North American – Manitoba Court of Queen’s Bench comments briefly on s. 256(5.11)

Dewar J reversed a finding of the Manitoba Tax Appeals Commission that a corporation (“533”) was subject to de facto control (as described in ITA s. 256(5.1)) by Mr. Carson rather than Mrs. Carson, Accordingly, 533 in fact was not associated within the meaning of ITA s. 256 with Mr. Carson’s companies and, thus, also, for Manitoba payroll tax purposes. This reversal was made on the basis that the TAC had misinterpreted the terms of a declaration of trust respecting 2/3 of the 533 shares held by one of Mr. Carson’s companies. With that reversal, there were no other significant findings that would support the TAC’s findings of association. In contrast to McGillivray, the evidence indicated that “she was making the material decisions in the operation of the restaurant” of 533, and there was no unwritten agreement that she would follow her husband’s direction.

Dewar J also commented obiter on the subsequent enactment of s. 256(5.11), stating:

I make no comment about whether that amendment if applicable in 2007 - 2011 would have changed the result which I have come to on this appeal, except to say that it would have merited further consideration. The amendment permits a court to conclude that a person without a legally enforceable right or ability to control or influence the election of directors has control of a company for the purpose of determining whether that company is associated with another.

I have italicized one word to highlight the lukewarm nature of this comment.

Neal Armstrong. Summary of North American et al. v. The Deputy Minister of Finance, 2019 MBQB 29 under s. 256(5.1).