Wynndel Logging Co Ltd, Wynndel Lumber Sales Ltd, Hallmark Lumber Ltd, Celcrest Timber LTD v. Minister of National Revenue, [1980] CTC 2141, 80 DTC 1125

The Assistant Chairman:—When the appeal by Wynndel Logging Co Ltd (hereinafter referred to as “Logging”) was called for hearing, counsel asked for an order that the evidence taken in this appeal be taken as the evidence in three other appeals, namely, Wynndel Lumber Sales Ltd (hereinafter referred to as “Sales”), Hallmark Lumber Ltd (hereinafter referred to as “Lumber”), and Celcrest Timber Ltd (hereinafter referred to as “Timber”). Such an order was made. To appreciate what was under appeal when these four appeals were heard by the Board, it appears to be necessary to refer to the objections filed as well as the notices of appeal and the replies thereto as well as statements by counsel at the hearing.

It appears that originally, for each of the years 1971 to 1975, the Minister assessed each of the four appellants on the basis that they were associated with each other. The appellants duly objected to all assessments. The notices of appeal filed by Timber and Lumber appealed only the 1971 to 1973 years. However the notices of appeal filed by Sales and Logging appealed the years 1971 to 1975 inclusive. Paragraphs 3 and 4 of the notices of appeal of Sales and Logging (and both read the same) read as follows:

3. By notices in writing dated July 27, 1977 the Minister of National Revenue confirmed the said assessments for the 1971, 1972, 1974 and 1975 taxation years but accepted that the appellant was not associated with Hallmark Lumber Ltd or Celcrest Timber Ltd during the appellant’s 1974 or 1975 taxation years.

4. The Minister of National Revenue reassessed the appellant for the 1973 taxation year by Notice of Reassessment No 148487 dated July 27, 1977 on the basis that the appellant was also associated with Wynndel Box & Lumber Co Ltd.

The respondent, in his replies admitted paragraph 4, but with respect to paragraph 3 stated as follows:

2. Admits with respect to paragraph 3 thereof that the Minister confirmed the assessment for 1971 and accepted that the appellant was not associated with Hallmark Lumber Ltd or Celcrest Timber Ltd in 1974 or 1975 but says further with respect to the said paragraph 3 that, while he otherwise confirmed his assessments for 1972, 1974 and 1975, he also added an association of the appellant with Wynndel Box and Lumber Co Ltd to the assessments for those years.

No appeal came before me with respect to Wynndel Box & Lumber Co Ltd (hereinafter referred to as “Box”).

At the hearing of the appeals, counsel for the appellants stated:

However, Mr Chairman, the appellants are prepared to concede that firstly, all of the appellants were associated with each other at some time during the 1971 taxation year. The only dispute in that regard between the appellants and the Minister is that the appellants say that none of the appellants were associated in that year with Wynndel Box and Lumber Company Limited.

I might indicate, Mr Chairman, at this time that the association with Wynndel Box and Lumber Company will not affect the amount of tax in dispute for 1971. So in effect the 1971 year should no longer be of any concern to this Board.

THE CHAIRMAN: Okay. Well, in other words, decision should go dismissing the appeal for 1971?

MR BIRNIE: Yes, Mr Chairman . . . They also concede that Hallmark Lumber Ltd and Celcrest Timber Ltd were associated with each other during all of the years under appeal . . . No, sorry, Mr Chairman, 1971 to 1973.

The issues as put to the Board following the above discussions were:

1. While admitting that Lumber and Timber were associated with each other in the years 1972 and 1973—Were they associated with any other corporation in those years? and

2. Were Sales and Logging associated with any corporation in the 1972 to 1975 taxation years?

Several paragraphs of the notices of appeal were admitted by the respondent. Those that relate to other than procedural matters are quoted as follows:

5. At all times material to this Appeal the only issued voting shares of the appellant and each of the said corporations were the shares listed in the following table and each of the persons named in the following table was the registered holder of the shares set out opposite his name:

Wynndel Wynndel

Box & Lumber Wynndel Hallmark Celcrest

Lumber		Sales	Logging	Lumber	Timber
	Co Ltd	Ltd	Co Ltd	Ltd	Ltd
Wynndel Lumber Sales Ltd	30
Wynndel Logging Co Ltd	30
Jack C Wigen		5033		35	3
Rose K Wigen		34
G D Leversage in Trust		5033
J Robert Wigen			5033	35	3
Monrad Wigen			34
G D Leversage in trust			5033
R Bothamly				25
G D Leversage				5
	60	10,100	10,100	100	6

6. With the exception of the shares referred to in paragraph 5 as registered in the names of G D Leversage in Trust and Monrad Wigen, all of the shares referred to in that paragraph were, at all times material to this Appeal, beneficially owned by the registered shareholder thereof.

8. Susan Wigen attained her majority on September 23, 1972 and Michael Wigen attained his majority on July 8, 1974.

9. The said Jack C Wigen and J Robert Wigen are the sons of the said Monrad Wigen and Rose K Wigen. None of the said Wigens are related to G D Leversage or R Bothamly.

In addition, an agreed statement of facts was filed with the Board as Exhibit A-1 as follows:

The parties hereto, by their respective solicitors, hereby admit the facts specified hereunder and the copies of documents annexed hereto and further admit that such copies are true copies and that such documents were executed as they purport to have been, provided that:

(a) such admissions are made for the purposes of this Appeal only and may not be used against either party on any other occasion; and

(b) either party may produce further evidence not inconsistent with this agreement at the hearing of this Appeal.

The facts hereby admitted are:

1. That Monrad Wigen, referred to in the Notice of Appeal herein, died on September 19, 1971.

2. That at the date of his death Monrad Wigen owned 34 ordinary voting shares in the capital stock of Wynndel Logging Co Ltd.

3. That devolution of the said Monrad Wigen’s estate was governed by his last will and testament a copy of which is annexed hereto as Exhibit “A”.

4. That on April 27, 1972 Rose K Wigen applied to the Supreme Court of British Columbia for a grant of letters probate of the Estate of Monrad Wigen.

5. That by order of the Supreme Court of British Columbia given May 24, 1972 letters probate were granted to the Estate of Monrad Wigen and the administration thereof was granted to Rose K Wigen.

6. That on April 27,1972 Rose K Wigen filed with the Minister of Finance for the Province of British Columbia the Affidavit of Value and Relationship required by section 15 of the Succession Duty Act of British Columbia in respect of the Estate of Monrad Wigen.

7. That the Minister of Finance for the Province of British Columbia determined that duty was payable under the Seccession Duty Act and fees were payable under the Probate Fees Act in respect of the said shares of Wynndel Logging Co Ltd.

8. That the Certificate of Discharge of Duty and Fees in respect of the said shares was issued pursuant to Section 51 of the Succession Duty Act and Section 32 of the Probate Fees Act on December 17, 1975.

9. That the documents referred to in Section 98 of the Companies Act RSBC 1960, c 67 as amended by SBC 1963, c 42 were never produced or deposited with an officer of Wynndel Logging Co Ltd or any other person authorized by its Directors to receive the same.

10. That the documents referred to in Section 61 of the Companies Act SBC 1973, c 18 were never produced or deposited with Wynndel Logging Co Ltd.

11. That Rose K Wigen was never registered as a member of Wynndel Logging Co Ltd either in a representative or personal capacity.

12. That all of the companies referred to in paragraph 5 of the Notice of Appeal herein were incorporated pursuant to the Companies Act of British Columbia.

13. That at all times material to this Appeal the Memorandum of Association and Articles of Association of Wynndel Logging Co Ltd, Wynndel Lumber Sales Ltd, Celcrest Timber Ltd and Hallmark Lumber Ltd were in the form of the copies thereof annexed hereto as Exhibits ‘B’, ‘C’, ‘D’, and ‘E’ respectively.

14. That the 1971 to 1975 taxation years, inclusive, of Wynndel Lumber Sales Ltd, Wynndel Logging Co Ltd, and Celcrest Timber Ltd commenced on January 1 and ended on December 31.

15. That the 1971 to 1975 taxation years, inclusive, of Hallmark Lumber Ltd commenced on August 1 and ended on July 31.

(The documents referred to as exhibits in paragraphs 3 and 13 are not reproduced.)

Evidence was given by J C Wigen and Gordon Leversage. Mr Wigen was one of four children of Monrad and Rose Wigen. Mr Leversage was a chartered accountant. Mr Monrad Wigen and some of the appellants had been clients of Mr Leversage for some time. He then worked for a firm for some years (1974 to February 1978), during which time I presume he did not act for any of the parties to these appeals. He returned to private practice in February 1978 and then once again acted for the parties as previously.

Mr J C Wigen stated he believed his father was in partnership with his grandfather about 1913 to 1922 when Box was incorporated. Those two partners were the original shareholders of it, with Rose, his mother, becoming a shareholder later. Jack C Wigen, his two brothers and his sister worked for Box during high school days and in the summer. His brother, Richard, went to University and, following graduation, did not return to Box. His sister, Donna, worked for a brief period after high school and then left. He and his brother, Robert, continued on with Box. In 1959 there was a reorganization which resulted in the incorporation of Logging and Sales. In Sales the original shareholders were J C Wigen, Richard Wigen and Rose Wigen; and in Logging were his father, Donna and Robert.

Richard’s shares in Sales were sold in 1967 to a trust of which Mr Leversage was the trustee and the two children of J C Wigen—Susan, then about 14, and Michael, then about 12—were the beneficiaries. The trustee was to hold the shares until the children reached their majority. As is admitted in the pleadings, this happened on September 23, 1972 and July 8, 1974 respectively. Mr Leversage never had any beneficial interest in these shares which were transferred to the children in November 1977. Mr Leversage, in August 1968, as trustee became the owner of all Donna’s shares in Logging and the three infant children of Robert were the beneficiaries. He was to hold the shares until those children reached their majority. At the time of the hearing, the trustee was still the registered owner. Mr Leversage never received any instructions as to how to vote any of those shares. Mr Leversage, who assisted in preparing the requisite estate forms with the various levels of government for the estate of Monrad Wigen, stated the finalization of the estate was delayed due to the death of the estate solicitor and the question as to value of the assets with the Minister of Finance.

One of the attachments to the agreed statement of facts was the last will and testament of Monrad Wigen. I shall not reproduce all of the will but Summarize it. Paragraph 2 names his widow Rose “the Executor and Trustee”. Provision was made, should Rose predecease the testator, for another trustee. Since that did not happen, the proviso is inoperative. The operative paragraph of the will gave all the property of the deceased to “my trustee”, upon several trusts, namely:

(a) to deliver the personal effects to Rose if she survived him by 30 days (which obviously she did),

(b) to realize the remainder of his estate in such fashion as his trustee saw fit “in her absolute discretion”,

(c) to pay debts, etc,

(d) To pay the net income derived therefrom ROSE KATHLEEN WIGEN, during her lifetime, with power to my trustee in her absolute discretion to encroach from time to time upon the capital of my estate for the maintenance, benefit, comfort and support and for the payment of medical, nursing and hospitalization expenses on behalf of my wife.

(e) Upon the death of the survivor of me and my wife, to divide the amount thereof remaining into 4 equal portions and distribute at the trustee’s absolute direction to my children then living in equal shares.

The will concluded as follows:

5. l DECLARE that my trustee shall have the fullest powers of determining whether any monies of my estate ought to be treated as income or capital and generally of determining all matters as to which any doubt, difficulty or question may arise under or in relation to the execution of the trusts of this my will or any codicil hereto and I DECLARE that every determination aforesaid shall bind all persons interested under this my will or any codicil hereto and shall not be objected to or questioned on any ground whatsoever.

From the above it can be seen that the trustee/executrix, Rose, has considered power and, in light of paragraph (d) above, it appears to me that she had a general power of appointment of all property of the deceased including the power to appoint it to herself. It would clearly appear that paragraph (e) is a nullity as, after the death of the trustee (Rose), the trustee (Rose) has the absolute discretion as to the dividing of the deceased’s property among his children living at that time. As I see it, the will should be interpreted as not only making Rose the trustee/executrix of the last will, but also the sole beneficiary.

It is now to be determined whether or not any or all of the appellants are associated for the years in which the Minister says they are associated. All the argument by both counsel was directed to paragraphs 256(1)(b) and (e) of the Income Tax Act, SC 1970-71-72, c 63 as amended. Subsection 256(1), with all its paragraphs, reads as follows:

For the purposes of this Act 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) each of the corporations was controlled by one person and the person who controlled one of the corporations was related to the person who controlled the other, and one of those persons 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,

(d) one of the corporations was controlled by one person and that person was related to each member of a group of persons that controlled the other corporation, and that person or that group of persons 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, or

(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.

The term “related group’’ is defined in paragraph 251(4)(a) as follows:

means a group of persons each member of which is related to every other member of the group.

Paragraph 6 of the respondent’s replies in the Sales and Logging appeals reads as it now applies after allowances were made at the commencement of the hearing:

Says that he assumed that the companies associated by the disputed assessments were either controlled by the same person or group of persons, or each of the companies was controlled by a related group each of the members of which was related to all of the members of the other related group ... for 1972 and subsequent years, either of the related groups owned not less than 10% of the shares of each of the corporations.

Insofar as Lumber and Timber are concerned, paragraph 6 of their replies is the same except it refers to 1972 and 1973.

Counsel forthe appellants submitted that, since no one person controlled Sales and Logging, the respondent’s position must be that both of those corporations were controlled by the same group of persons and, after looking at the shareholding, that same group of persons must be Rose Wigen and Gordon Leversage—which is impossible. His submission that such control is impossible is because Rose Wigen was never a shareholder of Logging and, consequently, never had the capacity to vote and consequently she cannot be part of a group of persons who control Logging with the result that the two corporations cannot be associated pursuant to paragraph 256(1 )(b). Still with reference to paragraph 256(1)(b) and the same group of persons, counsel pointed out that Mr Leversage held the shares in his name in both Sales and Logging as a trustee and he lost his right to vote those shares when the beneficiaries reached the age of majority. With respect to half the shares of Sales in his name, since one of the beneficiaries attained the age of majority on September 23,1972, then from that day onward he and Rose Wigen did not have the power to vote the majority of the shares in that company. If his first argument with respect to Rose Wigen were incorrect but this second submission re the trustee was correct, then Sales and Logging would be associated only for 1972.

In connection with Rose Wigen’s right to vote with respect to control, reliance was of course placed on the case of Buckerfield’s Limited et al v MNR, [1965] 1 Ex CR 299; [1964] CTC 504; 64 DTC 5301, the decision of Jackett, P (as he then was) with respect to control, and two articles of the articles of association of Logging; namely, articles 29 and 55. The said articles state that an executor cannot have any rights of membership in relation to meetings of the company until he is registered as a member and only members can vote. The agreement as to facts states that Rose was never registered as a member of Logging. Further support for the appellant’s submission was on the basis of section 98 of the Companies Act of British Columbia, RSBC 1960, c 67 as amended. In summary fashion, subsection (2) of that section states that a share shall not be transferred until the provisions of the Probate Fees Act and the Succession Duty Act are complied with. The estate was not discharged from its obligations in this respect by the Minister of Finance until December 17,1975, with the result that, according to the appellant, no transfer of the shares of Logging registered in the name of Monrad Wigen could be made to anyone (including Rose) until December 17, 1975.

Insofar as Gordon Leversage is concerned, the shares in his name in Logging after September 23, 1972, (the shares he held in trust for Susan Wigen being half the shares in his name) were held by him as a bare trustee for Susan, and counsel’s submission was that he could only vote those shares as directed by her, with the result that from that day onward he and Rose Wigen were not a group who controlled Logging. Counsel, as authority for his submission that the bare trustee was not to be considered with respect to control of a corporation but rather the beneficial owner, referred to Waters treatise, The Law of Trust in Canada, p 24 as well as Halsbury’s Laws of England, 3rd ed, vol 38, p 885, and the cases /RC v J Bibby and Sons, Ltd, [1944] 1 All ER 548; [1945] 1 All ER 667; IRC v Silverts Ltd, [1951] 1 All ER 703; and MNR v Sheldon’s Engineering Ltd, [1955] SCR 637; [1955] CTC 174; 55 DTC 1106. In the last-mentioned case, a bank took title to all the issued shares of a company as security for a loan. At that time or soon after, while the shares were in the name of nominees for the bank, a proxy for all the shares was given to a person who controlled another company. The issue was whether or not one company was dealing at arm’s length with the other company when it sold its assets to that company. The Crown’s position in that case was that the person to whom the proxy was given controlled both companies. On appeal to the Supreme Court of Canada, the court held that the companies were dealing at arm’s length. In so holding, Locke, J, for the court, stated:

At the time these steps were taken by the old company, it was completely controlled by the bank.

Later he continued:

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.

Counsel for the appellants’ submission with respect to association was that, because of paragraph 256(1)(e), he accepts that Logging was con trolled by a related group until the death of Monrad Wigen but, after his death on September 19,1971, he submits that, for the same reasons as advanced with respect to his argument on the applicability of paragraph 256(1)(b) (Rose Wigen, the executrix, was not a shareholder), Logging was not controlled by a related group.

However there is in counsel for the appellants’ submission a further argument with respect to paragraph 256(1)(e): the cross ownership test (as he called it) is not met except in the case of Lumber and Timber. He continued that he admits Sales is controlled by a related group (Jack Wigen and Rose Wigen), Lumber is controlled by a related group (Jack Wigen and Robert Wigen) and that both groups are related to each other, but with respect to Sales and Lumber one requirement is missing for them to be associated, namely, ‘‘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.” The Crown’s position, it appeared to him, was that the cross-ownership test could not be met through Jack C Wigen since he owned at least 10% of each company, but he submitted that that is not what paragraph 256(1)(e) requires. It requires that the “group” own the 10%. The apparent position of the respondent would seem to indicate that the respondent is interpreting paragraph 266(1)(e) to mean the same as paragraph 39(4)(e) before tax reform. Paragraph 39(4)(e) contained the requirement: “and one of the members of one of the related groups owned directly or indirectly one or more shares of the capital stock of each of the corporations.”

His submission was that the change was clear and, relying on the interpretation of Jackett, P in the Buckerfield’s case (supra), one person is not a group. Jackett, P stated: “the word group in its ordinary meaning, as I understand it, can refer to any number of persons from two to infinity.” Counsel for the appellants stated, as he interpreted the pleadings, the position of the respondent was, that group which controlled one corporation (they, as a group) need own in excess of 10% of the issued shares of the other corporation but that each person in that group did not have to be a shareholder of the other corporation; rather, as counsel for the appellants saw it, the respondent’s position was, only one person of the group which controlled one corporation was required to own shares in the other corporation and the cross-over requirement would be satisfied if that person owned at least 10% of the issued shares. Counsel then continued and submitted, if his interpretation were correct, the respondent was ignoring the obvious change of wording from paragraph 39(4)(e) before tax reform to paragraph 256(1)(e) after tax reform. To say that this interpretation satisfies paragraph 256(1 )(e), one is saying there has been no change in the two subsections, “one of the members” and “the related” are synonymous expressions.

The appellants contended that, insofar as paragraph 256(1)(e) is concerned:

(a) Logging, after September 19, 1971, is not controlled by any related group and so it cannot be associated with any other corporation;

(b) Sales is not associated with any other corporation as the persons in the related group who control Sales do not each own shares totalling in excess of 10% in any other corporation.

The respondent contended that, for control purposes, a trustee would be the one to consider and not the beneficiary of the trust, if a different person. It is a question, according to counsel, of who can vote at a shareholders’ meeting. It is the trustee who votes at the meeting not the beneficiary of the trust and, after the meeting, if the trustee did not vote as the beneficiary wished, the beneficiary may remove him as trustee and have himself registered as the owner. So, in counsel’s submission, it is the registered shareholders who determine control of the corporations. Counsel’s submission with respect of paragraph 256(1)(e) was that, after having ascertained the related group, you then ascertain whether or not the persons in that group collectively own not less than 10% of the issued share capital. There is no need that each member of the group own at least one share or at least 10% of the issued shares, it is just that the group as a whole owns 10%. Continuing with counsel’s submission that it is the registered owner that counts, Jack C and Rose K are the related group and control Sales, and Jack C owns more than 10% of the shares in Timber and Lumber and hence those three corporations are associated.

To succeed in all the assessments, counsel for the respondent submitted he must convince this Board that, immediately after the death of Monrad Wigen, one must consider that Rose Wigen is in his place and stead in Logging. Insofar as the Articles of the company and a clearance from the Minister of Finance were concerned, the shares of Monrad could not have been registered in the name of Rose before December 1975. This of course would mean that, at least for 1975, there would be a related group and association for that year. Counsel for the respondent submitted that, since the trustee is the one who could vote at a shareholders’ meeting, it is he who is considered when one comes to consider control, not the beneficiary. This applies, according to counsel, while the shares are in the name of the trustee and the trust is still valid as well as after the date when the beneficiary could demand to have the shares registered in his name.

In considering these appeals one should keep in mind what Jackett, P said in the Buckerfield’s case (supra) at 303, 507 and 5303 respectively, with respect to control:

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.

While Collier, J did not specifically refer to the Buckerfield’s case in his reasons in Danalan Investments Ltd v MNR, [1973] CTC 251; 73 DTC 5210, his consideration as to whether or not three companies were associated was determined on the same approach. In that case three companies were assessed on the assumption that they were associated and the person who was the key to the association was not a registered shareholder of two of the companies. The Crown endeavoured to show, and to the court did show, that that person was the owner of sufficient shares so that the companies were associated. At 255 and 5212 respectively he states:

From all the above evidence, I conclude that true or real ownership, as contrasted with registered ownership of the shares I have earlier described, was not in the witnesses who gave evidence but in Benjamin Wainberg.

At 257 and 5214 respectively he states as well:

This only serves to confirm my view that Benjamin Wainberg was the true owner of shares in the appellant companies, sufficient in number that the result of association follows.

It also appears that it is not who voted at a shareholders’ meeting to elect the board of directors but rather who could have voted. The issue of control with respect to association would appear to be, who could have controlled the company at such a meeting rather than who in fact did at a particular meeting.

Another case which should be considered because of the death of Monrad Wigen is the Federal Court judgment in H A Fawcett & Son, Limited v Her Majesty the Queen, [1979] CTC 303; 79 DTC 5224, (now under appeal to the Federal Court of Appeal). The issue in that case was whether or not three corporations were associated on the basis they were controlled by one person, George C Fawcett. Fawcett controlled two corporations and his father controlled a third. His father died on a Friday, two days before the end of the appellant’s year. Fawcett did not get possession of his father’s Will until the following Tuesday when he received it from the bank manager. Since the bank was not opened Saturday or Sunday the learned judge Stated that he “would have found it difficult, if not altogether impossible, to deal with the Will before the end of November”. The Will left the shares to Fawcett. Counsel’s submission was that Fawcett did not have the voting power for the last two days of the year. Counsel for the appellant pointed out that under the Probate Courts Act, RSNB 1973, c P-17, s 43, probate could not be granted before ten days after death unless the estate is being wasted. Reference was also made to the New Brunswick Companies Act, RSNB 1973, c C-13, as well as the By-Laws of the corporations, both of which were similar to the Companies Act and the Articles of Association in this case. Counsel for the defendant in that case relied on the Devolution of Estates Act of the Province of New Brunswick, RSNB 1973, c D-9, s 3(1), which reads as follows:

All real and personal property that is vested in any person, without a right in another person to take by survivorship, shall on his death, notwithstanding any testamentary disposition, devolve upon and become vested in his personal representative from time to time as trustee for the persons entitled thereto, and subject to the payment of his debts and so far as such property is not disposed of by deed, will, contract or other effectual disposition, shall be administered, dealt with and distributed as if it were personal property not so disposed of.

Following his reference to that section, the learned judge states as follows:

In my view, it follows from the provisions of that subsection that the beneficial interest in the father’s share of the plaintiff company vested in his son at the moment of his death. At that very moment George C Fawcett became beneficially entitled to a majority of the shares of the plaintiff company and acquired therefrom a controlling interest in that company, even if on the books still stood the name of his father as the holder of the shares. The word “controlled’’ in paragraph 256(1 )(b) of the Income Tax Act contemplates the power to control, whether directly or indirectly, and whether the actual transfer has been completed in the company registry.

His lordship concluded his reasons by holding the corporations were associated.

Reference in this case has been made to the will of Monrad Wigen and I have interpreted that will to give Mrs Wigen a general power of appointment over the property of her deceased husband. At this point I feel I should quote from the Administrative Act, RSBC 1960, c 3 as follows:

5. From and after the decease of any person dying intestate, and until administration is granted in respect of his estate and effects, the personal estate and effects of the deceased person are vested in the Court, subject only to the power of any Court of competent jurisdiction to grant administration in respect thereof.

7. For the purposes of this Act, an administrator of the estate of a deceased person shall be deemed to be administrator as if there had been no interval between the death of the deceased and the grant of administration.

It would seem that the combined effect of those two sections would produce the same results as Dube, J found in the Fawcett case.

With respect to the shares held in trust by Mr Leversage, one must be guided by the decision of Jackett, P in Buckerfield’s (supra) and of Collier, J in Danalan Investments Ltd (supra), namely, who could have put himself in a position to vote the shares at a notional meeting of shareholders? The trustee was to hold the shares of which he was trustee until the beneficiary thereof attained the age of majority: Susan Wigen in September 1972, and Michael Wigen in July 1974. It is clear that, any time after September 1972, Susan could have had the 2516% shares to which she was entitled registered in her name with the result that Sales would have four potential voters in 1973 and four after July 1974. In 1973 they would be Jack—5033, Rose—34, Susan—2516 /2 and Leversage—2516V2, and in 1974, Jack—5033, Rose—34, Susan—2516 /2 and Michael—2516 /2.

However, in the case of the trust affecting 5033 of the shares of Logging, the beneficiaries of that trust had not reached the age of majority by the end of 1974 and consequently, except for the court, no one could replace the trustee and become the registered owner of those shares. In these circumstances the person, and only the person, who could vote these shares in the trustee.

With respect to paragraph 256(1)(e) counsel for the appellants’ submission was that, for this subsection to apply, the related group must own at least 10% of the issued shares of the second corporation and each member of that group must own at least one share of the second corporation. If such were not the case, his submission continues, then paragraph 256(1)(e), notwithstanding the change of wording from what was in paragraph 39(4)(e), is being interpreted exactly the same as paragraph 39(4)(e). The respondent contended that all that was needed was that the same group hold a total of at least 10% of the shares but there is no requirement that each person of that group own at least one share. It could be one person could own all of the shares and the requirement of the section is still met.

As I interpret paragraph 256(1)(e) there are two related groups, one which controls one corporation and the other controls the second corporation, and then one of those related groups must own at least 10% of the issued shares in the other corporation. The appellants’ submission, as stated above, was that each member of one of the groups must own at least one share of the other corporation, the total of their ownership being in excess of 10%. I believe that one must ascertain or delineate the group and, having done that, must determine whether or not that group has at least a 10% shareholding in the other corporation. There is no requirement that each member of that group must own at least one share. As to the change between the predecessor section and paragraph 256(1)(e), I believe that increasing the shareholding from one share to 10% of the issued shares increases the restriction which previously existed.

Based on the statements above, the control of the shares of Sales after September 1972 was as follows:

For Sales in 1972 Rose K Wigen and G D Leversage could be a group which controls that corporation. However, after September 1972, Susan replaced Leversage insofar as control is concerned with respect to 2516 /2 shares. Such being the case, after that date, Rose K Wigen and G D Leversage no longer control Sales.

Following the death of Monrad Wigen, the control of his shares in Logging shall be considered to be with Rose K Wigen. With respect to Logging, after the death of Monrad Wigen in September 1971, a group which could control that corporation would be Rose K Wigen and G D Leversage.

With the group of Rose K Wigen and G D Leversage able to control Sales in the 1972 year and the same group able to control Logging, those two corporations are associated for that year. Since, after that year, that same group is not able to control Sales, the association does not exist for the years 1973 to 1975 inclusive within paragraph 256(1)(b).

—At all times, a group which could control Sales could be Jack C Wigen and Rose K Wigen.

(1972-1975)

—At all times, a group which could control Logging could be J Robert Wigen and Rose K Wigen.

—At all times, a group which could control Lumber could be Jack C Wigen and J Robert Wigen.

—And at all times, a group which could control Timber could be Jack C Wigen and J Robert Wigen.

It has been agreed between the parties that the three above-named individuals are related to each other so that each group is a related group and each member of each group is related to each member of the other group. While Rose K Wigen owns no shares in Lumber or Timber, Jack C Wigen owns more than 10% of the shares of each of those corporations and so those two corporations are associated with Sales pursuant to paragraph 256(1)(e). While Rose K Wigen (in lieu of Monrad Wigen) owns no shares in Lumber or Timber, J Robert Wigen does and he owns more than 10% of the shares of each of those corporations. Consequently those corporations are associated with Logging pursuant to paragraph 256(1)(e).

In conclusion I find that:

(a) Sales, Logging, Lumber and Timber are associated with each other in 1972;

(b) Sales is not associated with any of those corporations for the subsequent years;

(c) Logging, Lumber and Timber are associated as assessed; and

(d) The appellants having admitted the corporations are associated for the 1971 taxation year, I so find the corporations associated for that year.

The Crown’s position on the assessments which are appealed was, as stated, the four corporations were associated for the years 1971 to 1973 inclusive and Sales and Logging associated with each other for 1974 and 1975. The allocation of the small business deduction was to Logging and Sales in 1972 and originally 1973. There was no allocation in 1974 and 1975 as it was stated the limit was reached. A reassessment of Logging in 1973, while not changing its tax, indicated that there was no allocation of the small business deduction for 1973 as the limit had been reached the previous year. Since some of the deduction was allocated to Sales, the appeals of Timber and Lumber for the 1973 taxation year and of Logging for the 1973, 1974 and 1975 taxation years will have to be allowed and the assessments referred back to the Minister for a redetermination of the limit and, if necessary, a re-allocation of that deduction.

Judgment will go accordingly.

Appeals allowed.