THURLOW,
J.:—These
ten
appeals
are
from
re-assessments
of
income
tax
for
the
taxation
years
1961
and
1962,
(except
those
of
Miller
Building
Limited,
Career
Girl
Store
Limited
and
I
&
A.
Realty
Limited
which
relate
only
to
the
1962
taxation
year)
all
of
which
were
based
on
assumptions
by
the
Minister
that
all
ten
of
the
appellant
companies
together
with
Aaron
Investments
Limited
and
Miller
Men’s
Wear
Limited
were
at
relevant
times
“associated”
with
each
other
within
the
meaning
given
that
expression
for
the
purposes
of
Section
39
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148:
In
each
ease
the
sole
issue
raised
is
whether
the
Minister’s
assumptions
were
correct,
or
perhaps
more
accurately
the
extent
to
which
the
assumptions
were
correct,
but
this
issue
has,
by
the
terms
of
an
order
stating
issues
to
be
determined
and
directing
that
the
appeals
be
heard
together
on
common
evidence,
as
well
as
by
the
positions
taken
by
counsel
in
the
course
of
the
trial,
been
further
narrowed
to
certain
particular
issues
defined
in
paragraphs
1
and
2
of
the
order
with
respect
to
the
control
of
particular
appellant
companies
and
to
a
further
more
general
issue
stated
in
paragraph
3
of
the
order
as
to
whether
any
and
if
so
which
of
the
companies
were
associated
in
either
of
the
taxation
years
in
question.
These
issues
are
stated
and
dealt
with
later
in
these
reasons.
The
order
also
provided
that
‘‘upon
the
determination
of
the
answers
to
the
aforesaid
questions
by
the
Court,
all
of
the
Appeals
will
be
referred
back
to
the
Respondent
for
reconsideration,
and
if
necessary
in
respect
of
all
or
any
one
or
more
of
the
appellants,
allocation
pursuant
to
subsections
(3)
and
(3a)
of
Section
39
of
the
Income
Tax
Act
and
re-assessment
of
all
or
any
one
or
more
of
the
appellants
in
accordance
with
the
Court’s
determination
of
the
answers
to
the
said
questions.
’
’
When
the
appeals
came
on
for
trial
counsel
for
the
Minister
stated
that
the
appeals
of
T
&
A
Realty
Limited
and
Aaron
Building
Limited
with
respect
to
their
re-assessments
for
the
1962
taxation
year
had
been
settled
between
the
parties
and
by
consent
an
order
was
granted
allowing
with
costs
the
appeals
of
I
&
A
Realty
Limited
and
Aaron
Building
Limited
from
the
re-assessments
for
1962
and
referring
the
re-assessments
back
to
the
Minister
for
reconsideration
and
re-assessment
on
the
basis
that
during
the
1962
taxation
year
I
&
A
Realty
Limited
and
Aaron
Building
Limited
were
associated
only
with
each
other
and
with
Aaron
Investments
Limited.
This
has
rendered
it
unnecessary
to
deal
with
three
of
the
particular
issues
defined
in
the
earlier
order
and
with
the
general
issue
as
well
so
far
as
the
re-assessments
of
these
appellants
for
1962
are
involved.
Seven
other
particular
issues,
and
the
rest
of
the
general
issue,
however,
remain.
For
the
determination
of
these
the
parties
put
before
the
Court
an
agreed
statement
of
facts
which
together
with
copies
of
the
articles
of
association
of
nine
of
the
appellant
companies
tendered
by
counsel
for
the
Minister
and
the
minute
books
of
several
of
the
appellant
companies
tendered
on
behalf
of
the
appellants
constitute
the
material
on
which
the
issues
are
to
be
decided.
Each
of
the
appellant
companies
was
incorporated
under
the
Companies
Act,
R.S.S.
1953,
c.
124,
of
the
Province
of
Saskatchewan
on
the
filing
of
a
memorandum
of
association
and
each
adopted
the
articles
of
Table
A
of
that
Act
either
with
or
without
modifications
as
its
articles
of
association.
As
each
of
the
particular
issues
to
be
determined
includes
the
preliminary
words
‘‘
Within
the
meaning
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
as
amended’’
and
poses
a
question
whether
a
particular
company
or
person
or
group
controlled
a
particular
appellant
company
during
a
stated
period,
it
will
be
convenient
at
this
point
to
review
the
provisions
of
the
Act
under
which
the
problems
arise.
Subsection
(1)
of
Section
39
provides
that
the
tax
payable
by
a
corporation
under
Part
I
of
the
Act
is
18
per
cent
of
the
first
$35,000
of
the
amount
of
income
subject
to
tax
and
47
per
cent
of
the
amount
by
which
the
income
subject
to
tax
exceeds
$35,000.
By
subsections
(2)
and
(3)
however
where
two
or
more
corporations
are
‘‘associated’’
with
each
other
the
aggregate
amount
of
their
incomes
taxable
at
the
18
per
cent
rate
is
not
permitted
to
exceed
$35,000.
The
reason
for
this
is
not
hard
to
discern.
Without
such
provisions
Section
39(1)
would
constitute
an
invitation
to
those
beneficially
interested
in
profitable
corporate
enterprises
to
so
arrange
and
multiply
corporate
structures
as
to
render
the
whole
of
a
taxable
income
in
exeess
of
$35,000
taxable
at
the
lower
rate.
To
take
the
simplest
situation
a
person
owning
the
shares
of
a
corporation
earning
from
$35,000
to
$70,000
in
taxable
income
might
arrange
to
have
half
of
the
amount
earned
by
a
second
corporation
and
thus
avoid
paying
47
per
cent
on
any
of
the
income.
By
the
same
process
a
person
or
a
group
of
closely
related
persons
might,
even
if
not
owning
all
the
shares,
accomplish
in
their
own
interest
in
a
substantial
way
the
same
result.
The
overall
purpose
of
the
provisions
as
to
“associated”
companies,
as
I
read
them,
is
to
prevent
the
owners
of
the
equity
stock
in
corporations
from
gaining,
whether
inten-
tionally
or
otherwise,
such
a
tax
advantage.*
But
the
method
adopted
by
the
provisions
is
arbitrary
and
is
made
to
depend
not
on
the
right
of
shareholders
to
benefit
from
profits
but
on
various
relationships
between
shareholders,
some
of
which
are
particularly
defined
and
others
not,
and
by
whom
the
companies
concerned
were
“controlled”.!
With
respect
to
the
meaning
of
‘‘controlled’’
in
Section
39(4),
Jackett,
P.,
in
Buck
erfield’s
Limited
et
al.
v.
M.N.R.,
[1965]
1
Ex.
C.R.
299
at
302;
[1964]
C.T.C.
504
at
507,
said:
‘“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.
See
British
American
Tobacco
Co.
v.
C.I.R.,
[1943]
1
All
E.R.
13,
where
Viscount
Simon,
L.C.,
at
page
15,
says:
‘The
owners
of
the
majority
of
the
voting
power
in
a
company
are
the
persons
who
are
in
effective
control
of
its
affairs
and
fortunes.’
See
also
M.N.R.
v.
Wrights’
Canadian
Ropes,
Ltd.,
[1947]
A.C.
109;
[1947]
C.T.C.
1,
per
Lord
Greene,
M.R.,
at
pages
118,
6,
where
it
was
held
that
the
mere
fact
that
one
corporation
had
less
than
50
per
cent
of
the
shares
of
another
was
‘conclusive’
that
the
one
corporation
was
not
‘controlled’
by
the
other
within
Section
6
of
the
Income
War
Tax
Act.’’
(5)
When
two.
corporations
are
associated,
or
are
deemed
by
this
subsection
to
be
associated,
with
the
same
corporation
at
the
same
time,
they
shall,
for
the
purpose
of
this
section,
be
deemed
to
be
associated
with
each
other.”
Subsections
(5a),
(5c)
and
(5d)
of
Section
139
are
as
follows:
“(5a)
For
the
purpose
of
subsection
(5),
(5c)
and
this
subsection,
‘related
persons’,
or
persons
related
to
each
other,
are
(a)
individuals
connected
by
blood
relationship,
marriage
or
adoption;
(b)
a
corporation
and
(i)
a
person
who
controls
the
corporation,
if
it
is
controlled
by
one
person,
(ii)
a
person
who
is
a
member
of
a
related
group
that
controls
the
corporation,
or
(iii)
any
person
related
to
a
person
described
by
subparagraph
(i)
or
(ii);
(c)
any
two
corporations
(i)
if
they
are
controlled
by
the
same
person
or
group
of
persons,
(ii).
if
each
of
the
corporations
is
controlled
by
one
person
and
the
person
who
controls
one
of
the
corporations
is
related
to
the
person
who
controls
the
other
corporation,
(iii)
if
one
of
the
corporations
is
controlled
by
one
person
and
that
person
is
related
to
any
member
of
a
related
group
that
controls
the
other
corporation,
(iv)
if
one
of
the
corporations
is
controlled
by
one
person
and
that
person
is
related
to
each
member
of
an
unrelated
group
that
controls
the
other
corporation;
I
turn
now
to
the
first
of
the
particular
issues
to
be
determined.
This
is
stated
as
follows
:
“Within
the
meaning
of
the
Income
Tax
Act,
R.S.C.
1952,
e.
148,
as
amended,
l(a)
during
the
period
commencing
on
February
1,
1960
and
ending
on
December
31,
1962
did
Allied
Business
Supervisions
Limited
control
Career
Girl
Store
Limited
?
’
’
Throughout
the
period
mentioned
there
were
three
issued
shares
of
Career
Girl
Store
Limited
(hereafter
referred
to
as
Career
Girl)
all
of
which
were
beneficially
owned
by
Allied
Business
Supervisions
Limited
(hereafter
referred
to
as
Allied).
Two
of
the
three
shares
were
registered
in
the
name
of
Allied.
The
other
was
registered
for
part
of
the
time
in
the
name
of
R.
N.
Hall
and
during
the
remainder
of
the
period
in
the
name
of
Joseph
Tomney
each
of
whom
in
turn
was
the
nominee
of
Allied.
Throughout
the
period
Alexander
Aaron
was
the
representative
of
Allied
in
respect
of
its
shares
in
Career
Girl
and
was
a
director
and
the
president
of
the
latter
company.
(v)
if
any
member
of
a
related
group
that
controls
one
of
the
corporations
is
related
to
each
member
of
an
unrelated
group
that
controls
the
other
corporation,
or
(vi)
if
each
member
of
an
unrelated
group
that
controls
one
of
the
corporations
is
related
to
at
least
one
member
of
an
unrelated
group
that
controls
the
other
corporation.
(5c)
In
subsection
(5a),
(Bd)
and
this
subsection,
(a)
‘related
group’
means
a
group
of
persons
each
member
of
which
is
related
to
every
other
member
of
the
group;
and
(b)
‘unrelated
group’
means
a
group
of
persons
that
is
not
a
related
group.
(5d)
For
the
purpose
of
subsection
(5a)
(a)
where
a
related
group
is
in
a
position
to
control
a
corporation,
it
shall
be
deemed
to
be
a
related
group
that
controls
the
corporation
whether
or
not
it
is
part
of
a
larger
group
by
whom
the
corporation
is
in
fact
controlled;
(b)
a
person
who
had
a
right
under
a
contract,
in
equity
or
otherwise,
either
immediately
or
in
the
future
and
either
absolutely
or
contingently,
to,
or
to
acquire,
shares
in
a
corporation,
or
to
control
the
voting
rights
of
shares
in
a
corporation,
shall,
except
where
the
contract
provided
that
the
right
is
not
exercisable
until
the
death
of
an
individual
designated
therein,
be
deemed
to
have
had
the
same
position
in
relation
to
the
control
of
the
corporation
as
if
he
owned
the
shares;
and
(c)
where
a
person
owns
shares
in
two
or
more
corporations,
he
shall
as
shareholder
of
one
of
the
corporations
be
deemed
to
be
related
to
himself
as
shareholder
of
each
of
the
other
corporations.”
Hall
and
Tomney
in
succession
were
also
directors.
The
articles
of
association
of
this
company
consisted
of
Table
A
with
certain
modifications
one
of
which
was:
“6.
That
all
motions
put
before
any
meeting
of
shareholders
or
directors
of
the
Company
shall
require
the
unanimous
consent
of
all
its
members,
and
Paragraphs
46,
76
and
82
of
the
said
Table
A
shall
be
amended
accordingly.’’
Counsel
for
the
Minister
challenged
the
validity
of
this
article
on
grounds
which
are
considered
later
in
these
reasons
with
respect
to
the
third
issue
but
for
the
purpose
of
considering
this
issue
I
shall
assume
that
paragraph
6
is
a
valid
article
and
that
it
means
inter
alia,
as
I
think
it
does,
that
no
decision
could
be
taken
by
the
company
in
general
meeting
except
by
unanimous
consent
of
all
the
members.
On
this
basis
it
was
submitted
that
Allied
nevertheless
‘‘controlled’’
Career
Girl
during
the
period
in
question
since
Allied
was
throughout
the
period
the
beneficial
owner
of
the
two
shares
held
by
itself
and
of
the
share
held
by
its
successive
nominees,
that
as
beneficial
owner
Allied
was
entitled
to
call
upon
the
nominee
to
transfer
the
share
at
any
time
either
to
Allied
itself
or
to
another
nominee
and
thus
to
put
an
end
to
the
existing
trust
and
was
further
entitled
to
direct
the
manner
in
which
the
nominee
should
exercise
the
rights,
including
the
voting
rights,
attaching
to
his
nominal
ownership
of
the
share
and
that
Allied
was
accordingly
at
all
material
times
in
a
position
to
secure
unanimous
consent
of
all
shareholders
to
the
decisions
which
it
desired
Career
Girl
to
make.
Counsel
for
the
appellants
on
the
other
hand
submitted
that
a
second
shareholder
was
a
continuing
necessity,
that
so
far
as
Career
Girl
was
concerned
that
shareholder
was
the
sole
owner
of
the
share
registered
in
his
name
and
was
entitled
to
vote
as
he
saw
fit
and
that
Allied
being
thus
unable
to
control
the
vote
attaching
to
the
nominee’s
share
was
not
in
a
position
to
enforce
unanimous
consent
to
its
proposals
and
was
therefore
unable
to
control
Career
Girl.
But
for
certain
expressions
of
judicial
opinion
in
somewhat
similar
situations,
I
should
have
thought
the
solution
of
the
question
so
raised
to
be
too
clear
for
serious
argument.
Because
of
the
form
of
the
statutory
provisions
and
of
what
I
conceive
to
be
their
purpose
I
do
not
think
the
question
is
to
be
approached
merely
from
the
point
of
view
of
Career
Girl
or
that
it
is
equivalent
to
asking:
‘‘From
the
point
of
view
of
Career
Girl
did
Allied
control
Career
Girl?”
On
the
contrary
since
both
corporations,
and
possibly
others
as
well,
may
be
affected
by
the
answer
the
question
is
I
think
to
be
considered
objectively
and
given
the
kind
of
practical
answer
which
a
businessman
might
be
expected
to
give.
As
I
see
it
the
situation
is
plainly
one
of
the
kind
at
which
the
statutory
provisions
appear
to
be
aimed
and
in
the
absence
of
anything
to
the
contrary
in
the
facts
it
is
I
think
to
be
taken
that
the
nominee
was,
in
the
exercise
of
the
voting
right
attaching
to
the
share
held
in
his
name,
subject
to
the
control
of
Allied.
Nor
do
I
think
it
is
reasonable
to
assume
that
the
nominee
in
this
situation
would
not
carry
out
the
instructions
of
the
beneficiary
of
the
share.
Allied
thus
appears
to
me
to
have
had
through
its
ownership
of
the
shares
control
of
the
votes
of
all:
three
issued
shares
of
Career
Girl
and
therefore
to
have
controlled
the
company.
The
chief
expression
of
opinion
relied
on
by
the
appellants
in
support
of
their
position
was
that
of
the
House
of
Lords
in
CLR.
v.
J.
Bibby
and
Sons
Limited,
[1945]
1
All
E.R.
667
where
the
question,
which
arose
on
the
taxation
of
a
particular
company
rather
on
a
question
of
relationship
between
companies,
was
whether
the
directors
of
a
company
‘‘had
a
controlling
interest
therein’’.
The
directors
owned
beneficially
less
than
half
of
the
issued
shares
but
some
of
them
held
additional
shares
of
which
they
were
trustees,
(though
not
bare
trustees),
and
these
shares
along
with
the
shares
held
beneficially
gave
the
directors
more
than
50
per
cent
of
the
voting
power
in
the
company.
Both
in
the
Court
of
Appeal,
[1944]
1
All
E.R.
548
and
in
the
House
of
Lords
it
was
held
that
the
directors
had
a
controlling
interest
within
the
meaning
of
the
statutory
provision
under
consideration.
In
discussing
the
matter,
however,
Lord
Greene,
M.R.
in
the
Court
of
Appeal
expressed
the
view
that
the
case
of
shares
held
by
a
director
as
a
bare
trustee
would
be
different
and
that
the
voting
power
attaching
to
shares
so
held
would
reside
in
the
beneficial
owner
of
the
shares.
In
the
House
of
Lords
this
view
was
doubted
and
the
question
whether
even
in
such
a
case
the
voting
power
attaching
to
shares
so
held
would
reside
in
the
director
holding
them
(for
the
purposes
of
the
particular
statutory
provision)
was
expressly
left
open.
Thus
Lord
Russell
of
Killowen
said
at
page
670
:
“It
is
true
that
the
Court
of
Appeal
except
the
case
of
what
they
describe
as
a
bare
trustee,
but
express
a
view
that
the
control
would
reside
in
the
beneficial
owner
of
the
shares.
The
case
envisaged
is
no
doubt
the
case
of
the
director
who
puts
shares
into
the
name
of
a
nominee,
taking
probably.
a
blank
transfer
executed
by
the
nominee.
I
prefer
to
express
no
de-
finite
opinion
in
relation
to
this
question,
but
to
keep
it
as
an
open
question
to
be
debated
when
the
necessity
for
a
decision
thereon
in
fact
arises.’’
Lord
Simonds
also
said
at
page
673
:
“Those
who
by
their
votes
can
control
the
company
do
not
the
less
control
it
because
they
may
themselves
be
amenable
to
some
external
control.
Theirs
is
the
control,
though
in
the
exercise
of
it
they
may
be
guilty
of
some
breach
of
obligation
whether
of
conscience
or
of
law.
It
is
impossible
(an
impossibility
long
recognised
in
company
law)
to
enter
into
an
investigation
whether
the
registered
holder
of
a
share
is
to
any
and
what
extent
the
beneficial
owner.
A
clean
cut
there
must
be.
It
is
for
this
reason
that,
while
respectfully
concurring
in
every
other
line
of
the
judgment
of
Lord
Greene,
M.R.,
I
would
reserve
further
consideration
of
that
part
of
it
which
deals
with
the
case
of
the
so-called
bare
trustee.
His
case
is
not
yet
before
your
Lordships
and
perhaps
never
will
be.
If
and
when
it
is,
the
validity
of
the
distinction
made
by
Lord
Greene,
M.R.,
will
have
to
be
considered
and
I
should
myself
require
a
more
satisfactory
explanation
than
has
yet
been
given
of
a
term
which,
though
it
has
statutory
sanction,
has
never,
I
believe,
received
statutory
definition.”
These
expressions
would
cause
me
greater
hesitation
in
reaching
my
conclusion
were
it
not
for
the
difference
between
the
question
which
required
determination
in
the
Bibby
case
and
that
presented
here.
Here
the
question
is:
Did
Allied
control
Career?
If
it
did
that
is
the
end
of
the
matter
and
as
I
see
it,
it
matters
not
whether
its
control
exists
by
virtue
of
its
ownership
of
shares
in
its
own
name
or
by
virtue
of
its
ownership
of
shares
in
the
name
of
its
nominee
or
by
a
combination
of
the
two.
In
the
Bibby
case
the
question
was:
Did
the
directors
of
the
company
have
a
controlling
interest
therein?
The
directors
had
the
necessary
shares
and
the
necessary
votes
and
the
answer
was
accordingly
in
the
affirmative.
But
there
was
no
question
asking:
‘
‘
Did
beneficiaries
of
a
trust
‘control’
or
‘have
a
controlling
interest’
in
the
company?’’
or
''Did
directors
beneficially
entitled
to
shares
held
by
nominees
‘control’
or
‘have
a
controlling
interest’
in
the
company
?”
It
seems
to
me
therefore
not
to
be
inconsistent
with
the
judgment
in
the
Bibby
ease
that
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
who,
if
they
were
the
directors,
might
also
be
held
to
‘‘control’’
or
to
“have
a
controlling
interest’’
for
the
purposes
of
the
provisions
considered
in
the
Bibby
case.
Compare
Cameron,
J.
in
Vancouver
Towing
Co.
Ltd.
v.
M.N.R.,
[1946]
Ex.
C.R.
623
at
631;
[1947]
C.T.C.
18
at
26.
A
somewhat
similar
point
was
put
thus
in
C.J.R.
v.
Silverts,
Lid.,
[1951]
1
All
E.R.
708
by
Evershed,
M.R.,
at
page
709
in
the
course
of
comparing
the
Bibby
case
with
that
of
British
American
Tobacco
Co.
Ltd.
v.
CI.R.,
[1943]
1
All
E.R.
13.
“It
is,
no
doubt,
true
to
say
that
their
Lordships
in
the
Bibby
case
had
not
before
them
the
special
case
of
a
trust
with
custodian
and
managing
trustees,
but
we
see
no
distinction
in
principle
between
that
case
and
the
case
(say)
of
an
ordinary
settlement
of
shares
containing
a
stipulation
that
the
trustees
(as
registered
holders
of
the
settled
shares)
should
at
all
times
vote
in
accordance
with
the
directions
of
the
tenant
for
life.
A
stipulation
of
that
kind
clearly
falls
to
be
disregarded
under
the
Bibby
decision,
and
the
statutory
control
accorded
to
the
managing
trustees
over
their
custodian
trustee
is
equally
res
inter
alios
so
far
as
the
company
is
concerned.
In
our
opinion,
this
result
involves
no
conflict
with
the
British
American
Tobacco
case.
Although
(as
already
stated)
the
formula
‘controlling
interest’
ought
to
be
treated
as
being
used
in
the
same
sense
in
the
Acts
of
1937
and
1939,
namely,
in
the
ordinary
sense
of
the
English
language,
yet
(as
observed
by
Romer,
J.)
the
questions
posed
in
the
British
American
Tobacco
case
and
in
the
Bibby
case
were
different.
In
neither
case
was
the
question
the
general
one:
‘Who
controls
the
company?’
In
the
British
American
Tobacco
case
the
question
was
whether
(in
the
ordinary
and
proper
sense
of
the
words)
company
A
held
a
controlling
interest
in
company
C,
though
the
control
was
exercised,
not
directly
but
indirectly
through
the
agency
of
company
B.
If
the
question
were
raised
under
some
other
taxing
provision:
‘Has
company
B
a
controlling
interest
in
company
0?
’
an
affirmative
answer
to
that
question
might
be
given
consistently
with
the
affirmative
answer
to
the
first
question
in
the
British
American
Tobacco
case.
So,
in
the
Bibby
case
and
in
the
present
case,
the
question:
‘Have
the
directors
a
controlling
interest
in
the
company?’
falls
to
be
answered,
aye
or
no,
without
regard
to
the
possible
question
(if
asked)
whether
some
other
person
or
body
has
(indirectly)
a
controlling
interest
in
the
same
company.”
Moreover
the
statement
of
Lord
Simonds
in
the
Bibby
case
that
‘‘Those
who
by
their
votes
can
control
the
company
do
not
the
less
control
it
because
they
may
themselves
be
amenable
to
some
external
control’’
appears
to
me
to
imply
that
a
person,
to
whose
external
control
a
shareholder
who
can
control
a
company
is
amenable,
is
himself
in
control
of
the
company,
as
well.
The
only
difference
between
the
control
of
such
a
person
and
that
of
the
nominal
shareholder
appears
to
me
to
be
that
the
shareholder
has
the
right
to
control
by
exercising
the
voting
rights
attaching
to
the
shares
while
the
person
to
whom
he
is
amenable
has
the
right
to
control
by
externally
controlling
the
exercise
by
the
shareholder
of
the
voting
rights
attaching
to
the
shares
held
in
his
name.
The
present
case
accordingly
appears
to
me
to
resemble
the
British
American
case
more
closely
than
the
Bibby
and
Silverts
cases
and
to
be
distinguishable
from
them.
This
view
may
not
be
entirely
consistent
with
the
view
of
the
scope
of
the
British
American
case
later
expressed
by
the
Court
of
Appeal
in
8.
B
er
endsen
Ltd.
v.
C.I.R.,
[1958]
Ch.
1.
See
also
the
remarks
of
Viscount
Simonds
in
Barclays
Bank
Lid.
v.
C.I.R.,
[1960]
2
All
E.R.
817
at
821
but
it
seems
to
me
to
be
in
harmony
with
the
view
of
the
Supreme
Court
of
Canada
in
M.N.R.
v.
Sheldon’s
Engineering
Limited,
[1955]
S.C.R.
637;
[1955]
C.T.C.
174.
In
that
case
the
question
was
whether
at
a
particular
time
Sheldon
and
Egoff
controlled
a
company.
They
held
proxies
from
McKay
and
Baird
who
were
the
registered
owners
of
a
majority
of
the
shares
which
they
held
as
nominees
of
their
employer,
the
Royal
Bank
of
Canada.
In
this
Court,
[1954]
Ex.
C.R.
507;
[1954]
C.T.C.
241
Potter,
J.
said
at
page
519
(253)
:
“No
authorities
were
cited
by
either
side
relative
to
the
legal
effect
of
control
of
a
meeting
of
a
company
by
proxies,
and
the
weight
of
authority
is
that
it
is
the
total
of
the
voting
power
or
shares
in
the
hands
of
those
persons
who
own
the
shares
that
gives
control.
A
company
which
holds
shares
in
another
company
must
vote
at
meetings
of
such
other
company
by
the
use
of
proxies.
Nevertheless,
on
the
authorities,
particularly
the
statement
of
the
law
by
Viscount
Simon,
L.C.,
in
British
American
Tobacco
Company
v.
Inland
Revenue
Commissioners
it
is
the
holding
of
the
majority
of
the
shares
by
which
one
company
controls
another,
and
it
was
not
suggested
that,
because
the
company
holding
the
majority
of
shares
in
another
named
proxies
to
vote
them,
the
company
was
controlled
by
the
proxy
holders.
I
therefore
hold
that
neither
W.
D.
Sheldon,
Jr.,
George
Murray
Egoff,
Harold
William
Mogg,
nor
William
Clark
Caldwell
was
a
person
who
controlled
directly
or
indirectly
the
old
company
at
the
time
approval
was
given
to
the
agreement
of
July
4,
1949,
and
its
execution
authorized
on
behalf
of
the
old
company.”
In
the
Supreme
Court,
however,
Locke,
J.,
who
delivered
the
unanimous
opinion
of
the
Court,
appears
to
have
gone
further
and
to
have
held
that
control
was
in
the
Royal
Bank
of
Canada
when
he
said
at
page
644
(180)
:
“W.
D.
Sheldon,
Jr.
alone,
did
not,
nor
did
he,
together
with
his
three
associates
Egoff,
Caldwell
and
Mogg,
control
the
old
company
at
the
time
on
July
4,
1949,
when
the
resolutions
and
by-laws
authorizing
the
sale
to
the
new
company
were
adopted
by
the
directors
and
subsequently
confirmed
by
the
shareholders.
I
cannot
accept
the
contention
advanced
on
behalf
of
the
Minister
that,
by
reason
of
Section
73
of
the
Companies
Act
(R.S.O.
1937,
ce.
251),
Sheldon
was
entitled
to
vote
upon
the
shares
standing
on
the
share
register
of
the
company
in
the
names
of
McKay
and
Baird.
That
section,
in
my
opinion,
has
no
application
to
a
case
in
which,
in
addition
to
the
in-
i
strument
of
hypothecation,
an
actual
transfer
of
the
shares
to
the
creditor
has
been
made.
It
would
require
an
express
provision
in
the
Companies
Act
to
authorize
any
person
other
than
a
shareholder
or
a
proxy
to
vote
at
meetings
of
the
company.
At
the
time
these
steps
were
taken
by
the
old
company,
it
was
completely
controlled
by
the
bank.’’
(Italics
added.)
And
at
page
645
(181)
:
“While
the
arrangements
which
were
carried
into
effect
at
the
meetings
of
the
two
companies
on
July
4
were
made
in
advance
and,
no
doubt,
included
settling
the
consideration
to
be
paid
for
the
depreciable
assets,
it
was
the
bank
and
not
Sheldon,
Jr.,
either
alone,
or
together
with
his
associates,
that
was
in
command
of
the
old
company
after
June
21.’’
(Italics
added.)
This
view
appears
to
coincide
with
that
expressed
by
Denning,
L.J.,
in
Barclays
Bank
Ltd.
v.
C.I.R.,
[1960]
2
All
E.R.
817,
when
he
said
at
page
832:
‘*A
man
has
control
of
a
company
not
only
when
he
has
the
majority
voting
power
by
means
of
shares
in
his
own
name;
but
also
when
he
has
it
by
means
of
shares
in
the
name
of
a
nominee;
and
also
when
he
has
it
by
means
of
some
shares
in
his
own
name
and
other
in
the
name
of
a
nominee.”
The
views
of
Denning,
L.J.
on
this
point
differed
from
those
of
the
majority
but
the
views
of
the
latter
are
in
my
opinion
inapplicable
in
the
present
situation
since
under
the
English
statute
there
under
consideration
the
question
was
posed
from
the
point
of
view
of
the
taxpayer
company.
As
already
indicated
I
do
not
think
this
is
the
correct
approach
in
determining
control
for
the
purpose
of
ascertaining
whether
companies
are
“associated”
for
the
purposes
of
Section
39
of
the
Income
Tax
Act.
A
further
case
relied
on
by
the
appellants
was
Rubenstein
v.
M.N.R.
(1965),
39
Tax
A.B.C.
7,
but
as
I
was
informed
that
that
case
is
presently
under
appeal
to
this
Court
I
think
it
better
to
refrain
from
commenting
on
it
beyond
observing
that
it
did
not
arise
under
Section
39.
For
the
reasons
which
I
have
stated
I
am
of
the
opinion
that
Allied
Business
Supervisions
Limited
was
in
a
position
to
control
all
the
voting
power
of
Career
Girl
Store
Limited
and
that
the
question
posed
by
the
issue
as
stated
should
be
answered
in
the
affirmative.
The
second
issue,
numbered
1(b)
in
the
order
is
:
“Within
the
meaning
of
the
Income
Tax
Act
R.S.C.
1952,
c,
148,
as
amended,
1(b)
during
the
period
commencing
on
February
1,
1960
and
ending
on
December
31,
1962
did
Aaron’s
(Saskatoon)
Ltd.
or
Aaron’s
(Saskatoon)
Ltd.
and
Morgans
Ltd.
together
control
Aaron’s
Renfrew
Furs
Ltd?”
Throughout
the
period
mentioned
there
we
6,250
issued
shares
of
Aaron’s
Renfrew
Furs
Limited
(hereafter
referred
to
as
Renfrew)
750
of
which
were
owned
beneficially
by
and
registered
in
the
name
of
Morgans
Limited
and
5,499
of
which
were
beneficially
owned
by
and
registered
in
the
name
of
Aaron’s
(Saskatoon)
Limited
(hereafter
referred
to
as
Saskatoon).
The
remaining
share
as
well
was
beneficially
owned
by
Saskatoon
and
during
the
period
was
successively
registered
in
the
names
of
Peter
A.
Mahon,
Roy
N.
Hall
and
Joseph
Tomney
in
each
case
as
nominee
of
Saskatoon.
The
articles
of
association
of
Renfrew
were
similar
to
those
of
Career
Girl
Store
Limited
and
also
contained
as
number
6
a
provision
requiring
unanimous
consent
of
all
members
for
any
decision
taken
in
a
general
meeting.
In
respect
of
this
issue
counsel
put
forward.
the
same
arguments
as
had
previously
been
advanced
in
respect
of
the
first
issue
and
in
particular
those
with
respect
to
the
validity
of
the
requirement
for
unanimous
consent
and
to
the
right
to
control
through
the
voting
power
of
the
nominee
shareholder.
For
the
reasons
already
stated
with
respect
to
the
first
issue
I
am
of
the
opinion
that
at
all
material
times
Morgans
controlled
750
votes
and
Saskatoon
controlled
5,500
votes,
that.
when
combined
the
votes
of
these
two
companies
amounted
to
complete
control
of
Renfrew
and
that
the
question
posed
by
the
issue
should
be
answered
in
the
affirmative.
As
the
next
two
issues,
numbered
1(c)
and
1(d)
in
the
order,
are
concerned
with
the
control
of
the
same
company
and
raise
the
same
problem
they
may
be
considered
together.
These
issues
are
:
“1.
Within
the
meaning
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
as
amended,
(c)
during
the
period
commencing
on
February
1,
1960
and
ending
on
July
14,
1961
did
Isidore
Aaron
and
Alexander
Aaron
together
control
Aaron’s
Ladies
Apparel
Limited.
(d)
during
the
period
commencing
on
July
14,
1961
and
ending
on
December
31,
1962
did
Aaron’s
(Prince
Albert)
Limited
control
Aaron’
s
Ladies
Apparel
Limited
?
’
’
The
issued
share
capital
of
Aaron’s
Ladies
Apparel
Limited
(hereafter
referred
to
as
Ladies
Apparel)
consisted
of
1,008
common
shares
of
which
during
the
period
mentioned
in
1(c)
349
shares
were
held
by
Isidore
Aaron,
349
by
Alexander
Aaron
and
310
by
Margaret
Pratt
each
being
the
registered
and
beneficial
owner
of
the
shares
so
held.
Isidore
Aaron
and
Alexander
Aaron
are
brothers.
In
the
period
mentioned
in
1(d)
the
698
shares
formerly
held
by
Isidore
Aaron
and
Alexander
Aaron
were
beneficially
owned
by
and
registered
in
the
name
of
Aaron’s
(Prince
Albert)
Limited
(hereafter
referred
to
as
Prince
Albert).
The
articles
of
association
of
Ladies
Apparel
provided:
‘
‘6.
That
all
motions
put
before
any
meeting
of
shareholders
or
directors
of
the
Company
shall
require
the
unanimous
consent
of
all
its
members,
and
Paragraphs
46,
76
and
82
of
the
said
Table
A’
shall
be
amended
accordingly.’’
and
the
sole
question
for
determination
on
these
issues
is
whether
this
article
is
valid
and
thus
requires,
as
it
purports
to
do,
that
unanimous
consent
of
all
members
of
the
company
be
obtained
for
any
decision
to
be
taken
by
the
shareholders.
If
so,
it
is
plain
that
the
questions
must
be
answered
in
the
negative
for
at
all
material
times
there
were
310
shares
held
by
Margaret
Pratt
the
votes
of
which
were
not
controlled
by
Isidore
Aaron
or
Alexander
Aaron
or
by
Prince
Albert.
On
the
other
hand,
if,
as
contended
on
behalf
of
the
Minister,
article
6
is
invalid,
it
is
equally
clear
that
both
questions
must
be
answered
in
the
affirmative.
Briefly,
the
Minister’s
contention
is
that
article
6
is
repugnant
to
Section
14(b)
of
the
Interpretation
Act,
R.S.S.
1953,
e.
1
of
the
Province
of
Saskatchewan,
and
that
it
is
also
inconsistent
with
a
number
of
sections
of
the
Companies
Act,
R.S.S.
1953,
e.
124
which
specifically
authorize
or
require
certain
things
to
be
done
by
“special
resolution’’
an
expression
which
is
defined
in
the
statute
as
being
a
resolution
which
inter
alia
is
passed
by
a
majority
of
not
less
than
three-fourths
of
the
members.
Sections
14(b)
of
the
Interpretation
Act
provides:
“14.
In
an
Act
words
making
a
number
of
persons
a
corporation
shall:
(b)
vest
in
a
majority
of
the
members
of
the
corporation
the
power
to
bind
the
others
by
their
acts
;
’
’
Similar
wording
is
also
to
be
found
in
the
Interpretation
Act,
of
Canada,
R.S.C.
1952,
c.
158,
Section
30.
According
to
Wegenast
on
Canadian
Companies,
page
218,
this
provision
is
probably
intended
merely
to
embody
the
common
law
rule.
By
Section
3
of
the
Saskatchewan
Statute
it
is
enacted
that:
“3.
(1)
This
Act
extends
and
applies
to
every
Act
and
every
regulation
now
or
hereafter
enacted
or
made,
except
in
so
far
as
any
provision
of
this
Act:
(a)
is
inconsistent
with
the
intent
or
object
of
the
Act
or
regulation
;
(b)
would
give
to
any
word,
expression
or
clause
of
the
Act
or
regulation
an
interpretation
inconsistent
with
the
context
thereof
or
the
interpretation
section
of
the
Act
or
regulation
or
;
(c)
is
by
the
Act
or
regulation
declared
not
applicable
thereto.”
In
view
of
this
provision
I
do
not
think
that
Section
14(b)
was
intended
to
override
the
right,
which
Section
18*
of
the
Companies
Act
appears
to
give
to
persons
seeking
incorporation
of
a
company,
to
adopt
such
regulations
for
the
government
of
their
proposed
company
as
they
think
fit.
The
fact
that
the
rule
to
which
Wegenast
refers
as
the
“common
law
rule’’
is
enacted
in
Section
14(1)
will
thus
not
serve
to
render
article
6
invalid
if
it
would
not
otherwise
be
invalid.
On
the
general
question
whether
such
an
article
is
valid
or
not
there
is
a
surprising
dearth
of
authority
and
I
was
not
referred
to
any
case,
nor
have
I
been
able
to
find
any,
in
which
the
point
has
been
decided.
On
principle,
however,
I
am
unable
to
see
any
good
reason
why
it
should
be
invalid.
By
Section
24(1)
of
the
Compames
Act
it
is
provided
that:
“24.
(1)
The
memorandum
and
articles
shall,
when
registered,
bind
the
company
and
the
members
thereof
to
the
same
extent
as
if
they
had
been
respectively
signed
and
sealed
by
each
member,
and
‘contained
covenants,
on
the
part
of
each
member,
his
heirs,
executors
and
administrators,
to
observe
all
the
provisions
of
the
memorandum
and
of
the
articles,
subject
to
the
provisions
of
this
Act.’’
If
the
incorporators
of
a
company
or
the
members
of
a
company
wish
to
have
the
company’s
affairs
conducted
only
to
the
extent
that
all
members
agree,
and
therefore
take
steps
to
so
provide
in
the
articles
of
the
company
the
article
so
providing
becomes
a
contract
between
them
and
the
company
and
there
appears
to
me
to
be
no
reason
why
such
a
contract
should
not
be
valid
and
enforceable.
The
nature
of
articles
of
association
was
described
by
Duff,
J.
(as
he
then
was)
as
follows
in
Theatre
Amusement
Co.
v.
Stone
(1915),
50
S.C.R.
32
at
p.
36.
“The
articles
of
association
are
binding
upon
the
company,
the
directors
and
the
shareholders,
until
changed
in
accordance
with
the
law.
So
long
as
they
remain
in
force,
any
shareholder
is
entitled,
unless
he
is
estopped
from
taking
that
position
by
some
conduct
of
his
own,
to
insist
upon
the
articles
being
observed
by
the
company,
and
the
directors
of
the
company.
This
right
he
cannot
be
deprived
of
by
the
action
of
any
majority.
In
truth,
the
articles
of
association
constitute
a
contract
between
the
company
and
the
shareholders
which
every
shareholder
is
entitled
to
insist
upon
being
carried
out.
’
’
That
an
article
can
restrict
the
right
of
a
mere
majority
to
bind
the
minority
by
an
ordinary
resolution
appears
from
Quin
&
Axtens
Ltd.
et
al.
v.
Salmon,
[1909]
A.C.
442.
In
that
case
the
articles
of
a
company
provided
that
the
business
of
the
company
was
to
be
managed
by
the
directors
who
might
exercise
all
the
powers
of
the
company
subject
to
such
regulations
as
might
be
prescribed
by
the
company
in
general
meeting.
Another
article
provided
that
no
resolution
of
the
directors
having
for
its
object
the
acquisition
or
letting
of
premises
should
be
valid
if
either
of
two
particular
directors
should
dissent.
A
resolution
of
the
kind
mentioned
was
passed
by
the
directors
with
one
of
the
two
particular
directors
dissenting
but
it
was
subsequently
approved
by
a
majority
of
the
shareholders
in
general
meeting.
The
House
of
Lords
held
the
resolution
ineffective
and
void
on
the
ground
that
so
long
as
the
article
remained
unrepealed
it
governed
the
situation
and
the
vote
of
a
mere
majority
of
the
shareholders
in
general
meeting
could
not
override
it.
The
case
of
Edwards
v.
Halliwell,
[1950]
2
All
E.R.
1064
appears
to
me
to
be
to
the
same
effect.
The
point
also
seems
to
have
been
taken
for
granted
in
North-
West
Transportation
Company,
Limited
v.
Beatty
(1887),
12
App.
Cas.
589
at
p.
593
where
Sir
Richard
Baggallay
in
delivering
the
judgment
of
the
Privy
Council
said
:
“The
general
principles
applicable
to
cases
of
this
kind
are
well
established.
Unless
some
provision
to
the
contrary
is
to
be
found
in
the
charter
or
other
instrument
by
which
the
company
is
incorporated,
the
resolution
of
a
majority
of
the
shareholders,
duly
convened,
upon
any
question
with
which
the
company
is
legally
competent
to
deal,
is
binding
upon
the
minority,
.
.
.
(Italics
added.)
On
the
other
hand
I
have
not
found
in
the
cases
which
I
have
examined
any
statement
which
appears
to
proceed
on
the
assumption
that
it
is
not
open
to
incorporators
of
a
company
to
provide
by
the
articles
that
something
more
than
a
mere
majority
should
be
required
in
order
to
bind
the
minority
or
that
unanimous
consent
of
the
members
should
be
required
for
any
decision
to
be
taken
by
the
company.
On
the
whole
therefore
I
am
of
the
opinion
that
article
6
is
not
repugnant
to
Section
14(b)
of
the
Interpretation
Act
and
that
there
is
nothing
in
its
nature
or
substance
which
renders
it
invalid
as
a
contract
between
the
shareholders
and
the
company
or
as
an
article
of
the
company.
Nor
do
I
think
such
an
article
is
inconsistent
with
the
various
provisions
of
the
Companies
Act
which
provide
what
may
and
what
must
be
done
by
special
resolution
since
the
definition
of
the
majority
required
to
pass
a
special
resolution
merely
prescribes
minimum
requirements
for
such
a
resolution.
I
shall
therefore
hold
that
article
6
is
valid
and
it
follows
from
this
that
the
question
posed
by
the
two
issues
numbered
1(c)
and
1(d)
must
be
answered
in
the
negative.
In
the
remaining
three
particular
issues
defined
in
the
order
the
question
of
control
turns
on
whether
the
person
named
in
the
issue,
in
addition
to
the
votes
to
which
he
was
entitled
as
shareholder,
had
the
right
to
control
the
company
by
the
exercise
of
a
casting
vote
in
the
case
of
an
equality
of
the
other
votes.
In
each
of
the
three
companies
the
votes
of
a
majority
were,
under
the
articles,
sufficient
to
carry
an
ordinary
resolution
of
shareholders
and
in
each
case
the
articles
provided
for
a
casting
vote
exer-
cisable
by
the
chairman
of
the
meeting
in
the
case
of
a
tie.
While
this
is
a
point
on
which
opinion
may
differ,
offhand
I
should
have
doubted
that
control
arising
in
that
way,
if
it
can
be
considered
to
be
control
at
all,
was
within
the
meaning
of
the
word
“controlled”
in
Section
39(4)
of
the
Income
Tax
Act*
since
the
situation
seems
not
to
be
one
of
the
kind
at
which
I
think
the
provision
is
aimed
and
since
the
casting
vote,
unlike
the
votes
arising
from
shareholding,
which
are
exercisable
without
responsibility
to
the
company
or
to
other
shareholders,
is,
in
my
opinion,
not
the
property
of
the
holder,
but
is
an
adjunct
of
an
office.
However,
in
view
of
the
conclusion
which
I
have
reached
on
the
facts
respecting
the
three
issues
it
is
not
necessary
for
me
to
reach
a
concluded
opinion
on
the
question.
The
first
of
these
issues,
numbered
2(a)
in
the
order,
is:
“Within
the
meaning
of
the
Income
Tax
Act
R.S.C.
1992,
e.
148,
as
amended,
2(a)
during
the
period
commencing
on
February
1,
1960
and
ending
on
December
31,
1962
did
Alexander
Aaron
control
Allied
Business
Supervisions
Limited
?’’
Throughout
the
period
mentioned
Alexander
Aaron
owned
50
per
cent
of
the
voting
shares.
The
remaining
shares
were
owned
by
Joseph
Tomney
and
Roy
N.
Hall,
until
December
20,
1962,
when
Tomney
became
the
owner
of
the
shares
formerly
held
by
Hall.
Until
December
20,
1960,
when
Roy
N.
Hall
resigned,
all
three
were
directors.
The
articles
provided
:
“46.
In
the
case
of
an
equality
of
votes,
whether
on
a
show
of
hands
or
on
a
poll,
the
chairman
of
the
meeting
at
which
the
show
of
hands
takes
place
or
at
which
the
poll
is
demanded,
shall
be
entitled
to
a
second
or
casting
vote.
48.
On
a
show
of
hands
every
member
present
in
person
shall
have
one
vote.
On
a
poll
every
member
shall
have
one
vote
for
each
share
of
which
he
is
a
holder.
41.
The
chairman,
if
any,
of
the
board
of
directors
shall
preside
as
chairman
at
every
general
meeting
of
the
company.
42.
If
there
is
no
such
chairman,
or
if
at
any
meeting
he
is
not
present
within
fifteen
minutes
after
the
time
appointed
for
holding
the
meeting
or
is
unwilling
to
act
as
chairman,
the
members
present
shall
choose
some
one
of
their
number
to
be
chairman.”
To
determine
whether
Alexander
Aaron
had
the
right
to
a
casting
vote
at
meetings
of
shareholders
it
is
therefor
necessary
to
ascertain
if
he
was
the
chairman
of
the
board
of
directors
of
the
company.
Article
79
provided:
“79.
The
directors
may
elect
a
chairman
of
their
meetings
and
determine
the
period
for
which
he
is
to
hold
office;
but,
if
no
such
chairman
is
elected,
or
if
at
any
meeting
the
chairman
is
not
present
within
five
minutes
after
the
time
appointed
for
holding
the
same,
the
directors
present
may
choose
one
of
their
number
to
be
chairman
of
the
meeting.”
The
minute
book
of
the
company
shows
that
at
a
general
meeting
of
shareholders
held
on
December
17,
1959,
Alexander
Aaron
and
Joseph
Tomney
were
elected
directors
and
that
it
was
resolved
that
directors
should
hold
office
for
an
indefinite
period
until
their
term
of
office
should
be
changed
by
a
subsequent
shareholders
meeting.
The
minutes
recited
that
‘‘
Alexander
Aaron
acted
as
chairman”.
At
a
further
meeting
of
the
directors
held
later
on
the
same
day
Alexander
Aaron
was
elected
as
president
and
Joseph
Tomney
was
elected
as
secretary.
The
president
and
secretary
were
then
authorized
to
sign
certain
documents
on
behalf
of
the
company.
The
minutes
recite
that
“the
meeting
was
called
to
order
with
Alexander
Aaron
as
chairman”.
Between
that
date
and
December
31,
1962,
the
minute
book
records
minutes
of
four
meetings
of
the
directors
and
five
meetings
of
the
shareholders
in
each
case
either
reciting
that
‘‘the
meeting
was
called
to
order
with
Alexander
Aaron
as
chairman”
or
that
‘‘
Alexander
Aaron
acted
as
chairman”.
In
the
minutes
of
a
further
meeting
of
the
directors
there
is
no
mention
of
who,
if
anyone,
acted
as
chairman.
Nowhere
in
the
recorded
minutes
is
there
record
of
an
election
of
Alexander
Aaron
as
chairman
for
any
term
or
of
any
determination
of
the
period
for
which
a
chairman
was
to
hold
office.
Accordingly
while
it
is
clear
that
Alexander
Aaron
was
in
fact
chairman
during
the
several
meetings
recorded
in
the
minutes
there
is
no
record
of
his
being
elected
to
the
office
of
chairman
of
the
board
of
directors
for
any
defined
term.
Counsel
for
the
Minister
submitted
that
while
there
is
no
minute
showing
the
election
of
Alexander
Aaron
as
chairman
of
the
board
of
directors
his
election
to
that
office
should
be
inferred
from
the
fact
that
on
each
of
the
occasions
mentioned
he
appears
to
have
acted
as
chairman
and
that
the
fact
that
there
is
no
minute
of
such
an
election
is
not
significant.
While
the
minutes
may
be
taken
as
binding
the
particular
company
in
respect
of
the
matters
recited
in
them
it
is
worthy
of
note
that
in
each
case
these
minutes
are
signed
by
all
the
shareholders
and
directors
concerned
and
having
regard
to
the
not
uncommon
practice
by
which
minutes
are
signed
reciting
meetings
which
are
never
held
I
do
not
think
that
any
inference
can
safely
be
drawn
from
the
recitals
contained
in
them.
In
my
view
there
is
no
basis
for
reaching
the
conclusion
that
Alexander
Aaron
was
ever
elected
chairman
of
the
board
of
directors
otherwise
than
for
particular
meetings
or
that
he
was
entitled,
by
virtue
of
any
such
election,
to
be
chairman
of
any
general
meeting
of
the
shareholders.
It
was
also
submitted
that
Alexander
Aaron
was
chairman
of
the
board
of
directors
and
entitled
to
preside
at
shareholders
meetings
by
virtue
of
his
having
been
appointed
president
of
the
company
for
an
indefinite
term
and
in
support
of
this
position
reference
was
made
to
the
remarks
of
Masten,
J.A.,
in
Fremont
Canning
Co.
et
al.
v.
Wall
&
Fine
Foods
of
Canada
Limited,
[1941]
3
D.L.R.
96
at
107.
The
office
of
president,
however,
is
nowhere
mentioned
in
the
Saskatchewan
statute
or
in
the
articles
of
the
company
and
in
this
respect
the
Dominion,
Ontario
and
Quebec
companies
legislation
differs
from
that
in
provinces
having
company
legislation
similar
to
that
in
England.
(Vide
Rand,
J.,
in
Ghimpelman
et
al.
v.
Bercovici
et
al.,
[1957]
S.C.R.
128
at
135.)
There
being
no
definition
in
the
articles
of
Allied
of
the
duties
or
powers
of
an
officer
to
be
known
as
the
president,
it
must
I
think
be
taken
that
the
only
authority
conferred
on
him
was
that
contained
in
the
minutes
of
the
meeting
at
which
he
was
appointed,
consisting
of
authority
to
sign
certain
particular
documents
on
behalf
of
the
company,
and
I
can
see
no
basis
upon
which
it
can
be
said
that
he
was,
by
his
appointment
as
president,
constituted
the
chairman
of
the
board
of
directors
for
an
indefinite
period.
In
my
opinion,
therefore,
it
cannot
be
said
that
Alexander
Aaron
was
entitled
to
be
the
chairman
at
any
meeting
of
shareholders
that
might
have
been
called
and
to
exercise
a
casting
vote
in
the
case
of
a
tie.
Regardless,
therefore,
of
whether
the
right
to
such
a
casting
vote
could
be
considered
as
giving
him
control
of
the
company,
I
am
of
the
opinion
that
Alexander
Aaron
did
not
control
Allied
during
the
period
mentioned
in
the
issue
as
stated
and
that
the
question
posed
by
the
issue
must
be
answered
in
the
negative.
The
next
issue,
numbered
2(b)
in
the
order,
is:
“Within
the
meaning
of
the
Income
Tax
Act
R.S.C.
1952,
e.
148,
as
amended,
2(b)
during
the
period
commencing
on
February
1,
1960
and
ending
on
December
31,
1962
did
Anne
Aaron
control
Miller
Building
Limited
?”
During
the
period
mentioned
there
were
150
issued
shares
of
Miller
Building
Limited,
75
of
which
were
held
by
Wilma,
Georgina,
Edward
and
Frank
Rawlinson
and
74
of
which
were
held
by
Anne
Aaron.
The
remaining
share
was
also
owned
by
Anne
Aaron
but
was
registered
in
the
name
of
her
husband,
Alexander
Aaron,
who
was
her
nominee
and
held
the
share
under
the
terms
of
a
trust
agreement
by
which
he
bound
himself
to
vote
according
to
her
direction.
The
articles
of
association
of
this
company
appear
to
have
consisted
of
Table
A
without
alteration
and
contained
provisions
similar
to
those
already
cited
in
describing
the
articles
of
Allied
Business
Supervisions
Limited.
Again
there
is
no
record
of
anyone
having
been
appointed
chairman
of
the
board
of
directors,
though
in
what
purport
to
be
the
minutes
of
annual
meetings
of
the
shareholders
held
in
1959,
1960,
1961
and
1962
Alexander
Aaron
is
named
as
having
been
chairman
of
the
meeting.
These
minutes
also
record
that
Alexander
Aaron,
E.
A.
Rawlinson
and
F.
F.
Rawlinson
were
annually
elected
to
be
the
directors
of
the
company.
It
is
also
recorded
in
what
purport
to
be
minutes
of
meetings
of
the
directors
held
annually
on
the
same
days
as
the
annual
meetings
of
shareholders
that
A.
A.
Aaron
was
each
year
elected
president
but
there
is
no
record
of
anyone
having
acted
as
chairman
of
such
meetings.
There
being
three
directors
Alexander
Aaron
clearly
was
not
in
a
position
to
make
himself
chairman
of
the
directors.
For
the
reasons
already
discussed,
I
am
of
the
opinion
that
it
cannot
be
said
that
Anne
Aaron
or
Alexander
Aaron
was
entitled
to
be
chairman
of
meetings
of
shareholders
and
thus
to
a
casting
vote
at
such
meetings.
Moreover,
while
Alexander
Aaron
may
have
been
bound
to
cast
the
vote
to
which
he
was
entitled
as
a
shareholder
in
accordance
with
such
directions
as
Anne
Aaron
might
give
him,
it
is
I
think
apparent
that
even
when
he
was
acting
as
chairman,
(if
indeed
there
ever
was
a
meeting),
and
even
if
he
was
entitled
to
be
the
chairman
of
shareholders
meetings
and
thus
entitled
to
a
casting
vote
in
case
of
a
tie
he
was
not
bound
to
cast
that
vote
in
accordance
with
directions
given
him
by
Anne
Aaron.
Accordingly
I
am
of
the
opinion
that
it
cannot
be
said
that
Anne
Aaron
controlled
Miller
Business
Limited
during
the
period
mentioned
in
the
issue
as
stated
and
that
the
question
posed
by
the
issue
must
be
answered
in
the
negative.
The
remaining
particular
issue,
numbered
2(e)
in
the
order,
is:
‘“Within
the
meaning
of
the
Income
Tax
Act
R.S.C.
1952,
e.
148,
as
amended,
2(c)
during
the
period
commencing
on
February
1,
1960
and
ending
on
December
11,
1961
did
Alexander
Aaron
and
Isidore
Aaron
together
control
Aaron
Building
Limited
?’’
During
the
period
mentioned
there
were
2,000
issued
shares
of
Aaron
Building
Limited,
1,000
of
which
were
held
by
Abraham
Isaac
Katz,
500
by
Alexander
Aaron
and
500
by
Isidore
Aaron,
The
articles
of
association
consisted
of
Table
A
with
certain.
amendments
and
contained
provisions
similar
to
those
already
cited
in
describing
the
articles
of
Allied
Business
Supervisions
Limited.
Again,
there
is
no
record
of
anyone
having
been
appointed
chairman
of
the
board
of
directors.
In
what
purport.
to
be
the
minutes
of
a
general
meeting
of
shareholders
held
on
December
28,
1959
it
is
recited
that
Alex
Aaron
acted
as
chairman.
In
what
purport
to
be
minutes
of
a
meeting
of
provisional
directors
held
earlier
the
same
day
it
is
also
recited
that
he
acted
as
chairman
and
in
minutes
of
a
further
meeting
of
the
directors
held
still
later
on
the
same
day
it
is
recited
that
the
meeting
was
called
to
order
with
Alex
Aaron
as
chairman,
and
that
Isidore
Aaron
was
elected
as
president.
There
is
no
record
of
minutes
of
any
further
meeting
of
shareholders
or
directors
until
December
11,
1961,
when
in
minutes
of
a
meeting
of
directors
it
is
again
recited
that
Alex
Aaron
acted
as
chairman.
For
reasons
similar
to
those
already
stated
with
respect
to
Allied
Business
Supervisions
Limited
I
am
of
the
opinion
that
it
cannot
be
said
that
Alex
Aaron
or
Isidore
Aaron
was
entitled
to
be
chairman
of
meetings
of
shareholders
and
thus
to
a
casting
vote
in
case
of
a
tie
and
therefore
that
it
cannot
be
said
that
Alexander
Aaron
and
Isidore
Aaron
together
controlled
Aaron
Building
Limited
during
the
period
mentioned
in
the
issue
as
stated.
It
follows
that
the
question
posed
by
the
issue
must
be
answered
in
th
negative.
This
brings
me
to
the
more
general
issue,
numbered
3
in
the
order
to
be
resolved
on
the
basis
of
the
answers
to
the
particular
issues
and
the
admissions
made
by
the
parties.
It
reads:
‘<3.
Are
any
one
or
more
of
the
Appellants
or
Aaron
Investments
Limited
associated
with
each
other
during
the
1961
and
1962
taxation
years
and
if
so,
which
of
the
Appellants
are
associated
with
each
other
or
with
Aaron
Investments
Limited
during
each
of
the
said
taxation
years.”’
This
poses
a
complicated
question
but
it
was
indicated
by
by
counsel
in
the
course
of
argument
that
the
results
to
follow
from
the
answers
to
the
particular
issues
on
the
alleged
associations
between
the
companies
would
not
be
contentious
once
the
answers
were
known.
As
at
present
advised
the
position
appears
to
me
to
be
as
follows.
1.
In
view
of
the
answer
to
issue
1(a),
that
Allied
Business
Supervisions
controlled
Career
Girl
Store
Limited
from
February
1,
1960
to
December
31,
1962,
these
two
corporations
were
“associated”
by
virtue
of
Section
39(4)
(a)
during
both
the
1961
and
1962
taxation
years.
2.
It
is
admitted
that
Isidore
Aaron
controlled
both
Aaron’s
(Saskatoon)
Limited
and
Morgans
Limited
in
both
the
1961
and
1962
taxation
years
and
that
they
were
associated
companies
and
on
the
basis
of
the
answer
which
I
have
given
to
issue
1(b),
that
these
two
companies
together
controlled
Aaron’s
Renfrew
Furs
Limited
from
February
1,
1960,
to
December
31,
1962,
counsel
for
the
appellants
agreed
that
these
three
corporations
were
“associated”
with
each
other
during
both
taxation
years.
3.
In
view
of
the
answers
to
:
(a)
issue
1(c),
that
Aaron’s
Ladies
Apparel
Limited
was
not
controlled
by
Isidore
Aaron
and
Alexander
Aaron
together
from
February
1,
1960
to
July
14,
1961,
and
to:
(b)
issue
1(d),
that
Aaron’s
Ladies
Apparel
Limited
was
not
controlled
by
Aaron’s
(Prince
Albert)
Limited
(which
was
admittedly
controlled
by
Alexander
Aaron),
during
the
period
from
July
14,
1962
to
December
31,
1962,
there
is
no
basis
for
holding
Aaron’s
Ladies
Apparel
Limited
associated
with
any
other
company
during
the
1961
or
1962
taxation
years.
4.
In
view
of
the
answer
to
issue
2(a),
that
Allied
Business
Supervisions
Limited
was
not
controlled
by
Alexander
Aaron
during
the
period
from
February
1,
1960
to
December
31,
1962,
there
is
no
basis
for
holding
Allied
to
have
been
associated
with
any
company
other
than
Career
Girl
Store
Limited
during
the
1961
and
1962
taxation
years.
5.
Miller
Building
Limited
and
Miller
Men’s
Wear
Limited
were
admittedly
associated
companies.
In
view
of
the
answer
to
issue
2(b),
that
during
the
period
from
February
1,
1960
to
December
31,
1962,
Miller
Building
Limited
was
not
controlled
by
Anne
Aaron
there
is
no
basis
for
holding
Miller
Building
Limited
or
Miller
Men’s
Wear
Limited
associated
with
any
of
the
other
companies
during
the
1961
and
1962
taxation
years.
Even
if
the
answer
had
been
in
the
affirmative
I
should
have
been
unable
to
see
how
the
assumed
association
with
any
company
controlled
by
Alexander
Aaron
could
be
supported
under
Section
39(4)
(c)
since
Anne
Aaron
‘‘owned’’
no
share
in
any
company
controlled
by
Alexander
Aaron
and
Alexander
Aaron
“owned”
no
share
in
Miller
Building
Limited.
6.
In
view
of
the
answer
to
issue
2(c),
that
during
the
period
from
February
1,
1960
to
December
11,
1961,
Aaron
Building
Limited
was
not
controlled
by
Alexander
Aaron
and
Isidore
Aaron
together,
there
is
no
basis
for
holding
that
company
to
have
been
associated
with
any
of
the
other
companies
during
the
1961
taxation
year.
If
these
conclusions
are
not
in
accord
with
the
views
of
counsel
or
are
insufficient
to
dispose
of
the
appeals
the
matter,
as
well
as
the
matter
of
costs,
may
be
spoken
to
when
application
is
made
to
settle
the
judgments.
The
judgments
will
not
be
pronounced
in
the
meantime.
Subject
to
this
the
appeals
will
be
allowed
with
costs
and
the
re-assessments
will
be
referred
back
to
the
Minister
for
reconsideration,
re-allocation
pursuant
to
subsections
(3)
and
(3a)
of
Section
39
of
the
Income
Tax
Act
where
necessary,
and
re-assessment
on
the
basis
of
the
conclusions
in
the
next
preceding
six
numbered
paragraphs.
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