Addy,
J
[TRANSLATION]:—Since
the
issue
in
the
three
above-mentioned
actions
turns
not
only
on
common
evidence
but
on
the
same
statutory
provisions
and
legal
principles,
in
accordance
with
the
earlier
order
of
the
Associate
Chief
Justice
and
by
consent
of
the
parties,
I
tried
them
concurrently.
The
problem
is
one
of
assessment
for
income
tax
purposes.
The
taxation
years
in
question
are:
Mars
Finance
Inc,
1971
and
1972;
Les
Immeubles
Perron
Limitée,
1971
and
1973;
and
J
Euclide
Perron
Limitée,
1972.
The
Court
must
determine
whether
the
three
defendants
were
associated
for
the
taxation
years
in
issue,
pursuant
to
subsection
39(5)
of
the
old
Act,
applicable
to
taxation
year
1971
and
subsection
256(2)
of
the
new
Act,
applicable
to
taxation
years
1972
and
1973.
In
each
case,
the
Minister
of
National
Revenue
reassessed
defendants
and
found
them
to
be
associated.
The
Tax
Review
Board
reversed
the
Minister’s
decisions,
allowing
the
appeals
brought
by
the
defendants.
The
appeals
at
Bar
are
brought
by
way
of
trial
de
novo
against
these
decisions
of
the
Tax
Review
Board.
Facts
There
is
little
dispute
as
to
the
principal
facts,
which
were
admitted
by
the
parties.
They
are
summarized
as
follows:
(TRANSLATION)
During
the
1971,
1972
and
1973
taxation
years,
the
voting
shares
of
the
aforesaid
corporations
were
held
by
the
following
persons:
(a)
J
Euclide
Perron
Ltée:
|
—
Fernand
Perron
|
|
33%%
|
|
-Georges-Henri
Perron
|
33
/3%
|
|
—André
Perron
|
|
33%%
|
|
(These
three
persons
are
brothers.)
|
|
|
(b)
Les
Placements
du
Moulin
Ltée:
|
|
|
—
Fernand
Perron
|
|
33%%
|
|
-Georges-Henri
Perron
|
33%%
|
|
—André
Perron
|
|
33%%
|
|
(c)
Les
Immeubles
Perron
Ltée:
|
|
|
—
Mrs
J
Euclide
Perron
|
1%
|
|
—
Madeleine
Perron
\
|
50.2%
|
|
Colette
Perron
|
1
|
|
|
Monique
Perron
|
>
|
49.2%
|
|
Michele
Perron
|
|
|
|
|
Thérèse
Perron
|
/
|
|
|
—
Les
Placements
du
Moulin
Ltée
|
49.8%
|
|
(Madeleine,
Colette,
Monique,
Michele
and
Thérèse
|
|
|
Perron
are
the
sisters
of
Fernand,
Georges-Henri
and
|
|
|
André
Perron,
and
Mrs
J
Euclide
Perron
is
the
mother
|
|
|
of
these
persons.)
|
|
|
(d)
Mars
Finance
Inc:
|
|
|
—the
three
Perron
brothers
|
16.21%
|
|
—the
children
of
Georges-Henri
Perron
|
0.33%
|
|
—the
five
Perron
sisters
|
3.04%
|
|
—J
Euclide
Perron
Ltée
|
20.21
%
|
|
—
Les
Placements
du
Moulin
Ltée
|
1.76%
|
|
—
Les
Immeubles
Perron
Ltée
|
10.32%
|
|
—outsiders
|
|
48.13%
|
Additionally,
with
consent
of
the
parties
but
subject
to
earlier
objections
by
counsel
for
the
Department
to
certain
questions
put
by
counsel
for
the
defendant
corporations,
the
transcript
of
the
testimony
before
the
Tax
Review
Board
was
submitted
in
evidence
by
the
defendants
instead
of
calling
the
witnesses
to
testify
viva
voce.
It
was
further
agreed
that,
for
all
practical
purposes,
it
would
be
more
appropriate
to
refer
only
to
the
sections
of
the
new
Act,
since
the
sections
relating
to
the
case
in
the
new
Act
and
the
old
Act
are
identical
from
every
standpoint,
except
that
paragraph
256(1)(e)
of
the
new
Act
requires
that
one
of
the
two
related
groups
be
owner
of
at
least
ten
per
cent
of
the
shares
of
one
class,
while
under
paragraph
39(4)(e)
of
the
old
Act
it
was
only
necessary
to
own
one
share.
In
view
of
the
disposition
of
the
shares
in
issue
in
this
action,
counsel
for
the
parties
were
also
in
agreement
that
in
the
case
at
Bar
the
difference
between
the
new
Act
and
the
old
Act
could
not
in
any
way
affect
the
outcome.
Act
It
is
accordingly
only
necessary
to
cite
the
relevant
sections
of
the
new
Act.
They
read
as
follows:
251.(2)
For
the
purposes
of
this
Act
“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)
and
(ii);
(c)
any
two
corporations
(i)
if
they
are
controlled
by
the
same
person
or
group
of
persons
.
.
.
(4)
In
this
Act,
(a)
“related
group”
means
a
group
of
persons
each
member
of
which
is
related
to
every
other
member
of
the
group;
and
(5)
For
the
purposes
of
subsection
(2)
and
section
256,
(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;
(6)
For
the
purposes
of
this
Act,
(a)
persons
are
connected
by
blood
relationship
if
one
is
the
child
or
other
descendant
of
the
other
or
one
is
the
brother
or
sister
of
the
other;
256.(1)
For
the
purposes
of
this
Act
one
corporation
is
associated
with
another
in
a
taxation
year
if
at
any
time
in
the
year,
(e)
each
of
the
corporations
was
controlled
by
a
related
group
and
each
of
the
members
of
one
of
the
related
groups
was
related
to
all
of
the
members
of
the
other
related
group,
and
either
of
the
related
groups
owned
directly
or
indirectly,
in
respect
of
each
corporation,
not
less
than
10%
of
the
issued
shares
of
any
class
of
the
capital
stock
thereof.
(2)
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
Act,
be
deemed
to
be
associated
with
each
other.
The
main
provision
by
which
the
question
at
issue
must
be
resolved
is
certainly
paragraph
256(1)(e).
II
seems
clear
from
reading
this
section
that
three
conditions
must
be
present
for
corporations
to
be
regarded
as
associated
under
it:
Firstly,
each
corporation
must
be
controlled
by
a
related
group;
Secondly,
each
member
of
a
related
group
must
be
related
to
all
members
of
the
other
related
group;
Thirdly,
one
of
the
two
related
groups
must
be
owner
directly
or
indirectly,
in
respect
of
each
corporation,
of
not
less
than
ten
per
cent
of
the
issued
shares
of
any
class
of
the
capital
stock
thereof.
Observations
and
Conclusions
It
is
clear
that
the
three
Perron
brothers,
Mrs
J
Euclide
Perron,
their
mother,
and
the
five
Perron
sisters
are
all
related
persons
under
paragraphs
(2)(a)
and
(6)(a)
of
section
251
and
that,
in
a
corporation,
they
necessarily
form
between
themselves
part
of
a
related
group
under
subsection
(4)(a)
of
the
same
section.
Is
J
Euclide
Perron
Limitée
associated
with
Mars
Finance
Inc?
I.
Re:
First
condition
of
paragraph
256(1)(e)
(a)
J
Euclide
Perron
Limitée
is
100%
controlled
by
a
related
group,
the
three
Perron
brothers.
(b)
Is
Mars
Finance
Inc
controlled
by
a
related
group?
1.
Leaving
aside
for
present
purposes
the
children
of
Georges-Henri
Perron,
the
three
Perron
brothers
are
related
to
the
five
Perron
sisters
by
blood
relationship
and
are
related
to
J
Euclide
Perron
Limitée
in
accordance
with
subparagraphs
251(2)(b)(i)
and
(il),
since
each
of
them
is
a
member
of
a
related
group
controlling
this
corporation.
2.
For
the
same
reasons,
the
three
Perron
brothers
are
also
related
to
Les
Placements
du
Moulin
Ltée.
3.
Mrs
Perron
and
the
five
Perron
sisters
form
a
related
group,
and
since
together
they
hold
50.2%
of
the
voting
shares
of
Les
Immeubles
Perron
Limitée,
these
persons
form
a
related
group
which
is
deemed
to
control
this
corporation
under
paragraph
251(5)(a);
as
the
three
Perron
brothers
are
related
to
each
person
who
is
a
member
of
the
related
group
controlling
Les
Immeubles
Perron
Limitée,
they
are
therefore
related
to
this
corporation
within
the
meaning
of
subparagraphs
251
(2)(b)(ii)
and
(iii).
4.
The
five
Perron
sisters
are
related
to
J
Euclide
Perron
Limitée
and
to
Les
Placements
du
Moulin
Ltée,
because
these
two
corporations
are
controlled
by
their
three
brothers
and,
thus,
are
all
members
of
a
related
group.
5.
The
five
Perron
sisters
are
also
related
to
Les
Immeubles
Perron
Limitée,
because
they
are
each
members
of
a
related
group
controlling
this
corporation
(subparagraphs
251
(2)(b)(ii)
and
(iii)).
6.
J
Euclide
Perron
Limitée
is
related
to
Les
Placements
du
Moulin
Limitée,
because
they
are
both
controlled
by
the
three
Perron
brothers
(subparagraph
251
(2)(c)(i)).
7.
J
Euclide
Perron
Limitée
is
also
related
to
Les
Immeubles
Perron
Limitée
for
the
following
reasons:
the
three
Perron
brothers
are
members
of
a
related
group
which
controls
J
Euclide
Perron
Limitée,
and
this
company
is
therefore
related
to
them;
Les
Immeubles
Perron
Limitée
is
also
related
to
the
three
Perron
brothers
(See
paragraph
3
above).
These
two
corporations
are
accordingly
related
under
subparagraph
251
(2)(b)(ii)
and
(iii).
8.
Les
Immeubles
Perron
Limitée
and
Les
Placements
du
Moulin
Limitée
are
deemed
to
be
related,
since
they
are
both
related
to
J
Euclide
Perron
Limitée
(see
paragraphs
6
and
7
above).
9.
Accordingly,
one
must
conclude
that
Mars
Finance
Inc
is
controlled
by
a
related
group,
this
group
consisting
of
the
three
Perron
brothers
and
the
five
sisters,
J
Euclide
Perron
Limitée,
les
Placements
du
Moulin
Ltée
and
Les
Immeubles
Perron
Limitée
holding
together
more
than
50%
of
the
voting
shares
of
Mars
Finance
Inc.
10.
The
first
condition
of
paragraph
256(1)(e)
is
therefore
met
for
J
Euclide
Perron
Limitée
and
Mars
Finance
Inc.
II.
Re:
Second
condition
of
paragrah
256(1)(e)
It
will
be
seen
that
each
member
of
the
related
group
which
controls
J
Euclide
Perron
Limitée,
in
particular
the
three
Perron
brothers,
is
related
to
all
members
of
the
related
group
controlling
Mars
Finance
Inc
(see
paragraphs
l-(b)1,
2
and
3
above).
Therefore,
the
second
condition
of
paragraph
256(1)(e)
is
also
satisfied
regarding
these
two
corporations.
III.
Re:
Third
condition
of
paragraph
256(1)(e)
Since
one
of
the
related
groups,
namely,
that
of
the
three
Perron
brothers,
is
the
owner
of
100%
of
the
shares
of
J
Euclide
Perron
Limitée
and
of
16.21
%
of
the
shares
of
Mars
Finance
Inc,
the
third
condition
of
paragraph
256(1
)(e)
is
met.
IV.
Conclusion
J
Euclide
Perron
Limitée
is
therefore
associated
with
Mars
Finance
Inc,
since
all
the
conditions
of
paragraph
256(1)(e)
have
been
met.
Is
Les
Immeubles
Perron
Limitée
associated
with
Mars
Finance
Inc?
A.
First
condition
of
paragraph
256(1)(e)
Les
Immeubles
Perron
Limitée
is
controlled
by
a
related
group
(see
paragraph
l-(b)3
above)
and
Mars
Finance
Inc
is
also
controlled
by
a
related
group
(see
I-(b)9
above).
It
follows
that
the
first
condition
of
paragraph
251(1)(e)
is
therefore
met
with
regard
to
these
two
corporations.
B.
Second
condition
of
paragraph
256(1)(e)
1.
The
five
Perron
sisters
are
related
to
all
members
of
the
related
group
which
controls
Mars
Finance
Inc
since
for
the
reasons
already
stated,
they
are
related
to
the
three
Perron
brothers,
to
J
Euclide
Perron
Limitée
and
to
Les
Placements
du
Moulin
Ltée
(see
paragraph
l-(b)4
above).
They
are
also
related
to
Les
Immeubles
Perron
Limitée
(see
paragraph
l-(b)5
above).
2.
Mrs
J
Euclide
Perron
isof
course
related
to
her
children,
thatis,thethree
Perron
brothers
and
five
sisters;
she
is
related
to
J
Euclide
Perron
Limitée
within
the
meaning
of
subparagraphs
251
(2)(e)(ii)
and
(iii),
since
she
is
related
to
her
three
sons
and
each
of
them
is
a
member
of
a
related
group
controlling
this
company,
and
she
is
related
to
Les
Placements
du
Moulin
Ltée
for
the
same
reasons.
Finally,
under
subparagraph
251
(2)(b)(ii),
she
is
related
to
Les
Immeubles
Perron
Limitée
as
a
member
of
a
related
group
controlling
this
corporation
(see
I-3
above).
The
question
of
whether
the
second
condition
of
paragraph
256(i)(e)
is
met
in
the
case
of
Les
Immeubles
Perron
Limitée
and
Mars
Finance
Inc
must
accordingly
be
answered
in
the
affirmative.
C.
Third
condition
of
paragraph
256(1)(e)
This
condition
was
also
met,
since
the
related
group
controlling
Mars
Finance
Inc,
composed
of
the
three
brothers,
the
five
sisters
and
the
three
other
corporations,
owns,
in
respect
of
Mars
Finance
Inc
as
well
as
Les
Immeubles
Perron
Limitée,
at
least
10%
of
the
issued
shares
of
each
of
these
two
corporations,
and
it
must
be
accordingly
be
concluded
that,
since
the
three
conditions
of
this
section
were
met,
these
two
corporations
are
also
associated.
Are
the
three
defendants
associated?
Since
J
Euclide
Perron
Limitée
is
associated
with
Mars
Finance
Inc,
and
the
latter
is
also
associated
with
Les
Immeubles
Perron
Limitée,
the
three
are
deemed
to
be
associated
under
the
provisions
of
paragraph
256(2)(e).
De
Facto
Control
v
De
Jure
Control
Counsel
for
the
defendant
put
forward
the
argument
that
de
facto
control
of
Les
Immeubles
Perron
Limitée
was
not
exercised
by
the
group
composed
of
Les
Placements
du
Moulin
Ltée
or
in
concert
with
the
mother
and
five
sisters,
but
only
by
the
latter.
It
can
be
seen
from
examining
the
transcript
of
the
evidence
submitted
to
the
Tax
Review
Board
that
a
group
composed
of
the
Perron
sisters
and
the
mother,
which
held
50.2%
of
the
shares,
was
de
facto
responsible
for
making
the
policy
of
Les
Immeubles
Perron
Limitée.
Before
dying,
J
Euclide
Perron
apparently
expressly
distributed
shares
in
his
various
corporations
so
as
to
ensure
that
the
boys
would
be
responsible
for
construction
and
the
daughters
and
mother
could
enjoy
the
interest
and
the
benefits
of
reliable
investments
in
Les
Immeubles
Perron
Limitée.
He
accordingly
organized
the
distribution
of
shares
so
that
the
latter
could
control
the
corporation.
The
brothers
apparently
tried
on
several
occasions,
but
without
success,
to
impose
on
this
corporation
a
policy
of
long-term
investments
or
investments
without
an
immediate
or
regular
return.
The
sisters
and
mother
always
objected
to
this
policy,
preferring
a
regular,
immediate
and
certain
return.
The
brothers
subsequently
tried
to
acquire
the
sisters’
shares.
In
order
not
to
lose
control,
the
latter
always
refused
to
sell
them.
So
that
they
could
carry
out
the
reinvestment
policies
which
Les
Immeubles
Perron
Limitée
refused
to
undertake,
the
brothers
were
obliged
to
create
Les
Placements
du
Moulin
Ltée.
The
legal
question
which
must
be
resolved
in
the
case
at
Bar
is
whether
a
group
composed
of
individuals
and
a
corporation,
all
forming
a
related
group
within
the
meaning
of
section
251,
is
deemed
in
law
to
control
that
corporation,
despite
the
fact
that
the
members
of
this
group
are
not
agreed
on
the
exercise
of
that
control,
and
that
de
facto
control
of
the
general
policy
of
the
business
is
always
exercised
by
a
limited
and
very
specific
number
of
the
general
group
and
in
opposition
to
the
other
members
of
the
group.
In
other
words,
in
the
case
at
Bar,
should
the
dissenting
members
be
regarded
at
law
as
excluded
from
the
controlling
group
in
view
of
the
actual
Situation?
Counsel
for
the
defendants
referred
to
certain
statements
by
Noël,
J
in
Yardley
Plastics
of
Canada
Ltd
v
MNR,
[1966]
Ex
CR
1027;
[1966]
CTC
215;
66
DTC
5183
in
support
of
his
argument
that
de
facto
control
should
prevail
even
in
a
case
where
two
corporations
might
be
considered
associated
in
the
strict
sense
of
subsection
251(1)(2).
He
cited
the
following
extract
at
p
1037
of
the
Yardley
case:
I
do
not
believe,
as
submitted
by
counsel
for
the
Minister,
that
the
latter
is
allowed
to
choose
out
of
several
possible
groups
any
aggregation
holding
more
than
50%
of
the
voting
power,
even
if
the
members
of
the
group
are
common
shareholders
in
both
corporations
and
that
such
a
group
then
becomes
irre-
buttably
deemed
to
be
the
controlling
group
for
the
purposes
of
section
39(4)
of
the
Act
as
this
could
lead
to
an
absurd
situation
where
no
two
large
corporations
in
this
country
would
be
safe
from
being
held
to
be
associated.
It
is
important
to
note
that
Yardley
Plastics
did
not
involve
corporations
controlled
by
related
groups
within
the
meaning
of
paragraph
39(4)(e)
of
the
old
Act
(paragraph
256(e)
of
the
new
Act);
rather,
the
provision
in
question
was
paragraph
39(4)(b)
(paragraph
256(1
)(b)
of
the
new
Act):
the
Court
had
to
decide
whether
the
two
corporations
were
associated
by
reason
of
the
fact
that
they
were
controlled
by
the
same
persons
or
the
same
group
of
persons,
who
might
be
complete
strangers
and
not
persons
all
related
by
blood.
It
appears
clear
in
this
latter
case
that
the
question
is
first
and
foremost
one
of
fact,
and
that
it
is
indeed
de
facto
control
that
must
be
considered.
In
the
case
at
Bar,
the
corporations
are
controlled
entirely
by
persons
who
are
all
related
by
blood
relationship
and
for
the
reasons
already
stated
these
corporations
meet
all
the
conditions
of
paragraph
256(1)(e).
They
are
all
therefore
associated
from
the
legal
point
of
view,
and
it
matters
not
in
such
a
situation
whether
or
not
the
related
persons
share
the
same
views
concerning
control
of
these
corporations.
De
facto
control
cannot
be
considered
in
such
a
situation,
when
there
is
de
jure
control
based
on
an
immediate
family
relationship
between
ali
the
members.
The
appeals
are
accordingly
allowed
with
costs
and
the
assessments
made
by
the
Minister
of
National
Revenue
and
based
on
the
conclusion
that
the
defendant
corporation
are
associated,
are
restored.
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