A W Prociuk (orally):—This appeal in the Estate of Alfred John Ferguson Roberts was instituted by Messrs Norman Lindsay Ross, Leslie Edwin Pope, T Irvine Cormack, C Peter V Forrest, and Robert T Hoard, all of whom are parties, as was the deceased, to a certain buy-sell agreement dated November 15, 1968. They were all major shareholders in Ker & Stephenson Limited, a company incorporated under the laws of British Columbia, having its registered office in Victoria, British Columbia. The said agreement reads as follows:
Whereas, the shareholders are the major shareholders in Ker & Stephenson Limited, a company duly incorporated under the laws of the Province of British Columbia, and having its registered office at 680 Broughton Street, in the City of Victoria, in the Province of British Columbia, (hereinafter referred to as the “Company”);
And whereas, it is the desire of the shareholders that upon the death of any of them, the shares of common stock of the company which are owned by such deceased shareholder at the time of his death, shall be purchased by the surviving shareholders, except the said Alfred John Ferguson Roberts;
And whereas, the shareholders have requested the secretary for the time being of Ker & Stephenson Limited, presently Robert T. Hoard, to act as trustee for the purpose of carrying out the arrangements contained in this agreement as hereinafter mentioned;
Now therefore this indenture witnesseth that in consideration of the premises and the mutual agreements and covenants herein contained, it is hereby declared, agreed and covenanted by and between the shareholders as follows:—
1. Upon the death of any shareholder:
(a) The shares of the said company owned by such deceased shareholder shall be valued in accordance with the assessment thereof by the Estate Tax Department of the Department of National Revenue, Government of Canada.
(b) The personal representative of the deceased shareholder shall sell and the surviving shareholders, except the said Alfred John Ferguson Roberts, shall purchase the shares of the said company owned by such deceased shareholder at the time of his death, in proportion to their shareholdings among each other, excepting thereout shares owned by the said Alfred John Ferguson Roberts, the purchase price to be the value of the shares determined in accordance with paragraph 1 (a) hereof.
(c) The surviving shareholders shall pay the purchase price of the said shares to the personal representative of the deceased shareholder, as follows:
(i) A sum equivalent to one-third (%) of the value thereof shall be payable to the personal representative of the deceased shareholder, in cash, within six (6) months following the death of the deceased shareholder, provided however, that in the event the Estate Tax assessment has not been made and accepted by the personal representative of the deceased shareholder, within the said six (6) months, the required one-third (‘/3) payment shall be made upon acceptance of such assessment by the personal representatives.
(ii) The balance of the purchase price of the said shares shall be paid to the trustee in equal monthly payments amortized over a three (3) year term, together with interest at the rate of five per cent (5%) per annum, the first of such equal monthly payments to become due and payable one (1) year after payment made in the last preceding paragraph hereof;
Provided however, the entire balance owing by the surviving shareholders shall immediately become due and payable on the happening of any of the following events, that is to say:
(a) Upon any act of bankruptcy of the company,
or
(b) Upon liquidation or winding-up of the company,
or
(c) On the sale of the business presently being conducted by the company.
2. The personal representative of the deceased shareholder shall have the said shares registered in the name of, and delivered to, the surviving shareholders who shall forthwith deposit with the trustee share certificates in endorsed form as security for any unpaid balance and the trustee shall pay over to the personal representatives of the deceased shareholder the payments received by him from the surviving shareholders. The trustee shall retain the certificates for the said shares until the balance has been fully paid. The surviving shareholders shall have the right however, to vote the said shares deposited by them so long as they are not in default under any of the terms of this agreement, so long as such vote is not detrimental to the interests of the deceased shareholder.
3. Time shall be of the essence of this agreement.
4. The shareholders may jointly alter the terms of this agreement with the consent of the trustee, or may jointly revoke this agreement at any time by notice in writing delivered to the trustee.
5. The shareholders and each of them shall indemnify and save harmless the trustee from all actions, claims and demands whatsoever in respect of any act or thing done or omitted to be done by the trustee in or about the execution of the trusts herein mentioned.
6. In the event of the death of the said Alfred John Ferguson Roberts all of the terms and conditions of this agreement shall be in full force and effect with respect to the requirements of the shareholders surviving the said Alfred John Ferguson Roberts being required to purchase such shares, and the personal representative of the said Alfred John Ferguson Roberts being required to sell such shares in proportion to the shareholdings of the surviving shareholders, save and except that the following special conditions shall apply with respect to the sale of the shares of the said Alfred John Ferguson Roberts, that is to say:
(a) A sum equivalent to Twenty (20%) of the value thereof shall be payable to the personal representative of Alfred John Ferguson Roberts, in cash, within Three (3) months of the settlement of values by the Estate Tax Department of the Department of National Revenue, Government of Canada.
(b) The balance of the purchase price of the said shares shall be paid to the personal representative of the said Alfred John Ferguson Roberts, in equal annual instalments amortized over a Five (5) year term, together with interest at the rate of Five per cent (5%) per annum, the first of such equal annual payments to become due and payable one (1) year after the twenty per cent (20%) payment required to be made herein.
(c) At the present time, certain of the shareholders namely, Norman Lindsay Ross, Leslie Edwin Pope, Robert T. Hoard, T. Irvine Cormack and C. Peter
V. Forrest are purchasing shares from Alfred John Ferguson Roberts pursuant to agreements dated the 25th day of December A.D., 1965 and the 15th day of November A.D., 1968, under terms calling for instalment payments for the purchase price thereof and it is understood and agreed that if any of the above-named should die prior to payment by them in full to Alfred John Ferguson Roberts for the purchase price of the shares, such shares may be purchased by the surviving shareholders only upon terms allowing payment in full to Alfred John Ferguson Roberts of any moneys owing to him; for greater certainty it is understood and agreed by and between the parties hereto that such of the above-named shareholders as are alive at the date of the death of Alfred John Ferguson Roberts are required to purchase the shares of Alfred John Ferguson Roberts as aforesaid, notwithstanding that they may not have completed payments to Alfred John Ferguson Roberts under the agreements of December 25th, 1965, and November 15th, 1968.
7. This agreement shall be binding upon the heirs, executors and administrators of each of the shareholders.
In witness whereof the parties hereto have hereunto set their hands and seals, the day and year first above written.
And the agreement bears the signatures of the respective parties.
The late Alfred John Ferguson Roberts died on or about August 15, 1970, intestate. Letters of administration were granted to the official administrator for the County of Victoria, British Columbia, on January 19, 1971. The deceased in his lifetime owned, amongst other things, 4,600 shares in the said company, and the value per share as declared by the official administrator was $14.14. There was founded by notice of reassessment, dated February 17, 1972, a fixed value of the said shares at $25.87 each. Pursuant to the terms of the agreement aforesaid, the appellants are bound to pay the said value, and this appeal is from the said assessment, alleging that this sum is unrealistic and too high. They suggested a figure of $15.47 per share.
At the commencement of the hearing, T E Jackson, Esq, QC, learned counsel for the respondent, moved to quash the appeal on the ground that the appellants have no status herein, they being neither executors, administrators nor successors within the meaning of the Estate Tax Act. J S de Villiers, Esq, counsel for the administrator, requested leave to be heard on behalf of the administrator, and same was granted. He similarly argued that the appellants had no status herein, and the administrator apparently is satisfied with the respondent’s assessment as it relates to the value of the shares in question. Learned counsel for the appellants argues that the appellants were successors to the said shares and beneficially entitled thereto within the meaning of the Estate Tax Act. “Successor” is defined by the Act, as follows:
62. (1) In this Act,
“successor” in relation to any property passing on the death of a deceased, includes any person who, at any time before or on or after the death of the deceased, became beneficially entitled to any such property
(a) by virtue of, or conditionally or contingently on, the death of the deceased,
(b) by virtue of the exercise of any general power of which the deceased was the donee or other holder,
(c) in any case, under any disposition made by the deceased during his lifetime, or
(d) by virtue of the application in respect of the death of the deceased of any law of Canada or a province providing for relief of dependants of deceased persons,
and includes
(e) any person beneficially entitled to any such property in default of the exercise of any general power of which the deceased was the donee or other holder,
(f) any person as the donee or other holder of any general power created by the deceased in respect of any such property,
(g) any person who on the death of the deceased, had, under any settlement described in paragraph 7(1 )(b), a beneficial interest in property deemed by subsection 3(2) to be property passing on such death, and
(h) any trustee, guardian, committee, curator, or other similar representative of any person mentioned in this paragraph, in his capacity as such trustee, guardian, committee, curator or other representative;
If the appellants can qualify as successors, then it follows that they are entitled to be heard by the Board, as the Act specifically so provides.
The appellants’ rights and liabilities, in my opinion, stem only from the agreement, and the only reference to or connection with the Act is the matter of establishing the quantum of consideration by the respondent. The agreement does not give the appellants a right to appeal from the assessment in any way. One would have thought that a clause covering a dispute of this nature would have been implemented to the effect that in that situation the executor, or administrator, as the case may be, would have teen obliged to appeal; but the agreement does not cover this eventuality, nor does it contemplate the same in any way.
Th appellants, as purchasers, in my opinion, are not successors to the assets of the deceased, nor are they beneficially entitled thereto within the meaning of the Act.
The motion, accordingly, is allowed, and the appeal is quashed, by reason of the fact that the appellants have no status before the Board.
Appeal quashed.