Hall, J (all concur):—The issue in this appeal is whether the appellant company is controlled within the meaning of paragraph 39(4)(b) of the Income Tax Act, RSC 1952, c 148, by the same group of persons as control Burland Realty and Equipment Limited (hereinafter called “Burland”). Gibson, J in the Exchequer Court held that they did and dismissed the appellant’s appeals in respect of the assessments made for the years 1961, 1962, 1963 and 1964.
The case before Gibson, J was tried on agreed facts and turned mainly on the interpretation to be given to an agreement dated May 23, 1957 between four holding companies, Franklatt Investments Limited, Georgelatt Investments Limited, Molatt Investments Limited and Rulev Investments Limited (referred to hereafter as “Franklatt”, “Georgelatt”, “Molatt” and “Rulev”) and four individuals, Frank Goldblatt, George Goldblatt, Morley Goldblatt and Reuben Levy.
The voting shares of Burland were held by Marvin E Goldblatt, Cecil Levy, Malcolm Goldblatt, Lawrence (Larry) Goldblatt, Morton Levy, Robert Levy, Labol Levy, Abby M Goldblatt and Deborah Moses and by one Sorie Rosenblatt, a daughter of Frank Goldblatt who is excluded from the group alleged to control Burland because she is not a shareholder of Franklatt or Molatt. Her exclusion is not material in the issue to be determined in this appeal. Burland was controlled by the other nine above-named who were the children of the aforementioned Frank Goldblatt, George Goldblatt, Morley Goldblatt and Reuben Levy (hereinafter called “the four fathers”). The three Goldblatts were brothers, Reuben Levy is Frank Goldblatt’s brother-in-law.
The children referred to in the preceding paragraph, through their control of the four holding companies, Franklatt, Georgelatt, Molatt and Rulev, were the registered owners of 469,996 of the 500,000 issued common shares of the appellant. Four of the remaining shares of the appellant were registered in the names of the four fathers. The remaining 30,000 shares were owned by Ruth Levy Bader, widow of Sidney Levy who died May 17, 1960. Sidney Levy’s shares passed to Ruth Levy on his death.
The agreement of May 23, 1957 was entered into between the four fathers and the four holding companies previously named. It contained inter alia the following clauses:
3. The Board of Directors of each of the Corporations shall be composed of four (4) Directors, respectively, and so long as this Agreement or any of its extensions or renewals shall be in full force and effect, Franklatt, Georgelatt, Molatt and Rulev shall each have the respective rights to designate one (1) Director only to the Board of Directors of each of the said Corporations; provided however that no person shall be so designated as a Director of any of the said Corporations unless he has been an employee or officer for at least three (3) years of any of the Corporations.
4. It is hereby understood and agreed that so long as the Parties of the fifth, sixth, seventh and eighth parts live they will, at their individual and respective options, be designated and elected as Directors of the said Corporations, or such one or more of them as they shall respectively desire.
5. The written consent, or affirmative vote of a majority of the Directors elected as aforeprovided shall, so long as this Agreement or any of its extensions or renewals be in full force and effect, be necessary for effecting or validating any act of the said Corporations, or any of them.
6. The Parties hereto agree to execute and deliver any papers, documents and instruments, causing such meetings to be held, resolutions to be passed and by-laws enacted, exercise their votes and influence, and do and perform and cause to be done and perform such further and other acts and things as may be necessary, practicable or desirable in order to give full effect to this Agreement and every part thereof.
7. If at any time during the term of this Agreement the Parties hereto shall deem it necessary to make any alterations, amendments, or change in this Agreement, or any clause thereof, for the more advantageous or satisfactory management of the business of the Corporations and it shall be lawful and proper for them to do so by the consent in writing of Franklatt, Georgelatt, Molatt and Rulev.
8. The party of the fifth part hereby acknowledges that all shares held by him in the said Corporations are held by him on behalf of and for Franklatt, which owns the whole beneficial interest thereof.
9. The Party of the sixth part hereby acknowledges that all shares held by him in the said Corporations are held by him on behalf of and for Georgelatt which owns the whole beneficial interest thereof.
10. The Party of the seventh part hereby acknowledges that all shares held by him in the said Corporations are held by him on behalf of and for Molatt which owns the whole beneficial interest thereof.
11. The Party of the eighth part hereby acknowledges that all shares held by him in the said Corporations are held by him on behalf of and for Rulev which owns the whole beneficial interest thereof.
Gibson, J dismissed the appeals of the appellant, holding that the four fathers did not have de jure control of appellant in the taxation years 1961 to 1964 inclusive and upheld the contention of the Minister that appellant was a company controlled by the same group of persons as controlled Burland.
I agree with the trial judge. The meaning of “control” in paragraph 39(4)(b) which reads:
39. (4) For the purpose of this section, one corporation is associated with another in a taxation year if, at any time in the year,
(b) both of the corporations were controlled by the same person or group of persons,
means the right of control that is vested in the owners of such a number of shares in a corporation so as to give them the majority of the voting power in the corporation: MNR v Dworkin Furs (Pembroke) Ltd, [1967] S.C.R. 223 at 227; [1967] CTC 50 at 53; 67 DTC 5035, and Vina- Rug (Canada) Limited v MNR, [1968] S.C.R. 193 at 197; [1968] CTC 1; 68 DTC 5021.
I would accordingly dismiss the appeal with costs.