THURLOW, J.:—These appeals are from assessments of nonresident income tax levied in respect of amounts of interest remitted by City Park Apartments Limited, a resident Canadian corporation to each of the appellants in each of the years 1966, 1967 and 1968. In each case City Park Apartments Limited (which is referred to hereafter as City Park) deducted 15% of the amount to be paid and remitted it to the Receiver General of Canada and the Minister subsequently, on application being made by the appellants for refunds, assessed the appellants in the amounts so remitted. The issue in each of the appeals is the same, that is to say, whether non-resident income tax was payable in respect of the interest payments in question.
Liability for the tax turns on whether or not the interest payments fall within the exception provided for in Section 106(1) (b) (iii) (A) of the Income Tax Act. The section provides that:
106. (1) Every non-resident person shall pay an income tax of 15% on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit to him as, on account or in lieu of payment of, or in satisfaction of,
(b) interest except
(iii) interest payable in a currency other than Canadian currency to a person with whom the payer is dealing at arm’s length, on
(A) any obligation where the evidence of indebtedness was issued on or before December 20, 1960.
Here, under the relevant contracts the interest was payable in Swiss francs and no question is raised as to the evidence of indebtedness having been issued prior to December 1960. What is in question is whether the payments made by City Park were made to a party with whom it was dealing at arm’s length.
The loans on which the interest in question accrued were made to City Park at various times commencing in 1954 and ending in 1958 by each of the two appellants in equal amounts from moneys which they had raised, through public subscriptions in Switzerland, where they reside and carry on their business, to a fund known as Canada-Immobil Investment Fund for real estate in Canada, of which the appellants were the trustees. At the times material to the appeals there were about 2,000 persons holding certificates for investments in the fund all of which certificates were in bearer form. It does not appear from the evidence and was not suggested that any of the certificate holders were resident in Canada.
Following the raising of the money City Park had been incorporated in Ontario, had been loaned the principal amounts in question and had constructed two apartment buildings in Toronto. The moneys used by City Park to make the interest payments in question resulted from its operations of these apartment buildings.
At all material times all the issued shares of City Park were registered in the name of Société Internationale de Placements (hereafter referred to as SIP), and the certificates therefor were in the custody of the appellants. S I P is a Swiss corporation engaged in the management of investment funds and is the manager of the Canada-Immobil Investment Fund. The shares of City Park have been and are assets of that fund. The share capital of SIP itself was and is held by the two appellants and another corporation in the proportions of 40%, 40% and 20% respectively. The appellants together have thus been at all material times in a position to control SIP but their capital stock is publicly held and they themselves are not related to each other. The situation, as it appears to me, is thus one in which the assets of the Canada-Immobil fund included both the loans, which were made separately and were repayable with interest separately to the appellant banks, and all the capital stock of the debtor company.
The certificates for shares in the Canada-Immobil fund bore the signature of S SI P and read as follows:
Each share entitles the holder thereof to a proportionate right of co-ownership in the assets of the Fund according to article 1 of the Regulations reproduced overleaf./ Each share’s participation in the co-ownership corresponds to the assets of the Fund divided by the number of shares outstanding./ The determination of value of each share as well as the rights and obligations of the certificate holders are governed by the Regulations (articles 7 and 4). Each holder accepts these Regulations and any subsequent amendment thereof as binding (article 27).
Below the signature of S SI P appeared the following which was signed by the appellants:
The undersigned trustees confirm that an amount corresponding to the current value of the proportionate share in the assets of the Investment Fund represented by this certificate has been paid into the Fund. They assume the obligation to exercise the functions of trustees as provided for by the Regulations.
The Trustees
Among the provisions of the regulations, which were printed on the back of the certificate and bore the signatures of S SIP and of the appellants, were the following :
In order to facilitate investments in real estate in Canada, the undersigned have agreed to issue certificates in bearer form evidencing co-ownership in Canadian real estate.
These values and assets and the income derived therefrom shall constitute a fund for the benefit of the certificate holders which, together with the organization created for its administration, shall be known as CANADA-IMMOBIL Investment Fund for real estate in Canada (abbreviation: Fund).
The contractual relations and rights between the holders of Certificates and the Management of the Investment Fund shall be governed by the following regulations:
1. Each Certificate of CANADA-IMMOBIL Investment Fund for real estate in Canada entitles the owner thereof :
(a) to proportionate rights of Co-Ownership in the assets of the Fund, within the meaning of Article 646 of the Swiss Civil Code and to the extent of the number of shares represented by said Certificate.
(b) to the rights specified in these Regulations in respect of income and of realized capital gains, if any;
(c) to any other rights arising under these Regulations.
2. All rights and benefits evidenced by the Certificates may be transferred by delivery of such Certificates.
The Managers and Trustees of the Fund may treat the bearer of any Certificate and the bearer of any dividend coupon as the owner of such Certificate or coupon, as the case may be, for all purposes.
3. These Regulations govern the legal rights of Co-Ownership with regard to the administration, the representation, the acquisition and sale of the assets, the dissolution of the relation of Co-Ownership, the method of liquidation and distribution of assets and all rights and relationships whatsoever relating to the Co- Ownership Fund.
Owners of Certificates who wish to withdraw from the Co-Ownership shall not be entitled to claim either the complete dissolution of the Fund, or a physical distribution of assets, but can only demand the repurchase of their Certificates by the Managers or Trustees in accordance with Article 9.
4. By acquiring such Certificates each owner agrees to and accepts these Regulations and any amendments thereof as binding upon him, and accepts and agrees, to be bound by all decisions made and actions taken by the Managers, the Trustees and the Committee of Experts pursuant thereto. Such owner, however, does. not assume or incur any liability beyond the payment of the purchase price of such Certificate.
5. The duration of the Fund is unlimited. The Managers have, however, the right at any time upon six months’ notice to liquidate the Fund as provided for in Article 18.
(B) Form and Denomination of Co-Ownership Shares
6. Certificates shall be issued in bearer form for one share and five shares with yearly coupons attached.
The text of these Regulations shall be printed on each Certificate.
Certificates shall be signed, by hand or by facsimile, by the Managers and the Trustees.
(C) Net Asset Value, Issue and Repurchase of Co-Ownership Shares
7. The net asset value of each share in the Fund shall be determined from the balance of all assets and liabilities of the Fund divided by the number of shares outstanding.
In the case of value of shares, the net asset value of each share, after allowance for all expenses, shall be adjusted to the next highest mutiple of five Swiss Francs, or in the case of repurchase of shares or liquidation of the Fund, to the next lower multiple of five Swiss Francs.
8. Until further notice, Certificates of shares in the Fund will be issued by the Managers or their agents in accordance with the possibilities of investment.
The issue price for each share shall be determined on the basis of the net asset value (Art. 7) plus all expenses and taxes in connection with the issue. This price also includes a commission of
244% to cover issuing expenses.
9. Owners of Certificates shall at any time have the right to require the repurchase of shares, represented by such Certificates, out of the assets of the Fund, on presentation thereof, at their choice, to the Managers, or the Trustees, or their Substitutes.
The repurchase price of a share shall be based on its estimated net asset value (Art. 7) by deducting expenses which would be incurred in effecting a sale of the investments at that time and any taxes which would become exigible as a result of such a sale or of a distribution at that time of the proceeds of such a sale.
Whenever it shall become necessary to sell real estate in order to meet such demands for repurchase of shares, the repurchase price shall be determined and payment effected after the receipt of proceeds of such real estate sales.
11. CO-OWNERSHIP FUND
10. The values and moneys belonging to the owners of Certificates constitute, in their totality, the Co-Ownership Fund.
According to these Regulations the holders of Certificates entrust the Managers and the Trustees respectively with the safe-custody, administration and representation of the Co-Ownership Fund.
11. The investments in real estate to be made for account of the Fund shall be effected in accordance with the following principles:
(a) Real estates, from which a regular annual revenue may be expected, . ..
(b) Vacant lots, if their purchase is made with a view to realize building projects of the Fund.
(c) Exceptionally, vacant land on which no buildings will be erected within a measurable space of time . . .
If by any reason the Managers consider an investment in real estate not advisable, they may at their discretion invest available cash balances in the manner they deem appropriate.
12. All investments shall be acquired with moneys of the Fund, these acquisitions being normally effected by taking over or founding and financing real estate companies.
16. The revenues from the investments, diminished by the expenditures and by any allowance pursuant to Article 15, shall be distributed after deduction of all expenses and taxes on July 1st every year, for the first time on July 1st, 1955. Payments shall be made without deduction of a commission. The Co-Ownership Fund shall however be charged with an annual commission of 3% calculated on the aggregate value of the real estates and other investments, to cover safe-custody fees and as remuneration of the Managers for their services.
18. In case the Managers decide to liquidate the Co-Ownership Fund, all investments shall be sold on the best possible terms by the Managers within such time as they, at their discretion, deem necessary.
The net proceeds and cash amounts available, after deduction of all expenses and taxes and a handling fee of 44% shall be paid out by the Trustees and other designated paying agents (if any) against surrender of the certificates. As far as practicable, payments shall be made in yearly instalments if the liquidation is not completed within one year.
111. ADMINISTRATION
19. The administrative functions of the Fund shall be assigned: (a) The Management:
to the Société Internationale de Placements, (SIP), Basle, Switzerland, or its Substitutes appointed as hereinafter provided.
(b) The Trusteeship:
to the Swiss Bank Corporation, Basle, Switzerland, and the Credit Suisse, Zurich, Switzerland, or their Substitute appointed as hereinafter provided.
(c) The Examination and Valuation of real estates: to the Committee of Experts.
20. The Managers shall exercise the functions of a common contractual representative of the Co-Owners of the Fund. They shall have full power and discretion in regard to the investment and reinvestment of the assets of the Fund.
They shall arrange for the purchase and sale of real estates and, if the occasion arises, for the construction of buildings, by effecting the formation or taking over of companies, which on the Managers’ instructions undertake the necessary steps.
As regards the real estate companies and their commissioners in Canada, the Managers shall give instructions for the execution of the administrative affairs, shall see to a relevant and competent management of the real estates and shall supervise the administration.
21. The Trustees, on behalf of the Certificate holders, shall perform the following functions:
To receive as custodians an administrators the payments of subscribers of shares and the proceeds of the sale of real estate and other investments as well as the amounts for the payment of the coupons maturing each year.
To act as custodians and administrators for moneys, shares of companies owned by the Fund, securities and other documents representing claims, as well as for values assigned to the Renewal- and Amortization Fund. Each Trustee shall have the right to deposit securities and other assets of the Fund in the name of such Trustee, . . .
The Trustees shall represent the Certificate holders in their relation to the Managers,
With regard to the companies belonging to the Fund, the Trustees shall only be bound to ascertain that the shares and other documents evidencing ownership, as well as the real estate properties owned by such companies, are not sold or pledged without the equivalent being utilized for the benefit of the Certificate holders.
23. All expenses for steps taken or caused to be taken by the Managers, the Trustees or the Committee of Experts in the fulfillment of their respective functions shall be charged against the investments or the income derived therefrom. The same applies to any fees for management of real estate and administrative work (Article 20 par. 4) payable to commissioned firms in Canada at the rates prevailing there.
24. The Managers, the Trustees and the Committee of Experts shall perform their duties with every care, without, however, assuming any liability.
27. Any matters relating to the administration of the Fund not specifically covered by these Regulations shall be settled and determined or provided for by unanimous action of the Managers and the Trustees, and published in the manner provided in Article 29 hereafter, and upon such publication such amendments shall be binding on the Certificate holders, their successors and assigns, to the same extent as if incorporated in these Regulations. In case of disagreement between the Managers and the Trustees, the matter shall be determined in accordance with Article 28.
28. Any disagreement between the Managers and the Trustees and any disputes between the Managers, Trustees and the Certificate holders shall, except in the case hereinafter provided for, be settled by arbitration without recourse to the Courts.
Notwithstanding the use in these regulations of the expression “co-ownership” and other like expressions to characterize the nature of the certificate holders’ rights and the constitution of the managers under regulations 10 and 20 as contractual representatives of the co-owners of the fund the evidence indicates that the preponderance of legal opinion in Switzerland favoured the view that the certificate holders were not in fact owners of the fund or any of its assets and had no rights in rem in respect of them but simply had rights enforceable in personam against the managers and the trustees to compel performance of the obligations undertaken by them under the contract. An act of the Swiss Parliament which came into force on February 1, 1967 and applied to existing funds, as well as to those organized thereafter, set at rest any doubt that may theretofore have existed on the question by making it clear that the rights of the certificate holders were simply rights to claim against the managers and trustees of the fund. Thereafter certificates issued for shares in the Canada-Immobil fund bore a surcharged stamp stating in German and in French:
Conformément à la loi sur les fonds de placement, les porteurs de parts n’ont aucun droit de co-propriété, mais seulement des droits de créance.
The funds raised by the sale of these certificates were credited first to the ordinary account of SIP in each of the appellant banks and thereafter on S I P’s instructions they were trans- fered to a S I P Canada-Immobil capital account from which funds to be loaned to City Park were transfered, on S I P's instructions, to a S SIP advance account for real estate companies and from that account to an advance account in the name of City Park on which that company could then draw to pay for its land and the construction of its buildings. Money subsequently remitted by City Park to the appellants as interest on the loans was converted by them to Swiss franes on a date fixed by S SIP and thereupon deposited to a SIP Canada-Immobil income account. When the annual coupons of the certificate holders fell due a sum sufficient to pay the amount fixed by SIP P to be paid out to them was transferred from the income account to a distribution account from which the coupon payments would be made. Before transferring funds from income to distribution account it was necessary to have regard for amounts to be paid for expenses and commission to S SI P and the appellants and to amounts to be held as reserves but subject to such items the amount transferred to distribution account was in practice substantially the whole of the funds in the income account.
The contracts under which moneys of the fund were loaned to City Park were separate contracts for each of the appellants but were in similar terms. They recited the acquisition by City Park of an apartment site in Toronto and the making by City Park of a contract for the construction of an apartment building thereon and they went on to say that in consideration thereof the bank granted the loan and that a similar loan would be made by the other bank. Interest was then provided for at the rate of 714% per annum and for an increase to 814% in case of default in its payment. The borrower agreed to raise all funds needed to finance the bonds and projected building from the appellants, not to borrow from any other money lender and not to encumber the property save that the banks were entitled, if they saw fit, to demand security by way of mortgage on the property for the loans. The duration of the loans was unlimited but either party had the right to terminate them on six weeks’ notice. City Park further gave the appellant in each case the right “to examine at any time upon request by the latter, their bookkeeping and administration and to effect undisturbedly any control of the real estate property and its management” all at the cost of City Park. The contracts were declared to be governed by Swiss law and City Park elected domicile in Switzerland.
In each of the years here in question the profits of City Park were not sufficient to permit it to pay the whole of the interest which accrued on the loans and on S I P’s instructions substantial amounts of accrued interest were waived.
The appellants’ case for regarding the appellants as parties with whom City Park dealt at arm’s length, as I understood it, was that the transactions to be considered were simply those of the payments of interest made in the years in question pursuant to the loan contracts made in 1954, that if the appellants are considered, as a strict reading of the statute would indicate they should be considered, as the payees of the interest there was no ease for holding that either appellant had control of City Park, since it held no shares therein, or that it had control of SIP, since it held but 40% of the shares therein, and that on the facts the appellants had an obligation to receive the interest and distribute it in accordance with the fund regulations and in so doing exercised no influence or control over City Park and could not properly be said to deal with that company otherwise than at arm’s length. On the other hand, in counsel’s submission, if, for the purposes of Section 106, the certificate holders were to be regarded as the recipients of the interest, as a broad readings of the statute indicated they should, it could not be said that they had any shareholding in or control or power to exercise control over City Park and that they could not properly be regarded otherwise than as persons with whom that company dealt at arm’s length.
The position of counsel for the Minister on the other hand was that City Park was at all material times under the control of S SIP and that the appellants as well, in matters pertaining to the Canada-Immobil fund, were subject to the control of SIP, from which it followed that the appellants and City Park could not be said to deal at arm’s length. Further in his submission if the certificate holders were regarded as the receivers of the interest S I P was their representative in matters pertaining to the fund and since it also controlled City Park on their behalf they were not parties with whom City Park could be said to deal at arm’s length. Alternatively it was submitted that the interest in question was subject to tax as income of a trust under Section 106(1) (c) of the Income Tax Act.
I should add at this point that counsel for all parties indicated that what was desired was a determination of the question whether the interest payments in question were subject to tax under Section 106 of the Act, rather than of the narrower question whether the assessments in respect thereof were properly made against the appellants.
A useful discussion of the concept involved in the expression dealing at arm’s length’’ and similarly worded expressions in the Income Tax Act and the Estate Tax Act is found in the judgment of my brother Cattanach, J. in M.N.R. v. T. R. Merritt Estate, [1969] 2 Ex. C.R. 51; [1969] C.T.C. 207, where at page 61 [216] he said:
In M.N.R. v. Sheldon’s Engineering Ltd., [1955] S.C.R. 637; [1955] C.T.C. 174, Locke, J., delivering the judgment of the Supreme Court of Canada, had occasion to comment upon the expression “dealing at arm’s length” as it appeared in a provision in the Income Tax Act. He said at page 643 [p. 179] :
The expression is one which is usually employed in cases in which transactions between trustees and cestuis que trust, guardians and cestuis que trust, guardians and wards, principals and agents or solicitors and clients are called into question. The reasons why transactions between persons standing in these relations to each other may be impeached are pointed out in the judgments of the Lord Chancellor and of Lord Blackburn in McPherson v. Watts (1877), 3 App. Cas. 254.
He went on to say, however, that “These considerations”—i.e., the reasons why transactions between persons standing in such relations as trustee and cestuis que trust may be impeached— “have no application in considering the meaning to be assigned to the expression in Section 20(2)”.
Having thus put aside the principles that had been developed concerning transactions between persons standing in the relationship of trustee and cestuis que trust and other relationships giving rise to an implication of undue influence, Locke J. went on to reject the argument that the provision in the Income Tax Act at that time whereby certain defined classes of persons were deemed not to deal with each other at arm’s length was exhaustive of the classes of persons who could be regarded as not dealing with each other at arm’s length for the purposes of that Act. He said:
I think the language of Section 127(5) [now 139(5)], though in some respects obscure, is intended to indicate that, in dealings between corporations, the meaning to be assigned to the expression elsewhere in the statute is not confined to that expressed in that section.
While, therefore, the facts in the Sheldon’s Engineering (supra) ease did not fall within any of the specially enumerated classes of cases where persons were deemed not to deal with each other at arm’s length, Locke; J. concluded that it was still necessary to consider whether, as a matter of fact, the circumstances of the case fell within the meaning of the expression “not dealing at arm’s length” within whatever meaning those words have apart from any special deeming provision.
In this appeal, the question is whether the circumstances are such as to fall within the words “persons dealing with each other at arm’s length” in Section 29(1) of the Estate Tax Act. In my view, these words in the Estate Tax Act have the same meaning as they had in the income tax provision with which Locke, J. was dealing in Sheldon’s Engineering when those words were considered, as Locke, J. had to do, apart from any special “deeming” provision.
It becomes important, therefore, to consider what help can be obtained from the judgment in Sheldon’s Engineering as to the meaning of the words “persons dealing at arm’s length” when taken by themselves. The passage in that judgment from which, in my view, such help can be obtained, is that reading as follows:
Where corporations are controlled directly or indirectly by the same person, whether that person be an individual or a -corporation, they are not by virtue of that section deemed to be dealing with each other at arm’s length. Apart altogether from the provisions of that section, it could not, in my opinion, be fairly contended that, where depreciable assets were sold by a taxpayer to an entity wholly controlled by him or by a corporation controlled by the taxpayer to another corporation controlled by him, the taxpayer as the controlling shareholder dictating the terms of the bargain, the parties were dealing with each other at arm’s length and that Section 20(2) was inapplicable.
In my view, the basic premise on which this analysis is based is that, where the “mind” by which the bargaining is directed on behalf of one party to a contract is the same “mind” that directs the bargaining on behalf of the other party, it cannot be said that the parties are dealing at arm’s length. In other words where the evidence reveals that the same person was “dictating” the “terms of the bargain” on behalf of both parties, it cannot be said that the parties were dealing at arm’s length.
To this I would add that where several parties—whether natural persons or corporations or a combination of the two— act in concert, and in the same interest, to direct or dictate the conduct of another, in my opinion the ‘‘mind’’ that directs may be that of the combination as a whole acting in concert or that of any one of them in carrying out particular parts or functions of what the common object involves. Moreover as I see it no distinction is to be made for this purpose between persons who act for themselves in exercising control over another and those who, however numerous, act through a representative. On the other hand if one of several parties involved in a transaction acts in or represents a different interest from the others the fact that the common purpose may be to so direct the acts of another as to achieve a particular result will not by itself serve to disqualify the transaction as one between parties dealing at arm’s length. The Sheldon’s Engineering case (supra), as I see it, is an instance of this.
Reference may also be made to the judgments of Cameron, J. in M.N.R. v. Kirby Maurice Company Limited, [1958] Ex. C.R. 77; [1958] C.T.C. 41, and Ancaster Development Company Limited v. M.N.R., [1961] Ex. C.R. 201; [1961] C.T.C. 91, as well as the judgment of my brother, Noel, J., in Pender Enterprises Limited v. M.N.R., [1966] Ex. C.R. 180; [1965] C.T.C. 343.
Turning now to the various submissions put forward on behalf of the appellants, I agree with the submission that the material times at which the situation must be considered are the times when the interest payments were made by City Park. I also agree with counsel’s submission that it is difficult to apply the concept in a situation where the transaction is simply one of payment of the whole or part of an existing obligation. On the other hand it appears to me that the fairness of the particular transaction is not the point, though its apparent unfairness, if that were the case, might constitute some evidence to characterize it as not being at arm’s length. Nor is the question to be decided by the test of whether the same transaction could be expected to take place between parties dealing at arm’s length, for it is the fact of the power of one party to influence or control another which, as I see it, determines the matter rather than either the effect of such influence or control or the fact of its exercise. It also appears to me that while the transactions here in question are the payments of interest and the times at which they were made are the times when the power to influence or control must be considered, evidence of a situation that was initiated and existed before the material times and continued through and after them may be considered in determining whether the parties dealt at arm’s length at the material times. Moreover, if a transaction, such as the payment of an existing obligation, is in reality nothing more than the transferring of money by a person—or a group, or an organization—from one of his or its pockets to another the transaction in my opinion is I not one between parties who deal at arm’s length regardless of
what reasons prompt it and regardless of how closely or in how many respects it may resemble similar transactions between strangers.
In the present case on reading the documents already referred to I find myself much inclined to regard the certificate holders as the recipients of the interest paid by City Park and I might well conclude that they were the recipients if their rights were what the construction of the certificates by the application of common law and equity principles would seem to indicate they were. However, I find it difficult to treat them as the recipients for the purposes of Section 106, in view of the nature of their rights under Swiss law both before and after the coming into force of the Act passed in 1966. As I see it, none of the certificate holders ever did have any right to interest, or to recover any sum as interest, whether from City Park, or from either of the appellants, or from SIP. They did have a right to claim against the appellants and S I P a distribution of income of the fund but it seems to me that their right, rather than being a right to the income itself of the fund, was a right to claim and compel the payment of an amount, the quantum of which, and nothing else, was related to and governed by the amount of distributable income of the fund.
However if, contrary to this view, the certificate holders are regarded as the recipients of the interest for the purposes of Section 106, it seems to me that this can only be because they are to be regarded as owners of the fund assets, and of the income therefrom, and as the principals in fund transactions, from which it follows, in my view, that they must be regarded as the owners of the shares of City Park and in control of that company through their representative, SIP, which manages the assets of their fund for them and dictates what City Park is to do. In such circumstances the certificate holders, in my opinion, cannot be regarded as ever having been, since the incorporation of City Park, parties with whom City Park deals at arm’s length either in the payment of interest or in any other fund transactions between them. In this view of the case therefore the interest payments are subject to tax and the appeals cannot succeed.
I also find it difficult to regard either the appellants alone or SIP alone as the recipients, for the purposes of Section 106, of \ the interest paid by City Park and it seems to me that in truth \the recipient was the three of them, or perhaps more precisely, in respect of each payment, SIP and the particular appellant to whom the interest payment was remitted. For while the money was paid in each case to the appellant bank, which had itself undertaken certain obligations to the certificate holders under the fund regulations and thus had a measure of control over its disposition, the funds had been raised by the appellants and S I P acting in concert and the interest, when paid, was paid into an account in the name of S I P—albeit one earmarked with the name of the fund—and SIP too had certain rights and authority and obligations to the certificate holders in regard thereto. In this view as well, however, it seems clear that the recipients cannot be regarded as parties with whom City Park ever dealt at arm’s length since they acted in concert, and within the group they had all the voting power of City Park and could dictate what it was to do.
As I see it the same result would follow for similar reasons if the appellant alone were regarded in each instance as the recipient of the interest paid by City Park. I do not agree with the submission of counsel for the Minister that S I P controlled both City Park and the appellants because I do not think it is correct, in any practical sense, to say that SIP controlled the appellants even in matters pertaining to the fund. But it appears to me on the evidence that SIP and the appellants acted in concert in establishing the fund and in organizing its investments and while neither appellant alone controlled $ I P to my mind it is not conceivable as a practical possibility that SIP would or could disregard the instructions or wishes of the appellants or either of them as to the voting of City Park stock or as to what City Park should do or that they would not combine their voting power in SI P itself to enforce their will if occasion to do so arose whether with respect to these pari passu ranking and somewhat interdependent loans or any other matters of concern to them.
I should add that the view that the appellants and SIP, though separately carrying out somewhat. different functions, acted throughout in concert appears to me to be supported by the fact that apart from their joint participation in organizing and raising the funds and in arranging for their investment, no security on City Park properties has ever been taken or demanded by either appellant for the outstanding loans and the amount to be paid as interest thereon is determined annually by SIP. In such circumstances it does not appear to me that City Park, in dealings with S I P or the appellants, either singly or as a group, could be regarded as free of the influence which the three together or separately were in a position to exert or that City Park could be regarded as dealing with any of them either together or separately at arm’s length. Indeed, as a practical matter, it appears to me that the payment of the interest by City Park did amount to nothing more than the moving of money from one of the fund’s pockets to another.
In view of this conclusion it is unnecessary to reach or express any concluded opinion on the Minister’s alternative contention that the interest was income of a trust within the meaning of Section 106(1) (c).
The appeals therefore fail and they will be dismissed with costs.