Judson,
J
(concurred
in
by
Fauteux,
CJC,
Abbott
and
Hall,
JJ):—
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin
control
the
respondent,
Consolidated
Holding
Company
Limited.
The
issue
on
appeal
is
whether
they
also
control
Martin
&
Robertson
Limited.
If
they
do,
the
two
companies
are
associated
within
the
meaning
of
subsection
39(4)
of
the
Income
Tax
Act.
The
Tax
Appeal
Board
(reported
[1968]
Tax
ABC
561)
held
that
they
did
control
Martin
&
Robertson
Limited,
but
this
decision
was
reversed
on
appeal
to
the
Exchequer
Court
(reported
[1969]
CTC
633).
The
case
was
argued
on
the
following
agreed
statement
of
facts:
The
Appellant
(Consolidated)
is
a
company
incorporated
under
the
laws
of
the
Province
of
British
Columbia
and
having
authorized
capital
of
$200,000
divided
into
5,000
ordinary
shares
of
$10.00
each
and
150,000
redeemable
preference
shares
of
$1.00
each.
A
total
of
3,302
ordinary
shares
have
been
issued
and
these
are
held
1,651
by
Harold
D
Gavin
and
1,651
by
Robert
D
Gavin.
In
the
taxation
years
1963
and
1964
the
Minister
reassessed
the
income
of
the
Appellant
on
the
basis
that
the
Appellant
was
“associated”
in
the
taxation
years
with
Martin
&
Robertson
Limited.
The
reassessment
denies
the
Appellant
a
low
rate
of
tax
in
respect
of
the
said
years
and
assesses
tax
at
the
high
rate
by
reason
of
the
alleged
association.
Martin
&
Robertson
Limited
is
a
company
incorporated
under
the
laws
of
the
Province
of
British
Columbia
with
authorized
capital
of
$30,000.00
divided
into
30,000
ordinary
shares
of
$1.00
each.
The
issued
capital
of
the
said
company
is
held
as
follows:
Harold
D
Gavin
|
1
share
|
Robert
D
Gavin
|
1
share
|
Duncan
H
Gavin
(as
executor
for
Estate
of
A
S
Gavin)
|
3,111
shares
|
Estate
of
Duncan
Gavin,
deceased
|
13,777
shares
|
Consolidated
Holding
Co
Ltd
|
13,110
shares
|
|
30,000
shares
|
Under
the
will
of
Duncan
Gavin
deceased,
Montreal
Trust
Company,
Harold
D
Gavin
and
Robert
D
Gavin
were
appointed
executors
and
the
executors
were
directed,
after
the
termination
of
certain
life
interests,
to
divide
the
estate
into
four
equal
shares
to
be
held
as
to
three
shares
in
trust
for
the
daughters
of
the
deceased
and
as
to
-a
fourth
share
to
Robert
D
Gavin,
the
son
of
the
deceased.
In
the
taxation
years
1963
and
1964
one
of
the
life
interests
continued
to
exist
and
accordingly
the
estate
had
not
been
divided
to
provide
for
the
interests
of
the
said
daughters
and
son.
The
Appellant
objected
to
the
said
reassessments
and
has
been
notified
by
the
Minister
that
the
Minister
has
reconsidered
the
assessments
and
they
are
confirmed
on
the
ground
that
“in
the
1963
and
1964
taxation
years
the
taxpayer
was
associated
with
Martin
&
Robertson
Limited
within
the
meaning
of
subsection
(4)
of
section
39
of
the
Act”.
Two
conflicting
theories
are
put
forward
in
this
appeal.
The
taxpayer
says
that
for
the
purpose
of
deciding
the
question
of
control
under
paragraph
39(4)(b)
of
the
Income
Tax
Act,
only
the
share
register
of
the
company
in
question,
Martin
and
Robertson
Limited,
may
be
looked
at.
If
this
is
followed,
we
find
three
executors
and
trustees
(Montreal
Trust
Company,
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin)
registered
for
13,777
shares
and
Consolidated
Holding
Company,
whose
two
shareholders
are
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin,
as
to
the
13,110
shares.
On
the
other
hand,
the
Minister
contends
that
we
must
look
at
legal
realities
as
found
in
the
will
of
Duncan
Gavin,
the
15th
clause
of
which
provides
that
in
carrying
out
the
duties
of
the
trustees
save
as
aforesaid,
I
direct
that
the
views,
discretion
or
direction
of
any
two
of
my
trustees
shall
be
binding
upon
the
other
of
my
trustees.
Do
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin,
who
control
“Consolidated”,
also
control
Martin
&
Robertson
Limited
by
virtue
of
their
ability
to
combine
and
give
a
direction
to
the
third
trustee,
Montreal
Trust?
The
Exchequer
Court
held
(p.
638),
in
accordance
with
the
company’s
articles,
that
Montreal
Trust
Company
had
equal
voice
with
the
co-executors
and
may
prevent
the
two
co-executors
exercising
that
control
which
is
accorded
by
the
said
will.
In
determining
whether
a
group
of
persons
controls
a
company,
it
is
not
sufficient
in
the
case
of
trustees
who
are
registered
as
shareholders
to
stop
the
inquiry
at
the
register
of
shareholders
and
the
articles
of
association.
It
is
necessary
to
look
to
the
trust
instrument
to
ascertain
whether
one
or
more
of
the
trustees
have
been
put
in
a
position
where
they
can
at
law
direct
their
co-trustees
as
to
the
manner
in
which
the
voting
rights
attaching
to
the
shares
are
to
be
exercised.
From
the
point
of
view
of
the
company,
apart
from
protective
provisions,
trustee
shareholders
must
vote
as
a
unit.
If
they
are
not
unanimous,
the
shares
cannot
be
voted.
In
this
event,
the
control
would
be
in
“Consolidated”,
the
two
shareholders
of
which
are
the
two
Gavin
trustees.
Merely
to
look
at
the
share
register
is
not
enough
when
the
question
is
one
of
control.
The
problem
here
is
not
solved
by
a
decision
that
a
company
is
not
bound
to
see
to
the
execution
of
trusts
to
which
its
shares
are
subject
or
that
it
may
take
the
vote
of
the
first
named
trustee
on
its
share
register.
These
are
merely
protective
provisions
in
favour
of
the
company
and
do
not
touch
the
question
of
control.
Here,
if
one
looks
at
the
facts
as
a
whole,
one
finds
that
the
two
Gavins,
by
combining,
can
control
the
vote
of
the
estate
shares.
They
already
control
the
voting
of
“Consolidated”.
In
this
case,
therefore,
both
corporations
are
controlled
by
the
same
group
of
persons,
namely
the
two
Gavins.
They
are,
in
the
words
of
Abbott,
J
in
Vina
Rug
(Canada)
Ltd
v
MNR,
[1968]
SCR
193
at
197;
[1968]
CTC
at
4,
in
a
position
to
control
at
least
a
majority
of
votes
to
be
cast
at
a
general
meeting
of
shareholders.
I
do
not
think
that
the
decision
in
Inland
Revenue
Commissioners
v
J
Bibby
&
Sons
Ltd,
[1945]
1
All
ER
667,
establishes
anything
more
than
this
proposition
—
that
a
person
who
is
the
registered
owner
of
50
per
cent
of
the
shares
with
voting
rights
controls
the
company
and
that
it
is
immaterial
whether
or
not
his
exercise
of
that
voting
power
can
be
controlled
either
by
co-trustees
or
through
appropriate
proceedings
by
order
of
the
Court.
It
does
not
establish
the
proposition
that
in
a
case
such
as
this,
where
two
trustees
have
the
power
to
subject
a
third
trustee
in
the
exercise
of
the
voting
rights
of
the
shares,
one
must
disregard
that
power.
I
would
allow
the
appeal
with
costs
both
here
and
in
the
Exchequer
Court,
and
restore
the
assessments
of
the
Minister.
Spence,
J
(dissenting):—This
is
an
appeal
from
the
judgment
of
Sheppard,
J,
Deputy
Judge
of
the
Exchequer
Court
of
Canada,
pronounced
on
November
17,
1969
(reported
[1969]
CTC
633).
By
that
judgment,
Sheppard,
J
allowed
an
appeal
by
Consolidated
Holding
Company
Limited
from
the
decision
of
the
Tax
Appeal
Board
pronounced
by
Mr
W
O
Davis
on
May
24,
1968
(reported
[1968]
Tax
ABC
561).
The
question
before
Sheppard,
J
and
again
before
this
Court
was
whether
or
not
the
Consolidated
Holding
Company
Limited
was
an
“associated
company”
with
Martin
and
Robertson
Limited
within
the
meaning
of
section
39
of
the
Income
Tax
Act,
RSC
1952,
c
148,
as
amended,
and
particularly
paragraph
39(4)(b)
of
the
said
statute.
That
subsection
provides:
39.(4)
For
the
purpose
of
this
section,
one
corporation
is
associated
with
another
in
a
taxation
year
if,
at
any
time
in
the
year,
(a)
one
of
the
corporations
controlled
the
other,
(b)
both
of
the
corporations
were
controlled
by
the
same
person
or
group
of
persons,
(c)
.
.
.
Consolidated
Holding
Company
Limited
has
two
registered
shareholders,
namely,
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin,
who
each
hold
1,651
shares
and
who
are
cousins.
Therefore,
these
two
form
the
group
which
controls
Consolidated
Holding
Company
Limited.
Martin
and
Robertson
Limited
has
outstanding
30,000
shares,
the
voters
of
which
are
registered
on
the
share
records
of
the
company
as
follows:
Harold
D
Gavin
|
1
share
|
Robert
D
Gavin
|
1
share
|
Duncan
H
Gavin
(as
executor
for
Estate
of
A
S
Gavin)
|
3,111
shares
|
Estate
of
Duncan
Gavin,
deceased
|
13,777
shares
|
Consolidated
Holding
Co
Ltd
|
13,110
shares
|
|
30,000
shares
|
Both
companies
were
incorporated
under
the
Companies
Act
of
British
Columbia,
RSBC
1960,
c
67.
Duncan
Gavin,
deceased,
held
26,889
shares.
The
said
Duncan
Gavin
died
and
by
his
last
will
and
testament
appointed
Harold
D
Gavin,
Robert
D
Gavin
and
the
Montreal
Trust
Company
as
his
executors
and
trustees.
Clause
15
of
the
said
last
will
and
testament
of
Duncan
Gavin,
deceased,
provided:
15.
In
carrying
out
the
duties
imposed
upon
my
Trustees
save
as
aforesaid,
I
DIRECT
that
my
[sic]
views,
discretion
or
direction
of
any
two
of
my
Trustees
shall
be
binding
upon
the
other
of
my
Trustees.
The
problem,
therefore,
is
whether
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin
as
a
group
also
controlled
Martin
and
Robertson
Limited.
The
Tax
Appeal
Board
held
that
the
group
did
so
and
dismissed
the
appeal
of
Consolidated
Holding
Company
Limited
from
the
Minister’s
assessment.
Sheppard,
J
held
that
the
group
did
not
control
Martin
and
Robertson
Limited
and
allowed
the
Consolidated
Holding
Company
Limited
appeal
from
the
Tax
Appeal
Board.
In
so
doing,
Sheppard,
J
adopted
the
judgment
of
this
court
in
MNR
v
Dworkin
Furs
(Pembroke)
Ltd
et
al,
[1967]
SCR
223;
[1967]
CTC
50,
where
Hall,
J,
giving
the
judgment
of
the
court,
said
at
page
227
[52]:
The
word
controlled
as
used
in
this
subsection
was
held
by
Jackett,
P
to
mean
de
jure
control
and
not
de
facto
control
and
with
this
I
agree.
He
quoted
Jackett,
P
in
Buckerfield's
Limited
et
al
v
l\ZINR,
[1965]
1
Ex
CR
299
at
302;
[1964]
CTC
504
at
507,
as
follows:
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
IRC,
[1943]
1
All
ER
13,
where
Viscount
Simon,
LC,
at
p
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
MNR
v
Wrights’
Canadian
Ropes
Ltd,
[1947]
AC
109
per
Lord
Greene,
MR
at
page
118,
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.
It
is,
of
course,
plain
that
the
group
has
de
jure
control
of
Consolidated
Holding
Company
Limited
and
no
further
reference
need
be
made
to
that
issue.
The
question
is
whether
the
same
group
control
Martin
and
Robertson
Limited
in
the
fact
that
the
members
thereof
own
such
a
number
of
shares
as
carry
the
majority
of
votes
in
the
election
of
the
board
of
directors.
As
I
have
said,
between
the
two
of
them,
the
group
composed
of
Harold
Duncan
Gavin
and
Robert
Duncan
Gavin
own
26,889
of
the
30,000
shares
issued
but
of
those
26,887,
13,777
are
owned
by
them
together
with
the
Montreal
Trust
Company
as
executor
and
trustee
of
the
Estate
of
Duncan
Gavin,
deceased,
and
they
each
held
one
share
transferred
to
them
to
qualify
their
election
as
directors.
It
is
the
contention
of
the
Minister
of
National
Revenue
that
because
of
the
provisions
of
clause
15
[of
the
will]
the
same
two
members
of
the
group
may
impose
their
decision
on
the
third
executor,
the
Montreal
Trust
Company,
and
by
so
doing
control
Martin
and
Robertson
Limited
as
effectively
as
they
control
Consolidated
Holding
Company
Limited.
It
would,
of
course,
under
the
clause,
be
possible
for
either
of
the
two
cousins
to
agree
with
Montreal
Trust
Company
and
impose
their
joint
decision
upon
the
other
cousin
but,
as
Abbott,
J
said,
in
his
judgment
in
this
Court
in
Vina
Rug
(Canada)
Ltd
v
MNR,
[1968]
SCR
193
at
197;
[1968]
CTC
1
at
4:
Moreover,
in
determining
de
jure
control,
more
than
one
group
of
persons
can
be
aptly
described
as
a
“group
of
persons”
within
the
meaning
of
section
39(4)(b).
In
my
view,
it
is
immaterial
whether
or
not
other
combinations
of
shareholders
may
own
a
majority
of
voting
shares
in
either
company,
provided
each
combination
is
in
a
position
to
control
at
least
a
majority
of
votes
to
be
cast
at
a
general
meeting
of
shareholders.
The
respondent
Consolidated
Holding
Company
Limited
submits
that
there
is
no
right
to
go
behind
the
share
register
of
Consolidated
Holding
Company
Limited
and
investigate
the
character
in
which
any
shareholder
holds
the
shares
registered
in
his
name
and
that
when
three
persons
hold
shares
jointly,
in
this
case,
Harold
Duncan
Gavin,
Robert
Duncan
Gavin
and
the
Montreal
Trust
Company,
then
the
provision
in
the
will,
of
which
they
are
executors,
that
two
may
impose
their
decision
on
the
third,
is
irrelevant.
The
respondent
further
submits
that
under
the
ordinary
rules
of
corporation
law
there
must
be
unanimity
in
the
voting
of
the
said
shares
before
they
may
be
validly
voted.
The
respondent
cites
Lumbers
v
Fretz,
62
OLR
635,
where
a
judgment
of
Wright,
J
was
affirmed
on
appeal
to
the
Court
of
Appeal
((1928-29),
63
OLR
190).
Wright,
J
said
at
pages
649-650:
Counsel
for
the
defendants
has
cited
to
me
some
American
decisions
to
the
effect
that
in
such
cases
a
trustee
or
executor
is
entitled
to
vote
the
shares
when
the
other
trustees
are
not
present.
I
do
not
think
these
decisions
are
in
harmony
with
the
English
decisions.
In
Masten
and
Fraser’s
Company
Law
of
Canada,
2nd
ed,
p
528,
it
is
stated
that
“joint
holders
must
concur
in
voting,
unless
the
by-laws
provide
otherwise,”
and
that
statement
or
opinion
appears
to
be
the
logical
deduction
from
the
decisions
in
/n
re
T
H
Saunders
&
Co
Ltd,
[1908]
1
Ch
415,
and
Barton
v
London
and
North
Western
Railway
Co
(1889),
24
QBD
77;
Burns
v
Siemens
Bros
Dynamo
Works
Ltd
(No
2)
(1918),
88
LJ
Ch
21.
In
Corpus
Juris,
vol
14,
p
903,
para
1397,
it
is
stated:
“Where
there
are
two
or
more
personal
representatives,
no
one
or
more
can
vote
against
the
protest
of
the
other
or
others.”
It
is
manifest
that
the
action
of
L
O
Lumbers
and
Maria
Lumbers
in
protesting
against
the
introduction
of
the
by-laws
in
question,
and
requesting
an
adjournment
of
the
meeting,
was
an
emphatic
protest
on
their
part
against
the
other
executors
assuming
to
represent
or
vote
the
shares
of
the
estate.
I
accept
as
the
law
the
statement
already
cited
from
Masten
and
Fraser’s
book,
and
hold
that
the
votes
for
the
estate
of
James
Lumbers
in
respect
of
the
40
shares
held
jointly
as
trustees
by
Maria
Lumbers
and
W
G
Lumbers
were
improperly
cast.
It
will
be
seen
that
Wright,
J
cited
as
his
authority,
inter
alia,
Masten
and
Fraser’s
Company
Law
of
Canada,
3rd
ed.
The
last
edition
of
that
outstanding
text
is
Fraser
and
Stewart,
5th
ed,
and
at
page
663
the
learned
author
in
turn
uses
the
Lumber
v
Fretz
decision
as
authority
for
his
proposition
in
these
words:
An
executor,
administrator,
committee,
guardian
or
trustee
may
vote
in
respect
of
any
shares
registered
in
his
name.
Where
there
are
several
execu-
tors
all
must
concur
in
voting
the
shares
of
the
estate
they
represent:
Lumbers
v
Fretz
(1928),
62
OLR
635
at
650,
aff’d
(1928),
63
OLR
190
(CA).
In
my
view,
the
proposition
is
sound
and,
despite
the
provisions
of
clause
15
of
the
will,
the
company
is
entitled
to
require
the
unanimous
decision
of
the
three
executors
in
the
voting
of
the
block
of
shares
in
their
names
as
executors
and
trustees
of
Duncan
Gavin.
The
question
has
been
considered
in
several
decisions
in
the
United
Kingdom
dealing
with
statutes
the
wording
of
which
differs
but
the
intention
is
the
same
as
paragraph
39(4)(b)
of
the
Income
Tax
Act.
Inland
Revenue
Commissioners
v
J
Bibby
and
Sons
Ltd,
a
decision
of
the
House
of
Lords,
[1945]
1
All
ER
667,
dealt
with
a
section
of
the
Finance
(No
2)
Act
of
1939
which
provided
in
subsection
13(3)
that
a
company
was
entitled
to
have
its
standard
profits
increased
by
the
percentage
of
the
increase
in
its
capital
and
in
subsection
(9)
permitted
that
increase
to
come
to
10%
provided
that
the
directors
had
a
“controlling
interest”
in
the
company.
There
were
eight
directors
who
were
the
beneficial
owners
and
registered
holders
of
209,000-odd
ordinary
shares
out
of
the
500,000
issued.
Three
of
those
directors
were
also
registered
holders
of
another
57,500
shares
which
they
held
as
trustees
of
their
sister’s
marriage
settlement.
The
Commissioners
contended
that
those
latter
shares,
of
which
the
said
three
directors
were
not
the
beneficial
owners
although
they
were
the
registered
owners,
could
not
be
counted
in
determining
whether
the
directors
had
a
controlling
interest.
The
House
of
Lords
unanimously
found
in
favour
of
the
company.
Lord
Russell
of
Killowen
said
at
page
669:
My
Lords,
I
agree
with
the
view
of
the
Court
of
Appeal.
When
the
section
speaks
of
directors
having
a
controlling
interest
in
a
company,
what
it
is
immediately
concerned
with
in
using
the
words
‘controlling
interest”
is
not
the
extent
to
which
the
individuals
are
beneficially
interested
in
the
profits
of
the
company
as
a
going
concern
or
in
the
surplus
assets
in
-a
winding
up,
but
the
extent
to
which
they
have
vested
in
them
the
power
of
controlling
by
votes
the
decisions
which
will
bind
the
company
in
the
shape
of
resolutions
passed
by
the
shareholders
in
general
meeting.
In
other
words,
the
test
which
is
to
exclude
a
company’s
business
from
subsect.
(9)(a)
and
include
it
in
(9)(b),
is
the
voting
power
of
its
directors,
not
their
beneficial
interest
in
the
company.
For
the
purpose
of
such
a
test
the
fact
that
a
vote-carrying
share
is
vested
in
a
director
as
trustee
seems
immaterial.
The
power
is
there,
and
though
it
be
exercised
in
breach
of
trust,
or
even
in
breach
of
an
injunction,
the
vote
would
be
validly
cast
vis-a-vis
the
company,
and
the
resolution
until
rescinded
would
be
binding
on
it.
Lord
Macmillan
said
at
pages
670-671:
In
my
opinion
the
Court
of
Appeal
rightly
rejected
the
contention
of
the
Inland
Revenue
Commissioners.
The
question
whether
the
directors
of
the
respondent
company
have
the
control
of
it
by
their
voting
power
as
shareholders
must
in
my
view
be
determined
by
the
memorandum
and
articles
of
the
company
and
by
the
register
of
shareholders.
By
the
constitution
of
the
company,
as
I
have
already
mentioned,
the
voting
power
is
vested
in
the
ordinary
shareholders
and
the
register
shows
that
the
directors
hold
a
majority
of
these
shares.
As
was
said
by
Jessel,
MR,
in
Pulbrook
v
Richmond
Consolidated
Mining
Company
(1878),
9
Ch
D
610
at
615:
“The
company
cannot
look
behind
the
register
as
to
the
beneficial
interest
but
must
take
the
register
as
conclusive
and
cannot
inquire
.
.
.
into
the
trusts
affecting
the
shares.”
And
again
on
the
latter
page:
Suppose
that
all
the
shares
held
by
the
directors
in
the
present
case
were
held
by
them
as
trustees,
could
it
be
said
that
they
did
not
control
the
company?
If
so,
then
in
whose
hands
was
the
control
of
the
company?
Lord
Porter
said
at
page
672:
Nevertheless
for
good
or
ill
the
trustee
like
the
beneficial
owner
controls,
though
if
his
powers
be
wrongly
exercised
they
may
in
some
way
or
other
be
capable
of
being
challenged.
In
British
American
Tobacco
Co
Limited
v
Inland
Revenue
Commissioners,
[1943]
AC
335,
the
House
of
Lords
had
agreed
that
when
one
company
held
the
majority
of
the
shares
in
another
then
one
could
look
at
the
shareholding
in
the
first-named
company
in
order
to
determine
if
a
group
controlled
the
second
company
and
other
companies.
The
apparent
clash
between
that
decision
and
the
decision
in
Bibby
(supra)
was
explained
by
Lord
Evershed,
MR
in
Inland
Revenue
Commissioners
v.
Silverts
Ltd,
[1951]
Ch
521,
when
he
pointed
out
that
the
control
may
be
exercised
either
directly
or
indirectly
through
the
agency
of
another
company.
The
Silverts
case
is
interesting
in
the
present
situation
as
there
of
four
directors
one,
S
J
Silvert,
was
the
registered
holder
of
all
the
"B"
shares.
No
other
director
was
the
registered
holder
of
either
“A”
or
"B"
shares.
The
“A”
and
"B"
shares
conferred
equal
voting
rights
on
their
holders
and
there
was
no
provision
for
a
casting
vote.
The
"A"
shares
were
all
the
subject
matter
of
a
settlement
in
favour
of
an
infant.
By
the
settlement,
the
National
Provincial
Bank
Limited
was
appointed
a
custodian
trustee
but
two
of
the
other
directors
were
appointed
managing
trustees.
The
question
was
whether
those
two
directors
together
with
the
other
director
S
J
Silvert
controlled
the
company.
The
Court
of
Appeal
held
that
they
did
not
do
so
and
that
the
National
Provincial
Bank
Limited
being
the
registered
shareholder
of
all
the
“A”
shares
excluded
the
two
directors
from
being
considered
as
controlling
the
company
despite
the
fact
that
they
were
managing
trustees
of
the
settlement.
At
page
526,
Lord
Evershed,
MR
said:
The
distinction
(between
a
custodian
and
bare
trustee)
is,
for
practical
purposes,
perhaps
a
fine
one;
but
it
is
a
real
one.
Indeed,
it
has
not
been
seriously
contended
before
us
on
the
part
of
the
Crown
that
the
bank
in
the
present
case
can
be
properly
regarded
as
a
bare
trustee
in
the
sense
intended
by
the
House
of
Lords
in
the
Bibby
case.
The
situation
in
the
Silverts
case
(supra)
would
seem
to
be
very
close
to
the
present
one.
By
the
statute
under
which
the
trustees
were
appointed,
the
Public
Trustee
Act,
1906,
in
section
4,
paragraph
(2)(b),
all
powers
and
discretions
remain
vested
in
the
managing
trustees,
but
by
paragraph
(d)
the
custodian
trustee
was
not
bound
to
give
effect,
for
example,
by
voting
in
all
cases
to
the
wishes
and
effects
of
the
managing
trustees.
In
my
view,
however,
the
matter
is
dealt
with
authoritatively
in
Barclays
Bank
Ltd
v
Inland
Revenue
Commissioners,
[1961]
AC
509.
In
that
case,
the
deceased
person
held
at
his
death
1,100
shares
in
a
company.
By
a
settlement
made
nineteen
years
before,
he
had
settled
another
3,650
shares
of
the
company
on
a
trust
for
his
wife
and
children
taking
no
beneficial
interest
himself.
In
the
settlement
deed,
he
named
four
trustees
and
he
was
the
first
of
those
named.
Under
Table
A
of
the
Companies
(Consolidation)
Act,
1908,
which
had
been
incorporated
in
the
company’s
articles
of
association,
being
the
first-named
of
the
four
trustees,
the
deceased
exercised
the
power
of
voting
the
shares.
The
two
blocks
together
were
a
majority
of
the
issued
share
capital
of
the
company.
It
was
held
that
the
deceased
had
“control
of
the
company”
within
the
meaning
of
the
relevant
sections
of
the
Finance
:Act,
1940.
Five
members
of
the
House
of
Lords
sat
on
the
appeal,
Viscount
Simonds,
Lord
Cohen
and
Lord
Keith
of
Avonholm
holding
that
a
person
who
had
the
power
by
exercise
of
voting
rights
in
accordance
with
the
constitution
of
a
company
to
carry
a
resolution
in
general
meeting
had
control
for
the
purpose
of
the
subsection
and
that
it
was
irrelevant
that
the
shareholder
who
had
the
apparent
control
might
himself
be
amenable
to
some
external
control.
Lord
Reid
dissented
and
Lord
Denning
concurred
only
because
the
settlor
was
the
person
who
held
the
joint
holding
having
created
it
in
his
own
disposition.
The
view
of
the
majority
would
seem
to
apply
exactly
in
the
present
case.
There,
the
settlor
being
the
first-
named
trustee
voted
by
virtue
of
the
provisions
of
the
articles
of
the
company
despite
the
fact
that
he
might
have
been
amenable
to
control
by
the
other
three
trustees.
Here,
by
virtue
of
corporations
law,
the
three
executors
and
trustees
must
agree
on
the
voting
of
the
shares
despite
the
fact
that
by
virtue
of
the
clause
in
the
will
two
of
the
three
might
control
the
decision
of
the
third.
The
words
of
subsection
55(1)
of
the
Finance
Act,
1940,
with
which
the
case
was
concerned,
were
“the
deceased
had
the
control
of
the
company
at
any
time
during
the
five
years
ending
with
his
death”.
The
difference
between
those
words
and
“controlling
interest
in”
was
stressed
by
the
appellants.
Lord
Cohen,
at
page
536,
said:
If
that
were
all,
I
should
be
content
to
say
that
it
seems
to
me
to
be
a
distinction
without
a
difference,
.
.
.
I
have
the
same
reaction
as
to
any
difference
between
the
words
in
the
Bibby
case
(supra)
and
the
words
in
the
present
statute.
The
latter
are
simply
“both
of
the
companies
were
controlled
by
the
same
person
or
group
of
persons”.
Those
are
ordinary
English
words
and,
in
my
view,
should
be
interpreted
as
they
have
been
in
the
cases
which
I
have
cited.
Indeed,
it
would
be
very
difficult
to
carry
on
the
administration
of
corporate
affairs
on
any
other
basis.
A
shareholders
register
well
nigh
has
to
be
the
sole
basis
upon
which
the
voting
rights
of
shares
can
be
determined
and,
therefore,
the
sole
basis
for
deciding
who
controls
a
company.
One
could
think
of
a
hundred
situations
which
would
make
any
other
system
impossible,
only
one
of
which
was
mentioned
by
Lord
Macmillan
in
Bibby
at
page
671.
For
these
reasons,
I
would
dismiss
the
appeal
with
costs.