Prince Rupert Hotel ( 1957 ) Ltd. v. Canada
T-644-90
Pinard J.
5/5/93
8 pp.
Appeal from reassessments for 1984, 1985, 1986 -- Plaintiff member of two joint ventures formed to develop and operate lodges at Whistler, B.C. -- Also general partner in partnerships created to run hotels on behalf of limited partners -- Partners agreed general partners to receive management fees allocated to them from income of limited partnerships in consideration for management services -- Fees to be reported by joint ventures as income -- Due to solicitors' error informal agreements, estimated $993,903 and $849,004 respectively income lost and $234,291 and $138,625 in management fee revenues lost -- From out-of-court settlement $187,500 allocated to plaintiff as 1985 share and $93,791 as 1986 share -- Plaintiff not including amounts in income -- By reassessment defendant including payments in income -- General partnership interest constituting capital property -- Limited partnership agreements not amended and still apply as existed before actions commenced -- Plaintiff continuing to operate lodges on behalf of limited partners -- Plaintiff contending value of general partnership permanently impaired by negligence of solicitors retained to prepare partnership agreements -- Arguing amount received as damages for harm done to such capital property capital receipt and not part of business profit -- Defendant submitting compensation paid in respect of lost management fee income and representing income from business -- Both parties recognized amounts not received as proceeds of disposition of capital property -- Appeal dismissed -- Rule stated by Diplock L.J. in London and Thames Haven Oil Wharves, Ltd. v. Attwooll, [1967] 2 All E.R. 124 (C.A.) applies -- Where trader receiving compensation for trader's failure to receive sum of money as profits from trade, compensation treated for income tax purposes in same way as sum treated if received instead of compensation -- Attwooll followed in The Queen v. Manley, A. (1985), 85 DTC 5150 (F.C.A.) and Canadian National Railway Company (1988), 88 DTC 6340 (F.C.T.D.) -- Measure of damages determined by reference to value of lost income -- As plaintiff continuing to provide management services, solicitors' errors not destroying, sterilizing or materially crippling whole of profit-making structure of business operations of general partners -- General partners not losing capital asset -- Compensation paid in respect of management fee income -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 3, 9.