The Chairman (orally: December 12, 1974):
1 This is an appeal by Prompt Taxi Association Limited against the reassessment of the Minister of National Revenue for the years 1965 to 1970, inclusive. The point to be decided is whether or not a benefit has been conferred on the appellant, pursuant to subsection 16(1) of the former Income Tax Act, as the result of an agreement, or series of agreements, entered into by the appellant with David Vininsky first in 1963 and again in 1971, all of which are before the Board as appellant's Exhibits A-2, 3 and 4.
2 Mrs Brummer, the beneficial owner of the shares of the appellant company, gave evidence that from 1960 to 1963 she operated the taxi business and up until 1963 her husband did the buying of the cars and the hiring of the drivers. After 1963, or in 1963, and prior to the signing of the appellant's Exhibit 2, Mrs Brummer was advised that in effect she should have someone operating the business for her because apparently she had—perhaps a delicate way to put it would be—partners unknown to her that were sharing in the profits. She, through an agent, was introduced to David Vininsky, who was prepared to take over and operate this business.
3 She said in her evidence that in so far as she was concerned, the purport of the whole exercise was to divest herself of the responsibility of the operation of the taxi service, and to receive a fixed income as a result of these agreements.
4 Counsel for the appellant makes a strong argument on the grounds that the agreements provide for the manager, Vininsky, to purchase any new cars in addition to the cars that were transferred to him for the operation with the original agreement, and since he was to do so at his own expense there was no benefit accruing to the appellant; that, even though the motor vehicles were registered in the name of the appellant, the true beneficial owner was Vininsky. Alternatively, if the appellant was the owner, then, pursuant to section 443 of the Civil Code, it was a usufruct if what was transferred involved any benefit to the appellant, it would be by way of a capital gain, what had been transferred being the vehicles, a capital asset; then again, if it is a management agreement, the costs of the manager are deductible to him; and, in any event, if it was merely a joint venture, the costs to the manager could not, by any stretch of the imagination, be income to the appellant.
5 I think that the law of Quebec is no different from the law of other provinces in that a certificate of registration of a motor vehicle is not a certificate of title, it is merely an indication of who the registered owner is. I think what one must do in this case in order to reach a conclusion is to take the various agreements in toto and see if one can infer from the collective agreements what the intention of the parties was and also look at what in fact did take place. In all three agreements one is struck by the preamble, which states that “Whereas Prompt is the owner of sixty taxi cabs, all of which are furnished with City of Montreal permits, taxi meters, two-way radios, dome lights and other accessories”. To my mind, paragraph 5 of appellant's Exhibit 2 sets out the terms of what I find to be a management agreement, and I make that finding not only on the documents, but on the activity that was carried out and the manner in which Mrs Brummer removed herself completely from the operation of the business and left it in the hands of the manager, Vininsky. The terms of paragraph 5 are that the manager may deduct such sums as are required to pay for the operation of the fleet; he is to pay $4,000 per month; and he is to pay whatever is required to finance the automobiles. If one looks through the agreement, one sees that what is in effect to happen is that, at the end of the agreement, the vehicles or substitute vehicles are to be returned in approximately the same state in which they were received in 1963.
6 Throughout the agreements the inference is that Prompt was in fact the owner of the motor vehicles but all the expenses in connection with the operation including insurance liabilities, etc were to be paid by the manager as part of his management agreement.
7 If one goes to appellant's Exhibit 4, which was drawn up in 1971 as an addition to Exhibit A-3, one finds that, notwithstanding anything contained in the agreement of September 30, 1971 (Exhibit A-3) (which was the second agreement entered into), it is specifically agreed that, upon the termination of said agreement or any renewal thereof, the manager shall have the absolute right and option to acquire ownership of the 60 taxi automobiles by paying to Prompt the sum of $18,000, which was the equity that Prompt had in the vehicles turned over to Vininsky at the time the original contract was entered into.
8 I could mention several other terms of the agreements that lead me to the same conclusion but, on all the evidence, I cannot come to the conclusion that the appellant has discharged the onus cast upon it by the Act and the appeal must be dismissed.
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