canada v. R., [1998] 4 C.T.C. 77 (S.C.C.)which held that the Deputy Attorney General was not entitled to assert an alterna- live basis to sustain an assessment being litigated. As McLachlin, J., declared:

The Minister should not be allowed to advance a new basis for reassessment after the limitation period [subsection 152(4)] has expired.

(See also Bastarache, J.’s opinion shared by McLachlin, J.)

Appellant’s counsel, therefore, asked me to ignore the claim by the Deputy Attorney General that the transfer of property or conferral of the benefit was a repayment or return of the consideration since that was not the basis of the assessment. Since I have considered the issue as directed by the Federal Court of Appeal and since the appellant is successful, it is not necessary at this time to consider counsel’s submission with respect to Continental Bank, supra. I am satisfied that I could give, and have given, effect to the direction of the Federal Court of Appeal. [8] There is no need to call any new evidence to decide whether the Minister relied on subsection 6202.1(1) of the Regulations as the basis of the assessment.

Appeal allowed.

Appendix

Appendix to Reasons for Judgment

EXHIBIT "C" to Agreed Statement of Facts

RESUME

LUMBERTON MINES LIMITED 100-UNITS

TOTAL $3 MILLION PRIVATE PLACEMENT FINANCING

COMPRISED AS FOLLOWS:

COST

Lumberton - resource exploration flow-through

6,000,000 common voting shares @ $0.50 per share

Total Cost		$3,000,000
	MAXIMUM TOTAL	$3,000,000
UNIT PARTICIPATION BREAKDOWN
Lumberton - Resource Exploration flow-through
to be expended by November 1, 1991.
(see Use of Maximum Proceeds attached)
60,000 common voting shares of Lumberton	30,000
1) Mining Exploration	$ 5,000
2) Oil & Gas Exploration	25,000
	$ 30,000
TOTAL COST PER ONE UNIT		$ 30,000

NEW SHAREHOLDER TO RECEIVE ADDITIONALLY AT NO COST OUT OF ASSET HOLDINGS OF LUMBERTON MINES LIMITED, THE FOLLOWING:

1. ONE UNIT ACQUISITION

1. Lifetime playing privileges at Palmer Bar Golf Course, when completed.

2. 5,000 common voting shares of Provident Ventures Corporation out of share position held by Lumberton.

Exhibit "C"

3. First option to purchase one one-quarter acre building lot at Palmer Bar Golf Course development, when completed, such option to be exercised at then current specified price, within 30 days from receipt, by shareholder, of notice of regulatory body subdivision related approval.

2. TWO UNIT ACOUISITION

1. Two lifetime playing privileges at Palmer Bar Golf Course, when completed.

2. One one-quarter acre building lot at Palmer Bar Golf Course development, when completed. Maximum $10,000 lot servicing charge to be borne by lot owner at appropriate future date.

1991 MINIMUM INVESTOR BENEFIT

A. ONE UNIT PARTICIPATION

		TAXABLE INCOME		ESTIMATED TAX	ATTRIBUTED
		SHELTER AMOUNT		SAVINGS AMOUNT	VALUE
1.	100% write-off
	(maximum tax rate)	$ 30,000.00	$ 15,000.00
2.	RRSP (self-administered
	re maximum rate)	$ 11,500 00	$ 5,750-00
		$41,500.00	$ 20,750-00		$ 20,750.00
3.	60,000 common voting shares
	Lumberton Mines Limited				$ 30,000.00
4.	one lifetime playing privilege -
	Palmer Bar Golf Course				$ 10,000.00*
5.	5,000 common voting shares
	Provident Ventures Corporation
	(no cost - $0.30/share value)
	(Palmer Bar Golf Course)				$ 1,500.00
6.	First option to purchase one
	one-quarter acre building lot at
	Palmer Bar Golf Course development				$	—
					$ 62,250.00
7.	0.7% Grassy, N.E. British Columbia
	pipeline interest @ 15% discounted value				$ 67,200.00**
*Deemed value at time of operation’s commencement

report on Grassy gas project dated November 1, 1990

				Exhibit “C"
TOTAL BENEFIT				$129,450.00
TOTAL MINIMUM NET BENEFIT:
	Total Benefit	$129,450.00
	Less Total Unit Cost	30,000.00
	TOTAL NET MINIMUM BENEFIT	$ 90,450.00
FUTURE ADDITIONAL INVESTOR BENEFTTS
***1.	Minimum annual Grassy pipeline
	revenue per year	$ 10,220.00
2.	Expected escalation of Lumberton
	share value to exceed $1.50	$ 90,000.00
***Based on minimum of 40 mmcf/day pipeline throughput with minimum $0.10/mcf tariff
B. TWO UNIT PARTICIPATION (DOUBLE)
		TAXABLE INCOME	ESTIMATED TAX	ATTRIBUTED
		SHELTER AMOUNT SAVINGS AMOUNT		VALUE
1.	100% write-off
	(maximum tax rate)	$ 60,000.00	$ 30,000.00
2.	RRSP (self-administered
	re maximum rate)	$ 11,500.00	$ 5,750.00
		$ 71,500.00	$ 35,750.00	$ 35,750.00
3.	120,000 common voting shares
	Lumberton Mines Limited			$ 60,000.00
4.	One one-quarter acre building lot			$ 50,000.00*
	Palmer Bar Golf Course			**
5.	Two lifetime playing privileges -
	Palmer Bar Golf Course			$ 20,000.00**
				$165,750.00
6.	1.4% Grassy, N.E. British Columbia
	pipeline interest @ 15% discounted value			$134,400.00***
* Lot choice to be drawn at time of subdivision approvals.
Owner to pay up to maximum of $10,000 for related
services when necessary.
**Deemed value at time of operation's commencement.

♦♦♦Derived from independent engineering evaluation

Exhibit "C"

	report on Grassy gas project dated November 1,1990.
TOTAL BENEFIT		$300,150.00
TOTAL MINIMUM NET BENEFIT:
	Total Benefit	$ 300,150.00
	Less Two Unit Cost	60,000.00
	TOTAL NET MINIMUM BENEFIT	$ 240,150.00
FUTURE ADDITIONAL INVESTOR BENEFITS
*** 1.	Minimum annual Grassy pipeline
	revenue per year	$ 20,440.00
2.	Expected escalation of Lumberton
	share value to exceed $1.50	$ 180,000.00

♦♦♦Based on minimum of 40 mmcf/day pipeline throughput with minimum $0.10/mcf tariff

LUMBERTON MINES LIMITED

USE OF MMIMUM PROCEEDS

Mining
Placer gold exploration
Palmer Bar Creek, S.E. British Columbia	$ 300,000
Hellroaring Creek, S.E. British Columbia
Shames Creek, N.W. British Columbia
Other	$ 200,000
	$ 500,000	500,000
Oil & Gas
Grassy area, N.E. British Columbia
(pipeline)	$1,400,000
South central Alberta
(exploration drilling)	$1,000,000
Other Exploration	$ 100,000
	$2,500,000	$2,500,000

TOTAL	$3,000,000
	Exhibit "C"
The Company will endeavour to maximize flow-through expenditures prior to year end 1991 for shareholder tax purposes.

Reference to two-year period in the related flow-through agreement merely reflects the government regulatory maximum time frame.

Appendix to Reasons for Judgment

EXHIBIT "E" to Agreed Statement of Facts

LUMBERTON MINES LIMITED

#2600. 520-Sth Avenne S.W., Calgary, Alberta

T2P 3117 (403)265-6165 FAX (403)265-0893

March 26, 1991

This will serve to acknowledge receipt of $60,000.00 from Wm. Maier, In Trust representing payment in full for .120,000 common voting shares of

Lumberton on a combined oil and gas/mining flow-through basis. The shares will be delivered to you at the earliest Opportunity, subsequent to listing on The Alberta Stock Exchange. You are advised that in accordance with Alberta Securities Commission regulations, the subject shares may be restricted from trading for a period of one year from the date of issue.

The Company also acknowledges that you will receive additionally, without cost:

* 1. Two lifetime playing privileges at Palmer Bar Golf Course, when operational (estimated mid 1992).

* 2. One one-quarter acre building lot at the Palmer Bar Golf Course development.

* 3. 1.4% equity interest in the Grassy 5-mile 8" gas pipeline assigned

to unit holder at nominal cost ($1.00), subsequent to cost recovery by Lumberton, to be held in trust by Lumberton, as operator, with related revenue for the account of unit holder. The 1.4% pipeline equity interest tariff revenue will commence no later than November 1, 1991, at a tariff rate of $0.20 per mef until unit holder costs are recovered, at which time it reverts to a $0.10 base level tariff. This base level tariff, at the expected 40 mncf/day gas rate in 1991, will generate a minimum of approximately $20,400 per year.

*As set out in the related Information Resume.

Illegible signature

Exhibit "E"

LUMBERTON MINES LIMITED

#2600,520 - Sth Avenue S. W.

Calgary, Alberta

T2P 3R7

Telephone- (403) 265-6165 FAX (403) 265-0893

February 26, 1992

TO: Lumberton Unit Holders

Flow-Through Share Issuance Agreement dated March 1, 1991

Accompanying this letter, find a replacement receipt which

supercedes the original one. This replacement receipt sets out more correctly the intent of the private placement financing with respect to the flow-through aspect.

Should you have any questions please phone the undersigned.

Yours very truly,

LUMBERTON MINES LIMITED

John W. McLeod, P.Geol.

Director

JWM/paa

Encl.

Exhibit "E"

LUMBERTON MINES LIMITED #2600,520 - Sth Avenue S.W. Calgary, Alberta T2P 3R7

Telephone- (403) 265-6165 FAX (403) 265-0893

March 26, 1991

This will serve to acknowledge receipt of $60,000.00 from

Wm. Maier, In Trust representing payment in full for 120,000 common voting shares of Lumberton on a combined oil and gas/mining flow-through basis. The shares will be delivered to you at the earliest opportunity, subsequent to listing on The Alberta Stock Exchange. You are advised that in accordance with

Alberta Securities Commission regulations, the subject shares may be restricted from trading for a period of one year from the date of issue.

The Company also acknowledges receipt of payment in full in the amount of $1.00 (Cdn.) for a 1.4% undivided equity interest unit in the Grassy five-mile 8" gas pipeline, effective November 1, 1991, to be held in trust for you by

Lumberton, as operator, with related revenue for your account. The 1.4% pipeline equity interest tariff revenue will commence no later than November 1, 1991, at a tariff rate of $0.20 per mcf until related unit holder costs are recovered, at which time it reverts to a $0.10 per mef base level tariff.

You will also receive, at no cost, in conjuction with the aforementioned purchase of the interest in the Grassy gas pipeline, the following:

*1. Two lifetime playing privileges at Palmer Bar Golf Course, when operational (estimated mid 1993).

*2. One one-quarter acre building lot at the Palmer Bar Golf Course development.

*As set out in the related Information Resume

Appendix to Reasons for Judgment

EXHIBIT "H" (page 1) to the Agreed Statement of Facts

LUMBERTON MINES LIMITED 1700, 520 — 5th Avenue S.W. Calgary, Alberta T2P 3R7 (403) 265-6161

August 10, 1995

Mr. Robert B. Furukawa

c/o 1700, 520 — 5th Avenue S.W.

Calgary, AB T2P 3R7

Dear Bob:

RE:	Lumberton Mines Limited
	Private Placement Financing dated March 1, 1991
	As previously discussed, Lumberton indicated its willingness to issue 1,000 common shares of

Provident Ventures Corporation, out of its holdings, for each double unit held in the Lumberton private placement financing of March 1, 1991. This was agreed to in an effort to have the unit holders’ settlement more fairly reflected, related to single and double unit holders.

Accordingly, enclosed please find Provident Ventures Corporation share certificate number 02595, representing 125 shares, pro rata to your double unit interest, registered in the name of Robert B. Furukawa. Please acknowledge receipt of this certificate by signing and returning the duplicate copy of this letter.

Should you have any questions, please do not hesitate to call.

Yours very truly,

LUMBERTON MINES LIMITED

John W. McLeod, P. Geol.

Managing Director

JWM/de

Encl.