Andrews,
J
(in
Chambers):—This
is
an
appeal
pursuant
to
section
44
of
the
Succession
Duty
Act,
RSBC
1960,
c
372
against
a
decision
of
the
Minister
of
Finance
made
pursuant
to
section
43
of
the
Succession
Duty
Act.
In
an
order
dated
June
28,
1974
Hutcheon,
J
directed
that
the
issues
to
be
determined
by
this
hearing
are:
(1)
the
question
of
whether
the
share
price
of
$5.33
fixed
pursuant
to
the
agreement
applicable
to
certain
designated
shareholders,
which
included
the
deceased,
in
respect
of
the
common
shares
of
Wood
Gundy
Securities
Ltd
is
the
fair
market
value
of
the
shares
for
the
purposes
of
the
Succession
Duty
Act;
and
(2)
the
issue
whether
either
clause
2(2)(i)
or
2(2)(j)
of
the
Succession
Duty
Act
is
applicable
to
the
said
assets.
The
appellants
are
the
executors
of
the
will
of
John
Joseph
West.
Mr
West
was
a
senior
executive
of
Wood
Gundy
Securities
Ltd,
a
private
company.
It
was
the
policy
of
Wood
Gundy
to
offer
shares
in
the
company
to
its
senior
employees.
Shares
in
the
company
have
never
been
held
by
persons
other
than
employees.
At
the
time
of
his
death
Mr
West
had
accumulated
35,000
common
shares
in
Wood
Gundy.
He
held
those
shares,
as
did
all
other
shareholders,
pursuant
to
what
is
sometimes
known
as
a
“buy-sell”
or
“buy-out”
shareholders’
agreement.
The
Shareholders’
Agreement
provides,
inter
alia,
that:
1.
A
shareholder
cannot
sell
his
shares
without
first
offering
such
shares
for
sale
to
employees
designated
by
the
Shareholders’
Committee;
2.
On
retirement,
whether
voluntary
or
involuntary,
or
at
death,
a
shareholder
must
sell
his
shares
to
employees
designated
by
the
Shareholders
by
the
the
Shareholders’
Committee;
3.
A
shareholder
who
reaches
age
60
must
in
each
of
the
next
five
years
offer
to
sell
20%
of
his
then
holding
of
shares
to
employees
designated
by
the
Shareholders’
Committee;
4.
Under
certain
restricted
conditions
a
shareholder
may
sell
his
shares
to
an
outsider
but
the
price
of
those
shares
cannot
be
in
excess
of
the
formula
referred
to
in
paragraph
7
below;
(See
3(c)
of
the
shareholders’
agreement.)
5.
In
each
case
the
sale
is
required
to
be
at
a
price
determined
by
the
Shareholders’
Committee
in
accordance
with
the
formula
set
out
in
Clause
7
which
reads
as
follows:
“7.
The
formula
price
for
all
purposes
of
this
Agreement
shall
be
determined
as
at
any
date
in
the
following
manner—
(i)
the
Shareholders’
Committee
as
at
such
date
shall
value
the
assets
of
the
Company
at
what
is
in
its
opinion
their
fair
realizable
market
value;
(ii)
from
such
valuation
there
shall
be
deducted
all
liabilities
of
the
Company
as
at
that
date,
such
reserves
as
the
Shareholders’
Committee
in
its
sole
discretion
considers
adequate
and
the
aggregate
par
value
of
all
Preference
Shares
of
the
Company
then
outstanding;
(iii)
sixty-six
and
two-thirds
per
cent
(6624%)
of
the
net
asset
value
of
the
Company
as
so
determined
shall
then
be
divided
by
the
number
of
Common
Shares
outstanding
as
at
that
date.
and
the
result
shall
be
the
formula
price
as
at
that
date.
The
formula
price
is
so
determined
and
any
valuation
made
by
the
Shareholders’
Committee
in
arriving
at
the
same
shall
be
conclusively
binding
upon
all
parties
to
this
agreement.”
Mr
lan
Woolley,
secretary
of
Wood
Gundy
Ltd,
gave
evidence
as
to
the
reason
for
restricting
shareholdings
to
employees.
Mr
Woolley
stated
that
Wood
Gundy
is
a
private
company
so
there
is
a
legal
restriction
on
who
may
hold
shares.
In
addition,
the
company
is
a
member
of
all
Canadian
stock
exchanges
and
of
the
Investment
Dealers’
Association,
whose
rules,
in
the
view
of
Mr
Woolley,
require
approval
by
those
bodies
of
all
individuals
who
are
about
to
become
shareholders.
The
company
is
also
subject
to
the
control
of
various
provincial
securities
commissions,
who,
according
to
Mr
Woolley,
also
have
restrictions
and
require
prior
approval
to
be
given
before
an
individual
can
become
a
shareholder.
Mr
Woolley
is
directly
involved
in
setting
the
value
of
the
shares
pursuant
to
section
7
of
the
Shareholders’
Agreement.
His
evidence
was
that
prices
are
set
every
month
according
to
the
formula
set
out
in
section
7
of
the
Shareholders’
Agreement.
He
stated
that
the
reason
a
figure
of
/3
is
deducted
from
the
estimated
net
realizable
value
of
the
company
is
that
because
of
the
restrictions
in
the
transfer
of
the
shares
they
are
not
readily
marketable
and
therefore
some
deducion
must
be
made
from
the
estimated
net
realizable
value
figure.
After
the
death
of
Mr
West
there
was
correspondence
between
Mr
Wooi'
Iey
and
the
executors
regarding
the
35,000
common
shares.
Mr
Woolley
submitted
to
the
executors
a
form
of
offer
which
was
executed
by
them
and
returned
to
Mr
Woolley.
The
Shareholders’
Committee
fixed
the
price
applicable
to
the
sale
at
$5.33
per
share
and,
in
due
course,
nominated
a
number
of
employees
to
purchase
the
shares
held
by
the
estate.
By
August
1969
the
estate
was
in
a
position
to
provide
releases,
the
shares
were
duly
delivered
by
the
estate
to
Mr
Woolley,
and
the
price
of
$186,550
(35,000
x
$5.33)
was
paid.
The
estate
fixed
the
value
of
the
shares
for
succession
duty
purposes
at
the
figure
they
had
received
pursuant
to
the
“buy-sell”
agreement—ie
$186,550.
The
assessor
rejected
that
valuation
and
assessed
a
valuation
equivalent
to
$10
per
share.
The
estate
appealed
to
the
Minister
of
Finance
pursuant
to
section
43
of
the
Succession
Duty
Act,
against
that
assessment.
The
present
proceedings
come
by
way
of
an
appeal
from
the
Minister’s
decision.
The
sole
issue
on
this
appeal
is
whether
the
$5.33
price
is
the
“value”
for
the
purposes
of
the
Succession
Duty
Act.
Clause
(b)
[of
the
definition
of
“value”
in]
subsection
2(1)
states
that:
2.
(1)
In
this
Act,
unless
the
context
otherwise
requires,
“value”
means,
(b)
in
relation
to
any
other
property,
the
fair
market
value
of
the
property
computed
in
each
case
as
of
the
date
of
death
of
the
deceased
in
respect
of
whose
death
the
value
is
relevant
or
as
of
whatever
other
date
is
specified
in
this
Act;
It
is
not
the
purpose
of
these
proceedings
to
actually
determine
the
value
of
the
shares
if
$5.33
is
not
the
correct
value,
but
rather
the
issue
is
solely
to
determine
whether
$5.33
is
the
fair
market
value
of
the
shares.
I
am
of
the
opinion
that
even
if
clause
2(2)(i)
or
(j)
are
applicable
here,
their
application
will
turn
on
the
determination
of
the
first
question
of
the
fair
market
value
of
the
shares.
I
will
discuss
those
sections
after
disposing
of
the
first
issue.
To
support
his
view
that
“fair
market
value”
is
that
which
is
actually
received
by
the
estate
pursuant
to
a
shareholders’
buy-sell
agreement
the
appellant
principally
relies
on
the
Supreme
Court
of
Canada
decision
in
Beament
Estate
v
MNR,
[1970]
SCR
680;
[1970]
CTC
193;
70
DTC
6130.
The
respondent,
in
support
of
his
view
that
a
buy-sell
formula
price—while
a
factor
to
be
considered—is
not
the
sole
or
conclusive
determinant
of
fair
market
value,
principally
relies
on
two
English
decisions:
Attorney
General
v
Jameson,
[1905]
2
IR
218
(KB),
and
CIR
v
Crossman
and
Mann,
[1937]
AC
26
(HL).
While
both
lines
of
authority
stem
from
circumstances
very
different
from
the
case
at
bar,
nonetheless,
the
principles
set
out
in
those
decisions
provide
a
useful
guide
in
the
determination
of
the
issue
at
bar.
In
Beament
Estate
v
MNR
the
Supreme
Court
of
Canada
was
considering
the
definition
of
“value”
contained
in
subparagraph
58(1
)(s)
(ii)
of
the
Estate
Tax
Act,
SC
1958,
c
29.
That
paragraph
is
virtually
identical
to
clause
(b)
[of
the
definition
of
“value”
in]
subsection
2(1)
of
the
BC
Succession
Duty
Act
but
for
the
additional
words
at
the
end
of
subparagraph
58(1)(s)(ii)
“.
.
.
without
regard
to
any
increase
or
decrease
in
such
value
after
that
date
for
any
reason”.
I
am
of
the
opinion
that
even
with
those
additional
words
the
sections
are
still,
for
the
purposes
of
this
application,
identical
in
effect.
The
[SCR]
headnote
to
the
Beament
decision
in
the
Supreme
Court
adequately
sets
out
the
facts:
In
1961,
the
deceased
incorporated
a
private
investment
holding
company
with
an
authorized
capital
divided
into
class
A
and
class
B
shares,
each
carrying
one
vote
and
each
having
a
par
value
of
$1.
The
deceased
subscribed
for
2,000
class
B
shares
and
each
of
his
two
children
subscribed
for
12
class
A
shares.
No
other
shares
were
issued.
The
letters
patent
conferred
a
5
per
cent
cumulative
preferential
dividend
on
the
class
A
shares
and
entitled
the
holders
of
the
class
B
shares
to
the
remaining
net
earnings
of
the
company
arising
from
income
but
not
from
capital
gains.
On
the
dissolution
or
winding-up
of
the
company
the
holders
of
the
class
B
shares
were
limited
to
receiving
the
par
value
of
their
shares.
The
holders
of
the
class
A
shares
were
entitled
to
receive
all
the
remaining
distributable
assets.
Pursuant
to
an
agreement,
the
deceased
covenanted
with
his
children
to
provide
in
his
will
for
the
dissolution
of
the
company
and
the
distribution
of
its
assets
in
accordance
with
the
provisions
of
the
letters
patent.
The
result
of
this
agreement
was
that
the
deceased’s
estate
received
$10,725.98.
The
Minister
contended
that
the
value
of
the
2,000
Class
B
shares
free
from
the
obligations
assumed
by
the
deceased
under
the
contract
would
be
$110,000,
and
that
that
was
the
value
of
the
property
passing
to
the
estate
for
the
purposes
of
the
Estate
Tax
Act.
Chief
Justice
Cartwright
held
the
“value
of
the
shares
was
that
which
the
shares
actually
produced
for
the
estate—ie
$10,725.98”.
However,
as
the
respondent
in
the
case
at
bar
has
pointed
out,
the
fair
market
value
of
shares
in
a
company
which
is
being
wound
up
is
the
fair
market
value
of
the
assets
of
the
company
available
for
distribution
in
respect
of
those
shares.
There
is
no
ongoing
advantage
in
holding
the
shares
as
no
return
other
than
the
distribution
of
assets
can
be
expected
in
respect
of
them.
In
the
case
of
a
company
which
is
not
being
wound
up
the
income
earning
potential
of
shares
in
that
company
may
be
a
basis
for
valuating
those
shares.
Even
though
the
facts
of
the
Beament
case
were
without
doubt
different
from
the
facts
of
the
case
at
bar,
this
Court
must
pay
close
attention
to
what
was
said
by
Cartwright,
CUC
at
page
687
[198,
6133]
of
his
reasons:
Once
it
is
established
(and
it
has
been
conceded)
that
the
contract
binding
the
deceased
and
his
executors
to
have
the
company
wound
up
was
valid,
the
real
value
of
the
shares
cannot
be
more
than
the
amount
which
their
holder
would
receive
in
the
winding-up.
To
suggest
that
they
have
in
fact
any
other
value
would
be
altogether
unrealistic.
When
the
true
value
of
the
shares
in
the
circumstances
which
exist
is
readily
ascertainable,
I
can
find
nothing
in
the
Act
that
requires
the
computation
of
the
value
they
would
have
had
under
completely
different
circumstances
followed
by
an
inquiry
as
to
whether
any
deductions
should
be
made
from
that
value.
It
would,
of
course,
be
within
the
power
of
Parliament
to
enact
that
an
asset
of
a
deceased
person
which
in
fact
could
produce
only
$10,725.98
for
his
estate
should
be
valued
for
purposes
of
taxation
at
ten
times
that
amount
but,
in
my
opinion,
it
would
require
clear
and
unambiguous
words
to
bring
about
such
a
result.
Nowhere
in
the
words
of
the
statute
can
I
find
the
expression
of
such
an
intention
applicable
to
the
facts
of
the
case
at
bar.
I
find
this
passage
consistent
with
the
interpretation
of
fair
market
value
given
by
McIntyre,
J
(as
he
then
was)
in
Re
Mann
Estate,
[1972]
5
WWR
23
(BCSC);
affirmed
[1973]
CTC
561;
[1973]
4
WWR
223;
affirmed
[1974]
CTC
222;
[1974]
2
WWR
574.
I
now
turn
to
consider
the
decision
of
the
House
of
Lords
in
Commissioners
of
Inland
Revenue
v
Crossman
and
Mann
(supra)
which
followed
the
King’s
Bench
Division
decision
in
Attorney
General
v
Jameson
(supra).
The
Courts
in
Jameson
and
Crossman
were
considering
subsection
7(5)
of
the
Finance
Act,
1894,
which
states
that:
The
principal
value
of
any
property
shall
be
estimated
to
be
the
price
which,
in
the
opinion
of
the
commissioners,
such
property
would
fetch
if
sold
in
the
open
market
at
the
time
of
the
death
of
the
deceased.
In
interpreting
subsection
7(5)
the
Jameson—Crossman
decisions
held
that
where
there
is
a
restriction
in
the
articles
on
the
alienation
of
shares
the
fair
market
value
of
the
shares
of
the
deceased
for
the
purposes
of
the
Finance
Act
is
what
a
notional
purchaser
would
pay
to
stand
in
the
shoes
of
the
vendor.
(See
reasons
of
Lord
Ashbourne
in
Jameson
at
227.)
It
is
clear,
however,
that
the
English
courts
felt
“coerced”
by
subsection
7(5)
to
disregard
the
restrictive
provisions
in
the
articles
and
to
assume
an
open
market.
(See
the
reasons
of
Lord
Blanesburgh
in
Crossman
at
54
and
55.)
The
Jameson—Crossman
principle
has
been
considered
in
this
country
in
Re
Harvey
(Assessor
of
Taxes)
v
Walsh,
[1953]
DLR
257
(Newfoundland
SC).
The
statute
under
consideration
in
that
case
was
The
Death
Duties
Act,
1934
(Newfoundland).
Again,
the
articles
in
the
companies
involved
in
the
Harvey
case
contained
restrictions
on
the
alienation
of
shares.
The
Death
Duties
Act
of
Newfoundland
was
a
very
short
statute
which
did
not
contain
a
provision
equivalent
to
subsection
7(5)
of
the
English
Finance
Act.
I
quote
from
the
reasons
of
Dunfield,
J
in
the
majority.
I
have
endeavoured
to
follow
through
and
reduce
to
a
precis
the
course
of
argument
and
decision
in
these
leading
cases
to
accentuate
the
differences
between
the
English
position
and
our
present
position,
and
to
demonstrate,
what
I
think
is
clear,
that
the
British
decisions
in
favour
of
the
taxing
authority
all
along
have
been
based
on
the
necessity
seen
by
the
deciding
Judges
to
carry
out
the
hypothetical
sale
contemplated
by
s
7(5)
with
the
assumptions
as
to
the
restrictions
contemplated
by
the
Jameson
-
Salvesen-
Crossman
doctrine,
if
I
may
so
compendiously
describe
it;
a
process,
as
Lord
Roche
describes
it,
of
forcing
to
fit
the
facts
a
machinery
which
the
Legislature
had
constructed
for
another
purpose.
Can
it
be
supposed
that
the
majority
decision
would
have
gone
as
they
did
in
the
absence
of
s
7(5)
of
the
Finance
Act
of
1894?
I
cannot
believe
it.
But
in
our
case
we
have
no
such
section
as
7(5)
and
no
such
process
of
supposititious
sale.
The
issue
of
the
fair
market
value
of
the
shares
of
a
deceased
where
there
are
restrictions
and
alienation
of
the
shares
under
a
buysell
agreement
has
been
considered
in
the
United
States.
While
the
matter
has
by
no
means
been
settled
in
the
American
courts,
I
find
useful
in
the
determination
of
the
issue
at
bar
the
reasons
for
judgment
of
Mr
Justice
Hand
in
Lomb
v
Sugden
(Collector
of
Internal
Revenue)
(1936],
82
F
2d
166
(Circuit
Court
of
Appeal,
2nd
Circuit).
In
that
case
the
deceased
had,
during
her
lifetime,
entered
inio
an
agreement
with
all
of
the
other
stockholders
of
the
company
in
which
she
held
shares
whereby
none
of
them
could
sell
their
stock
without
first
offering
the
shares
to
be
sold
to
the
others
at
a
price
to
be
computed
in
accordance
with
the
agreement.
The
agreement
also
provided
that
if
the
other
stockholders
should
refuse
to
make
such
a
purchase
the
stock
might
be
sold
to
outsiders.
At
p
167
Mr
Justice
Hand
held
that:
.
.
.
an
option
contract
giving
stockholders
a
right
to
purchase
at
a
specified
price
upon
the
owner’s
sale
or
death
limited
the
value
of
the
stock
to
the
low
price
at
which
he
or
his
executors
were
obliged
to
sell
it.
On
the
following
page,
referring
to
the
value
of
the
stocks
for
estate
purposes,
Mr
Justice
Hand
states:
Its
value
io
the
estate
can
be
no
greater
than
that
with
which
the
decedent
parted.
Now,
fair
market
value
in
this
country
has
always
imported
the
concept
of,
in
the
words
of
Estey,
J
in
Attorney
General
of
Alberta
v
Royal
Trust
Company,
[1945]
SCR
267
at
288—as
applied
in
Re
Mann
Estate
(supra),
page
27,
a
market
“which
is
not
disturbed
by
factors
similar
to
either
boom
or
depression,
and
where
vendors,
ready
but
not
too
anxious
to
sell,
meet
with
purchasers
ready
and
able
to
purchase
.
.
I
find
it
neither
fair
nor
reasonable
to
apply
the
English
test
based
on
subsection
7(5)
of
the
English
Finance
Act
which
ignores
a
key
factor
enunciated
by
Estey,
J
that
only
purchasers
“able
to
purchase’’
are
to
be
considered
in
determining
fair
market
value.
lt
is,
of
course,
within
the
competence
of
the
Legislature
to
direct
that
a
notional
price
purchasers
unable
to
purchase
may
be
willing
to
pay
must
be
considered
in
determining
fair
market
value
for
the
purposes
of
the
Succession
Duty
Act.
However,
I
am
compelled
to
adopt
the
words
of
Cartwright,
CJC
that
“.
.
.
it
would
require
clear
and
unambiguous
words
to
bring
about
such
a
result”
Beament
Estate
v
MNR
(supra)
at
687
[198,
6133].
See
also
Cantor
Ltd
v
Minister
of
Finance
(January
2,
1976,
BCSC,
unreported
No
X7712/75,
Fulton,
J).
As
an
example
of
clear
wording
which
might
impel
a
court
to
disregard
the
value
in
a
buy-sell
agreement
for
the
purposes
of
determining
fair
market
value
see
section
26
of
The
Succession
Duty
Act
(Manitoba),
SM
1972,
c
9,
as
follows:
26.
The
value
of
any
property
included
in
computing
the
aggregate
net
value
of
the
property
of
the
deceased
by
virtue
of
clause
(i)
of
section
3
shall,
for
the
purposes
of
this
Act,
be
determined
without
regard
to
any
condition
or
restriction
attaching
to
the
transfer
or
acquisition
of
the
property
that
became
or
becomes
effective
at
a
time
determinable
by
reference
to
the
death
of
the
deceased.
I
cannot
find
in
the
statute
such
clear
and
unambiguous
words,
and
accordingly
I
must
answer
yes
to
the
first
issue
directed
to
this
Court
by
Hutcheon,
J.
I
now
turn
to
consider
specifically
whether
either
clause
2(2)(i)
or
clause
2(2)(j)
of
the
Succession
Duty
Act
is
applicable
to
the
said
assets.
I
set
out
those
clauses:
2.
(2)
For
all
purposes
of
this
Act,
the
following
property
shall
be
deemed
to
be
property
of
the
deceased
and
to
be
property
passing
on
his
death:—
(i)
Any
right
that
any
person
had
at
the
time
of
the
death
of
the
deceased
under
an
agreement
made
by
the
deceased
during
his
lifetime
whereby
that
person
agreed
to
purchase
after
the
death
of
the
deceased
any
property
of
the
deceased
or
any
property
over
which
the
deceased
had
any
means
of
control,
at
a
fixed
price
or
at
a
price
to
be
fixed,
where
the
value
of
the
consideration
for
the
agreement
to
purchase,
including
the
price
so
fixed,
is
less
than
the
value,
at
the
time
of
the
agreement
and
at
the
death
of
the
deceased,
of
the
property:
(j)
Any
right
that
any
person
had
at
the
time
of
death
of
the
deceased
under
an
agreement
made
by
the
deceased
during
his
lifetime,
to
exercise
after
the
death
of
the
deceased,
an
option
to
purchase
any
property
of
the
deceased
or
any
property
over
which
the
deceased
had
any
means
of
control,
at
a
fixed
price
or
at
a
price
to
be
fixed,
where
the
value
of
the
consideration
for
the
purchase
of
the
property,
including
the
price
so
fixed,
is
less
than
the
value,
at
the
date
of
death
of
the
deceased,
of
the
property:
In
his
written
argument
counsel
for
the
respondent
does
not
refer
to
clause
2(2)(i).
I
assume
the
respondent
is
conceding
that
clause
2(2)(i)
does
not
apply
here
because
that
section
refers
to
a
circumstance
where
there
is
a
binding
agreement
to
buy
shares
at
the
time
of
death,
where
here
there
is
only
an
option
to
buy
those
shares.
Turning
to
clause
2(2)(j)
I
hold
that
that
provision
is
not
applicable
in
the
circumstances
of
this
case.
The
value
of
the
consideration
for
the
purchase
of
the
shares
is
$5.33
per
share.
I
have
already
held
that
the
value
at
the
date
of
death
of
the
shares
was
also
$5.33.
There
being
no
difference
in
the
two
values,
the
clause
does
not
apply.
In
conclusion,
I
allow
the
appeal
from
the
decision
of
the
Minister
and
direct
the
reassessment
on
the
basis
of
a
value
of
$5.33
per
share.
The
appellants
are
entitled
to
the
costs
of
the
appeal.
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