(2.1)-(11)

CAE, which was engaged in manufacturing flight simulator systems, incurred over $700 million in R&D expenditures on further developing such systems, as to which it received “contributions” over a five-year period of $250 million from Industry Canada. Under the agreement with Industry Canada, CAE was required to repay 135% of the amounts advanced (or $337.5 million) beginning after the last advance was made and in escalating specified amounts over a 15-year period.

Ouimet J agreed (at para. 123) with CAE that the arrangement was a loan, before going on to find that it was government assistance.

An offshore fund ("SLT"), in which the taxpayer had an interest, invested in instruments (labelled as "Notes") of non-resident subsidiaries of Canadian banks. The Notes did not bear interest and provided for a payment on maturity (15 years after their issuance, subject to earlier repayment after having given 367 days’ notice) that reflected the performance of a matching actively-managed portfolio of assets (the “Reference Assets”) held by affiliates of the bank-group obligors. If the Notes constituted "debts" for purposes of s. 94.1(1)(a) (the question posed under Rule 58), the taxpayer would be required to recognize its share of foreign accrual property income of SLT under Element C of the FAPI definition. The principal issue was whether they so constituted debts notwithstanding that the dollar amounts to be paid thereunder were unknown until the maturity date.

After stating (at para. 61) that “subsection 94.1(1) … contemplates in express terms that an instrument that derives its value from fluctuating portfolio investments can be a debt” and (at para. 87) that a narrow construction of “debt” would go contrary to the purpose of the above provisions of “annual imputation of income while … foreign investments are in place,” Noël CJ found that future crystallization of the amount due was sufficient, and concluded (at para. 91):

When regard is had to the text, context and purpose of paragraph 94.1(1)(a), a debt arises for purposes of this provision when an amount or credit is advanced by one party to another party; an amount is to be paid or repaid by that other party at some point in the future in satisfaction of the advance and this amount is fixed or determinable or will be ascertainable when payment is due. As these three conditions are present here … this suffices to dispose of the appeal … .

After quoting (at para.55) the statement in Sattva that “While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement,” Owen J found that, contrary to the taxpayer’s understanding of the arrangements as reflected in its financial statements, the arrangements at issue had not in fact been structured so as to give rise to a debt owing to the taxpayer by a corporation that subsequently became bankrupt – so that the taxpayer’s claim for a business investment loss was properly denied. Before, so concluding, he stated (at para. 66):

For a debt to be incurred, there must be an obligation to pay the amount of the debt. This is consistent with the most common definition of the word “debt”, which is “an obligation to pay a sum certain or a sum readily reducible to a certainty” [citing R.B. Dunlop, Creditor-Debtor Law in Canada, 2nd ed. (Toronto: Carswell, 1995) at page 16. Halsbury’s Laws of Canada].

The question referred by the parties pursuant to Rule 58 was whether two contracts, entitled Notes and issued for US $998 million by affiliates of two Canadian banks and guaranteed by those banks, which were held by St. Lawrence Trading Inc. ("SLT"), an open-ended investment fund incorporated under the laws of the British Virgin Islands, constituted debt for purposes of the Act. If the Notes constituted "debt obligations" under s. 95(1) or "debt" under s. 94.1, the taxpayer (a unitholder of SLT) would be required to recognize its share of resulting foreign accrual property income of SLT.

The two Notes, which were governed by English law, were respective obligations of non-resident subsidiaries of two Canadian banks (which guaranteed the Notes). The amount payable thereunder on maturity 15 years after issuance (or on early maturity, occurring 367 days after any termination notice given by SLT or upon the occurrence of specified adverse changes) tracked the value of portfolios of assets held by two other non-resident bank subsidiaries (which had previously purchased portfolios managed by SLT prior to the proposed expansion of the s. 94.1 rules) and actively managed by a third-party manager ("GAM"). The Notes specified that the value of the "Reference Assets" would be calculated by GAM each Monday throughout the term of the Notes and on any maturity date.

Boyle J noted (at paras. 48, 51) that the taxpayer's position "that a debt cannot exist unless and until the amount to be paid is certain or can be made certain from facts which are known or knowable… would mean that the Notes are not debt prior to maturity even though they would clearly be debt for purposes of this test upon maturity," and stated (at para. 125):

Paragraphs 94.1(1)(a) and (b) expressly contemplate that a "debt" may derive its value primarily from investments of the issuer or another person in other securities, commodities, real estate or currency. … A debt can be a derivative as can many other securities and obligations, including hybrid financial instruments.

And at paras. 129, 131):

The core essential characteristics of debt generally for purposes of the Act are:

1. an amount or credit is advanced by one party to another party;
2. an amount is to be paid or repaid by that other party upon demand or at some point in the future set out in the agreement in satisfaction of the other party's obligation in respect of the advance [f.n. ..."That there is the possibility that the amount once ascertained may be a nil amount need not disqualify the obligation."];
3. the amount described in (ii) is fixed or determinable or will be ascertainable when payment is due; and
4. there is an implicit, stipulated, or calculable interest rate (which can include zero).

...Other evidence such as supportive or contradictory wording or intention is very much part of the overall weighing process when considering hybrid or special purpose financial instruments.

In finding that the Notes constituted debt for purposes of the Act, Boyle J noted (at para. 133) that they were entitled Notes, they had a maturity which could be triggered early in the event of default or at the Note holder's option, "upon maturity there is a payment obligation that relates clearly, though in a complex fashion, to the amount for which the Notes were issued, and this payment satisfies the obligation in respect of the issue price," the related term sheet described the amount for which they were issued as a "Principal Amount," "at maturity, however and whenever triggered, that is whenever payment is required to be made, the amount payable by the issuer under the Notes to the Note holder is readily ascertainable with exact precision," an interest rate was stipulated in the Notes (and it was "reasonable to consider zero to be an amount for these purposes…this was presumably set out to make it clear to the parties that there would be no current returns earned or payable"), the Notes ranked pari passu with other debt (being "evidence that the parties' intention was that this be treated like other debt" – and with this ranking not described as "apply[ing] only upon maturity of the Notes"), and the Guarantees provided that the Guarantors would be liable as if they were the primary debtors.

In rejecting a submission that the taxpayer was not entitled to deduct a doubtful debt reserve for unpaid interest because no written demand to pay the interest was made by the taxpayer, Owen J stated (at para. 60):

Although the precise meaning of the word "debt" may be the subject of some debate, it certainly encompasses a contractual obligation to pay an ascertainable sum such as the Interest, regardless of whether or not a demand for payment had been made by the Appellant.

See summary under s. 20(1)(l).

Interest awarded on a retroactive award of back pay by the Canadian Human Rights Tribunal did not represent interest on a "debt obligation" as the debt was not acknowledged by the employer (the government) until the time of the award. Webb J noted (at para. 11):

In Blacks Law Dictionary, 8th ed. a "debt" is defined as a "liability on a claim; a specific sum of money due by agreement or otherwise" and "obligation" is defined as "A formal, binding agreement or acknowledgment of a liability to pay a certain sum or do a certain thing for a particular person or set of persons".

Retractable preferred shares whose holders gave notice of retraction after the corporation had become insolvent did not qualify as claims provable against the Corporation given that the Corporation's obligation to redeem its shares was not absolute but was dependent upon the Corporation being solvent. In addition, the share conditions provided that even after exercise of the retraction rights, the holders continued to be entitled to dividends and to vote until their shares were redeemed, and the share conditions did not provide for interest if the corporation failed to honour its retraction obligations. The circumstances surrounding the issue to them of their shares did not indicate that they were extending credit to the Corporation rather than investing in it, and it would have been contrary to the policy of the Canada Business Corporations Act to let the holders rank equally with creditors of the Corporation.

Weiler J.A. stated (at p. 523) that "risk-taking, profit-sharing, transferability of investment, and the right to participate in a share of the assets on a liquidation after the creditors have been paid are the hallmarks of a shareholder".

A syndicate including the Canadian Deposit Insurance Corportion and six major Canadian banks agreed to provide financial support to Canadian Commercial Bank ("CCB") by advancing $255 million to CCB for undivided interests by way of participation in a portion of a portfolio of assets held by CCB, with the right to receive from CCB on a proportionate basis the money recovered on those assets as well as a specified percentage of CCB's pre-tax income, until such time as the money advanced had been repaid, and with the further right in certain circumstances to receive warrants to acquire treasury shares of CCB representing approximately three-times the number of common shares currently outstanding.

The full amount advanced qualified as a loan (with the warrants as an equity sweetener), rather than as an equity investment. Accordingly, the syndicate's claim under the loan ranked equally with the claims of CCB's other unsecured creditors. Although the participation agreements had some aspects of equity, of particular relevance to their debt character was that CCB was legally obligated to repay $255 million and no more to the syndicate members.

Before finding that payments made by a corporation to its shareholder-employees constituted debts of the employees rather than representing advance distributions of share capital, and therefore were subject to s. 80.4(1), Rip J. stated (p. 2017):

"A debt is a sum payable in respect of a liquidated money demand. It does not include an unliquidated claim for damages. A debt is a sum of money owed in respect of which a plaintiff has a right to bring and maintain an action."

The debtor ("Chateauvert") executed a floating charge and assignment of book debts in favour of the plaintiff ("Acmetrack"), and acknowledged therein a varying amount of trade indebtedness not exceeding $125,000 and covenanted to repay such indebtedness. A preliminary issue addressed in determining the relative priority of Acmetrack, and the defendant (the "bank") in respect of a chattel mortgage subsequently executed by Chateauvert in favour of the bank, was whether the the instrument of Acmetrack was properly registrable under the Corporation Securities Registration Act (Ontario), which turned on whether the instrument qualified as a debenture. In so finding, Zuber J.A. quoted the above passage in Levy, and stated (at p. 206):

The plaintiff's security is a document in which a debt is acknowledged and in which the debtor covenants to repay. In my view, this is sufficient for it to qualify as a debenture. The fact that the debt is not stated as a sum certain does not destroy the character of the document. I conclude, therefore, that the plaintiff's security was properly registered pursuant to the C.S.R.A.

He declined to follow a statement in Rollies' Sport that a debenture must state a specific debt.

At issue was whether a bank had a perfected security interest in a bankrupt corporation's property. The bank had registered its security interest under Ontario's Personal Property Security Act but not the Corporate Securities Registration Act. Registration under the latter act was required if there was a mortgage, charge or assignment of book debts made by the corporation contained within a debenture, secure bonds, or debenture stock. The bank's security interest in the corporation's assets included all of the corporation's equipment, inventory, and all its "present and future intangibles," including "all its book debts and other accounts receivable, chattel paper, contract rights and other choses in action of every kind or nature now or hereafter to become due... ."

Steele J. stated (at p. 45):

While the agreement contains words often found in a debenture ... nowhere does the security agreement refer to or create or is it stated to be deemed to secure bonds, debentures or debenture stock. Notwithstanding the broad and sometimes vague meaning of the word "debenture", the document itself is not a debenture because it contains no basic promise to pay, or an acknowledgement of, a specific debt.

The bank was therefore found to have a perfected interest.

The deceased had gone through the form of a marriage in Las Vegas while he had not yet completed his divorce with his first wife, and he soon had the Vegas marriage annulled. The estate of the deceased paid out a $45,000 to his "wife" from Vegas in satisfaction of her claim for maintenance and damages. Anderson J. found that the $45,000 was not a "debt" because (i) it was not a "sum payable in respect of a liquidated money demand recoverable by action" (p. 257), and (ii), as found in McFadzean, a right to claim maintenance pursuant to a statute is not a claim in debt.

Wright J. stated (at p. 753):

A [family law] maintenance order does not create a property right. It is something that the court may alter or take away when it pleases. It is not a legal debt.

In finding that an agreement, under which in consideration for a payment of $4 million the taxpayer obtained certain rights and privileges to produce and take petroleum from lands, did not represent a loan, Cattanach J. stated (at p. 6368):

The essence of a loan is that the advance shall be repaid. The agreements provided that nothing there shall be construed as creating a personal liability on Amoco to repay the principal sum advanced and interest thereon but that the plaintiff for its reimbursement shall look exclusively to the petroleum substances to the extent of Amoco's share therein which was assigned the plaintiff.

At the time of death of the deceased, a director of his family business corporation, he was under investigation by the Department of National Revenue for having misappropriated sums from the company (namely, proceeds of sales made by the company to customers). Three years later, the Department determined that the misappropriated sums amounted to $183,507.99. The matter was settled on the basis that the corporation would be assessed to include this sums in its income, and the estate would not be assessed for a shareholder benefit provided that it repaid this sum to the corporation.

Lacroix J. found that this sum could be deducted in determining the net assets of the estate for estate tax purposes on the basis that it was a debt owing by him to the corporation at the time of his death, i.e., (quoting Beament Estate v. MNR) it was "a sum payable in respect of [a] liquidated money demand, recoverable by action" by the corporation at that time. He stated (at p. 5093) that "the assessments made by the Department of National Revenue established that there were amounts owing to the company" and (at p. 5094) that there was "a 'money demand' that the company was entitled to require from Joseph Lorenzo Guay, or his estate," and "the amount of this money demand was liquidated by the Department itself and set at $183,507.99."

The taxpayer applied to the issuer ("Yeoman") for a loan of 4,000l under the company's "share investment plan" for the purpose of purchasing investments through his stockbroker. The application was approved and the taxpayer purchased investments on March 27, 1969. On April 14, 1969, the taxpayer executed the Yeoman security documentation. However, this documentation was not executed by Yeoman until May 7, 1969, when it also arranged for the loan funds to be transferred to the taxpayer's stock brokerage account.the issuer executed a mortgage and thereafter instructed his bankers to settle the taxpayer's account with his stockbroker. The taxpayer claimed that he was entitled to interest relief on the loan interest pursuant to s. 62(1) of the Income and Corporation Taxes Act 1970 (UK), which provided such relief for "interest falling due before April 6, 1975 on a debt incurred on or before April 15, 1969."

Foster J. held that the debt was incurred on the date when Yeoman advanced the loan funds and not on the prior date when the contract when there arose a contract to make the loan. As indicated in Webb v. Stenton, a debt is not incurred unless there is a present liability to pay either in the present or in the future.

One defendant sold his business to the other. As required under Ontario's Bulk Sales Act, they filed an affadavit which listed all of the business's trade creditors - which the affadavit claimed was "nil." The plaintiff, who had a potential claim against the seller for a prior breach of contract for the shipment of some corned beef, alleged that his claim for damages was "indebtedness" and a "debt," which would bring him within the definition of an "unsecured trade creditor" in the Bulk Sales Act.

Houlden J. found (at p. 770) that the claim of the plaintiff was not for debt:

The word "debt" has a well-defined judicial meaning as a sum payable in respect of a liquidated money demand. It does not include an unliquidated claim for damages: Diewold v. Diewold.

The deceased died owning Class B shares of an investment company which entitled their holder to receive dividends out of all the earnings of the company with the exception of the payment of a relatively nominal fixed dividend on the Class A shares held by his children. However, he had entered into a contract with his children that in his will the would direct his executors to wind-up the company upon his death, which would result in the holder of the Class B shares (his estate) receiving only a relatively modest amount equal to the amount which he had originally subscribed for the Class B shares plus most of the current earnings. In the absence of this contractual obligation, the Class B shares of the deceased had a value for estate tax purposes on his death of $110,000; whereas the amount which would be received on these shares on the winding-up of the company was approximately $11,000.

Jackett P. framed the issue before him as being the question as to whether a deduction, under s. 5(1)(a) of the Estate Tax Act, for "(i) any debts incurred by the deceased, and (ii) any encumbrances created by him," included a deduction from the unencumbered value of the shares in respect of the obligation of the executors and the deceased for those shares to be extinguished for their lower liquidation value of $11,000. In finding that this deduction could not be taken because this contractual obligation did not qualify as a "debt" or "encumbrance," Jackett P. stated (at 5022):

The word "encumbrance" in this context means, as I understand it, a claim, lien, or liability that is "attached to property" (cf. Shorter Oxford English Dictionary). The word "debt", in the absence of a special statutory definition, means "a sum payable in respect of liquidated money demand, recoverable by action" (cf. Diewold v. Diewold, [1941] S.C.R. 34 at page 39). Moreover, Parliament appears to have used the word "debt" in section 5(1)(a) in a sense that did not include obligations generally for, by section 5(2), it is provided that a statutory debt or "other obligation" imposed by a statute shall be deemed to be a "debt" that falls within section 5(1)(a). It follows...that no deduction is permitted for any liability in damages or other such obligation not based on a statute, no matter how substantial such liability may be.

California real estate developers were required to advance to the local water utilities the cost of extending new water mains to new subdivisions, but were entitled to be periodically reimbursed (e.g., semi-annually) on a non-interest bearing basis out of specified percentages of the revenues received by the utilities from the water consumers supplied through the new mains. The right to repayment ceased after a specified period (usually 10 or 20 years.) The taxpayer purchased various of these "Water Main Extension Contracts" at prices ranging from approximately 40% to 60% of the initial development cost. The taxpayer contended that the contract was a capital asset and its returns in excess of cost were capital gains - a position that was correct under the definition of "capital asset" in the U.S. Internal Revenue Code only if the water contract constituted "evidence of indebtedness."

The Court found that each water contract was evidence of indebtedness, even though it was contingent on the water payments from the subdivision's residents. Sweigert J. stated (at p. 227):

In Gilbert v. Comm'r of Internal Revenue, 248 F.2d 399 (2d Cir. 1957) the Court said that although for the purpose of federal tax statutes, debt in the classic sense is an unqualified obligation to pay a sum certain at a reasonably close fixed maturity date along with a fixed percentage in interest payable regardless of the debtor's income or lack of it, "some variation from this formula is not fatal to the taxpayer's effort to have the advance treated as a debt for tax purposes."

The statutory provision in question had a history of being construed broadly. Moreover, as "capital assets" included corporate shares along with debentures, bonds, and other evidence of indebtedness, it appeared that the provision was referring broadly to securities , whether equity securities (i.e. shares) or debt securities. Sweigert J. found that construing the provision in the taxpayer's favour in the circumstances was "well within a variation of the strict, classic definition of 'debt' as allowed in tax cases" (p. 231).

Schultz C.C.J. set aside a default judgment against the defendant applicant because it was not judgment for a "debt or liquidated money demand." He adopted a definition in the B.C. Annual Practice, 1964 ed at p. 55:

A liquidated demand is in the nature of a debt, i.e. a specific sum of money due and payable under or by virtue of a contract. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a "debt or liquidated demand" but constitutes "damages."

On that basis he found that the plaintiff's claim for compensation was in the nature of damages - in addition to a number of items arrived at by a precise formula, there was an amount for "excess car rental while underload" without any further explanation.

Accrued but unpaid dividends were not a debt because there was no guarantee of payment.

The plaintiff had reclaimed the land he sold to the defendant, who had defaulted on their pay-by-instalment arrangement. The Court found that, by seizing the land, the plaintiff had extinguished any personal right to recover funds from the defendant. Consequently, the defendant was unable to make use of a debtor protection provision in the Farmers' Creditors Arrangement Act.

Before so concluding, Hudson J stated (at p. 39) that

"debt" is defined in Stroud's Judicial Dictionary as "a sum payable in respect of a liquidated money demand, recoverable by action," and I think this definition can be accepted as applicable here.

After the plaintiff discovered that his sale of a threshing machine to the defendant was legally ineffective, he received an award at trial for the estimated value of the defendant's use of the machine until it was returned to him, namely, $60, being $10 for each day the machine was used. He appealed on the matter of costs - either his claim sounded in damages, or he was restricted to costs determined by the "small debt scale."

The Court found that the plaintiff's claim sounded in damages. Lamont J.A. stated (at DLR p. 95):

In Corpus Juris, vol. 1, at p. 966, the distinction between the old action of assumpsit and that of debt is made as follows:

"As ordinarily stated, the distinction between assumpsit and debt is that the former is to recover damages for the breach of a simple or parol contract, and the latter for the recovery of a debt, eo nomine and in numero; that assumpsit will lie where the amount is uncertain or unliquidated, and debt only for a sum certain."

...

A sum is considered certain when it can be made certain. By this, I take it, is meant where it can be determined by computation. If, for instance, the contract of the parties furnishes a specific mode or rule of payment, or if its terms furnishes the means of ascertaining the exact amount due, an action for debt will lie. But where no specific sum is claimed, and neither the contract nor the averments furnish data from which the defendant can determine the amount he owes, the action, in my opinion, cannot be said to be for a "debt" ... .

The accused was found to have committed a securities trading offence by conspiring to sell shares (whose definition included debentures) door-to-door. The investment contracts in question represented investment in a mushroom farm, whereby the purchasers would be entitled after 21 years to a 50% share in the farm company's profits, and a guaranteed return of at least 10% per annum of the purchase price. The contracts included a statement that the company would buy (and pay the premiums) on an insurance policy to guarantee a return of the investor's purchase price at the end of the 21-year period. After acknowledging the lack of a precise definition of "debenture" in the common law, Charles J. nevertheless found (at p. 599) that the investment contracts:

...appear to contain that which is implicit in the widest definition of a debenture - namely, an acknowledgment of an existing debt. ... By undertaking to pay these premiums the company takes on itself a liability which is only consistent with the acknowledgment of an existing debt.

The plaintiff guaranteed a mortgage note given by two acquaintances ("Mr. and Mrs. Johns") to secure their guarantee of loans owing by the Antigo Canning Company to the defendant bank. Under his guarantee, the plaintiff agreed to pay "all loans, drafts, endorsements, accounts, checks, notes, interest, demands, liabilities of every kind and description now owing, or which may hereafter become due or owing by [Mr. and Mrs Johns] to [the defendant]."

On August 22, 1928, the plaintiff guaranteed a mortgage note for $6,750 which two acquaintances ("Mr. and Mrs. Johns") owed to the defendant bank apparently as a result of their guarantee of bank loans made to their company having been called by the bank. The plaintiff repaid the note with a $750 cash advance and a $6000 "collateral note" secured with collateral including shares of a listed company. Under the collateral note, the plaintiff deposited the collateral as "security to the payment [of the $6000 note], and for the further security and payment of any and all indebtedness which the undersigned may now or hereafter be owing to [the defendant]." When the plaintiff repaid the $6000 owing under his note, the bank initially refused to return the collateral on the basis that, under the terms of the collateral note, the collateral was also security for the August 22, 1928 guarantee of the taxpayer. The plaintiff claimed damages relating to the decline in the value of the share collateral between the time he repaid the $6,000 note and the time that the bank ultimately returned this collateral to him.

The Court found that it was improper for the bank to withhold the collateral, as the plaintiff had no "indebtedness" to the defendant after he repaid the $6000 collateral note (i.e., his obligation under his August 22, 1928 guarantee did not represent "indebtedness.") Rosenberry C.J. stated (at p. 247):

The term "debt" has a well-defined technical meaning in the law and means a sum of money due by certain and express agreement... and does not include liabilities which are contingent in that it is uncertain as to whether anything will ever be demandable under the contract.

Given that Mr. and Mrs. Jones' obligation to guarantee their company's liabilities (guaranteed, in turn, by the taxpayer) had not yet been triggered, the plaintiff's liability under his guarantee was contingent. Rosenberry J. stated (at p. 247):

This presents the case of a contingent liability which in turn is contingent upon a second liability.

The circumstances of this case indicate very strongly that a liability so highly contingent was never though of nor intended to be included by the parties as coming within the term "indebtedness" as used in the collateral note.

In satisfaction of a prior judgment against the defendant, the plaintiff sought an order for garnishment of the monthly pension of the defendant, who was a retired police officer. The legislation that would authorize such an order applied to "wages, debts, earnings, salary, income from trust funds or profits ... due and owing the the judgment debtor." Heher J. granted the order on the reasoning that pension payments were debts that the Pension Commission owed the defendant as they became payable, notwithstanding that pensions payable by a public authority were not payable pursuant to a contractual obligation. He stated (at Atlantic Reporter p. 678-79):

The ordinary legal sense of the term "debt" is an obligation for the payment of money founded upon a contract, express or implied. ... But it is also used in the larger sense of that which one person is bound to pay to another under any form of obligation....

In the main, the distinguishing characteristic of such an obligation is that it is for a sum certain, or a sum readily reducible to a certainty. ... It is an obligation to pay a sum certain, or a sum which may be ascertained by a simple mathematical calculation from known facts, regardless of whether the liability arises from contract or is implied or imposed by law.

The City of Hannibal, Missouri, sold bonds, which were to be payable solely from tolls collected from traffic using the bridges. The Court found that this did not violate the city's constitutional requirement that no indebtedness exceeding the current year's revenue could be incurred without being approved by a two-thirds majority of city voters. The bonds constituted liabilities whose payment was contingent on the collection of tolls from the bridge - and a contingent liability is not a debt.

The appellant demolition company had a contractual obligation to pay the respondent construction company for a demolitions project (in exchange for the right to salvage the wreckage), but the obligation only triggered when the respondent gave the appellant possession of the building to be demolished. The Court found that this obligation did not constitute a debt until possession was transferred, because until that time the respondent could not "have maintained an effective action against the appellants" for the amount in question (p. 268).

Masten J.A. quoted with approval (at p. 269), the statement of Moss J.A. in Mail Ptg. Co. v. Clarkson (1898), 25 A.R. (Ont.) 1, at 9:

A debt is defined to be a sum of money which is certainly, and at all events, payable without regard to the fact whether it be payable now or at a future time. And an accruing debt is a debt not yet actually payable, but a debt which is represented by an existing obligation.

A holder of preferred shares of the taxpayer was entitled to fixed dividends and to have the shares redeemed 15 years after the date of their issuance if they had not previously been redeemed by the taxpayer out of a sinking fund that was protected from the taxpayer and its creditors. Before finding that the dividend paid by the taxpayer on the preferred shares did not qualify as interest on "borrowed capital" for purposes of s. 3(4) of the Income War Tax Act, Audette J. noted that the preferred shares were part of the authorized capital of the company, the dividends were payable out of profits only and could be passed (whereas a bond holder always had the privilege to receive the interest), in the case of the taxpayer making default in paying dividends, the preferred shareholders could not wind-up the company without the common shareholders joining in such resolution, and on a winding-up the preferred shareholders would be liable to pay the balance of any unsubscribed capital.

The appellant and others subscribed cash for "income stock certificates" of the respondent corporation, and successfully submitted that the certificates were "debentures" for purposes of s. 108 of the Companies (Consolidation) Act, 1908 (UK), which therefor meant that he had the right to inspect the register of holders of the company debentures. The income certificates were non-interest bearing, were evidenced by certificates and were repayable only out of 3/4 of the annual profits of the corporation.

The Court found that as the "root meaning" of debenture is "a record of indebtedness" (Pollock M.R., at p. 13) or "an acknowledgement of indebtedness" (per Sargant L.J. at p. 19) and the certificates has some of the other characteristics often associated with debentures, they so qualified.

Sargant L.J. stated (at p. 19) regarding the words "this is to certify that the above-named company is indebted to" the applicant, which indebtedness is "payable only out of profits hereinafter mentioned":

I should find it difficult to frame clearer words for the purpose of expressing that there is an immediate debt, but that that debt is only to be payable in the future and on a contingency....

Furthermore, there was provision for the company to pay off the principal at any time after giving three months' notice, which indicated that notwithstanding the provision for repayment out of profits, the corporation considered there to be an immediate debt. This undercut an argument (p.20) that the company "could by passing a resolution to wind up absolutely and entirely deprive the holders of this document of any right whatever to receive any payment...."

In finding that securities issued by a corporation that were referred to in various corporate documents as "preferred shares" and were evidenced by share certificates nonetheless represented secured loans made to the corporation for purposes of the Winding-up Act of Canada, Graham E. J. noted that a lien was placed on the assets of the corporation to secure the payment of the amounts advanced and the interest or "dividends" thereon, with a power of sale in case of default and the right to redeem on the part of the corporation within a fixed time. With respect to statements in the deed that the interest or dividends were to be paid out of profits, Graham E.J. stated (at p. 145) that "practically the interest due upon a mortgage is only paid out of profits" and (at p. 145) he referred to the following statement in Kent v. Quicksilver Mining Co., 78 N.Y. 178:

"The idea of a borrowing is not filled out unless there is in the agreement therefor a promise or understanding that what is borrowed will be repaid or returned, the thing itself or something like it of equal value, with or without compensation for the use of it in the meantime. To borrow is the reciprocal action of to lend, and to lend or loan, say the dictionaries, is the parting with a thing of value to another for a time fixed or indefinite, yet to have some time an ending, to be used or enjoyed by the other, the thing itself or the equivalent of it to be given back at the time fixed or when lawfully asked for, with or without compensation for the use, as may be agreed upon."

An advertiser purchased the right to use certain advertising space in a newspaper over a twelve-month period. In consideration, the advertiser was to pay the newspaper's advertising fees in each month that those fees arose, and at the end of the twelve-month period to pay $1000 minus all the advertising fees spent in that period (or nothing at all if the fees exceeded $1000). The advertiser went into receivership without having bought any advertising yet. The trial judge found that the advertiser was indebted to the newspaper for $1000 on the reasoning that it was certain that at least $1000 would be payable from the advertiser to the newspaper when the period expired.

The Court of Appeal found that there was no debt, on the grounds that the $1000 would not necessarily become payable. Burton C.J.O. stated (at p. 5):

The $1000 would not become due necessarily by the mere effluxion of time; ... it would have been necessary to aver and prove that the [newspaper] had always been able and willing to afford the space stipulated for, and, in any event, the non-ability or refusal to supply the space when properly required would have afforded a complete answer to the claim.

Chitty J. stated (at Ch.D. p. 264):

In my opinion a debenture means a document which either creates a debt or acknowledges it, and any document which fulfills either of these conditions is a "debenture." I cannot find any precise legal definition of the term, it is not either in law or commerce a strictly technical term, or what is called a term of art.

The defendant was a judgment debtor, who was entitled for his life to income from a trust fund, which was payable to him half-yearly, and who had assigned his interest in the trust to the plaintiff as security for a loan. The plaintiff unsuccessfully sought to attach this interest in the trust on the basis that the future income distributions were each a "debt due or accruing due."

Brett M.R. stated (at pp. 525-26):

There is a sum of money which is to be payable out of the proceeds of property when it comes to the hands of the trustees. Nobody can say that until then it is in any legal or equitable sense a debt which is debitum in presenti. The money may never come to these trustees without any fault of their own, for they may die or cease to be trustees before anything can become due. Therefore there are contingencies upon which no debt may ever arise... .

Concurring, Fry L.J. stated (at p. 530):

There is clearly no debt payable at the present time. Is there any debt payable in futuro? A trustee is not, in my opinion, an equitable debtor to the cestui que trust until there is money in his hands which he ought to pay to his cestui que trust, or until he has made himself personally liable to pay money to his cestui que trust by reason of some breach of the trust or default in the performance of his duties as trustee.

The defendant company had made a capital call on its shareholders of 5l a share, and assigned that call to the plaintiff as security for an amount which was found in the reasons for judgment to be owing. At issue was the validity of the plaintiff's claim for 1,000l from Lord Poltimore, being the call due upon his 200 shares.

This sum was attachable if it represented a debt due or accruing due from him - even though "the time for payment had not yet arrived" (at p. 247 LR).