MARTLAND,
J.
(LOCKE
AND
CARTWRIGHT,
JJ.,
concurring)
:—
In
the
year
1951
the
appellant,
along
with
three
other
persons,
decided
to
acquire
from
Imperial
Oil
Limited
(hereinafter
called
“Imperial”)
a
farmout
in
respect
of
certain
lands,
the
subjectmatter
of
a
petroleum
and
natural
gas
lease
held
by
Imperial
as
lessee.
The
farmout
was
granted
by
Imperial
by
an
agreement,
in
writing,
dated
May
25,
1951,
to
one
of
the
members
of
the
syndicate,
Paul
Moseson,
who
acted
as
representative
for
the
group.
There
was
already,
at
that
time,
a
producing
well
on
the
lands.
The
agreement
required
the
payment
to
Imperial
of
$40,000.
Moseson
undertook
certain
drilling
commitments
on
the
land.
There
was
also
provision
for
the
delivery
of
specified
quantities
of
any
oil
produced
from
any
wells
which
were
so
drilled.
In
order
to
spread
the
risk
involved,
agreements
were
made
by
Moseson
with
two
companies,
Central
Explorers
Limited
(hereinafter
called
‘‘Central’’)
and
Banff
Oil
Limited
(hereinafter
called
“Banff”),
whereby,
in
consideration
of
$30,000
paid
by
the
former
and
$15,000
paid
by
the
latter,
together
with
their
agreements
to
contribute
toward
the
drilling
costs
involved
in
the
drilling
of
the
wells
pursuant
to
the
farmout,
these
two
companies
acquired
between
them
a
75
per
cent
interest
in
the
producing
well
and
specified
percentage
interests
in
the
wells
subsequently
to
be
drilled,
toward
the
cost
of
which
they
were
required
to
contribute.
The
members
of
the
syndicate
agreed
to
incorporate
a
company
to
take
over
their
interests
under
the
farmout
and,
in
consequence,
Ponder
Oils
Ltd.
(hereinafter
called
“Ponder”)
was
incorporated,
as
a
private
company,
on
June
15,
1951,
with
an
authorized
capital
consisting
of
1,000,000
shares
without
nominal
or
par
value.
Out
of
the
funds
obtained
as
a
result
of
the
agreements
with
Central
and
Banff,
$40,000
was
paid
to
Imperial
pursuant
to
the
farmout
agreement.
The
remaining
$5,000
was
placed
in
a
special
trust
account
and,
subsequent
to
its
incorporation,
was
turned
over
to
Ponder.
Pursuant
to
the
agreement
with
Imperial,
production
from
the
producing
well
on
the
property
began
to
accrue
for
the
benefit
of
the
syndicate
on
May
26,
1951.
The
moneys
thus
received
were
also
held
in
the
same
trust
account
which,
after
its
incorporation,
became
the
bank
account
of
Ponder.
The
drilling
of
a
well
on
the
lands,
the
subject-matter
of
the
farmout,
was
commenced
by
Ponder
on
July
27,
1951.
Drilling
proceeded
and
calls
were
made
from
time
to
time
upon
Central
and
Banff
for
their
contributions
toward
the
drilling
costs.
The
well
was
completed
on
September
3,
1951,
and
proved
to
be
a
successful
producer
of
oil.
Ponder
had
been
incorporated
at
the
instance
of
the
four
members
of
the
syndicate,
who
were
the
only
persons
beneficially
interested
in
it
until
after
the
completion
of
the
well.
Until
August
23,
1951,
its
directors
were
Moseson,
the
company’s
solicitor,
and
the
solicitor’s
secretary.
On
that
date
the
latter
was
replaced
on
the
board
of
directors
by
the
appellant.
The
members
of
the
syndicate
had
agreed,
at
the
time
Ponder
was
incorporated,
as
to
the
amount
of
their
share
interest
in
the
company,
to
be
received
as
consideration
for
the
transfer
to
Ponder
of
all
their
rights
under
the
farmout
agreement.
It
had
been
agreed
that
748,000
shares
should
be
issued,
fully
paid,
of
which
Moseson
should
receive
250,000
and
each
of
the
other
three
members
166,000.
Moseson
agreed
to
convey
to
Ponder
certain
other
properties
in
which
he,
alone,
was
interested.
The
formal
documentation
of
some
of
these
transactions
lagged
substantially
behind
the
actual
events.
For
example,
although
the
payment
of
$15,000
had
been
promptly
made
by
Banff
and
it
had
contributed
its
share
of
the
cost
of
drilling
the
well,
the
written
contract
evidencing
its
interest
was
not
actually
executed
until
October
2,
1951.
Similarly,
the
written
agreement
to
evidence
the
transfer
by
Moseson
to
Ponder
of
the
interest
of
the
syndicate
in
the
farmout
agreement
was
not
executed
until
September
25,
1951.
That
agreement
recited
the
payment
which
had
been
made
by
Moseson
to
Ponder
of
the
sum
of
$5,000.
It
provided
for
the
issue
of
748,000
fully
paid
shares
of
Ponder
to
Moseson
and
his
nominees.
It
was
provided
in
this
agreement
that:
‘‘This
Indenture
shall
be
effective
as
and
from
the
15th
day
of
June,
1951,
as
if
the
same
had
been
executed
and
delivered
on
that
date.”
On
the
same
date
a
written
agreement
was
executed
by
the
four
members
of
the
syndicate,
whereby
Moseson
agreed
to
cause
the
shares
to
be
issued
and
allotted
by
Ponder
as
to
250,000
shares
to
himself
and
166,000
shares
to
each
of
the
other
three
members
of
the
syndicate,
who,
in
turn,
agreed
to
accept
such
shares
in
full
satisfaction
of
any
claims
and
demands
which
they
might
have
against
Moseson
in
respect
of
the
properties.
Subsequent
to
the
execution
of
these
agreements,
shares
were
allotted.
Up
to
the
time
of
the
trial,
the
appellant
had
not
disposed
of
any
of
his
166,000
shares.
Before
these
written
agreements
had
been
executed,
Ponder
had
issued
and
allotted
251,997
of
its
shares
at
a
price
of
40
cents
cash
per
share.
Subsequent
to
that
issue,
on
September
12,
1951,
Ponder
had
been
converted
into
a
public
company
and
its
share
capital
had
been
increased
by
the
creation
of
an
additional
3,000,000
shares
without
nominal
or
par
value.
The
appellant
has
been
assessed
for
income
tax
for
the
year
1951
on
an
additional
$33,200
of
income
for
that
year,
on
the
basis
that
the
166,000
shares
of
the
capital
stock
of
Ponder
which
he
received
represent
income
in
his
hands
for
that
year
from
an
adventure
in
the
nature
of
trade.
In
determining
this
figure,
the
shares
were
valued
at
20
cents
each
by
a
comparison
with
the
price
paid
of
40
cents
per
share
for
the
251,997
shares
issued
in
September,
subject
to
a
50
per
cent
discount
owing
to
the
fact
that
the
shares
received
by
the
appellant
were
subject
to
an
escrow
agreement.
This
assessment
is
based
on
the
proposition
that
the
appellant
did
not
acquire
any
right
to
his
166,000
shares
until
after
the
successful
completion
of
the
well
on
September
3,
1951,
and
at
a
time
when,
as
a
result
of
that
successful
completion,
the
value
of
Ponder’s
shares
had
increased.
The
appellant’s
contention
is
that
the
agreement
for
the
transfer
of
the
farmout
to
Ponder
for
a
share
consideration
was
actually
made
before
the
drilling
of
the
well
had
been
commenced
and
that
the
shares
to
be
received
by
the
syndicate
for
the
transfer,
at
that
time,
could
have
had
no
value
greater
than
the
value
of
the
actual
asset
which
the
syndicate
was
conveying
to
Ponder.
He
relies
on
the
authority
of
Doughty
v.
The
Commissioner
of
Taxes,
[1927]
A.C.
327.
At
p.
336,
Lord
Phillimore,
who
delivered
the
judgment
of
the
Privy
Council,
said:
“The
other
ground
on
which
the
appellant’s
case
may
rest
is
that
the
transaction
which
led
to
the
claim
for
tax
was
not
a
sale
whereby
any
profit
accrued
to
the
two
partners.
The
case
of
Craig
(Kilmarnock)
(1914
8.C.
338)
just
referred
to
is
an
authority
for
saying
that
the
Crown
is
not
entitled
to
take
a
mere
bookkeeping
entry
as
conclusive
evidence
of
the
existence
of
a
profit.
The
two
partners
made
no
money
by
the
mere
process
of
having
their
stock
in
trade
valued
at
a
high
rate
when
they
transferred
to
a
company
consisting
of
their
two
selves.
If
they
overestimated
the
value
of
the
stock
the
value
of
the
several
shares
became
less.
The
capital
of
the
company
would
be
to
this
extent
watered.
As
already
observed,
they
could
not,
by
overestimating
the
value
of
the
assets,
make
them
more.’’
The
appellant’s
appeal
to
the
Tax
Appeal
Board
was
dismissed
and
his
appeal
from
that
decision
was,
in
turn,
dismissed
by
the
Exchequer
Court.
The
basis
of
the
decision
in
that
Court
is
contained
in
the
following
extract
from
the
reasons
for
judgment:
Now
Ponder
Oils
Limited
came
into
existence
on
June
15.
1951,
and
from
its
inception
or
shortly
afterwards
appears
to
have
obtained
possession
of
the
assets
and
rights
of
the
syndicate
and
to
have
discharged
the
syndicate’s
obligations
under
the
farmout
contract.
But
it
did
not
pay
for
the
assets
immediately,
nor
does
the
consideration
for
them
appear
to
have
been
agreed
upon
between
the
syndicate
and
the
company.
Since
Ponder
was
then
a
private
corporation
in
which
no
one
but
the
members
of
the
syndicate
was
beneficially
interested,
it
may
be
assumed
that
the
syndcate
could
have
dictated
as
the
consideration
to
be
paid
by
Ponder
whatever
they
wished,
whether
in
terms
of
money
or
shares.
It
might
have
been
a
very
high
consideration
or
a
very
low
one
or
a
reasonable
one
in
either
money
or
shares,
but
whatever
it
might
be,
to
my
mind
it
could
at
that
time
be
worth
no
more
than
the
value
of
what
Ponder
had.
But
while
the
members
of
the
syndicate
had
in
fact
agreed
among
themselves,
even
before
the
incorporation
of
Ponder,
to
take
a
particular
number
of
shares
as
the
consideration,
on
the
evidence
I
can
discover
nothing
prior
to
the
contract
of
September
25,
1951
from
which
any
obligation
of
the
company
to
issue
such
shares
or
any
right
of
the
syndicate
or
the
members
to
demand
them
of
the
company
can
be
held
to
have
arisen.
And
even
adopting
the
appellant’s
contentions
to
the
point
that
the
company
was
between
June
15
and
September
25
under
an
enforceable
obligation
to
pay
for
what
it
had
acquired
from
the
syndicate,
I
am
unable
to
find
on
its
part
any
undertaking
to
pay
in
shares.
If
a
contract
between
the
company
and
the
syndicate
is
to
be
inferred
from
the
circumstances,
including
the
receipt
by
Ponder
of
the
production
from
the
well,
the
carrying
on
by
Ponder
of
the
drilling
and
the
collection
by
Ponder
of
the
contributions
of
the
participants,
the
inference
I
would
draw
is
that
Ponder
took
over
the
contract
in
circumstances
from
which
a
promise
to
pay
would
be
implied,
but
to
pay
a
reasonable
sum
rather
than
to
issue
shares,
for
I
see
nothing
in
what
the
company
did
from
which
a
promise
to
issue
shares
may
be
inferred.
And
even
if
the
receipt
of
$5,000
in
cash
as
part
of
what
was
transferred
be
regarded
as
inconsistent
with
a
contract
to
pay
in
money
and,
therefore,
suggestive
that
the
consideration
was
to
be
something
else
and
probably
shares,
there
was
still
no
promise
by
the
company
to
pay
in
shares
to
the
exclusion
of
any
other
kind
of
payment.
In
my
view,
the
syndicate’s
right
to
be
paid
by
Ponder
in
shares
arose
for
the
first
time
on
September
25,
when
their
right
to
payment
for
what
Ponder
had
acquired
from
them
was
converted
from
a
right
to
be
paid
in
some
form
to
a
definite
right
to
shares.
’
’
There
is,
in
this
passage,
at
the
very
outset,
a
finding
of
fact
that,
from
the
inception
of
Ponder
or
shortly
afterwards,
that
company
obtained
possession
of
the
assets
and
rights
of
the
syndicate
and
discharged
the
syndicate’s
obligations
under
the
farmout
agreement.
This
finding
is,
in
my
opinion,
of
great
importance.
Ponder
had,
with
the
consent
of
the
members
of
the
syndicate,
taken
over
possession
of
the
syndicate’s
asset,
the
farmout
agreement,
and,
in
turn,
Ponder
received
the
production
from
the
completed
well
on
the
farmout
property
from
and
after
May
26,
1951.
The
acquisition
of
that
possession
must
have
been
by
virtue
of
some
agreement
with
the
syndicate
and,
that
being
so,
if
the
syndicate
had
sought
against
Ponder
a
direction
for
specific
performance,
the
principle
stated
by
Turner,
L.J.,
in
Wilson
v.
West
Hartlepool
Railway
Company,
2
DeG.J.
&
S.
475
at
494,
adopted
by
Kay,
J.,
in
Howard
v.
Patent
Ivory
Manufacturing
Company
(1888),
88
Ch.
D.
156
at
163,
would
be
applicable
:
‘Where
possession
has
been
given
upon
the
faith
of
an
agreement,
it
is
I
think
the
duty
of
the
Court,
as
far
as
it
is
possible
to
do
so,
to
ascertain
the
terms
of
the
agreement
and
to
give
effect
to
it.’’
What
were
the
terms
of
the
agreement
by
virtue
of
which
Ponder
had
become
possessed
of
the
assets
of
the
syndicate?
It
is
clear,
on
the
evidence,
that
all
members
of
the
syndicate
understood
that
there
would
be
an
issue
of
fully
paid
shares
by
Ponder
to
the
syndicate
members
in
consideration
for
the
asset.
The
four
members
of
the
syndicate
had
agreed
upon
that
consideration.
They
were
the
sole
beneficial
owners
of
Ponder,
which,
at
that
time,
had
issued
only
three
qualifying
shares,
which
were
subject
to
the
control
of
the
syndicate
members.
One
of
the
members
of
the
syndicate,
Moseson,
was
a
director
of
Ponder
and
the
other
two
directors
were
his
nominees.
This
being
so,
it
appears
to
me
that
when
Ponder
took
possession
of
the
asset
the
consideration
which
it
was
to
pay
had
been
agreed
upon
by
everyone
who
was
in
a
position
to
determine
the
intent
of
that
company
as
to
the
consideration
which
it
should
pay.
In
my
view,
had
he
desired
so
to
do,
the
appellant
was
in
a
position,
once
Moseson
had
turned
over
to
Ponder
possession
of
the
syndicate
assets
in
which
he
had
an
interest,
to
compel
Moseson,
as
his
trustee,
to
take
the
steps
necessary
to
obtain
the
issuance
to
him
of
his
166,000
shares
in
the
capital
stock
of
Ponder.
That
there
was
an
agreement
in
existence
before
the
execution
of
the
written
agreement
between
Moseson
and
Ponder
on
September
25
is
recognized
specifically
in
that
document,
in
the
clause
which
has
been
quoted
earlier.
The
reason
why
there
had
not
been
a
written
agreement
at
an
earlier
date
is
explained
by
the
appellant
in
his
evidence:
By
Mr.
LAYCRAFT
:
Q.
That
document
is
dated
September
25,
1951.
When
was
the
arrangement
made?’’
A.
‘‘The
arrangement
was
made
in
May,
1951.”
Q.
‘Was
the
arrangement
in
fact
carried
out
from
the
incorporation
of
Ponder
Oils
Limited
?’’
A.
“It
was.”
Q.
‘Why
then
is
the
document
dated
so
much
later?’’
A.
“Mainly
because
Ponder
Oils
had
no
personnel
to
press
on
to
get
the
documentation
up-to-date
until
after
the
1st
of
September,
and
they
got
this
out
as
quickly
as
possible.”
Q.
‘“Do
you
continue
to
blame
lawyers—”
By
His
Lordship
:
Q.
“The
arrangement
was
made
in
May,
1951,
but
it
was
in
fact
carried
out
from
the
time
of
incorporation
?”
A.
‘
‘
Yes,
Your
Lordship.”
Q.
“You
said
something
else.
It
is
dated
later
because
Ponder
Oils
had
not—what?”
A.
“They
had
no
one
to
press
on
with
the
documentation
or
arrangements
that
had
been
made
until
after
the
1st
of
September.”
By
MR.
LAYCRAFT
:
Q.
“Do
you
continue
to
blame
lawyers?”
A.
“Yes”.
The
position
is,
therefore,
that,
by
agreement
among
the
syndicate
members,
possession
of
their
asset
passed
to
a
private
company,
which
had
no
other
assets,
pursuant
to
an
understanding
that
they
would
receive
748,000
of
its
shares,
fully
paid,
of
which
the
appellant
should
receive
166,000.
At
that
time
Ponder
had
no
issued
shares
other
than
the
three
qualifying
shares
held
by
its
first
directors.
The
748,000
shares
agreed
to
be
issued
to
the
syndicate
members
at
that
time
could
have
a
value
no
more
and
no
less
than
the
value
of
the
asset
which
had
been
turned
over
to
it.
No
profit
could,
at
that
time,
accrue
to
the
appellant
in
respect
of
the
166,000
shares
to
which
he
was
then
entitled.
In
my
opinion,
the
agreements
of
September
25
did
no
more
than
to
evidence,
in
writing,
agreements
which
already
existed
and,
consequently,
it
is
not
proper
to
attribute
as
income
to
the
appellant
the
value
placed
upon
his
166,000
shares
as
of
September
25.
In
my
opinion,
the
appeal
should
be
allowed
with
costs
both
in
this
Court
and
in
the
Exchequer
Court,
and
the
re-assessment,
dated
December
17,
1956,
as
varied
by
the
Minister,
should
be
vacated.
JUDSON,
J.
(ABBOTT,
J.,
concurring)
:—The
appellant
is
one
of
a
syndicate
of
four
persons
who,
in
May
of
1951,
acquired
a
farmout
agreement
from
Imperial
Oil
Limited.
On
June
15,
1951,
the
syndicate
caused
to
be
incorporated
Ponder
Oils
Limited
for
the
purpose
of
transferring
to
that
company
the
asset
to
be
exploited.
The
question
at
issue
in
this
appeal
is
whether
the
company
was
bound
by
agreement
to
issue
shares
for
the
asset
on
June
15,1951,
or
whether
that
obligation
arose
for
the
first
time
on
September
25,
1951.
The
importance
of
the
date
is
that
in
the
interval
the
property
had
proved
to
be
valuable
and
Falconer
had
made
a
substantial
profit
as
a
member
of
the
syndicate.
The
Exchequer
Court,
after
a
careful
and
detailed
review
of
the
dealings
among
the
syndicate
members
and
between
them
and
the
company,
concluded
that
there
was
no
agreement
for
the
issue
of
shares
until
September
25,
1951,
and
that
consequently,
tax
was
payable.
The
syndicate
acquired
the
farmout
agreement
by
an
agreement
in
writing
dated
May
25,
1951.
There
was
probably
a
prior
oral
agreement
because
on
May
17,
1951,
it
sold
a
half
interest
in
the
farmout
agreement
for
$380,000.
By
an
agreement
in
writing
dated
October
2,
1951,
the
syndicate
also
sold
a
quarter
interest
for
$15,000.
This
$15,000
was
paid
by
the
purchaser
of
the
quarter
interest
long
before
the
formal
date
of
the
agreement.
I
say
this
because
as
a
result
of
the
two
sales
comprising
the
three-quarter
interest,
the
syndicate
received
$45,000
in
cash,
of
which
it
paid
$40,000
to
Imperial
Oil.
This
$40,000
was
the
purchase
price
under
the
farmout
agreement.
These
two
purchasers
of
the
half
interest
and
quarter
interest
respectively
agreed
to
contribute
to
the
drilling
costs
in
the
proportions
of
their
interest.
On
June
15,
1951,
Ponder
Oils
Limited
came
into
being
as
a
private
company
with
an
authorized
capital
stock
of
one
million
shares
n.p.v.
Drilling
began
ia
July
of
1951
and
by
September
3,
1951,
there
was
a
well
in
production.
On
September
12,
1951,
Ponder
Oils
Limited
was
converted
into
a
public
company
and
its
authorized
capital
was
increased
by
the
creation
of
an
additional
three
million
shares
n.p.v.
Shortly
before
this
happened,
the
company
had
sold
251,997
shares
privately
at
40
cents
per
share.
In
addition,
there
were
three
qualifying
shares
outstanding.
The
next
step
was
the
execution
of
the
formal
agreement
between
Paul
Moseson,
the
syndicate
manager,
and
Ponder
Oils
Limited.
It
was
dated
September
25,
1951,
and
it
provided
that
it
should
be
effective
from
June
15,
1951,
as
if
it
had
been
executed
and
delivered
on
that
date.
It
recites
the
following
facts:
(a)
The
acquisition
of
the
farmout
agreement
from
Imperial
Oil
Limited
by
agreement
dated
May
25,
1951.
(b)
The
sale
of
the
half
interest
by
agreement
dated
May
17,
1951.
(c)
The
agreement
to
sell
the
quarter
interest.
(This
is
the
agreement
which
was
not
put
in
writing
until
October
2,
1951.)
(d)
The
existence
of
a
lease
known
as
the
Berube
lease
held
by
Moseson
and
at
that
time
the
subject-matter
of
litigation
in
the
Supreme
Court
of
Alberta.
(e)
Moseson’s
holding
of
four
units
in
the
Kavanagh
Oil
syndicate.
Moseson
then
transfers
to
the
company
the
remaining
one-
quarter
interest
in
the
Imperial
farmout
agreement
in
consideration
of
the
issue
of
748,000
fully
paid
shares
n.p.v.
The
company
also
acknowledges
receipt
of
$5,000
from
Moseson.
This
is
the
balance
of
$5,000
remaining
from
the
proceeds
of
the
sale
of
the
half
interest
and
the
quarter
interest.
This
money
appears
to
have
been
turned
over
to
Ponder
immediately
on
its
receipt.
Moseson
agrees
to
prosecute
the
action
to
establish
the
Berube
lease
and
to
assign
it
to
the
company
if
the
action
is
successful.
Moseson
also
transfers
his
interest
in
the
Kavanagh
certificate,
Ponder
to
assume
Moseson’s
liability
of
$1,000
in
respect
of
this.
In
addition
to
issuing
the
shares,
Ponder
agrees
to
indemnify
Moseson
against
all
his
liabilities
under
the
Imperial
farmout
agreement,
also
to
indemnify
him
if
the
purchaser
of
the
quarter
interest
took
a
certain
course
of
action.
This
is
obviously
an
elaborate
agreement
defining
the
relations
between
the
syndicate
and
the
company.
The
748,000
shares
were
issued
in
escrow
and
were
divided
as
follows:
P.
E.
Moseson
|
290,000
shares
|
W.
L.
Falconer
|
166,000
shares
|
T.
A.
Link
|
166,000
shares
|
A.
W.
Nauss
|
166,000
shares
|
Moseson
received
84,000
more
shares
than
each
of
the
others
because
he
alone
was
interested
in
the
Berube
lease
and
the
Kavanagh
syndicate.
As
stated
above,
the
problem
is
whether
the
appellant
Falconer
realized
a
profit
on
September
25,
1951,
from
the
receipt
of
these
shares.
The
findings
of
the
learned
trial
judge
are
as
follows:
‘In
my
view,
the
syndicate’s
right
to
be
paid
by
Ponder
in
shares
arose
for
the
first
time
on
September
25,
when
their
right
to
payment
for
what
Ponder
had
acquired
from
them
was
converted
from
a
right
to
be
paid
in
some
form
to
a
definite
right
to
shares.
The
material
fact,
in
my
opinion,
is
that
through
carrying
out
their
scheme,
the
syndicate
became
entitled
to
shares
on
September
25,
but
not
until
then,
and
thereby
realized
profit
from
their
scheme
in
the
form
of
a
right
to
shares.
September
25,
in
my
opinion,
is
accordingly
the
date
at
which
the
right
to
the
shares
to
which
the
appellant
became
entitled
should
be
valued.”
In
addition,
the
evidence
shows,
although
not
very
clearly,
that
it
was
Ponder
that
actually
conducted
the
drilling
operations.
How
Ponder
was
financed
during
this
interval
to
enable
it
to
operate
does
not
appear.
The
evidence
also
seems
to
show
that
from
the
moment
of
the
acquisition
of
the
property
the
syndicate
members
intended
to
incorporate
Ponder
and
to
turn
over
the
property
to
the
company
for
a
certain
number
of
shares.
I
am
not
satisfied
on
the
evidence
that
the
Berube
lease
and
the
Kavanagh
syndicate
interest
were
ever
intended
to
be
included
in
the
deal
until
the
written
agreement
came
to
be
executed.
But
these
were
merely
the
intentions
of
the
promoters.
No
corporate
action
whatever
was
taken
along
these
lines
until
September
25,
1951.
There
were
no
meetings
of
directors
to
approve
of
any
agreement
with
the
syndicate.
The
company
appears
to
have
done
nothing
in
a
corporate
way
beyond
holding
the
formal
meetings
to
get
itself
organized.
It
did
not
agree
to
issue
any
shares.
It
received
no
transfer
of
the
farmout
agreement.
It
did
receive
the
$5,000
from
Moseson
and
it
did
spend
money
for
the
development
of
the
property.
It
seems
to
me
quite
impossible
to
hold
that
on
June
15,
1951,
there
was
a
contract
between
the
company
and
the
syndicate
for
the
transfer
of
these
property
interests
mentioned
in
the
agreement
of
September
25
in
consideration
of
the
allotment
by
the
company
of
the
748,000
shares.
Until
the
date
of
the
formal
agreement
everything
depended
upon
the
intention
of
the
syndicate
promoters.
Neither
party
could,
on
June
15,
1951,
have
proved
the
existence
of
a
concluded
contract
on
these
terms
and
an
action
for
specific
performance
by
either
party
to
enforce
such
terms
would
have
failed.
This
contract
is
a
bilateral
matter.
What
the
promoters
intended
to
do
when
they
had
time
to
attend
to
the
business
does
not
establish
a
contract.
The
position
between
the
two
dates
is
that
the
company
was
apparently
in
possession
of
the
property,
developing
the
property
at
its
own
expense
on
the
money
from
some
unknown
source.
It
is
possible
that
the
company
might
have
established
a
right
to
acquire
the
property
on
payment
of
a
reasonable
price,
although
I
am
doubtful
of
that,
but
I
am
in
complete
agreement
with
the
finding
of
the
learned
trial
judge
that
it
was
not
until
September
25,
1951,
that
the
company
came
under
any
obligation
to
issue
a
defined
number
of
shares
for
the
property,
including
the
Berube
lease
and
the
Kavanagh
syndicate
interest.
The
appellant’s
right
to
receive
the
shares
thus
arose
for
the
first
time
on
September
25,
1951.
The
shares
were
then
worth
substantially
more
than
the
appellant’s
interest
in
the
syndicate
on
June
15,
1951.
The
result
is
that
the
appellant
was
properly
assessed
on
the
basis
that
the
receipt
by
him
as
a
syndicate
member
of
the
shares
of
Ponder
was
a
receipt
of
income
from
a
venture
in
the
nature
of
trade.
The
case
is
not
within
the
principle
of
Doughty
v.
Commissioner
of
Taxes,
[1927]
A.C.
327.
The
remaining
question
is
whether
the
shares
were
properly
valued
for
the
purpose
of
computing
the
tax.
After
reviewing
the
evidence
of
dealings
in
the
shares
and
after
discounting
the
value
of
these
shares
because
they
were
subject
to
escrow,
the
learned
trial
judge
affirmed
the
Minister’s
valuation
at
20
cents
per
share.
I
can
find
no
reason
for
disturbing
this
assessment.
I
would
dismiss
the
appeal
with
costs.
Judgment
accordingly.