Roland St-Onge (orally: March 3, 1975):
1 This appeal of Ross H Stanfield is from an assessment by the Minister of National Revenue dated June 8, 1973, wherein taxes with interest in the amounts of $143.04, $143.04 and $1,727.83 were levied in respect of the 1967, 1968 and 1969 taxation years.
2 The appeal came before me on February 25, 1975 in the City of Vancouver, British Columbia. The only question at issue is whether the appellant was qualified as a grubstaker under subsection 83(3) of the Income Tax Act, when he dealt with one John Hilton, prospector, prior to the years under appeal.
3 Mr Stanfield explained that in 1955 he met Mr John Hilton, and has been in various ventures with him since that time. In 1958 Mr Hilton went on a prospecting trip in the Williams Lake area, and staked the Brooks claims in his name. He was very enthusiastic about the mining potential of the area, and convinced Mr Stanfield that there was something worthwhile to be prospected and claimed in that area. There was nothing in writing, but at that time both men agreed that the appellant would pay the out-of-pocket expenses to help Mr Hilton in his prospecting and that they would share any eventual profit on a 50-50 basis. From that date, Mr Hilton went several times to the Williams Lake area to prospect.
4 In the fall of 1958 the appellant gave $200 in cash to Mr Hilton. On January 19, 1960 he gave him a cheque for $400, and on March 21 of the same year another cheque for $100, in order to help Mr Hilton in prospecting.
5 On December 30, 1961 the appellant, because of influenza, could not go with Mr Hilton to the Williams Lake area, and one Mr Haveron was the man who accompanied Mr Hilton to prospect and stake Zephyr Nos 1 to 16 claims. He was promised an interest of 5%, and, consequently, Mr Stanfield and Mr Hilton were to receive 471/2% each. After the staking of the Zephyr claims, Mr Hilton met with many people in order to develop the property. Finally, the claims were transferred to Gibraltar Mines Limited, and the appellant became entitled to receive $9,550 in 1967, $4,405 in 1968 and $4,390 in 1969.
6 Heard as a witness, Mr Hilton corroborated Mr Stanfield's testimony and swore that the two cheques he received were in fact paid for the prospecting of the Zephyr Nos 1 to 16 claims. Counsel for the Minister asked Mr Hilton several times whether it was possible that the cheques could have been given for purposes other than the prospecting of the Zephyr claims, but Mr Hilton was always very categorical in saying that the money was given to him for the prospecting of the said claims. The two witnesses swore that there was a genuine agreement between them for the prospecting of the Zephyr claims. There is written evidence to the effect that at least $500 was paid by the appellant to Mr Hilton. In addition, both men shared in the proceeds of the sale.
7 As to the question whether some prospecting was carried out before the paying of money, the evidence shows very clearly that the most important prospecting was effectuated after the paying of the out-of-pocket expenses by the appellant. As a matter of fact, it was the prospecting of the Brooks claims by Mr Hilton that convinced the appellant that there were other possibilities in the area; consequently, he decided to enter into a grubstaking arrangement with him. It is clear from the evidence that the prospecting relevant to the gentlemen's agreement was effectuated thereafter.
8 In the circumstances, I have no hesitation in stating that the appeal falls under subsection 83(3) of the Income Tax Act. For the foregoing reasons, the appeal is allowed.
Email this Content