Dubé,
J:—This
is
an
appeal
from
a
reassessment
of
the
plaintiff’s
income
tax
for
the
1968
and
1969
taxation
years.
By
Notices
of
Reassessment
dated
March
24,
1971
the
Minister
reassessed
the
plaintiff
(hereinafter
“Regal’’)
on
the
basis
that
it
was
associated
with
National
Vending
Company
Limited
(hereinafter
“Vending”)
within
the
meaning
of
subsection
39(4)
of
the
Income
Tax
Act,
RSC
1952,
c
148,
and
the
taxes
payable
by
Regal
upon
its
taxable
income
for
1968
and
1969
were
to
be
computed
according
to
subsection
39(3)
of
the
Act.
Regal
claims
that
its
taxable
income
for
the
two
years
should
be
computed
in
accordance
with
subsection
(1)
and
not
subsection
(2)
or
(3)
of
section
39.
By
its
amended
statement
of
claim,
plaintiff
also
claims
that
the
interval
of
29
months
between
the
filing
of
its
objection
and
the
confirmation
of
the
reassessment
by
the
Minister
of
National
Revenue
constitutes
a
breach
of
the
requirement
in
subsection
58(3).
of
the
Act
that
the
Minister
shall
make
such
confirmation
with
“all
due
despatch”.
At
the
opening
of
the
trial,
plaintiff
withdrew
its
amendment
and
reverted
to
the
original
statement
of
claim.
Counsel
for
the
defendant
pointed
out
in
argument
that
the
amendment
had
necessitated
a
second
examination
for
discovery
and
that
relevant
costs
should
be
taxed
against
plaintiff.
Both
parties
agreed
that
Exhibit
P-2
filed
by
the
plaintiff
was
an
accurate
reflection
of
the
shareholding
situation
for
the
relevant
period
as
entered
in
the
company
registry
books
as
follows:
}
152
common
in
1968
William
R
Lawlor
159
common
in
1969
(father
of
W
Eric)
1250
preferred
in
68-69
151
common
in
1968
Laurence
D
Lawlor
159
common
in
190
(husband
of
Adrienne)
1250
preferred
in
68-69
The
Minister
claims
that
on
or
before
July
15,
1968
Adrienne
Lawior
conveyed
199
shares
of
Regal
to
William
R
Lawlor
(her
brother-in-law)
and
that
Eric
Lawlor
(son
of
the
said
William
R
Lawlor)
conveyed
199
shares
of
Regal
to
Laurence
D
Lawlor
(brother
of
William
R
and
husband
of
Adrienne).
The
plaintiff
claims
there
was
no
such
transfer
intended
or
completed
and
therefore
the
two
brothers
William
R
and
Laurence
D
were
not
shareholders
of
Regal.
It
is
admitted
that
at
all
material
times
the
two
brothers
owned
the
majority
of
the
issued
shares
and
controlled
Peter
J
Lawlor
Ltd.
The
Minister
assumes
there
was
a
transfer
from
Adrienne
and
Eric
to
William
and
Laurence
mainly
on
two
grounds:
the
endorsements
on
the
back
of
the
share
certificates
and
a
stock
purchase
agreement
dated
July
15,
1968.
Firstly
as
to
the
endorsements.
Nine
common
stock
certificates
were
filed
as
exhibits.
The
first
three
were
for
one
share
each
and
duly
transferred
by
the
incorporators
to
the
three
stockholders,
Francis
G
McGrath,
W
Eric
Lawlor
and
Adrienne
Lawlor.
Certificate
number
4,
for
one
share,
is
issued
to
Francis
G
McGrath,
the
transfer
form
in
the
back
is
left
blank.
Certificate
number
5,
for
one
share,
issued
to
W
Eric
Lawlor
has
the
back
transfer
form
unfilled
but
signed
by
W
Eric
Lawlor.
Certificate
number
6,
for
one
share,
to
Adrienne
also
shows
an
unfilled
transfer
form
signed
in
blank
by
Adrienne.
Certificate
number
7,
for
199
shares,
issued
to
Francis
G
McGrath
shows
the
transfer
certificate
unfilled
and
unsigned.
However
certificate
number
8,
for
199
shares,
issued
to
Adrienne
Lawlor
has
the
back
transfer
form
filled
in
with
the
name
of
William
Ronald
Lawlor
and
signed
by
Adrienne
Lawlor.
And
certificate
number
9,
for
199
shares,
to
W
Eric
Lawlor
shows
a
transfer
certificate
filled
in
to
the
name
of
Laurence
David
Lawlor
and
signed
by
W
Eric
Lawlor.
In
the
shareholders’
register
appear
the
names
of
the
three
founders
and
of
McGrath,
Eric
and
Adrienne
Lawlor.
In
the
directors’
register
the
same
six
names
appear,
with
McGrath
as
president,
Adrienne,
vice-president
and
Eric,
secretary.
The
register
of
transfers
show
the
transfer
from
the
founders
to
McGrath,
Eric
and
Adrienne
of
one
share
each;
from
the
treasury
to
the
same
three
of
one
share
each;
and
from
the
treasury
to
the
same
three
of
199
shares
each.
The
names
of
the
two
brothers,
William
and
Laurence,
do
not
appear
on
the
register.
Francis
G
McGrath
and
the
four
Lawlors
all
testified
to
the
effect
that
there
was
no
intention
to
transfer
the
shares
from
Adrienne
and
Eric
to
William
and
Laurence.
They
claim
that
all
the
documents,
including
company
meeting
minutes
and
share
certificates,
were
signed
In
the
lawyer’s
office
at
incorporation.
They
merely
affixed
their
names
where
the
lawyer
asked
them
to,
no
questions
asked.
Adrienne
Lawlor
testified
that
she
paid
the
$200
for
her
200
shares
personally,
from
her
own
savings
of
household
money
and
family
allowances,
and
that
she
has
not
sold
her
shares
to
anyone.
She
is
not
active
in
the
business
but
receives
annual
financial
statements
and
occasionally
drops
in
at
the
office.
Eric
is
actively
engaged
in
the
business
which
he
joined
after
high
school.
As
far
as
he
is
concerned
he
paid
for
the
200
shares
himself
and
owns
them.
He
first
learned
about
the
alleged
transfer
when
a
taxation
officer
visited
Regal.
He
denies
any
agreement,
oral
or
written,
to
transfer
his
shares
to
his
father.
He
never
inquired
why
his
uncle’s
name
appeared
on
the
transfer
certificate
of
his
199
shares.
A
the
trial,
Eric’s
father,
William
R
Lawlor,
denied
any
arrangement
with
his
son
to
have
the
shares
transferred
to
him.
However
at
his
Examination
for
Discovery
he
testified
that
he
“wanted
some
rein
on
him
so
I
could
keep
him
under
my
wing”
and
“this
is
why
that
certificate
was
signed”.
At
discovery
he
also
admitted
that
the
certificates
had
been
endorsed
improperly:
Eric’s
certificate,
and
not
Adrienne’s,
should
have
been
endorsed
over
to
him.
At
the
trial
he
stated
he
did
not
instruct
his
solicitor
to
have
some
certificates
endorsed,
but
perhaps
his
accountant
had
done
so.
He
admitted
at
discovery
that
“he
was
advised
that
in
order
to
avoid
the
associated
company
provisions
of
the
Income
Tax
Act
[he]
and
[his]
brother
Laurence
should
not
be
shareholders
of
record”.
Laurence
D
Lawlor
testified
that
he
first
learned
of
the
transfer
endorsations
when
the
tax
officer
inspected
the
company
books.
The
stock
purchase
agreement
relied
upon
by
the
Minister
to
establish
his
reassessment
was
signed
by
McGrath,
William
and
Laurence
Lawlor
on
July
15,
1968.
According
to
the
text
of
the
agreement,
the
three
“shareholders”
agree
in
event
of
death
or
withdrawal
from
Regal
to
the
sale
and
purchase
of
each
other’s
common
stock
therein.
In
order
to
insure
funds
to
pay
for
the
stock,
insurance
‘has
been
obtained
from
the
Montreal
Life
Insurance
Company”
in
the
amount
of
$25,000
on
each
of
the
three
payable
to
each
of
the
other
two.
The
style
and
opening
paragraphs
of
the
document
read
as
follows:
COMMON
STOCK
PURCHASE
AGREEMENT
WITHOUT
TRUSTEE
synopsis:
Three
stockholders—obligation
to
sell
and
buy—each
stockholder
insures
lives
of
his
associates—proceeds
payable
to
surviving
stockholders.
1.
This
agreement
is
made
by
and
between
Francis
Joseph
McGrath,
William
Ronald
Lawlor
and
Laurence
David
Lawlor,
all
of
Saint
John,
New
Brunswick,
hereinafter
called
stockholders,
for
their
mutual
protection
in
event
of
the
death
or
withdrawal
from
Regal
Wholesale
Ltd
of
any
one
of
them
and
for
the
sale
and
purchase
of
his
common
stock
therein.
Common
stock
in
the
corporation
is
owned
by
them
as
follows:
|
Francis
Joseph
McGrath
|
1/3
|
|
William
Ronald
Lawlor
|
1/3
|
|
Laurence
David
Lawlor
|
1/3
|
Each
hereby
agrees
to
sell
the
stock
standing
in
his
name
and
the
others
hereby
agree
to
purchase
such
stock,
in
the
circumstances,
at
the
price,
and
on
the
terms
and
conditions
set
forth
below.
2.
Each
stockholder
has
assigned
his
stock
in
blank
and
deposited
the
certificate
with
the
secretary
of
the
corporation
who
is
authorized
and
directed
to
write
on
the
face
of
each
stock
certificate
the
following:
“This
certificate
is
held
subject
to
stockpurchase
[sic]
agreement
dated
Day
of
July,
1968”.
Such
assignment
and
deposit
shall
not
affect
the
right
of
the
stockholder
to
vote
the
stock
and
receive
the
dividends
thereon
until
such
time
as
the
purchase
price
has
been
received
by
him
or
his
executor
or
administrator
under
the
terms
of
this
agreement.
A
schedule
of
the
stock
included
in
this
agreement
is
attached.
No
certificate
of
stock
subject
to
this
agreement
shall
be
assigned,
encumbered
or
otherwise
disposed
of
during
the
continuance
of
this
agreement
except
as
provided
herein.
William
Lawlor
testified
at
the
trial
that
he
did
not
hold
one-third
of
the
stock
and
that
he
signed
the
document
because
an
insurance
agent,
Robert
Wisted,
suggested
the
agreement
to
sell
them
life
insurance
policies.
But
he
admitted
at
discovery
that
someone,
perhaps
himself,
could
have
told
the
insurance
agent
that
he
was
a
one-third
shareholder
of
the
company.
I
conclude
that
William
R
and
Laurence
D
Lawlor
never
intended
to
divest
themselves
of
the
ownership
of
their
shares
in
Regal.
They
were
advised
that
they
should
not
appear
on
the
company
register
as
owners
of
record
to
avoid
the
associated
company
provisions
of
the
Income
Tax
Act.
They
had
son
Eric
and
wife
Adrienne
endorse
the
transfer
certificates
over
to
them
(each
to
the
wrong
party
by
inadvertence)
and
kept
the
certificates
in
their
possession
and
under
their
control
at
the
office.
Their
signing,
along
with
McGrath,
of
the
common
stock
agreement
is
an
obvious
confirmation
of
that
conclusion.
Plaintiff
alleges
there
has
been
no
transfer
of
the
shares
to
William
R
and
Laurence
D
Lawlor
because
their
names
were
never
entered
in
the
company
register
as
required
under
the
New
Brunswick
Companies
Act,
RSNB
1952,
c
33.
Section
73
and
subsection
104(1)
of
chapter
33,
RSNB
1952,
then
in
force,
read
as
follows:
73.
Except
for
the
purpose
of
exhibiting
the
rights
of
parties
to
any
transfer
of
shares
towards
each
other
and
of
rendering
any
transferee
jointly
and
severally
liable
with
the
transferor
to
the
company
and
its
creditors,
no
transfer
of
shares
unless
made
by
sale
under
execution
or
under
decree,
order
or
judgment
of
a
court
of
competent
jurisdiction,
shall
be
valid
for
any
purpose
whatever
until
entry
of
such
transfer
is
duly
made
in
the
register
of
transfers;
provided
that
as
to
the
stock
of
any
company
listed
and
dealt
with
on
any
recognized
stock
exchange
by
means
of
stock
certificates,
commonly
in
use
endorsed
in
blank,
and
transferable
by
delivery,
such
endorsation
and
delivery
shall,
except
for
the
purpose
of
voting
at
meetings
of
the
company,
constitute
a
valid
transfer.
104.
(1)
A
book
called
the
register
of
transfers
shall
be
provided,
and
in
such
book
shall
be
entered
the
particulars
of
every
transfer
of
shares
in
the
capital
of
the
company.
Subsection
39(4)
of
the
Income
Tax
Act
determines
whether
corporations
are
associated
with
one
another:
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)
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
one
or
more
shares
of
the
capital
stock
of
each
of
the
corporations,
(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
one
of
those
persons
owned
directly
or
indirectly
one
or
more
shares
of
the
capital
stock
of
each
of
the
corporations,
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
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.
The
meaning
of
“control”
in
39(4)
has
been
defined
by
Jackett,
P,
as
he
then
was,
in
Buckerfield’s
Ltd
et
al
v
MNR,
[1964]
CTC
504
at
507-8;
64
DTC
5301
at
5303:
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
CIR,
[1943]
1
All
ER
13,
where
Viscount
Simon,
LC,
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.”
Plaintiff
contends
that
William
R
and
Laurence
D
did
not
control
Regal.
Their
names
were
not
entered
on
the
company
register,
not
being
shareholders
they
were
not
entitled
to
receive
notice
of
(by-law
B7)
and
vote
at
meetings
(by-law
38).
Plaintiff
further
claims
that
one
could
become
a
shareholder
of
Regal
only
by
allotment
(by-law
42)
or
by
transfer
(by-law
46)
of
shares,
and
that
allotment
is
not
alleged.
The
purpose
of
section
74
of
the
New
Brunswick
Companies
Act
(supra)
and
other
such
federal
and
provincial
provisions,
is
to
establish
the
effective
moment
of
recognition
of
shareholders
for
the
company’s
purposes;
the
company
will
not
recognize
the
transferee
of
the
shares
until
registration
has
been
completed.
But
as
between
transferor
and
transferee
the
essential
elements
are
the
execution
of
the
transfer
certificate
and
the
delivery
thereof.
So
far
as
the
transferor
is
concerned
the
transaction
is
completed
between
himself
and
the
transferee
when
he
hands
over
the
endorsed
certificate
and
there
and
then
beneficial
ownership
has
passed,
although
from
the
company’s
standpoint
the
transferee
does
not
become
a
shareholder
until
his
name
appears
on
the
register.
In
Danalan
Investments
Limited
v
MNR,
[1973]
CTC
251:
73
DTC
5209,
the
Minister
treated
the
appellant
and
two
other
corporations
as
“associated
corporations”
within
subsection
39(4)
contending
that
the
true
ownership
of
the
shares
was
other
than
as
reflected
on
the
share
registers.
Collier,
J
held
at
page
253
[5211]
that
the
names
on
the
register
were
mere
nominees:
The
books
of
the
two
companies
record
the
shareholdings
as
contended
by
the
appellants.
A
number
of
share
certificates
in
support
of
most
of
the
holdings
alleged
were
filed
as
exhibits
on
behalf
of
the
appellants.
Subsection
50(2)
of
the
Quebec
Companies
Act
provides
that
a
share
certificate
shall
be
prima
facie
evidence
of
title
of
the
shareholder
to
the
shares
mentioned
in
it.
In
my
opinion
the
presumption
created
by
the
statute
has
been
rebutted
by
the
respondent.
I
find
the
respondent
has
proved,
by
a
preponderance
of
evidence,
that
some
of
these
alleged
shareholders
(sufficient
to
amount
to
at
least
6%)
were
not
the
true
owners
of
the
shares,
but
were
mere
nominees
of
Benjamin
Wainberg.
In
Re
Montgomery
and
Wrights
Ltd,
38
OLR
335
at
336,
Middleton,
J
said
that
although
a
transfer
of
stock
must
“be
duly
recorded
to
complete
the
title,
but
any
unrecorded
dealing
is
not
void,
but
is
valid
as
exhibiting
the
rights
of
the
parties
thereto
towards
each
other”.
He
held
that
an
unrecorded
transfer
of
a
share
gave
the
transferee
the
title
to
the
share
as
against
the
purchaser
at
a
sheriff’s
sale.
I
find
that
William
R
and
Laurence
D
Lawlor
were
beneficial
owners
of
the
majority
of
the
shares
in
Regal
and
therefore
that
Regal
and
Vending,
admittedly
a
wholly
owned
subsidiary
of
Peter
J
Lawlor
Ltd,
are
associated
companies
within
the
meaning
of
the
Income
Tax
Act.
Counsel
for
the
defendant
in
his
argument
took
the
position
that
even
without
having
any
regard
to
the
legal
effect
of
the
non-registered
share
transfers,
Regal
and
Vending
still
were
associated
within
the
meaning
of
the
Income
Tax
Act.
He
submitted
that
by
virtue
of
paragraph
39(4)(d),
with
the
names
of
the
shareholders
as
they
appear
on
the
register,
the
companies
are
associated:
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,
(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
one
of
those
persons
owned
directly
or
indirectly
one
or
more
shares
of
the
capital
stock
of
each
of
the
corporations,
or
According
to
defendant’s
alternative
position,
the
companies
were
associated
as
follows:
(1)
Vending
“was
controlled
by
one
person”
(namely
Peter
J
Lawlor
Ltd)
and
(2)
Peter
J
Lawlor
Ltd
“was
related
to
each
member
of
a
group
of
persons”
(namely
Adrienne
Lawlor
and
Eric
Lawlor)
“that
controlled”
Regal
and
(3)
“one
of
those
persons”,
(namely
Peter
J
Lawlor
Ltd,
or
Adrienne
Lawlor
or
W
Eric
Lawlor),
“owned
directly
or
indirectly
one
or
more
shares
of
each
of”
Regal
and
Vending.
Defendant
claims
that
the
three
component
requirements
of
paragraph
39{4)(d)
as
enumerated
above
are
satisfied
as
follows:
Firstly,
Vending
was
controlled
by
one
person,
namely
Peter
J
Lawlor
Ltd.
Peter
J
Lawlor
Ltd
is
a
person
within
the
meaning
of
the
Income
Tax
Act
by
virtue
of
paragraph
139(1)(ac).
The
evidence
is
that
Peter
J
Lawlor
Ltd
owned,
during
the
taxation
years
in
question,
all
of
the
issued
shares
of
Vending.
Secondly,
Peter
J
Lawlor
Ltd
was
related
to
each
member
of
the
group
of
persons
(namely
Adrienne
Lawlor
and
W
Eric
Lawlor)
that
controlled
Regal.
By
applying
the
relevant
provisions
of
the
Income
Tax
Act
to
the
facts
of
this
case
it
is
submitted
that
this
requirement
of
paragraph
39(4)(d)
is
satisfied
as
follows:
William
R
Lawlor
and
Laurence
D
Lawlor,
being
brothers
are
connected
by
blood
relationship
and
therefore
are
related:
139.
(5a)
For
the
purpose
of
subsection
(5),
(5e)
and
this
subsection,
“related
persons”,
or
persons
related
to
each
other,
are
(a)
individuals
connected
by
blood
relationship,
marriage
or
adoption;
(6)
For
the
purpose
of
paragraph
(a)
of
subsection
(5a),
(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;
(b)
persons
are
connected
by
marriage
if
one
is
married
to
the
other
or
to
a
person
who
is
so
connected
by
blood
relationship
to
the
other;
and
Together
William
R
Lawlor
and
Laurence
D
Lawlor
owned
the
majority
of
the
common
shares
and
all
of
the
preferred
shares
of
Peter
J
Lawlor
Ltd.
Accordingly,
William
R
Lawlor
and
Laurence
D
Lawlor
are
a
related
group
which
controls
Peter
J
Lawior
Lid:
139.
(5c)
In
subsection
(5a),
(5d)
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
(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;
Therefore
by
virtue
of
subparagraph
139(5a)(b)(ii)
Peter
J
Lawlor
Ltd
is
related
to
both
William
R
Lawlor
and
Laurence
D
Lawlor:
139.
(5a)
For
the
purpose
of
subsection
(5),
(5c)
and
this
subsection,
“related
persons”,
or
persons
related
to
each
other,
are
(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);
By
virtue
of
subparagraph
139(5a)(b)(iii)
Peter
J
Lawlor
Ltd
is
related
to
any
person
who
in
turn
is
related
to
William
R
Lawlor
and
Laurence
D
Lawlor.
Adrienne
Lawlor
is
related
to
Laurence
D
Lawlor,
being
his
wife.
W
Eric
Lawlor
is
related
to
William
R
Lawlor,
being
his
son.
Therefore,
Peter
J
Lawlor
Ltd
is
related
to
both
Adrienne
Lawlor
and
W
Eric
Lawlor
who
together
form
a
group
which
controls
Regal.
Subsection
39(4)
of
the
Act
does
not
require
the
group
which
controls
Regal
to
be
related.
Accordingly,
the
fact
that
Adrienne
Lawlor
and
Eric
Lawlor
are
not
themselves
related,
does
not,
it
is
submitted,
remove
the
present
fact
situation
from
the
ambit
of
subsection
39(4).
Thirdly,
the
ownership
of
Peter
J
Lawlor
Ltd
of
shares
in
both
Regal
and
Vending
is
sufficient
to
satisfy
the
third
requirement
of
paragraph
39(4)(d).
The
fact
that
neither
Adrienne
Lawlor
nor
W
Eric
Lawlor
owned
shares
in
National
Vending
Ltd
does
not
prevent
the
operation
of
that
provision.
Defendant
submitted
that
authority
for
this
proposition
may
be
found
in
Electric
Power
Equipment
Ltd
v
MNR,
[1968]
Ex
CR
460;
[1967]
CTC
479;
67
DTC
5322.
In
his
decision,
Sheppard,
DJ
inter-
preted
paragraph
39(4)(b)
and
held
that
“one
of
those
persons”
referred
to
any
of
the
“persons”
to
which
reference
is
previously
made
in
the
subparagraph.
In
other
words,
it
is
submitted
that
“one
of
those
persons”
refers
to
the
“person”
who
controlled
by
itself
the
one
corporation
as
well
as
to
any
of
the
persons
in
the
group
controlling
the
other.
Therefore,
if
Peter
J
Lawlor
Ltd
owned
one
or
more
shares,
not
necessarily
voting
shares,
of
the
capital
stock
of
both
Regal
and
National,
then
the
two
latter
corporations
would
be
associated
within
the
meaning
of
paragraph
39(4)(b).
Since
Peter
J
Lawlor
Ltd
did
own
preferred
shares
in
Regal,
and
owned
ail
of
the
issued
shares
in
Vending,
the
two
corporations
are
associated.
In
my
view,
the
alternative
position
of
the
defendant
is
valid:
regardless
of
the
effect
of
non-registration
of
the
shares,
Regal
and
Vending
are
still
associated
within
the
meaning
of
the
Income
Tax
Act.
Plaintiff
argued
that
the
alternative
position
was
predicated
on
the
premise
that
Adrienne
and
Eric
Lawlor
are
a
“group”
of
persons
who
controlled
Regal
and
submitted
they
did
not
constitute
a
“group”
within
the
meaning
of
the
legislation.
Plaintiff
claimed
that
as
defined
by
the
Oxford
and
Webster
dictionaries,
the
word
“group”
connotes
“collective
unity’,
“segregation
from
others”,
having
a
“community
of
interest”.
In
Yardley
Plastics
of
Canada
Ltd
v
MNR,
[1966]
CTC
215;
66
DTC
5183,
Noël,
J
said
at
page
224
[5188]:
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
irrebuttably
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.
“Group”
was
defined
in
S
Madill
Ltd
v
MNR,
[1972]
CTC
47:
72
DTC
6027,
as
people
having
“a
community
of
interest
and
concern”.
It
was
defined
in
Vina-Rug
(Canada)
Ltd
v
MNR,
[1968]
CTC
1;
68
DTC
5021,
as
persons
who
“had
at
all
material
times
a
sufficient
common
connection”.
In
Buckerfield's
Ltd
v
MNR
(supra)
Jackett,
P,
now
Chief
Justice
of
this
Court,
said
at
page
509
[5303]
that
“the
word
‘group’
in
its
ordinary
meaning,
as
I
understand
it,
can
refer
to
any
number
of
persons
from
two
to
infinity”.
Surely,
these
two
persons,
Adrienne
and
Eric
Lawlor,
have
a
community
of
interest
and
concern,
a
common
connection,
a
sufficient
collective
unity
to
form
a
“group”.
The
aunt
and
nephew
are
not
only
related
to
the
two
Lawlor
brothers,
they
all
earn
their
livelihood
from
the
same
business
ventures.
They
are
all
Lawlors,
by
their
own
admission
a
tightly
knit
family
group.
In
conclusion,
the
reassessments
are
affirmed
and
the
appeal
is
dismissed,
with
costs
to
the
defendant.
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