Carol A. McCullough v. Minister of National Revenue, [1986] 2 CTC 2132, 86 DTC 1606

Taylor, T.C.J.:—This is an appeal heard in Calgary, Alberta, on June 25, 1986, against an income tax assessment for the year 1981 in which the Minister of National Revenue included in the income of the appellant an amount of $25,220.82 arising as follows:

(From the Notice of Appeal)

Facts

— Robert A. McCullough:

(i) Died on June 12, 1981;

(ii) was, at such time, an employee of Ocelot Industries Ltd. (“Ocelot");

(iii) was, as such time, a beneficiary under a deferred profit sharing plan (the “DPSP") established by Ocelot and of which Canada Trust was the carrier and trustee (the “Trustee"); and

(iv) was entitled, at such time, to a sum of $25,220.82 out of the DPSP.

— The Appellant was designated a beneficiary under the DPSP in the event of the death of the said Robert A. McCullough.

— The Appellant has not received, to this date, any such sum, or any amount at all, out of the DPSP.

— The Appellant submits that she has never received any amount from the Trustee under the DPSP within the meaning of subsection 147(10) of the Income Tax Act.

The Appellant requests that this appeal be allowed and the assessment be referred back to the Respondent to reassess so as to vacate the inclusion of $25,220.82 in her income and to reduce the interest owed to the Respondent in consequence thereof.

All of which is respectfully submitted by the Appellant through her solicitors.

DATED at the City of Calgary, in the Province of Alberta, this 7th day of March, 1985.

FENERTY, ROBERTSON, FRASER & HATCH Barristers and Solicitors

2900, 700 — 9th Avenue S.W.

Calgary, Alberta

TZP 4A7

(Signature)

C.H. FRYERS

(From the Reply to Notice of Appeal)

— a cheque in the sum of $17,654.57, representing the D.P.S.P. proceeds of $25,220.82 less taxes, was received by Donald T. Hatch, Barrister and Solicitor, in September, 1981, for or on behalf of the Appellant;

— the Appellant received the sum of $25,220.82 from the D.P.S.P. in her 1981 taxation year.

— The respondent relied, inter alia, on paragraph 56(1)(i), and subsections 60(j), 147(1) and 147(10) and section 76 of the Income Tax Act, R.S.C. 1952 c. 148, as amended by S.C. 1970-71-72, c. 63, s. 1, applicable to the Appellant’s 1981 taxation year.

Mr. Donald T. Hatch, was the sole witness, and he identified certain documents entered in support of the appellant’s case. Particularly significant among these, in my view were the following:

Exhibit A-4

We act as solicitors for the estate of Mr. McCullough who died on June 12th, 1981. Amongst his records we found a duplicate deposit slip to the above des- cribed account. Will you please advise us of the balance in this account and if Mr. McCullough had any other accounts or deposits with you.

22665DTH	268-7002
June 22, 1981
Canada Trust
505 — 3rd Street S.W.
Calgary, Alberta
Dear Sirs:
re: Robert A. McCullough, deceased
Account No. 101387

Yours truly,

D.T. Hatch

DTH:W

Exhibit A-5

\Ne enclose a copy of our letter to you of June 22nd to which we have not as yet received a reply. We would appreciate hearing from you as we require this information to deal with Mr. McCullough’s estate.

We have also found reference in Mr. McCullough’s files to a deferred profit sharing plan. Mr. McCullough was employed by Ocelot Industries Ltd. and we understand that this plan was transferred to you from Montreal Trust and we believe it has a value of about $38,000.00 or more at this time. Will you please provide us with particulars of this plan. We believe Mrs. McCullough is named as beneficiary. Please let us know what you will require in order for us to transfer it.

Yours truly,

D.T. Hatch

DTH: W Encl.

Exhibit A-6

Canada Trust

August 26, 1981

[Received Sept. 1, 1981]

Fenerty Robertson Fraser and Hatch

39th Floor, Bow Valley Square II

205-5th Avenue S.W.

Calgary, Alberta

TZP 2V7

Attention: D.T. Hatch

Dear Sir:

Re: Robert A. McCullough,

our reference no. 231-610-875-379-00

Further to your letter of August 5, 1981, please be advised that the above noted deceased has a Deferred Profit Sharing Plan through Ocelot Industries Ltd., in which he presently holds 1,533.343 Equity units at a value as of June 30, of $17.50 per unit.

In order to proceed with a disbursement of funds from this account, we will require authorization from Ocelot Industries Ltd.

Yours sincerely,

THE CANADA TRUST COMPANY

“James F. Corson”

James F. Corson, Manager

Pension Trust Department

JFC:th

Exhibit A-7

OCELOT INDUSTRIES LTD.

900, 333-5th Avenue S.W. Calgary, Alberta T2P 3B6 (403) 261-2000

[Delivered by Messenger]

September 26, 1981

Fenerty Robertson Fraser and Hatch

39th Floor, Bow Valley Square II

205-5th Avenue S.W.

Calgary, Alberta

T2P 2V7

Attention: Mr. Donald T. Hatch

Dear Mr. Hatch:

RE: Deferred Profit Sharing Plan Cheque

Robert A. McCullough

Enclosed please find Canada Trust’s cheque #43687 in the amount of $17,654.57. This cheque is payable to Carol A. McCullough, Mr. Robert A. McCullough’s beneficiary.

Thank you for your assistance in this matter.

Yours truly,

OCELOT INDUSTRIES LTD.

“Marie Moore”

(Mrs.) Marie Moore

Employee Relations Coordinator

MM/bf

Exhibit A-8

[“John Armstrong Information”*]

22665 DTH	268-7002
	February 22, 1982
Ocelot Industries Ltd.
900, 333-5th Avenue S.W.
Calgary, Alberta
T2P 3B6
Attention: Mrs. Marie Moore
Dear Mrs. Moore:
re: Deferred Profit Sharing Plan Cheque
Robert A. McCullough

We refer to your letter to us of September 26th and return to you Canada Trust's cheque in the amount of $17,654.57 and the statement from Canada Trust showing the calculation of the cheque

Mrs. McCullough is establishing a Registered Retirement Savings Plan and wishes to arrange for the rollover of these funds from the deferred profit sharing plan into her RRSP. As soon as her plan has been established we will be in touch with you to arrange for that transfer which can be done on a tax free basis.

Yours truly,

D.T. Hatch

DTH:W

Ends.

*[Editorial Note: The words in brackets appear as a handwritten notation on the original exhibit.]

Exhibit A-9

We refer to our correspondence and discussions with respect to Mr. McCullough's dererred profit sharing plan and enclose two copies of a Revenue Canada TDZ form completed by Carol McCullough. As you will note she wishes to transfer the proceeds payable to her under the deferred profit sharing plan to a registered retirement savings plan that she has acquired with National Trust Company.

22665 DTH	268-7002 7002
	August 23, 1982
Ocelot Industries Ltd.
900, 333-5th Avenue S.W.
Calgary, Alberta
T2P 3B6
Attention: Mr. Doug Cutts
Dear Sirs:
re: Deferred Profit Sharing Plan Cheque
Robert A. McCullough

Please now arrange to have the balance in the deferred profit sharing plan paid to National Trust for deposit to Mrs. McCullough’s RRSP. I would appreciate receiving confirmation from you after this has been accomplished and your advice as to the exact balance paid to National. Trust.

If you require anything further from us please advise.

Yours truly,

D.T. Hatch

DTH:W

Ends.

cc Mr. Mark L. Ferguson

RRSP Administrator

National Trust Company, Limited

150 Toronto Dominion Square

320-8th Avenue S.W.

Calgary, Alberta

T2P 3B2

Exhibit A-10

We refer to our letter to you of August 23rd. National Trust advises us that it has not as yet received from you the payment from Mr. McCullough’s deferred profit sharing plan. Will you please follow this matter up for me and advise me of its status.

Yours truly,

D.T. Hatch

DTH:W

cc Mr. Mark L. Ferguson

RRSP Administrator

National Trust Company, Limited

150 Toronto Dominion Square

320-8th Avenue S.W.

Calgary, Alberta

T2P 3B2

Exhibit A-11

OCELOT INDUSTRIES LTD.

900, 333-5th Avenue S.W. Calgary, Alberta T2P 3B6 (403) 261-2000

December 9, 1982

[Delivered by Messenger]

Clarkson Gordon

13 Floor, 707-7 Ave. S.W.

Calgary, Alberta

TZP 3H6

Attention: Ms. Susan Dalgetty

Dear Ms. Dalgetty:

Re R.A. McCullough—Estate

Further to your recent inquiries regarding the estate of Mr. R.A. McCullough, I am enclosing some correspondence regarding his D.P.S.P. with Ocelot Industries Ltd.

On February 3, 1981, Mr. McCullough’s D.P.S.P. with Montreal Trust was transferred to an Ocelot Industries Ltd. D.P.S.P. with Canada Trust

Mr. McCullough passed away on June 12, 1981, at which time we were advised that Mr. D. Hatch would be the lawyer handling the estate and that cheques for Insurance etc. should be forwarded directly to his attention.

On September 26, 1981, a cheque from Canada Trust in the amount of $17,654.57 was forwarded to Mr. Hatch. This cheque represented Mr. McCullough’s D.P.S.P. refund of $25,220.82 less tax of $7,566.25. This cheque was returned to us by Mr. Hatch on February 22, 1982, advising us that he will notify us to have it transferred to Mrs. McCullough’s R.R.S.P. We did not hear again from Mr. Hatch until August 23, 1982, when he forwarded a TD2 form advising of the necessary R.R.S.P. information

On September 3, 1982, I returned the cheque to Canada Trust advising them to reissue the cheque payable to Mrs. McCullough’s R.R.S.P. Since then, I have had numerous calls to Mr. Phil Mowat at Canada Trust. Today Mr. Mowat advised me that Canada Trust Head Office confirms it is too late to change the payment and will be returning the cheque to us payable to Mrs. McCullough. He advised that if the auditors or lawyer feel they want to query this matter, they should contact Canada Trust in writing. If this is done, please forward me a copy of such correspondence.

If you have any questions regarding the estate, Mr. Don Hatch, Mrs. McCullough's lawyer, should be contacted at Fenerty, Robertson, Fraser & Hatch, 268- 7002. The contact at Canada Trust you may call is Mr. Phil Mowat at 262-7911

Yours truly,

OCELOT INDUSTRIES LTD.

“Marie Moore”

(Mrs.) Marie Moore

Employee Relations Coordinator

MM/mab

cc D. Hatch

P. Mowat

Exhibit A-12

OCELOT INDUSTRIES LTD.

900, 333-5th Avenue S.W. Calgary, Alberta T2P 3B6 (403)

261-2000

December 13, 1982

[Delivered by Messenger]

Fenerty, Robertson, Fraser & Hatch

39th Floor, Bow Valley Square II

205-5th Ave. S.W.

Calgary, Alberta

T2P 2V7

Attention: Mr. Donald T. Hatch

Dear Mr. Hatch:

Re: Deferred Profit Sharing Plan Cheque

Robert A. McCullough

Further to your letter to Doug Cutts dated November 22, 1982 and our telephone conversation December 8th, I am enclosing:

1) a copy of a letter from Canada Trust.

2) Canada Trust’s cheque payable to Carol A. McCullough in the amount of $17,654.57 dated December 10, 1982.

3) An amended 1981 T4A for Carol A. McCullough

As outlined in the letter from Canada Trust, they feel it is too late to transfer the proceeds of the D.P.S.P. to Mrs. McCullough’s R.R.S.P. However, the letter states if you can provide them with “some basis to the contrary” they will consider it.

If there is any correspondence regarding the above matter, with Canada Trust and your office, please forward copies of such correspondence to my attention.

Thank you for your assistance in this matter.

Yours truly,

OCELOT INDUSTRIES LTD.

“Marie Moore”

(Mrs.) Marie Moore

Employee Relations Coordinator

MM/mab

cc: Susan Dalgetty, Clarkson Gordon

Exhibit A-12

Canada Trust

December 10, 1982

[“Received December 13, 1982

Accounting Department”]

Ocelot Industries Ltd.

900, 333-5th Avenue, S.W.

Calgary, Alberta

TZP 3B6

Attention: Mrs. Marie Moore

Employee Relations Co-ordinator

Dear Mrs. Moore:

RE: DEFERRED PROFIT SHARING PLAN

ROBERT A. MCCULLOUGH

Further to our telephone conversation on Thursday, December 9, 1982, this will confirm that since the proceeds of a DPSP must be transferred into an RRSP within 60 days of the end of the taxation year in which it was paid* it is our opinion that we cannot complete the transfer to Mrs. McCullough’s RSP as requested.

♦[Editorial Note: Original exhibit contains the word “received” in handwritten

notation below the phrase “in which it was paid”.]

If, however, Mrs. McCullough’s counsel is able to provide us with some basis to the contrary, we would certainly be willing to consider it.

In the meantime, we are enclosing an amended T4A slip as discussed along with the cheque which we have re-issued due to the fact that it was stale dated.

Yours truly,

THE CANADA TRUST COMPANY

“P.B. Mowat”

P.B. Mowat

Manager, Pension Trust Department

PBM/pe*wp

Enclosures

1-pe-10-5

It was the essence of the testimony of Mr. Hatch that he had been retained as solicitor to the estate of the deceased Mr. McCullough, not as solicitor for the beneficiary of the D.P.S.P., Mrs. McCullough. Mr. McCullough had died intestate, and it was pointed out by Mr. Hatch that under the law the immediate family relations — which in this case were Mrs. McCullough, (the widow), and a daughter of Mr. McCullough's from a previous marriage — were the beneficiaries. He was contacted by a Mr. Harry Harvey, a friend of Mrs. McCullough, and requested by Mr. Harvey to accept the role as solicitor for the estate. He had not been acquainted with Mr. McCullough before his death, nor did he know Mrs. McCullough. To the best of Mr. Hatch's memory he had never discussed with Mrs. McCullough acting in any capacity for her personally — indeed to act as solicitor for her would have created the prospect of a conflict of interest. Mrs. McCullough had other advisors, according to Mr. Hatch, primarily a chartered accountant, and while Mrs. McCullough attended only two or three meetings regarding estate matters, the others — Mr. Hatch, Mr. Harvey and the chartered accountant — met when necessary and proceeded with these affairs. It was a very complicated estate, according to Mr. Hatch, and since Mrs. McCullough was not too well, every effort was made to minimize the involvement required of her. Mr. Hatch was unable to recall specific instructions regarding the proposed allocation of the proceeds of the D.P.S.P. (directly to an R.R.S.P.), but stated it was really quite a simple decision for all of them — it was the only logical thing to do. Mr. Harvey regularly met with Mrs. McCullough, as far as Mr. Hatch knew, and he conveyed her wishes in these matters to Mr. Hatch, or to the group of advisors. Shortly after the death of Mr. McCullough, the capital stock of Ocelot Industries Ltd. began to decline in value and continued this rather rapid slide for quite some time. With specific reference to Exhibit A-5, above, Mr. Hatch did not regard the words "for us to transfer it”, as having any significance to any alleged role as solicitor, or even agent, for Mrs. McCullough. On receipt of the cheque — Exhibit A-7 — Mr. Hatch knew it was to be returned — since he was aware of the desire of Mrs. McCullough that the proceeds of the D.P.S.P. be transferred directly to an R.R.S.P. — and it was always his inten tion to do so. He had done so as soon as the cheque had been rediscovered (the term used by counsel for the respondent in cross-examination) and that was demonstrated by Exhibit A-8. Mr. Hatch also testified that he had received no further instructions or responsibility from Mrs. McCullough between the writing of Exhibit A-4 on June 22, 1981 and Exhibit A-9 on August 23, 1982.

Counsel for the appellant provided the Court with certain case law, as well as some definitions and constraints which he submitted should permit the Court to reject the Minister's assertions regarding the role (whether as solicitor or agent) of Mr. Hatch in this matter (see reply to notice of appeal (supra)). The following are particular notes:

A) Cordery's Law relating to Solicitors, Seventh edition, Graham J. Graham- Green C.B. T.D., Frederic T. Horne London, Butterworths (1981).

8) to receive money generally

A solicitor is not empowered by his general authority to receive money on behalf of his client in non-contentious matters . As a general rule, an agent authorised to receive money on behalf of his principal must receive it in cash . Thus payment to a solicitor for a vendor by giving credit to the solicitor will not discharge the purchaser as against the vendor except as to any sum which the solicitor may be authorised by the vendor to retain for himself . [Emphasis mine.]”

B) Black's Law Dictionary by Henry Campbell Black, M.A. St. Paul. Minn. West Publishing Co. (1968)

Agency. Includes every relation in which one person acts for or represents another by latter's authority, Saums v. Parfet, 270 Mich. 165, 258 N.W. 235, where one person acts for another, either in the relationship of principal and agent, master and servant, or employer or proprietor and independent contractor, Gordon V. Doty, 57 Idaho 792, 69 P.2d 136, 139.

Implied agency. One created by act of parties and deduced from proof of other facts. Sigel-Campion Live Stock Commission Co. v. Ardohain, 71 Colo 410, 207 p. 82, 83. It is an actual agency, proved by deductions or inferences from other facts, and third party need have no knowledge of the principal’s acts, nor have relied on them. Kentucky-Pennsylvania Oil & Gas Corporation v. Clark, 247 Ky, 438, 57 S.W. 2d 65.

C) The Common Law Library, Number 1

Chitty on Contracts

24th Edition, London, Sweet & Maxwell, (1977)

page 1290:

Prima facie, an agent who is authorised to receive payment (e.g. an auctioneer) has authority only to receive it in cash ; such an agent cannot bind his principal by accepting a bill of exchange without the express authority of the principal . But if such an agent in fact accepts a cheque and cashes it, or the proceeds are collected by his bank, that amounts to a payment in cash . On the other hand, a principal who desires to authorise an agent to receive payment by cheque only and not in cash must plainly notify third parties dealing with his agent of the exact extent of the agent's authority; thus a notification that cheques drawn in payment must be drawn in a particular form does not exclude the presumption that payment may lawfully be made to the agent in cash and not by cheque at all.

Special mention was made by counsel to the case of Head v. M.N.R., 2 Tax A.B.C. 89; 50 D.T.C. 251. From Head (supra) at 90 (D.T.C. 252) I would quote certain sections which appear to bear on this case:

... In this appeal the question to be determined is whether the sending of a cheque to her solicitors on December 31st, 1946, payable to the appellant, consti- tutes payment as of that date to the appellant and established the necessary fact that the appellant “received” these monies under the provisions of the Income War Tax Act in the taxation year 1946.

. . . I am of the opinion, therefore, that the onus was on the Crown to establish that payment was made to the appellant on December 31st, 1946, through a duly authorized agent and one authorized to accept a cheque as an unconditional payment . . . while the evidence does establish that the firm to which the cheque was delivered were the solicitors for the appellant, no attempt was made to establish that this firm was authorized to accept a cheque payable to the appellant as payment for any sums owing.

. . . In the case under appeal I do not think it can be properly suggested that the appellant “received” the monies for income tax purposes until she had actually cashed the cheque and received the monies therefor. This occurred on or after January 6th, 1947.

As I read the above case, the point determined therein was not whether the firm of solicitors was acting as agent for the appellant, but rather, whether as agents — the solicitors were empowered to accept the cheque in satisfaction of the obligation. It was asserted by counsel for the appellant in the instant case, that since there was no question of Mrs. McCullough's right to the payment, as beneficiary, (according to Mr. Hatch she clearly had that right) this was a non-contentious matter, and accordingly Mr. Hatch could not receive the cheque in a capacity as agent, unless specific authority so to do had been delegated to him by Mrs. McCullough.

In response to this proposition, counsel for the Minister put forward extracts from The Law of Agency as follows:

D) The Law of Agency, 5th edition, G.H.L. Fridman MA, BCL, LLM, London, Butterworths (1983)

From section 54

Scope of Authority

(a) General

Owing to the relationship in which the solicitor stands to his client, a solicitor in an action has a wider and more extended authority than an ordinary agent acting for a principal. The client apart from instructing him and empowering him to do certain acts in his professional capacity in which he is skilled, confides as well in his judgment and trained ability, in his opinion and advice, and in his technical knowledge. The client impliedly gives his solicitor a discretion which, if used fairly and in the best of faith, would be used for the client’s benefit. The solicitor is the client when he receives the retainer and he has, beyond the bare retainer to do his work, a right to use his trained judgment, his knowledge and discretion in the interests of his client, and using them fairly, the client is bound by the acts of his solicitor both before and after judgment; that is, so far as it affects the recovery of the fruits of the judgment .

From section 93

4. Implied Authority

Every agent authorized to conduct a particular trade or business, to act generally for his principal in matters of a particular nature, or to do a particular class of acts, has implied authority to do whatever is incidental to the ordinary, usual conduct of such a trade or business, or of matters of that nature, or whatever is within the scope of that class of acts, and is necessary for the proper and effective performance of his duties. In the absence of express authority, the court will imply an authority sufficiently extensive to give effect to, or carry out, the unex- pressed but clear intention of the parties . The implied authority of an agent also extends to all subordinate acts which are necessary as ordinarily incidental to the exercise of the express authority. The authority need not be in express words but may be inferred from what took place between the parties.

From section 97:

. . . different policies underlie the action of the law in recognising and enforcing an agency relationship where none was previously agreed upon between the parties. In these instances the law is concerned to protect third parties who may have acted on the reasonable inference that a relationship of principal and agent existed between the parties concerned.

The application of estoppel to agency

Estoppel means that a person who has allowed another to believe that a certain state of affairs exists, with the result that there is reliance upon such belief, cannot afterwards be heard to say that the true state of affairs was far different, if to do so would involve the other person in suffering some kind of detriment.

In addition certain case law was referenced:

Arthur Henry Frankish v. M.N.R., 14 Tax A.B.C. 456; 56 D.T.C. 178; Eric Moody v. M.N.R., [1957] C.T.C. 110; 57 D.T.C. 1050 and Reginald E. Nourse v. M.N.R., 27 Tax A.B.C. 353; 61 D.T.C. 571.

Counsel for the respondent cast the Minister of National Revenue in the role of the “third party” referenced directly above.

In the view of counsel for the appellant, it could not be said that the Minister of National Revenue was the “third party”; nor could it be said the actual “third party” — whether Ocelot Industries Ltd. and/or Canada Trust, had been prejudiced by the actions of Mr. Hatch.

Analysis

The involvement of Mr. Hatch, in the affairs of Mrs. McCullough as beneficiary of the D.P.S.P., which is at the root of this appeal, arises out of his actions particularly related to Exhibits A-4, A-5, and A-8 above. It is a fair assumption that without the information contained in Exhibits A-4 and A-5, the disputed cheque might never have arrived in his office. It is also a fair assumption that immediately upon receipt of the cheque (Exhibit A-6) had he remitted it to Mrs. McCullough his situation could be less tenuous today. As I see it, the primary role of Mr. Hatch was that of fulfilling the responsibility he assumed when contacted by Mr. Harvey, and Mr. Hatch had said that was as solicitor for the estate. In that role, I can find no substantive indication that Mr. Hatch by contacting Canada Trust, as indicated in Exhibits A-4 and A-5, had assumed either directly or indirectly the role of agent (or solicitor) for Mrs. McCullough. Even though the reference to Mrs. McCullough as “beneficiary” and the use of the phrase “for us to transfer it” leave open some question, I am not prepared to reach the conclusion that they are sufficient to accomplish the Minister's purpose. His testimony is that at this time he was uncertain of the precise situation, and as solicitor for a complicated estate was attempting to follow down all requirements. However, the Court was also informed by him that at the same time, or very shortly thereafter, as a result of meetings with at least Mr. Harvey, Mr. Hatch had the firm opinion that there was agreement (presumably from Mrs. McCullough) that the proceeds from the D.P.S.P. would go directly to an R.R.S.P. We are not aware what “authorization” (Exhibit A-6) was provided from Ocelot Industries Ltd. to Canada Trust, if any; nor are we aware of any instructions from Mr. Hatch, or anyone else, to Canada Trust regarding the disposition or disbursement of the D.P.S.P., which resulted from that Canada Trust letter to Mr. Hatch dated August 26, 1981. Certainly if we accept that at that date Mr. Hatch was not agent for Mrs. McCullough personally, as beneficiary of the D.P.S.P., then there was no evident reason obliging him to do anything after Exhibit A-6 (supra). However, as I see it, that situation changed dramatically as of the delivery — incidentally by messenger — of the letter and the cheque referenced in Exhibit A-7 (supra). Mr. Hatch was aware that the proceeds of the D.P.S.P. were to be deposited in an R.R.S.P. His testimony is that he knew the cheque must be returned, since some income tax was obviously deducted by Canada Trust, and it was incorrect. Dealing solely from the information and testimony provided to this Court, I am satisfied that with or without the direction of Mrs. McCullough, had Mr. Hatch returned the cheque to Ocelot (or Canada Trust) with a request to reverse the income tax details, and send a new cheque, he would have been acting, at least as agent for Mrs. McCullough, — if not as solicitor. I am equally satisfied that had he mailed or delivered the cheque to Mrs. McCullough — possibly even Mr. Harvey — with an appropriate disavowing letter, he would have demonstrated his lack of authority to act on behalf of the appellant in that matter. Therefore, in my view, as of September 26, 1981 his own options were open — to (a) either obtain or exercise in a positive visible way authority from Mrs. McCullough with regard to the cheque; or (b) to renounce just as clearly to Canada Trust, Ocelot, Mrs. McCullough and Mr. Harvey, any responsibility for the cheque.

Moving ahead for a moment, and dealing with a pivotal point raised by counsel for the respondent — on February 22, 1982 (Exhibit A-8) Mr. Hatch dealt with Ocelot, conveying to that company instructions regarding the disposition of the D.P.S.P. I am satisfied that at that date he demonstrated his acceptance of a role as agent (or solicitor) for Mrs. McCullough, in fact, it would appear he assumed that role of his own volition, or at most under the direction of Mr. Harvey. But I do not agree with counsel for the respondent that such action taken on February 22, 1982 can endow him retroactively with his role as agent, regarding the period in issue, the year 1981. As I see it, it is only if this Court can find something in the conduct or action of Mr. Hatch during 1981, which confirms a role as agent, that the Minister can utilize Mr. Hatch as the vehicle through which to attach to the appellant the amount at issue.

So, what did Mr. Hatch do between September 26, 1981, at which date I have already held that he was not acting as agent, and February 22, 1982, at which date I have held that he was acting in that capacity? In my view, there were only two actions, which can clearly be attributed to him — first, he put the cheque in his file, and second, he forgot about it. The evidence available to the Court regarding the nature of the cheque — which information came from Mr. Hatch, and was not challenged substantively by the respondent — was to the effect that the D.P.S.P. had no relationship to the estate at all, — it was the property of Mrs. McCullough solely. While Mrs. McCullough might be entitled to certain concerns about the manner in which Mr. Hatch did deal with the cheque — file it and forget it — that is quite another issue, and not before this Court. I am not persuaded that Mr. Hatch by his conduct in the year 1981 evidenced authority as, or assumed the role of, agent or solicitor for Mr. McCullough.

The appeal is allowed and the matter referred back to the respondent for reconsideration and reassessment.

The appellant is entitled to party and party costs.

Appeal allowed.