N
OEL,
J.:—This
is
an
appeal
by
the
Minister
of
National
Revenue
from
a
decision
of
the
Tax
Appeal
Board
(26
Tax
A.B.C.
129)
setting
aside
the
taxes
levied
against
the
respondent
in
the
sum
of
$4,541.23
for
the
taxation
year
1954;
$9,174.08
and
$241.25
for
the
year
1955;
$16,176.81
for
the
year
1956
and
$11,624.03
for
the
year
1957,
on
the
basis
that
the
amounts
received
by
the
taxpayer
in
the
above
mentioned
years,
which
were
his
share
of
the
profits
from
a
number
of
real
estate
transactions
upon
the
winding
up
and
liquidation
of
a
syndicate
or
partnership,
of
which
he
was
a
member,
were
in
fact
capital
receipts
and
not
subject
to
income
tax.
According
to
the
respondent,
the
transactions,
in
respect
of
which
these
proceedings
have
arisen,
relate
to
the
creation
of
real
estate
investments
which
were
frustrated
and
sold
off
and
the
difference
between
the
land
purchase
price
and
the
land
proceeds
of
sale
was
of
a
capital
nature
and
therefore
not
assessable.
This
appeal
was
heard
at
the
same
time
as
eight
others
(one
of
which
Mrs.
Kathleen
DeMara
who
did
not
appear
and
whose
solicitors
stated
she
did
not
wish
to
appear
in
this
appeal)
involving
members
of
two
syndicates,
Mainshep
and
Newshep,
of
which
some
were
involved
in
the
Mainshep
Syndicate
only
and
others
in
both
the
Mainshep
and
Newshep
Syndicates.
Counsel
for
H.
A.
Smith,
John
Van
Nostrand,
Mrs.
A.
Mulholland,
C.
Mulholland
and
W.
Z.
Estey,
submitted
that
the
latter,
being
involved
in
one
venture
only,
their
position
was
different
from
the
three
others,
C.
H.
Lane,
the
respondent,
Norman
S.
Robertson
and
F.
D.
Turville,
who,
in
addition
were
also
involved
in
another
venture
at
approximately
the
same
time
in
the
same
area
and
consequently
the
appeals
of
these
nine
taxpayers
should
not
be
heard
at
the
same
time.
This
request,
however,
was
not
granted
it
being
decided
and
agreed
by
counsel
for
the
parties
that
the
evidence
with
respect
to
all
the
respondents
would
be
submitted
now
and
that
the
Court
would
make
a
proper
segregation
of
the
evidence
produced
and
safeguard
thereby
the
rights
of
the
different
respondents.
It
was
on
this
basis
that
the
evidence
was
adduced
and
the
appeals
were
heard.
The
respondent,
a
Toronto
lawyer,
became
a
member
of
the
Mainshep
Syndicate
in
1951.
The
latter
had
been
set
up
upon
the
instigation
and
suggestion
of
a
real
estate
broker,
C.
DeMara,
who
at
the
time,
acting
for
the
T.
Eaton
Co.
Ltd.,
had
obtained
options
of
lands
in
the
vicinity
of
Sheppard
Avenue
and
the
CPR
tracks
in
the
Township
of
North
York,
in
the
outskirts
of
the
City
of
Toronto.
The
T.
Eaton
Co.
Ltd.
had
decided
to
exercise
its
option
on
part
of
the
lands
only
where
they
intended
to
build
a
twelve
million
dollar
warehouse,
and
authorized
their
broker,
DeMara,
to
make
whatever
use
he
desired
of
their
option
on
the
adjacent
balance
of
the
lands,
a
20-acre
portion
referred
to
as
Parcel
A.
DeMara
then
obtained
an
option
to
purchase
an
additional
28
acres
called
Parcel
B
immediately
adjoining
Parcel
A
on
the
south.
At
the
time
the
above
acreage
was
undivided
farm
land
lying
along
the
CPR
line
and
was
remote
from
current
development.
On
the
south
side
of
Sheppard
Avenue
there
were
scattered
houses,
one
a
farm
purchased
under
the
Veterans’
Development
Act
presumably
to
be
farmed,
and
a
few
small
cottages.
There
were
no
stores,
factories
or
warehouses,
nor
sewer
facilities
within
at
least
one-half
mile.
Part
of
this
land
faced
on
Main
Street
and
the
latter
extended
southerly
into
Weston
which
is
now
a
part
of
Metropolitan
Toronto.
Mr.
DeMara,
who
was
a
friend
and
a
client
of
the
respondent,
approached
the
latter
and
proposed
that
a
syndicate
be
formed
to
acquire
the
property
under
option.
Mr.
Lane
then
approached
his
partner,
Mr.
Norman
Robertson,
Q.C.,
who,
he
claims,
immediately
suggested
that
the
property
be
used
for
the
purpose
of
erecting
thereon
multiple
dwelling
houses
as
at
the
time
there
was
a
great
shortage
of
housing
in
the
area,
and
that
the
money
necessary
for
this
project
be
borrowed
from
Central
Mortgage
and
Housing
which,
according
to
Mr.
Robertson,
would
make,
on
a
guaranteed
rental
system,
very
high
mortgage
advances,
up
to
8)
per
cent
or
even
higher.
The
latter
stated
that
at
the
time
he
knew
of
a
builder
of
housing
units
by
the
name
of
Salter,
who
obtained
from
a
company
he
knew,
insured
under
the
National
Housing
Plan,
a
loan
so
large
that
the
whole
board
of
directors
went
up
to
see
the
site
and
the
plant
and
this,
he
said,
had
something
to
do
with
the
decision
to
go
ahead
with
the
housing
development
of
the
Mainshep
Syndicate.
I
might
add
here
that
Mr.
Robertson
had
received
information
also
from
a
different
source
of
the
imminence
of
the
Eaton
development,
as
well
as
of
an
additional
nearby
large
development
of
Murray
Printing
Company,
and
the
housing
development
proposed
was
for
the
purpose
of
supplying
housing
facilities
to
the
numerous
families
of
the
future
employees
of
the
Eaton
warehouse
and
the
printing
company.
Eight
others
then
joined
with
C.
DeMara,
C.
H.
Lane,
the
respondent,
and
N.
Robertson
and
a
syndicate
agreement,
Ex.
“A”.
was
drawn
up
and
signed
some
time
prior
to
April
18,
1951.
The
syndicate
consisted
of
1,500
units
of
$100
each,
of
which
$130,000
were
subscribed
and
$58,500
paid
in.
According
to
Schedule
“C”
attached
to
the
agreement,
the
following
amounts
of
cash
were
advanced:
J.
Van
Nostrand,
$2,025,
C.
R.
DeMara,
$18,900,
F.
D.
Turville,
$4,950,
N.
S.
Robertson,
$5,850,
C.
H.
Lane,
$2,025.
The
balance
of
$24,755
was
subscribed
by
others
who
are
not
parties
to
these
appeals.
The
agreement
contained
a
number
of
terms
dealing
with
the
transferability
of
the
units,
the
election
of
an
executive
committee,
a
prohibition
against
expenditure
of
capital
for
construction
without
unanimous
approval
of
syndicate
members,
and
the
appointment
of
Mr.
Cyril
R.
DeMara
&
Co.
Limited
as
real
estate
agent
on
an
established
scale
of
fees.
The
purpose
of
the
syndicate
is
recited
on
p.
2
of
the
agreement
document
as
follows:
i
‘
A
syndicate
is
hereby
formed
for
the
purpose
of
acquiring
the
lands
described
in
Schedules
‘A’
and
‘B’
hereto
respectively
situate
in
the
Township
of
North
York,
in
the
County
of
York,
in
the
Province
of
Ontario,
with
a
view
to
erecting
duplexes
or
other
multiple
dwellings
thereon,
preferably
on
the
plan
commonly
referred
to
as
‘the
guaranteed
rental
plan’
sponsored
by
the
Government
of
Canada,
and
holding
the
same
until
mortgages
intended
to
be
placed
thereon
for
the
purpose
of
financing
the
buildings
have
been
fully
satisfied,
all
upon
the
terms
and
conditions
herein
mentioned.’’
Section
1
of
the
agreement
also
provides
inter
alia
that
the
lands
were
required
for
the
purpose
‘‘of
constructing
duplexes
or.
other
multiple
dwellings
upon
the
same
or
otherwise
dealing
with
the
said
lands’’.
Messrs.
Norman
Robertson,
Cyril
DeMara,
F.
D.
Turville
and
C.
H.
Lane,
the
respondent,
were
appointed
members
of
the
executive
or
managing
committee
of
the
Mainshep
Syndicate,
which
ultimately
expanded
to
23
members
and
comprised,
in
addition
to
DeMara
who
is
a
realtor,
a
surveyor,
four
lawyers,
a
number
of
businessmen,
and
the
wives
of
some
of
the
participants.
The
Mainshep
Syndicate
acquired
Parcel
A
by
deed,
dated
April
13,
1951,
at
a
price
of
$48,000,
and
obtained
an
option
to
acquire
Parcel
B
at
a
price
of
$75,000
which
had
to
be
exercised
on
or
before
April
15,
1952.
On
March
11,
1952,
an
extension
of
the
exercise
of
this
option
was
obtained
for
one
year
upon
payment
of
the
sum
of
$5,000
and
the
deed
for
Parcel
B
was
finally
taken
up
on:April
1;
1954.
The
Syndicate,
immediately
after
its
formation
around
the
end
of
April
or
beginning
of
May,
1951,
obtained
the
services
of
a
Toronto
architect,
a
Mr.
Hoare,
who,
after
walking
over
the
property,
expressed
his
satisfaction
with
the
location
and
thought
‘it
was
a
very
good
piece
of
land
and
suited
both
the
topography
and
the
location”
for
the
erection
of
multiple
dwelling
houses
for
the
families
of
the
men
who
would
work
in
the
Eaton
and
printing
plants
to
be
built
in
the
area.
He
had
designed
a
similar
project
for
a
Mr.
Salter
on
Sheppard
Avenue
shortly
before
that
(to
which
Mr.
Robertson
had
also
referred),
as
well
as
for
several
others,
and
confirmed
that
there
was
a
housing
shortage
at
that
time.
On
May
15,
1951,
Mr.
Hoare
made
investigations
as
to
the
zoning
of
the
area
and
the
possibility
of
installing
sewage
and
water
mains
and
prepared
a
number
of
plans
illustrating
how
the
52
housing
units
contemplated
might
be
laid
out
on
this
property.
The
plans
included
a
general
property
plan,
a
floor
plan
of
a
typical
building,
perspective
elevation
of
a
typical
building,
and
a
perspective
drawing
showing
a
whole
development.
He
then
estimated
the
cost
of
each
building
at
$70,000
each
which,
with
the
estimated
cost
for
sewage
and
water
mains
at
$150,000,
involved
a
total
expenditure
for
the
whole
project
of
approximately
$3,790,000.
At
this
time
the
Township
of
North
York,
where
the
syndicate
lands
were
situated,
did
not
have
a
general
zoning
by-law
covering
the
whole
township
and
large
areas
were
agricultural
lands
and
not
zoned
at
all.
It
would
seem,
however,
that
the
lands
of
the
syndicate
at
that
time
had
been
zoned
industrial
under
the
then
current
temporary
by-law
7071
passed
in
January
1,
1951,
and
a
planning
committee
set
up
to
zone
the
whole
township
was
still
in
the
process
of
preparing
a
definite
zoning
by-law.
On
June
25,
1951,
the
respondent
wrote
to
a
Dalton
engineering
and
construction
firm
to
inquire
if
it
would
be
interested
in
tendering
on
the
construction
project
and
this
firm,
in
another
letter,
expressed
its
desire
to
do
so.
On
September
18,
1951,
the
syndicate
itself
applied
to
Central
Mortgage
and
Housing
Corporation
for
the
desired
loan
and
forwarded
Mr.
Hoare’s
plans
along
with
the
application.
On
October
10,
1951,
Mr.
Lane
received
a
reply
stating
that
the
syndicate’s
letter
of
development
had
been
under
review,
but
that
because
the
mortgage
situation
‘‘as
affected
by
new
Government
policy
is
in
a
state
of
flux,
it
is
difficult
to
talk
financing
until
this
office
is
aware
of
how
Government
policy
is
to
be
implemented’’,
and
suggesting
that
as
they
were
dubious
about
the
site
being
quite
a
distance
away
from
existing
new
building,
the
matter
should
be
postponed
until
sometime
after
October
15.
Mr.
Lane,
on
October
15,
1951,
answered
some
of
the
points
raised
in
the
above
Central
Mortgage
and
Housing
Corporation
letter,
particularly
with
regard
to
the
matter
of
the
site
being
far
from
existing
new
building,
stating
:
“That
is
true
enough,
but
there
has
been
a
great
deal
of
activity
in
the
subdivision
and
sale
of
real
estate
in
that
vicinity
in
the
last
year
and
our
clients
felt
that
a
rapid
development
of
the
area
is
now
imminent.”
On
January
31,
1952,
the
syndicate
received
notice
of
the
North
York
zoning
by-law
7625
under
which
only
a
negligible
part
of
the
43
acre
parcel
was
zoned
residential,
the
balance
being
zoned
industrial
or
commercial,
and
as
for
the
lands
belonging
to
the
syndicate,
they
were
zoned
for
warehousing
only
and
precluded
the
building
of
any
residential
houses.
Tuesday,
February
26,
1952,
was
set
down
for
the
hearing
of
all
parties
interested
in
support
of
or
in
opposing
this
by-law.
On
February
12,
1952,
Mr.
Lane
wrote
Central
Mortgage
and
Housing
Corporation,
informing
them
that
the
matter
had
to
be
further
delayed
because
‘‘now
that
the
North
York
zoning
by-law
is
published
we
find
that
dwellings
would
not
be
permitted
on
the
lands
in
question’’,
adding
that
the
syndicate
committee
intended
to
make
representations
to
the
Municipal
Board
with
respect
to
the
restrictive
by-law.
On
February
15,
1952,
a
reply
was
received
from
Central
Mortgage
and
Housing
Corporation,
stating
:
41
In
view
of
the
efforts
which
you
are
about
to
make,
we
regret
to
advise
you
that
this
Corporation
is
not
disposed
to
consider
favourably
any
application
for
financing
in
respect
to
rental
units
at
the
location
as
indicated
by
you
in
previous
correspondence.
This
conclusion
has
been
reached
after
giving
careful
consideration
to
the
proposal.
’
’
To
this
the
syndicate
answered
on
February
18:
“We
are
sorry
to
hear
of
the
view
expressed
by
your
Corporation.
There
is
not
much
we
can
say
at
the
moment
until
the
zoning
by-law
of
the
Township
of
North
York
is
finally
passed.
In
the
meantime,
however,
we
would
be
obliged
if
you
would
consider
the
matter
open
for
us
to
make
further
representations.
’
’
The
syndicate
then
gave
up
their
multiple
dwelling
development
project,
because
before
the
Ontario
Municipal
Board,
on
February
26,
1952,
it
requested
that
the
area
be
zoned
for
manufacturing
on
the
basis
that
if
it
could
not
get
housing
it
would
sell
better
for
manufacturing
than
for
warehousing.
On
July
22,
1952,
the
syndicate
wrote
to
Mr.
J.
E.
Hoare,
the
architect,
the
following
:
“As
you
may
have
observed,
under
a
new
by-law
of
the
township
much
of
the
land
in
the
vicinity
of
our
client’s
property
near
Sheppard
Avenue
and
Main
Street
has
been
zoned
for
manufacturing
or
warehousing,
etc.,
so
that
it
becomes
impractical
to
go
on
with
our
client’s
proposal
to
build
multiple
dwelling
houses
on
the
said
lands.
Part
of
our
client’s
lands
along
Main
Street
have
been
zoned
for
single
family
dwellings
and
our
client
may
try
to
salvage
something
of
the
original
plans
by
building
houses
on
the
Main
Street
frontage.
However,
it
is
plain
it
cannot
go
on
with
the
plans
you
prepared
and
we
suggest,
therefore,
that
you
submit
your
account
to
date.”
As
the
architect
had
previously
agreed
that
if
the
syndicate
was
unable
to
proceed
beyond
the
preliminary
work
his
fee
would
be
a
flat
$400,
this
is
the
amount
he
was
paid.
On
October
29,
1954,
the
Mainshep
Syndicate
sold
3.06
acres
on
Main
Street,
which
had
been
zoned
residential,
to
Russell
J.
Peever,
a
builder,
for
the
sum
of
$30,000,
and
in
December,
1956,
it
sold
the
balance
of
the
land
to
Ford
Motor
Company
of
Canada,
Limited,
for
$306,360.
Three
of
the
respondents,
C.
H.
Lane,
N.
8.
Robertson
and
F.
D.
Turville,
were
also
members
of
a
second
syndicate
of
fourteen
persons
called
New
Sheppard
Syndicate,
evidenced
by
an
agreement
dated
September
5,
1952,
which
was
formed
for
the
purpose
of
taking
over
some
land
situated
in
the
vicinity
of
the
Mainshep
Syndicate’s
property
and
purchased
in
the
spring
of
1952,
as
well
as
purchasing
some
new
acreage
covering
in
all
some
26
acres
at
a
total
purchase
price
of
$34,000.
No
evidence
was
tendered
with
respect
to
any
plans
for
erecting
buildings
or
financing
this
venture,
except
that
it
was
stated
by
Mr.
Lane
that
the
idea
was
initially
to
erect
thereon
stores,
restaurants,
etc.,
to
service
the
residential
development
project
of
Mainshep.
Eleven
acres
of
the
new
Sheppard
parcel
were
sold
in
January
1954,
for
$50,000
and
the
other
15
acres
were
sold
in
February
1955,
for
$60,000.
The
question
for
consideration
is
whether,
on
the
facts
as
disclosed
by
the
evidence,
the
profits
realized
from
the
sale
of
the
lands
in
question
are
profits
from
a
business
or
property
within
the
meaning
of
Sections
3
and
4
of
the
Income
Tax
Act
and
the
extended
meaning
of
‘‘business’’
as
defined
in
Section
139(1)
(e)
or,
as
submitted
by
the
respondent,
these
Mainshep
lands
were
acquired
by
the
syndicate
and
its
members
as
an
investment
for
the
purpose
of
erecting
thereon
multiple
residential
units
with
a
guaranteed
rental
plan
and
that
it
was
only
because
this
purpose
was
frustrated
that
the
lands
were
sold,
realizing
therefrom
a
for
tint
ousprofit
by
way
of
capital
gain.
Now
the
test
pf
trading
is
objective,
as
the
intention
or
motive
of
the
tax}
,
although
relevant,
cannot
alone
determine
what
his
acts
amount
to
and,
in
some
cases,
can
be
negated
by
these
very
acts
;
furthermore,
whatever
alternative
is
taken
by
the
taxpayer
in
the
event
his
preferred
intention
becomes
for
some
reason
or
other
unrealizable
can
be
taxable
or
not
depending
on
whether
the
evidence
discloses
that
this
alternative
is
or
is
not
an
operation
of
trade.
indeed
such
is
the
situation
found
in
all
these
cases
where
land
is
purchased
for
the
purpose
of
using
it
to
create
an
investment
and
this
secondary
or
alternative
intention
can,
by
proper
evidence,
be
inferred
from
a
number
of
things
such
as
the
circumstances
surrounding
the
transaction,
the
conduct
of
the
taxpayer,
the
state
of
development
of
the
lands
in
the
vicinity
at
the
time,
Le.,
whether
they
were
speculative
or
not,
and
the
knowledge
the
taxpayer
had
of
such
development,
the
skills
of
the
taxpayer,
or
any
other
fact
or
circumstance
sufficient
to
indicate
that
the
purchasing
of
the
land
as
a
speculation
looking
to
resale
was
or
must
have
been
contemplated
in
the
event
the
preferred
intention
could
not
be
carried
out.
It
is,
I
believe,
on
this
basis
that
the
Supreme
Court
of
Canada
in
Regal
Heights
v.
M.N.R.,
[1960]
S.C.R.
902;
[1960]
C.T.C.
384
(Judson,
J.)
stated
at
pp.
905,
388:
‘‘There
is
no
doubt
that
the
primary
aim
of
the
partners
in
the
acquisition
of
these
properties,
and
the
learned
trial
judge
so
found,
was
the
establishment
of
a
shopping
centre,
but
he
also
found
that
their
intention
was
to
sell
at
a
profit
if
they
-
were
unable
to
carry
out
their
primary
aim.”
Now,
in
the
present
instance,
although
four
members
of
the
syndicate,
N.
S.
Robertson,
H.
A.
Smith,
J.
Van
Nostrand
and
C.
H.
Lane,
stated
that
the
sole
purpose
of
the
syndicate
was
to
erect
on
the
lands
purchased
a
multi-dwelling
guaranteed
housing
development,
and
the
agreement
recites
such
an
intent,
which
in
turn
is
corroborated
by
the
engaging
of
an
architect
who
prepared
plans
and
investigated
the
sewers
and
water
situation,
and
the
inquiring
as
to
whether
a
construction
company
would
be
interested
in
bidding
on
the
construction
job,
as
well
as
the
letters
written
to
Central
Mortgage
and
Housing
Corporation
for
a
loan
on
the
housing
project,
Mr.
Lane,
the
respondent
herein,
gave
a
number
of
answers
which,
in
my
opinion,
indicate
that
such
was
not
the
case.
Cf.
pp.
56-57
of
the
transcript
:
“Q.
Wasn’t
that
the
whole
object
in
Mr.
DeMara
coming
to
you?
He
said
‘
Here
is
some
land
we
can
get
at
X
dollars
and
a
few
days
or
months
or
years
from
now
it
is
going
to
be
worth
a
lot
more
money’?
A.
I
think
so,
but
I
don’t
remember
him
putting
it
that
way.
Q.
What
other
reason
would
there
be
for
him
suggesting
this
parcel
to
you?
A.
I
do
not
know
of
any
other.
Q.
I
suggest
that
is
a
reasonable
situation.
Then
when
he
suggested
the
proposition
to
you
I
gather
he
suggested
this
is
too
big
for
you
and
me;
we
need
some
others
to
come
in
on
it?
A.
Yes.”’
And
at
p.
76
of
the
transcript,
in
answer
to
a
number
of
questions
he
said:
“Q.
Was
there
any
consideration
given
to
the
possibility
of
re-sale
either
of
the
land
or
of
the
completed
buildings?
A.
No.
there
was
no
set
policy
or
arrangement
on
that.
His
Lordship
:
Was
it
ever
discussed
?
Witness
:
I
think
it
was,
my
lord.
If
you
couldn’t
do
one
thing
you
could
sell.
There
was
always
the
sale
of
it.’’
Now,
there
is
also
Mr.
Lane’s
letter
to
Central
Mortgage
and
Housing
Corporation
of
October
15,
1951,
and
particularly
that
passage
which
has
already
been
quoted
to
the
effect
that
‘‘there
has
been
a
great
deal
of
activity
in
the
subdivision
and
sale
of
real
estate
in
that
vicinity
in
the
last
year’’.
This
establishes
that
the
lands
belonging
to
the
syndicate
were
already
in
a
speculative
state
when
they
were
purchased
and
this
would
not
appear
to
me
to
be
surprising
in
view
of
the
manner
in
which
they
were
brought
to
the
attention
of
the
syndicate
by
Mr.
C.
DeMara,
an
experienced
and
active
realtor,
it
being
in
my
opinion
significant
that
the
latter
not
only
participated
as
a
member
in
the
transactions
of
this
syndicate
but
instigated
their
sale
to
the
syndicate,
stipulated
a
high
commission
fee
in
the
syndicate’s
agreement
where
he
was
appointed
its
real
estate
agent
and
ended
up
by
advertising
and
selling
the
lands.
May
I
also
add
that
the
organization
of
the
syndicate,
as
well
as
the
various
professional
and
business
skills
of
its
members,
including
that
of
a
professional
realtor,
together
with
the
knowledge
they
had
of
the
large
Eaton
and
Murray
Printing
developments
which
made
certain
the
rising
price
of
the
surrounding
lands
including
those
of
the
syndicate,
also
establishes
that
the
syndicate
knew
and
realized
that
if
the
land
could
not
be
zoned
residential,
or
the
necessary
finance
could
not
be
obtained
from
Central
Mortgage
and
Housing
Corporation,
it
was
obviously
good
and
profitable
for
commercial
purposes
and
I
must,
therefore,
conclude
that
the
sale
of
these
lands
was
surely
contemplated.
There
are,
however,
other
aspects
of
these
appeals
which
also
drive
me
to
the
conclusion
that
if
the
purchase
of
the
lands
was
for
the
purpose
of
erecting
dwelling
houses,
it
was
also
with
a
view
of
reselling
them
at
a
profit
if
the
preferred
intention
was
mot
possible.
Indeed,
there
is
the
statement
in
Section
1
of
the
syndicate’s
agreement
which
says
that
the
lands
were
required
or
the
purpose
‘‘of
constructing
duplexes
or
other
multiple
dwellings
upon
the
same
or
otherwise
dealing
with
the
said
lands’’.
Now
although
this
may
be
a
standard
insertion
in
a
document
of
this
kind
it
does,
in
my
opinion,
indicate
that
the
members
had
other
purposes
in
mind
and
of
course
one
of
which
might
possibly
have
been
their
sale
at
a
profit.
The
prohibition
contained
in
the
syndicate’s
document
of
making
capital
commitments
without
the
unanimous
consent
of
the
syndicate’s
members,
although
a
normal
clause
to
prevent
the
executive
committee
from
involving,
without
consultation
the
members
in
large
capital
expenses,
would,
however,
indicate
that
the
implementation
of
the
proposed
investment
project
could
not
commence
until
such
time
as
the
members
had
been
consulted
and
had
consented.
That
the
evidence
establishes
that
there
never
was
a
meeting
of
all
the
members
for
this
purpose
is
not
surprising
in
view
of
the
refusal
of
Central
Mortgage
and
Housing
Corporation
to
make
the
necessary
loans,
but
what
appears
to
be
more
surprising,
however,
is
that
when
immediately
after
the
hearing
before
the
Town
Planning
Committee,
on
February
26,
1962,
in
an
attempt
to
zone
the
syndicate’s
property
for
manufacturing,
which
incidentally
is
in
itself
also
surprising,
and
may
I
add
somewhat
of
an
anticlimax
to
its
letter
to
Central
Mortgage
and
Housing
Corporation
of
February
12,
1962,
where
it
was
stated
that
representations
would
be
made
for
residential
zoning,
a
decision
to
sell
the
lands
was
then,
around
the
end
of
February
1962,
immediately
taken
by
the
executive
committee
without
consultation
with
the
members
and
C.
DeMara
(the
pre-appointed
real
estate
agent
by
Section
9
of
Ex.
‘‘A’’)
immediately
prepared
an
attractive
printed
brochure
describing
the
property
in
question
and
offering
it
for
sale
at
that
date
for
a
price
of
$320,000.
This
also,
in
my
opinion,
would
indicate
that
the
proposed
investment
project
was
not
too
important
nor
serious
if
it
could
so
easily
be
set
aside,
without
consultation
and
the
sales
of
the
land
entered
into
without
a
meeting
of
the
members,
nor
their
authorization
which
does
not
seem
to
have
even
been
requested.
It
would
appear
from
this
that
the
syndicate’s
non-active
members
were
quite
content
to
leave
the
handling
of
the
syndicate’s
activities
to
the
executive
committee
who
had
carte
blanche
to
handle
the
business
of
the
syndicate
as
they
thought
best
and
because
of
this
situation,
the
passive
members
here
would
be
in
no
different
position
than
that
of
the
active
members.
Indeed,
if
the
transactions
are
business
transactions,
any
profit
derived
therefrom
from
any
of
the
members
would
be
taxable.
The
likelihood
that
the
purchase
of
the
lands
as
a
speculation
\
looking
to
resale
was
never
considered
in
the
event
the
preferred
purpose
could
not
be
realized,
is
further
negated
by
a
number
of
imponderables
which
the
syndicate
fully
appreciated.
It
bought
land
which
was
not
zoned
for
residential
buildings;
there
were
no
sewers
within
one
and
a
half
miles;
it
was
doubtful
that
the
employees
of
T.
Eaton’s
warehouse
or
the
Murray
Printing
Company
would
live
in
that
area;
there
was
considerable
doubt
that
A
the
money
would
come
from
Central
Mortgage
and
Housing
Cor-
/
poration;
the
investment
yield
under
a
guaranteed
rental
plan
was
very
low,
Mr.
Robertson
admitting
that
it
was
5
per
cent
at
the
most;
there
was
a
serious
commercial
risk
in
the
event
of
vacancies
occurring;
even
if
85
per
cent
of
the
$3,790,000
required
for
the
investment
project
was
borrowed
from
Central
Mortgage
and
Housing
Corporation,
the
members
would
still
have
to
find
$700,000
and
it
does
not
appear
that
most
of
these
members
could
have
supplied
this
amount.
I
In
my
opinion,
this
is
clearly
a
venture
in
the
nature
of
trade
and
the
above
facts
would
alone
be
sufficient
to
establish
this.
However,
there
is
still
more
convincing
evidence
of
trade
in
that
the
syndicate
even
purchased
after
the
preferred
investment
scheme
failed
and,
of
course,
these
other
subsequent
transactions,
if
I
had
any
doubt
as
to
the
Mainshep
transaction
being
of
such
a
nature,
which
I
must
say,
however,
I
have
not,
would
(as
stated
by
Wheateraft
in
his
volume
The
Law
of
Income
Tax,
Surtax
and
Profits,
p.
1-426)
convince
me
of
its
taxability
‘‘in
the
same
way
that
the
thirteenth
stroke
of
a
crazy
clock
throws
doubt
on
what
has
gone
before’’.
Indeed,
on
March
11,
1952,
after
the
issuance
of
by-law
No.
7625,
which
zoned
to
syndicate’s
property
for
warehousing
only
and
prohibited
the
building
of
dwellings
thereon
and
at
which
time
the
syndicate
knew
of
the
impossibility
of
going
ahead
with
the
project
not
only
because
of
this
restrictive
by-law
but
also
because
of
the
definite
refusal
of
Central
Mortgage
and
Housing
Corporation
to
approve
of
the
loan,
it
went
ahead
and
extended
the
option
to
Parcel
B,
thereby
committing
itself
to
an
immediate
payment
of
$5,000,
an
additional
payment
of
$25,000
on
account
of
the
purchase
price
on
April
15,
1952,
an
increase
of
the
original
purchase
price
by
$1,000
to
be
paid
in
cash
by
April
15,
1952,
thus
leaving
an
amount
outstanding,
to
which
they
also
committed
themselves,
of
$40,000
due
and
payable
on
April
15,
1953.
Such
an
important
commitment,
as
we
have
just
seen,
entered
into
after
the
syndicate
knew
that
it
was
no
longer
prepared
to
go
along
with
its
original
intention
and
build
residences
on
the
land
can
only
strengthen
my
conviction
that
the
managing
committee
of
the
Syndicate
to
whom
the
other
members
were
content
to
leave
the
details
of
the
transactions
on
the
date
of
the
extension
of
his
option
of
Parcel
B
on
March
11,
1952,
definitely
acquired
it
for
the
sole
purpose
of
reselling
it
at
a
profit
as
soon
as
possible
which
it
eventually
did.
I
might
add
here
that,
although
Mr.
Lane,
with
some
hesitation,
stated
that
he
thought
the
syndicate
was
committed
to
purchasing
this
Parcel
B,
such
was
not
the
case
as
at
that
time
$5,100
only
had
been
paid
for
the
option
and
it
is
not
even
sure
that
this
amount
would
have
been
appropriated
by
the
optionor
in
the
event
the
option
was
not
taken
up.
In
any
event
it
could
have
meant
at
the
most
a
loss
of
$5,000.
Now
the
same
applies
to
the
Newshep
Syndicate,
which,
as
we
have
seen,
was
organized
and
set
up
long
after
the
residential
development
of
Mainshep
had
been
given
up
and
there
is
no
evidence
of
any
attempt
to
build
anything
on
this
land.
It
is
therefore
also
clear
here
that
the
lands
purchased
by
the
Newshep
Syndicate,
of
which
three
of
the
respondents,
C.
H.
Lane,
N.
8.
Robertson
and
F.
Turville
were
members,
were
commercial
purchases
looking
to
resale,
1.e.,
adventures
or
concerns
in
the
nature
of
trade.
Mr.
Lane
raised
another
point
applicable
however
to
his
case
only
which
is
that
of
the
3,400
units
he
owned
in
the
Newshep
Syndicate,
1,425
were
held
by
him
in
trust
for
his
wife
and
that
the
proceeds
from
the
realization
of
this
syndicate’s
assets
were
divided
between
them
in
that
proportion.
At
p.
46
of
the
transcript
he
explains
why
these
units
were
held
in
his
name
:
“A.
To
go
back,
Cyril
R.
DeMara,
who
was
one
of
the
managers,
and
I
discussed
the
question
of
wives
and
we
thought
to
avoid
having
to
call
them
to
meetings
and
send
notices
and
that
sort
of
thing,
the
husbands
would
hold
them
in
trust,
and
he
did
the
same
for
his
wife,
as
it
appears
in
the
lower
court,
and
I
had
some
for
my
wife.
To
obtain
the
money
we
put
a
new
mortgage
on
a
house
which
was
jointly
owned
and
out
of
that
mortgage
the
old
mortgage
was
paid
off
and
the
net
result
was
divided
between
my
wife
and
myself
and
she
paid
for
what
she
received
for
units
in
the
New
Sheppard
Syndicate.
Subsequently,
when
a
call
was
received,
she
had
no
more
money
and
I
put
in
just
for
myself
and
that
is
how
the
units,
this
proportion
between
us.
The
monies
were
divided
and
cheques
were
issued
to
me
and
I
paid
my
wife.
There
was
one
error
where
I
guess
my
secretary
knowing
of
this
interest,
issued
the
cheque
directly
to
Mrs.
Lane
but
by
and
large
I
paid
for
it
and
it
was
paid
to
her.”
This
statement
appears
to
be
corroborated
by
Ex.
J
which
is
the
mortgage
document
referred
to
by
Mr.
Lane
and
which
establishes
that
on
April
12,
1951,
both
he
and
his
wife
borrowed
$9,000,
part
of
which
was
used
to
purchase
the
units
in
the
Sheppard
Syndicate
which
apparently
existed
at
that
time
but
which
had
not
yet
been
formalized
in
the
later
New
Sheppard
Syndicate
agreement
of
September
5,
1952.
This
document
indicates
that
both
Mr.
Lane
and
his
wife
became
jointly
responsible
for
the
money
borrowed
and
covenanted
to
pay
it.
In
view
of
this,
it
would
appear
that
the
1,425
units
were
beneficially
owned
by
the
respondent’s
wife
and
as
the
money
used
to
purchase
these
1,425
units
was
borrowed
by
her
and
was
her
money,
this
would
take
it
out
of
the
provisions
of
Section
21(1)
of
the
Income
Tax
Act
which
to
be
applied
requires
that
property
be
transferred
to
one’s
spouse
and,
consequently,
of
the
3,400
units
in
Newshep
it
must
be
held
that
1,425
belonged
to
the
respondent’s
wife.
He
then
raised
another
point
which
is
that
part
of
the
monies
invested
by
him
in
the
syndicates
was
borrowed
and
that
any
interest
paid
on
monies
so
borrowed
should
be
allowed
as
an
expense.
This
submission,
in
my
opinion,
should
be
accepted
provided
satisfactory
evidence
is
adduced
and
this
matter
is
referred
back
to
the
Minister
for
reconsideration
and
re-assessment.
It
therefore
follows
that
on
the
particular
facts
and
circumstances
of
this
case,
I
must
and
do
find
that
of
the
3,400
units
held
in
the
name
of
the
respondent
in
the
Newshep
Syndicate,
1,425
belonged
to
his
wife;
that
the
matter
of
the
interest
on
the
money
borrowed
by
the
respondent
to
purchase
his
interest
in
the
syndicates
be
and
is
hereby
referred
back
to
the
Minister
for
reconsideration
and
re-assessment;
that
the
profits
realized
by
him
from
the
sale
of
the
Mainshep
Syndicate
property
as
well
as
those
realized
from
the
sale
of
the
lands
belonging
to
the
Newshep
Syndicate,
were
not
enhancements
of
the
value
of
investments
but
were
made
in
the
operation
of
a
speculative
business
scheme
for
profit
making
and
are
adventures
in
the
nature
of
trade
and,
therefore,
taxable.
They
are,
because
of
the
definition
of
‘‘business’’
in
Section
139(1)
(e)
income
from
a
business
within
the
meaning
of
Sections
3
and
4
of
the
Income
Tax
Act.
As
the
Minister
was
right
in
assessing
the
respondent
as
he
did
for
the
taxation
years
involved
this
appeal
is
therefore
allowed
and
the
appellant
will
be
entitled
to
the
costs
to
be
taxed
in
the
usual
way
in
the
eight
appeals
but
as
the
latter
were
heard
on
the
same
evidence
and
at
the
same
time,
counsel
for
the
appellant
will
be
entitled
to
one
set
of
counsel
fees
at
trial
only
to
be
apportioned
between
the
eight
respondents
with
the
exclusion
of
Mrs.
Kathleen
DeMara.
Judgment
accordingly.
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