Words and Phrases - "successor"

The taxpayer ("Envision") was formed on the amalgamation under the Credit Union Incorporation Act (B.C.) (the "CUIA") of two credit unions. S. 23(b) thereof provided that "the amalgamated credit union is seized of and holds and possesses all the property ... and is subject to all the debts ... of each amalgamating credit union."

The taxpayer sought to avoid having this qualify as an amalgamation described in s. 87(1) of the Act (which required that all property of the predecessors, other than intercompany shares or debts, become property of the amalgamated corporation). To this end, a beneficial interest in some "surplus" real estate was conveyed to a numbered corporation subsidiary at the exact stipulated time for the amalgamation in the amalgamation agreement.

Rothstein J found that s. 23(b) of the CIUA, which should not be overriden by the amalgamation agreement in light of the obvious intent that amalgamated corporations would be responsible for their predecessors' liabilities, caused the amalgamated corporation (Envision - viewed, at para. 48, as a "successor") to be seized of its predecessors' properties, including the surplus properties, at the moment of the amalgamation. As to the resulting effect on the sale agreement for the surplus properties (para. 46):

At the moment of amalgamation, the predecessors ... no longer had separate legal personalities capable of fulfilling the terms of the sale agreements. While they were continued under the CUIA, they continued inside Envision. ... So, despite the fact that the agreements listed [them] as the vendors, at the moment of the amalgamation, the vendor was Envision.

Conversely, the premise of the taxpayer's argument, that there could be a conveyance of the assets of the predecessors (Delata and First Heritage) to Envision, was incorrect, as (para. 50, concurred in by Cromwell J at para. 60):

At the moment Envision was created, the predecessors ceased to have any independent legal existence, so there were not two parties capable of engaging in a conveyance. In this case, there was no point in time when Delta, First Heritage and Envision existed as separate legal entities such that Delta and First Heritage could convey their property to Envision.

In rejecting a "tracing" approach of the Court of Appeal which, in effect, treated the shares of the numbered company as representing the surplus properties, Rothstein J enunciated (at para. 57) the "basic rule of company law that shareholders do not own the assets of the company."