KEARNEY,
J.:—This
is
an
appeal
from
a
decision
of
the
Tax
Appeal
Board,
dated
January
8,
1962
(28
Tax
A.B.C.
221),
dismissing
the
appellant’s
appeal
from
a
re-assessment
of
its
declared
income
for
its
taxation
year
1959,
notice
of
which
was
given
by
the
Minister
on
August
23,
1960,
and
whereby
losses
incurred
in
the
construction
and
sale
of
homes,
amounting
to
$134,667,
during
the
years
1956
to
1959,
inclusive,
and
claimed
in
full
as
deductions
by
the
taxpayer,
were
disallowed
to
the
extent
of
25%
thereof
or
$33,667.
The
appellant’s
income
tax
return
for
the
year
1959
discloses
taxable
income
amounting
to
$146,184.74,
from
which
it
deducted
as
a
loss
the
sum
of
$55,197.08
which
included
a
balance
of
loss
carried
forward
from
the
aforesaid
previous
years,
thereby
reducing
its
taxable
income
to
$90,987.66.
As
a
result
of
the
above-mentioned
disallowance
of
$33,667.01,
the
appellant’s
taxable
income
was
raised
to
$124,654.67,
thereby
adding
$13,220.15
to
its
tax
otherwise
payable
for
the
said
year.
The
appellant
objected
to
the
said
re-assessment
but
on
reconsideration
the
Minister
confirmed
it
on
the
grounds
that
the
said
losses
resulted
from
what
constituted
a
partnership
agreement
entered
into
on
April
26,
1955
between
the
appellant
and
J.
H.
Smith
Construction
Co.
Limited
(hereinafter
referred
to
as
“Smith
Co.’’)
which
stipulated
that
the
profits
were
to
be
shared
to
the
extent
of
75%
by
the
appellant
and
25%
by
Smith
Co.
and
that
as
consequence
losses,
although
not
specifically
referred
to
in
the
agreement,
must
be
borne
by
the
parties
in
Like
proportions.
The
appellant
denies
that
the
agreement
in
question
constitutes
a
partnership
and
submits
that
it
is
a
management
contract
entailing
lease
and
hire
of
services.
It
also
submits
alternatively
that,
even
assuming
a
contract
of
partnership
existed,
as
claimed
by
the
respondent,
nevertheless
the
appellant
was
justified
in
deducting
the
entire
losses
incurred,
inter
ala,
because
it
was
required
to
pay
them,
since
Smith
Co.,
which
became
a
declared
bankrupt
in
1959,
was
not
at
any
time
in
a
position
to
pay
any
portion
of
them.
Consequently,
the
appellant
is
entitled
to
write
off
as
worthless
any
claim
which
it
might
have
against
Smith
Co.
to
the
extent
of
$33,667.01
and
this
Court
should
refer
the
record
back
to
the
Minister
to
be
dealt
with
accordingly.
The
respondent
concedes
that
should
it
be
found
that
the
agreement
does
not
constitute
in
law
and
in
fact
a
partnership
the
appellant
is
entitled
to
succeed.
The
record
for
the
purposes
of
the
present
appeal
consists
of
the
evidence
of
one
witness,
M.
J.
Prupas,
C.A.,
who
was
the
auditor
of
both
the
appellant
and
Smith
Co.
and
was
heard
on
behalf
of
the
appellant,
together
with
the
transcript
of
proceedings
and
the
exhibits
filed
before
the
Tax
Appeal
Board.
There
is
no
dispute
as
to
the
facts
and
no
disagreement
as
to
the
amounts
of
losses
and
profits
involved.
Counsel
also
agree
that
Sections
15(1)
and
27(1)
(e)
of
the
Income
Tax
Act
are
relevant
to
the
issues
and
that
in
order
to
determine
the
nature
of
the
agreement
recourse
must
be
had
to
the
civil
law
of
the
Province
of
Quebec.
The
agreement
is
short
and
reads
as
follows:
41
Whereas
the
Parties
hereto
desire
to
associate
themselves
for
the
purpose
of
carrying
on
a
contracting
and
construction
business
;
WHEREAS
the
Parties
have
agreed
upon
terms
and
conditions
subject
to
which
their
enterprise
will
be
carried
on;
NOW
THEREFORE
IT
IS
AGREED
AS
FOLLOWS:
1.
That
the
Party
of
the
First
Part
will
secure
suitable
land,
and
will
arrange
for
the
subdivision
of
such
land,
and
the
financing,
mortgages
and
sale
of
the
houses
and
other
buildings
to
be
erected
thereon,
such
land
to
be
vested
in
and
belong
to
the
Party
of
the
First
Part;
2.
That
the
Party
of
the
Second
Part
will
manage
the
execution
of
the
said
project,
carry
on
the
work
of
construction,
supervise
all
field
operations,
set
up
efficient
construction
systems,
and
perform
all
services,
technical
and
otherwise,
that
may
be
required,
and
keep
books
of
account
and
cost
records
in
connection
therewith.
The
books
of
account
shall
be
the
joint
property
of
both
parties,
and
accessible
to
either
at
any
time.
The
books
and
accounts
shall
be
audited
periodically
by
an
accountant
named
by
the
Party
of
the
First
Part;
3.
That
before
entering
upon
any
such
project,
the
suitability
and
cost
of
such
land,
as
well
as
the
commission
to
be
paid
on
sales
of
the
buildings
to
be
erected,
shall
be
agreed
upon
by
both
Parties
hereto
;
4.
That
should
opportunities
arise,
the
Party
of
the
First
Part
shall
secure
contracts
for
the
construction
of
buildings,
roads
and
public
works;
5.
That
no
bids
for
such
work
and
no
contracts
for
same
shall
be
entered
into
without
the
consent
of
both
Parties;
6.
That
the
execution
of
such
contracts
shall
be
similarly
managed
by
the
Party
of
the
Second
Part
;
7.
That
the
Party
of
the
Second
Part
shall,
while
the
present
agreement
is
in
force,
engage
in
no
other
activity
or
enterprise,
and
shall
work
exclusively
for
and
with
the
Party
of
the
First
Part
;
8.
That
the
present
agreement
shall
be
for
a
period
of
five
years
from
this
date,
subject
to
termination
by
the
Party
of
the
First
Part
upon
giving
three
months
notice
in
writing
to
the
Party
of
the
Second
Part;
9.
That
the
Party
of
the
First
Part
will
reimburse
the
Party
of
the
Second
Part
all
its
disbursements
in
carrying
out
the
work
hereinabove
described,
together
with
an
annual
fee
of
$5,000.00.
Said
disbursements
shall
include
rent
of
office
space
and
salaries
to
staff
required,
such
staff
however,
to
be
engaged
after
consultation
with,
and
consent
of
the
Party
of
the
First
Part;
10.
That
the
profits.
from
the
said
enterprise
shall
then
be
divided
in
the
following
proportions
:
To
the
Party
of
the
First
Part,
Seventy-five
per
cent
(79%)
;
To
the
Party
of
the
Second
Part,
Twenty-five
per
cent
(25%).
The
Party
of
the
Second
Part
shall
be
allowed
to
draw
on
account
of
such
profits
to
the
sum
of
Four
hundred
dollars
($400.00)
per
month.
11.
That
before
such
profits
are
so
divided,
provision
shall
be
made
for
taxes,
and
there
shall
be
deducted
as
an
expense
a
salary
of
$100.00
per
week
to
a
representative
of
the
Party
of
the
First
Part.
12:
That
the
Party
of
the
First
Part
guarantees
to
the
Party
of
the
Second
Part
a
minimum
of
$10,000.00
to
include
fee
and
share
of
profit,
for
the
first
twelve
months
of
the
present
agreement,
or
lesser
period
if
notice
of
termination
be
given
in
accordance
with
paragraph
8
hereof.’’
Before
proceeding
with
the
examination
of
the
legal
aspect
of
the
case,
the
following
further
facts
are
worth
noting.
I
think
I
should
first
observe,
in
passing,
that
the
appellant
was
incorporated
on
May
14,
1954,
its
head
office
being
in
the
City
of
Montreal.
Smith
Co.,
which
also
had
its
head
office
in
the
City
of
Montreal,
was
incorporated
on
March
24,
1955.
Shortly
after
incorporation,
the
appellant
began,
on
a
modest
scale,
with
the
aid
of
one
Wilfrid
Bédard,
building
contractor,
to
erect
and
sell
homes
on
lands
it
had
acquired.
The
appellant
then
increased
its
land
holdings
and
decided
to
extend
its
construction
and
selling
operations,
and
in
furtherance
thereof,
it
entered
into
the
aforementioned
agreement.
Beginning
on
May
31,
1955,
Smith
Co.
proceeded
to
build
numerous
homes
on
the
lands
of
the
appellant.
The
appellant
relied
on
the
building
skill
of
Smith
Co.
but
apparently
the
type
of
homes
thus
built
were
not
readily
saleable
at
remunerative
prices
and
losses
ensued
which,
in
its
first
year
of
operations
ending
May
31,
1956,
amounted
in
round
figures
to
$43,000,
and
in
1957
exceeded
$72,000.
As
a
result,
although
the
agreement
contemplated
continuance
for
five
years,
it
was
prematurely
terminated
by
mutual
consent
on
July
31,
1957
and
the
relationship
between
the
parties
to
the
contract
was
severed.
The
appellant,
however,
continued
its
real
estate
development
and
its
losses
in
1958
on
the
homes
constructed
by
Smith
Co.
diminished
and
in
1959
they
practically
ceased
and
in
the
same
year,
with
its
new
operations,
the
company
showed
a
net
profit,
as
we
have
seen,
of
more
than
$146,000.
For
as
long
as
the
agreement
lasted
the
appellant,
as
provided
in
paragraph
9
of
the
agreement,
paid
Smith
Co.
all
costs
and
expenses
incurred
by
it
in
carrying
out
the
work
it
had
undertaken,
with
the
result,
as
appears
by
statements
of
operations
for
1956
and
1957,
Exhibits
A3
and
A4,
it
experienced
neither
a
loss
nor
a
gain.
The
evidence
does
not
disclose
whether
Smith
Co.
took
on
any
other
assignments
after
the
dissolution,
but
it
lingered
on
until,
on
October
27,
1959,
it
went
into
bankruptcy.
.
I
might
here
interject
that,
apart
from
the
appellant,
its
president,
Mr.
Ezra
Shamoon,
signed
the
agreement
in
his
personal
capacity
as
Party
of
the
First
Part.
Mr.
Jack
H.
Smith,
president
of
Smith
Co.,
likewise,
was
made
a
party,
and
he
and
his
company
are
together
described
as
Party
of
the
Second
Part.
It
would
appear
that
Mr.
Shamoon,
who
was
a
man
of
means,
was
made
party
to
the
agreement
in
order
t
to
guarantee
the
performance
of
the
undertakings
of
the
appellant
and
that
Mr.
Smith,
who
was
supposed
to
supply
the
building
skill,
was
made
a
party
of
the
second
part
in
order
to
guarantee
that
the
Smith
Co.
would
be
assured
of
his
personal
services.
Neither
of
the
two
presidents
were
in
any
way
impleaded
nor
was
it
suggested
that
anything
turned
on
the
fact
that
they
were
parties
to
the
agreement,
and
I
think
the
two
companies
alone
can
be
regarded
as
party
of
the
first
part
and
party
of
the
second
part
respectively.
Did
the
agreement
in
question
constitute
in
fact
and
in
law
a
contract
of
partnership?
The
first
article
of
the
Civil
Code
with
which
we
are
most
concerned
is
Article
1830,
which
reads
as
follows
:
“It
is
essential
to
the
contract
of
partnership
that
it
should
be
for
the
common
profit
of
the
partners,
each
of
whom
must
contribute
to
its
property,
credit,
skill
or
industry.”
A
glance
at
some
of
the
provisions
of
the
agreement,
particularly
paragraphs
1,
2
and
10
thereof,
suffices
to
show
that
one
party
was
to
contribute
skill
and
the
other
credit,
and
both
would
participate
in
profits,
and
as
paragraphs
3
and
5
indicate
that
the
work
was
to
be
undertaken
by
mutual
consent,
at
first
sight
it
would
appear
that
all
prerequisites
to
a
partnership
have
been
met
and
that
the
appeal
must
fail.
Such
a
conclusion
could
only
be
reached,
however,
if
Article
1830
is
to
be
read
as
constituting
a
definition
of
the
contract
of
partnership
and
provided
the
agreement
does
not
contain
other
clauses
which,
as
suggested
by
the
appellant,
tend
to
show
that
we
are
here
concerned
with
a
more
common
type
of
contract
whereby
the
appellant
hired
the
services
of
Smith
Co.
as
manager
of
construction
projects
at
a
fixed
fee
plus
a
commission
or
bonus
of
25%
of
the
net
profits
realized.
Article
1830
of
the
Civil
Code
does
not
purport
to
define
the
contract
of
partnership
nor
does
it
include
all
the
essential
elements
necessary
to
constitute
such
a
contract,
as
stated
in
Mignault,
Droit
Civil
Canadien,
Vol.
8,
p.
81,
“Le
Code
ne
définit
pas
la
société’’.
The
same
author,
after
discussing
the
elements
of
mutual
contribution
by
the
parties
to
the
partnership
and
the
right
to
participate
in
the
benefits
to
be
derived
from
it,
makes
mention
in
the
following
terms
at
page
183,
supra,
of
another
essential
element
which
often
serves
to
distinguish
it
from
the
kindred
contract
of
lease
and
hire
of
services—namely
“l’intention
de
contracter
une
société’’,
or
(as
it
is
often
called
by
the
authors)
affectio
societatis
:
“Il
ne
suffit
pas
qu’il
y
ait
un
apport
réciproque
ou
même
un
partage
de
bénéfices,
il
faut
de
plus
qu’il
y
ait
intention
de
contracter
une
société.”
See
also
:
Affectio
societatis
discussed,
Revue
Trimestrielle
de
Droit,
1925,
Vol.
24,
p.
761;
notes
on
element
of
risk,
p.
775.
Bourboin
v.
Savard,
40
B.R.
68,
71,
Rivard,
J.:
“.
.
.
pour
qu
’il
y
ait
société,
il
faut
à
défaut
de
contrat
exprès,
que
les
faits
fassent
apparaître
clairement,
chez
l’un
et
l’autre
des
prétendus
associés,
l’intention
de
former
un
contrat
de
société
et
non
pas
tel
ou
tel
autre
contrat
qui
peut
présenter
avec
la
société
plus
ou
moins
d’analogie.
C’est
à
cela
que
revient
ce
que
les
auteurs
ont
appelé
affectio
societatis.”
Pinsky
v.
Poitras
et
al.,
44
R.
de
J.
63
at
74,
where
the
importance
of
the
intention
of
the
parties
is
stressed
and
where,
in
this
connection,
the
following
admonition
is
found
:
“On
ne
doit
par
recourir
aux
autorités
anglaises,
vu
qu’il
semble
que
les
principes
du
droit
anglais
sur
ce
point
ne
sont
pas
semblables
aux
nôtres.
’
Planiol
&
Ripert,
Droit
Civil,
Vol.
11,
p.
236:
“981
5°
aux
quatre
éléments
énumérés
ci-dessus
on
en
ajoute
généralement
un
cinquième
consistant
dans
Vaffectio
societatis,
c’est-à-dire
l’intention
de
former
une
société
ou,
de
façon
plus
exacte
et
plus
précise,
la
volonté
de
coopérer
en
acceptant
délibérément
certains
risques.
C’est
parfois
sur
l’absence
de
cet
élément
que
l’on
s’est
appuyé
de
façon
prépondérante
pour
refuser
le
titre
d’associé
à
l’employé
ou
au
prêteur
d’argent
participant
aux
bénéfices.
.
.
.”
Dalloz,
Nouveau
Répertoire,
Vol.
IV
(S-W),
p.
106:
“106.
Pour
qu’il
y
ait
contrat
de
société,
il
faut,
en
troisième
lieu,
que
toutes
les
parties
contractantes
aient
consenti
à
former
entre
elles
une
société,
et
non
pas
tel
ou
tel
contrat
présentant
avec
la
société
plus
ou
moins
d’affinité
(prêt,
ou
louage
de
services,
accompagné
d’une
clause
de
participation
aux
bénéfices,
par
exemple).
110.
La
société
se
distingue,
en
particulier,
du
contrat
de
travail
avec
participation
aux
bénéfices,
dans
lequel
l’employé
conserve
une
situation
subordonnée
et
ne
contribue
pas
normalement
aux
pertes
de
son
patron.”
Laurent,
Droit
Civil
Français,
Vol.
26,
p.
152;
“.
.
.
Il
est
incontestable
que
la
participation
aux
bénéfices
éventuels
d’une
entreprise
est
de
l’essence
de
la
société,
et
que
sans
cette
participation
il
n’y
a
pas
de
société
possible.
Mais
de
là
il
ne
faut
pas
conclure
que
toute
convention
dans
laquelle
se
rencontre
cet
élément
constitue
nécessairement
une
société.
Il
y
a
d’autres
éléments
dont
il
faut
tenir
compte.
La
cour
de
cassation
les
énumère
dans
un
arrêt
rendu
sur
le
rapport
de
M.
Bau:
‘
Le
contrat
de
société
exige
comme
conditions
essentielles
de
sa
formation
l’intention
des
parties
de
s’associer,
une
chose
mise
en
commun,
et
la
participation
aux
bénéfices
et
aux
pertes
de
l’entreprise.
’
’
’
Furthermore,
in
endeavouring
to
ascertain
the
true
intent
and
meaning
of
the
type
of
agreement
here
in
issue
consideration,
I
think,
must
be
given
to
such
additional
factors
as
the
language
in
which
it
is
couched;
whether
and
to
what
extent
mutually
shared
elements
of
speculation
or
risk
exist;
the
extent
of
inequality,
if
any,
of
the
authority
which
it
vested
in
the
parties;
and
the
de
facto
conduct
of
the
parties
in
giving
effect
to
the
agreement.
See
notes
and
authorities,
beginning
with
paragraph
2
on
page
337,
in
Traité
de
Droit
Civil
du
Québec,
Trudel
Series
(Hervé
Roch
and
Rodolphe
Paré),
Vol.
13.
Speaking
of
the
rule
of
interpretation
where
the
language
of
a
convention
is
doubtful
or
obscure,
in
Dufort
v.
Dufresne,
[1923]
S.C.R.
130,
131,
Duff,
J.
(as
he
then
was)
said:
“The
rule
of
interpretation
for
such
a
case
(in
substance
it
is
the
same
in
the
province
of
Quebec
as
in
France),
seems
to
be
well
settled.
Where
the
language
of
a
private
convention
is
doubtful
or
obscure,
to
quote
Huc,
Commentaire
du
Code
Civil,
vol.
7,
Art.
175,
le
juge
doit,
avant
tout,
rechercher
quelle
a
été
la
commune
intention
des
parties
pourvu
cependant
que
cette
intention
paraisse
douteuse.
Cette
intention
peut
d’ailleurs
être
recherchée,
en
dehors
de
l’acte,
dans
d’autres
écrits
et
les
circonstances
de
la
cause.
Comme
aussi
l’exécution
donnée
par
les
parties
à
une
convention
en
sera
souvent
le
meilleur
interprète.’
After
the
above-mentioned
quotation,
the
learned
Judge
goes
on
to
Say:
“The
authorities
recognize
in
the
most
explicit
way
the
principle
adverted
to
in
the
concluding
words
that
the
conduct
of
the
parties
in
the
execution
of
a
contract
expressed
in
doubtful
language
affords
a
very
important
clue
to
their
real
intention.’’
In
my
opinion,
the
following
provisions
of
the
agreement
indicate
that
we
are
here
concerned
with
a
contract
of
lease
and
hire
of
services,
or
one
of
principal
and
agent,
rather
than
partnership.
Paragraph
1
makes
it
clear
that
the
title
to
the
ownership
of
the
homes
to
be
erected
was
vested
solely
in
the
appellant.
Paragraph
7
states
that
the
party
of
the
second
part,
during
the
continuance
of
the
agreement,
shall
engage
in
no
other
activity
or
enterprise
and
shall
work
exclusively
for
and
with
the
appellant
(italics
added)—which
signifies
the
notion
of
master
and
servant
and
the
subservience
of
the
party
of
the
second
part
to
the
appellant.
This,
I
think,
is
accentuated
by
the
fact
that
the
party
of
the
first
part
was
in
no
way
bound
to
give
its
whole
or
any
designated
part
of
its
time
and
attention
to
the
enterprise
referred
to
in
the
agreement.
The
above
observations,
I
think,
are
equally
apposite
in
respect
of
paragraph
8,
wherein
the
party
of
the
second
part
was
firmly
bound
for
a
period
of
five
years
and
could
not
earlier
terminate
the
agreement,
except
for
cause,
and
such
dominant
right
was
reserved
to
the
party
of
the
first
part.
By
paragraph
9
the
party
of
the
first
part
undertook
in
addition
to
paying
all
expenses
incurred
by
the
party
of
the
first
part
in
the
enterprise,
to
pay
an
annual
fee
of
$5,000
to
the
party
of
the
second
part.
In
short,
the
party
of
the
second
part
was
insured
against
losses
and
guaranteed
a
remuneration
of
$5,000
per
annum.
Paragraph
12
goes
even
further
and
it
guarantees
for
the
first
twelve
months,
or
such
shorter
time
as
the
agreement
may
be
in
effect,
that
the
party
of
the
second
part
will
receive,
as
a
minimum,
$10,000,
to
include
fee
and
share
of
the
profits,
if
any,
which
meant
that,
if
profits
exceeding
$5,000
were
realized,
the
party
of
the
second
part,
in
addition,
would
be
entitled
to
25%
thereof,
and
if
losses,
regardless
of
the
amount,
were
incurred,
it
would,
nevertheless,
be
remunerated
to
the
extent
of
$10,000.
The
foregoing
provisions
serve
to
indicate,
I
think,
that
rather
than
being
a
partner
in
the
accepted
sense
of
the
term,
the
party
of
the
second
part,
which,
it
is
admitted,
had
no
financial
resources
to
speak
of,
who
had
only
skill
to
offer,
accepted
a
subservient
role
in
consideration
of
guaranteed
payment
of
services
and
repayment
of
all
its
disbursements,
including
materials
and
operating
costs,
in
carrying
out
the
work.
Thus,
during
the
26
months
which
the
agreement
lasted
Smith
Co.
received
about
$16,000
as
remuneration
for
services,
without
any
risk
of
having
to
pay
losses
incurred
in
the
event
that
the
costs
of
construction
and
sale
of
the
houses
exceeded
their
realizable
market
value,
while,
at
the
same
time,
retaining
the
right,
if
the
enterprise
prospered,
to
share
in
any
profits
which
might
be
realized.
Insofar
as
consultation
and
consent
is
concerned,
as
the
agreement
did
not
provide
any
arbitration
clause
if
Smith
Co.
failed
to
vive
its
consent
the
agreement
was
heavily
loaded
in
favour
of
the
appellant
since
the
right
to
terminate
it
was
vested
in
him
alone.
It
appears
to
me
unlikely
that
the
party
of
the
second
part
intended
to
enter
into
an
agreement
which,
according
to
the
respondent,
inter
alia
entailed
the
assumption
vis-à-vis
third
parties
of
losses
to
which
it
could
not
put
an
end
in
less
than
five
years
and
which
it
was
in
no
position
to
pay.
By
the
same
taken,
it
is
unreasonable
to
suppose
that
the
party
of
the
first
part,
who
was
underwriting
all
losses,
would
not
reserve
the
sole
control
of
bringing
the
enterprise
to
an
end
at
any
time
on
three
months’
notice.
Apart
from
seeking
to
ascertain
the
intention
of
the
parties
as
reflected
in
the
wording
of
the
agreement,
it
is
important,
as
stated
earlier,
to
examine
the
manner
in
which
it
was
treated
by
the
parties.
In
the
above
connection,
counsel
for
the
respondent
drew
attention
to
the
fact
that
Exhibit
A2,
which
brought
about
the
eancellation
of
the
agreement,
mentions
that
it
was
‘‘subject
to
a
rendering
of
accounts
between
them,
all
Parties
reserving
such
rights
and
recourses
as
to
them
in
law
and
justice
appertain
in
the
premises.’’
I
do
not
think
such
clause,
which
is
not
un-
common
serves
to
indicate
the
existence
of
any
particular
type
of
agreement.
In
the
instant
case
it
would
serve
to
cover
such
contingencies
as
unfinished
construction
or
prior
commitments
signed
by
Smith
Co.
for
undelivered
material
or
labour
yet
to
be
furnished
and
the
unpaid
proportion
of
the
$5,000
fee
payable
to
the
said
company.
As
appears
from
the
testimony
of
M.
J.
Prupas,
C.A.,
he
was
auditor
for
the
appellant
before
he
had
any
dealings
with
Smith
Co.
and,
as
it
was
privileged
to
do,
the
appellant
appointed
him
as
auditor
of
the
latter
company.
The
auditor
recognized
that
the
agreement
was
expressed
in
doubtful
language,
and
on
being
informed,
after
consultation
with
the
parties,
that
Smith
Co.
was
acting
in
the
capacity
of
a
general
contractor,
he
accordingly
set
up
the
books
of
the
said
company
to
reflect
the
existence
of
a
contract
of
lease
and
hire
of
services.
The
evidence
before
this
Court
is
that
which
was
filed
by
consent
and
nowhere
does
it
appear
that
either
of
the
parties
to
the
agreement
held
out
to
the
public
that
by
registration,
as
required
by
Article
1834
of
the
Civil
Code,
or
otherwise
a
partnership
existed
between
them.
Apparently,
the
subcontractors
who
dealt
with
Smith
Co.
knew
only
Smith
Co.
and
the
purchasers
of
homes
from
the
appellant
only
knew
and
dealt
with
the
latter.
In
the
Dufort
case,
supra,
the
Court
in
coming
to
the
conclusion
that
a
partnership
existed
was
influenced
by
the
fact
that
the
parties
repeatedly
described
their
contract
and
themselves
by
the
words
‘‘société’’
and
‘‘associé’’,
which
are
the
French
equivalent
of
‘‘partnership’’
and
‘‘partners’’.
Mignault,
J.
(p.
186)
:
‘‘
Après
avoir
examiné
le
contrat
du
1
er
septembre
1912,
Je
suis
d’avis
que
c’est
un
contrat
de
société.
Les
parties
déclarent
expressément
qu’elles
consentent
à
se
mettre
en
société,
et
les
mots
‘société’
ou
‘associés’
sont
répétés
presque
à
chaque
clause.
Sans
doute
les
termes
dont
les
parties
se
servent
pour
désigner
le
genre
de
contrat
fait
par
elles
ne
constituent
pas
toujours
un
indice
infaillible
de
la
nature
juridique
de
ce
contrat,
mais
cela
aide
beaucoup
à
découvrir
quelle
a
réellement
été
leur
intention,
et
si
les
conventions
peuvent
se
concilier
avec
la
description
que
les
parties
en
ont
faite,
cet
indice
peut
être
accepté
comme
décisif
par
les
tribunaux.”
Nowhere
in
the
instant
agreement
did
the
parties
to
it
make
use
of
the
words
“partnership”
or
‘‘partner’’.
The
nearest
approach
to
doing:
so
is
a
single
instance
in
the
opening
paragraph
which
states,
‘The
parties
thereto
desire
to
associate
themselves
for
the
purposes
of
carrying
on
a
contracting
and
construction
business.”
The
words
‘‘associate’’
and
‘‘association’’
are
generic
and
have
a
much
wider
meaning
than
‘‘partner’’
or
“partnership”,
and
although
they
may
include
the
latter
they
may
also
signify
a
mere
companion
or
companionship.
Counsel
for
the
respondent,
in
support
of
disallowance
by
the
Minister
of
the
25%
of
the
losses
which
he
claimed
should
be
charged
to
Smith
Co.
and
cannot
be
claimed
by
the
appellant,
refers
to
Article
1831
of
the
Civil
Code
and
comments
thereon
by
Mignault.
“Art.
1831.
Participation
in
the
profits
of
a
partnership
carries
with
it
an
obligation
to
contribute
to
the
losses.
Any
agreement
by
which
one
of
the
partners
is
excluded
from
participation
in
the
profits
is
null.
An
agreement
by
which
one
partner
is
exempt
from
liability
for
the
losses
of
the
partnership
is
null
only
as
to
third
persons.”
Mignault
at
page
212,
supra,
states:
“.
.
.
Il
est
évident
que
les
parties
peuvent
régler
ce
partage
comme
elles
l’entendent,
à
la
condition
toutefois
de
ne
point
accorder
tous
les
bénéfices
à
l’un
des
associés
ou
d’en
priver
entièrement
l’un
d’eux
(art.
1831).
Si
elles
établissent
une
règle
pour
le
partage
des
bénéfices,
sans
parler
des
pertes,
celles-ci
se
partageront
dans
la
même
proportion.”
As
pointed
out,
however,
by
the
same
author
at
p.
184,
Article
1831
has
no
application
to
agreements
other
than
a
partnership,
and
in
order
to
make
it
applicable,
one
must
necessarily
suppose
the
existence
of
a
partnership.
For
the
reasons
already
mentioned,
in
my
opinion,
it
is
established
that
the
agreement
in
issue
did
not
constitute
a
contract
of
partnership,
that
the
parties
to
it
never
intended
to
enter
into
such
an
agreement
and
their
conduct
serves
to
confirm
that
their
intention
was
not
to
do
so.
In
view
of
the
above-mentioned
conclusion,
I
find
it
unnecessary
to
deal
with
the
appellant’s
subsidiary
submission—namely
that
even
if
a
partnership
did
exist
the
appellant
was
entitled
to
regard
the
$33,667
owing
by
Smith
Co.
as
uncollectable
and
that
the
decision
of
the
Minister
to
disallow
it
is
a
deduction
should
be
set
aside
and
the
record
referred
back
to
the
respondent
for
revision
accordingly.
The
appeal
is
consequently
allowed
with
costs
and
the
record
will
be
accordingly
referred
back
to
the
Minister
for
the
purpose
of
re-assessment.
Judgment
accordingly.
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