Sheppard,
DJ:—The
issue
is
the
liability
of
the
plaintiff
to
income
tax
on
shares
in
his
name
under
subparagraph
6(1)(a)(i)
and
subsection
16(1)
of
the
Income
Tax
Act.
The
plaintiff
and
his
three
sons,
Alvin
Glenn
Nelson,
Atle
Noel
Nelson
and
Richard
Allen
Nelson,
had
equal
interests
in
a
partnership
carrying
on
a
logging
and
sawmill
operation
near
Trail,
BC.
In
1963
a
company,
Atco
Lumber
Ltd,
was
formed
to
carry
on
the
partnership
business,
and
Varcoe,
then
the
solicitor,
stated
he
was
instructed
by
the
plaintiff
that
all
four
were
to
be
the
shareholders
and
to
have
an
equal
interest,
but
the
plaintiff
was
to
have
the
power
to
vote
so
as
to
override
the
others.
Accordingly,
the
company
was
incorporated
with
Class
A
shares,
carrying
the
right
to
vote,
and
Class
B
shares,
not
having
the
right
to
vote.
On
incorporation,
there
was
issued
to
each
of
the
plaintiff
and
his
three
sons
a
certificate
for
one
Class
A
share;
therefore,
all
voted
equally.
In
December
of
1964
Varcoe
had
the
plaintiff
sign
and
then
had
filed
a
petition
to
the
effect
that
the
Class
A
shares
to
the
plaintiffs
had
been
overlooked,
and
upon
obtaining
an
order
on
January
5,
1965
he
had
issued
96
Class
A
shares
to
the
plaintiff.
Ninety-six
Class
B
shares
were
to
have
been
issued
to
each
of
the
three
sons
to
enable
them
to
have
an
equal
economic
interest,
but
the
Class
B
shares
were
overlooked,
and
shortly
after
July
31,
1965
Yolland,
a
chartered
accountant,
phoned
Varcoe
for
the
company,
to
have
96
Class
B
shares
issued
to
each
son
being
a
shareholder.
Those
Class
B
shares
were
overlooked
by
Varcoe,
and
have
not
been
issued.
Apparently,
the
fact
that
the
plaintiff
held
an
additional
96
Class
A
shares
was
overlooked
by
all
the
four
shareholders,
and
in
the
meantime
each
proceeded
as
if
their
interest
in
the
company
was
of
equal
value.
In
1969
the
company
declared
a
dividend
and
paid
$1,000
to
each
of
the
four
shareholders.
The
Minister
assessed
the
plaintiff
with
the
income
having
been
received
in
proportion
to
his
holding
of
shares;
that
is,
as
he
held
97%
of
the
shares,
he
was
assessed
with
an
income
as
dividends
of
$3,880,
less
the
$1,000
reported
by
him,
and
upon
appeal
to
the
Tax
Appeal
Board,
the
appeal
was
dismissed.
The
plaintiff
contends
that
there
is
a
resulting
trust
of
%
of
the
96
Class
A
shares
issued
to
the
plaintiff.
However,
whether
called
a
resulting
or
constructing
trust
(Hussey
v
Palmer,
[1972]
3
All
ER
744,
for
Lord
Denning
at
747(b))
that
would
be
in
error
as
the
96
Class
A
shares
were
not
intended
by
any
of
the
shareholders
to
be
other
than
the
plaintiff’s
and
no
proceeding
has
been
taken
to
divest
the
plaintiff
of
any
of
the
shares.
There
is
complete
honesty
in
all
the
shareholders,
and
the
proper
remedy
is
for
each
of
the
three
sons,
being
a
shareholder,
to
have
issued
to
him
96
Class
B
shares.
Therefore,
the
remedy
would
be
by
specific
performance.
There
is
no
circumstance
to
permit
the
plaintiff
being
declared
a
trustee.
However,
the
company,
in
issuing
dividends,
must
have
regard
to
its
register;
that
is,
its
recorded
holdings
of
its
shares
without
inquiring
into
any
beneficial
ownership
against
the
registered
shareholder.
Hence
the
payment
of
dividends
in
equal
amounts
must
be
on
the
direction
or
concurrence
of
the
plaintiff.
The
onus
is
on
the
plaintiff
and
as
he
has
not
satisfied
the
Court
of
any
error
the
appeal
must
be
dismissed
with
costs.
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