RAND,
J.:—The
respondent
is
what
is
called
the
administrator
of
an
investment
trust.
It
raises
money,
purchases
securities
which
it
places
in
the
custody
of
a
trustee,
in
this
case
a
corporate
body,
and
disposes
of
certificates
representing
fractional
interests
in
trust
units
of
the
securities
deposited.
A
unit
consists
of
a
specified
number
of
shares
of
common
stock
of
named
companies
and
is
divided
into
1000
‘‘Trust
Shares
Series
B’’,
each
representing
1
1/1000
undivided
interest
in
the
unit.
But
the
administrator
can,
in
addition,
be
itself
a
purchaser
of
these
certificates,
and
that
was
the
case
here.
Three
agencies
are
thus
concerned:
the
underlying
companies
earning
income
in
respect
of
which
dividends
are
paid;
the
intermediate
trustee
by
which
that
stock
is
held
and
to
which
the
dividends
are
paid
;
and
the
respondent
the
holder
of
Series
B
shares.
Dividends
declared
out
of
income
on
which
the
underlying
companies
had
paid
taxes
imposed
on
Canadian
companies
resident
in
Canada
were
received
by
the
trustee.
These
and
other
incidental
income
arising
in
the
course
of
administering
the
trust,
after
deductions
for
fees,
etc.,
of
both
the
trustee
and
the
administrator,
were
distributed
among
the
certificate
holders
including
the
respondent.
As
received
by
the
respondent,
they
became
income
out
of
which
dividends
would
be
payable
to
its
own
shareholders.
Under
the
Act
these
moneys
represented
taxable
income
in
the
hands
(a)
of
the
underlying
companies;
(b)
of
the
respondent;
and
(c)
of
its
shareholders.
But
the
respondent
claims
to
be
entitled
to
deduct
from
its
income
the
amount
so
received
as
dividends
received
by
it
from
the
underlying
companies
under
Section
27(1)
which
reads:
“(1)
Where
a
corporation
in
a
taxation
year
received
a
dividend
from
a
corporation
that
(a)
was
resident
in
Canada
in
the
year
and
was
not,
by
virtue
of
a
statutory
provision,
exempt
from
tax
under
this
Part
for
the
year,
an
amount
equal
to
the
dividend
minus
any
amount
deducted
under
subsection
(2)
of
section
11
in
computing
the
receiving
corporation’s
income
may
be
deducted
from
the
income
of
that
corporation
for
the
year
for
the
purpose
of
determining
its
taxable
income.”
and
the
question
is
the
narrow
one
whether
the
moneys
were
so
received
by
the
respondent.
The
Minister
was
of
the
opinion
that
they
were
not,
and
this
view
was
upheld
by
the
Tax
Appeal
Board.
But
Cameron,
J.,
in
the
Exchequer
Court,
on
the
author-
ity
of
Baker
v.
Archer-Shee,
[1927]
A.C.
844,
held
they
were
and
that
the
respondent
was
entitled
to
make
the
deduction
as
claimed.
I
regret
that
I
am
unable
to
agree
with
that
view
of
the
statute
or
of
the
application
of
the
authority
mentioned.
In
Archer
the
question
with
which
the
House
of
Lords
had
to
deal
was
quite
distinguishable
from
that
here.
It
was
whether
the
moneys
to
which
a
life
beneficiary
under
a
trust
was
entitled
were
‘‘income
arising
from
securities
’
’
;
and
it
was
held
they
were.
In
this
sense
“arising
from’’
is
equivalent
to
“derived
from’’,
and
here
as
there
the
moneys
payable
to
the
beneficiary
by
the
trustee
can,
as
held
by
Archer,
be
said
to
be
‘‘derived
from’’
the
dividends
paid
by
the
underlying
companies;
and
it
is
true
that,
in
this
case,
when
a
certain
share
of
a
trust
unit
is
acquired
through
certificates,
the
holder
is
entitled
to
call
for
a
fractional
part
of
the
underlying
securities
themselves,
a
circumstance
not
present
in
Archer.
But
several
obstacles
lie
in
the
way
of
the
respondent:
the
language
of
Section
27,
the
provisions
of
Section
58
dealing
with
trustees
and
beneficiaries,
and
the
nature
of
the
trust
itself.
It
is
seen
that
by
Section
27
a
corporation
must
have
‘‘received
a
dividend
from
a
corporation’’
and
on
the
face
of
it
the
respondent
did
not
received
a
dividend
from
the
underlying
companies.
In
Re
Income
Tax
Acts,
(1924-1928),
[1939]
Q.S.R.
276,
the
expression
‘‘derived
as
dividends”,
held
to
extend
to
income
in
the
hands
of
a
life
beneficiary
received
by
the
trustee
as
dividends,
was
argued
by
the
Commissioner
as
meaning
‘‘received
by
a
shareholder’’.
On
this
Henchman,
J.,
observed:
‘‘Is
there,
then,
anything
in
the
words
in
s.
8,
subsec.
8,
of
our
Act,
‘income
derived
as
dividends
from
any
company’,
to
compel
me
to
set
aside
this
reasoning
and
its
result?
Do
the
words
‘derived
as
dividends
from
any
company’
necessarily
connote
the
meaning
‘received
by
the
taxpayer
from
the
company
as
dividends’?
I
do
not
think
so.
If
that
were
the
meaning,
and
if
it
had
been
intended
to
bring
about
a
result
different
from
that
reached
by
the
Victorian
Court,
it
would
have
been
easy
to
say
‘income
received
(or
received
by
the
taxpayer)
as
dividends
from
any
company
.
.
.’
But
the
words
are
‘derived
as
dividends’,
and
these
words
appear
to
me
to
be
directed
to
the
nature
of
the
original
source
of
the
income,
rather
than
to
whether
the
ultimate
recipient
is
the
shareholder
himself
or
a
person
otherwise
entitled
to
the
benefit
of
the
dividend.’’
Then
the
trust
is
one
for
holders
of
certificates
that
may
number
among
the
thousands;
the
moneys
are
massed
and
the
charges
to
be
made
against
them
represent
the
business
return
for
the
organization
and
management
of
the
investments
on
the
part
both
of
administrator
and
trustee.
The
certificates
may
be
payable
to
holders
and
transferable
by
delivery.
The
administrator
has
certain
powers
of
directing
the
sale
or
purchase
of
constituent
stocks
and
the
investment
of
proceeds
in
bonds
of
or
guaranteed
by
the
Government
of
Canada
or
that
the
proceeds
remain
on
deposit
in
a
chartered
bank;
and
all
voting
power
in
respect
of
the
stocks
is
vested
in
the
administrator.
What
is
created
is
an
intermediate
origin
of
income
distinct
from
the
underlying
investments.
In
Archer
the
trustee
was
little
more
than
a
depository,
but
even
that
was
seemingly
thought
sufficient
to
divorce
the
beneficiary
from
the
primary
securities
by
the
Court
of
Appeal
and
by
Lord
Sumner
and
Lord
Blanesburgh,
dissenting,
in
the
House
of
Lords.
Sections
27
and
58
distinguish
clearly
between
a
corporation
shareholder
and
a
corporation
beneficiary
of
a
corporate
trustee.
Section
58
is
headed
“Trusts,
Estates
and
Income
of
Beneficiaries
and
Deceased
Persons’’.
It
provides
that
a
trust
or
estate
shall,
for
the
purposes
of
the
Act,
be
deemed
an
‘‘individual’’;
and
in
this
conception,
rules
out
by
subsection
(3)
the
basic
deductions
under
Section
25
to
individuals.
Subsections
(4)
and
(5)
provide:
“
(4)
For
the
purposes
of
this
Part,
there
may
be
deducted
in
computing
the
income
of
a
trust
or
estate
for
a
taxation
year
such
part
of
the
amount
that
would
otherwise
be
its
income
for
the
year
as
was
payable
in
the
year
to
a
beneficiary
or
other
person
beneficially
interested
therein
or
was
included
in
the
income
of
a
beneficiary
for
the
year
by
virtue
of
subsection
(2)
of
section
60.
(5)
Such
part
of
the
amount
that
would
be
the
income
of
a
trust
or
estate
for
a
taxation
year
if
no
deduction
were
made
under
subsection
(4)
of
this
section
or
under
regulations
made
under
paragraph
(a)
of
subsection
(1)
of
section
11
as
was
payable
in
the
year
to
a
beneficiary
or
other
person
beneficially
interested
therein
shall
be
included
in
computing
the
income
of
the
person
to
whom
it
so
became
payable
whether
or
not
it
was
paid
to
him
in
that
year
and
shall
not
be
included
in
computing
his
income
for
a
subsequent
year
in
which
it
was
paid.”
In
relation
to
Section
11(1)
(a)
the
right
is
given
by
subsection
(6A),
enacted
in
1950,
to
the
beneficiary
“Who
is
entitled,
either
contingently
or
absolutely,
to
the
property
of
the
trust
or
estate
or
some
part
thereof
at
some
future
time”?
to
deduct
from
the
amount
that
would
otherwise
be
his
income
from
the
trust
by
virtue
of
subsection
(5),
such
part
as
would
otherwise
be
deductible
from
the
income
of
the
trust
under
regulations
authorized
by
paragraph
(a)
of
subsection
(1)
of
Section
11,
as
the
trustee
may
determine.
Subsection
(6B),
enacted
in
the
same
year,
deals
with
depletion
and
in
a
somewhat
converse
form
it
provides
that
no
part
of
any
amount
payable
to
a
beneficiary
shall,
for
the
purposes
of
subsections
(4)
and
(5),
be
deemed
to
be
payable
out
of
an
amount
deductible
in
computing
the
income
of
the
trust
under
paragraph
(b)
of
subsection
(1)
of
Section
11
except
such
part
as
is
designated
by
the
trustee
as
being
so
payable.
Then
subsection
(7)
makes
applicable
to
the
income
of
an
individual
beneficiary
Section
35,
which
provides
for
a
deduction
from
tax
by
an
individual
of
a
percentage
of
dividends
received
from
taxable
corporations.
With
this
specific
provision
for
an
individual,
how
can
the
case
of
a
corporate
body
as
beneficiary
be
implied
on
an
interpretation
that
would
render
the
former
superfluous?
Subsection
(8)
provides
for
the
deduction
of
foreign
tax
by
the
beneficiary.
Section
60
extends
taxation
to
all
benefits
received
by
a
beneficiary
as,
for
example,
amounts
paid
by
the
trust
for
upkeep
and
maintenance
of
property
for
a
life
beneficiary.
The
comprehensive
scope
of
these
provisions
makes
it
quite
evident
that
Parliament
intended
them
to
be
an
exclusive
code
for
dealing
with
the
interests
of
beneficiaries
in
the
conception
of
which
the
trustee
is
deemed
to
be
an
independent
and
individual
taxpayer
in
relation
to
the
income
of
the
trust
from
which
deductions
and
treatment
of
moneys
payable
to
the
beneficiary
are
expressly
dealt
with.
In
the
light
of
this
precise
language
and
the
scheme
which
it
embodies,
the
respondent
as
beneficiary
cannot
be
said
to
have
received
from
the
underlying
corporations
the
dividends
which
were
paid
to
the
trustee.
What
it
received
was
a
fractional
income
from
a
complex
business
trust,
and
whether
or
not
the
amount
so
received
may
be
the
subject
of
deduction
in
ascertaining
the
income
of
the
beneficiary
depends
upon
whether
it
is
permitted
by
the
statutory
prescriptions
dealing
with
trust
beneficiaries.
The
deduction
claimed
is
not
permitted
and
it
results
in
what
may
be
called
triple
taxation.
That
is
a
consideration
which
inclines
a
court
to
a
rigorous
scrutiny
of
the
enactment
before
it,
but
it
does
not
permit
an
interpretation
that
supplies
what
Parliament
must
be
taken
to
have
deliberately
omitted.
I
would,
therefore,
allow
the
appeal
and
restore
the
original
assessment,
with
costs
in
this
and
in
the
Exchequer
Court.
Estey,
J.:—The
respondent,
Trans-Canada
Investment
Corporation
Limited
(hereinafter
referred
to
as
administrator),
is
administrator
of
an
investment
trust,
the
terms
of
which
are
embodied
in
an
agreement
dated
September
1,
1944,
made
between
the
administrator
as
the
party
of
the
first
part,
the
Yorkshire
and
Canadian
Trust
Company
Limited
(hereinafter
referred
to
as
the
trustee),
the
party
of
the
second
part,
and
the
holders
from
time
to
time
of
the
certificates
representing
the
Trans-Canada
Shares,
Series
“B”,
the
parties
of
the
third
part
(hereinafter
referred
to
as
certificate
holders).
While
in
the
ordinary
course
of
the
business
under
this
investment
trust
the
administrator
receives
funds
to
invest,
as
will
be
more
fully
explained,
the
issue
here
arises
out
of
the
fact
that
in
1950
the
administrator
invested
its
own
funds
in
the
purchase
of
1,000
Trans-Canada
Shares,
Series
‘‘B’’
and
received
two
half-
yearly
payments
‘‘of
the
net
income
less
deductions’’
from
the
trustee
in
a
total
sum
of
$737.26.
This
amount,
in
its
tax
return,
is
shown
as
a
receipt,
but
claimed
as
a
deduction
under
Section
27(1)
of
the
Income
Tax
Act
S.C.
1948,
11
&
12
Geo.
V,
c.
52),
the
relevant
part
of
which
reads
as
follows
:
“27(1)
Where
a
corporation
in
a
taxation
year
received
a
dividend
from
a
corporation
that
(a)
was
resident
in
Canada
in
the
year
and
was
not,
by
virtue
of
a
statutory
provision,
exempt
from
tax
under
this
Part
for
the
year,
an
amount
equal
to
the
dividend
minus
any
amount
deducted
under
subsection
(2)
of
section
11
in
computing
the
receiving
corporation’s
income
may
be
deducted
from
the
income
of
that
corporation
for
the
year
for
the
purpose
of
determining
its
taxable
income.”’
It
is
conceded
that,
if
the
administrator
received,
within
the
meaning
of
subsection
27(1),
the
dividends
from
the
underlying
companies,
it
is
entitled
to
suceed
in
this
litigation.
The
Minister
disallowed
the
deduction
and
in
this
he
was
supported
by
the
Income
Tax
Appeal
Board.
It
was,
however,
allowed
in
the
Exchequer
Court
on
the
basis
that
the
dividends
received
by
the
trustee
from
the
fifteen
underlying
companies
referred
to
in
Clause
13
of
the
trust
agreement
(hereinafter
referred
to
as
the
underlying
companies)
did
not,
as
and
when
paid
to
the
certificate
holders,
lose
their
character
as
dividends
and,
by
virtue
of
section
27(1),
were
deductible
and,
therefore,
not
taxable
income.
In
this
appeal
it
is
contended
on
behalf
of
the
Minister
that
the
$737.26
was
received
by
the
administrator
as
a
cestur
que
trust
under
the
terms
of
the
trust
agreement
and
not
as
dividends
from
the
underlying
companies
and,
in
any
event,
this
amount
was
not
dividends
received
by
a
corporation
from
another
corporation
within
the
meaning
of
section
27(1).
The
trust
agreement
provides
that
the
administrator,
with
the
funds
received
by
him
for
investment,
must
purchase
the
number
of
shares
of
common
stock
specified
opposite
the
names
of
the
respective
underlying
companies
and
when
the
shares
there
specified
have
been
purchased
they
constitute,
within
the
terms
of
the
agreement,
a
trust
unit.
The
administrator,
having
purchased
these
shares
constituting
a
trust
unit,
is
required
to
deliver
them
to
the
trustee,
who
registers
the
common
shares
in
his
own
name
and
issues
to
the
respective
investors
certificates
evidencing
Trans-Canada
Shares,
Series
‘‘B’’.
Each
share
represents
a
one-
thousandth
undivided
interest
in
the
trust
unit.
Though
the
shares
are
held
in
the
name
of
the
trustee,
“the
right
to
vote
or
consent
or
otherwise
act
in
respect
of
such
shares
of
stock
or
other
securities
shall
vest
solely
in
the
Administrator’’
and
the
trustee
“shall,
upon
demand
of
the
Administrator,
execute
.
.
.
valid
proxies
or
powers
of
attorney
to
vote
or
consent
or
otherwise
act
in
respect
of
such
shares
of
stock
or
other
securities.”
Moreover,
the
administrator
may,
under
the
provisions
of
paragraph
25
of
the
agreement,
direct
the
trustee
to
sell
shares
of
stock.
Paragraph
25
reads
as
follows:
“25.
If
the
Administrator
at
any
time
shall
deem
it
advisable
that
the
shares
of
stock
of
any
one
or
more
or
all
of
the
Underlying
Companies
or
any
other
property
forming
part
of
the
Trust
Units
should
no
longer
be
held
by
the
Trustee
hereunder,
whether
the
same
shall
have
been
sold
and
repurchased
and
as
often
as
any
sale
and
repurchase
thereof
may
or
shall
have
been
made,
the
Administrator
may,
in
its
sole
discretion,
direct
the
Trustee
to
sell
such
shares
of
stock
or
other
property,
and
the
Trustee,
upon
receipt
of
such
direction
from
the
Administrator,
shall
sell
such
shares
of
stock
or
other
property
in
the
manner
provided
in
Clause
22
hereof.
’
’
Whenever
the
trustee
shall
sell
the
shares
of
stock
it
shall,
after
making
certain
deductions,
hold
the
proceeds
of
the
sale
in
a
capital
account
subject
to
the
detailed
directions
contained
in
the
agreement.
The
trust
agreement
provides
that
‘‘the
Certificates
may
be
fully
registered
Certificates
without
coupons,
or
may
be
bearer
Certificates
with
coupons
attached.’’
They
are
transferable.
The
holder
of
the
bearer
certificates
may
deal
with
them
as
the
absolute
owner
and
‘‘every
Holder
waives
or
renounces
all
his
equities
and
rights
in
such
Certificate
in
favour’’
of
a
purchaser
from
a
holder.
Further,
the
trustee
and
the
administrator,
in
dealing
with
the
party
in
possession
of
such
certificates,
is
protected
by
the
express
terms
of
the
agreement.
The
forms
of
the
certificates
evidencing
Trans-Canada
Shares,
Series
“B”
are
contained
and
set
out
as
schedules
to
the
agreement.
Reverting
now
to
a
trust
unit,
it
is,
under
the
terms
of
the
trust
agreement,
included
in
the
phrase
1
‘deposited
property”,
which
is
defined
in
the
trust
agreement
as
follows
:
“The
term
‘Deposited
Property’
shall
mean
all
Trust
Units
held
by
the
Trustee
hereunder,
including
all
shares
of
stock,
securities
and
other
property,
and
any
cash
received
by
the
Trustee
in
respect
thereof,
and
the
amount
of
any
reserve
established
pursuant
to
the
provisions
of
Clause
32
hereof
and
the
amount
of
any
accumulated
Net
Income.”
The
agreement
then
provides
in
paragraph
17:
“The
Trustee
shall
receive
all
income
profits
earnings
dividends
interest
and
distributions
from
and
proceeds
of
the
Deposited
Property
and
shall
apply,
distribute
and
deal
with
the
same
under
the
terms
and
provisions
hereof
and
to
the
extent
that
may
be
necessary
or
proper
to
carry
out
the
powers
hereby
granted.
>
y
The
agreement
then
provides
that
the
trustee
will
distribute
and
pay
on
March
1
and
September
1
in
each
year
‘‘shares
represented
by
the
several
Certificates,
of
the
Net
Income
received
by
the
Trustee
during
the
half-yearly
period
ending
respectively
fifteenth
February
and
fifteenth
August
next
proceeding
the
date
of
each
such
payment,
less
the
deductions
hereinafter
specified.”
The
phrase
‘‘net
income’’
is
defined:
‘“The
term
‘Net
Income’
shall
mean
the
aggregate
of
(a)
all
cash
received
by
the
Trustee
by
way
of
dividends
(except
liquidating
dividends)
or
interest
in
respect
of
the
Deposited
Property,
and
(b)
the
net
cash
proceeds
received
by
the
Trustee
from
the
sale
of
any
stock
dividends
(subject
however
as
provided
in
Clause
19
hereof)
subscription
rights,
warrants,
securities
and
other
rights
and
property,
and
(c)
any
interest
allowed
by
the
Trustee
hereunder,
after
making
the
deductions
from
such
aggregate
authorized
by
Clause
31
hereof.’’
The
deductions
referred
to
in
Clause
31
are
the
amount
of
the
administrator’s
semi-annual
fee
provided
for
in
the
agreement,
the
amount
of
the
trustee’s
semi-annual
fee
and
expenditures
also
provided
for
in
the
agreement,
as
well
as
all
necessary
assessments
and
other
governmental
charges
in
respect
of
the
4
‘
deposited
property’’
or
the
income
therefrom
and
also
any
amount
set
aside
as
a
reserve
fund.
Throughout
this
litigation
the
respondent
relied
upon
the
decision
in
Baker
v.
Archer-Shee,
[1927]
A.C.
844.
There
the
wife
(Lady
Archer-Shee)
of
the
taxpayer,
under
the
will
of
her
father,
Alfred
Pell,
who
died
domiciled
in
New
York,
was
entitled,
as
tenant
for
life,
to
the
income
from
an
estate
consisting
of
foreign
government
securities,
foreign
stocks
and
shares
in
other
foreign
property.
This
property
was
held
in
trust
by
the
Trust
Company
of
New
York
which
received
the
income,
made
certain
deductions,
including
sufficient
to
pay
government
taxes,
and
paid
the
balance
to
the
order
of
Lady
Archer-Shee
into
Morgan’s
Bank
in
New
York.
The
majority
of
their
Lordships,
upon
the
assumption
that
the
United
States
law
was
the
same
as
that
of
England,
held,
as
expressed
by
Lord
Wrenbury,
that
Lady
Archer-Shee
had
‘‘an
equitable
right
in
possession
to
receive
during
her
life
the
proceeds
of
the
shares
and
stocks
of
which
she
is
tenant
for
life
.
.
.
Her
right
under
the
will
is
‘property’
from
which
income
is
derived.”
Lord
Atkinson,
who
agreed
with
Lord
Wrenbury,
stated
that
her
life
interest
had
become
“vested
in
her.’’
In
the
opinion
of
the
majority
the
trustee,
in
making
the
deductions,
was
acting
as
agent
for
Lady
Archer-Shee.
In
order
to
bring
the
facts
of
this
case
within
the
principle
enunciated
in
Baker
v.
Archer-Shee,
the
respondent
contended
that
the
dividends
received
from
the
underlying
companies
retained
their
character
as
such,
notwithstanding
the
manner
in
which
they
were
dealt
with
by
the
trustee,
until
the
latter
paid
them
out,
less
deductions,
to
the
certificate
holders.
It
would
seem
that
an
examination
of
the
provisions
of
the
trust
agreement
indicates
that
such
is
untenable.
The
intervention
of
a
trustee
or
of
more
than
one
beneficiary
will
not,
in
circumstances
such
as
existed
in
Baker
v.
Archer-
Shee,
destroy
the
identity
of
the
dividends
or
cause
them
to
lose
their
character
as
such.
In
the
case
at
bar,
however,
there
is
much
more.
Under
the
trust
agreement
the
trust
unit
provides
the
basis
upon
which
the
Trans-Canada
Shares,
Series
‘‘B’’
are
issued.
Constituted
of
shares
of
stock
of
varying
proportions
in
fifteen
underlying
companies,
this
unit,
in
the
hands
of
the
trustee,
becomes
a
part
of
the
‘‘
deposited
property”
and
the
other
sources
of
revenue
specified,
less
deductions,
constitute
‘‘net
income”
(the
definition
of
which
is
above
quoted)
and
it
is
‘‘the
proportionate
part
attributable
to
the
Series
B.
Shares’’
thereof
to
which
the
holders
of
Trans-Canada
Shares,
Series
‘‘B’’
are
entitled.
That
this
‘‘net
income’’
may
consist
of
items
other
than
the
dividends
from
the
shares
of
stock
in
the
underlying
companies
is
evident
from
the
definition
of
‘‘net
income,’’
but,
when
regard
is
had
to
the
responsibility
of
the
administrator,
in
certain
circumstances,
to
sell
the
shares
in
the
underlying
companies,
this
difference
is
particularly
emphasized.
Further,
not
only
is
there
no
express
provision
giving
the
certificate
holders
an
interest
in
the
dividends
as
received
by
the
trustee,
but
the
scheme,
considered
as
a
whole,
would
indicate
an
intention
that
the
certificate
holders
should
have
a
claim
against
the
‘‘net
income’’
and
only
to
‘‘the
proportionate
part
attributable
to
the
Series
B.
Shares.’’
With
these
factors
in
mind
it
would
seem
that
the
very
purpose
of
the
scheme,
the
importance
therein
of
the
‘‘trust
unit,’’
the
“deposited
property’’
and
the
‘‘net
income,’’
as
well
as
the
fact
that
the
certificates
evidencing
Trans-Canada
Shares,
Series
“B”
are
transferable,
disclose
a
situation
entirely
distinguishable
from
that
before
the
court
in
the
Archer-Shee
case.
The
certificate
holder
may,
in
the
case
at
bar,
direct
the
trustee
as
to
in
what
manner
it
should
deliver
his
return
out
of
the
proportionate
part
of
the
‘‘net
income”
attributable
to
Trans-Canada
Shares,
Series
“B”,
but,
with
respect
to
the
dividends
received
from
the
underlying
companies,
they
become
a
part
of
the
fund
out
of
which
‘‘net
income’’
is
derived
and
with
respect
to
which
the
trustee
must
follow
the
directions
of
the
trust
agreement.
Under
this
latter
the
control
of
these
dividends
remains
at
all
times
with
the
trustee
and
is
never
subject
to
change
or
direction
on
the
part
of
the
certificate
holders.
This
trust
agreement,
read
as
a
whole,
with
particular
emphasis
upon
the
portions
already
referred
to,
with
great
respect
to
those
who
hold
a
contrary
opinion,
does
not
contain
language
to
support
a
construction
that
either
a
legal
or
an
equitable
right
is
created
in
favour
of
the
certificate
holders
in
respect
to
the
dividends
received
by
the
trustee
from
the
underlying
companies.
The
provisions
of
paragraph
34
of
the
agreement
have
been
stressed
as
indicating
that
the
certificate
holders
have
an
equit-
able
interest
in
these
dividends.
Under
paragraph
34
it
is
provided
that
“At
any
time
prior
to
the
termination
of
this
Agreement,
the
Holder
of
Certificates
representing
in
the
aggregate
200
Series
B.
shares,
or
any
multiple
thereof
shall
be
entitled
to
receive
(b)
Certificates
duly
endorsed
and
other
instruments
in
proper
form
for
transfer
representing
1/5th,
or
any
multiple
thereof
as
the
case
may
be
being
the
proportionate
part
thereof
applicable
to
the
shares
of
stock,
securities
and
other
property
held
by
the
Trustee
which
constitute
one
Trust
unit.”
It
is
further
provided
that
the
certificate
holder
is
also
entitled
to
the
benefits
which
have
accrued
in
respect
of
his
shares.
Under
this
paragraph
34
the
certificate
holder
has
a
privilege
or
an
option
which
he
may
exercise
at
any
time.
However,
he
may
never
exercise
that
option
and
neither
the
administrator
nor
the
trustee,
nor
any
other
person,
can
compel
him
to
do
so.
It
is,
moreover,
a
privilege
which
can
be
exercised
only
by
those
holding
in
the
aggregate
200
Series
B.
shares
or
any
multiple
thereof.
Under
this
clause,
until
such
time
as
the
holder
may
exercise
his
privilege
or
option,
he
has
no
property
interest
thereunder,
equitable
or
otherwise.
The
language
of
Channell
B.
is
appropriate:
“.
.
.
when
the
position
of
things
is
that
one
party
has
a
right
to
require
a
legal
interest
to
be
executed
at
his
option
and
the
other
party
has
not
a
right
to
have
the
legal
interest
executed
there
then
is
no
equitable
interest
until
the
option
has
been
exercised.’’
Drury
v.
Rickard,
(1899),
63
J.P.
374
at
376.
With
great
respect
to
those
who
hold
a
contrary
opinion,
it
would
appear
that
paragraph
34
does
not
create
any
equitable
rights
in
the
certificate
holder
until
he
has
exercised
the
privilege
or
option.
Moreover,
his
rights
are
then
with
respect
to
the
shares
and
whatever
amounts
may,
as
aforesaid,
be
attributable
thereto,
rather
than
to
the
dividends
with
which
we
are,
in
this
litigation,
concerned.
The
appeal
should
be
allowed
with
costs.
CARTWRIGHT,
J.
(F'auteux
J.
concurs)
:—For
the
reasons
given
by
the
learned
trial
judge
I
agree
with
the
conclusion
at
which
he
has
arrived.
I
wish,
however,
to
add
a
few
observations
as
an
argument,
which
is
not
referred
to
expressly
by
the
learned
trial
judge,
was
addressed
to
us,
i.e.,
that
the
terms
of
Section
58
of
the
Income
Tax
Act
require
a
construction
of
Section
27(1)
different
from
that
adopted
by
the
learned
trial
judge.
If
the
words
of
Section
27(1)
alone
are
considered
it
would
be
my
opinion
that
the
words
—
‘‘from
a
corporation
that
(a)
was
resident
in
Canada
in
the
year
and
was
not
by
virtue
of
a
statutory
provision,
exempt
from
tax
under
this
Part
for
the
year
’
constitute
an
adjectival
phrase
qualifying
the
word
“dividend”
and
not
an
adverbial
phrase
qualifying
the
word
‘‘received’’.
If
this
be
the
correct
view,
it
follows
that
in
applying
the
words
of
the
section
to
the
facts
of
this
case
the
question
to
be
answered
is
not,
from
whose
hand
did
the
appellant
receive
actual
payment
of
the
sum
of
$737.26,
but
rather,
of
what
did
such
sum
consist,
and,
in
my
opinion,
the
reasons
of
the
learned
trial
judge
make
it
clear
that
the
answer
to
such
question
is
that
it
consisted
of
dividends
of
the
sort
described
in
the
phrase
above
quoted
and
‘that
the
mere
interposition
of
a
trustee
between
the
dividend-paying
companies
and
the
beneficial
owner
of
the
shares
did
not
change
the
character
of
such
sum.
The
finding
of
the
learned
trial
judge
that
the
appellant
was
the
beneficial
owner
of
the
shares
in
the
underlying
companies
was
not
questioned
before
us.
It
is
argued,
however,
that,
assuming
that
this
would
be
the
correct
construction
of
Section
27(1)
read
by
itself,
when
read
with
the
rest
of
the
Act,
and
particularly
with
Section
58,
it
must
be
construed
as
having
no
application
to
a
case
in
which
a
corporation
receives
a
dividend
of
the
sort
described
through
the
medium
of
a
trustee.
It
is
said
that
Section
58
is
a
code
dealing
exhaustively
with
all
cases
in
which
income
is
received
in
the
first
instance
by
a
trustee
and
paid
over
by
it
to
a
beneficiary,
and
that
as
subsection
(7)
expressly
provides
the
manner
in
which
an
individual
beneficiary
may
avail
himself
of
the
provisions
of
Section
35
in
respect
of
the
part
of
the
income
received
by.
him
from
the
trustee
which
consists
of
income
from
the
shares
of
the
capital
stock
of
taxable
corporations
and
the
section
is
silent
as
to
corporate
beneficiaries
it
must
be
inferred
that
a
corporate
beneficiary
is
left
without
relief
in
respect
of
such
income
received
by
it
through
the
medium
of
a
trustee.
This
is
a
persuasive
argument
but
I
do
not
think
it
is
entitled
to
prevail.
In
Statutes
of
Canada,
1948,
11-12
George
VI,
c.
52,
Secton
58
ended
with
subsection
(6).
As
it
then
stood
the
effect
of
the
section
was
to
provide
that
a
trustee
in
computing
its
income
should
deduct
such
part
thereof
as
was
payable
to
a
beneficiary
who
in
turn
was
required
to
add
such
part
in
computing
his
income.
In
so
far
as
such
part
consisted
of
dividends
from
taxable
corporations
the
beneficiary
if
an
individual
would
have
been
entitled
to
the
benefits
of
Section
55
and
if
a
corporation
to
the
benefits
of
Section
27,
unless
it
could
be
maintained
that
the
character
of
so
much
of
such
part
as
consisted
of
dividends
had
been
changed
by
passing
through
the
hands
of
the
trustee
and,
in
my
opinion,
the
reasons
of
the
learned
trial
judge
make
it
clear
that
this
could
not
be
successfully
maintained.
It
does
not
appear
to
me
that
the
fact
that
Parliament,
by
Statutes
of
Canada,
1949,
13
George
VI,
c.
25,
Section
27,
added
subsection
(7),
prescribing
an
arithmetical
formula
for
apportioning
between
a
trustee
and
an
individual
beneficiary
the
dividends
from
taxable
corporations
received
in
the
first
instance
by
the
trustee
and
did
not
add
a
corresponding
subsection
as
to
a
corporate
beneficiary
constitutes
a
sufficient
reason
for
construing
Section
27(1)
in
a
manner
contrary
to
what
appears
to
me
to
be
the
plain
meaning
of
the
words
in
which
it
is
expressed
or
for
introducing
the
anomaly
that
the
interposition
of
a
trustee
between
a
dividend-paying
taxable
corporation
and
the
beneficial
owner
of
its
shares
should
leave
unaffected
in
the
case
of
an
individual
beneficial
owner
but
destroy
in
the
case
of
a
corporate
beneficial
owner
that
protection
against
multiple
taxation
which
it
was
the
clear
intention
of
Parliament
to
afford
to
all
recipients
of
dividends
from
taxable
corporations.
As
was
pointed
out
by
Fauteux
J.
in
Attorney
General
for
Quebec
v.
Bégin
(as
yet
unreported),
the
rule
expressio
unius
est
exclusio
alterius
must
be
applied
with
caution
in
construing
a
statute.
To
apply
it
in
this
ease
would,
in
my
opinion,
defeat
the
intention
of
Parliament.
1
would
dismiss
the
appeal
with
costs.
Appeal
dismissed.
Email this Content