Shortly after Charles was decided by the High Court of Australia, another fixed investment trust was the subject of taxation proceedings. This time, it was before the Supreme Court of Canada in MNR v. TransCanada Investment Corporation Ltd. The trust was a typical fixed investment trust. Under the trust deed, an administrator (i.e. the manager) was to purchase a fixed number of predetermined shares of common stock of companies to constitute a trust unit. Upon all the shares of underlying companies of a unit being vested in the trustee, the trustee would issue shares of a trust unit. Each share of a trust unit represented an undivided equal interest in the unit. The administrator was permitted to be a holder of shares in the unit. The administrator, which was a corporation, received distribution from the trust in its capacity as a holder. That income comprised dividends from underlying corporations that were resident in Canada as well as other incomes received but after all expenses had been deducted. The relevant Income Tax Act allowed certain deductions in computation of income ‘where a corporation received a dividend from a [non-exempt] corporation that was resident in Canada‘. The question was whether the administrator as a holder was entitled to claim those deductions as a corporation that received a dividend from the underlying corporations. The court, by a majority of three to two, affirmed the judgment of the Exchequer Court and held that the interposition of a trustee between a dividend-paying taxable corporation and the beneficial owner, being a corporation, of the former’s shares did not destroy the tax exemption.

FundsThe majority focused on the interpretation of the relevant tax statute. Their judgment contained no illumination of the Baker principle—other than their agreement with the trial judge. Locke J was the only one in the majority who emphasized that the shares in the underlying companies representing the trust unit were kept separate from all others by the trustee, and when dividends were received they were immediately placed in a special trust account and all distributions made out of that account. To him, it appeared that the fixity of the underlying investment played an important part in determining the application of Baker. On the other hand, Estey J, in the minority, emphasized that net income under the trust deed could include profits from realization of underlying shares, that transferable shares were issued, and that control of dividends received was not in the hand of certificate holders. He held that these factors and the deed as a whole did not support ‘a construction that either a legal or an equitable right is created in favour of the certificate holders in respect to the dividends received by the trustee from the underlying companies‘.

In Costa and Duppe Properties Pty. Ltd. v. Duppe, a trust deed provided that units were to be issued and each unit was defined as an undivided part or share in the trust fund having the characteristics provided in the deed. Clauses 7(a) and 8(a) of the trust deed provided as follows. `7.(a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being.’ `8.(a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other [sic] than in accordance with the provisions hereinafter contained.’ The trustee was given wide investment powers, including the power to carry on a trade or business. There was no manager. The units issued were held equally by two trustees of two discretionary private trusts. The trust fund comprised three parcels of land under the Transfer of Land Act 1958. A unitholder registered a caveat in respect of each parcel. On an application by the trustee of the unit trust to vacate the caveats, the question posed to the court was whether the unitholder had an estate or interest in land within the meaning of section 89(1) of the Act. Brooking J of the Supreme Court of Victoria held that the unitholder had such an estate and interest to support the caveats.

Thus, Baker was applied in a situation which hitherto had not been encountered; it was a situation of a conflict of claims of parties to the trust. To Brooking J, it is an inescapable conclusion of New Zealand Insurance and Charles that the unitholders have proprietary interests in all properties, which clause 7(a) recognizes. His logic was that there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed’. Clause 8(a) was confined to its narrowest limit to mean that `no unitholder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed‘. In effect, the position would be the same even without these two clauses.

In Softcorp Holdings Pty. Ltd. v. Commissioner of Stamps, a unit trust was formed by a deed between a settlor and a trustee under which the settlor had paid the trustee a nominal sum and the trustee was to hold the trust fund for the benefit of those who later were to hold units. A unit was defined to be an undivided part or share in the trust fund. Nine units were issued and held by three unitholders equally. By a subsequent amending deed, a new B class unit was created conferring the right to receive in specie one-quarter shares in a company upon those shares forming part of the trust fund. This amending deed also conferred a discretion to the trustee to transfer assets in specie to other unitholders. After the execution of the amending deed, the trustee did acquire those company shares and distribution in specie was made accordingly. The Commissioner of Stamps assessed ad valorem duty on the transfers of shares to each of the unitholders. On appeal to the Supreme Court of South Australia, the question was whether each transfer fell within the exemption as ‘a transfer of property to a person who has the beneficial interest in the property by virtue of an instrument that is duly stamped’. Bollen J held that on construction, the combined effect of the trust deed and the amending deed, which provided for transfer of shares in specie, was that each unitholder was to have one-quarter of the company shares. For the exemption to apply, it is not necessary for the transferee to have ‘the’ beneficial interest in precisely ‘the’ actual shares transferred, as argued for the Commissioner. Having one-quarter of the whole of the shares was having the beneficial interest in the property.

Bollen J regarded his decision as one of ‘interpretation of the relevant provisions of the Stamp Duties Act and the application thereof to the facts’ rather than an application of precedents.

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