Kerr,
J:—This
is
in
respect
of
an
application
pursuant
to
paragraph
174(3)(b)
of
the
Income
Tax
Act.
I
am
informed
that
it
is
the
first
application
under
that
section
of
the
Act,
and
that
there
is
no
jurisprudence
relating
particularly
to
the
section.
The
relevant
portion
of
section
174
reads
as
follows:
174.
(1)
Where
the
Minister
is
of
the
opinion
that
a
question
of
law,
fact
or
mixed
law
and
fact
arising
out
of
one
and
the
same
transaction
or
occurrence
or
series
of
transactions
or
occurrences
is
common
to
assessments
in
respect
of
two
or
more
taxpayers,
he
may
apply
to
the
Tax
Review
Board
or
the
Federal
Court—Trial
Division
for
a
determination
of
the
question.
(2)
An
application
under
subsection
(1)
shall
set
forth
(a)
the
question
in
respect
of
which
the
Minister
requests
a
determination,
(b)
the
names
of
the
taxpayers
that
the
Minister
seeks
to
have
bound
by
the
determination
of
the
question,
and
(c)
the
facts
and
reasons
on
which
the
Minister
relies
and
on
which
he
based
or
intends
to
base
assessments
of
tax
payable
by
each
of
the
taxpayers
named
in
the
application,
and
a
copy
of
the
application
shall
be
served
by
the
Minister
on
each
of
the
taxpayers
named
in
the
application
and
on
any
other
persons
who,
in
the
opinion
of
the
Tax
Review
Board
or
the
Federal
Court—Trial
Division,
as
the
case
may
be,
are
likely
to
be
affected
by
the
determination
of
the
question.
(3)
Where
the
Tax
Review
Board
or
the
Federal
Court—Trial
Division
is
satisfied
that
a
determination
of
the
question
set
forth
in
an
application
under
this
section
will
affect
assessments
in
respect
of
two
or
more
taxpayers
who
have
been
served
with
a
copy
of
the
application
and
who
are
named
in
an
order
of
the
Board
or
the
Court,
as
the
case
may
be,
pursuant
to
this
subsection,
it
may
(a)
if
none
of
the
taxpayers
so
named
has
appealed
from
such
an
assessment,
proceed
to
determine
the
question
in
such
manner
as
it
considers
appropriate,
or
(b)
if
one
or
more
of
the
taxpayers
so
named
has
or
have
appealed,
make
such
order
joining
a
party
or
parties
to
that
or
those
appeals
as
it
considers
appropriate.
(4)
Where
a
question
set
forth
in
an
application
under
this
section
is
determined
by
the
Tax
Review
Board
or
the
Federal
Court—Trial
Division,
the
determination
thereof
is,
subject
to
any
appeal
therefrom
in
accordance
with
the
Federal
Court
Act,
final
and
conclusive
for
the
purposes
of
any
assessments
of
tax
payable
by
the
taxpayers
named
by
it
pursuant
to
subsection
(3).
The
application,
which
was
by
notice
of
motion,
supported
by
an
affidavit
of
Ronald
J
Thrasher,
asks:
(a)
for
an
order
pursuant
to
paragraph
174(3)(b)
of
the
Income
Tax
Act
joining
Arthuro
Brez
and
Alcide
Fortuna
to
the
action
aforesaid
for
the
purpose
of
determining
the
question,
in
what
amounts
the
partnership
profits
of
AB
&
Lafortune
Contractors
for
its
1969
taxation
year
are
allocable
for
income
tax
purposes
among
the
three
partners
that
comprised
the
partnership;
namely
Gerald
Dain,
Arthuro
Brez
and
Alcide
Fortuna;
(b)
for
a
determination
of
the
question
set
forth
in
paragraph
(a)
hereof;
(c)
for
an
order
that
the
said
Gerald
Dain,
Arthuro
Brez
and
Alcide
Fortuna
shall
be
bound
by
the
determination;
and
(d)
for
an
order
for
directions
as
to
the
manner
in
which
evidence
will
be
adduced
in
the
determination
of
the
question.
The
notice
of
motion
states
that
the
facts
upon
which
the
Minister
based
his
assessments
for
the
1969
taxation
year
of
each
of
the
persons
mentioned
in
paragraph
(c)
are
as
follows:
1.
On
or
about
the
1st
day
of
January
1967,
the
said
Gerald
Dain,
Arthuro
Brez
and
Alcide
Fortuna
entered
into
a
partnership
which
carried
on
the
business
of
general
contractors
under
the
firm
name
and
style
of
AB
&
Lafortune
Contractors.
2.
Each
of
the
partners
had
a
1/3
interest
therein.
3.
The
partnership
had
a
fiscal
year
end
of
June
30th.
4.
The
profits
of
the
said
partnership
for
its
1969
fiscal
year
were
$92,070.63.
5.
Prior
to
June
30,
1969
the
said
Gerald
Dain
notified
his
partners
that
as
of
June
30,
1969
he
would
be
terminating
his
interest
in
the
partnership.
6.
Pursuant
to
litigation
commenced
in
the
Supreme
Court
of
Ontario
by
the
said
Gerald
Dain
a
form
of
settlement
was
drawn
up
and
executed
by
the
said
Gerald
Dain,
which
settlement
reads
as
follows:
“DATED
at
Ottawa
this
21st
day
of
July,
1969.
l,
GERALD
DAIN,
upon
the
dissolution
of
the
partnership
known
as
AB
and
Lafortune
Contractors
and
carried
on
by
Alcide
Fortuna,
Arthuro
Brez,
and
Gerald
Dain,
hereby
acknowledge
receipt
of
the
sum
of
$15,000.00
plus
the
sum
of
$350.00
for
costs
and
I
accept
the
sum
of
$15,000.00
as
complete
and
final
withdrawal
of
my
one-third
interest
in
the
partnership
assets
of
AB
and
Lafortune
Contractors
including,
without
limiting
the
generality
of
the
foregoing,
cash
on
hand,
accounts
receivable,
all
other
assets,
both
fixed
and
current,
and
good
will.
I
hereby
release
any
interest
that
I
may
have
in
the
assets,
the
name
and
the
operation
of
AB
and
Lafortune
Contractors
and
I
release
all
claims
that
I
may
have
on
or
against
the
assets
of
Arthuro
Brez
and
Alcide
Fortuna
and
AB
and
Lafortune
Contractors,
as
of
July
1st,
1969.
I
hereby
undertake
to
sell
any
shares
or
interest
that
I
may
have
in
AB
and
Lafortune
Contractors
Limited,
a
private
company
not
yet
fully
incorporated,
to
any
person
or
persons
as
directed
by
Arthuro
Brez
and
Alcide
Fortuna
for
the
total
sum
of
$1.00.
I
further
undertake
to
provide
the
aforementioned
Arthuro
Brez
and
Alcide
Fortuna
with
my
resignation
from
the
Board
of
Directors
of
the
aforementioned
company
upon
request.
I
hereby
authorize
and
direct
my
solicitors
to
file
a
Notice
of
Discontinuance
of
an
action
commenced
at
my
request
on
the
14th
day
of
July,
1969,
in
the
Supreme
Court
of
Ontario
at
Ottawa
as
Action
No.
525/69.
Having
been
advised
by
my
solicitor,
I
hereby
agree
to
accept
the
sum
of
$15,000.00
in
the
following
manner:
(a)
$2,000.00
having
been
already
accepted.
(b)
$12,000.00
by
way
of
cheque
from
Chiarelli
&
Guzzo,
Barristers
and
Solicitors,
solicitors
for
Arthuro
Brez
and
Alcide
Fortuna.
(c)
$1,000.00
by
way
of
promissory
note
payable
on
August
31st,
1969.
(d)
I
direct
that
the
sum
of
$350.00
be
paid
to
my
solicitors,
Gowling,
MacTavish,
Osborne
&
Henderson,
for
costs.
I
hereby
declare
that
I
have
made
no
contracts
nor
agreements
of
any
kind
on
behalf
of
AB
and
Lafortune
Contractors
with
any
customers
of
the
aforementioned
AB
and
Lafortune
Contractors
to
perform
any
additional
services
or
provide
additional
materials
under
existing
contracts
other
than
what
has
been
brought
to
the
attention
of
Arthuro
Brez
and
Alcide
Fortuna.
|
Signed
|
Signed
|
|
Witness
|
Gerald
Dain”
|
7.
Subsequent
to
the
execution
of
the
release
the
financial
statements
were
prepared
and
each
of
the
said
partners
was
credited
therein
with
a
one-third
interest
of
the
profits
in
the
amount
of
$30,690.21
each.
8.
The
said
partners
were
assessed
for
income
tax
by
assessments
reflecting
the
said
allocation
of
profits.
9.
The
said
Dain
objected
to
and
ultimately
appealed
the
said
assessment
to
the
Tax
Review
Board.
10.
The
Tax
Review
Board
by
judgment
dated
the
27th
day
of
February
1973,
and
mailed
on
the
28th
day
of
February
1973
[not
reported]
allowed
the
appeal
of
the
said
Gerald
Dain
from
the
said
assessment
and
referred
it
back
to
the
Minister
of
National
Revenue
on
the
basis
that
the
sum
of
$12,682.42
should
not
be
taxed
in
his
hands
because
this
amount
was
not
and
will
never
be
received
by
him.
The
notice
of
motion
also
states
that
the
reasons
on
which
the
Minister
relies
to
support
the
assessments
are
as
follows:
11.
Each
of
the
said
partners,
having
had
one-third
interest
in
the
partnership,
was
entitled
to
receive
a
like
proportion
of
the
profits
for
the
partnership’s
1969
tax
year.
12.
Each
partner’s
share
of
the
1969
profits
came
to
$30,690.21
and
was
payable
to
the
partners
in
their
1969
tax
year.
13.
By
virtue
of
section
6(1
)(c)
of
the
Income
Tax
Act
each
taxpayer
was
required
to
add
the
amount
of
$30,690.21
into
his
income
for
the
1969
taxation
year.
14.
The
form
of
settlement
executed
by
the
said
Gerald
Dain
as
set
out
in
paragraph
6
above
operated
solely
as
a
release
of
his
interest
In
the
capital
of
the
partnership
and
did
not
operate
to
disentitle
him
to
his
share
of
proceeds
of
the
partnership
profits
in
the
partnership’s
1969
fiscal
year.
At
the
hearing
of
the
application
counsel
on
behalf
of
the
plaintiff
argued
in
support
of
the
motion,
and
it
was
opposed
by
counsel
for
the
defendant
Dain
and
by
counsel
for
Arthuro
Brez.
There
apparently
was
an
oversight
in
giving
Alcide
Fortuna
notice
of
this
hearing,
which
had
been
adjourned
from
an
earlier
date,
and
he
did
not
appear
and
was
not
represented.
Here
the
situation
is
that
one
of
the
taxpayers,
Dain,
appealed
to
the
Tax
Review
Board
from
his
assessment,
and
consequently
paragraph
174(3)(b)
applies.
Counsel
for
the
plaintiff
argued,
inter
alia,
that
the
onus
of
proving
an
assessment
erroneous
remains
on
the
taxpayer
throughout
on
appeal
to
the
Tax
Review
Board
and
to
the
Federal
Court,
and
in
this
instance
the
appeal
to
the
Federal
Court
in
respect
of
Dain’s
assessment
should
be
treated
as
an
appeal
by
the
taxpayer
within
the
context
of
section
174;
that
one
of
the
purposes
of
the
section
is
to
obviate
litigation
and
avoid
separate
appeals
or
hearings
where
there
are
common
questions,
such
as
dovetailing
assessments;
that,
on
an
appeal
by
a
taxpayer
to
the
Tax
Review
Board,
the
Minister
may
await
the
result
of
that
appeal
without
precluding
his
right,
in
an
appeal
by
him
to
the
Federal
Court
from
an
adverse
decision
of
the
Board,
to
apply
for
a
determination
under
section
174
and
to
have
other
taxpayers
added
to
such
latter
action;
and
that,
if
the
section
is
not
so
construed,
anomalous
consequences
would
follow.
Counsel
for
Brez
and
counsel
for
Dain
argued
that
section
174
is
a
code,
that
the
appeal
referred
to
in
paragraph
174(3)(b)
is
an
appeal
by
a
taxpayer,
not
an
action
or
appeal
by
the
Minister,
and
that
the
time
for
the
Minister
to
apply
for
a
determination
in
this
instance
was
when
there
was
an
appeal
by
the
taxpayer
before
the
Tax
Review
Board.
Section
174
is
designed
to
have
a
determination
of
such
questions
as
are
referred
to
in
subsection
(1),
and
it
contemplates
two
situations,
namely,
(a)
where
none
of
the
taxpayers
has
appealed
from
an
assessment,
and
(b)
where
one
or
more
of
the
taxpayers
has
or
have
appealed.
In
the
first
situation,
the
Tax
Review
Board
or
the
Federal
Court,
whichever
has
the
application
for
a
determination,
may
proceed
to
determine
it
in
such
manner
as
it
considers
appropriate.
In
the
other
situation,
where
one
(or
more
than
one)
of
the
taxpayers
has
appealed
from
his
assessment,
the
section
affords
an
opportunity
to
the
Minister
to
apply
under
section
174
to
the
tribunal
that
has
the
taxpayer’s
appeal,
and
it
can
deal
with
the
appeal
and
with
the
question
under
section
174
and
can
join
other
parties
to
the
appeal.
However,
I
do
not
find
in
section
174,
either
in
express
words
or
by
reasonable
and
necessary
implication,
any
authority
in
the
Federal
Court
to
join
a
party
or
parties
to
an
action
or
appeal
by
the
Minister
from
a
decision
of
the
Tax
Review
Board,
which
the
present
action
is,
for
although
this
action
is
in
consequence
of
the
decision
on
the
taxpayer’s
appeal
to
the
Tax
Review
Board
and
as
defendant
in
this
action
he
still
has
the
onus
of
showing
the
assessment
to
be
erroneous,
and
the
action
is
a
trial
de
novo,
it
nevertheless
is
not
an
appeal
by
the
taxpayer
but
by
the
Minister.
If
a
taxpayer
appeals
in
the
first
instance
to
the
Tax
Review
Board
and
follows
it
with
a
further
appeal
to
this
Court
from
the
Board’s
decision,
it
may
possibly
be
that
the
Minister
has
a
right
to
apply
to
this
Court
for
a
determination
under
section
174
even
although
he
did
not
apply
to
the
Tax
Review
Board
when
it
had
the
taxpayer’s
initial
appeal,
and
in
that
situation
the
Court
may
have
authority
to
join
other
parties
to
the
taxpayer’s
latter
appeal,
but
that
is
not
the
situation
here.
In
addition
to
asking
for
an
order
joining
Brez
and
Fortuna
to
the
action
for
the
purpose
of
determining
the
question
as
to
allocation
of
the
partnership
profits
among
the
partners,
the
application
asks
for
a
determination
of
the
question
and
for
an
order
that
the
three
partners
be
bound
by
the
determination.
It
appears
to
me
that
joining
Brez
and
Fortuna
to
the
action
would
be
a
prerequisite
to
the
making
of
a
determination
binding
on
them,
and
if
the
Court
has
no
authority
to
join
them
to
the
action
there
would
be
no
point
in
making
an
order
for
the
determination
of
the
question.
The
application
will
therefore
be
dismissed,
with
costs.
Email this Content