A-344-84
The Queen (Appellant)
v.
Donald Stanley Derbecker (Respondent)
Court of Appeal, Thurlow C.J., Hugessen J. and
Cowan D.J.—Toronto, October 30, 1984.
Income tax — Income calculation — Appeal concerning
claiming of reserve on disposition of property pursuant to s.
40(1)(a)(iii) of Act — Promissory note representing proceeds of
disposition payable on demand after December 31, 1976 —
Norton v. Ellam (1837), 2 M. & W. 461 (Exch. of Pleas)
applied — Note becoming present debt January 1, 1977 —
Expression "due to him" looking only at taxpayer's entitle
ment to enforce payment not whether actually paid — Income
Tax Act, S.C. 1970-71-72, c. 63, s. 40(1)(a)(iii).
CASES JUDICIALLY CONSIDERED
APPLIED:
Norton v. Ellam (1837), 2 M. & W. 461 (Exch. of
Pleas).
REFERRED TO:
Brown v. Brown, [1893] 2 Ch. 300; Royal Bk. v. Hogg,
[1930] 2 D.L.R. 488 (Ont. S.C.); Spencer Investments
Ltd. v. Hansford (1974), 48 D.L.R. (3d) 474 (Alta.
S.C.).
COUNSEL:
H. Erlichman for appellant.
Ian V. B. Nordheimer for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Fraser & Beatty, Toronto, for respondent.
The following are the reasons for judgment
rendered in English by
HUGESSEN J.: Subparagraph 40(1)(a)(iii) of
the Income Tax Act [S.C. 1970-71-72, c. 63],
allows a taxpayer to take a reserve
40. (1)(a) ...
(iii) ... in respect of such of the proceeds of disposition of
the property that are not due to him until after the end of the
year....
In the present case, part of the proceeds of
disposition were represented by a promissory note
expressed to be payable "on demand after Decem-
ber 31, 1976". In the now classic words of Parke,
B., in Norton v. Ellam (1837), 2 M. & W. 461
(Exch. of Pleas) at page 464:
... a promissory note, payable on demand, is a present debt,
and is payable without any demand ....
That case has been many times approved.'
The learned Trial Judge [ [ 1984] 1 F.C. 840]
held that in the absence of a demand in the year
1977 the note in question was not "due" to the
taxpayer in that year. She said [at page 844]:
... what was intended was to tax the taxpayer not at the time
he was entitled to the money but at the time when it was
required to be paid to him.
With respect we think that she was wrong and that
the words "due to him" look only to the taxpayer's
entitlement to enforce payment and not to whether
or not he has actually done so.
Here, the taxpayer, alone and at his sole option,
was entitled to enforce payment of the note in
1977. From January 1, 1977, it became a present
debt and could be sued on without any demand. It
was owing and payable. It was, therefore, "due to
him".
The appeal will therefore be allowed with costs
here and in the Trial Division.
' Brown v. Brown, [1893] 2 Ch. 300; Royal Bk. v. Hogg,
[1930] 2 D.L.R. 488 (Ont. S.C.); Spencer Investments Ltd. v.
Hansford (1974), 48 D.L.R. (3d) 474 (Alta. S.C.).
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.