Nathan Fish v. Minister of National Revenue, [1969] CTC 324, 69 DTC 5234

WALSH, J.:—This is an appeal from a decision of the Tax Appeal Board dated the 11th day of January, 1967, which main- tained the income tax assessments of the appellant, for the taxation years 1949 to 1954, inclusive, with one minor modification which is no longer in issue. In assessing the appellant for the taxation years in question the respondent had utilized the net worth method of calculation of income and in doing so had included certain items which the appellant claims should not have been so included. There are two main questions involved. The first concerns the farm property consisting of some 31 arpents in the Cote-de-Liesse section of Montreal known as Lot No. 569 on the official plan and book of reference of the Parish of St. Laurent which was purchased on August 9, 1948 for $13,429.35 by Louis Lavut and Harry Rothman, with Lavut contributing $2,000 towards the purchase price and Rothman $3,000, though the property was at the time purchased in Rothman’s name, and it was agreed that each party would have a half interest in same, subject only to each party first drawing the amount of his down payment out of the proceeds of any eventual sale (Agreement page 24, Book of Documents). The appellant purchased Lavut’s undivided half interest in the property for the sum of $3,000 by two Agreements dated August 11, 1948, and November 2, 1949, (Agreement on pages 25 and 71, Book of Documents). On December 14, 1949, Harry Rothman acknowledged at the bottom of the agreement of August 11, 1948, that he had taken communication of both documents, that he had received from appellant the sum of $500 to make up the difference betwen his investment of $3,000 and the investment of $2,000 by Lavut and that appellant now owned one-half interest in the said farm with him. Part of this property amounting to 25.2 arpents was expropriated by the Canadian National Railways on July 31, 1952, the expropriation indemnity amounting to $51,464.50, and the respondent considered the appellant’s share of the profit therein to amount to $23,189.87 and taxed this as income. The remaining 6 arpents were sold on June 16, 1953 for the sum of $99,616.50 and respondent considered the appellant’s share of the profits of this sale to amount to $31,- 367.18 which was also included as part of his income. The appellant contends that both these profits should have been treated as capital gain, the acquisition of the land by him not having been an adventure in the nature of trade within the meaning of Section 139(1) (e) of the Income Tax Act. The second matter in dispute involved another farm property involving 35 subdivision lots of Lot 83 situated in Cote-St. Lue, a suburb of Montreal, which was purchased on December 16, 1952, by Dave Salmon, the brother of appellant’s wife from appellant’s mother, Mrs. Clara Fish, for the sum of $28,000 payable $20,000 prior to the signing of the deed, with the purchaser assuming the mortgage of $8,000 owing to one Stanley H. MacDowell from whom the said Clara Fish had bought the property on February 12, 1952, for $27,535 of which $19,535 had been paid at the execution of the deed with the balance of $8,000 remaining as a mortgage (pages 107 and 101A, Book of Documents). This property was resold by Salmon on September 22, 1953, to Triangle Realty Corporation for the sum of $117,685.65, (page 124, Book of Documents) which company in turn sold part of the property to Smith Building Services Limited. The proceeds of this sale were deposited by Salmon in bank account No. 2025 with the Royal Bank of Canada which he opened and which was operated largely by appellant’s wife Mrs. Frieda Fish by virtue of power of attorney from Salmon. This account and succeeding accounts to which the proceeds of it were eventually transferred were subsequently used by the said Frieda Fish and Salmon, mainly for future real estate dealings and investments made by her, allegedly for them. The respondent makes the assumption that Salmon was a “prête-nom” or mandatary of appellant and includes in the net worth statement of appellant as of December 31, 1954, the sum of $43,155.97 standing at Salmon’s credit in the said account No. 2025, together with an amount of $10,303.79 receivable as of that date from the Triangle Realty Corporation, being the balance of the sale price and a further account receivable in the amount of $17,456 representing a portion of the sale price due by Smith Building Services Limited who had purchased part of the land from Triangle Realty Corporation.

Appellant produced a Book of Documents as Exhibit Al containing photostats of various deeds, agreements, bank statements, cancelled cheques, and other documents relating to various dealings of appellant, his relatives and associates relating to property and other matters not only during the years covered by the disputed assessment but also subsequently right down to the date of the appeal. Appellant’s attorney pointed out that a number of these documents had not been available at the time of the hearing before the Tax Appeal Board at which hearing appellant had been represented by a different firm of attorneys, and that it was only after considerable additional research that some of these documents were located, which no doubt explains certain statements and conclusions as to the facts of the case which appear in the judgment by the Tax Appeal Board and which in the light of the subsequent evidence now produced appear to be erroneous. This Book of Documents was produced without objection by counsel for respondent. A further book of documents entitled Synopsis of Appellant’s Evidence re Royal Bank of Canada account No. 2025 was handed to the Court without being filed as an exhibit with the consent of the defense for use as working documents to assist the Court in following appellant’s evidence with respect to his very involved business dealings. The documents in this book consist of photocopies of ledger cards of account No. 2025 and its successor accounts, a summary of payments relating to the acquisition of the Cote-St. Lue property and the settlement of the Clara Fish estate, a summary of transactions relating to loans and payments made from the said account to appellant and to other parties and appellant’s repayment of same, photostats of cancelled cheques drawn on the said account and payments made to it, and other documents. It was pointed out by the attorneys for the appellant that although the notices of assessment for the years 1949 to 1954 were made on December 15, 1956, and Notices of Objection filed on February 8, 1957, it was not until more than six years later that re-assess- ment notices dated May 15, 1963, were received wherein many of the items originally contested were allowed but other original items which form the subject matter of the second issue of the present appeal were added. A further delay occurred until January 11, 1967, when the judgment of the Tax Appeal Board was rendered. In view of the lengthy delays it is not surprising that some of the documentation was difficult if not impossible to locate and some of the evidence confused to such an extent that appellant’s own attorneys had to submit during the hearing documents amending some of the documents originally included in the synopsis of appellant’s evidence, notably an amended page 9 being a summary of payments relating to the acquisition of the Cote-St. Lue property and to the settlement of the estate of Clara Fish and an amendment to page 16, being a summary of transactions relating to loans made to Nathan Fish whereby the first item for $1,090.10, dated January 1, 1954, being a payment from Dave Salmon to the Town of Cote-St. Lue was deleted, when as a result of the evidence of the witnesses heard it became evident that the summary of transactions contained in these documents as originally drawn was not entirely accurate.

Dealing first of all with the Cote-de-Liesse property it was appellant’s contention that this was purchased by him as an investment. It was his first acquisition of real estate. He is a practising notary in Montreal and Louis Lavut, for whom he had done notarial work from time to time and who owed him $500, approached him and offered to sell him one-half of his half interest in the property in question for $1,000. He disclosed that the other half was owned by Harry Rothman but did not want appellant to disclose his purchase to Rothman at the time. He claimed that an attempt was made by Rothman to get immigrants to settle on the land as at that time they could be admitted to Canada on condition of settling on a farm. Rothman also had some plan to construct and rent industrial buildings on the property but was unable to persuade the Parish of St. Laurent in which the property was situated to provide the necessary services. The property was rented during all this period to tenant farmers who paid about $60 a month rent. After payment of taxes and interest on the mortgage on the property in the amount of $8,429.35, being the balance of the price, at 5%, it is evident that there would be little if any income accruing to the owners on their investment from this use of the property. No effort was made to sell the property prior to the expropriation of the major portion of same by the Canadian National Railway Company in 1952 and appellant contends that he had no prior knowledge of any interest of the railway company in the property at the time he purchased his interest in it. As a result of this expropriation the portion left was insufficient for development for any of the purpose which they had considered and it was then sold. Harry Rothman corroborated appellant’s evidence with respect to this property, stating that it was only after he had purchased the property with Lavut that he learned that drive-in theatres were not allowed in Quebec. He then planned to bring a relative to Canada to settle on the farm and obtained an immigration permit for him but he never came. He also explored the idea for an industrial park and consulted an architect with respect to it but this fell through as the necessary services were not available. When the property was finally disposed of by expropriation of the major part and sale of the balance he was not assessed for income tax on his portion of the proceeds which were accepted as capital gain. Louis Lavut in his evidence insisted that he learned within about a month after buying the property that a drive-in theatre could not be built but he still had hopes that this law might be changed. He was already aware of this, however, when he sold his interest in the property to the appellant. He had had the architect’s sketch for the drive-in theatre made immediately after he bought the land. He does not recall any discussion with Rothman about bringing his cousin to Canada. He said that he was not in the business of buying and selling land in 1948 but acquired the land in question through a real estate agent for the express purpose of building the drive-in theatre, and that there was no speculation in land on Cote-de-Liesse Road in 1948, plenty of it being available at the time.

Considerable evidence was adduced as to appellant’s real estate dealings since the purchase of the interest in the Cote-de- Liesse property in 1948. A list with comments which was produced as Exhibit A3 indicates that twenty-three other properties were bought between 1948 and 1965. Of these thirteen have since been sold. A further breakdown based on the comments on the list indicates that appellant was not the beneficial owner of one of these properties, that two of them consisted of personal residences , one of which was purchased after the first was sold being in appellant’s wife’s name, and that of the other twenty ten are revenue bearing properties and ten vacant land. Of the revenue bearing properties four have been sold with appellant still retaining six and six parcels of vacant land have been sold, appellant still retaining four.

It has been held that ‘‘. . . on income tax appeals evidence may be received in respect to any matters that have occurred up to the time of the actual hearing of the appeal, provided such matters have relevancy to the taxation year to which the assessment, or re-assessment, under appeal applies”*, [1] and it would appear that while this purchase in 1948 was appellant’s first venture in real estate he has since dealt in it regularly sometimes for purposes of investment and sometimes apparently as an adventure in the nature of trade. Even if the ‘ ‘. . . transaction . . . (had been) an isolated one . . . (however) this would not necessarily) exclude it from the category of trading or business transactions of such a nature as to attract income tax to the profit therefrom.’’t [2] (words in brackets are mine). In the leading case Of M.N.R. v. James A. Taylor, [1956] C.T.C. 189, the then President Thorson reviewed the Canadian and British jurisprudence in considerable detail in order to provide certain criteria for determining the type of transaction which constitutes ‘‘an adventure in the nature of trade’’. He concludes at page 211 :

. . . the fact that a transaction is totally different in nature from any of the other activities of the taxpayer and that he has never entered upon a transaction of that kind before or since does not, of itself, take it out of the category of being an adventure in the nature of trade.

. . a transaction may be an adventure in the nature of trade although the person entering upon it did so without any intention to sell its subject matter at a profit. The intention to sell the purchased property at a profit is not of itself a test of whether the profit is subject to tax for the intention to make a profit may be just as much the purpose of an investment transaction as of a trading one. Such intention may well be an important factor in determining that a transaction was an adventure in the nature of trade but its presence is not an essential prerequisite to such a determination and its absence does not negative the idea of an adventure in the nature of trade. The considerations prompting the transaction may be of such a business nature as to invest it with the character of an adventure in the nature of trade even without any intention of making a profit on the sale of the purchased commodity. And the taxpayer’s declaration that he entered upon the transaction without any intention of making a profit on the sale of the purchased property should be scrutinized with care. It is what he did that must be considered and his declaration that he did not intend to make a profit may be overborne by other considerations of a business or trading nature motivating the transaction.

On the other hand Kearney, J. in two judgments, M.N.R. v. Valclar Investment Company Limited, [1964] C.T.C. 22, and M.N.R. v. Cosmos Inc., [1964] C.T.C. 34, in each of which cases a corporation incorporated to invest in stocks and bonds bought a parcel of real estate to diversify its investments and resold same soon after for a substantial profit, this being its only dealing in real estate, and the sale in each case resulting from an unsolicited offer, held that these were profits on the resale of an investment and not ‘‘an adventure in the nature of trade”. In each case the property had been rented in the meanwhile by a tenant farmer but the revenue from it was trivial so that an increment could only be gained upon resale. He held that the land, unlike a commodity, was at least susceptible of producing an annual yield and that the purchase of it was akin to the purchase of “growth stocks which though not actually dividend paying are an investment, and that as the element of speculation as such was negligible the transaction could not be considered as an undertaking or adventure’’. He cites the Supreme Court judgment in Irrigation Industries Ltd. v. M.N.R., [1962] S.C.R. 346 at 347; [1962] C.T.C. 215 at 216, where a corporation made a profit on resale of an investment in somewhat speculative shares of a mining company. The judgment held that:

The transaction in question did not fall within either of the positive tests which the authorities have suggested should be applied in determining whether or not a particular transaction does or does not constitute an adventure in the nature of trade, i.e., (1) whether the person dealt with the property purchased by him in the same way as a dealer would ordinarily do, and (2) whether the nature and quantity of the subject-matter of the transaction may exclude the possibility that its sale was the realization of an investment or otherwise of a capital nature, or that it could have been disposed of otherwise than as a trade transaction. M.N.R. v. Taylor, [1956] C.T.C. 189; C.I.R. v. Livingston (1926), 11 T.C. 538; Leeming v. Jones, [1930] 1 K.B. 279, referred to.

and again :

The test, applied by the trial judge, whether the appellant entered into the transaction with the intention of disposing of the shares at a profit so soon as there was a reasonable opportunity of so doing, standing alone, was not sufficient to determine whether or not the transaction constituted an adventure in the nature of trade. An accretion to capital does not become income merely because the original capital was invested in the hope and expectation that it would rise in value; if it does so rise, its realization does not make it income. Leeming v. Jones, [1930] 1 K.B. 279 and [1930] A.C. 415, referred to.

The Supreme Court case of Regal Heights Limited v. M.N.R., [1960] S.C.R. 902; [1960] C.T.C. 384, dealt with a situation where a group of persons formed a partnership and purchased certain lands for the purpose of developing a large shopping centre in the City of Calgary, and incorporated the appellant company to which the property in question was transferred. Due to the failure to negotiate a lease with a major department store the shopping centre plan was dropped and the holdings of the company were later disposed of at enhanced prices resulting in a substantial profit which was taxed. It was held the promoters and the company failed to promote a shopping centre and they then disposed of their speculative property at a profit. This was an adventure in the nature of trade and the profit from it is taxable within the meaning of Sections 3, 4, and 139(1) (e) of the Income Tax Act.’’ In that case the judgment of Judson, J. at p. 905 [p. 388] states:

There is no doubt that the primary aim of the partners in the acquisition of these properties, and the learned trial judge so found, was the establishment of a shopping centre but he also found that their intention was to sell at a profit if they were unable to carry out their primary aim.

This case seems to establish the doctrine of secondary intention. In a very recent case, Bel Dor Holdings Ltd, v. M.N.R., [1969] C.T.C. 309, Gibson, J. deals with a somewhat similar matter. In this case the appellants purchased property in the Town of Oakville on representations that it would be rezoned for a shopping centre, paying so high a price that there would be no advantage in using the land for any other purpose. For ten years they made unremitting efforts to have it rezoned but encountered opposition from local merchants. They had the necessary funds to finance the building of the shopping centre and spent considerable money on solicitors’ fees and other fees attempting to secure approval of the project. Finally in 1963 the Council of the Town of Oakville reversed its support of the plan for rezoning, the property was sold to another company who were successful in arranging the rezoning for construction of apartment buildings. The judgment concluded that there was no doubt that the appellant intended during all the period to establish a shopping centre on the property and that at all material times it was practical and financially sound for it to do so and that 'any secondary intention seems to have been nonexistent for any practical purpose’’. The judgment further concludes that shopping centres are a well known form of investment which earn substantial incomes for the owners of same and are not usually built and established for the purposes of sale and realization of a profit on the sale after they have been built and that the acquisition in 1953 of the property at the price paid made no economic sense for any other use except as a shopping centre. The gain on realization in 1963 resulting from unprecedented and unforeseen rise in land values is therefore not treated as income.

In the present case it is apparent that appellant had no clear intentions of his own as to what he wished to do with the property at the time he acquired his interest in it nor at any time thereafter but was content to rely entirely on the plans of his associates to whom he left the decisions. His intentions must therefore be considered as depending on the intentions of his associates Lavut and Rothman when he purchased the first one-quarter interest and subsequently Rothman alone after he purchased Lavut’s remaining interest. He may well have believed Lavut’s declaration of the intention of building a drive-in theatre and have considered this a profitable investment, though it is extraordinary that, as a notary, with the Statutes readily available to him, he did not personally check into the existing state of Quebec law on the matter. He explains this by saying that the investment was so small that he was content to rely on the plans of his associates. It may well be that Lavut misled him in encouraging him to believe that there was still a possibility of the project being realized at the time he sold him the second undivided quarter interest in the property. It is certainly clear, however, that at the time he bought there was no real prospect of this use of the land ever being realized. Thereafter he was content to rely on Rothman’s plans as to what might be done with the property and I do not find the evidence respecting these plans to be very satisfactory or the plans themselves to be very practical or realistic. Rothman mentions that he planned to bring a cousin to Canada as an immigrant and settle him on the property. This would hardly have been a very good investment, though Rothman may have had a personal interest in doing so. There was also some evidence from Rothman, entirely uncorroborated by the production of any plans or correspondence, that an attempt was to be made to build an industrial park on the property and rent same. Since no municipal services were available to the land at the time this scheme was also quite nebulous and incapable of immediate realization. The attempt to acquire a cinerama franchise in that part of town was equally unlikely to succeed. It is true that the eventual disposal of the major part of the property was not by any voluntary act on the part of the owners but as the result of the expropriation by the Canadian National Railway Company. It is evident however from the price paid by the railway company, which must be assumed to bear some relation to the property value at the time, that it had already increased very substantially in value between 1948 and 1952. Certainly the income derived from the rental of the property in the interval was so slight as to have been of no interest to the owners aS an appropriate investment of their equity in the property. I am inclined to believe that the appellant was content to be associated with Rothman in the ownership and development for eventual sale of this land and even if he believed in the feasibility of the drive-in theatre project at the time he acquired his interest in it he nevertheless had in mind the secondary objective that even if this project did not succeed an eventual profit could be made on a resale of the property. The facts would seem to resemble more closely those in the Regal Heights case (supra) than in the Valclair Investment (supra) Cosmos (supra) or the Bel Dor cases (supra) in view of the proof subsequent conduct of appellant in other real estate dealings indicating that this was not an isolated one, and the reasonable presumption of the existence of secondary intention.

I therefore agree with the finding of the Tax Appeal Board with respect to this portion of appellant’s assessment.

Turning to the second question in which the assessment rests on the assumption of the Minister that appellant’s brother-in-law Dave Salmon was his prête-nom or mandatary in the purchase and eventual sale of the property, the case of M.N.R. v. Pillsbury Holdings Ltd., [1965] 1 Ex. C.R. 676; [1964] C.T.C. 294, holds that the taxpayer can meet this by (a) challenging the Minister’s allegation that he did assume those facts, (b) assuming the onus of showing that one or more of the assumptions was wrong, or

(c) contending that, even if the assumptions were justified, they do not of themselves support the assessment. In this case the appellant has chosen to adopt alternative (b) and we must now examine whether he has successfully discharged the onus of proof and rebutted the assumption of the respondent on which the assessment is based.

A considerable amount of evidence was adduced and documents produced in the Book of Documents to show that over a period of years appellant has been in the habit of purchasing and selling land in the names of various préte-noms, some being relatives and some business associates. He has also on occasion purchased and sold land in his name when he was merely acting as a préte- nom for someone else. There appears to have been a great deal of mutual trust and confidence involved between the parties to these various deals, since in some circumstances there have been merely letters or other private writings between the parties setting out the true situation as to ownership as opposed to the legal situation disclosed in the deed of purchase or of sale, and in other cases the dealings between the parties have been merely of a verbal nature. Repayments of sums due as a result of these dealings have frequently been made indirectly by the debtor discharging his obligation to the creditor by paying the amount due to some third party to whom the creditor indicated he was indebted and suggested that payment of the obligation due to him be made in this way.

Appellant’s explanation of the motivation back of these dealings and the reason why he so frequently used prête-noms is not entirely satisfactory. He explains that as a notary he is prohibited from receiving deeds to which he or his wife is a party.* [3] Since most of these deeds were received by him he could only insert his name as purchaser or vendor as the case may be, by having the deed prepared and received by another notary. This would involve some delay and inconvenience and perhaps expense and he therefore preferred to adopt the alternative of making the purchase and the subsequent sale where applicable in the name of a third party who permitted his name to be so used. He maintained that he always declared the income from any such properties which produced revenue as part of his income even though the actual title deed would show someone else as the owner. He admitted, however, that when another notary received the deed he would normally not charge him for it as a matter of professional courtesy. He also admitted that on at least one occasion, that of a sale by Rebecca Smilovitz to Frieda Salmon, appellant’s wife, he acted as notary (page 117, Book of Documents) in flagrant contravention of the Notarial Code. He claimed that he did this by oversight. It would appear that his constant acting as notary in deeds in which he was the actual purchaser though he used a prête-nom in his place would be against the spirit and intention of the Notarial Code even if not against the letter of it. It is not his conduct as a notary which concerns us here but it would seem to be a fair inference that in making frequent purchases of property for his own account, but buying same in the name of others, he was not entirely guided by the convenience of being able to make the deed himself but may well have had the secondary intention of attempting to conceal as far as possible from public scrutiny some of the ramifications of his fairly extensive real estate investment and dealings. It is of course neither illegal nor improper to purchase land in the name of a préte-nom and this device is frequently used for perfectly legitimate purposes. A lawyer or notary may well agree to have lands acquired in his name on behalf of a client who is endeavouring to assemble a parcel of land for some development which necessitates acquisitions from a number of different vendors and who does not want to disclose his identity until all the land has been acquired as this might affect the price. In 1948, for example, appellant was approached by Messrs. Lavut, Balinsky and Perlini Builders who wished to purchase some property on Ridgedale Avenue in Montreal and construct houses thereon. The borrowed $2,000 from appellant at 10% and to protect his loan the property was purchased in his name. Subsequently during the course of construction he advanced further sums of $3,000 and of $5,000. Canada Housing Act loans on each of the six houses being constructed on the property were made by Confederation Life to him. As each of the houses was sold he received back a proportional amount of his advances. By a private Agreement made December 14, 1948, between appellant and Lavut when appellant made the second advance of $3,000 he was to receive one-quarter of the net profit from the sale of the buildings, (page 34, Book of Documents) but he testified that after making the third advance in the amount of $5,000 he decided that he preferred to revert to the original agreement of repayment of his loans with 10% interest. It should be noted that in the Confederation Life loans to appellant Lavut, Balinsky and Perlini intervened to guarantee payment (pages 45, 49, 52, 55, 58, and 61, Book of Documents). This appears to be an example of a legitimate situation where he retained the properties in his name so as to give him complete protection for his advances to the builders but at the same time protected himself with respect to the building loans made on the properties by having the builders intervene to guarantee payment of them. It is the converse case, where he acquired properties for his own account by using the names of others that is more open to question. While the use of préte-noms is relatively common and not illegal as I have already stated it does of necessity give rise to considerable confusion as to the real ownership of property and has the effect of defeating the purpose of registration laws in that the deeds affecting the properties and registered at the Registry Office do not disclose the true ownership. It is not suprising therefore that the suspicions of the Minister should have been aroused as to whether appellant has in fact disclosed in his tax returns all the income realized from investments in real estate or profits from the sale of same in cases when the purchase was an adventure in the nature of trade, when these properties have been held for him in the names of relatives, friends or business associates. This no doubt led to the assumption by the Minister that appellant’s brother-in-law Dave Salmon was merely a prête-nom for him in the acquisition and disposal of the Cote-St. Lue property and that the bank account opened by Salmon in which the proceeds of the sale were deposited and subsequent withdrawals made for further real estate purchases, by appellant’s wife Frieda Salmon Fish, loans to appellant and other purposes, was in reality a bank account operated under the direction and control of appellant and that the contents could therefore justifiably be included in his net worth statement.

It must here be stated, however, that while proof of system or of a course of conduct may create a presumption that it was also followed in the business transaction with respect to the Cote-St. Lue property, the presumption must be based on something more than mere suspicion and there must have been some evidence with respect to the dealings with that particular property and the bank account in which the proceeds of its sale were deposited which would justify the presumption that the course of conduct which had been followed by the appellant in many other cases had also been followed in this particular instance and that Dave Salmon was another prête-nom for the appellant. The presumption made by the Minister is not an irrebuttable one and while the burden of proof falls on the appellant to successfully refute it he can discharge this obligation by acceptable and credible explanations of the facts which gave rise to the Minister’s presumption in this specific instance.

Reviewing the history of the acquisition and disposal of this property and the opening of the bank account relating thereto considerable evidence was adduced and substantiating documents, many of which were not produced before the Tax Appeal Board, were now produced in the Book of Documents. Appellant testified that his mother Clara Fish (Mrs. Osias Fish), a widow, liked to invest in real estate. As he was a notary it was natural enough that most of her dealings would be handled through him. Apparently the proceeds of some of her real estate dealings were left in his hands or in the hands of his brother Gerald Fish until reinvested for her. A document in private writing on appellant’s letterhead dated February 5, 1952, signed by both him and his mother, acknowledges that he owes her $10,000 paid to him some years prior thereto and that he has the same day received from Mrs. Fish a further sum of $9,883.20 and that he is to use the total amounting to $19,383.20 to pay for the lots which she has acquired on Randall and Borden in Cote-St. Lae, with any differences by reason of adjustments of taxes or otherwise to be reimbursed to him if and when he pays same to the vendor. (page 101M, Book of Documents). On February 12, 1952, by deed of sale passed before the appellant, Stanley Herbert Mac- Dowell sold the properties in question to Clara Fish for $27,535 acknowledging the receipt of $19,535 at the execution of the deed with a balance of $8,000 to be paid within four years, or prior thereto if any of the lots are resold by the purchaser. The cheque for $19,535 however payable to S. H. MacDowell was drawn by Gerald Fish on his own account (page 2, Book of Documents). Gerald Fish in his evidence indicated that prior to issuing this cheque from his own account he had received his mother’s cheque for $9,383.20 from appellant who eventually covered the balance by payments to him of $5,098.67 and $5,000. These deposits appear on a photostat of entries from Gerald Fish’s bank statement filed as Exhibit A5 at the trial, the deposits being made on February 8 and February 12. This seems to be approximately in conformity with the provisions of the document referred to above on page 101M of the Book of Documents, but why payment was made in this involved way with MacDowell receiving his actual payment from Gerald Fish was not satisfactorily explained. In any event this would not seem to justify a conclusion that the property was purchased with appellant’s funds or that his mother was merely a préte-nom for him when she acquired it. Soon after, Mrs. Clara Fish took ill with cancer and decided she did not wish to retain the property. Appellant testified that she offered to sell the property to him but that he did not wish to buy it as he was afraid that his brothers and sisters might feel that he had taken advantage of them if he did so and subsequently resold it at a profit.

Mrs. Frieda Fish, appellant’s wife, herself a lawyer by profession, being separate as to property from appellant by marriage contract, testified that she practised her profession for a time following their marriage in 1951 until their son was born and then became interested in real estate. She was very fond of her mother-in-law and discussed real estate matters with her. Her mother-in-law, Mrs. Clara Fish, indicated when she became ill soon after buying the Cote St-Lue property that she wished to dispose of it. She was incurring heavy medical bills and was always a very generous person and wanted to have ready cash available for charitable and other purposes. Frieda Fish did not like to see the property go outside the family and induced her brother, Dave Salmon, to buy it in partnership with her. Her husband, the appellant, had no objection to this though he did not wish to purchase the property himself. She and Salmon agreed to pay Mrs. Clara Fish $28,000 for it, approximately what she paid and the deed was passed before appellant on December 16, 1952, the purchaser being her brother Dave Salmon who gave his address however as appellant’s office. I do not believe too much significance can be attributed to this or to the fact that the deed was passed before appellant. Payment was to be made in the amount of $20,000 prior to the signing of the deed and the assuming by the purchaser of the mortgage of $8,000 payable to Stanley H. MacDowell. In order to acquire this property from Mrs. Clara Fish she and her brother Dave Salmon persuaded their father to borrow $10,000 from a friend David Becker, which sum they paid to Mrs. Clara Fish, giving her a note for $10,000 for the balance. Eventually they repaid David Becker $6,000 on February 5, 1956, (page 14 Synopsis of Appellant’s Evidence) and their father Mr. Salmon, Sr., arranged with Becker for payment of the balance. He absolved them from repaying him this additional $4,000 provided they would pay $2,000 to another son Herbert Salmon which they did by cheque dated March 1, 1960 (page 15, Synopsis of Appellant’s Evidence). In effect Salmon, Sr., made a gift to Dave Salmon and Frieda Salmon Fish of $2,000 but this has no bearing on the present case. The repayment of $6,000 to David Becker from Dave Salmon was further corroborated by a photostat of an affidavit from Becker (page 158, Book of Documents). The repayment of the $8,000 due to MacDowell is established by a notarial acknowledgment and acquittance passed before appellant on November 25, 1953 (page 128A, Book of Documents). This payment would appear to have been made by cheque dated October 16, 1953, to S. H. MacDowell for $8,186.50, the difference being accounted for by interest, (pages 207 and 208, Book of Documents). This left a balance of $10,000 owing to Mrs. Clara Fish who had died on March 9, 1953 — that is to say, some time before the sale of the property by Salmon on September 22, 1953, so the amount was now due to Mrs. Fish’s estate.

Her estate was wound up in an unusual manner. She had made a will dated October 3, 1952, during her mortal illness, in holograph form, in which she leaves $1,000 to each and every grand- child and also $1,000 to her great-grandchild and after the above deductions leaves 40% to her daughter Bertha, 40% to her son Gerald and 20% to her son Nathan of all my possessions, land, houses and money’’. When she sold the Cote St-Lue property to Dave Salmon on December 16, 1952, she no longer owned any land, and if she had previously been in the habit of investing in real estate as indicated in the evidence of appellant and of his wife she owned none at the time of her death. Moreover it appears that her cash and liquid assets resulting from earlier investments was for the most part held for her by appellant and Gerald Fish. The acknowledgment already referred to on page 101M of the Book of Documents in which appellant acknowledges that he owes her $10,000 paid to him some years prior thereto, was explained by him in his evidence as being a loose way of saying that he had $10,000 of her money on hand resulting from earlier investments he had made for her and did not indicate that he had borrowed this sum from her. However Mrs. Fish apparently had a bank account of her own at that time (February 5, 1952) as she allegedly made out a cheque for $9,383.20 which eventually found its way into Gerald Fish’s hands and he made the payment of $19,535 to MacDowell on the property purchase, receiving the balance from the appellant. Oddly enough no Succession Duty Declarations were ever filed for Mrs. Clara Fish’s estate and her will was not even probated until February 15, 1965, nearly twelve years after her death. It may well have been a desire to liquidate her assets and avoid the necessity of filing Succession Duty Declarations that induced her to sell the property shortly before her death, but this need not concern us here.

In any event Dave Salmon and Frieda Fish, appellant’s wife, liquidated the $10,000 they owed the estate of Mrs. Clara Fish on the purchase of the property by making payments in February and March, 1954, to her heirs in accordance with the terms of her will. One of Clara Fish’s daughters Estelle Fish had married a Mr. Gold and had two children and this payment of $2,000 was made in cash. Another daughter Alice Fish had married a man by the name of Constantine and had one daughter Helen who was a widow with one daughter (the grand-daughter referred to in the will) and $2,000 was paid to settle these legacies, also in eash. A further payment of $1,000 was made to Sheldon Fish, son of appellant and his wife, and a payment of $2,340 was made to the deceased’s daughter Bertha Fish representing her 40% interest in the residue, plus her share of the interest which had amounted to $800 on the $10,000 loan by the time payment was made. Under the terms of the will Gerald Fish would have been entitled to an equal amount $2,340 and the appellant to 20% or $1,170. Gerald Fish was somewhat annoyed, however, that the mother’s property which had been sold to Dave Salmon had been later resold at such a very substantial profit and that the appellant’s wife who had gone into this venture with Salmon had also benefited from the profit on this resale and to avoid friction with his brother appellant stated that he waived his 20% in favour of his brother Gerald. A cheque was issued on the Dave Salmon account to Triangle Realty Corporation for $4,500 allegedly on account of the purchase of a residential property which Gerald Fish was buying from them. It is to be noted that the same day, February 19, 1954, an identical cheque for $4,500 was issued to Triangle Realty Corporation allegedly no account of the purchase price of a property which Frieda Salmon Fish was buying from them, though the deed of sale was not passed until July 14, 1954, and then called for a down payment of $9,000. This $4,500 was eventually repaid to the Salmon account by appellant as he felt that he should be paying for the property he was living in, according to the evidence of appellant’s wife. These payments would total $11,840, some $1,000 more than the amount owed to the estate with interest, the excess being something in the nature of a gratuitous payment to Gerald Fish. With respect to these payments in settlement of the purchase price of the property bought from Clara Fish therefore which were made from Dave Salmon’s bank account No. 2025 for which Frieda Salmon Fish had power of attorney and which was opened by deposit of the down payment received from the resale of the property, there is nothing to indicate that any of these payments were made under the direction of appellant (save to the extent that he waived his 20% in the residue of the estate in favour of his brother Gerald which does not affect the present question) or that he had any control over bank account No. 2025. We now come to another series of entries from the ledger sheets of this bank account which indicate that a number of loans were made from it to appellant or payments made from it on his behalf and for his benefit, which, unless he could establish that all such loans were repaid might well justify an assumption that the account was being used as if it were his own. If all such loans were duly repaid however there would appear to be nothing unusual or even suspicious in the fact that he might readily be able to borrow money from time to time as required from his wife and brother-in-law rather than go to strangers for it. Various loans were made from the account from time to time or payments made from it on behalf of appellant as appears from a list on page 16 in the Synopsis of Appellant’s Evidence. The first item on this however dated January 1, 1954, being a payment in the amount of $1,090.10 to the Town of Cote St-Luc, for taxes was eventually after considerable conflicting evidence established to be a misunderstanding and was in fact a payment made for taxes on the property purchased by Salmon and not on the unsubdivided part of Lot 83 in Cote-St. Luc which was later purchased by appellant and certain associates on which the taxes were much less. This item must therefore be deleted from the list. The payment dated December 13, 1954, to Philippe Delorme and Roger Delorme in the amount of $6,250 appears to have been for the benefit of the appellant on account of the purchase price of a property purchased by Esther Nobleman Gold, Estelle Fish Gold and Sylvia Salmon, the latter for a one-half interest on December 16, 1953, (page 129, Book of Documents), with respect to which the said Sylvia Salmon acknowledged by deed dated February 12, 1954, that appellant was the actual owner and transferred her interest in same to him (page 18, Book of Documents). The cheque for $5,543.76 drawn on the Salmon account on January 15, 1956, payable to S. II. MacDowell and N. Fish was explained as being on account of the purchase price of the unsubdivided part of Lot 83 which appellant and certain associates were buying from Mr. MacDowell. This was repaid by cheque dated February 13, 1956, from Nathan Fish to D. Salmon (page 20, Synopsis of Appellant’s Evidence). A further cheque dated July 19, 1956, was paid on Salmon’s account to Nathan Fish and Jack Liberman in the amount of $6,250. This was issued in connection with the purchase by appellant and one Bennie Singer of a property from Jack Liberman on the same date, (page 160, Book of Documents) and was allegedly repaid by a deposit in Salmon’s account on December 14, 1956, in the amount of $6,250 (page 212, Book of Documents). Four other cheques were issued by appellant on account of the purchase price of a property on Notre Dame St., purchased by Frieda Fish allegedly on behalf of herself and her brother from one Aimé Bibeau on May 24, 1957, (page 187, Book of Documents). These four cheques were issued as follows: the first, dated May 8, 1957, in favour of B. Bélanger, agent, for $1,000 endorsed on the back, ‘‘deposit on account of offer to purchase property on Notre Dame East and Desjardins,’’ the second dated May 24, 1957, in favour of Aimé Bibeau in the amount of $3,227.32, the third bearing the same date in favour of Edouard Cousineau and Aimé Bibeau in the amount of $5,070.72, and the fourth also dated May 24, 1957, in favour of Aimé Bibeau is in the amount of $1,480. Three of these cheques bear the notation ‘‘repay loan of Mrs. F. and D. 8S. re Notre Dame,’’ but it appears that this notation may have been added later when the documents were being prepared in connection with the appeal. These four payments would total $10,728.04 and would approximately repay the $4,500 paid to Triangle Realty and one of the $6,250 payments made on behalf of appellant which was not paid directly to the Salmon account (see summary, page 16, Synopsis of Appellant’s Evidence). It would seem that it was the appellant’s wife Frieda Fish that benefited from these repayments however rather than her brother Dave Salmon as she admits that the Notre Dame Street property was revenue producing though by no means profitable, and that she declared all the revenue from same as hers. Frieda Fish also benefited from a further cheque in the amount of $9,000 drawn on the Salmon account dated May 24, 1957, payable to Edouard Cousineau and Aimé Bibeau in connection with the purchase of the Notre Dame St. property.

Three other withdrawals from the Salmon account (page 26, Synopsis of Appellant’s Evidence) consisting of a cheque dated April 19, 1955, payable to Nathan Fish and International Plumbing for $10,000, another dated December 6, 1955, payable to International Plumbing and Heating Supplies Limited for $8,000 and a third dated February 11, 1957, for $3,500 payable to B. Simonovitch were explained as being for loans to International Plumbing and Heating Supplies Limited (B. Simonovitch). Mrs. Fish explained that Mr. Simonovitch was an old friend of her family and she did not insist on putting a hypothec on his property to guarantee this loan, as this would have affected other borrowing by him but that her husband, the appellant, was also made a party as a further guarantee. Two documents acknowledging the $10,000 and $8,000 loans from Dave Salmon appear on pages 150A and 150B, Book of Documents. These loans were fully repaid according to Mrs. Fish’s evidence by a series of monthly cheques, first in the amount of $250 and subsequently in the amount of $499.37 which appear as deposits in the ledger sheets of the account at pages 209 and following of the Book of Documents.

Another series of cheques issued on the Salmon account between January 11, 1956, and January 11, 1964, to either Frieda Salmon or Georges Henri Brossard totalling $21,800 were used for the purchase of a property bought from Georges Henri Brossard by Frieda Salmon on January 11, 1956. Brossard testified as a witness that he dealt only with Mrs. Fish and only met the appellant when he signed the deed to authorize his wife as required by Quebec law and that all payments for the purchase of the property were made to him by Mrs. Fish.

Further cheques were issued on the account on October 17, 1958, for $1,000 and October 22, 1958, for $16,000 to Frieda Salmon in connection with the purchase of a property by her from one Georges Duquette on October 22, 1958, (page 197, Book of Documents). Duquette testified that all his dealings had been with Frieda Fish and that he had never dealt with the appellant, only meeting him when he signed the deed to authorize his wife and that all payments had been made by her. Finally there were two further cheques, one dated March 9, 1955, for cash in the amount of $15,000 and the other November 6, 1961, payable to Norman C. Denys, an attorney, the latter being explained as payment to him of legal fees in connection with services rendered to Dave Salmon in objecting to an assessment of the profit on the resale of the Cote St-Luc property as income. A notice of objection was made and this was maintained by the department, the profit being accepted as capital gain (Exhibit A6 filed at trial). The $15,000 was used in connection with expenses resulting from the serious illness in a hospital in New York and eventual death from leukemia of Sylvia Salmon Nevard, the sister of Dave Salmon and Frieda Salmon Fish. Her hospital stay alone cost between $5,000 and $7,000, funeral bill was $1,091.30, and both Dave Salmon, Mrs. Fish, and other members of the Salmon family made frequent trips to New York during her terminal illness to spend as much time as possible with her, so in effect this money was all spent on behalf of members of the Salmon family. (See pages 282 to 237, Book of Documents. )

Turning now to the circumstances in which the property in question was acquired by Dave Salmon and the manner in which the bank account in which the proceeds of resale were deposited was operated, Dave Salmon testified that he had always been interested in animals and wanted to go in for chicken farming and that when he was approached by his sister about buying the land from Mrs. Clara Fish he went to see it with his sister Frieda Salmon Fish and with his father who, as outlined above, borrowed the money for the down payment from his friend David Becker. On July 22, 1953, he formally registered a declaration of carrying on business under the name of Dave’s Chicken F'arm in the office of the Superior Court for the District of Montreal (page 121A, Book of Documents). He said that subsequently he encountered difficulties in securing the necessary permit for carrying on this business in Cote St-Luc and in due course one Lew Kozlov, a real estate agent, approached his sister and made what he considered to be a fantastic offer for the property. He said that he himself does not enjoy dealing in real estate and was very worried for some nine months about the mortgage due on the property and was entirely surprised by the very generous offer made. He considered himself to be the owner of the property and responsible for paying the mortgage on it and the balance of price due to the estate of Mrs. Clara Fish but his sister is much better educated than he is, being a lawyer, and he left all business matters to her. Although the bank account in which the proceeds of the sale were deposited was in his name, his sister Frieda Salmon Fish had power of attorney for it and all but a very few cheques drawn on it were drawn by her. Subsequently properties were bought in her name and they have never divided the amounts in the bank account. He has a good position as Traffic Manager of Domtar and has not required funds from the account but it has always been understood that he could get same whenever they were required. His sister Frieda Fish declared the income on the properties bought with funds of the account in her name. He never acted in any way as a nominee or prête-nom for appellant. Mrs. Frieda Salmon Fish, in her evidence, indicated that she considered herself and her brother Dave Salmon to be in partnership in connection with the purchase and sale of the Cote St-Luc property and the bank account resulting from this sale.

Certainly the relationship between Dave Salmon and his sister, Frieda Salmon Fish, was an extremely loose one and never clearly defined and he obviously trusted in her implicitly. From the legal point of view the property was purchased solely in his name and sold by him with the proceeds going into an account in his name. On the other hand his sister had a free hand in the operation of the bank account as she apparently made all subsequent property purchases in her name and declared the income from such investments as her own in her tax returns. Certainly substantial sums were drawn from the account from time to time for her benefit in connection with these property purchases and the only benefit he ever gained from the account was an indirect one in that some $15,000 was spent on behalf of the Salmon family generally in connection with the illness of his sister. I believe that a very good case could be made for holding that Dave Salmon was merely a préte-nom for his sister Frieda Salmon Fish in connection with all these dealings and that the profit derived from the sale of the Cote St-Luc property was really hers and not his. In this event in view of her subsequent dealings in real estate the profit on the disposal might perhaps have been considered as an adventure in the nature of trade insofar as she was concerned. However there was nothing to indicate to the Minister at the time that the beneficial as well as the legal ownership in the property did not vest in Dave Salmon and the profit on the resale was eventually accepted as capital gain insofar as he was concerned. What we are now dealing with however is not the nature of the business relationship between Frieda Salmon Fish and her brother but rather that of the business relationship, if any, between appellant and Dave Salmon and it is only appellant’s income tax returns for the years in question with which we are concerned. A finding that Dave Salmon may well have been a préte-nom for Mrs. Frieda Salmon Fish does not necessarily lead to a finding that he was therefore also a préte-nom for the appellant. It certainly cannot be held that a married woman cannot have separate business enterprises or invest or deal in real estate entirely separately and apart from her husband, and without necessarily being under his direction or control in connection with these business ventures. While it is entirely conceivable that many a wife with little experience in business might well be used by her husband as a cover for some of his business dealings which were in reality entirely arranged, carried out and paid for by him though using her name, there appears to be insufficient grounds for making this assumption in the present case. Mrs. Fish as a lawyer with several years practice was qualified by her education and experience to deal in real estate, and when she retired from practice following the birth of their son, it seems perfectly plausible that she might wish to do this on a part-time basis in order to earn some independent income, or make capital gains for herself. In fact in view of the circles in which appellant and his wife lived and the friends and business associates they had, it might even seem unlikely if she did not seek to use her training in some such business ventures or investments herself.

The detailed evidence submitted seems to establish that although appellant frequently was able to borrow money from the Salmon account he always repaid same in one way or another though some of the repayments were made to third parties for the benefit of his wife Frieda Salmon Fish. This is not to state however that he benefited personally from these advances. I consider therefore that he has successfully rebutted the presumption of the Minister that Dave Salmon was his prête-nom or mandatary in connection with the purchase and resale of the Cote St- Lue property and the use of the bank account in which the proceeds of the sale were deposited and that therefore the bank balance of $43,155.97 in account No. 2025 in the Royal Bank of Canada as of December 31, 1954, the account receivable of $10,308.79 from Triangle Realty Corporation as of December 31, 1954, and the account receivable in the amount of $17,456 as at December 31, 1954, due from Smith Building Services Limited should be deleted from the net worth statement of appellant and the assessments referred back to the Minister to be re-assessed accordingly.

In view of the fact that some of the more important documents on which appellant relies were only produced at a late date, after the hearing before the Tax Appeal Board, and that he is only partially successful in his appeal, no costs. will be awarded to him.