KERWIN, J.:—This appeal raises only questions of fact, including, of course, the proper inferences to be drawn from established circumstances. For the reasons given by my brother Rand, I am of opinion that the trial judge came to the right conclusion, and the appeal should therefore be. dismissed with costs. Le
RAND, J. (concurred in by Locke and Fauteux, JJ.) :—The appeal raises the question whether a profit arising in the year 1946 on a certain stock transaction is liable to assessment under Section 2(1) (f) of The Excess Profits Tax Act, 1940.
The appellant, which I shall call ‘‘the company’’, was incorporated in 1930 to carry on the business of a dealer in securities in the broadest sense of the expression, and until 1938 engaged in operations as a member of an investment dealers’ association. In 1938, as a result of the depressed state of business, the company found itself with a portfolio of securities, including a group in which it held a part interest only, amounting in cost price to approximately $1,000,000.00, which were then held by banks for advances slightly less than that sum. Being unable to meet certain requirements of the association, the shareholders, including Gairdner who was the dominant figure behind all three companies to be mentioned, decided to incorporate a new company, Gairdner & Company Limited, which I shall call ‘‘the new company’’, to which the company sold its physical equipment. records and good will, for shares in the new company. The securities and the liabilities against them remained with the company, but the new company might elect to carry out any or all of the contracts or uncompleted transactions.
Between April, 1938, and June, 1944, the company engaged in trading transactions in stocks and bonds in the course of which a substantial number of its original holdings were liquidated. In the latter month it sold to another company controlled by Gairdner and members of his family, Trafalgar Securities Limited, which then held all the common shares of the company, securities to the amount of $152,000.00. At the end of 1944 the company’s portfolio represented a cost value of $126,000.00 and a market value of $143,200.00. No sales were made in 1945. Between April 30, 1938, and December 31, 1946. roughly 124 purchases and 200 sales took place.
In these latter, of eight purchases amounting to 32,920 shares. 17,180 were resold on the same day, 2,475 within one month. 0,000 within two months, 5,000 within three months, 1,000 within four months and 2,265 within eighteen months. Of nine purchases made after 1946 amounting to 22,260 shares, 2,000 were resold on the same day, 1,000 in one month, 2,500 in two months, 3,500 in six months, 2,000 within one year, 9.260 within two years and 2,000 within three years.
These complementary transactions in buying and selling on their face bear the imprint of a course of action pursued with a view to making a profit through their ultimate result; and so far as the company.’s business included the disposal of securities held on April 30, 1938, with resulting purchases, it was by way of completing the business admittedly carried on by the company as a dealer before 1938. But the contention is that all these transactions represent mere changes of investments. strictly so-called, as distinguished from the marchandising of securities, and that the profit or loss were chargeable to capital.
It is unnecessary to dwell at any length on this contention. Investments, in the sense urged, look primarily to the maintenance of an annual return in dividends or interest. Substitutions in the securities take place, but they are designed to further that primary purpose and are subsidiary to it. On the facts before us, there cannot, in my opinion, be any real doubt that there was no such dominant purpose here.
It is then urged that the particular purchase of Dominion Malting stock in 1944 was an exceptional transaction, designed to obtain a working control of that company in order to enable Gairdner to introduce his sons to industrial management. I will assume that he had such an object in mind, but it was only one of the least two purposes, the other of which was rna^e evident, i.e., that if at any time a sufficiently favourable opportunity to sell arose it would be seized upon. Ordinarily, a business is a scheme involving a series of transactions of one or more modes of dealings, more or less repetitive, for making a profit from the total activities. There could be a business of taking over. by means of stock control, run down industries, building them up, and disposing of them; and that pattern of action can be included in a group of cognate transactions operating in any form.
Cameron, J., came to the conclusion that this particular transaction was part and parcel of the general trading operations of the company conducted from 1938 to the end of 1946 and I agree with him. The mere fact that membership in the dealers’ association had ceased in 1938 is quite irrelevant; membership was subject to certain conditions in relation to the company’s financial structure, but its loss did not affect the company’s right independently to deal as it pleased in security transactions.
I would, therefore, dismiss the appeal with costs.
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