KEARNEY,
J.:—The
Court
is
here
concerned
with
an
appeal
from
a
decision
of
the
Income
Tax
Appeal
Board
reported
as
No.
565
v.
M.N.R.,
20
Tax
A.B.C.
159,
wherein
the
respondent’s
(hereinafter
sometimes
referred
to
as
‘‘the
taxpayer’’)
appeal
from
re-assessments
of
his
income
tax
for
the
years
1948
to
1953,
inclusive,
was
allowed.
In
his
re-assessments,
the
appellant
added
to
the
respondent’s
reported
income,
for
each
of
the
above-mentioned
years,
the
sums
of
$9,225,
$1,790,
$1,570,
$7,950,
$4,850
and
$4,250
respectively,
representing
either
bonuses
or
discounts
received
by
the
taxpayer
in
respect
of
direct
loans
which
he
made
to
mortgagors
or
discounts
on
mortgages
which
he
purchased.
The
case
turns
on
whether
the
foregoing
amounts
constitute
income
from
a
business
within
the
meaning
of
Section
3
of
The
Income
War
Tax
Act,
R.S.C.
1927,
c.
97,
Sections
3,
4
and
127
(1)
(e)
of
the
Income
Tax
Act,
S.C.
1948,
c.
52,
and
Sections
3,
4
and
139(1)
(e)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148.
Although
the
taxpayer,
in
the
first
year
in
question,
was
assessed
under
The
Income
War
Tax
Act,
in
the
later
years
under
The
1948
Income
Tax
Act,
and
still
later,
under
the
present
Act
as
contained,
for
the
purposes
of
the
present
appeal,
in
the
1952
revision,
counsel
agreed
that
nothing
turns
on
this
differentiation
and
that
we
may
direct
our
attention
solely
to
the
Income
Tax
Act
as
it
stood
in
1952,
the
relevant
provisions
of
which
read
as
follows
:
“3.
The
income
of
a
taxpayer
for
a
taxation
year
for
the
purposes
of
this
Part
is
his
income
for
the
year
from
all
sources
inside
or
outside
Canada
and,
without
restricting
the
generality
of
the
foregoing,
includes
income
for
the
year
from
all
(a)
businesses,
(b)
property,
and
(c)
offices
and
employments.
4.
Subject
to
the
other
provisions
of
this
Part,
income
for
a
taxation
year
from
a
business
or
property
is
the
profit
therefrom
for
the
year.
139.
(1)
In
this
Act,
(e)
‘business’
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatsoever
and
includes
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment.”
At
the
opening
of
the
hearing,
counsel
for
the
appellant
tendered
as
exhibits
the
returns
filed
by
the
taxpayer
for
the
six
years
in
question,
the
Minister’s
re-assessment
for
each
of
such
years,
the
taxpayer’s
notices
of
dissatisfaction
and
the
Minister’s
replies
thereto,
which,
by
consent,
were
filed
as
a
single
exhibit
marked
‘‘Ex.
1’’.
Similarly,
a
memorandum,
containing
fifteen
consecutively
numbered
pages,
plus
four
additional
pages
some
of
which
are
unnumbered
and
hereinafter
referred
to
as
a
supplement,
giving,
inter
alia,
particulars
and
the
number
of
each
mortgage
transaction
entered
into
by
the
respondent
during
the
six
years
in
question,
as
well
as
similar
transactions
effected
by
the
taxpayer
in
years
prior
and
subsequent
to
the
6-year
period
in
question,
was
filed
as
Exhibit
2.
The
only
witness
heard
on
behalf
of
the
respondent
was
the
taxpayer
himself.
At
the
date
of
trial,
he
was
in
his
7
0th
year.
Born
in
Warsaw,
he
came
to
Canada
in
1905.
He
resides
in
Forest
Hill
Village,
Toronto,
where
he
has
been
‘‘for
many,
many
years
engaged
in
the
fruit
and
vegetable
business’’.
From
a
modest
beginning,
he
caused
to
be
incorporated
in
1911
the
Ontario
Produce
Company,
of
which,
at
the
time
of
the
hearing,
he
was
vice-president,
owning
50
per
cent
of
the
issued
stock
of
the
company,
his
brother
being
the
owner
of
the
other
50
per
cent.
He
held
a
similar
office
and
stock
ownership
in
Oshawa
Wholesale
Limited,
which
was
a
distributor
of
fruits
and
vegetables
to
the
IGA
stores
and
groceries.
Prior
to
1930
the
respondent
had
been
able
to
effect
savings
which
he
invested
in
the
stock
market
and
which
he
totally
lost
following
the
1929
crash.
Since
the
above
loss,
the
respondent,
as
he
modestly
put
it,
has
been
able
to
buy
some
odd
few
shares
of
stock
as
the
money
came
to
him.
I
say
‘‘modestly’’
because
the
schedules
of
his
dividends
attached
to
his
income
tax
returns
show
that
during
the
SIX
years
in
issue
his
average
dividends
from
his
stock
market
investments
have
amounted
to
about
$10,000
per
annum.
In
respect
of
mortgage
transactions,
leaving
aside
the
interest
he
derived
therefrom,
the
respondent’s
average
realization
on
discounts
and
bonuses
during
the
same
period
amounted
approximately
to
$5,000
per
annum.
His
evidence
also
indicates
that
he
attended
to
his
own
stock
market
investments
and
these
show
very
little
variation
from
year
to
year.
The
respondent
does
not
appear
to
have
invested
in
bonds
but
very
largely
in
what
are
sometimes
termed
“growth
stocks’’,
consisting
of
dividend
yielding
common
shares.
Any
time
the
question
of
putting
his
money
into
mortgages
arose,
Mr.
Wolfe
relied
entirely
on
Mr.
Shifrin
who
was
his
nephew
and
legal
adviser.
The
respondent
stated
that
he
was
wholly
occupied
from
early
morning
to
late
at
night
in
his
fruit
and
vegetable
business
and
had
neither
the
time
nor
the
required
knowledge
to
appraise
the
worth
or
otherwise
of
the
mortgages
which
he
acquired
through
his
legal
adviser.
He
testified
that
he
did
not
see
or
interview
any
of
the
mortgagors
nor
did
he
inspect
any
of
the
properties
on
which
his
mortgages
were
to
be
registered.
Whether
he
acquired
a
mortgage
recommended
by
his
legal
adviser
only
depended
on
whether
he
happened
to
have
sufficient
funds
on
hand
to
pay
for
it.
Incredible
as
it
may
seem,
he
stated
that
he
did
not
even
enquire
about
the
rate
of
interest
nor
whether
he
was
entitled
to
any
bonus
or
discount.
Mr.
Shifrin
made
the
collections,
attended
to
necessary
insurance
and
had
possession
of
all
documents
in
connection
with
the
mortgages.
The
following
is
a
cumulative
copy
of
Schedule
“A”
which
is
attached
to
each
re-assessment
made
by
the
Minister
for
the
six-
year
period
in
question
in
respect
of
the
31
mortgages
which
are
in
issue.
The
last
column
shows
the
amounts
which
he
added
to
the
respondent’s
taxable
income
in
each
of
the
six
years,
and,
for
ready
reference,
I
have
taken
the
liberty
of
adding
a
first
column
indicating
the
number
which
has
been
assigned
in
exhibit
2
to
each
mortgage
transaction
mentioned
therein.
MINISTER’S
SCHEDULE
“A”
FOR
THE
YEARS
1948
TO
1953,
INCLUSIVE
Max
Max
Wolfe
No.
Type
of
Mortgage
Wolfe
Share
of
(Ex.
2)
|
MORTGAGOR
|
Mortgage
Face
Value
|
Share
1948
Profits
|
|
1948
|
|
50
|
Brittania
Hotel
|
2nd
|
$16,200
|
All
|
$1,500
|
63
|
Windsor
Hotel
|
2nd
|
5,000
|
All
|
600
|
48
|
Autoguild
Motors
|
2nd
|
8,800
|
All
|
800
|
40
|
Dominion
Hotel
|
2nd
|
8,500
|
All
|
400
|
50
|
Brittania
Hotel
|
3rd
|
22,000
|
All
|
3,000
|
Supp.,
Governor
Simcoe
Hotel
Ltd.
|
2nd
|
31,000
|
¥2
|
2,500
|
p.
2
|
|
P.
|
|
|
Repath,
T.
B.
and
A.
V.
|
2nd
|
2,400
|
¥2
|
125
|
47
|
Andrews,
Marie
|
2nd
|
1,500
|
All
|
300
|
|
$9,225
|
|
1949
|
|
37
|
Anthony-Wilkie-Y
ork
|
2nd
|
$
4,978
|
All
|
$
600
|
41
|
Gamble,
Gertrude
O.
|
2nd
|
2,500
|
All
|
250
|
42
|
Gunning-Mason
|
2nd
|
2,140
|
All
|
140
|
40
|
Dominion
Hotel
|
2nd
|
3,200
|
All
|
400
|
33
|
Rochester
House
|
2nd
|
*10,200
|
All
|
400
|
|
$1,790
|
“November
1,
1948—Cancelled
January
1949.
|
|
|
1950
|
|
27
|
Grand
Trunk
Hotel
|
2nd
|
$
7,000
|
All
|
$
500
|
34
|
Sieverling,
P.
&
A.
|
2nd
|
2,350
|
All
|
220
|
25
|
Dutch
Inn
|
2nd
|
6,350
|
All
|
550
|
32
|
Raxlen-Lewis
|
2nd
|
5,500
|
All
|
300
|
|
$1,570
|
|
1951
|
|
22
|
Oakville
House
|
2nd
|
$14,200
|
All
|
$1,450
|
26
|
Richelieu
Hotel
|
2nd
|
15,000
|
All
|
3,000
|
20
|
Jasper
Hotel
|
2nd
|
10,000
|
All
|
1,750
|
24
|
Bright
House
|
2nd
|
17,500
|
All
|
1,750
|
|
$7,950
|
|
1952
|
|
10
|
Lowe-Secord
|
2nd
|
$
2,350
|
All
|
$
500
|
6
|
Davidson-Browning
|
2nd
|
1,400
|
All
|
350
|
15
|
Quinte
Hotel
|
2nd
|
29,000
|
All
|
3,000
|
14
|
Piskor-Lane
|
2nd
|
4,250
|
All
|
500
|
|
$4,350
|
|
1953
|
|
9
|
Lewis,
David
|
2nd
|
$
1,900
|
All
|
$
200
|
12
|
Norris,
H.
R.
|
2nd
|
7,000
|
All
|
900
|
2
|
Baldwin,
A.
H.
|
2nd
|
2,500
|
All
|
250
|
4
|
Calder,
Charles
|
3rd
|
2,000
|
All
|
500
|
16
|
Tabone,
Harry
|
2nd
|
5,500
|
All
|
1,400
|
Supp.,
Downey,
Thomas
and
Mary
|
2nd
|
3,600
|
All
|
1,000
|
p.
4
|
|
|
$4,250
|
Besides
assigning
a
particular
number
to
each
transaction
Exhibit
2
gives
further
information
regarding
the
31
mortgages
in
issue
as
described
in
the
aforementioned
Schedule,
e.g.,
it
distinguishes
chattel
mortgages
from
other
mortgages;
indicates
the
rate
of
interest
on
each
mortgage
and
how
it
is
payable
;
the
manner
in
which
the
principal
is
repayable;
the
life
or
duration
of
the
mortgage;
and
whether
the
taxpayer
obtained
a
bonus
or
discount
in
respect
thereof.
I
do
not
think
it
necessary
to
put
on
record
the
above-mentioned
further
particulars
in
respect
of
all
the
mortgage
transactions
of
the
taxpayer
between
1948
and
1953,
but
the
following
graph
sets
out
such
particulars
in
respect
of
the
year
1948,
being
the
one
in
which
the
respondent’s
mortgages,
both
numerically
and
in
amount,
were
larger
than
any
other
subsequent
year.
I
have
inserted,
after
the
figures
under
the
title
‘‘Discount
or
bonus’’,
the
letter
(b)
or
(d)
to
indicate
under
which
of
the
two
categories
the
figure
falls.
|
Repayment
|
No.
|
Face
Value
|
Discount
|
|
Rate
of
|
a/c
of
|
(Ex.
2
1
Mortgagor
|
and
Type
|
or
Bonus
|
Duration
|
Interest
|
Principal
|
50
|
Brittania
|
$16,200
|
$1,500(b)
|
Apr.
22/46
|
8%
per
an.
|
$300
|
|
Hotel
|
2nd
chattel
|
|
?/48
|
payable
|
monthly
|
|
monthly
|
|
63
|
Windsor
|
$
5,000
|
600(b)
|
Apr.
1/46
|
8%
|
*
|
$125
|
|
Hotel
|
2nd
|
|
“
?/48
|
|
monthly
|
48
|
Autoguild
|
$
8,800
|
800(d)
|
Apr.
13/47
|
10%
“
|
$400
|
|
Motors
|
2nd
|
|
13/48
|
|
monthly
|
40
|
Dominion
|
$
8,500
|
400(b)
|
July
1947
|
?
|
|
$200
|
|
Hotel
|
2nd
|
|
Aug.
1948
|
|
monthly
|
50'
|
Brittania
|
$22,000
|
300(b)
|
Oct.
1947
|
5%
|
“
|
$150,
|
|
Hotel
|
3rd
chattel
|
|
Aug.
1/48
|
|
monthly
|
*
|
Governor
|
$31,000
|
$5,000(b)
|
Oct.
31/47
|
5%
|
‘“
|
$800
|
|
Simcoe
|
2nd
chattel
|
|
Dec.
9/48
|
|
monthly
|
|
Hotel
Ltd.
|
|
(See
Ex.
2—Supplement,
p.
2)
|
(assigned)
|
|
47
|
Andrews,
|
$
1,500
|
300(b)
|
Jan.
30/48
|
5%
|
“
|
$
50
|
|
Marie
|
2nd
|
|
Nov.
?/48
|
|
monthly
|
*
|
Repath,
|
$
2,400
|
250(b)
|
Feb.
20/48
|
5%
|
“
|
$150
|
|
T.
B.
and
|
|
Dec.
15/48
|
|
monthly
|
|
A.
V.
|
|
(Supplement,
p.
2)
|
|
(assigned)
|
|
*These
chattel
mortgages
were
held
by
Max
Wolfe
and
his
brother
|
|
Maurice
in
equal
shares
and
were
assigned
by
the
holders
to
Ontario
|
|
Produce
Co.
Limited,
the
assignors
receiving
full
amount
owing
at
|
|
that
time,
namely,
$20,600
and
$1,650
respectively.
|
|
As
appears
on
Exhibit
2,
page
1
of
the
Supplement,
the
respondent
and
his
brother
made
assignments
similar
to
those
above-mentioned
in
respect
of
earlier
first
mortgages
which
are
not
in
issue.
The
following
is
what
I
might
term
a
combined
analysis
of
Exhibit
2
made
in
argument
by
counsel
for
the
parties,
which,
except
in
one
instance—I
will
refer
to
it
later—,
I
find
to
be
substantially
accurate.
During
the
aforementioned
6-year
interval
all
of
the
31
mortgages
fell
due
or
were
realized.
The
great
majority
of
the
mortgages
represented
direct
loans
to
the
mortgagors
in
respect
of
which
the
respondent
received
a
bonus
and
the
remainder
was
purchased
by
the
taxpayer
at
a
discount.
According
to
my
count,
22
of
them
were
2nd
mortgages
on
real
property,
one
was
a
3rd
mortgage
on
realty,
seven
were
2nd
chattel
mortgages
and
one
was
a
3rd
chattel
mortgage
on
hotel
furnishings
and
equipment.
Sixteen
of
them
bore
interest
at
5
per
cent,
one
at
5^2
per
cent,
eight
at
6
per
cent,
two
at
8
per
cent
and
one
at
10
per
cent.
No
rate
of
interest
is
mentioned
as
regards
one
of
the
two
Dominion
Hotel
mortgages.
The
period
from
the
acquisition
by
Mr.
Wolfe
of
the
mortgages
to
maturity,
either
by
purchase
or
by
an
original
direct
loan
to
the
mortgagor,
ranged
from
one
to
five
years,
nine
of
them
matured
in
less
than
two
years,
twelve
in
two
years
and
five
in
more
than
two
but
less
than
five
years.
It
was
necessary
for
the
respondent
in
the
case
of
six
of
the
said
mortgages
to
extend
the
due
date
thereof
for
one
year,
at
which
time
they
were
paid
by
the
mortgagor.
Mr.
Wolfe
was
the
sole
proprietor
of
29
of
the
said
51
mortgages
and
shared
a
50
per
cent
interest
with
his
brother
Maurice
in
the
other
two.
Between
1937
and
1945
his
mortgage
investments
consisted
exclusively
of
1st
mortgage
transactions,
which
were
19
in
number,
bearing
interest
from
5
to
7
per
cent,
but
the
great
majority
of
them
yielded
6
per
cent
and
in
no
case
was
any
discount
or
bonus
involved.
Apparently
in
1946
the
respondent
first
became
interested
in
2nd
mortgages
and
acquired
eleven
of
them
during
1946
and
1947.
Counsel
for
the
respondent
considered
that,
among
the
31
mortgages
with
which
we
are
concerned,
the
maturity
date
of
ten
of
them
was
five
years,
and
this
statement
gives
rise
to
the
aforementioned
instance
which
I
think
calls
for
some
detailed
consideration
and
consequent
modification.
In
perusing
Exhibit
2,
which
contains
some
obvious
typographical
errors
and
omissions,
I
found
one
mortgage
transaction
(Anthony-Wilkie,
No.
37)
in
which
the
principal
fell
due
in
something
over
three
years;
the
Jasper
Hotel
mortgage
(No.
12)
fell
due
in
a
little
over
two
years;
and
the
same
was
true
in
connection
with
No.
15,
The
Quinte
Hotel.
But
I
was
only
able
to
discover
five
instances
in
which
a
5-year
term
was
mentioned.
The
first
of
the
said
five
transactions
was
the
Lowe-Secord
mortgage
(No.
10—Ex.
2),
which
was
assumed
by
Enrico
Car-
fagnini
and
dated
August
29,
1947,
maturing
August
30,
1952.
It
was
assigned
to
Max
Wolfe
on
September
12,
1947
at
a
discount
of
$500
and
was
discharged
on
September
23,
1952—but
this
appears
to
be
the
only
instance
in
which
the
respondent
held
a
5-year
mortgage
to
maturity.
The
said
five
transactions
were
as
follows:
The
Grand
Trunk
Hotel
mortgage
was
dated
December
30,
1947
and
matured
on
December
16,
1952.
The
Davidson-Browning
mortgage
(see
Ex.
2—No.
6),
which
was
dated
January
15,
1948,
maturing
in
five
years,
was
assigned
to
Max
Wolfe
with
a
discount
of
$350
on
February
23,
1948,
and
discharged
on
May
1,
1952,
or
eight
months
and
a
half
prior
to
the
date
of
its
maturity.
The
Charles
Calder
transaction
concerns
a
$2,000
3rd
mortgage
for
five
years
(Ex.
2—No.
4)
dated
April
1,
1952.
It
was
assigned
to
Max
Wolfe
on
August
11,
1952
and
reassigned
by
him
on
July
11,
1953
to
Ontario
Produce
Co.
Limited,
at
which
time
there
was
$1,900
owing
on
it,
and
as
appears
by
a
pencilled
notation,
Max
Wolfe
received
full
payment
of
this
sum.
Re
Downey
(see
last
page
of
Supplement—Ex.
2).
This
was
a
o-year
mortgage
for
$3,600
dated
February
16,
1953.
The
mortgagee
was
Gordon
I.
Gonthier,
who
assigned
it
to
Max
Wolfe
on
Mareh
5,
1953
at
a
discount
of
$1,000,
who
in
turn
reassigned
it
on
June
16,
1953
to
Ontario
Produce
Co.
Limited,
which
paid
to
Max
Wolfe
the
amount
then
owing
on
the
said
mortgage,
viz.,
$3,571.44.
I
now
pass
on
to
consideration
of
the
evidence
given
by
the
two
witnesses
heard
on
behalf
of
the
appellant.
Mr.
John
S.
MacLeod,
Assistant
Treasurer
of
The
Toronto
General
Trusts
Corporation,
who
had
charge
of
mortgages,
stated
that
his
company
only
invests
in
1st
mortgages
to
the
extent
of
60
per
cent
of
the
mortgage
lending
value
of
the
property
concerned,
as
provided
in
The
Trustee
Act
of
Ontario.
The
prevailing
rate
of
interest
from
the
early
1940’s
until
1951
was
5
per
cent.
During
that
year
and
until
mid-1954
it
varied
between
95
and
91%
per
cent.
Shortly
thereafter
it
rose
to
6
per
cent,
where
it
remained
until
1956.
At
the
time
of
hearing
it
was
7
per
cent.
Mr.
MacLeod
added
that,
although
the
Trust
Company
with
which
he
is
connected
does
not
deal
in
2nd
mortgages,
he
had
occasion
to
observe
that
in
the
Toronto
area
substantial
investments
were
made
in
2nd
and
3rd
mortgages
and
that
it
was
not
uncommon
for
the
mortgagee,
in
addition
to
a
rate
of
interest
which
corresponded
with
the
going
rate
on
1st
mortgages,
to
ask
for
a
bonus
or
discount,
and,
in
instances
where
the
money
was
borrowed
to
provide
part
of
a
purchase
price,
it
was
normal
investment
practice
to
do
so.
While
Mr.
MacLeod’s
testimony,
particularly
on
cross-examination
in
respect
of
investment
practice,
indicates
that
individuals
in
need
of
money
frequently
borrowed
on
2nd
mortgages,
it
does
not
throw
any
light
on
what
was
the
status
or
business
of
the
grantors
of
the
mortgages
concerned,
or
whether
it
was
customary
for
such
individuals
not
publicly
engaged
in
the
business
of
lending
to
deal
in
them
to
the
extent
to
which
the
respondent
did,
nor
does
it
take
into
consideration
the
respondent’s
even
more
speculative
dealings
in
chattel
mortgages.
Reginald
F.
Heal,
who
for
30
years
was
engaged
in
the
real
estate
and
mortgage
brokerage
business
in
Toronto,
was
next
heard
on
behalf
of
the
appellant.
The
witness
stated
that
he
had
dealt
in
2nd
mortgages
by
obtaining
them
for
clients
in
need
of
money
and
then
disposing
of
them
to
would-be
purchasers.
He
stated
that
while
each
2nd
mortgage
loan
had
to
be
judged
on
its
own
merit,
in
respect
of
prevailing
interest
rates
from
1946
to
1950,
when
1st
mortgages
were
yielding
5
or
514
per
cent,
2nd
and
3rd
mortgage
rates
would
be
between
2
or
3
per
cent
higher.
On
temporary
building
loans
2
per
cent
per
month
was
a
common
rate.
Speaking
of
discounts
and
bonuses,
he
said
they
occurred
in
both
1st
and
2nd
mortgages,
and,
when
added
to
the
interest
rate
in
the
case
of
2nd
mortgages,
the
calculated
yield,
depending
on
the
security
and
how
pressing
was
the
need
of
the
borrower,
would
be
as
high
as
12
per
cent.
He
rarely
dealt
in
chattel
mortgages
because
of
the
‘‘terrific
risk’’
involved,
and
in
respect
of
2nd
chattel
mortgages
the
interest
charges,
he
stated,
could
be
ridiculously
high.
On
cross-examination
Mr.
Heal
testified
that
between
1948
and
1953
it
was
normal
practice
for
investors
to
demand
a
discount
on
2nd
and
3rd
mortgages,
and
this
was
sometimes
true
of
1st
mortgages,
particularly
when
‘‘the
principal
was
higher
in
relation
to
the
value
of
the
property’’.
In
98
per
cent
of
such
cases
a
person
who
wanted
to
sell
a
2nd
mortgage
could
not
do
so
unless
he
gave
a
discount
off
the
principal.
The
issue
with
which
we
are
here
concerned
has
been
commonly
described
as
a
capital
gain
or
income
case—and
the
following
are
four
most
recent
decisions
which
are
reported
in
the
current
edition
of
the
1962
Canada
Tax
Cases
and
which,
together
with
the
authorities
therein
referred
to,
comprise
a
very
complete
review
of
what
has
been
so
far
said
on
the
question
in
issue:
M.N.R.
v.
Minden,
[1962]
C.T.C.
79
at
91;
Irrigation
Industries
Ltd.
v.
M.N.R.,
[1962]
C.T.C.
215;
M.N.R.
v.
Maclnnes,
[1962]
C.T.C.
350;
M.N.R.
v.
Rosenberg,
[1962]
C.T.C.
372.
The
said
jurisprudence
indicates
a
sometimes
divergent
approach
to
the
subject
which
I
think
illustrates
the
appositeness
of
what
was
said
more
than
half
a
century
ago
in
the
oft-quoted
case
of
Californian
Copper
Syndicate
v.
Harris,
5
T.C.
159
at
166,
wherein
the
Lord
Justice
Clerk
observed:
“What
is
the
line
which
separates
the
two
classes
of
cases
may
be
difficult
to
define,
and
each
case
must
be
considered
according
to
its
facts;
the
question
to
be
determined
being—Is
the
sum
of
gain
that
has
been
made
a
mere
enhancement
of
value
by
realising
a
security,
or
is
it
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
for
profit-making?”
I
propose
to
examine
the
question
of
the
applicability
to
the
case
at
bar
of
the
various
helpful
tests
or
indicia
referred
to
in
the
above-mentioned
jurisprudence
with
a
view
to
determining
whether
or
not
it
can
be
said
that
the
respondent
was
engaged
in
an
adventure
in
the
nature
of
trade.
In
the
first
place,
I
believe
that,
in
a
case
such
as
this,
the
word
‘‘adventure’’
is,
to
all
intents
and
purposes,
synonymous
with
speculation
and
risk.
The
securities
in
issue
certainly
could
not
be
regarded
as
approved
investments
under
The
Trustee
Act,
R.S.O.
1950,
c.
400
(as
amended),
and
I
believe
the
same
may
be
said
of
the
corresponding
Acts
of
the
other
provinces.
The
evidence
shows
that
six
mortgagors
could
not
pay
their
mortgage
when
it
fell
due
but
that
after
being
granted
a
delay
of
a
year
they
were
able
to
do
so.
The
evidence
clearly
shows
the
respondent
not
only
agreed
to
accept
ordinary
second
mortgages
as
security
but
also
risked
large
sums,
I
would
not
say
on
the
strength,
but
rather
on
the
weakness
of
chattel
mortgages.
Mr.
Heal,
whose
business
includes
transactions
in
2nd
mortgages,
stated
that,
beyond
having
an
odd
chattel
mortgage,
he
did
not
deal
in
them
‘because
you
would
have
to
be
a
great
gambler
to
take
one
’
’
;
and
the
witness
added
that
he
had
never
heard
of
such
a
thing
as
a
2nd
chattel
mortgage.
The
evidence
shows
that
the
respondent,
in
respect
of
the
year
1948,
after
allowing
for
the
discounts
and
bonuses
which
he
had
received,
had
made
a
so-called
investment
of
$15,875
in
four
ordinary
2nd
mortgages
and
over
$55,000
in
4
chattel
mortgages,
three
of
which
were
2nd
chattel
mortgages
and
the
other
was
a
3rd
chattel
mortgage,
which,
in
my
opinion,
shows
that
the
adventurous
nature
of
the
said
transactions
is
established
beyond
question.
Counsel
for
the
respondent,
relying
on
the
evidence
of
Mr.
MacLeod,
submitted
that,
unlike
for
instance,
the
case
of
M.N.R.
v.
Spencer,
[1961]
C.T.C.
107,
there
was
evidence
in
the
present
case
establishing
that
the
mortgages
in
issue
constituted
usual
or
normal
forms
of
investment.
The
chattel
mortgage
transactions
above
described
added
to
the
frequent
acquisitions
of
2nd
mortgages,
in
my
opinion,
serve
to
give
to
the
respondent’s
entire
mortgage
dealings
an
extraordinary
speculative
character
which,
I
think,
removes
them
from
the
category
of
what
is
regarded
as
normal
or
ordinary
investments.
Another
factor
often
referred
to
is
the
matter
of
relationship
between
the
taxpayer’s
ordinary
occupation
and
his
mortgage
dealings.
I
think
this
facet
of
the
case
should
be
resolved
in
favour
of
the
taxpayer
because
the
evidence
indicates
that
no
significant
relationship
of
this
nature
existed.
As
I
read
the
jurisprudence,
a
most
important,
if
not
the
most
telling
test
referred
to,
concerns
the
repetitious
nature
of
short
term
quick
profit
making
transactions.
In
contrast
to
his
portfolio
of
stocks
which
varied
very
little
during
the
six-year
period
in
question,
his
mortgage
investments
cannot,
on
the
evidence,
be
regarded
otherwise
than
as
of
very
short
duration,
accompanied
by
a
system
of
frequent
replacements.
As
Kerwin,
J.
(as
he
then
was),
observed
in
Noak
v.
M.N.R.,
[1953]
2
S.C.R.
136
at
137;
[1954]
C.T.C.
6,
‘‘the
number
of
transactions,
and,
in
some
cases,
the
proximity
of
the
purchase
to
the
sale,
indicates
the
carrying
on
of
a
business”.
What
was
said
by
Kerwin,
J.,
in
respect
of
sales
of
securities
is
equally
applicable
when
they
are
converted
or
realized
upon.
See
Kellock,
J.,
(supra)
at
p.
138
[
[1954]
C.T.C.
at
p.
8].
At
page
139
[[1954]
C.T.C.
at
p.
9],
this
learned
judge
concluded
by
saying
that
in
the
case
in
question
he
concurred
with
the
learned
trial
judge:
‘‘in
the
view
that
the
appellant
has
not
satisfied
the
onus
of
establishing
any
error
in
the
method
of
assessment
and
would
dismiss
the
appeal
with
costs”.
The
respondent
stated
that
he
never
sold
any
of
his
2nd
mortgages.
I
do
not
question
his
good
faith
in
saying
this,
but
in
strict
point
of
fact
it
is
not
so
because,
as
I
have
already
indicated,
he
made
assignments
of
such
mortgages
to
Ontario
Produce
Co.
Ltd.
and
did
not
pass
on
to
the
company
any
part
of
the
bonuses
or
discounts
which
he
had
obtained;
he
thus
received
full
payment
of
the
amount
outstanding
thereon.
It
is
true
that
he
and
his
brother
owned
and
controlled
the
last-mentioned
company,
but
from
the
point
of
view
of
taxation
the
company
and
the
respondent
were
distinct
entities.
These
above-mentioned
occurrences,
while
not
overly
important
in
themselves,
are
just
what
one
would
expect
to
find
where
a
person
was
engaged
in
the
business
of
lending
money
or
a
scheme
for
profit-making.
The
respondent
testified
that
he
never
resorted
to
advertising
in
connection
with
his
mortgage
transactions—and
whether
or
not
Mr.
Shifrin
did,
he
did
not
know.
Neither
did
he
have
recourse
to
borrowing
in
order
to
make
possible
his
acquisitions
in
mortgages:
He
did
so
out
of
his
savings—and,
insofar
as
these
criteria
may
constitute
a
factor,
his
evidence
in
respect
of
them
would
operate
in
his
favour.
Another
important
indicia
is
the
proof
of
the
taxpayer’s
intent
in
entering
into
the
transactions
which
he
did.
Whether
the
respondent
was
attracted
to
the
ventures
upon
which
he
embarked
was
because
of
the
profit
he
would
make
or
the
interest
he
would
receive,
or
a
combination
of
both,
we
will
never
know,
since,
on
his
own
evidence,
due
to
lack
of
knowledge,
he
was
incapable
of
forming
any
intent.
The
President
of
this
Court,
in
the
Minden
case
(supra),
held
that
the
fact
that
the
taxpayer
knows
nothing
about
his
mortgage
investments
cannot
exempt
him
from
responsibility
for
the
conduct
and
acts
of
his
agent.
But
here
again,
the
Court
is
left
in
the
dark,
because
Mr.
Shifrin,
in
whom
the
taxpayer
had
implicit
confidence,
was
not
called
as
a
witness.
Insofar,
therefore,
as
intent
is
concerned,
it
is
to
be
determined
by
the
inferences
to
be
drawn
from
the
nature
of
the
transactions—and
I
consider
that
the
proof
on
this
score
weighs
heavily
against
the
respondent.
To
what
extent,
if
any,
can
it
be
said
that
the
respondent
organized
himself
in
order
to
carry
out
the
transactions
in
issue?
Apart
from
sharing
a
50
per
cent
interest
with
his
brother
Maurice
in
the
Brittania
Hotel
and
The
Governor
Simcoe
Hotel
mortgages,
he
was
the
sole
party
having
any
interest
in
the
remaining
transactions.
The
only
thing,
in
this
case,
which
might
savour
of
organization
was
Mr.
Shifrin’s
status
in
the
case.
That
a
considerable
amount
of
administrative
work
fell
on
Mr.
Shifrin’s
shoulders
appears
from
the
fact
that
replacement
of
mortgages
was
frequent
and
all
of
them
bore
interest
on
a
monthly
basis
or
a
quarterly
basis,
and
the
same
is
true
with
respect
to
repayments
on
account
of
capital.
No
evidence
was
offered
with
respect
to
the
contractual
relationship
between
Mr.
Wolfe
and
Mr.
Shifrin,
and
I
do
not
think
that
any
important
deductions,
one
way
or
the
other,
can
be
drawn
under
this
heading.
In
my
opinion,
on
balance
the
evidence
in
this
case,
while
it
likely
falls
short
of
establishing
that
the
respondent
was
engaged
in
operating
a
business
in
the
ordinary
sense
of
the
term,
it
nevertheless
proves
he
was
engaged
in
speculative
or
adventurous
undertakings
of
a
trading
nature
within
the
extended
meaning
of
the
word
‘‘business’’
as
contained
in
Section
139(1)
(e)
of
the
Act.
For
the
reasons
above-mentioned
I
find
in
favour
of
the
appellant
and
I
would
allow
the
Minister’s
appeal
herein
with
costs.
Judgment
accordingly.