GIBSON, J.:—These appeals were tried together because the same evidence and argument was applicable to each.
The matter for decision in each appeal is whether each of the appellants was associated with a company known as Stradwick’s Limited within the meaning of Section 39(2) of the Income Tax Act.
Specifically, the determination of which ‘‘group of persons’’ of two possible groups controlled this company within the meaning Section 39(4) (b) of the Act during the taxation years 1961 and 1962 is the issue in each appeal.
In each case the assessments appealed from were made on the assumption that each of the appellant companies was associated with each other and each was also associated with Stradwick’s Limited and Stradwick Industries Limited.
The owners and the number of shares of all the outstanding common shares (and there were no other voting shares issued in any of these companies) at all material times of each appellant company and of these two other companies were as follows:
Floor & Wall Covering Distributors Limited
J. C. Stradwick, Sr. nil J. C. Stradwick, Jr. 2,239 W. L. Stradwick 2,239 H. D. McGilvery 1,121 Others 4,401 Total issued shares 10,000 Vina-Rug (Canada) Limited J. C. Stradwick, Sr. nil J. C. Stradwick, Jr. 6,133 W. L. Stradwick 6,133 H. D. MeGilvery 6,133 Stradwick’s Limited 5,250 Others 16,351 Total issued shares 40,000 Stradwick s Limited J. C. Stradwick, Sr. 12 J. C. Stradwick, Jr. 10 W. L. Stradwick 10 H. D. McGilvery 8 Total issued shares 40 Stradwick Industries Limited
J. C. Stradwick, Sr. 25,500 J. C. Stradwick, Jr. nil W .L. Stradwick nil H. D. MeGilvery 9,900 Others 15,000 Total issued shares 50,000
The J. C. Stradwick, Sr. referred to is the father of J. C. Stradwick, Jr. and W. L. Stradwick. H. D. McGilvery is a stranger in the tax sense, and is and has been for many years a business associate of Stradwick Sr. and the sons. The others referred to are strangers in the tax sense.
Considering the business activities of all of these companies together during the relevant period such could be described as the manufacture and sale at both the wholesale and retail levels of floor and wall tile and many allied products used as building materials.
The factual questions to be decided are two, namely: (1) was Stradwick’s Limited at the material times controlled by (a) the two Stradwick sons and McGilvery, as submitted by the respondent, or (b) by Stradwick Sr. and his two sons, as submitted by the appellants; and (2) depending on which group referred to in (1) above is chosen, whether such group is a ‘‘group of persons’’ within the meaning of Section 39(4) (b) of the Income Tax Act.
As judicially decided in this court in such cases as Bucker- field’s Limited et al v. M.N.R., [1965] 1 Ex.C.R. 229; [1964] C.T.C. 504; Yardley Plastics of Canada v. M.N.R., [1966] C.T.C. 215; and Aaron’s (Prince Albert) Limited et al v. M.N.R., [1966] C.T.C. 330 “control” in this subsection means the right to control by ownership of voting shares, not de facto control. What is done at any time with such right to control is therefore not necessarily material.
In this connection the appellants, as they were entitled to do, following the dictum of Noél, J. in Yardley Plastics of Canada Limited v. M.N.R., above cited, sought to establish in evidence that the ‘‘group of persons’’ consisting of Stradwick Sr. and the two sons, as opposed to the group consisting of the Stradwick sons and McGilvery, did in fact control Stradwick’s Limited. In my opinion the appellants failed to do so.
In my opinion also, without detailing the indicia which are clear from the evidence, each of these groups of persons is a ‘‘group of persons’’ within the meaning of Section 39(4)(d) [sic] of the Act, in that they had at all material times a sufficient common connection as to be in a position to exercise control of Stradwick’s Limited.
In the result therefore, the appellant has not established that the assumption of the respondent is wrong, namely that the ‘‘group of persons’’ consisting of the Stradwick sons and Me- Gilvery at material times controlled Stradwick’s Limited within the meaning of Section 89 (4) (b) of the Act; or that because of this, that this group of persons by this indirect method also controlled Vina-Rug (Canada) Limited.
Whether or not within the meaning of Section 39(4) (d) [sie] of the Act Stradwick Sr. and the Stradwick sons, also during the same material times, controlled Stradwick’s Limited, I do not have to decide, but it is clear from the circumstances of this matter that such is the ease.
In the result therefore each appellant falls within the provisions of Section 39(2) of the Act and is not entitled to get the greater advantage from the lower tax rate provided in Section 39(1) (a) of the Act.
The appeals are dismissed with costs.