Dubé,
J:—The
main
issue
to
be
determined
in
this
case
is
whether
the
plaintiff
corporation
in
its
fiscal
year
ending
November
30,
1975
was
associated
with
Fawcett
Enterprises
Limited
and
Son
Valley
Ranch
Limited
under
paragraph
256(1)(b)
of
the
Income
Tax
Act
on
the
basis
that
all
three
corporations
are
controlled
by
the
same
person,
George
C
Fawcett.
The
latter’s
father,
Henry
A
Fawcett,
the
majority
shareholder
of
the
plaintiff,
died
on
November
28,
or
two
days
before
the
termination
of
plaintiff’s
fiscal
year.
The
father’s
will
appointed
his
son,
George
C
Fawcett,
as
his
executor
and
the
beneficiary
of
his
common
shares
in
the
plaintiff
corporation.
George
C
Fawcett
testified
at
the
trial
that
at
the
death
of
his
father
he
was
Vice-President
and
Supervising
Manager
of
the
plaintiff
corporation.
His
father
died
at
about
10:00
am
on
Friday,
November
28,1975
at
the
Moncton
Hospital.
The
weekend
was
spent
making
arrangements
for
the
funeral
which
took
place
on
Monday,
December
1.
On
Tuesday
he
went
to
his
bank
at
Petitcodiac,
NB,
25
miles
away
from
Moncton,
where
he
knew
he
would
find
his
father’s
will
in
a
deposit
box.
The
following
day
he
returned
to
the
bank
whereupon
the
manager
took
possession
of
the
will
and
delivered
it
to
the
company
lawyer.
Because
banks
are
closed
on
Saturdays
and
Sundays,
George
C
Fawcett
would
have
found
it
difficult,
if
not
altogether
impossible,
to
deal
with
the
will
before
the
end
of
November,
which
for
banking
purposes
terminated
on
the
very
Friday
his
father
died.
The
will
was
probated
on
December
11,1975.
The
transfer
of
shares
from
father
to
son
was
entered
on
the
corporation
books
on
January
29,
1976.
The
fiscal
year
of
the
other
two
corporations
also
terminates
on
November
30
and
George
C
Fawcett
owns
the
majority
of
shares
in
both.
Learned
counsel
for
the
plaintiff
argues
that
the
word
“controlled”
in
paragraph
256(1
)(b)
means
the
right
of
control
that
is
vested
in
the
owners
of
such
a
number
of
shares
in
a
corporation
so
as
to
give
them
the
majority
of
the
voting
power
in
the
corporation.
He
submits
that
George
C
Fawcett
did
not
have
such
power
between
November
28
and
30,
1975.
Under
the
New
Brunswick
Companies
Act
(RSNB
1973,
c
C-13)
a
shareholder
or
a
personal
representative
of
the
deceased’s
shareholder
(unless
the
letters
patent
or
the
By-Laws
otherwise
provide)
is
entitled
to
one
vote
per
share,
(paragraph
103(b)
and
subsection
2(1)).
However,
a
person’s
status
as
a
shareholder
or
a
personal
representative
must
be
established
by
the
recording
of
his
name
on
the
books
of
the
company
as
provided
for
by
section
104.
The
executor
of
a
deceased
shareholder
establishes
his
status
as
the
representative
of
the
deceased
by
filing
with
the
company
a
certified
copy
of
the
Letters
Testamentary
and
a
declaration
of
transmission
(subsection
79(3)).
Counsel
points
out
that
by
virtue
of
section
43
of
the
Probate
Courts
Act,
RSNB
1973,
c
P-17
Letters
Testamentary
cannot
be
issued
until
after
the
lapse
of
ten
days
from
the
death
of
the
deceased,
unless
the
estate
is
being
wasted
or
there
is
other
urgent
special
reason
why
letters
should
be
sooner
issued.
George
C
Fawcett
testified
that
he
did
discuss
the
matter
with
the
company
lawyer
and
was
informed
that
there
was
no
danger
of
the
estate
being
wasted
and
no
other
urgent
reason
to
request
earlier
probate,
so
he
awaited
the
prescribed
ten
day
period
before
seeking
probate
of
his
father’s
will:
in
any
event,
time
exigencies
may
not
have
allowed
him
to
obtain
speedy
probate
before
the
end
of
November.
And
to
compound
plaintiff’s
difficulties,
under
paragraph
26
of
By-Law
no
1,
the
company
cannot
recognize
a
person
as
a
shareholder
unless
he
is
registered
as
such,
and
under
paragraph
5
of
the
same
By-Law,
four
days
notice
is
required
for
a
special
shareholders
meeting
(unless
all
shareholders
dispense
with
the
notice).
As
an
alternative
argument,
counsel
suggests
that
even
if
George
©
Fawcett
had
the
right
to
vote
his
father’s
shares
within
the
relevant
period,
it
does
not
result
therefrom
that
the
three
corporations
were
associated:
George
C
Fawcett,
the
executor,
and
George
C
Fawcett
the
individual
holding
shares
in
his
own
right
in
the
other
two
companies,
is
not
the
same
person
for
the
purposes
of
paragraph
256(1
)(b)
of
the
Act.
Subsection
104(2)
of
the
Income
Tax
Act
provides
that
a
trust
shall
be
deemed
to
be
an
individual,
and
the
word
“individual”
is
defined
by
subsection
248(1)
as
“a
person
other
than
a
corporation”.
Thus
the
words
“by
the
same
person”
would
not
apply
to
George
C
Fawcett
as
trustee
and
as
owner.
On
the
other
hand,
the
defendant
relies
upon
subsection
3(1)
of
the
Devolution
of
Estates
Act
of
the
Province
of
New
Brunswick
(RSNB
1973,
c
D-9)
which
reads
as
follows:
All
real
and
personal
property
that
is
vested
in
any
person,
without
a
right
in
another
person
to
take
by
survivorship,
shall
on
his
death,
notwithstanding
any
testamentary
disposition,
devolve
upon
and
become
vested
in
his
personal
representative
from
time
to
time
as
trustee
for
the
persons
entitled
thereto,
and
Subject
to
the
payment
of
his
debts
and
so
far
as
such
property
is
not
disposed
of
by
deed,
will,
contract
or
other
effectual
disposition,
shall
be
administered,
dealt
with
and
distributed
as
if
it
were
personal
property
not
so
disposed
of.
(Italics
are
mine)
In
my
view,
it
follows
from
the
provisions
of
that
subsection
that
the
beneficial
interest
in
the
father’s
share
of
the
plaintiff
company
vested
in
his
son
at
the
moment
of
his
death.
At
that
very
moment
George
C
Fawcett
became
beneficially
entitled
to
a
majority
of
the
shares
of
the
plaintiff
company
and
acquired
therefrom
a
controlling
interest
in
that
company,
even
if
on
the
books
still
stood
the
name
of
his
father
as
the
holder
of
the
shares.
The
word
“controlled”
in
paragraph
256(1
)(b)
of
the
Income
Tax
Act
contemplates
the
power
to
control,
whether
directly
or
indirectly,
and
whether
the
actual
transfer
has
been
completed
in
the
company
registry.
In
Regal
Wholesale
Ltd
v
The
Queen,
[1976]
CTC
272;
[1977]
CTC
202;
76
DTC
6146;
77
DTC
5152,
I
held
that
two
persons
were
the
beneficial
owners
of
the
majority
of
the
shares
in
Regal
even
if
their
names
were
not
entered
on
the
company
register.
I
said
at
278
[6150]:
The
purpose
of
section
74
of
the
New
Brunswick
Companies
Act
(supra),
and
other
such
federal
and
provincial
provisions,
is
to
establish
the
effective
moment
of
recognition
of
shareholders
for
the
company’s
purposes;
the
company
will
not
recognize
the
transferee
of
the
shares
until
registration
has
been
completed.
But
as
between
transferor
and
transferee
the
essential
elements
are
the
execution
of
the
transfer
certificate
and
the
delivery
thereof.
So
far
as
the
transferor
is
concerned
the
transaction
is
completed
between
himself
and
the
transferee
when
he
hands
over
the
endorsed
certificate
and
there
and
then
beneficial
ownership
has
passed,
although
from
the
company’s
standpoint
the
transferee
does
not
become
a
shareholder
until
his
name
appears
on
the
register.
In
determining
the
control
of
a
company
it
is
not
sufficient
“merely
to
look
at
the
share
register”*.
“A
person
beneficially
entitled
to
all
the
shares
of
a
company
might
be
said
to
‘control’
it
or
to
have
a
‘controlling
interest’
in
it
even
though
all
the
shares
were
held
in
the
names
of
nominees
.
.
.”t.
A
person
“controls”
a
corporation
if
the
requisite
voting
power
is
in
his
hands,
directly
or
indirectly.
My
brother
Cattanach
had
this
to
say
with
reference
to
the
meaning
of
“controlled”
in
the
then
paragraph
39(4)(b)
{the
predecessor
to
256(1
)(b):
..
.
the
word
“controlled”
in
section
39(4)(b)
contemplates
and
includes
such
a
relationship
as,
in
fact,
brings
about
a
control
by
virtue
of
majority
voting
power,
no
matter
how
that
result
if
effected,
that
is
either
directly
or
indirectly.
$
Neither
can
plaintiff’s
second
alternative
be
of
assistance
to
the
company.
Ownership
in
the
shares
owned
by
the
father
vested
immediately
on
his
death
in
his
son,
George
C
Fawcett,
as
trustee
for
the
person
entitled
thereto,
namely
himself,
and
not
trustee
for
another
beneficiary.
As
stated
by
Jackett,
J§
(now
the
Chief
Justice
of
this
Court)
the
purpose
of
section
256
of
the
Income
Tax
Act
is
to
discourage
“the
multiplication
of
corporations
carrying
on
business
in
order
to
get
greater
advantage
from
the
lower
tax
rate”.
In
the
instant
case
all
three
corporations
share
the
same
office
and
the
same
staff
at
Petitcodiac,
and
all
three
are
in
the
lumber
business.
The
plaintiff
company
sells
lumber
and
builders
supplies,
Fawcett
Enterprises
Limited
manufactures
and
processes
lumber
from
a
sawmill
and
a
planning
mill,
Son
Walley
Ranch
Limited
sells
rough
lumber
and
pulp
wood
wholesale.
It
may
seem
inequitable
that,
but
for
a
couple
of
days,
the
three
corporations
would
not
have
been
associated
for
the
fiscal
year
1975,
but
the
language
of
paragraph
256(1)(b)
is
clear
and
effect
must
be
given
to
it.
The
paragraph
reads:
For
the
purposes
of
this
Act
one
corporation
is
associated
with
another
in
a
taxation
year
if
at
any
time
in
the
year,
(a)
...
(b)
both
of
the
corporations
were
controlled
by
the
same
person
or
group
of
persons.
(Italics
are
mine)
In
my
view,
therefore,
for
the
period
of
two
days
in
the
fiscal
year
1975
the
three
corporations
were
controlled
by
the
same
person,
George
C
Fawcett.
The
Income
Tax
Act
includes
no
provisions
to
the
effect
that
beneficial
ownership,
which
has
not
been
registered
or
could
not
be
registered
in
the
company
books
before
the
end
of
the
fiscal
year,
is
not
to
be
construed
as
being
effective
control
under
the
Act.
If
it
had
been
the
intention
of
Parliament
to
exclude
from
the
provisions
of
paragraph
256(1)(b)
shares
which
were
acquired
by
an
executor
or
a
trustee
by
virtue
of
the
death
of
any
other
person
it
would
have
done
so
in
clear
unambiguous
terms,
as
it
did
for
the
purposes
of
other
subsections.*
The
appeal
therefore
should
be
dismissed
with
costs.
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