GIBSON,
J.:—These
appeals
were
tried
together
because
the
same
evidence
and
argument
was
applicable
to
each.
The
matter
for
decision
in
each
appeal
is
whether
each
of
the
appellants
was
associated
with
a
company
known
as
Stradwick’s
Limited
within
the
meaning
of
Section
39(2)
of
the
Income
Tax
Act.
Specifically,
the
determination
of
which
‘‘group
of
persons’’
of
two
possible
groups
controlled
this
company
within
the
meaning
Section
39(4)
(b)
of
the
Act
during
the
taxation
years
1961
and
1962
is
the
issue
in
each
appeal.
In
each
case
the
assessments
appealed
from
were
made
on
the
assumption
that
each
of
the
appellant
companies
was
associated
with
each
other
and
each
was
also
associated
with
Stradwick’s
Limited
and
Stradwick
Industries
Limited.
The
owners
and
the
number
of
shares
of
all
the
outstanding
common
shares
(and
there
were
no
other
voting
shares
issued
in
any
of
these
companies)
at
all
material
times
of
each
appellant
company
and
of
these
two
other
companies
were
as
follows:
Floor
&
Wall
Covering
Distributors
Limited
|
J.
C.
Stradwick,
Sr.
|
nil
|
|
J.
C.
Stradwick,
Jr.
|
2,239
|
|
W.
L.
Stradwick
|
2,239
|
|
H.
D.
McGilvery
|
1,121
|
|
Others
|
4,401
|
|
Total
issued
shares
|
10,000
|
|
Vina-Rug
(Canada)
Limited
|
|
|
J.
C.
Stradwick,
Sr.
|
nil
|
|
J.
C.
Stradwick,
Jr.
|
6,133
|
|
W.
L.
Stradwick
|
6,133
|
|
H.
D.
MeGilvery
|
6,133
|
|
Stradwick’s
Limited
|
5,250
|
|
Others
|
16,351
|
|
Total
issued
shares
|
40,000
|
|
Stradwick
s
Limited
|
|
|
J.
C.
Stradwick,
Sr.
|
12
|
|
J.
C.
Stradwick,
Jr.
|
10
|
|
W.
L.
Stradwick
|
10
|
|
H.
D.
McGilvery
|
8
|
|
Total
issued
shares
|
40
|
Stradwick
Industries
Limited
|
J.
C.
Stradwick,
Sr.
|
25,500
|
|
J.
C.
Stradwick,
Jr.
|
nil
|
|
W
.L.
Stradwick
|
nil
|
|
H.
D.
MeGilvery
|
9,900
|
|
Others
|
15,000
|
|
Total
issued
shares
|
50,000
|
The
J.
C.
Stradwick,
Sr.
referred
to
is
the
father
of
J.
C.
Stradwick,
Jr.
and
W.
L.
Stradwick.
H.
D.
McGilvery
is
a
stranger
in
the
tax
sense,
and
is
and
has
been
for
many
years
a
business
associate
of
Stradwick
Sr.
and
the
sons.
The
others
referred
to
are
strangers
in
the
tax
sense.
Considering
the
business
activities
of
all
of
these
companies
together
during
the
relevant
period
such
could
be
described
as
the
manufacture
and
sale
at
both
the
wholesale
and
retail
levels
of
floor
and
wall
tile
and
many
allied
products
used
as
building
materials.
The
factual
questions
to
be
decided
are
two,
namely:
(1)
was
Stradwick’s
Limited
at
the
material
times
controlled
by
(a)
the
two
Stradwick
sons
and
McGilvery,
as
submitted
by
the
respondent,
or
(b)
by
Stradwick
Sr.
and
his
two
sons,
as
submitted
by
the
appellants;
and
(2)
depending
on
which
group
referred
to
in
(1)
above
is
chosen,
whether
such
group
is
a
‘‘group
of
persons’’
within
the
meaning
of
Section
39(4)
(b)
of
the
Income
Tax
Act.
As
judicially
decided
in
this
court
in
such
cases
as
Bucker-
field’s
Limited
et
al
v.
M.N.R.,
[1965]
1
Ex.C.R.
229;
[1964]
C.T.C.
504;
Yardley
Plastics
of
Canada
v.
M.N.R.,
[1966]
C.T.C.
215;
and
Aaron’s
(Prince
Albert)
Limited
et
al
v.
M.N.R.,
[1966]
C.T.C.
330
“control”
in
this
subsection
means
the
right
to
control
by
ownership
of
voting
shares,
not
de
facto
control.
What
is
done
at
any
time
with
such
right
to
control
is
therefore
not
necessarily
material.
In
this
connection
the
appellants,
as
they
were
entitled
to
do,
following
the
dictum
of
Noél,
J.
in
Yardley
Plastics
of
Canada
Limited
v.
M.N.R.,
above
cited,
sought
to
establish
in
evidence
that
the
‘‘group
of
persons’’
consisting
of
Stradwick
Sr.
and
the
two
sons,
as
opposed
to
the
group
consisting
of
the
Stradwick
sons
and
McGilvery,
did
in
fact
control
Stradwick’s
Limited.
In
my
opinion
the
appellants
failed
to
do
so.
In
my
opinion
also,
without
detailing
the
indicia
which
are
clear
from
the
evidence,
each
of
these
groups
of
persons
is
a
‘‘group
of
persons’’
within
the
meaning
of
Section
39(4)(d)
[sic]
of
the
Act,
in
that
they
had
at
all
material
times
a
sufficient
common
connection
as
to
be
in
a
position
to
exercise
control
of
Stradwick’s
Limited.
In
the
result
therefore,
the
appellant
has
not
established
that
the
assumption
of
the
respondent
is
wrong,
namely
that
the
‘‘group
of
persons’’
consisting
of
the
Stradwick
sons
and
Me-
Gilvery
at
material
times
controlled
Stradwick’s
Limited
within
the
meaning
of
Section
89
(4)
(b)
of
the
Act;
or
that
because
of
this,
that
this
group
of
persons
by
this
indirect
method
also
controlled
Vina-Rug
(Canada)
Limited.
Whether
or
not
within
the
meaning
of
Section
39(4)
(d)
[sie]
of
the
Act
Stradwick
Sr.
and
the
Stradwick
sons,
also
during
the
same
material
times,
controlled
Stradwick’s
Limited,
I
do
not
have
to
decide,
but
it
is
clear
from
the
circumstances
of
this
matter
that
such
is
the
ease.
In
the
result
therefore
each
appellant
falls
within
the
provisions
of
Section
39(2)
of
the
Act
and
is
not
entitled
to
get
the
greater
advantage
from
the
lower
tax
rate
provided
in
Section
39(1)
(a)
of
the
Act.
The
appeals
are
dismissed
with
costs.
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