group of persons

The appellant (“MPP”) was an insolvent, publicly traded, mining company with accumulated non-capital and net capital losses of $9.7 million and $72.7 million, respectively. In order for two companies (“Madison” and “Vanac,” which dealt with each other and MPP at arm’s length) to access those losses and shelter gains and income from portfolios of rental properties, transactions were implemented, beginning in October 1997 which, in general outline, included the following:

The taxpayer (“ProRé”) was a corporation without share capital engaged in the reinsurance of casualty risk whose capital had been contributed by 27 mutual general insurance companies (the “MGICs”), which were non-share corporations carrying on insurance businesses in their respective territories in Quebec with members having a participation in their capital.

Because John Stradwick, Jr., his brother W.L. Stradwick and H.D. McGilvery, who collectively owned more than 50% of the shares of Stradwick's and Vina-Rug, had at all material times a sufficient interconnection as to be in a position to exercise control over the two corporations, and therefore constituted a 'group of persons' within the meaning of s. 39(4) of the pre-1972 Act, the two corporations were associated. It was irrelevant whether other combinations of majority shareholders could be found.

Two corporations whose voting shares were held as follows

A predecessor ("Birchcliff") of the taxpayer negotiated a plan to merge with a corporation ("Veracel"), which had discontinued its medical equipment business, in order to access Veracel's non-capital losses and credits. Investors subscribed for subscription receipts of Veracel and received voting common shares of Veracel therefor under a Plan of Arrangement, and Veracel and Birchcliff amalgamated immediately thereafter under the Plan.