Taylor,
T.C.J.:—This
is
an
appeal
heard
in
Toronto,
Ontario,
on
July
16,
17,
18
and
22,
1986,
against
income
tax
assessments
for
the
years
1980
and
1981,
in
which
the
Minister
of
National
Revenue
made
the
following
changes
to
the
information
filed:
(a)
1980
—
Additions
to
income
|
(i)
reduction
of
inventory
allowance
|
$12,644
|
|
(ii)
taxable
capital
gain
on
disposition
of
|
|
|
land
and
buildings
in
Waterloo
|
87,000
|
|
(b)
1981
—
Additions
to
income
|
|
|
(i)
reduction
of
inventory
allowance
|
19,460
|
|
(ii)
increase
in
part
of
proceeds
from
|
|
|
disposition
of
quota
included
in
income
|
298,421
|
|
(c)
1981
—
Addition
to
taxable
income
|
|
|
(i)
reduction
in
1982
non-capital
loss
|
|
|
applied
to
1981
|
112,400
|
The
details
of
the
transactions
and
the
reasons
for
the
dispute,
which
formed
part
of
the
above
reassessments
are
set
out
in
the
notice
of
appeal:
4.
(a)
The
taxpayer
operates
a
creamery
and
participates
in
a
financing
programme
set
up
by
the
Canadian
Dairy
Commission.
Under
this
plan,
the
production
of
butter
is
encouraged
during
months
of
high
milk
production
by
the
provision
of
financing
for
“Plan
B
Butter”.
The
plan
involves
the
"purchase”
by
the
Canadian
Dairy
Commission
of
butter
produced
during
these
months,
for
which
the
Commission
pays
the
creamery
a
price
of
a
few
cents
per
pound
less
than
the
government
support
price.
The
butter
is
placed
in
storage
and
must
be
removed
from
storage
by
the
creamery
before
a
date
specified
in
the
contract,
usually
in
the
following
spring,
and
at
the
time
of
removal
must
pay
the
Commission
a
price
a
few
cents
below
the
support
price.
Most
of
the
butter
thus
financed
is
packaged
in
wrappers
carrying
the
label
and
brand
name
of
the
taxpayer’s
customers.
The
Canadian
Dairy
Commission
does
not
have
the
right
to
deal
with
this
butter
except
in
accordance
with
the
contract
under
which
it
agrees
to
offer
to
resell
it
to
the
taxpayer.
The
butter
held
by
the
Dairy
Commission
under
this
plan
is
treated
as
inventory
of
the
taxpayer
on
its
financial
statements
and
the
advances
received
from
the
Commission
are
shown
as
liabilities.
When
the
butter
is
withdrawn
from
storage
and
sold,
the
profit
is
recorded.
The
taxpayer,
in
1980
and
1981,
claimed
the
3%
inventory
allowance,
provided
for
in
paragraph
20(1)(gg)
of
the
Income
Tax
Act,
with
respect
to
the
Plan
B
butter
at
the
beginning
of
those
years.
The
amount
of
inventory
allowance
claimed
with
respect
to
this
butter
was:
|
1980
|
$12,644.00
|
|
1981
|
19,460.00
|
The
reassessments
complained
of
disallowed
the
inventory
allowance
claimed
with
respect
to
the
Plan
B
butter
(see
1
(a)(i)
and
(b)(i)
above).
(b)
The
company
acquired
land
and
buildings
in
Waterloo
in
1934,
on
which
it
carried
on
its
furniture
business.
The
acquisition
cost
of
the
land
was
$12,000.
In
February
1974
an
appraisal
was
carried
out
by
a
qualified,
independent
appraiser.
That
appraiser
determined
that
the
highest
and
best
use
of
the
land
was
as
“residential
or
institutional
use
land,
probably
low
or
medium
density
multiple
unit
sites''
and
further,
gave
the
opinon
that
the
value
of
the
land,
free
of
structures,
was
$305,000.
In
1980,
the
company
disposed
of
the
land
for
proceeds,
net
of
expenses
of
disposition,
of
$202,000
and,
in
reporting
the
disposition,
the
amount
was
estimated
by
the
company
to
be
equal
to
the
minimum
V-Day
value
of
the
land.
No
gain,
therefore,
was
reported
on
the
disposition.
The
taxpayer
was
reassessed
for
1980
on
the
basis
that
the
V-Day
value
of
the
land
was
only
$28,000,
so
that
a
taxable
capital
gain
of
$87,000
was
included,
by
reassessment,
in
the
taxpayer's
income
(see
1(a)(ii)
above).
(c)
In
1981,
the
company
sold
the
assets
of
the
creamery
business.
Included
in
the
sale
was
the
company’s
milk
supply
quota
for
which
proceeds
of
$1,600,000
were
received.
Independent
reviews
and
valuations
of
the
creamery
business
had
been
made
which
indicated
that
the
value
of
milk
supply
quota
had
not
increased
since
1971.
Based
on
this
and
other
information,
the
company
officials
were
of
the
opinion
that
the
value
of
this
quota
at
V-Day
was
equal
to
the
proceeds
received,
i.e.
$1,600,000.
Since
this
quota
was
a
government
right,
the
application
of
Income
Tax
Application
Rule
21
resulted
in
no
inclusion
in
the
taxpayer's
income
with
respect
to
this
disposition.
Revenue
Canada
has
reassessed
the
taxpayer
on
the
basis
that
the
V-Day
value
of
the
quota
was
only
$1,000,000.
As
a
result,
an
additional
amount
of
$298,421
has
been
included
in
the
taxpayer’s
1981
income
(see
item
1
(b)(ii)
above).
(d)
In
1982
the
company
disposed
of
shares
of
Robbinex
Trading
Corporation
for
proceeds
of
$10.
These
shares
had
been
acquired
from
shareholders
of
the
company
for
$700,000.
The
company
reported
an
allowable
business
investment
loss
of
$349,995
which,
along
with
other
losses,
resulted
in
a
non-capital
loss
for
1982
of
$531,765.
This
amount
was
applied
to
reduce
the
taxable
income
of
the
1981
taxation
year.
Revenue
Canada
reassessed
the
taxpayer
on
the
basis
that
the
cost
of
the
shares
to
the
company
was
only
$475,200
and
that
the
allowable
business
investment
loss
was
only
$237,595.
As
a
result,
the
non-capital
loss
applied
to
the
1981
year
was
reduced
by
$112,400.
5.
The
following
are
the
reasons
on
which
the
taxpayer
relies
in
this
appeal:
(a)
The
arrangement
under
which
the
Plan
B
butter
is
handled
represents
a
method
of
financing
provided
by
the
Canadian
Dairy
Commission
to
encourage
the
production
of
butter
in
the
summer
months
to
ensure
an
adequate
supply
during
the
winter.
Although
the
Canadian
Dairy
Commission
takes
title
to
butter,
this
is
done
only
to
secure
the
advance
made
by
it
to
the
taxpayer.
The
Canadian
Dairy
Commission
is
not
able
to
deal
with
the
butter
as
its
own
and
is
obligated
to
return
it
to
the
taxpayer
on
repayment
of
an
amount
equal
to
that
advanced.
A
further
indication
that
the
butter
is,
in
fact,
the
property
of
the
taxpayer
while
held
by
the
Commission,
is
that
the
butter
is
wrapped
under
the
taxpayer’s
brand
name.
Furthermore,
the
taxpayer
asserts
that
the
practice
followed
by
it
is
the
practice
followed
by
the
industry
as
a
whole.
Since
this
arrangement
essentially
is
one
of
providing
security
for
financing
and
the
Canadian
Dairy
Commission
does
not
have
the
usual
rights
of
ownership,
such
as
the
ability
to
sell
or
otherwise
deal
with
the
property
as
if
it
were
its
own,
it
is
appropriate
that
the
butter
be
dealt
with
as
belonging
to,
and
forming
part
of
the
inventory
of,
the
taxpayer.
On
that
basis,
the
taxpayer
should
be
entitled
to
claim
the
inventory
allowance
with
respect
to
this
butter.
(b)
The
value
of
the
land
at
V-Day
substantially
exceeded
the
amount
used
in
the
reassessment
as
its
V-Day
value.
Based
on
the
independent
appraisal
some
26
months
after
V-Day,
it
appears
that
this
value
could
not
be
less
than
$202,000.
No
gain,
therefore,
was
realized
on
the
disposition.
(c)
Independent
evidence
will
be
advanced
to
show
that
the
value
of
milk
quota
of
the
type
involved
here
did
not
increase
between
V-Day
and
the
date
of
the
sale.
The
V-Day
value,
therefore,
was
equal
to
the
proceeds
received
for
It.
(d)
The
shares
of
Robbinex
Trading
Corporation
were
intended
to
belong
to
R.G.
&
D.H.
Holdings
but
were
temporarily
held
by
individuals
in
order
to
qualify
for
certain
financing
advantages
available
from
the
provincial
government.
The
transfer
of
the
shares
to
the
company
by
its
shareholders
took
place
at
the
net
cost
of
the
shares
to
them,
i.e.
original
cost
of
$1,000,000
less
of
grant
of
$300,000
from
the
Province
of
Ontario.
All
gains
or
losses
realized
after
that
time
properly
were
gains
or
losses
of
the
company.
Furthermore,
it
was
inappropriate
to
reduce
the
value
of
the
shares,
and
therefore
the
cost
of
the
shares,
to
the
company
by
the
full
amount
of
the
loss
suffered
by
it
until
the
date
of
the
transfer
for
the
following
reasons:
(i)
a
loss
of
approximately
$300,000
before
the
company
became
profitable
was
anticipated
and
allowed
for
in
the
arrangements
under
which
the
shares
were
purchased;
(ii)
at
the
date
of
the
transfer,
based
on
all
the
information
available
at
that
time,
the
losses
were
within
the
original
estimate,
and
from
the
volume
of
orders
it
was
anticipated
that
the
company
would
become
profitable
within
the
next
month;
and
(iii)
if
the
full
loss
is
to
be
applied,
it
should
be
applied
to
the
original
cost
of
the
shares
and
not
to
the
amount
of
cost
less
the
grant
received
from
the
Province
of
Ontario.
6.
The
taxpayer
requests
that
its
income
be
reduced
by
the
amounts
set
out
in
1(a)
and
(b)
above
and,
further,
that
its
taxable
income
be
reduced
by
the
amount
set
out
in
1(c)
above.
In
reply
thereto,
the
Minister
stated
as
follows:
(b)
the
Appellant
is
a
company
owned
100%
by
Teeswater
Holdings
Ltd.
(hereinafter
“the
Parent”);
(c)
prior
to
October
1980,
the
parent
company
was
owned
50%
by
Donald
H.
Thompson
and
50%
by
Robert
Thompson
and
after
October
1980
by
Donald
H.
Thompson
Holdings
Inc.
and
Robert
G.
Thompson
Holdings
Ltd;
(d)
the
Appellant’s
year
end
is
October
31;
(e)
at
all
material
times,
the
Appellant
operated
a
creamery;
(f)
it
entered
a
contract
with
the
Canadian
Dairy
Commission
(hereinafter
the
“CDC”)
pursuant
to
which
the
Appellant
agreed
to
sell
butter
to
the
CDC
at
a
price
a
few
cents
less
per
pound
than
the
support
price
for
butter;
(g)
the
CDC
offered
to
resell
the
butter
to
the
Appellant
for
the
same
number
of
cents
per
pound
less
than
the
support
price
at
a
resale
date
which
was
defined
by
the
contract;
(h)
the
CDC
would
buy
butter
manufactured
and
offered
for
sale
between
April
1
and
September
15;
(i)
the
Agreement
was
effective
from
April
1
of
one
year
to
March
31
of
the
next;
(j)
the
CDC
acquired
and
retained
title
of
the
butter
it
purchased;
(k)
The
CDC
paid
the
Appellant
all
storage
costs
of
the
butter;
(l)
the
Appellant
could
repurchase
the
butter
by
requisitioning
it
from
the
CDC
and
paying
for
it;
(m)
any
butter
repurchased
by
the
Appellant
was
not
repurchased
until
after
October
31
of
the
1980
and
1981
taxation
years;
(n)
the
butter
was
not
held
by
the
Appellant
for
sale
in
the
ordinary
course
of
its
business;
(o)
the
Appellant
acquired
land
and
a
building
in
Waterloo,
Ontario
in
1934
in
which
it
carried
on
a
furniture
business
(hereinafter
the
“Waterloo
land
and
building”);
(p)
the
fair
market
value
of
the
Waterloo
land
as
at
December
31,
1971
was
$28,000;
(q)
the
Waterloo
land
was
zoned
for
industrial
use
as
at
December
31,
1971
and
served
an
industrial
purpose
at
December
31,
1971;
(r)
the
structures
as
at
December
31,
1971
were
suitable
for
the
industrial
purpose
of
manufacturing
furniture
and
were
so
used
at
that
time;
(s)
the
highest
and
best
use
of
the
Waterloo
land
as
at
December
31,
1971
was
industrial
use;
(t)
the
Appellant
disposed
of
the
Waterloo
land
on
February
28,
1980;
(u)
the
Appellant
received
total
proceeds
of
disposition
of
$777,000
on
the
sale
of
its
land,
building
and
equipment
and
incurred
costs
with
respect
to
the
disposition
of
$37,337.00
resulting
in
net
proceeds
of
disposition
of
$739,663.00;
(v)
the
proceeds
of
disposition
in
respect
of
the
land
was
$202,000
and
total
proceeds
of
disposition
were
properly
allocated
as
follows:
|
Land
Proceeds
—
Form
T2S6
|
$202,000
|
|
Class
3
Proceeds
|
193,000
|
|
Class
6
Proceeds
|
3,000
|
|
Class
8
Proceeds
|
75,000
|
|
Class
29
Proceeds
|
260,663
|
|
Class
12
Proceeds
|
6,000
|
|
Total
Proceeds
|
$739,663
|
(w)
The
Appellant
claimed
and
was
allowed
a
terminal
loss
of
$103,986
with
respect
to
the
disposition
of
the
building;
(x)
the
Appellant
realized
a
capital
gain
of
$174,000
and
a
taxable
capital
gain
of
$87,000
in
its
1980
taxation
year
on
the
disposition
of
the
Waterloo
land;
(y)
in
1981,
the
Appellant
disposed
of
the
assets
of
the
creamery
business;
(z)
one
of
the
assets
disposed
of
was
the
Appellant’s
plant
milk
supply
quota
(hereinafter
“the
quota”)
which
was
disposed
of
for
proceeds
of
$1.6
million;
(aa)
as
at
December
31,
1971,
the
V-Day
value
of
the
quota
was
$1
million;
(bb)
upon
the
disposition
of
the
quota,
the
Appellant
realized
a
negative
cumulative
eligible
capital
amount
of
$298,421
which
it
did
not
report
for
tax
purposes
and
accordingly
by
reassessment,
$298,421
was
added
to
its
income.
This
amount
was
calculated
by
the
Respondent
as
follows:
|
Milk
Quotas
|
Other
Assets
Total
Total
|
|
Proceeds
|
$1,600,000.00
|
$1,094,700.00
|
$2,694,700.00
|
|
Adjusted
Cost
Base
|
1,000,000.00
|
515,000.00
|
1,515,000.00
|
|
Excess
|
$
600,000.00
|
$
579,700.00
$1,179,700.00
|
|
Section
14
—
|
|
|
Proceeds
(12)
|
$
300,000.00
|
$
289,850.00
$
589,850.00
|
|
Milk
Quotas
|
Other
Assets
|
Total
Total
|
|
Opening
Balance
|
|
|
Accumulative
|
|
|
Eligible
Capital
|
$
|
1,579.00
|
|
Nil
|
$
|
1,579.00
|
|
Revised
Negative
|
|
|
Accumulative
|
|
|
Eligible
Capital
|
$
|
298,421.00
|
$
|
289,850.00
|
_$_
588,271.00
|
|
Deduct:
Amount
|
|
|
reported
|
|
Nil
|
$
|
289,850.00
|
$
|
289,850.00
|
|
Increase
reassessment
|
$
|
298,421.00
|
|
Nil
|
$
|
298,421.00
|
(cc)
the
Appellant
acquired
shares
of
Robbinex
Trading
Corporation
(hereinafter
'Robinex’)
from
its
parent
company’s
shareholders
for
$700,000
on
or
about
January
1,
1981.
(dd)
the
fair
market
value
of
the
Robbinex
shares
at
the
time
the
Appellant
acquired
them
was
$475,200;
(ee)
as
the
Appellant
acquired
property
from
a
person
with
whom
it
was
not
dealing
at
arm’s
length
at
an
amount
in
excess
of
the
fair
market
value
at
the
time
it
so
acquired
the
property,
the
Appellant
has
been
deemed
to
have
acquired
the
Robbinex
shares
at
their
fair
market
value;
(ff)
the
Appellant
disposed
of
the
Robbinex
shares
for
$10
in
1982;
(gg)
the
Appellant
realized
an
allowable
business
investment
loss
of
$237,595
on
the
disposition
resulting
in
a
non-capital
loss
carryback
of
$419,365
in
1981.
B.
6.
The
respondent
relies
inter
alia
upon
sections
3,
14,
39
and
40
and
paragraphs
20(1)(gg)
and
69(1)(a)
of
the
Income
Tax
Act
and
subsection
26(3)
of
the
Income
Tax
Application
Rules
1971.
It
was
fairly
stated
by
counsel
for
the
respondent
in
argument,
that
this
was
virtually
four
trials
in
one
—
and
there
was
a
great
volume
of
evidence
submitted
as
well
as
testimony
from
many
witnesses.
In
dealing
with
the
matter,
I
have
selected
and
reviewed
in
this
analysis
only
that
documentation
and
testimony
which
to
me
seemed
particularly
vital.
That
is
not
to
minimize
in
any
way
the
totality
of
the
evidence
which
was
provided
to
the
Court
—
I
am
indeed
appreciative
of
it,
because
it
was
only
in
going
over
all
of
it
that
I
was
able
to
reduce
the
requirement,
as
I
see
it,
to
the
limits
in
this
decision.
Analysis
In
examining
the
notice
of
appeal
and
reply
to
notice
of
appeal
(supra)
with
the
benefit
of
opening
comments
from
counsel
it
was
agreed
that
the
issues
were
the
following
four,
which
are
indexed
to
the
references
in
the
notice
of
appeal
(supra):
(1)
Inventory
Allowances
—
Items
(a)(1),
and
(b)(1)
(2)
Milk
Quota
—
Item
(b)(ii)
(3)
Waterloo
Real
estate
—
Item
(a)(ii)
(4)
Robbinex
Shares
—
Item
(c)(i)
Inventory
Allowance
The
critical
fact
for
me,
is
the
testimony
and
evidence
submitted
by
Lawrence
John
Marcellus,
Director
of
Marketing
for
the
Canadian
Dairy
Commission
(“C.D.C.”),
which
included
as
documentation
copies
of
the
legislation
governing
C.D.C.,
the
standard
contracts
with
producers,
and
the
annual
reports
of
C.D.C.
—
filed
as
Exhibits
A-5,
A-6,
R-9,
R-10,
R-11
and
R-13.
In
my
view,
this
established
that
there
is
no
basis
for
the
contention
by
the
appellant
that
the
purchase
by
C.D.C.
of
the
Plan
“B”
butter
was
some
form
of
a
“financing”
arrangement.
It
was
a
simple
agreement
by
C.D.C.
to
take
excess
butter
production
during
certain
periods
of
the
year,
and
supply
the
appellant,
as
well
as
other
producers,
with
the
same
quantities
of
butter,
during
other
periods
of
the
year,
so
that
the
producers
could
maintain
an
even
supply
of
butter
to
their
customers.
Title
and
ownership
in
every
respect
to
the
Plan
“B”
butter
passed
to
the
C.D.C.
The
butter
might
be
stored
on
the
premises
of
the
appellant
—
at
the
option
of
the
C.D.C.
—
but
that
in
no
way
altered
this
elementary
situation.
The
appellant,
acting
as
“warehouseman”
for
C.D.C.
and
thereby
required
by
the
contract
to
pay
certain
attendant
costs
such
as
insurance
on
the
goods
stored,
would
not
convert
someone
else's
property
into
the
taxpayer's
inventory,
or
in
this
case
“re-convert”
it
into
the
appellant’s
inventory.
The
point
raised
by
the
appellant
that
the
butter
in
“prints”
had
been
wrapped
and
labelled
for
its
own
customers
—
and
therefore
the
appellant
could
get
back
this
butter,
is
in
my
view
a
specious
one.
The
wrapping
and
labelling
of
the
butter
for
a
specific
customer
was
done
by
the
appellant
for
its
own
purposes
—
with
the
reasonable
expectation
that
the
same
butter
would
be
returned
to
it.
However,
such
specific
wrapping
and
labelling
was
not
required
under
the
contract,
and
I
do
not
read
the
contracts
as
mandating
such
treatment
by
C.D.C.
As
a
matter
of
fact
C.D.C.
might
well
have
preferred
“plain”
wrapping,
if
such
was
done,
since
in
the
event
this
appellant
did
not
claim
(or
receive)
the
same
butter
it
had
sold,
there
would
likely
be
less
cost
to
C.D.C.,
or
someone
else,
to
prepare
the
butter
for
ultimate
distribution
and
sale.
The
appellant
in
its
accounting
records
did
not
take
the
funds
received
from
C.D.C.,
into
income,
but
treated
those
amounts
as
a
form
of
liability,
and
thereby
retained
a
recording
situation
wherein
the
butter
was
“described
in
the
taxpayer's
inventory”.
(Subparagraph
20(1)(gg).)
This
accounting
procedure
however
does
not
make
the
item
“inventory”,
nor
does
it
serve
to
retain
its
characteristics
of
“inventory”
for
a
taxpayer.
With
respect
to
the
words
of
subparagraph
20(1)(gg)
itself,
I
doubt
it
could
be
said
that
“the
cost
amount
to
the
taxpayer”
was
the
alleged
production
value
of
this
stored
Plan
“B”
butter
—
in
fact
a
good
argument
could
be
made
that
“the
cost
amount
to
the
taxpayer”
was
“nil”
—
after
receipt
of
the
payment
from
C.D.C.
Also
I
have
serious
doubts
that
the
appellant
could
meet
the
qualifications
“..
.
inventory
in
respect
of
the
business
..
.”
And
finally,
even
allowing
for
the
re-supply
conditions
in
the
contracts
between
the
appellant
and
C.D.C.
with
respect
to
the
butter,
it
cannot
be
said
that
it
was
“held
by
him
for
sale
.
..
.”
If
anything
it
was
held
by
C.D.C.
for
re-purchase
by
the
appellant.
Plan
“B”
butter
when
dealt
with
in
the
way
described
at
this
hearing
does
not
qualify
for
a
deduction
claimed
under
paragraph
20(1)(gg)
of
the
Act.
That
part
of
the
appeal
will
be
dismissed.
Milk
Quota
I
would
say
without
hesitation
that,
prima
facie,
the
proposition
put
forward
by
the
appellant
—
that
the
quota
sold
with
the
creamery
in
1981
for
$1.6
million
had
an
equivalent
value,
“market
value”,
to
that
amount
($1.6
million)
on
December
31,
1971,
is
a
rather
unusual,
perhaps
astonishing,
proposition
—
but
it
could
be
possible.
In
support
of
that
claim,
the
appellant
provided
the
Court
with
Exhibit
A-12,
an
appraisal
report
prepared
and
supported
in
testimony
by
Mr.
Edouard
Wayne
Hooey
C.A.,
of
Ward,
Mallette,
Chartered
Accountants.
Mr.
Hooey,
in
the
report,
indicated
that
there
were
two
different
methods
of
evaluating,
as
at
December
31,
1971,
the
milk
quota
—
“an
empiric
analysis
based
on
other
quota
sales”
approach,
and
"the
earning
approach
under
which
estimates
of
maintainable
earnings
were
capitalized
at
an
appropriate
rate
to
establish
a
value
for
the
company
with
that
value
then
allocated
between
various
business
assets
or
classes
of
assets"
approach.
Mr.
Hooey
was
accepted
by
the
parties
as
an
"expert
witness",
and
indeed
his
experience
and
background
included
related
assignments.
However,
during
his
testimony
Mr.
Hooey
made
it
clear
that
he
was
giving
both
his
own
view
and
that
of
his
client
—
the
appellant
—
which
of
course
were
identical,
and
that
does
leave
some
cloud
on
the
independence
and
value
of
his
report.
It
was
difficult
to
be
certain
from
the
testimony
of
Mr.
Hooey
which
method
he
used
as
"primary"
in
arriving
at
his
conclusion,
and
which
method
he
used
to
"check"
his
first
results
—
but
the
report
would
seem
to
finally
rely
on
the
"income
capitalization”
method.
With
regard
to
the
“empiric
analysis
based
on
other
quota
sales"
approach
(supra),
Mr.
Hooey's
report
noted
the
following:
Simply
put,
with
respect
to
quota
owned
by
smaller,
inefficient
creameries,
who
because
of
losses
or
inadequate
returns
were
required
to
sell
quota,
during
1969,
1970
and
1971
it
was
a
buyers
market.
The
value
in
use
of
additional
quota
to
a
large
processor
that
could
absorb
additional
quota
allocation
into
its
operations
was
far
greater
than
.60c-.65c
per
cwt.
To
give
a
specific
example
of
the
value
in
use
of
an
economic
quota
allocation,
and
the
value
of
quota
concentratrion,
it
might
be
useful
to
consider
the
1970
and
1971
results
obtained
by
Teeswater
with
respect
to
quota
it
had
acquired
in
1969
and
1970.
As
previously
mentioned,
we
consider
a
buyers
market
existed
for
smaller
quota
allocations
and
Teeswater
was
able
because
of
its
location
and
position
in
the
industry
to
acquire
those
quota
allocations
at
bargain
prices.
We
estimate
that
the
70,000,000
lbs.
of
quota
purchased
by
Teeswater
in
1969
and
1970
generated,
on
average,
in
excess
of
$300,000
of
pre-tax
income
annually
during
1970
and
1971.
Clearly,
the
value
of
that
quota
in
use
to
Teeswater
and
to
any
of
its
significant
competitors,
were
they
in
a
position
to
have
acquired
that
quota,
was
in
excess
of
.60c-.65c
per
cwt.
and
would
in
fact
be
in
excess
of
$1
per
cwt.
As
stated
at
the
beginning
of
this
section,
to
the
best
of
our
knowledge,
there
had
not
been
any
sales
of
quota
allocation
comparable
to
the
allocation
owned
by
Teeswater.
Had
there
been,
it
would
represent
a
sale
in
a
completely
different
market
to
the
one
smaller
processors
found
themselves
in.
A
sale
by
Teeswater
would
have
involved
the
sale
of
a
business
as
a
going
concern
and
the
market
would
include
not
only
other
large
processors
of
industrial
milk
but
also
other
investors
interested
in
expansion
or
diversification
into
the
food
industry.
A
premium
over
the
price
obtained
by
smaller
processors
at
December
31,
1971
for
sales
of
quota
allocation
is
warranted
for
quota
concentrations
in
efficient
use
by
operations
such
as
Teeswater.
Based
on
our
review,
we
believe
a
value
of
approximately
$1
per
cwt.
of
base
plant
supply
quota
or
$1,600,000
is
a
reasonable
value
to
be
attributed
to
plant
supply
quota
owned
by
Teeswater
and
reflects
an
appropriate
premium
in
the
specific
circumstances
of
Teeswater
Creamery.
[Emphasis
mine.]
Mr.
Hooey's
evidence
did
not
support
or
substantiate
the
portions
of
the
above
text
which
are
underlined,
and
they
are
essential
to
the
conclusion
reached
in
my
view.
Turning
then
to
the
Earnings
Approach,
Mr.
Hooey's
premise
was:
Earnings
Approach
In
order
to
establish
the
fair
market
value
of
a
company
based
on
earnings,
it
is
necessary
first
to
establish
a
level
of
earnings
that
can
be
maintained.
Maintainable
earnings
are
then
capitalized
using
an
appropriate
capitalization
rate
which
is
intended
to
provide
an
investor
with
a
reasonable
rate
of
return
taking
into
consideration
estimated
future
earnings
and
the
degree
of
risk
inherent
with
the
investment.
Mr.
Hooey
compared
operating
results
for
the
three
years
1970,
1971
and
1972
—
including
adjustments
to
them
he
considered
necessary
—
and
arrived
at
an
average
maintainable
earnings
of
$311,000,
which
he
multiplied
by
a
“capitalization
rate”
of
12-13
times,
selected
a
mid-point
value
of
$3.8
million
for
the
business
which
he
then
used
in
allocating
earnings
to
different
aspects
of
the
operation
—
“milk
quota",
“trucking
licenses"
and
“fixed
assets".
A
figure
of
$1.6
million
for
the
“milk
quota"
could
be
thus
calculated
as
at
December
31,
1971.
Because
of
a
corporate
change
which
affected
the
year
1972,
certain
specific
other
adjustments
had
to
be
made
to
that
year's
figures
to
make
them
somewhat
comparable
to
years
1970
and
1971.
With
this
calculation,
relatively
small
individual
adjustments
and
changes
could
make
substantial
differences
in
the
final
result.
It
is
my
view
that
all,
or
virtually
all,
of
the
adjustments
and
changes
made
by
Mr.
Hooey
had
the
effect
of
bolstering
and
increasing
the
V-Day
value
result,
and
I
found
none
that
would
have
tended
to
produce
a
minimal,
or
even
modest
result.
Recognizing
as
I
do
that
evaluation,
at
best,
is
an
art
and
not
a
science,
it
still
does
little
for
the
acceptability
of
a
report
when
in
structure
and
application
it
appears
to
be
highly
skewed
in
one
direction.
I
would
note
in
particular
the
following
factors
which
are
of
dubious
value
to
the
appellant:
(1)
The
use
of
“projections"
for
1972,
made
by
Ward
Mallette
in
April
1972
rather
than
the
actual
results
could
be
a
distortion.
It
might
be
asserted
that
as
at
V-Day
(December
31,
1971)
a
prospective
purchaser
could
only
look
ahead
at
“projections",
but
the
Court
was
not
made
aware
if
these
“projections"
had
proven
to
be
reasonably
accurate.
(2)
The
discarding
of
‘‘management
salaries”
paid,
of
$213,000
and
$188,000
respectively
for
the
years
1970
and
1971,
as
“unreasonably
high”,
and
the
substitution
therefor
of
a
marginal
salary
of
only
$60,000
for
the
year
1972
(during
which
management
salaries
might
not
have
been
paid
by
a
“prospective"
new
purchaser)
was
not
warranted
in
my
view.
The
experience
and
management
contributions
of
the
two
brothers,
R.G.
Thompson
and
D.H.
Thompson,
for
the
years
1970
and
1971,
whether
or
not
worth
the
totals
of
$213,000
and
$188,000,
could
not
have
been
replaced
for
$60,000
in
1972.
(3)
The
estimate
of
“additional
income"
of
$200,000
arising
out
of
the
acquisition
of
additional
quota
in
the
year
1970
is
highly
questionable.
The
net
“quota"
cost
of
that
purchase
of
another
small
creamery
(40,000,000
lbs.)
was
$104,000
(26c
per
cwt.).
I
would
suggest
it
would
have
been
optimistic
to
anticipate
not
only
full
recovery,
but
virtually
double
the
cost
of
the
quota
purchase
from
this
much
smaller
creamery.
(4)
Even
after
the
“adjustments"
contained
in
the
report,
the
income
of
the
corporation
for
the
year
1971
was
lower
by
a
substantial
amount
than
a
similar
calculation
for
the
year
1970
($367,300
—
(1970)
to
$254,000
—
(1971)).
I
would
think
that
some
attention
might
have
been
paid
to
this
indication,
at
least,
to
the
fact
that
the
profit
line
decreased
from
1970
to
1971
—
not
an
optimistic
note.
(5)
It
was
only
with
the
inclusion
and
utilization
of
the
“projected"
earnings
and
a
very
low
“management
salary”
factor
(no.
2
above)
for
the
year
1972,
that
the
average
adjusted
results
of
$311,000
per
year
(supra)
for
the
three
years
could
be
calculated.
(6)
The
allocation
of
the
"maintainable
earnings”
between
“fixed
assets”
and
"milk
quota”,
which
arises
out
of
the
calculations
based
on
the
value
of
the
business
of
$3.8
million
as
at
December
31,
1971
(supra)
is
difficult
to
follow,
but
it
would
appear
that
a
great
deal
more
credit
for
earnings
potential
is
given
to
the
“milk
quota”
than
that
given
to
the
“fixed
assets”.
The
evidence
indicates
that
the
appellant
had
a
good
efficient
plant,
and
responsible
knowledgeable
management.
To
attribute
a
major
part
of
that
earning
potential
to
an
intangible
asset
such
as
“milk
quota”
(not
totally
dissimilar
from
"goodwill”)
is
to
take
a
stronge
position
in
an
industrial
operation,
particularly
when
that
"quota”
was
quite
a
fictitious
figure
—
the
amount
of
milk
available
to
this
producer
being
only
a
percentage
of
that
quota.
In
summary,
the
appellant's
valuation
report
does
not
prove
the
assertion
that
the
quota
should
be
given
a
value
of
about
$1.00
per
cwt.
on
December
31,
1971.
We
turn
now
for
a
few
comments
on
the
respondent's
report.
Mr.
R.
P.
Carlin
testified
as
an
expert
witness
for
the
respondent,
and
presented
his
report
in
which
he
gave
his
opinion
in
the
amount
of
$1
million
for
the
quota.
He
based
this
on
the
same
two
methods
outlined
by
Mr.
Hooey,
but
he
used
the
known
sales
in
1970
and
1971
(supra)
to
conclude
that
the
range
of
values
was
60c
to
65c
per
cwt.
at
December
31,
1971,
producing
thereby
a
range
of
values
of
$972,000
to
$1,053,000.
Similarly,
using
the
"capitalization
of
income”
approach,
but
using
quite
realistic
amounts
and
adjustments
in
my
opinion,
he
verified
this
estimate
of
$1
million.
It
was
a
full
and
complete
report,
supported
by
clear
testimony
and
comprehensive
answers
to
questions
which
arose
out
of
it.
In
my
view
—
the
report
in
its
assumptions
and
calculations
was
generous
to
the
appellant
and
only
supported
in
the
most
conservative
manner
the
position
of
the
respondent.
Based
on
my
comprehension
of
the
evidence
available
I
seriously
doubt
that
at
December
31,
1971,
the
quota
could
have
sold
for
even
$1
million.
However,
it
is
not
my
role
to
restrict
or
reconstruct
the
Minister's
assessment,
only
to
determine
if
the
appellant
at
the
hearing
has
done
serious
damage
to
that
assessment.
In
my
appreciation
of
the
testimony
of
the
witnesses,
the
quota
system
was
first
introduced
in
1969,
and
there
was
great
expectation
almost
assurance,
for
a
period
of
time
thereafter,
that
the
quota
assigned
to
each
producer
could
be
completely
met
out
of
the
milk
which
would
become
available.
I
am
prepared
to
agree
that
when
creamery
plants
continued
to
receive
only
a
percentage
of
the
assigned
(or
purchased)
quota,
greater
interest
and
further
purchases
of
quota
may
have
developed.
Accordingly
during
1971,
quota
probably
had
a
value
somewhat
greater
than
the
26c
and
27c
per
cwt.
paid
earlier
in
1970
by
this
appellant,
but
there
is
no
indication
that
it
escalated
by
the
end
of
1971,
in
the
dramatic
way
asserted
by
the
appellant
to
$1.00
per
cwt.
There
is
no
indication
that
there
was
even
a
demand
of
any
kind
on
December
31,
1971
for
a
quota
the
size
of
the
appellant’s
(more
than
160,000,000
lbs.
by
that
time),
let
alone
that
it
would
sell
for
$1.00
per
cwt.,
taking
into
account
that
a
purchaser
would
be
expected
to
also
acquire
all
the
production
assets
of
this
company.
There
was
no
basis
provided
by
the
evidence
and
testimony
upon
which
to
conclude
that
the
appellant’s
quota
which
did
sell
sold
for
$1.00
per
cwt.
in
1981,
had
a
fair
market
value
of
the
same
amount
ten
years
earlier
in
1971,
no
matter
how
efficient
and
desirable
the
operation.
This
part
of
the
appeal
will
be
dismissed.
Waterloo
Real
Estate
The
appellant’s
proof
of
the
value
at
V-Day
in
1971
of
the
land
in
Waterloo,
sold
as
part
of
the
total
package
in
1980
for
$777,000
was
essentially
an
“appraisal”
(Exhibit
A-1)
report
prepared
by
Colin
C.
MacDonald,
appraiser-consultant
which
produced
an
amount
of
$161,780.
The
furniture
manufacturing
operation
conducted
by
the
appellant
at
V-Day
on
the
subject
land
was
by
all
agreement,
a
losing
venture
of
substantial
proportion
—
perhaps
$200,000
to
$300,000,
per
year.
Therefore
there
was
no
value
at
that
date
in
the
land
or
buildings
from
an
“income
capitalization"
perspective,
and
this
was
not
attempted
by
either
party.
The
appellant
agreed
that
the
estimate
of
$202,000
used
in
filing
the
returns
would
be
abandoned.
It
was
clear
from
the
testimony
and
evidence
that
at
December
31,
1971,
the
property
was
improved
—
it
contained
the
buildings
used
by
the
appellant
in
its
"furnitures"
division,
as
it
was
at
that
time.
It
was
also
clear
that
the
property
was
zoned
industrial,
and
had
been
so
designated
by
the
Municipality
in
an
official
plan
shortly
before
V-Day.
The
essence
of
Mr.
MacDonald's
report,
and
its
major
flaws,
are
contained
in
the
following:
Statement
of
Highest
and
Best
Use
It
is
the
appraiser’s
opinion
that
the
subject
property
on
the
effective
date
of
this
appraisal
was
not
utilized
in
accordance
with
the
principle
of
highest
and
best
use.
By
highest
and
best
use
is
meant
that
program
of
land
use
which
will
preserve
the
utility
of
the
land
and
yield
a
net
income
flow
that
forms,
when
appropriately
capitalized
the
highest
and
best
use
of
the
land.
The
subject
land
is
zoned
Industrial
but
surrounding
land
is
residential
on
four
sides.
The
subject,
Canadian
Cabinets
and
Furniture
was
not
considered
a
“viable”
business
in
1971.
It
is
apparent
that
an
alternate
use
would
be
residential,
either
single
family
units,
multi-family
or
townhouses.
Civic
officials
are
desirous
of
having
industrial
uses
moved
out
of
the
downtown
area.
It
was
intimated
at
City
Hall
Planning
Department
that
City
Hall
is
desirous
of
having
Industrial
uses
moved
out
of
the
subject
downtown
area.
An
overall
planning
review
intimates
that
a
zone
change
to
residential
would
likely
receive
favourable
consideration.
The
general
conclusion
is
that
the
subject
land
would
receive
favourable
consideration
as
a
residential
or
low
density
multiple
unit
site.
The
approach
then
taken
by
Mr.
MacDonald
was
to
consider
what
the
land
alone
would
have
been
worth
on
V-Day,
allowing
for
costs
of
demolition
of
the
buildings
and,
where
necessary,
costs
to
service
that
land
in
a
manner
similar
to
any
other
comparable
vacant
property.
While
Mr.
MacDonald
listed
in
his
report,
a
total
of
six
possible
“comparables”,
he
relied
almost
exclusively
on
one
designated
as:
300
Regina
St.
N.,
Waterloo
211.708
sq.ft.
(4.860
acres)
Sold
May
15,
1970
$224,500
($1.06/sq.
ft.)
He
expressed
the
view
that
the
two
properties
(subject
and
300
Regina
St.)
were
similar
in
size
and
near
enough
in
location
to
provide
a
good
reference
point.
He
was
unaware
(until
cross-examined)
that
there
had
been
some
buildings
on
the
site
at
300
Regina
St.,
before
sale;
that
it
had
consisted
of
three
separate
parcels,
not
one
parcel;
and
that
the
apartment
building
now
constructed
on
it
had
now
about
400
units
in
it.
He
did
agree
that
300
Regina
St.
had
been
zoned
"high
rise
residential"
at
the
time
of
acquisition,
but
he
had
made
no
examination
of
whether
the
residential
demand
in
the
area
might
have
supported
a
second
similar
high-rise
unit
at
the
subject
property
—
even
if
the
municipality
could
be
persuaded
to
rezone
it
for
such
a
purpose.
He
did
agree
such
“high-rise”
use
was
of
a
much
greater
density
use
than
even
he
had
indicated
could
or
should
be
assigned
to
the
subject
property
in
his
report
—
“‘single
family,
multi-family
or
townhouses”.
Eventually
Mr.
MacDonald’s
proposition
was
that
—
if
the
subject
land
had
been
vacant
at
December
31,
1971;
if
it
had
been
rezoned
to
permit
a
“high-rise”
residential
building;
and
if
there
existed
a
citizen
demand
for
such
accommodation
at
that
date,
then
the
subject
property
could
have
served
the
same
purpose
as
300
Regina
St.,
and
could
have
commanded
a
price
of
$161,780.
Minister's
counsel
in
this
matter,
took
the
position
that
there
were
several
technical
errors
in
Mr.
MacDonald’s
report
—
particularly
some
confusion
about
the
effective
date;
and
that
Mr.
MacDonald
had
rendered
his
own
report
valueless
by
not
first
valuing
the
total
real
estate
in
the
then
existing
use
—
as
the
“highest
and
best”
use,
which
valuation
would
include
and
identify
a
portion
for
the
land.
It
is
my
opinion
that
the
acknowledged
technical
errors
did
not
serve
to
invalidate
the
report
—
as
a
report;
and
I
can
at
least
comprehend
Mr.
MacDonald
visualizing
the
real
estate
stripped
of
its
assets
and
available
as
vacant
land
for
development
on
V-Day.
I
do
not
accept
that
the
only
way
a
qualified
appraiser
could
reach
an
estimate
of
valuation
of
the
property
would
be
to
go
through
the
exercise
described
by
counsel.
Counsel
for
the
Minister
chose
not
to
call
an
appraiser
and
present
an
appraisal
report
in
support
of
the
Minister's
assessment
valuation
of
$28,000.
Without
question,
I
am
prepared
to
agree
with
counsel
for
the
Minister
that
Mr.
MacDonald's
report
is
thin
and
weak.
Its
basic
premise,
“‘as
if
vacant
development
land”,
while
arguably
acceptable,
is
unusual,
and
Mr.
MacDonald
did
nothing
to
clear
away
the
questions
that
such
an
approach
brought
forward.
His
estimates
of
costs
for
demolition
($13,000)
and
servicing
($15,000)
are
probably
unrealistic,
leaving
the
net
amount
of
$161,780
subject
to
serious
questions.
However,
I
am
faced
with
certain
salient
points
—
à
parcel
of
property
of
approximately
the
same
size
as
the
subject
property,
allegedly
in
the
same
general
area
of
the
municipality,
and
allegedly
of
the
same
potential
as
the
subject
property,
was
sold
in
1970
(some
19
months
before
V-Day)
for
$224,500,
and
an
apartment
building
built
on
it.
Allowing
for
all
the
deficiencies
of
Mr.
MacDonald’s
report,
that
situation
in
itself
does
serious
damage
to
the
Minister's
unsubstantiated
estimate
of
$28,000.
I
see
no
purpose
in
arbitrarily
deciding
on
some
“in-between”
figure,
and
I
do
not
see
that
in
this
appeal
the
comments
regarding
valuation
proof
to
be
found
in
Nan
M.
Goodwin
v.
M.N.R.,
[1982]
C.T.C.
2675;
82
D.T.C.
1679,
have
any
application.
At
the
same
time
based
on
the
only
comparable
presented
to
the
Court
—
300
Regina
St.,
I
cannot
simply
accept
the
Minister's
assessment
amount
of
$28,000.
On
this
valuation
question,
the
preponderance
of
evidence
available,
in
fact
the
only
evidence,
favours
the
appellant,
and
this
part
of
the
appeal
will
be
allowed,
in
order
that
the
V-Day
value
of
the
land
shall
be
determined
as
$161,780.
Robbinex
Shares
No
official
valuation
report
was
presented
on
behalf
of
the
appellant,
but
the
witnesses
for
the
appellant
stated
that
at
the
time
the
Robbinex
shares
were
transferred
to
Holdings,
they
had
no
reason
to
assume
that
they
were
not
equal
to
the
$700,000
value
at
issue.
Information
supplied
to
them
by
the
manager
of
Cabinets
—
Mr.
Melenchuck
also
a
shareholder
in
Cabinets,
—
was
to
the
effect
that
both
current
business
and
future
orders
were
good;
the
old
inventory
was
being
disposed
of;
costs
were
getting
under
control;
new
furniture
designs
were
being
accepted
by
the
public;
and
the
company
should
be
earning
profits
by
the
end
of
1980
or
early
in
1981.
According
to
the
witnesses,
the
amount
of
the
operating
loss
shown
for
1980
of
$589,756
was
a
surprise
to
them,
and
only
became
known
late
in
March
1981
when
the
financial
statements
were
prepared.
They
all
indicated
that
they
expected
a
loss
of
some
$300,000
in
1980,
and
allegedly
had
made
provision
for
that
amount
in
the
planning.
Conversely,
Mr.
Carlin
for
the
Minister
prepared
and
presented
a
detailed
valuation
report,
and
reached
the
following
conclusion:
Exhibit
7
ROBBINEX
TRADING
CORPORATION
SHARE
VALUATION
AT
DECEMBER
31,
1980
|
ADJUSTED
BOOK
VALUE
BASIS
|
|
|
Current
Assets
|
|
$
99,679
|
|
Long
Term
Investment
|
|
|
Investment
in
Canada
Cabinets
|
|
$1,171,500
|
|
Less
Loss
to
December
31,
1980
|
$589,756
|
|
|
Portion
Attributable
to
Robbinex
|
|
561,156
|
|
Revised
Value
of
Investment
|
|
610,244
|
|
709,923
|
|
Less:
Current
Liabilities
|
|
8,610
|
|
Adjusted
Book
Value
1,275,00
[sic]
Common
|
|
|
Shares
|
|
709,313
|
|
Adjusted
Book
Value
900,000
Common
Shares
|
|
$495,000
|
Mr.
Carlin
provided
his
understanding
of
the
“investment"
by
Robbinex
Cabinets,
and
his
reasons
for
attributing
only
a
portion
of
the
Cabinet’s
loss
($561,256)
to
the
reduction
in
value
of
the
Robbinex
investment.
In
brief,
the
investment
was:
History
Robbinex
Trading
Corporation
was
incorporated
in
1979
as
an
investment
holding
company,
the
major
investment
being
shares
of
Canada
Cabinets
and
Furniture
(1980)
Inc.,
Waterloo,
Ontario,
as
follows:
In
vestment
in
Canada
Cabinets
and
Furniture
(1980)
Inc.
100
—
Class
B
12%
preference
shares,
par
value
|
$10,000
each
|
$1,000,000
|
|
(representing
100%
of
the
issued
|
|
|
Class
B
Shares)
|
|
|
215,000
—
Common
shares
|
21,500
|
|
$1,021,500
|
|
Promissory
Note
—
|
150,000
|
|
non-interest
bearing
|
|
|
Total
Investment
in
Canada
|
|
|
Cabinets
|
$1,171,500
|
It
was
common
ground
between
the
parties,
that
the
value
of
the
Rob-
binex
shares
was
to
be
found
in
the
underlying
value
of
the
assets
in
Cabinets.
It
is
difficult
to
accept
as
sufficient
the
opinion
of
the
witnesses
for
the
appellant
that
individually
or
collectively,
they
simply
lacked
adequate
knowledge
of
the
real
state
of
affairs
of
Cabinets
during
the
year
1980.
This
was
a
business
with
a
long
and
painful
record
of
huge
losses,
and
it
would
have
been
a
major
event
for
Mr.
Melenchuck
to
turn
it
around
in
a
matter
of
months.
It
was
a
business
with
which
the
brothers
Thompson
were
intimately
familiar,
having
invested
hundreds
of
thousands
of
dollars
in
it,
over
many
years.
Mr.
Doug
Robbins,
a
real
estate
consultant,
who
became
a
major
shareholder
in
Robbinex,
was
directly
familiar
with
all
aspects
of
it,
having
spent
some
time
previously
trying
to
sell
it
for
the
brothers
Thompson.
He
finally
persuaded
the
Ontario
government
to
provide
a
$300,000
grant
to
the
brothers
Thompson
in
connection
with
setting
up
“Cabinets”
resulting
in
the
transactions
under
review
in
this
appeal.
Mr.
Hooey,
C.A.,
occupied
and
continued
in
a
valued
and
responsible
external
role
with
regard
to
Cabinets,
and
was
equally
familiar
with
the
operation.
But
what
the
witnesses
might
have
thought
the
net
assets
of
Cabinets
were
worth
is
one
thing,
what
really
matters
though
is
what
they
were
actually
worth.
The
issue
is
whether
Holdings
did
receive
value,
not
if
the
vendors
of
the
shares
—
the
brothers
Thompson,
thought
that
Holdings
was
receiving
value.
The
bottom
line
of
the
appellants’
position
must
be
that
even
after
suffering
an
operating
loss
of
almost
$600,000
in
the
period
March
1
to
December
31,
1980,
the
net
asset
value
available
to
shareholders
of
Cabinets,
at
December
31,
1980
was
at
least
$700,000,
leaving
aside,
(for
purposes
of
simplicity)
the
reduction
in
net
value
available
to
Holdings,
because
the
brothers
Thompson
held
only
part
of
the
Robbinex
shares,
and
that
Robbinex
in
turn
held
only
part
of
the
Cabinets
shares.
I
do
not
wish
in
any
way
to
detract
from
the
excellent
report
and
detail
provided
by
Mr.
Carlin,
but
I
am
of
the
view
it
is
generous
in
the
extreme
in
its
approach
and
in
its
calculation
when
a
value
of
$495,000
is
reached.
I
prefer
to
base
my
opinion
on
that
amount
which
is
designated
in
the
financial
statements
of
Cabinets
as
generally
representing
the
“net
asset
value”
—
the
shareholders
equity
of
$460,244.
(Available
on
Exhibit
A-10
—
Balance
Sheet
as
at
December
31,
1980.)
That
leaves
no
basis
whatsoever
for
the
proposition
of
the
appellants
that
the
transferred
shares
in
Robbinex
were
worth
$700,000.
I
would
venture
that
a
detailed
analysis
of
all
information
relevant
to
the
1980
fiscal
year
of
Cabinets
which
should
have
been
readily
available
to
Holdings,
through
the
brothers
Thompson,
would
result
in
a
serious
question
that
at
December
31,
1980,
the
shares
of
Cabinets
held
by
Robbinex,
had
any
value
at
all.
The
Minister
has
accorded
the
shares
a
value
of
$475,200
and
it
is
beyond
the
scope
of
my
authority
to
reduce
that
amount,
but
I
have
seen
nothing
which
would
indicate
it
is
too
low
as
contended
by
the
appellants.
This
part
of
the
appeal
will
be
dismissed.
In
summary,
the
appeal
will
be
allowed
in
part
and
the
entire
matter
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment,
in
order
that
the
V-Day
value
of
the
Waterloo
land
shall
be
determined
as
$161,780.
In
all
other
respects
the
appeal
is
dismissed.
Appeal
allowed
in
part.
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