Dailley Recreational Services LTD v. Minister of National Revenue, [1984] CTC 2762, 84 DTC 1680

Taylor, TCJ:—The Court commenced to hear this appeal on common evidence with that of Virginia M Dailley (83-839), in London, Ontario on April 10, 1984. The notice of appeal from the corporation reads in part as follows:

In or about September, 1974 the Appellant purchased a house located on RR #33 in the township of Flamborough, Village of Blair, (hereinafter called “Blair House”) for a purchase price of $137,000.00.

On or about February 29, 1980 the Appellant sold Blair House to Mrs Virginia M Dailley, the sole shareholder, director and officer of the Appellant for consideration totalling in the aggregate $137,000.00.

The Appellant states that the fair market value of Blair House at the date of its sale to Mrs Virginia M Dailley was $137,000.00.

For the Minister the situation was:

3. In so reassessing the Appellant for the 1980 taxation year the Respondent assumed the following:

(h) the adjusted cost base of Blair House at the date of disposition was $160,992.00.

5. The Respondent submits that the disposition of Blair House by the Appellant to Mrs Dailley was a disposition to a person with whom the Appellant was not dealing at arm’s length for proceeds of less than the fair market value thereof at the time of disposition to a person within the meaning of subparagraph 69(1)(b)(i), with the result that the Appellant is deemed to have received proceeds of disposition therefor equal to the fair market value of Blair House in February of 1980, viz., $285,00.00.

At the commencement of proceedings counsel for the Minister informed the Court that the Minister’s revised valuation was $256,000, rather than the $285,000 noted above.

Some of the evidence for the appellant’s valuation consisted of the filing of a two-page “Appraisers’ Report’’ prepared in 1976 for The Niagara Mortgage Companies, with the apparent purpose of supporting an application for a mortgage with that company (Exhibit A-l). It is elementary in the extreme, and no one appeared for purposes of clarifying it or amplifying it. The value attributed to the property by virtue of this “report” was somewhat unclear, but apparently it was between $137,000 and $150,000. A notation in the certificate of the report reads: “This report is confidential to the Niagara Mortgage Companies.” The Court rejects it, as having no probative value. A second document, one-page, dated April 18, 1979 prepared by Mr John Last indicated the value at $147,000. While Mr Last did appear, (see below), this particular document (Exhibit A-2) is also rejected as having no probative value for purposes of the hearing. It does not as far as I am concerned provide support for the basic proposition advanced by the appellant that the property did not increase in value between the years 1974 and 1980. I should also note that another two-page “Appraisal Report” dated November 28, 1973 was submitted by the appellant which indicated a value of $130,500 (Exhibit A-4). In my view this document — if it serves any purpose at all — serves only to show that in the year of acquisition (1974), the amount paid of $137,000 probably was reasonable — but that point was not in issue. A further two-page document (Exhibit A-3) dated February 13, 1980 prepared by Mr Last, (supra), was also submitted, and Mr Last gave testimony regarding it. For record purposes and in the interest of putting forward the foundation for this appeal, that entire document (Exhibit A-3) is reproduced:

DYER REALTY INC, 53 Queen St West, Cambridge, Ont NBC 1G2

February 13, 1980

Mrs Virginia M Dailley,

Blair House, Fallbrook Lane,

Cambridge, Ontario

Dear Mrs Dailley:

Re: Appraisal—Blair House,

Fallbrook Lane, Cambridge

In accordance with your request for an appraisal, and for the purpose of estimating the fair market value, I have carefully inspected the property known as:—

PART LOTS 3 & 4, BEASLEY’S OLD SURVEY

LOTS 87, 88, 89, 90 AND PART LOT 91,

PLAN 581 — BLAIR HOUSE, FALLBROOK LANE,

CAMBRIDGE, ONTARIO.

As a result of my investigation and analysis, I am of the opinion that the fair market value of the said property as of FEBRUARY 13, 1980 is:—

ONE HUNDRED AND THIRTY SEVEN THOUSAND DOLLARS

($137,000.00)

Market Value as used in this letter of opinion is defined as that price in dollars that a typical Purchaser would pay a typical Vendor for a particular property, where neither party is acting under duress, with the assumption that the property has been properly exposed on the open market for a reasonable period of time.

I have no present or prospective interest in the property, and my fee is not contingent on the value found.

The value is estimated as though the property is free and clear, and any liens and encumbrances, if they exist, are disregarded.

I have no responsibility for matters legal in character, nor do I render any opinion, as to the title as it is assumed to be marketable.

I am not required to give testimony or attend court by reason of this appraisal, unless arrangements are made to do so with the writer at the time of accepting this assignment.

Respectfully submitted,

DYER REALTY INC

(signed)

JOHN LAST

Counsel for the respondent quite properly noted objections to even the introduction of Exhibits A-l, A-2 and A-3 but he did cross-examine Mr Last to some degree. Exhibit A-3, is also rejected by the Court as having no value to the appellant for purposes of the hearing.

Mr Stephen P Saxe, of Stephen P Saxe Ltd, Real Estate Valuation and Consultation, presented his Valuation Report “as of 29 February 1980, and 30 October 1981”. It is a lengthy document, and Mr Saxe was helpful in the examination of its contents by both parties. By his testimony, Mr Saxe relied on the “comparable sales” approach in reaching his conclusion, confirmed, or at least supported, by interviews he had with various parties who might contribute to such results. Mr Saxe was forthcoming in his agreement that such direct comparisons were very difficult in this case, indeed in almost all cases of valuations. In the end Mr Saxe reached the following determinations:

Summary

In respect of the first issue, that is the market value of the subject as at the former valuation date we have given consideration to eight sales transactions six of which we find to be particularly relevant in respect of the subject as at that date. In our view these sales reflect a range of values for the subject of from $135,000 to $150,000 and all information is considered relatively appropriate. As a result of this analysis we believe that the market value of the subject as at the former valuation date was:

One Hundred Forty-Two Thousand ($142,000) Dollars

As a result of our review of the trend analysis described above and of the other statistics made available from sources mentioned, we believe that the market value of the subject rose by a rate of from 10% to 15%, say 12.5%, during the period of from 29 February 1980 to 31 October 1981. In absolute terms, this reflects an increase of $17,750. Accordingly, we believe that the market value of the subject as at the latter valuation date (rounded) was:

One Hundred Sixty Thousand ($160,000) Dollars

This value estimate is exclusive of value added to the subject as a result of the improvements (labour, material and enhancements) carried out by Mrs Dailley during the period of occupancy between the valuation dates.

Rationale of Sale Price

The price at which the subject sold in October 1981 is considered by us to be a “windfall gain” insofar as the vendor was concerned. During the course of our investigation we interviewed the vendor and purchasers and we are satisfied as to the following:

a) that the transaction occurred at arm’s-length;

b) that the purchasers were unfamiliar with the real estate sub-market within which the subject was situated;

c) that the subject held a particular attraction to the purchasers; and,

d) that the purchasers had the financial resources to acquire property well in excess of the purchase price paid for the subject.

In conclusion, it is our opinion that the sale price of $285,000 at 31 October 1981 reflected consideration well in excess of market value, as defined above, and constituted an unusual or windfall gain in the hands of the vendor.

Without going into unnecessary detail it is my view that under cross- examination, the properties used by Mr Saxe as comparables were shown to have little use in reaching the conclusion he did regarding the value of the subject property at 29 February 1980; and that Mr Saxe must have substantially relied on his perception of general and statistical information he gathered from other sources, such as The Real Estate Board. The underlying rationale flowing from the results of Mr Saxe’s report — that in the period 1974 to 1980 the subject property increased in value only from $137,000 to $142,000 is one which defies acceptance, short of outstanding and convincing proof of the most unusual nature. Evidence of any such proof is difficult if not impossible to discern in his report or his testimony. I would also note the fact (for later reference) that Mr Saxe as a professional did use a forward inflation factor of 12/2 per cent in determining the difference between values at February 29, 1980 and October 30, 1981.

From the earlier testimony of Mrs Dailley herself it was clear that she had attempted to list the property in April 1981 for some $300,000, finally listing it for $285,000, and selling it for that amount within a month or two. In addition, Mrs Margaret Maude Goodbody the purchaser of the property from Mrs Dailley, when called as a witness by counsel for the appellant, testified under cross- examination that Mrs Dailley would not reduce the $285,000 price in 1981, but even at that she (Mrs Goodbody) was still of the view that she had acquired a prperty of that value in 1981. She would repeat the transaction again, even after several years had intervened, according to her.

At this juncture it was the intention of counsel for the appellant to introduce a final witness, a Mr Ronald Blaxley, retired real estate broker and alderman of the city of Cambridge. Counsel for the Minister while questioning the basis upon which Mr Blaxley could possibly provide “valuation” evidence, nevertheless did not move that he be barred from providing whatever assistance he could to the Court. It was clear to the Court that Mr Blaxley was not going to provide professional appraisal evidence, but only general observations as a result of his experience and his background in municipal politics. The Court accordingly took a stricter view — simply what purpose was to be served by Mr Blaxley’s testimony other than to assist the Court in a review of the evidence and testimony presented by Mr Saxe? The ensuing discussions emphasized that Mr Blaxley could be of no assistance in that regard and that therefore the appellant’s case rested on the report of Mr Saxe. As opposed to the position of Mr Saxe, the Court was faced with clear information as to the value in the eyes and minds of a willing buyer and a willing seller — Mrs Goodbody and Mrs Dailley, at a point in time just more than a year after the date critical to this appeal, without noticeable change or improvement to the property in the interim. Since in his own calculations Mr Saxe had used a factor of 12.5 per cent increase between 29 February 1980 and 31 October 1981, the Court could understand the proposition of the Minister that using a similar factor to reduce the $285,000 actually paid in October 1981 to $256,000 as the estimated market value in February 1980 was equally realistic and acceptable. The Court pointed out to counsel for the appellant that under the rather peculiar circumstances of this case it would be justifiable to accept the alternative proposition of the Minister that resulted in a $256,000 valuation which placed considerable weight on the actual sale of the same property in 1981 for $285,000. There was a lack of viable appraisal information to support the most unusual and basic proposition of the appellant (that the value of the property had remained virtually unchanged from 1974 to 1980) and then increased (according to the appellant’s own appraisal report) between 1980 and 1981. But more importantly, — the proposition of the appellants was that the 1981 purchaser had paid an exorbitant price for the property — a conclusion which was in direct conflict with the sworn testimony of Mrs Goodbody. After a discussion on “hindsight” which also included a concession by the appellant that the value of $142,000 rather than $137,000 should be used the Court requested written argument from counsel for the appellant in support of his submission that the sale of the property in 1981 should not be regarded as directly relevant or admissible evidence. In the event the Court could be dissuaded, the hearing could be resumed on that point, the Minister’s valuation report submitted and examined.

The following is the submission of counsel for the appellant, and the comments thereon submitted by counsel for the respondent:

LEGAL SUBMISSIONS

83-838 83-839

IN RE: THE INCOME TAX ACT

IN THE TAX COURT OF CANADA

BETWEEN:

VIRGINIA M DAILLEY

and

DAILLEY RECREATIONAL SERVICES LTD	Appellants,
AND
THE MINISTER OF NATIONAL REVENUE
	Respondent.

1. This matter was heard on April 10, 1984 before Mr Justice Delmer Taylor in London, Ontario.

2. When the matter was adjourned at 5:30 pm Mr Justice Taylor stated that the actual sale of Blair House from Virginia M Dailley to Mrs Goodbody which took place in October of 1981 was determinative of the fair market value of the property on February 29, 1980, the date the property was sold from Dailley Recreational Services Limited to Virginia M Dailley. Mr Justice Taylor further stated that either the Department of National Revenue was correct or the taxpayer was correct, and unless I could convince him that our figures were totally correct, he chose to accept the figure put forward by the Department of National Revenue.

3. I submit that the figure put forward by the Department of National Revenue is totally incorrect for the following reason:

“(a) Market value is the price which a willing buyer would be justified in paying and a willing seller would be warranted in accepting, if each is (1) well informed and well advised, (2) motivated by reactions of typical users, (3) free of undue stimulus, (4) financially capable of ownership, occupancy and/or use, and (5) allowed a reasonable time in which to test the market.

Market price is defined as the amount actually paid or about to be paid in a particular transaction. It is a fact. No allowance is made for knowledge or prudent conduct on the part of buyer or seller, degree and type of stimulus motivating either or both, financing terms, use for which the property is best suited, or length of time the property is exposed to the market. Market price can and often does, result from caprice, carelessness, desperation, egotism, ignorance, pressure, sentiment, social ambition, whim and many other factors.

Market value, on the other hand, is an estimate resulting from careful consideration of all data, with primary reliance on those data which reflect the doings of reasonable, prudent buyers and sellers under conditions of a fair sale.

Extracts from “Encyclopaedia of Real Estate Appraising”. 1963. (Page 20, 21).

(b) The Appellant submits that under the provisions of section 69 of the Income Tax Act we are concerned with determining the fair market value of Blair House and not the market price. Similarly, a benefit, if any, under section 15 of the Income Tax Act, should be based on fair market value and not market price.

(c) The Appellant submits that the only evidence of market value before the court was the expert testimony of Stephen Saxe and the mortgage appraisals of Blair House in 1976 and 1979.

(d) The Appellant submits that the actual sale that took place in October of 1981 is only evidence of market price and has nothing to do with the matters to be determined by this court. The purchaser was not a well informed and well advised purchaser. She was new to the area, she had no advice and no knowledge of value in the area, and she paid the asking price without any negotiation.

(e) As a general rule hindsight evidence is inadmissible as proof of market value as neither the buyer nor the seller would have any knowledge of what will happen in the future at the time that the transaction is entered into. The only time hindsight evidence should be admissible as proof of market value is when there is no other evidence available to the court from which market value can be determined.

(f) The Appellant submits that in the present instance there were a number of properties that sold during the relevant period that would have been suitable substitutes for the subject property. Evidence of these sales would be evidence of market value of the subject property.

(g) The Appellant submits that there was no evidence before the court that would justify the court taking the position that hindsight evidence was admissible and that the market price a year and a half after the particular sale is proof of the market value at the date of the particular sale.

(h) Finally, there is no rule of law which states that in valuation situations either the Appellant or the Respondent is correct. It is the duty of the judge, having heard all of the evidence, to decide what the market value of the subject property at the particular date should be.

(i) The Appellant respectfully submits that where, on the evidence, neither the valuation of the Appellant or the Respondent is correct, to simply choose between them may result in a serious injustice. Taxation is a very serious matter, and to impose tax upon an appellant in a situation where the quantum of taxation is not clearly justified by the evidence is to commit an injustice.

All of which is respectfully submitted.

Dated at Toronto this 7th day of May, 1984.

Shibley, Righton & McCutcheon Solicitors for the Appellants

Per:

B D Katchen

83-838 83-839

TAX COURT OF CANADA

IN RE: The Income Tax Act

BETWEEN:

VIRGINIA M DAILLEY —and—

DAILLEY RECREATIONAL SERVICES LTD

Appellants,

AND

THE MINISTER OF NATIONAL REVENUE

Respondent

REPLY TO LEGAL SUBMISSIONS OF THE APPELLANTS

In reply to the Appellants’ Legal Submissions dated May 7, 1984 the Respondent states as follows:

A. Statement of Facts:

1. The Respondent admits paragraph 1 of the Appellants’ submissions.

2. With respect to paragraph 3(b) of the Appellants’ submission, the Respondent admits that the issue in this appeal under Sections 69 and 15 of the Income Tax Act is the fair market value of Blair House at February 29, 1980.

3. The Respondent does not admit any other allegation of fact or conclusion of law in the Appellants’ submissions.

B. Authorities Upon Which the Respondent Relies and the Reasons Which He Intends to Submit:

4, The Respondent respectfully submits that the burden of proof is on the Appellants to show that the Respondent’s assessment is incorrect, and that in the absence of such proof the Appellants’ appeal must be dismissed. Johnston v MNR, 3 DTC 1182 (SCC).

5. It is respectfully submitted that the opinion evidence of the Appellants* witness Stephen Saxe was not sufficient to show that the Respondent’s assessment was incorrect.

6. It is submitted that, in fact, the evidence of the Appellant Mrs Dailley is supportive of the Respondent’s assessment in that in or about June of 1981, she initially suggested to the listing agent that Blair House be listed for $300,000.00 and then agreed to a listing of $285,000.00.

7. It is further respectfully submitted that the evidence of the Appellants’ witness Mrs Goodbody that she paid $285,000.00 for Blair House in October of 1981 is supportive of the Respondent’s assessment.

8. It is submitted that in addition to the sale to Mrs Goodbody, there was evidence of a conditional offer of $265,000.00 for Blair House by a Mr Petty, and a conditional offer of $285,000.00 by a Mr Smart, both such offers occurring prior to the sale to Mrs Goodbody in October of 1981.

9. It is respectfully submitted that in matters of valuation the best measure of fair market value of a property is provided by offers to purchase, or actual sales of, the subject property itself from independent and interested persons. Matador Co-operative Farm Association Ltd v MNR, 84 DTC 1038 at 1041 (TCC); MNR v Groulx, 66 DTC 5126 at 5139 (Ex Ct); affirmed 67 DTC 5284 (SCC).

10. It is respectfully submitted that in the absence of special circumstances, evidence of an offer to purchase is relevant to and probative of fair market value regardless of whether such offer was prior to or subsequent to the date of valuation. The Supreme Court of Canada stated in the case of Roberts and Bagwell v The Queen, [1957] SCR 28 at p 36, per Nolan, J:

“In my view, evidence of a sale after the enactment can, in the absence of special circumstances, be relevant to the value prior to the enactment. The same must be shown to be free in all respects from extraneous factors such as prior sales and made within such time as the evidence shows prices not to have changed materially from those before the critical data. In other words, mere circumstance of the sale being before or after a particular date cannot nullify the relevance of subsequent sales while the general market conditions have remained the same. The rules should allow the court to admit evidence of such sales as it finds, in place, time and circumstance to be logically probative of the fact found.” Roberts and Bagwell v The Queen, [1956] SCR 28, at pp 36-37.

11. It is further submitted that in the absence of special circumstances, market price is the best test of market value. HMQ v National System of Baking of Alberta Limited, 78 DTC 6018 at 6021 (FCTD); affirmed 80 DTC 6178 (FCA); Untermeyer v Attorney General of BC, [1929] DLR 315 at 319 (SCC).

12. It is respectfully submitted that the Appellants have shown neither special circumstances nor such a change in general market conditions as would indicate that the Respondent’s reliance upon the purchase price of Blair House in October of 1981 in establishing the fair market value of that property on February 29, 1980 was incorrect or unjustified.

WHEREFORE, the Respondent respectfully requests that this appeal be dismissed.

DATED at TORONTO this 6th day of June, 1984.

R. Tassé

Deputy Attorney General of Canada Solicitor for the Respondent

PER:

Roger E Taylor

As I read the above submissions, there are only two critical points raised by counsel for the appellant. First paragraph (e):

As a general rule hindsight evidence is admissible as proof of market value as neither the buyer nor the seller would have any knowledge of what will happen in the future at the time that the transaction is entered into. The only time hindsight evidence should be admissible as proof of market value is when there is no other evidence available to the court from which market value can be determined.

and paragraph (i):

The Appellant respectfully submits that where, on the evidence, neither the valuation of the Appellant or the Respondent is correct, to simply choose between them may result in a serious injustice. Taxation is a very serious matter, and to impose tax upon an Appellant in a situation where the quantum of taxation is not clearly justified by the evidence is to commit an injustice.

Taking these in reverse order I would note that I dealt with the second point in Goodwin v MNR, [1982] CTC 2675; 82 DTC 1679 at 2676 [1680]:

I am not of the opinion that the Board is required to consider at all whether the valuation used by the Minister is correct or incorrect.

I am aware that Goodwin, (supra), is under appeal to the Federal Court, and while I would be immediately redirected by a rejection of that opinion by the higher Court, I have seen nothing in the interim period to dissuade me from that opinion. I would also point out that in the instant appeal, an appraisal report of at least some consequence was presented which would serve to distinguish it to some degree from Goodwin, (supra).

The first point is really the one which needed serious consideration by the Court, and if indeed “hindsight” can play no viable part in such a determination, and if indeed the $285,000 amount paid in 1981 can be justly regarded as included in the term “hindsight”, then the position of counsel for the applicant should be maintained, the appraisal evidence slim as it is, presented by the appellant considered as the only evidence to this point in the hearing, and the hearing resumed for a review of whatever evidence the Minister might wish to present. And so to the question of “hindsight”, long a shibboleth of untouchable proportions.

It strikes me as strange, that in a tax appeal where the basic point at issue may be the intention of parties at a particular point in time, that the conduct of the parties subsequent to that critical date can well be looked at to confirm or deny the intentions put forward (ie in a “capital v income” acquisition matter). I am speaking of the conduct of the parties involved, not of external events or transactions in which they had no part, or over which they had no control. The learned Judge in the celebrated case of Power v The Queen, [1975] CTC 580; 75 DTC 5388 cautions against the rejection of direct testimony and acceptance of converse circumstantial evidence but he also carefully points out at 585 [5391]:

All issues must be determined by a careful consideration of all of the relevant evidence both direct and circumstantial ... The Court must also bear in mind that facts often speak louder than words and that free acts are very good indication of what a person really intends and overt acts and their results constitute an excellent means of deciding what the intention actually was.

One might reasonably argue that rather than the action of Mrs Dailley in selling the subject property for $285,000 in 1981 falling into the category of “hindsight”, her earlier action in acquiring the property in 1980 from the appellant corporation for $137,000 might be regarded as “foresight”. In this matter, I do not distinguish the action and conduct of Mrs Dailley from those of the corporation for purposes of a determination of the admissibility as evidence of the 1981 sale. It remains my conclusion that the best, and probably the only viable, evidence of the value of the subject property as at February 1980 is the sale in October 1981, and the facts related to that sale do not fit any criteria I understand, to exclude it therefrom merely because it is a subsequent transaction. A noted and highly regarded text on the subject “The Principles and Practice of Business Valuation” by Ian R Campbell, has this to say regarding the point [Editor's note. The footnotes for quoted material appear at end of quote.]:

Hindsight is Inadmissible in Reaching Valuation

Conclusions at an earlier Point in Time

It is well established that retrospective evidence is not admissible in reaching a notional valuation conclusion. Therefore, if in 1975 it is necessary to determine the fair market value of the outstanding shares of a closely held corporation as at December 31, 1971, any facts or information which become known after December 31, 1971 should not be considered unless those facts were both predictable and likely to have been considered by a reasonable and objective observer at the earlier date. In Holt v IRC, Danckwerts, J said:

It is necessary to assume the prophetic vision of a prospective purchaser at the moment of the death of the deceased, and firmly to reject the wisdom which might be provided by the knowledge of subsequent events.

In Taylor Estate v MNR, Mr Fordham quoted from a publication issued by the Canadian Institute of Chartered Accountants: [13]

There is a tendency for some valuators to read into retrospective valuations much material which was not actually available at the required valuation date. If a retrospective valuation is required, many court judgments have indicated that hindsight is to be excluded excepting where it applies to evidence in existence or which can be reasonably assumed to have been true as of the required valuation day.

Assume, for example, that a mining company has discovered valuable ore deposits after December 31, 1971. Using hindsight, it might be argued that since the ore was in the ground at December 31, 1971, the higher value evident following discovery should also be assigned at that earlier date. Such an argument would presumably be rejected by the courts. The reasonable expectancy that ore was in the ground should be considered at December 31, 1971. At that date a purchaser or vendor of the mining company (assets or shares) would have reflected this expectancy in the risk factor applied to the expected cash flow of the mine or, if there was no cash flow at December 31, 1971, in the speculative value they would have respectively assigned to it. Similarly, if a lumber mill was destroyed by fire in March 1972, this event could not be considered in determining its fair market value on December 31, 1971,

Although information such as a sale occurring after the valuation date should not be considered in determining notional value, [14] it is proper to use such information to assist in deciding whether a notional valuation conclusion is reasonable. For example, in W H Crandall v The Minister of National Revenue [15] the chairman of the Tax Review Board said that he was entitled to take advantage of hindsight in arriving at his decision, citing the case of Produits LDG v The Minister of National Revenue™ [16] as his authority to do this. In the Produits LDG case it was held proper to review what went on following the organization of a deferred pension plan when assessing the intent of the parties at the time the plan was established. This is consistent with the conclusions of the court in Baxter v F W Gapp & Co Ltd^ [17] where evidence of a resale price two years after a notional valuation date was considered to be prima facie evidence that the notional valuation was too high.

The foregoing principles of valuation will be applied and referred to throughout this book, they are the foundation upon which all valuation theory and practice rests.

Op cit, footnote 2, at p 84 where Bonbright said:

“The general legal doctrine is that hindsight appraisals are unacceptable.’’ [J C Bonbright, Valuation of Property, (1965 reprint),The Michie Company, Vol 1 at p 250.]

[1953] 2 All ER 1499 at 1501.

Although information such as a sale occurring after the valuation date should not be considered in determining notional values, it is proper to use such information to assist in deciding whether a notional valuation conclusion is reasonable.

is subject to misinterpretation, if not read in the light of preceding jurisprudence. The statement by Bonbright — “The general legal doctrine is that hindsight appraisals are unacceptable” — (Footnote 11) does not fall into the category of jurisprudence, nor would the quotation from a publication of the Canadian Institute of Chartered Accountants noted under footnote 13. To whatever degree the logic in Crandall v Minister of National Revenue, (supra), was correct, (and Campbell does not challenge that), — “deciding whether a notional valuation conclusion is reasonable”, then it would be equally relevant in deciding that a notional valuation conclusion is unreasonable — precisely the position taken in this Court on this point.

I am prepared to reject entirely the already seriously damaged appraisal information presented by Mr Saxe when it is cast against the know facts related to the 1981 sale of the subject property. Since that appraisal information from Mr Saxe constitutes all the viable evidence on behalf of the appellant to support a value of $137,000 (or even $142,000) the appellant has not succeeded in damaging the Minister’s case in any way sufficient to mandate presentation of further valuation information to the Court by the Minister.

In presenting his submissions for purposes of this determination, (supra), counsel for the appellants raised two additional questions:

In the event that the submissions do not dissuade you from your stated position that the Department of National Revenue’s estimate of the fair market value of Blair House, $256,000, is correct, then the following two points remain to be decided:

(1) Where an actual sale takes place between parties not dealing at arm’s length, are the parties required to pay fair market value inclusive of commission or may they reduce the agreed purchase price between them by the amount of commission that would normally be payable in an arm’s length transaction?

(2) Where a corporation sells an asset to its sole shareholder, it is deemed, under the provisions of subparagraph 69(1)(b)(i), to have received proceeds of disposition therefor equal to the fair market value. If the corporation is deemed to have received fair market value under the provisions of Section 69 of the Income Tax Act, has the shareholder also received a benefit under the provisions of Subsection 15(1)? The argument is based on the fact that if the corporation has received or is deemed to have received fair market value, then there is no benefit to the shareholder.

Since these matters were not dealt with when the action was heard on April 10, 1984 I would appreciate your advice as to whether, assuming we have now dealt with the question of value, I should reattend to simply argue the two legal points mentioned above. I enclose my submissions on what constitutes the fair market value and look forward to your decision on this portion of the appeal in due course.

Obviously the second question relates directly to the appeal of Mrs Dailley and the Court will be prepared to hear additional evidence on that point, if necessary. On the first question, the Dailley Recreational Services Ltd matter now rests in the hands of counsel for the respondent, and the Court will be prepared to consider a motion to allow that appeal, (but only to the extent that is warranted based on a value of the property of $256,000 in February 1980); or the Court will be prepared to hear evidence which the respondent may still feel to be relevant to a determination of that or any other value (if indeed there is need for any such evidence), and then hear argument from counsel for both parties on this appeal. The merits or demerits of question one can be put forward at that argument level of the case whichever route is chosen by counsel for the respondent.

The submission from counsel for the appellants is rejected. The hearing of this adjourned case will be scheduled and resumed as early as possible by the Court, unless counsel should consult and agree that only written submissions to the Court on all outstanding points in dispute would be in order, and so inform the Court.

Appeal adjourned.