Docket: A-571-14
Citation:
2016 FCA 99
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CORAM:
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DAWSON J.A.
RYER J.A.
DE MONTIGNY J.A.
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BETWEEN:
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MCGILLIVRAY
RESTAURANT LTD.
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Appellant
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and
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HER MAJESTY THE
QUEEN
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Respondent
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REASONS
FOR JUDGMENT
RYER J.A.
[1]
This is an appeal from a decision of Justice
Patrick Boyle of the Tax Court of Canada (the “Judge”), dated November 28, 2014
and cited as 2014 TCC 357. The appeal arises out of reassessments issued by the
Minister of National Revenue (the “Minister”) pursuant to the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the “Act”) to McGillivray Restaurant Ltd. (the
“Taxpayer”) in respect of its 2007, 2008 and 2009 taxation years (the
“Reassessments”). Unless otherwise indicated, all references in these reasons
to statutory provisions shall be to the corresponding provisions of the Act
that applied in respect of the Reassessments.
[2]
In each Reassessment, the Minister denied the
Taxpayer’s claim for a deduction from its tax otherwise payable under Part I of
the Act for the applicable taxation year, pursuant to paragraph 125(1)(a)
(the “Small Business Deduction”), on the basis that the Taxpayer was associated
with one or more corporations in each such taxation year, within the meaning of
subsection 256(1), and had not filed an agreement with any such corporation as
contemplated by subsection 125(3).
[3]
The issue in this appeal is whether, in the
years covered by the Reassessments, the Taxpayer was associated with G.R.R.
Holdings Ltd. (“GRR”) and MorCourt Properties Ltd. (“MorCourt”) on the basis
that an individual, Mr. Gordon R. Howard, who had de jure and de
facto control over GRR and MorCourt, also had de facto control over
the Taxpayer, within the meaning of subsection 256(5.1).
[4]
The Judge determined that MorCourt, GRR and the
Taxpayer were associated corporations, within the meaning of subsection 256(1)
and upheld the Reassessments.
[5]
For the reasons that follow, I would dismiss the
appeal.
I.
BACKGROUND
[6]
The appeal before the Judge proceeded on the
basis of a partially agreed statement of facts. In addition, the Judge made a
detailed summary of the evidence presented to him, which consisted of read-ins
by the Crown from the examination for discovery of Mr. Howard and an Agreed
Book of Documents. The essential facts for the purpose of dealing with the
issues raised in this appeal are summarized below.
[7]
At all relevant times, Mr. Howard and Mrs. Ruth
Howard were married. Mr. Howard owned all of the issued shares of GRR and
MorCourt. GRR was incorporated in the early 1980s and MorCourt was incorporated
around the same time as the Taxpayer. Like the Taxpayer, each of GRR and
MorCourt is a Canadian-controlled private corporation, within the meaning of
subsection 125(7).
[8]
In 1997, GRR entered into franchise agreements
with Keg Restaurants Ltd. (the “Franchisor”) and acquired certain territorial
exclusivity rights with respect to the operation of Keg Restaurant franchises
in Winnipeg. Pursuant to these arrangements, GRR successfully operated three
Keg Restaurants in Winnipeg until late 2005. The exclusivity rights were
conditional on GRR continuing to operate a minimum of three Keg restaurants in
Winnipeg.
[9]
At some time before the incorporation of the
Taxpayer, Mr. Howard decided that the Pembina Highway Restaurant should be
relocated. To that end, arrangements were made to acquire some land on
McGillivray Avenue and to obtain the Franchisor’s consent to the relocation.
[10]
In conjunction with the relocation transaction,
Mr. Howard sought professional advice and, as a consequence, he determined that
it would be prudent to “start separating some things”,
given the success that had been enjoyed since the acquisition of the three Keg-franchised
restaurants.
[11]
To that end, MorCourt was incorporated for the
purpose of acquiring the restaurant buildings and the land upon which they were
situated. More germane to this appeal, the Taxpayer was incorporated for the
purpose of acquiring and operating the new McGillivray Avenue restaurant,
including the franchise that would permit the operation of that restaurant.
[12]
Consistent with the professional advice that Mr.
Howard received, the Taxpayer was incorporated in August of 2005. Upon its
organization, Mrs. Howard was issued 760 voting common shares for $76.00 and
Mr. Howard was issued 240 voting common shares for $24.00. In addition, Mr.
Howard was elected as the sole director of the Taxpayer and appointed as its
only officer. No written shareholders’ agreements were put into place. The
capitalization of the Taxpayer was nominal.
[13]
The record contains little to explain the basis
upon which the Taxpayer legally acquired or financed the property that it used
when it commenced operations at the McGillivray Avenue location in December of
2005, shortly after the closing of the Pembina Highway location. However, the
record does disclose documentation that provided for the assignment of the
franchise covering the Pembina Highway location from GRR to the Taxpayer and
the Franchisor’s consent to that assignment.
[14]
Mr. Howard was well aware of the importance of
complying with the terms of the franchise agreements that related to the three
restaurants, and the requirements for the consent of the Franchisor to the
relocation of the Pembina Highway location and the assignment of the related
franchise to the Taxpayer. At his examination for discovery, he testified that
he assured the Franchisor that notwithstanding these changes, things would be
run on the same basis as they had in the past. He also testified, at his
discovery, that he gave similar assurances to the former Pembina Highway
employees whose employment was transferred to the Taxpayer. Mrs. Howard had
limited involvement in the operations of the Taxpayer. She and her husband
personally guaranteed the obligations of the Taxpayer and GRR to the
Franchisor.
[15]
The determination of Mrs. Howard’s 76% ownership
interest in the Taxpayer was based upon the professional advice that had been
provided to Mr. Howard. Nonetheless, the Taxpayer was organized on the basis
that Mr. Howard would not need his wife’s approval to make decisions on behalf
of the Taxpayer. In that regard, Mr. Howard assured his wife that
notwithstanding her 76% ownership position in the Taxpayer, the restaurants
would continue to operate as they always had, and the evidence indicates that
this is how things proceeded.
II.
THE DECISION OF THE JUDGE
[16]
The Judge determined that there were two
competing interpretations of subsection 256(5.1). He found that this Court’s
decision in Silicon Graphics Limited v. Canada, 2002 FCA 260, [2003] 1
F.C.R. 447 [Silicon Graphics], provided a narrow interpretation under
which a person would only be considered to have control in fact if that person
had the clear right and ability either to effect significant change in the
board of directors or the powers of the board of directors or to influence in a
very direct way the shareholders who would otherwise have the ability to elect
the board of directors.
[17]
In contrast, he concluded that this Court’s
decisions in Mimetix Pharmaceuticals Inc. v. Her Majesty the Queen, 2003
FCA 106, [2003] 3 C.T.C. 72 [Mimetix Pharmaceuticals] and Plomberie
J.C. Langlois Inc. v. Canada, 2006 FCA 113, [2007] 3 C.T.C. 148 [Plomberie
J.C. Langlois] had broadened the test set forth in Silicon Graphics.
Thus, he concluded that the test required him to look beyond the right and
ability to affect the composition or powers of the board, and to consider
broader manners of influence in making the determination of who in fact has effective
control of the affairs and fortunes of the corporation in question.
[18]
In applying this broader test, the Judge found
that Mr. Howard could not have had any more effective factual control over the
management and operation of the Taxpayer and its business.
[19]
In addition, at paragraph 59 of his reasons, the
Judge concluded that Mr. and Mrs. Howard had reached an agreement to the effect
that the franchise covering the McGillivray Avenue location would be
transferred to the Taxpayer and Mrs. Howard would acquire a 76% interest in the
Taxpayer for a nominal amount, only if she agreed to ensure that Mr. Howard was
the sole director and officer of the Taxpayer and that, as he had assured the
Franchisor, things would be run as they always had been.
[20]
Finally, the Judge concluded that while Mrs.
Howard could have replaced her husband as the sole director of the Taxpayer
(thereby repudiating their unwritten agreement), she did not do so, observing
that if she had decided to do so, she would have had to be concerned about the
potential consequences that could have resulted from such a decision.
III.
RELEVANT STATUTORY PROVISIONS
[21]
The provisions of the Act that are relevant to
this appeal are paragraph 256(1)(b) and subsection 256(5.1), which read
as follows:
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Associated
corporations
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Sociétés
associées
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256 (1) For the purposes of this Act, one corporation is associated
with another in a taxation year if, at any time in the year,
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256 (1) Pour l’application de la présente
loi, deux sociétés sont associées l’une à l’autre au cours d’une année
d’imposition si, à un moment donné de l’année :
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…
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[…]
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(b)
both of the corporations were controlled, directly or indirectly in any
manner whatever, by the same person or group of persons;
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b) la même personne ou le même groupe de
personnes contrôle les deux sociétés, directement ou indirectement, de
quelque manière que ce soit;
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…
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[…]
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Control in
fact
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Contrôle
de fait
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(5.1) For the
purposes of this Act, where the expression “controlled, directly or
indirectly in any manner whatever,” is used, a corporation shall be
considered to be so controlled by another corporation, person or group of
persons (in this subsection referred to as the “controller”) at any time
where, at that time, the controller has any direct or indirect influence
that, if exercised, would result in control in fact of the corporation, …
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(5.1) Pour
l’application de la présente loi, lorsque l’expression « contrôlée,
directement ou indirectement, de quelque manière que ce soit, » est utilisée,
une société est considérée comme ainsi contrôlée par une autre société, une
personne ou un groupe de personnes — appelé « entité dominante » au présent
paragraphe — à un moment donné si, à ce moment, l’entité dominante a une
influence directe ou indirecte dont l’exercice entraînerait le contrôle de fait
de la société. …
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IV.
ISSUES
[22]
There are two issues in this appeal:
a) Did the Judge err in his interpretation of the requirements of de
facto control in subsection 256(5.1)?
b) Did the Judge err in concluding that the Taxpayer was associated
with GRR and MorCourt for the purposes of paragraph 256(1)(b)?
V.
STANDARD OF REVIEW
[23]
In appellate review of a decision of the Tax
Court of Canada, this Court applies the standard of correctness with respect to
questions of law and the standard of palpable and overriding error with respect
to questions of fact and mixed fact and law in respect of which there are no
readily extricable questions of law (see Housen v. Nikolaisen, 2002 SCC
33, [2002] 2 S.C.R. 235 at paragraphs 8, 10 and 37).
VI.
ANALYSIS
A.
Introduction
[24]
The circumstances in which the Taxpayer was
incorporated, organized, capitalized and then managed make it clear that Mrs.
Howard had no meaningful interest in the Taxpayer or its affairs beyond her
$76.00 investment in its common shares. Moreover, the totality of these
circumstances indicate that the primary purpose of the incorporation of the
Taxpayer and its acquisition of the Pembina Highway restaurant and the related franchise
may have been an attempt to avoid the associated corporation rules in order to obtain
an additional Small Business Deduction.
[25]
The associated corporation rules in section 256
are aimed, inter alia, at ensuring that access to the Small Business
Deduction is limited. A discussion of the scheme of the Act in respect of that
tax incentive is not necessary for the purpose of these reasons.
[26]
Prior to the incorporation of the Taxpayer, GRR
operated three Keg restaurants and was limited to a single Small Business
Deduction. The Taxpayer’s incorporation and its acquisition of the McGillivray
Avenue restaurant facilitated access to a second Small Business Deduction in
respect of one of the three restaurant businesses that were previously carried
on by GRR.
[27]
The Minister took exception to the claim for a
second Small Business Deduction and issued the Reassessments on the basis that
GRR and MorCourt were associated with the Taxpayer, within the meaning of
paragraph 256(1)(b), because those corporations and the Taxpayer were
all controlled by Mr. Howard. That Mr. Howard had both de jure and de
facto control of GRR and MorCourt is not at issue. The Minister
alleged that Mr. Howard also had de facto control of the Taxpayer, within
the meaning of subsection 256(5.1).
[28]
The Minister has not alleged that the parties
to the transactions pursuant to which the Taxpayer acquired the McGillivray
Avenue restaurant and the related franchise were engaged in abusive tax
planning. In other words, this is not a case in which the general
anti-avoidance rule in subsection 245(2) is engaged and the purpose behind the
creation and deployment of the Taxpayer is irrelevant.
[29]
The overarching question is whether it can be
said that Mr. Howard or GRR had any direct or indirect influence that, if
exercised, would result in either of them having control in fact of the
Taxpayer.
B.
Did the Judge
err in his interpretation of the requirements of de
facto control in
subsection 256(5.1)?
[30]
The determination of who controls a corporation
or when an acquisition of control of a corporation occurs has considerable
significance under the Act. Prior to the introduction of subsection 256(5.1),
the Act included both “control” and “controlled directly or indirectly in any manner whatever”
but, in both of those formulations, control was thought of as de jure
control.
[31]
In Duha Printers (Western) Ltd. v. Canada,
[1998] 1 S.C.R. 795, 159 D.L.R. (4th) 457 [Dula Printers], the seminal
decision of the Supreme Court of Canada on corporate control, de jure
control was referred to as the ability of the owners of the majority of the
voting power in the corporation that would enable those owners to elect
directors of the corporation and accordingly to enjoy effective control of the
corporation. In colloquial terms, the majority shareholder has the power to get
the directors to do what he or she wants in terms of the operation of the
corporation, failing which that shareholder will use his or her majority voting
power to replace those directors with others who will do his or her bidding.
[32]
It is useful to recall that in paragraph 71 of Duha
Printers, the Supreme Court affirmed that an ordinary shareholders
agreement, in contradistinction to a unanimous shareholders agreement, is not
relevant to the determination of de jure control. Thus, the voting power
attributable to shareholdings, determined in light of the constating documents
and the share register of a corporation, is generally the determinative factor
in the de jure control analysis, except in limited circumstances not
relevant to this appeal, in which de jure control may not lie with the
person who holds the majority of the voting power in a corporation.
[33]
In the de facto control analysis, as one
would expect, there are a broader range of attributes – beyond voting power
determined in the context of constating documents and share registers – that
must be considered to determine whether the requirements of subsection 256(5.1)
have been met in any given case. For example, the rights of a person under the
provisions of a shareholders agreement, other than a unanimous shareholders
agreement, under which shareholders agree that the person will be able to
select the directors, would fall within the definition of “influence”, within the meaning of subsection
256(5.1). So, must the requisite influence arise out of legally binding or
enforceable arrangements, or can other kinds of influence lead to a finding of de
facto control? For example, does a person who by threats or other vile
means, at one end of the spectrum, or by matrimonial or familial love and
affection, at the other end of the spectrum, have the requisite influence over
a shareholder, who would otherwise have de jure control of a corporation,
that would be sufficient to establish that such person has de facto
control over that corporation?
[34]
Fortunately, in this appeal we are not obliged
to resort to an analysis from first principles because the meaning of de facto
control, for the purposes of subsection 256(5.1), has been previously
considered by this Court.
[35]
In Silicon Graphics, Justice Sexton
formulated the test as follows:
[67] It is therefore my view that in order
for there to be a finding of de facto control, a person or group of
persons must have the clear right and ability to effect a significant change in
the board of directors or the powers of the board of directors or to influence
in a very direct way the shareholders who would otherwise have the ability to
elect the board of directors.
[36]
This test was affirmed in 9044 2807 Québec
Inc. v. Canada, 2004 FCA 23, 325 N.R. 226 [Transport Couture],
wherein Justice Noël (as he then was), stated:
[24] It is not possible to list all the
factors which may be useful in determining whether a corporation is subject to de
facto control (Duha Printers, [1998] 1 S.C.R. 795, para. [38]).
However, whatever factors are considered, they must show that a person or
group of persons has the clear right and ability to change the board of
directors of the corporation in question or to influence in a very direct way
the shareholders who would otherwise have the ability to elect the board of
directors (Silicon Graphics, [2002] FCA 260, para. [67]). In other
words, the evidence must show that the decision-making power of the corporation
in question in fact lies elsewhere than with those who have de jure
control. [Emphasis added]
[37]
At the heart of Justice Noël’s description of the
legal test for de facto control is essentially a restatement of the test
enunciated by Justice Sexton in Silicon Graphics. Nothing in this excerpt
from Justice Noël’s reasons suggests an intention on his part to depart
from the Silicon Graphics formulation of the test for de facto control.
[38]
I do not interpret Justice Noël’s last sentence in
the above-quoted paragraph as broadening or otherwise altering the Silicon
Graphics test. It immediately follows a clear and direct endorsement of the
Silicon Graphics test. Moreover, in my view, its introductory phrase “In other words” indicates that this sentence is
intended to constitute only a paraphrase of that test. Although interpreted in
isolation this sentence might suggest a broader approach, its immediate context
requires an interpretation bounded by the clear endorsement of the Silicon
Graphics test.
[39]
As previously mentioned, the Judge concluded that
Mimetix Pharmaceuticals and Plomberie J.C. Langlois required him to
consider broad manners of influence, including exercise of control over
day-to-day operations in the de facto control analysis. While it is true
that in these two decisions a broader test appears to have been considered, the
narrow test set out in paragraph 67 of Silicon Graphics, which in my
view was its ratio decidendi, was never directly challenged before this
Court in either of these decisions.
[40]
It is well established that this Court will
follow its previous decisions unless “the previous
decision is manifestly wrong, in the sense that the Court overlooked a relevant
statutory provision, or a case that ought to have been followed” (see Miller
v. Canada (Attorney General), 2002 FCA 370, 220 D.L.R. (4th) 149 at
paragraph 10). This Court did not address any argument that Silicon Graphics
was manifestly wrong and should not be followed in either Mimetix
Pharmaceuticals or Plomberie J.C. Langlois. Moreover, in both Mimetix
Pharmaceuticals and Plomberie J.C. Langlois, this Court was
primarily concerned with the Tax Court’s appreciation of the evidence before
it.
[41]
To be clear, in my view, to the extent that
those decisions may be taken as having prescribed a test for de facto
control that is inconsistent with the Silicon Graphics test, those
decisions ought not to be followed.
[42]
At the hearing, Crown counsel asserted that this
Court “clarified” the Silicon Graphics
test in Lyrtech RD Inc. v. Canada, 2014 FCA 267, 470 N.R. 364 [Lyrtech],
a decision that was apparently not before the Judge.
[43]
In Lyrtech, this Court affirmed that the
test for de facto control is that in Silicon Graphics, adding
that paragraph 24 of the decision in Transport Couture clarified the Silicon
Graphics test. As noted above, it is my view that the stipulated paragraph
from Transport Couture must be taken as an affirmation of the Silicon
Graphics test. Moreover, Lyrtech is another example of the Court
responding to asserted errors in factual findings made in the decision under
review. Lyrtech cannot, in my view, be read as having determined that
the narrow test in Silicon Graphics was manifestly wrong and ought not
to be followed. To the extent that Lyrtech may be taken as having
repudiated the Silicon Graphics test, it ought not to be followed.
[44]
Crown counsel argued that support for the
broader approach to de facto control can be found within Silicon
Graphics itself. In paragraphs 63 to 65 of that decision, the Court dealt
with a number of arguments that were made to it as to the applicability of
broader factors. In dismissing these arguments on the basis that they were
unsupported on the record, it is my view that Justice Sexton cannot be taken as
having undermined the test that he clearly enunciated in paragraph 67 of his
reasons.
[45]
Accordingly, I affirm that the narrow test set
out in paragraph 67 of Silicon Graphics is correct and has not been
overturned by this Court.
[46]
I reject any assertion that the test for control
in fact is based on “operational control”. De
facto control, like de jure control, is concerned with control over
the board of directors and not with control of the day-to-day operations of the
corporation or its business. Paragraph 256(1)(b) and subsection 256(5.1)
specifically refer to control of a corporation and not to control of the
corporation’s business or operations. Indeed, this view is consistent with the
conclusion of President Jackett set out in Buckerfield’s Ltd. v.
Minister of National Revenue, [1965] 1 Ex. C.R. 299 at pages 302-303, [1964]
C.T.C. 504:
Many approaches might conceivably be adopted
in applying the word “control” in a statute such as the Income Tax Act
to a corporation. It might, for example, refer to control by “management”,
where management and the Board of Directors are separate, or it might refer to
control by the Board of Directors. The kind of control exercised by management
officials or the Board of Directors is, however, clearly not intended by section
39 when it contemplates control of one corporation by another as well as
control of a corporation by individuals. (see subsection (6) of section 39).
The word “control” might conceivably refer to de facto control by one or more
shareholders whether or not they hold a majority of shares. I am of the view,
however, that in section 39 of the Income Tax Act, the word “controlled”
contemplates the right of control that rests in ownership of such a number of
shares as carries with it the right to a majority of the votes in the election
of the Board of Directors …
[47]
While de jure control generally looks
only to share ownership in the limited context set forth in in Duha Printers,
in determining who has control over the election of the board of directors —
and thus the corporation — there is nothing to suggest that de facto
control is anything other than control by some means short of that necessary to
meet the test for de jure control. In my view, control of a corporation
for the purposes of the associated corporation provisions of the Act has never
been properly understood to mean what President Jackett referred to as control
by management or what might otherwise be called “operational”
control.
[48]
The difference between de facto and de
jure control, then, is limited to the breadth of factors that can be
considered in determining whether a person or group of persons has effective
control, by means of an ability to elect the board of directors, of a
corporation. That said, it remains the case that the list of factors that may
be considered when applying the Silicon Graphics test is open-ended.
However, in my view, a factor that does not include a legally enforceable right
and ability to effect a change to the board of directors or its powers, or to
exercise influence over the shareholder or shareholders who have that right and
ability, ought not to be considered as having the potential to establish de
facto control.
[49]
In my view, an interpretation of de facto
control as contemplated by subsection 256(5.1) that fails to include a
requirement that the influence in question must be grounded in a legally
enforceable right or ability runs counter to the clear admonition of the
Supreme Court of Canada in Canada Trustco Mortgage Co. v. Canada, 2005
SCC 54, [2005] 2 S.C.R. 601 wherein, at paragraph 12, the Chief Justice and
Justice Major unequivocally stated:
The provisions of the Income Tax Act
must be interpreted in order to achieve consistency, predictability and
fairness so that taxpayers may manage their affairs intelligently …
[50]
An interpretation of subsection 256(5.1) that
encompasses “operational” control would import a
degree of subjectivity into the de facto analysis that, in my view,
would lead to unpredictability, rather than predictability, as mandated by the Canada
Trustco interpretative approach.
[51]
Having clarified that the Silicon Graphics
test remains the test for de facto control, and it appearing that the
Judge applied a different test, I now turn to the facts in this appeal.
C.
Did the Judge
err in concluding that the Taxpayer was associated with GRR and MorCourt for
the purposes of paragraph 256(1)(b)?
[52]
Having determined that the Judge applied an
incorrect test for de facto control, it is necessary for me to apply the
correct test to the facts of this case.
[53]
The Judge determined that Mr. and Mrs. Howard
reached an agreement to the effect that the franchise with respect to the
Pembina Highway location would only be transferred from GRR to the Taxpayer if
Mrs. Howard agreed to use the voting power associated with her 760 common
shares of the Taxpayer to ensure that Mr. Howard was elected as the sole
director of the Taxpayer and that his directorship endured. In essence, the
Judge found that the Howards had made an agreement under which the identity and
composition of the board of directors of the Taxpayer would be under the
control of Mr. Howard.
[54]
At the hearing, counsel for the Taxpayer
asserted that the Judge made a palpable and overriding error in finding that
Mr. and Mrs. Howard had made such an unwritten agreement. Counsel correctly
noted that the record contains no direct evidence of such an agreement.
However, he agreed that if there had been a written agreement to the same
effect, the Minister’s position that the corporations were associated would be
unassailable. Counsel asserted correctly that the Franchise Agreement, to which
the Taxpayer was a party, did not require Mr. Howard to be the Taxpayer’s sole
director. From this, the Taxpayer asks this Court to infer that there was no
such oral agreement and that the Judge erred in his inference that there was
one.
[55]
A review on a standard of palpable and
overriding error requires an appellate court to show meaningful deference to
the factual findings of a trial judge. In the circumstances, it is my view that
the Judge’s finding that there was an unwritten agreement between Mr. and Mrs.
Howard was open to him on the evidence that was before him and in making it, he
committed no palpable and overriding error.
[56]
The absence of a written agreement is not proof
that there was no unwritten agreement. The Judge was aware of the longstanding
and successful relationship between Mr. Howard and the Franchisor, underscoring
the trust that had been established between them over the years. This
relationship indicates that the Franchisor may well have been satisfied by Mr.
Howard’s verbal assurances that things would be run in the same way they always
had in the three restaurants.
[57]
Although the parties stipulated in the partial
agreed statement of facts that Mrs. Howard could terminate Mr. Howard’s
directorship at any time, she did not do so. As long as the unwritten agreement
was in effect, Mr. Howard retained the right to determine the entirety of the
Taxpayer’s board of directors, i.e. that he would constitute the entire
board. It is clear that the rights possessed by Mr. Howard under the unwritten
agreement with his wife fell short of giving him de jure control of the
Taxpayer, as he did not own a majority of its voting shares and that agreement
was not a unanimous shareholders agreement within the meaning of the governing
corporate legislation. Nonetheless, as long as that agreement was not
repudiated by Mrs. Howard, Mr. Howard’s right to determine the Taxpayer’s Board
of Directors was influence of the type contemplated by subsection 256(5.1),
within the interpretation of this Court set out in Silicon Graphics.
VII.
CONCLUSION
[58]
For the foregoing reasons, I would dismiss the
appeal with costs.
"C. Michael Ryer"
“I agree
Eleanor R. Dawson J.A.”
“I agree
Yves de Montigny J.A.”
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