Dickson,
J
(concurred
in
by
the
Chief
Justice,
Martland
and
Spence,
JJ):—This
case
mirrors
the
ongoing
struggle
between
taxing
authorities,
casting
an
ever
wider
net
to
garner
succession
duties
or
estate
taxes,
and
taxpayers
adopting
ever
more
sophisticated
means
of
escapting
that
net.
One
cannot
reproach
the
taxpayer
or
his
professional
advisers
for
so
arranging
affairs
as
legitimately
to
minimize
tax
impact
but
there
are
times
when
the
schemes
devised
introduce
rather
fine
legal
distinctions
and
the
line
determining
tax
liability
becomes
difficult
to
draw.
The
complexity
is
enhanced
by
the
importation
of
concepts
from
traditional
conveyancing
law
and
the
injection
of
fine
subtleties
from
the
law
of
trusts.
The
casuistry
reaches
its
apogee
in
the
case
of
inter
vivos
transactions
in
which
the
donor
wants
to
retain
effective,
but
unobtrusive,
lifetime
control
of
the
property
gifted
and
yet
create
the
impression,
through
the
language
of
the
gifting
instrument,
that
he
or
she
has
disposed
wholly
and
irrevocably
of
the
subject-matter
of
the
gift.
Mrs
Myrtle
Louise
McCreath
died
domiciled
in
Ontario
on
May
21,
1968,
survived
by
her
husband
and
four
young
children.
During
her
lifetime
Mrs
McCreath
established
a
trust
(the
1948
Trust),
the
corpus
of
which,
at
the
date
of
her
death,
had
a
value
of
$25,016,000.
The
indenture
by
which
the
trust
was
created,
so
far
as
pertinent
to
the
present
appeal,
reads:
THIS
INDENTURE
made
this
29th
day
of
November,
1948.
BETWEEN:
MYRTLE
LOUISE
McCREATH,
of
the
City
of
Toronto,
in
the
County
of
York,
hereinafter
called
the
‘Settlor’
OF
THE
ONE
PART
—
and
—
NATIONAL
TRUST
COMPANY,
LIMITED
hereinafter
called
the
‘Trustee’
OF
THE
OTHER
PART
WHEREAS
the
Settior
will
be
entitled
to
a
voting
trust
certificate
representing
99,986
common
shares
in
the
capital
stock
of
Mount
Royal
Paving
&
Supplies
Limited;
AND
WHEREAS
the
Settlor
desires
to
establish
a
trust
respecting
the
said
voting
trust
certificate
as
hereinafter
set
forth;
AND
WHEREAS
the
foregoing
recitals
are
made
by
the
Settlor
and
not
by
the
Trustee;
NOW
THEREFORE
THIS
INDENTURE
WITNESSETH
that
in
consideration
of
the
sum
of
one
dollar
by
each
of
the
parties
hereto
to
the
other
paid,
the
receipt
whereof
by
each
of
the
parties
is
hereby
acknowledged,
it
is
agreed
by
and
between
the
parties
hereto
as
follows:
1.
The
Settlor
shall
forthwith
after
the
receipt
thereof
deliver
to
the
Trustee
a
voting
trust
certificate
representing
99,986
common
shares
in
the
capital
stock
of
Mount
Royal
Paving
&
Supplies
Limited
and
the
Trustee
shall
receive
such
voting
trust
certificate
to
constitute
a
trust
fund
to
be
held,
applied
and
dealt
with
by
the
Trustee
upon
the
following
trusts:
(a)
During
the
lifetime
of
the
Settlor
to
pay
or
apply
the
whole
net
income
of
the
trust
fund
in
each
year
to
or
for
the
benefit
of
the
Settior,
and
her
issue
from
time
to
time
alive
or
some
one
or
more
of
the
Settlor
and
her
said
issue
as
the
Trustee
may
from
time
to
time
in
its
absolute
discretion
determine
and
if
paid
or
applied
to
or
for
the
benefit
of
more
than
one
of
them
to
pay
or
apply
the
same
in
such
proportions
as
the
Trustee
may
from
time
to
time
in
its
absolute
descretion
determine.
(b)
On
the
death
of
the
Settlor,
if
she
shall
die
leaving
issue
her
surviving,
to
hold
the
trust
fund
in
trust
for
the
issue
of
the
Settlor
or
such
one
or
more
of
them
and
in
such
proportions
and
subject
to
such
terms
and
conditions
as
the
Settior
may
by
will
direct
and
in
default
of
such
direction
or
insofar
as
the
same
may
be
void
or
shall
not
extend
or
take
effect
to
pay
or
transfer
the
trust
fund
to
the
issue
of
the
Settlor
who
shall
be
living
at
her
death
and
if
more
than
one
in
equal
shares
per
stirpes.
(Paragraphs
1(c)
and
1(d)
relate
to
the
eventuality
of
the
Settlor
dying
without
children.)
2.
If
any
person
should
become
entitled
to
any
share
in
the
capital
of
the
trust
fund
before
attaining
the
age
of
twenty-one
years
the
share
of
such
person
shall
be
held
and
kept
invested
by
the
Trustee
and
the
income
and
capital
or
so
much
thereof
as
the
Trustee
in
its
absolute
discretion
considers
necessary
or
advisable
shall
be
used
for
the
benefit
of
such
person
until
she
or
he
attains
the
age
of
twenty-one
years.
3.
The
Trustee
may
make
any
payments
for
any
person
under
the
age
of
twenty-one
years
to
the
parent
or
guardian
of
any
such
person
whose
receipt
shall
be
a
sufficient
discharge
to
the
Trustee.
4.
The
Trustee
and
any
successor
trustee
shall
be
entitled
at
any
time
to
resign
on
thirty
days’
notice
in
writing
to
the
Settlor
or
upon
such
shorter
notice
as
the
Settlor
may
accept
as
sufficient.
In
the
event
of
any
such
resignation,
the
Settlor
shall
by
instrument
in
writing
forthwith
appoint
another
trustee
to
fil!
the
vacancy
resulting.
At
any
time
or
from
time
to
time
the
Settlor
during
her
lifetime
may
remove
the
Trustee
and
appoint
another
trustee
in
its
place.
Such
removal
and
appointment
may
be
made
by
instrument
in
writing
signed
by
the
Settlor.
The
trustee
hereunder
shall
at
all
times
be
a
trust
company
having
a
paid
up
capital
and
surplus
of
not
less
than
$5,000,000
and
with
an
office
in
the
City
of
Toronto.
5.
The
said
voting
trust
certificate
and
all
other
securities
or
sums
of
money
constituting
the
trust
fund
shall
be
registered
or
deposited
in
the
name
of
the
Trustee.
6.
The
Trustee
shall
be
entitled
to
be
reimbursed
for
all
expenses
incurred
by
it
hereunder
and
shall
be
entitled
to
reasonable
remuneration
for
its
services
under
this
agreement
and
as
may
from
time
to
time
be
agreed
upon
with
the
Trustee
by
the
Settlor.
The
Settlor
agrees
to
pay
such
remuneration.
Provided
that
after
the
death
of
the
Settlor
the
remuneration
payable
to
the
Trustee
shall
be
such
remuneration
as
may
be
allowed
by
a
Judge
of
the
Surrogate
Court
of
the
County
of
York
and
shall
be
payable
out
of
the
income
from
the
trust
fund
received
by
the
Trustee.
7.
Notwithstanding
anything
in
this
agreement
contained,
if
under
the
provisions
of
the
voting
trust
agreement
the
voting
trust
certificate
constituting
the
trust
fund
becomes
exchangeable
for
any
shares,
securities
or
other
assets
of
any
nature
whatsoever,
the
Trustee
shall
be
entitled
to
surrender
the
said
voting
trust
certificate
and
to
receive
in
exchange
therefor
such
shares,
securities
or
other
assets
which
shall
thereupon
constitute
the
trust
fund
and
may
retain
the
same
for
such
length
of
time
as
the
Trustee
in
its
absolute
discretion
shall
decide,
with
power
to
the
Trustee
to
sell
such
shares,
securities
or
other
assets
and
to
reinvest
the
proceeds
thereof
in
such
investment
as
it
considers
advisable
without
being
limited
to
investments
authorized
by
law
for
trustees.
By
the
terms
of
the
indenture
there
was
only
one
trust
fund
constituted,
comprising
initially
a
voting
trust
certificate
representing
99,986
common
shares
in
the
capital
stock
of
Mount
Royal
Paving
&
Supplies
Limited
and
thereafter
such
shares,
securities
or
other
assets
as
might
be
substituted
pursuant
to
paragraph
7.
During
the
lifetime
of
Mrs
McCreath
the
primary
trust
to
which
the
trustee
was
subject
was
one
requiring
it
to
pay
or
apply
the
whole
net
income
of
the
trust
fund
to
or
for
the
benefit
of
Mrs
McCreath
and
her
children
or,
in
its
discretion,
to
any
one.
or
more
of
the
group.
(At
the
time
of
the
creation
of
the
trust
Mrs
McCreath
had
only
one
child,
six
months
of
age.)
By
the
terms
of
the
1948
Trust
the
trustee
could,
theoretically,
in
the
exercise
of
its
discretion,
pay
all
the
income
to
Mrs
McCreath
or
exclude
her
entirely.
The
record
discloses
that
Mrs
McCreath
received
income
from
the
1948
Trust
in
1966,
1967
and
1968
but
it
is
silent
as
to
distribution
of
income
in
prior
years.
On
the
death
of
Mrs
McCreath
the
primary
duty
of
the
trustee
was
to
dispose
of
the
trust
fund
among
the
issue
of
Mrs
McCreath
or
such
of
them
as
she
might
by
will
direct
and
subject
to
such
terms
and
conditions
as
she
might
by
will
direct.
In
default
of
such
direction,
the
capital
of
the
fund
was
to
be
distributed
among
her
issue
in
equal
shares
per
stirpes.
Although
Mrs
McCreath
retained
the
power
by
will
to
choose
which
of
her
issue
should
be
the
object
of
her
bounty,
she
died
without
exercising
that
power.
Thus
there
were
many
“strings”
attached
to
the
property
of
which
Mrs
McCreath
purported
to
dispose.
The
appeal
arises
under
The
Succession
Duty
Act
of
Ontario,
RSO
1960,
c
386,
and
the
crucial
questions
to
be
answered
are:
(i)
Did
Mrs
McCreath,
either
expressly
or
by
implication,
reserve
to
herself
an
interest
in
the
property
passing
under
the
trust
so
as
to
make
it
“property
passing
on
the
death
of
the
deceased”
as
defined
in
subclause
1(p)(viii)
of
the
Act?
(ii)
Was
actual
and
bona
fide
possession
and
enjoyment
of
the
property
assumed
by
the
issue
of
Mrs
McCreath
and
retained
to
the
entire
exclusion
of
Mrs
McCreath
so
as
to
exempt
the
property
from
tax
by
the
operation
of
clause
5(1)(g)?
I!
would
answer
the
first
question
in
the
affirmative,
the
second
question
in
the
negative
and
allow
the
appeal
of
the
Minister.
In
coming
to
these
conclusions
it
is
necessary
to
turn
first
to
sections
6
and
12
of
The
Succession
Duty
Act,
for
they
establish
the
taxing
scheme.
Section
6
shows
the
incidence
of
taxation:
6.
Subject
to
sections
4
and
5,
on
the
death
of
any
person
whether
he
dies
domiciled
in
Ontario
or
elsewhere,
(a)
where
any
property
situate
in
Ontario
passes
on
his
death,
duty
shall
be
levied
on
such
property
in
accordance
with
the
dutiable
value
thereo
(b)
where
there
is
any
transmission,
duty
shall
be
levied
on
the
person
to
whom
there
is
such
transmission,
with
respect
to
such
transmission,
in
accordance
with
the
dutiable
value
thereof;
(c)
where
any
disposition,
other
than
of
realty
situate
outside
Ontario,
is
made
in
Ontario
on
or
after
the
1st
day
of
July,
1892,
to
any
person
who
is
resident
in
Ontario
at
the
date
of
death
of
the
deceased,
duty
shall
be
levied
on
such
person,
with
respect
to
such
disposition,
in
accordance
with
the
dutiable
value
thereef;
section
12
is
the
section
imposing
liability:
12.
(1)
Every
person
resident
in
Ontario
at
the
date
of
death
of
the
deceased
io
whom
or
for
whose
benefit
any
property
situate
in
Ontario
passes
on
the
death
of
the
deceased
is
liable
for
the
duty
levied
on
the
proportion
of
such
property
that
so
passes
to
him
or
for
his
benefit,
together
with
such
interest
as
may
be
payable
thereon.
Subject
to
sections
4
and
5
of
the
Act,
succession
duty
is
payable
on
the
death
of
any
person
domiciled
in
Ontario
or
elsewhere
where
any
property
situate
in
Ontario
passes
on
his
death.
The
Act
is
drafted
so
as
to
catch
all
forms
of
transactions
which
have
the
result
of
transferring
property
on
death
.Therefore
“property
passing
on
the
death
of
the
deceased”
is
broadly
defined
and
is
deemed
to
include,
according
to
subclause
1(p)
(viii):
any
property
passing
under
any
past
or
future
settlement,
including
any
trust,
whether
expressed
in
writing
or
otherwise
and
if
contained
in
a
deed
or
other
instrument
effecting
the
settlement,
whether
such
deed
or
other
instrument
was
made
for
valuable
consideration
or
not,
as
between
the
settior
and
any
other
person,
made
by
deed
or
other
instrument
not
taking
effect
as
a
will,
whereby
an
interest
in
such
property
or
the
proceeds
of
sale
thereof
for
life,
or
any
other
period
determinable
by
reference
to
death,
is
reserved
either
expressly
or
by
implication
to
the
settlor,
or
whereby
the
settior
may
have
reserved
to
himself
the
right
by
the
exercise
of
any
power
to
restore
to
himself,
or
to
reclaim
the
absolute
interest
in
such
property,
or
the
proceeds
of
sale
thereof,
or
to
otherwise
resettle
the
same
or
any
part
thereof,
.
.
.
The
Act
also
taxes
certain
recipients
of
“dispositions”,
defined
in
clause
1(f),
and
“transmissions”,
defined
in
clause
1(s).
We
are
not
concerned
in
this
appeal
with
transmissions.
Dispositions
are
defined
in
part
as
follows:
(f}
“disposition”
means:
(i)
any
means
whereby
any
property
passes
or
is
agreed
to
be
passed,
directly
or
indirectly,
from
the
deceased
during
his
lifetime
to
any
person,
(ii)
any
means
whereby
any
person
is
benefited,
directly
or
indirectly,
by
any
act
of
the
deceased
during
the
lifetime
of
the
deceased,
.
.
.
and
such
means
includes,
(ix)
any
creation
of
trust,
.
..
Clause
5(1)(g)
of
the
Act
is
of
importance
in
exempting
certain
dispositions.
It
reads:
5.
(1)
No
duty
shall
be
levied
on
any
of
the
following
property,
nor
on
any
person
to
whom
there
are
any
transmissions
of
any
of
the
following
property,
with
respect
to
such
transmissions,
nor
on
any
person
to
whom
any
of
the
following
dispositions
are
made,
with
respect
to
such
dispositions,
and
such
property
and
dispositions
shall
not
be
included
in
the
aggregate
value
nor
included
for
the
purpose
of
determining
any
rate
of
duty,
(g)
any
disposition
where
actual
and
bona
fide
enjoyment
and
possession
of
the
property,
in
respect
of
which
the
disposition
is
made,
was
assumed
more
than
five
years
before
the
date
of
death
of
the
deceased
by
the
person
to
whom
the
disposition
is
made,
or
by
a
trustee
for
such
person,
and
thenceforward
retained
to
the
entire
exclusion
of
the
deceased
or
of
any
benefit
to
him
whether
voluntary
or
by
contract
or
otherwise;
Reservation
of
an
interest
under
subclause
1(p)(viii)
It
is
essential,
I
think,
to
identify
with
some
precision
the
“property”
which
can
be
said
to
have
passed
in
the
settlement
of
1948.
This
question
usually
presents
difficulty,
especially
in
an
Act
such
as
the
present
one
which
provides
no
statutory
definition.
In
the
present
case
the
question
of
definition
is
of
particular
importance
because
counsel
for
the
respondents
submits
in
effect
that
Mrs
McCreath
made
two
gifts,
one
a
gift
of
the
equitable
interests
in
the
net
income
from
the
trust
fund
and
the
other
a
gift
of
the
equitable
remainder
in
the
corpus
of
the
fund.
With
respect,
I
do
not
agree
with
this
reading
of
the
indenture.
In
my
view
the
“property
passing”
under
the
settlement
was
the
equitable
interest
in
a
voting
trust
certificate
representing
99,986
common
shares
in
the
capital
stock
of
Mount
Royal
Paving
&
supplies
Limited
which
were
transferred
by
Mrs
McCreath
to
the
trustee.
If
the
“property”
for
purposes
of
subclause
1
(p)(viii)
is
such
equitable
interest,
the
next
question
is
whether
Mrs
McCreath
retained
an
“interest”
therein.
In
all
the
circumstances
it
seems
to
me
difficult
to
say
that
she
did
not
reserve
an
interest
in
the
property,
the
subjectmatter
of
the
trust.
Collectively
she
and
her
children
were
entitled
to
all
of
the
income.
The
word
“interest”
is
capable
of
many
meanings.
In
my
opinion
it
is
to
be
given
in
The
Succession
Duty
Act
a
meaning
wider
than
that
which
it
would
have
in
a
technical
conveyancing
context.
The
trial
judge,
Fraser,
J,
determined
that
the
settlor
did
have
an
interest
in
the
income
from
the
1948
Trust
and
subciause
1(p)(viii)
applied,
and
I
think
he
was
right.
Receipt
of
income
from
a
trust
fund
pursuant
to
the
terms
of
the
trust
would
suggest
an
interest,
in
the
sense
of
a
pecuniary
stake,
in
the
fund.
Fraser,
J
held,
however,
that
the
1948
Trust
was
exempt
from
taxation
under
subclause
1(p)(viii)
ofthe
Act
because
its
creation
was
a
disposition
exempt
from
taxation
by
virtue
of
clause
5(1
)(g).
The
majority
of
the
Court
of
Appeal
(Evans
and
McGillivray,
JJA)
assumed,
without
deciding,
that
the
corpus
of
the
trust
would
attract
succession
duty
under
section
6
of
the
Act
as
property
falling
within
subclause
1(p)(viii)
but,
in
common
with
Mr
Justice
Fraser,
held
that
the
corpus
was
exempt
from
succession
duty
by
reason
of
clause
5(1)(g)
of
the
Act.
In
the
view
of
Mr
Justice
Jessup
no
interest
in
the
corpus
was
reserved
by
the
settior
and
in
any
event
clause
5(1)(g)
applied.
There
are
no
Canadian
precedents
to
illuminate
subciause
1(p)(viii).
Two
English
authorities
construing
tax
legislation
in
almost
identical
wording
may
afford
some
guidance.
In
Attorney-General
v
Heywood
(1887),
19
QBD
326,
paragraph
38(2)(c)
of
the
Customs
and
Inland
Revenue
Act,
1881
(44
&
45
Vict,
c
12)
was
in
issue.
It
taxed:
(c)
Any
property
passing
under
any
past
or
future
voluntary
settlement
made
by
any
person
dying
on
or
after
such
day
[June
1,
1881]
by
deed
or
any
other
instrument
not
taking
effect
as
a
will,
whereby
an
interest
in
such
property
for
life,
or
any
other
period
determinable
by
reference
to
death,
is
reserved
either
expressly
or
by
implication
to
the
settlor,
or
whereby
the
settior
may
have
reserved
to
himself
the
right,
by
the
exercise
of
any
power,
to
restore
to
himself,
or
to
reclaim
the
absolute
interest
in
such
property.
In
Heywood
the
settlor
created
a
trust
fund
of
£43,000
held
on
the
following
trusts:
to
pay
income
to
such
of
the
settlor,
his
wife
and
children
for
the
settlor’s
life
as
the
trustee
should
choose
and
on
the
settlor’s
death
to
hold
the
property
in
trust
for
the
widow
and
children.
It
was
argued
that
all
that
was
reserved
to
the
settlor
was
a
mere
possibility
or
contingency,
and
not
an
interest.
Stephen,
J
held
that
the
settlor
had
retained
an
interest
for
life
within
the
terms
of
the
statute
and
Wills,
J
stated,
page
331:
The
application
of
the
word
“interest”
is
not
confined
to
a
vested
or
a
necessarily
contingent
interest.
The
Act
was
meant
to
cast
a
wider
net
than
such
a
construction
would
imply.
The
settlor
here
could
only
be
deprived
of
the
benefit
he
would
otherwise
get
under
the
settlement
by
the
exercise
of
the
power
of
depriving
him
of
such
benefit
which
was
vested
in
the
trustees,
and
unless
the
trustees
so
deprived
him
he
would
necessarily
get
a
benefit.
The
same
interpretation
of
“interest”
was
adopted
in
Attorney-General
v
Farrell,
[1931]
1
KB
81
(CA),
where
the
settlor
was
also
a
discretionary
object
of
income
of
a
trust
for
his
life
with
a
gift
over
on
his
death
and
Lord
Hanworth,
MR
had
this
to
say,
page
98:
However,
even
without
the
support
which
can
be
gathered
from
Drummond
v
Collins,
[1915]
AC
1011,
I
think
it
is
too
late
for
us
to
reopen
the
question
which
was
decided
in
Attorney-General
v
Heywood;
and
I
think
that
for
the
purposes
of
the
interpretation
of
section
38,
sub-section
2(c),
it
must
be
held
that
where
there
is
a
discretionary
trust,
a
possible
object
of
that
trust
holds
an
interest
within
sub-section
2(c).
It
is
the
respondents’
contention
that
the
term
“interest”
should
have
a
more
technical
meaning
than
in
Heywood.
They
rely
on
Gartside
v
Inland
Revenue
Commissioners,
[1968]
AC
553
(HL),
where
the
discretionary
object
of
a
trust
was
held
not
to
have
an
“interest
in
possession”
for
purposes
of
section
43
of
the
Finance
Act,
1940.
In
that
case,
the
terms
of
the
trust
gave
the
trustee
the
power
to
distribute
all
or
part
of
the
income
among
a
class
comprising
the
settlor’s
son,
wife
and
issue
for
the
son’s
life
or
to
accumulate
the
income
and
provided
for
a
gift
over
on
the
son’s
death.
Lord
Reid
(Lords
Morris
and
Guest
concurring)
held
at
607:
(A)n
examination
of
the
relevant
provisions
of
this
legislation
leads
to
the
clear
conclusion
that
objects
of
a
discretionary
trust
do
not
have
interests
extending
to
the
whole
or
any
part
of
the
income
of
the
trust
fund
and
it
must
follow
that
they
do
not
have
interests
in
the
fund
within
the
meaning
of
section
2(1)(b).
While
this
quoiation
would
seem
to
support
the
respondents’
contention
that
the
deceased
did
not
have
an
interest
here,
in
my
opinion
Gartside
is
inapplicable.
The
section
of
the
statute
in
issue
in
Gartside
is
very
different
from
subclause
1
(p)(viii).
Section
43
of
the
Finance
Act,
1940
read
as
follows:
43.
(1)
Subject
to
the
provisions
of
this
section,
where
an
interest
limited
to
cease
on
a
death
has
been
disposed
of
or
has
determined,
whether
by
surrender,
assurance,
divesting,
forfeiture
or
in
any
other
manner
(except
by
‘he
expiration
of
a
fixed
period
at
the
expiration
of
which
the
interest
was
imited
to
cease),
whether
wholly
or
partly,
and
whether
for
value
or
not,
after
becoming
an
interest
in
possession,
.
.
.
(a)
if,
had
there
been
no
disposition
or
determination
as
aforesaid
of
that
interest
and
no
disposition
of
any
interest
expectant
upon
or
subject
to
that
interest,
the
property
in
which
the
interest
subsisted
would
have
passed
on
the
death
under
section
one
of
the
Finance
Act,
1894,
that
property
shall
be
deemed
by
virtue
of
this
section
to
be
included
as
to
the
whole
thereof
in
the
property
passing
on
the
death;
or
(b)
if,
had
there
been
no
disposition
or
determination
as
aforesaid
of
that
interest
and
no
disposition
of
any
interest
expectant
upon
or
subject
to
that
interest,
the
property
in
which
the
interest
subsisted
would
have
been
deemed
by
virtue
of
paragraph
(b)
of
subsection
(1)
of
section
two
of
the
said
Act
to
be
included
to
a
particular
extent
in
the
property
passing
on
the
death,
the
property
in
which
the
interest
subsisted
shall
be
deemed
by
virtue
of
this
section
to
be
included
to
that
extent
in
the
property
passing
on
the
death.
For
a
full
understanding
of
Gartside’s
case,
section
43
must
be
read
in
conjunction
with
paragraph
2(1
)(b)
and
subsection
7(7)
of
the
Act
which
dealt
with
the
extent
and
valuation
of
the
interest.
Paragraph
43(1
)(b),
it
will
be
observed,
is
concerned
with
life
interests
in
possession
and
not
interests
simpliciter.
The
section
deems
certain
life
interests
to
be
property
passing
on
death.
The
English
statute,
which
is
an
estate
tax
Act,
taxes
life
interests
because
their
termination
affects
the
value
of
the
property
and
the
benefit
accruing
from
their
cessation
increases
the
property
value
on
a
death
(not
necessarily
the
death
of
the
original
donor).
In
Ontario
there
is
no
equivalent
section
for
taxing
a
life
interest,
as
the
concern
is
with
the
change
in
ownership
of
property
on
death,
and
not
with
the
increase
in
value
of
the
estate
by
a
death.
The
necessity
of
valuation
of
successive
life
interests
under
the
English
Act
demands
greater
precision
in
the
identification
and
quantification
of
an
“interest”;
otherwise,
as
a
practical
matter,
computation
of
tax
becomes
virtually
impossible
in
respect
of
discretionary
income
trusts.
Such
is
not
the
case
under
the
Ontario
Act,
where
the
concern
is
with
the
failure
of
a
donor
to
disassociate
himself
totally
from
inter
vivos
gifts,
thus
retaining
some
interest
in
the
subjectmatter
until
death.
The
English
section
is
different
in
orientation
from
clause
1
(p)(viii)
where
the
extent
of
the
interest
is
of
no
consequence.
Lord
Reid
recognized
such
a
distinction
and
expressly
endorsed
the
finding
of
the
courts
in
Heywood
and
Farrell
in
words
that
are
apposite
here
(at
612):
It
is
always
proper
to
construe
an
ambiguous
word
or
phrase
in
light
of
the
mischief
which
the
provision
is
obviously
designed
to
prevent,
and
in
light
of
the
reasonableness
of
the
consequences
which
follow
from
giving
it
a
particular
construction.
Here
[in
Heywood},
if
“interest”
were
given
a
narrow
or
technical
meaning,
it
would
be
very
easy
to
defeat
the
obvious
purpose
of
the
provision
by
setting
up
a
discretionary
trust
and
choosing
trustees
who
might
be
expected
to
exercise
their
discretion
in
favour
of
the
settlor,
And,
on
the
other
hand,
no
unreasonable
consequences
would
follow
if
the
word
were
given
a
wider
meaning
so
as
to
include
possible
benefit
that
would
come
to
the
settlor
tn
a
certain
event
.
.
.
Lord
Wilberforce
spoke
in
similar
words
(at
620):
For
section
38(2)(c)
is
concerned,
broadly,
with
the
case
of
persons
who
settle
their
property,
yet
wish
to
benefit
from
it
so
long
as
they
live.
To
tax
them
in
such
a
case
is
perfectly
understandable,
however
large
or
small
the
reserved
benefit
may
be
and
whether
it
is
defined
in
extent
or
undefined.
No
definition
is
necessary,
because
the
measure
of
the
charge
is
the
whole
value
of
the
property.
So
naturally
no
refernce
is
made
to
“extent”—the
mere
fact
of
reservation
is
enough.
I
think,
therefore,
that
the
decisions
in
principle
are
acceptable.
Fraser,
J
distinguished
the
finding
in
Gartside
on
the
basis
that
there
was
in
that
case,
unlike
the
present,
a
power
to
accumulate.
In
so
doing,
in
my
opinion,
with
respect,
he
erred
as
cases
subsequent
to
Gartside
rejected
this
as
a
basis
for
distinction
(Re
Weir’s
Settlement,
[1970]
1
All
ER
297
(CA);
Sainsbury
v
Inland
Revenue
Commissioners,
[1969]
3
All
ER
919
(Ch)).
I
conclude
that
Mrs
McCreath
retained
an
interest
in
the
settled
property
for
purposes
of
subclause
1
(p)(viii)
by
making
herself
one
oi
the
possible
objects
of
the
discretionary
trust.
The
primary
objects
of
the
donor’s
bounty
are
“the
Settlor
and
her
issue
from
time
to
time
alive”,
and,
in
fact,
the
settlor
did
receive
income
pursuant
to
paragraph
1(a).
Mrs
McCreath
could
apply
to
the
Court
to
require
the
trustee
to
respect
the
terms
of
the
trust
if
it
refused
to
exercise
its
discretion.
The
fact
that
a
discretionary
object
may
have
no
interest
in
property
law
terms
because
she
has
no
“right”
to
a
definable
amount
of
income
is
irrelevant.
I
do
not
believe
that
the
niceties
and
arcana
of
ancient
property
law
should
be
fastened
upon
with
mechanical
rigidity
to
determine
the
effect
of
a
modern
taxation
statute
whose
purpose
is
plain.
Exemption
under
clause
5(1
)(g)
Since
the
trust
property
is
property
passing
on
death,
it
would
seem
that
it
should
be
subject
to
duty
according
to
clause
6(a)
of
the
Act.
The
respondents
contend,
however,
that
the
corpus
of
the
trust
is
exempted
from
tax
by
the
operation
of
clause
5(1)(g)
(supra)
as
a
dispoistion
made
more
than
five
years
before
death
and
held
to
the
exclusion
of
the
donor.
Counsel
for
the
Minister
argued
that
the
respondents
could
not
claim
the
benefit
of
clause
5(1
)(g)
if
the
trust
property
was
“property
passing
upon
death”.
Clause
5(1)(g)
excludes
from
duty
“any
disposition”
made
by
the
deceased
where
the
property
disposed
of
was
assumed
to
the
entire
exclusion
of
the
decased
more
than
five
years
before
his
death.
It
is
the
contention
of
the
Minister
that
the
exception
given
by
this
clause
is,
by
its
very
words,
restricted
to
what
the
Act
treats
as
a
“disposition”.
It
is
then
urged
that
when
the
Legislature
made
section
6
of
the
Act
subject
to
sections
4
and
5,
it
meant
no
more
than
to
exempt
those
things
that
were
taxed
as
dispositions
if,
as
dispositions,
they
were
exempt
under
section
4
or
5.
Since
the
Minister
claimed
to
tax
here
under
subclause
1(p)(viii)
and
clause
6(a)
rather
than
subclause.
1(f)(i)
and
clause
6(c),
it
is
argued
that
ciause
5(1
)(g)
cannot
aid
the
respondents.
With
all
due
respect,
I
cannot
read
sections
5
and
6
in
these
terms.
The
opening
words
of
section
6
are
‘‘Subject
to
sections
4
and
5”.
These
words
apply
to
all
the
subsections
in
which
tax
liability
is
stated
in
section
6,
and
not
just
to
specific
ones
in
sections
5
and
6
with
corresponding
words.
It
appears
that
a
given
piece
of
property
can
be
both
a
“property
passing
on
death”
and
a
“disposition”
and,
in
either
case,
clause
5(1)(g)
can
take
effect.
It
has
been
suggested
that
a
restrictive
approach
to
the
term
“disposition”
is
justified
by
the
legislative
history
of
sections
5
and
6.
The
concept
of
a
“disposition”
and
the
provision
for
exempting
certain
dispositions
from
duty
were
introduced
as
part
of
a
legislative
package
amending
The
Succession
Duty
Act
in
1937.
However,
I
am
not
convinced
that
the
method
of
enacting
the
statutory
orovisions
related
to
dispositions
shows
that
the
word
“disposition”
in
clauses
5(1)(g)
and
6(c)
is
to
be
interpreted
to
exclude
items
that
are
also
“property
passing
on
death”.
Counsel
for
the
Minister
also
argued
that
the
result
reached
by
the
trial
judge
was
never
intended
by
the
Legislature.
According
to
the
holding,
clause
5(1
)(g)
would
exempt
the
corpus
of
a
gift
property,
even
if
the
settlor
retained
a
life
interest
in
the
income.
In
the
absence
of
clause
5(1)(g),
such
an
interest
would
taint
the
gift
and
make
the
property
subject
to
tax
by
the
operation
of
subclause
1(p)(viii).
I
do
not
think
that
any
incompatibility
between
subclause
1(p)(viii)
and
clause
5(1)(g)
need
necessarily
result.
The
concern
in
clause
5(1)(g)
is
that
the
donor
of
a
gift
more
than
five
years
before
death
be
entirely
excluded.
from
the
subject-matter
of
the
gift
or
any
benefit
from
the
gift.
In
deciding
what
constitutes
exclusion
or
retention
of
benefit,
the
courts
have
used
complex
and
often
convoluted
reasoning.
The
test
adopted
is
best
explained
in
Green’s
Death
Duties
(7th
ed,
at
143):
If
it
is
found
that
the
deceased,
instead
of
reserving
an
interest
in
the
property
given,
has
retained
and
excluded
from
the
gift
some
beneficial
interest,
the
interest
which
he
has
retained
is
not
a
reservation
in
relation
to
the
interest
which
he
has
given:
it
is
simply
something
which
was
not
included
in
the
gift.
The
principle
is
that
what
a
donor
keeps
back
is
no
gift.
See
also
15
Halsbury’s
(3rd)
at
21.
There
are
several
English
cases
which
elaborate
and
apply
this
test.
in
in
re
Cochrane,
[1905]
2
IR
626;
affirmed
[1906]
2
IR
200,
the
deceased
settled
a
mortgage
with
the
annual
income
up
to
the
value
of
£575
to
his
daughter
and
any
excess
income
to
him
for
his
daughter’s
life;
the
corpus
to
his
daughter
on
settlor’s
death
if
she
survived
him:
the
reversion
to
him
if
she
predeceased
him.
It
was
held
that
only
the
capitalized
value
of
the
excess
income
and
the
capitalized
value
of
the
contingent
reversion
were
taxable
on
settior’s
death.
Similar
results
were
achieved
in
Commissioner
for
Stamp
Duties
of
New
South
Wales
v
Perpetual
Trustee
Co,
Ltd,
[1943]
AC
425
(PC),
and
St
Aubyn
v
Attorney-General,
[1952]
AC
15
(HL),
where
Lord
Radcliffe
stated
(at
49):
All
these
decisions
proceed
upon
a
common
principle,
namely,
that
it
is
the
possession
and
enjoyment
of
the
actual
property
given
that
has
to
be
taken
account
of,
and
that
If
that
property
is,
as
it
may
be,
a
limited
equitable
interest
or
an
equitable
interest
distinct
from
another
such
interest
which
is
not
given
or
an
interest
in
property
subject
to
an
interest
that
is
retained,
it
is
of
no
consequence
for
this
purpose
that
the
retained
interest
remains
in
the
beneficial
enjoyment
of
the
person
who
provides
the
gift.
In
Commissioner
for
Stamp
Duties
of
New
South
Wales
v
Perpetual
Trustee
Co
(supra)
Lord
Russell
of
Killowen,
delivering
the
judgment
of
the
Board,
said
in
a
passage
at
pages
445-6
which
is
cited
with
approval
in
St
Aubyn’s
case
and
in
Oakes
v
Commissioner
of
Stamp
Duties
of
New
South
Wales,
[1954]
AC
57:
There
is
nothing
laid
down
as
law
in
that
case
which
conflicts
with
the
view
that
the
entire
exclusion
of
the
donor
from
possession
and
enjoyment
which
is
contemplated
by
section
11,
sub-section
1
of
the
Act
of
1889
(the
forerunner
of
section
43
of
the
Finance
Act,
1940)
is
entire
exclusion
from
possession
and
enjoyment
of
the
beneficial
interest
in
property
which
has
been
given
by
the
gift,
and
that
possession
and
enjoyment
by
the
donor
of
some
beneficial
interest
therein
which
he
has
not
included
in
the
gift
is
not
inconsistent
with
the
entire
exclusion
from
possession
and
enjoyment
which
the
sub-section
requires.
The
matter
was
further
refined
in
Oakes’
case
in
the
following
passage
from
the
judgment
of
Lord
Reid,
page
79:
The
contrast
is
between
reserving
a
beneficial
interest
and
only
giving
such
interests
as
remain
on
the
one
hand,
and
on
the
other
hand
reserving
power
to
take
benefit
out
of,
or
at
the
expense
of,
interests
which
are
given.
.
.
.
A
similar
approach
was
adopted
in
the
Canadian
case
of
MNR
v
National
Trust
Co,
Ltd,
[1949]
SCR
127;
[1948]
CTC
339.
A
father
settled
shares
with
income
to
his
daughter
for
life
and
corpus
to
her
on
his
death
if
she
survived
him;
otherwise
reversion
to
the
settlor.
This
Court
held
that
the
contingent
reversion
was
not
a
reservation
of
benefit
excluding
him
from
the
exemption
of
section
7
of
the
Dominion
Succession
Duty
Act.
As
Kerwin,
J
stated
(at
132
[351]):
it
logically
follows
from
the
principle
set
forth
above,
that
is,
that
the
reversion
of
the
father
is
something
not
comprised
in
the
gift
to
the
daughter,
that
the
former
was
excluded
from
any
benefit
in
the
subject
matter
of
the
gift.
Founding
on
the
line
of
cases
mentioned,
the
respondents
argue
that
the
corpus
in
the
1948
Trust
was
a
disposition
(subclause
1(f)(i)
or
(ii))
from
which
the
deceased
was
excluded
from
benefit.
The
retention
of
the
income
interest
was
something
not
given
(ie,
reserved
out
of
the
gift)
and
not
a
benefit
flowing
from
the
gift.
One
should
not
be
too
quick
to
adopt
the
holdings
in
these
cases
and
find
them
applicable
to
clause
5(1
)(g)
of
the
Ontario
Succession
Duty
Act.
Our
concern
here
is
the
interpretation
of
a
statute,
and
such
a
task
requires
consideration
of
the
total
context
in
which
a
given
word
or
section
is
found.
There
is
a
major
structural
difference
between
the
English
and,
to
a
lesser
extent,
the
Canadian
Acts
which
were
construed
in
the
cases
cited.
The
English
statute
contains
provisions
similar
to
both
subclause
1(p)(viii)
and
clause
5(1)(g),
but
both
are
phrased
as
“recapture”
provisions.
Thus,
if
a
given
scheme
does
not
fall
within
one
section
for
taxation
purposes,
it
will
be
caught
by
the
other.
The
Canadian
Act
had
both
a
recapture
and
exemption
scheme,
found
in
clauses
3(1)(d)
and
7(1
)(g)
(as
amended
by
SC
1942,
C
25,
s
6).
Both
provisions
dealt
with
gifts
with
reservations
of
benefits
in
terms
similar
to
clause
5(1)(g)
of
the
Ontario
Act.
In
contrast,
the
Ontario
statute
is
structured
with
a
recapture
section
(subclause
1(p)
(viii))
differing
in
form
from
its
exemption
section
(clause
5(1)(g)).
Whereas
there
is
no
difficulty
in
interpreting
two
recapture
sections
compatibly
(as
in
the
English
experience),
there
is
danger
that
an
exempting
section
may
be
read
incompatibly
with
a
recapture
section,
if
the
two
differ
in
wording,
so
as
to
free
from
tax
in
one
part
of
the
Act
all
those
who
have
been
caught
by
another
provision.
That
is
the
concern
In
interpreting
the
Ontario
Act.
Because
of
the
recapture/
exemption
dichotomy
unique
to
this
Act,
the
English
cases
cannot
bind
the
Court’s
interpretation
thereof,
nor
even
provide
much
guidance.
In
the
judgment
of
this
Court
in
Gorkin
(Adiiman
Estate)
v
MNR,
[1962]
SCR
363;
[1962]
CTC
245;
62
DTC
1166,
it
was
said
that
when
Parliament
inserts
a
recapturing
section
in
a
Succession
Duty
Act,
page
368
[250,
1169]:
it
must
be
assumed
that
it
was
placed
there
so
as
to
include.
as
a
Succession,
a
certain
type
of
transaction
which
would
not
otherwise
have
been
included
under
any
of
the
other
paragraphs.
.
.
.
We
must
read
clause
5(1)(g)
and
subclause
1
(p)(viii)
in
light
of
the
policy
of
the
Act,
which
is
to
tax
all
inter
vivos
gifts
from
which
the
donor
failed
to
detach
himself.
The
respondents’
argument
rests
upon
severance
of
income
and
corpus
yet
we
have
not
been
referred
to
any
case,
and
I
have
been
unable
to
find
one,
in
which
severability
of
beneficia!
interests
in
a
gift
of
shares,
between
capita!
and
income,
has
been
recognized.
The
United
States
Supreme
Court
dealt
with
the
possibility
of
severing
income
and
corpus
in
Commissioner
of
Internal
Revenue
v
Estate
of
Church
(1948),
335
US
632,
and
rejected
such
a
proposition.
Mr
Justice
Black
stated,
page
645:
Church
did
not
even
risk
attaching
an
unbreakable
cable
to
the
most
valuable
property
attribute
of
the
stocks,
their
income.
He
simply
retained
this
valuable
property,
the
right
to
the
income,
for
himself
until
death,
when
for
the
first
time
the
stock
with
all
its
property
attributes
“passed”
from
Church
to
the
trust
beneficiaries.
.
.
.
.
.
.
an
estate
tax
cannot
be
avoided
by
any
trust
transfer
except
by
a
bona
fide
transfer
in
which
the
settlor,
absolutely,
unequivocally,
irrevocably,
and
without
possible
reservations,
parts
with
all
of
his
title
and
all
of
his
possession
and
all
of
his
enjoyment
of
the
transferred
property.
On
the
wording
of
the
trust
document
I
can
find
no
reason
to
regard
the
property
which
passed
here
as
two
separate
and
distinct
cisposi-
tions,
one
of
income
and
one
of
corpus.
Essentially
the
subject-matter
of
the
gift
was
a
block
of
shares.
In
paragraph
1
of
the
indenture
the
trustee
undertook
to
receive
the
voting
trust
certificate
“to
constitute
a
trust
fund’.
Thus,
when
Mrs
McCreath
received
income,
the
benefit
came
from
property
which
she
had
purported
fully
to
have
given
away,
her
interest
in
the
shares
of
Mount
Royal
Paving
&
Supplies
Limited.
Although
the
trust
indenture
provides
that
the
income
from
the
trust
fund
is
to
be
handled
in
one
manner
and
the
corpus
in
another,
that
does
not
have
the
effect
of
constituting
two
properties.
The
matters
are
dealt
with
in
separate
subparagraphs,
it
is
true,
but
we
do
not
stop
at
mere
form
in
taxing
matters.
The
substance
of
the
matier
in
my
view
is
that
there
was
one
gift,
the
subject-matter
being
99,986
common
shares
in
the
capital
stock
of
Mount
Royal
Paving
&
Supplies
Limited.
The
income
from
the
1948
Trust
was
part
of
the
gift
and
not
something
“not
comprised
in”
the
gift
of
corpus.
If
a
father
gives
a
parcel
of
revenue-bearing
real
estate
to
his
son
and
retains
the
income
or
a
portion
of
the
income
from
the
real
estate,
it
could
not
seriously
be
contended
that
the
father
had
been
entirely
excluded
from
the
property
disposed
oi.
If,
as
I
have
found,
an
interest
was
reserved
to
Mrs
McCreath
in
the
property
passing,
within
the
meaning
of
subclause
1(p)(viii),
it
would
follow
that
the
disposition
made
by
her
was
not
such
that
the
possession
and
enjoyment
of
the
property
by
the
persons
to
whom
the
disposition
was
made
was
retained
to
the
entire
exclusion
of
Mrs
McCreath,
within
the
meaning
of
clause
5(1)(g).
lt
seems
to
me
that
Mrs
McCreath,
during
her
lifetime,
remained
effectively
in
control
oi
that
which
she
affected
to
dispose
of,
not
only
by
the
possible
income
interest,
but
also
because
of
the
right
to
designate
by
will
which
of
her
children
should
receive
the
corpus
on
her
death
and
subject
to
what
terms
and
conditions.
One
must
look
at
the
substance
of
the
matter
to
see
what
the
donor
parted
with
and
what
she
retained.
Mrs
McCreath
derived
actual
benefit
from
the
voting
trust
certificates
or
the
underlying
shares
or
their
dividends.
The
transfer
cf
the
shares
of
Mount
Royal
Paving
&
Supplies
Limited
to
the
trustee
was,
in
my
opinion,
a
colourable
gift
and
not
a
bona
fide
disposition
of
the
type
which
clause
5(1)(g)
is
intended
to
exempt.
Subclause
1(p)(viii)
and
clause
5(1)(g)
have
a
common
purpose,
taxation
of
those
who
purport
to
gift
their
property
during
life
but,
in
reality,
fail
to
do
so.
The
sections
should
be
complementary
as
in
the
English
and
Canadian
Acts
and
not
interpreted
absurdly
so
as
to
catch
the
donor
at
one
point
and
then
free
him
at
another.
If
subclause
1
(p)(viii)
and
clause
5(1
)(g)
are
to
work
harmoniously
within
the
total
context
of
the
Act,
clause
5(1)(g)
must
be
restricted
to
situations
where
the
donor
totaliy
excludes
himself
from
the
subject
property.
I
sum
up
these
reasons
with
the
following
conclusions:
1.
The
corpus
is
“property
passing
on
death”
under
subclause
1(p)(viii)
because
an
“interest”
was
retained
for
the
settlor’s
life.
2.
The
property
is
not
exempted
under
clause
5(1
)(g)
even
though
it
is
a
disposition
made
more
than
five
years
before
death.
Whenever
the
donor
fails
to
divest
himself
or
herself
of
control
of
or
income
benefits
from
the
property,
the
section
is
inapplicable
to
exempt
from
tax,
and
the
corpus
and
income
cannot
be
severed
for
purposes
of
this
section
if
the
donor
retains
an
income
interest.
I
would
accordingly
allow
the
appeal
with
costs
throughout
and
order
that
the
statements
of
succession
duty
dated
June
24,
1971
served
on
the
respondents
should
include
the
value
of
the
1948
Trust.
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