Thurlow,
CJ:—The
issue
in
this
appeal
and
the
relevant
facts
are
set
out
in
the
reasons
for
judgment
of
Mr
Justice
Heald
which
I
have
had
an
opportunity
to
consider.
I
also
reach
the
conclusion
that
the
appeal
fails
but
for
somewhat
different
reasons.
I
shall
deal
first
with
my
view
of
the
interpretation
of
subsection
75(1)
of
the
Income
Tax
Act.
It
has
been
said
in
Fasken
Estate
v
MNR,
[1948]
Ex
CR
580;
[1948]
CTC
265;
49
DTC
491
and
in
J
B
Dunkelman
v
MNR,
[1960]
Ex
CR
73;
[1959]
CTC
375;
59
DTC
1242
that
the
provision
is
to
be
strictly
construed.
That
means
that
it
is
to
have
effect
only
when
its
application
to
the
facts
is
clear
and
that
the
language
is
not
to
be
extended
to
situations
not
strictly
within
the
language
used
but
within
some
supposed
purpose
or
intendment
of
the
provision.
The
subsection
must
be
read
as
a
whole
to
determine
its
application.
But
the
wording
is
not
technical
and
its
interpretation
should
not
be
approached
as
if
it
were
technical.
Nor
should
it
be
construed
as
if
it
turned
on
the
niceties
of
distinctions
as
to
the
vesting
of
property
which
have
been
developed
and
recognized
by
courts
of
equity.
It
must
be
borne
in
mind
that
the
subsection
applies
in
Quebec,
where
the
basic
property
law
is
that
of
the
Civil
Code,
as
well
as
in
the
parts
of
Canada
where
the
tradition
of
the
common
law
prevails.
In
the
course
of
explaining
the
applicable
provisions,
in
both
Fasken
and
Dunkelman,
the
word
“vest”
was
used.
It
was
said
that
all
that
was
necessary
was
that
the
transferor
so
deal
with
his
property
as
to
divest
himself
of
it
and
vest
it
in
a
person
referred
to
in
the
provision.
But
in
neither
case
was
there
occasion
to
use
the
word
in
a
technical
sense.
In
particular
there
was
no
occasion
to
use
it
as
distinguishing
between
rights
that
are
vested
and
rights
that
are
contingent.
The
subsection
does
not
use
the
word
“vest”.
Nor
does
it
distinguish
between
what
is
vested
in
possession,
vested
in
remainder,
vested
in
interest,
vested
absolutely,
vested
but
subject
to
defeasance,
and
what
is
contingent
or
suspensive.
What
its
initial
wording
says
is:
“Where
a
taxpayer
has,
since
1930,
transferred
property
to
a
person
who
was
under
18
years
of
age,
either
directly
or
indirectly,
by
means
of
a
trust
or
by
any
other
means
whatever..All
that
this
calls
for
is
a
taxpayer,
transferor,
and
a
transfer
of
property
by
him
by
any
means
to
a
recipient
who
was
under
18
years
of
age.
It
is
not
necessary,
in
order
to
fall
within
this
wording,
that
all
of
the
rights
to
property
transferred
become
immediately
or
even
eventually
the
property
of
the
recipient
who
is
under
18
years
of
age.
But
it
is
apparent
from
what
follows
the
opening
words
that
the
subsection
is
concerned
only
with
the
property
transferred
to
the
person
under
18
years
of
age
and
with
income
from
that
property.
On
the
other
hand
“property”
is
defined
in
subsection
248(1)
as
including
“a
right
of
any
kind
whatever”.
Both
Fasken
and
Dunkelman
(supra)
were
concerned
with
whether
property
had
been
transferred
in
the
sense
of
the
statutory
provision.
Here
the
question
arising
on
the
opening
words
is
not
whether
property
was
transferred
but
whether
property
or
rights
in
property
were
transferred
to
a
person
under
18
years
of
age.
To
determine
this,
the
subsection
must
be
read
in
relation
to
the
taxation
years
in
question.
The
subsection
applies
if
property
was
transferred
at
any
time
after
1930
to
a
person
who
at
the
end
of
1975
or
1976
had
not
reached
18
years
of
age.
In
the
years
1975
and
1976
there
were
three
sons
of
the
appellant
who
were
objects
of
the
trust
who
had
not
yet
attained
that
age.
The
application
of
the
wording
I
have
quoted,
therefore,
in
my
opinion,
depends
on
whether
the
appellant,
by
the
device
of
the
trust,
transferred
property
to
them.
In
my
view,
it
makes
no
difference
that
there
was
but
one
child
at
the
time
of
the
creation
of
the
trust.
The
two
born
afterwards
were
also
plainly
within
the
class
of
beneficiaries
in
1975
and
1976
and
they
were
members
of
the
class
of
beneficiaries
as
a
result
of
the
creation
by
the
appellant
of
the
trust
and
the
transfer
by
him
of
property
to
the
trustee.
Viewing
the
matter
broadly
and
stripped
of
legal
concepts
I
find
it
difficult
to
see
any
answer
but
that,
within
the
ordinary
meaning
of
the
words
of
the
subsection,
as
applied
to
the
situation
in
1975
and
1976,
the
appellant
had
by
means
of
the
trust
transferred
property
to
his
three
children
who
in
the
taxation
years
in
question
were
under
18
years
of
age.
It
seems
to
me
that
from
the
point
of
view
of
the
appellant
and
of
his
children
the
answer
to
the
question
whether
he
had
transferred
property
to
them
would
be
affirmative
as
it
would
also
be
from
the
point
of
view
of
a
casual
observer.
I
turn
now
to
what
it
was
that
was
transferred
to
the
children.
Again
it
is
the
situation
as
of
1975
and
1976
that
must
be
considered.
The
property
transferred
by
the
appellant
consisted
of
shares
of
Glacier
Realties
Limited
and
in
the
way
in
which
the
trust
was
worded
the
deed
dealt
separately,
but
not
differently,
with
the
property
rights
in
the
shares
as
capital
and
with
the
income
to
be
derived
therefrom.
The
relevant
clause
of
the
deed
is
set
out
in
full
in
the
reasons
of
Mr
Justice
Heald
and
I
shall
not
repeat
it.
Under
it
(save
to
the
extent
to
which
the
discretionary
power
to
pay
to
the
children
or
some
of
them
was
in
fact
exercised)
the
trustee
was
not
merely
authorized
but
was
required
to
accumulate
the
income
and
add
it
to
the
capital
until
December
1,1991,
when
both
capital
and
accumulated
income
were
to
be
divided
into
as
many
shares
as
there
were
then
children
of
the
appellant
and
therefore
to
keep
“the
share
from
(sic)
each
such
child
invested”
and
‘‘to
pay
income
and
capital
to
such
child
upon
such
terms
and
in
such
manner
as”
was
thereinbefore
provided
until
the
child
should
attain
the
age
of
25
years,
then
to
pay
the
child
/3
of
his
share,
retain
the
remainder
of
such
share
upon
the
same
trust
until
he
reached
30
years
of
age
and
then
pay
it
to
him
absolutely.
This
in
my
view
is
a
trust
for
the
appellant’s
children
giving
them
a
present
beneficial
interest
in
the
capital
and
income
but
with
payment
or
delivery
deferred
in
the
case
of
each
of
them
in
part
until
he
reaches
25
years
of
age
and
for
the
remainder
until
he
reaches
30
years
of
age.
There
is
discretionary
power
in
the
trustee
to
divert
capital
or
income
or
both
from
one
child
to
another
and
there
are
provisions
under
which
upon
the
death
of
a
child
prior
to
his
reaching
the
age
of
30
years
his
interest
may
pass
to
his
children
or
to
other
children
of
the
appellant
and
there
is
finally
provision
for
an
event
where
by
reason
of
the
death
without
issue
of
children
of
the
appellant
prior
to
their
reaching
30
years
of
age
the
trust
estate
would
pass
to
the
appellant’s
wife,
but
while
the
rights
of
each
child
are
subject
to
these
provisions
I
do
not
see
this
as
affecting
the
present
right
of
the
three
children,
as
the
members
of
the
class,
in
the
capital
and
in
the
income
of
the
trust
for
1975
and
1976
as
conferred
on
them
by
the
trust
deed
subject
to
the
possibility
that
they
might
later
be
deprived
of
it
under
such
provisions.
I
should
add
that
I
think
this
view
of
the
present
right
of
the
children
draws
support
from
the
presence
in
the
deed
of
provisions
for
the
disposition
of
the
share
of
a
child
dying
without
issue
before
the
distribution
date
in
1991.
In
the
course
of
argument,
reference
was
made
to
a
number
of
cases
on
vesting
of
property
in
the
law
of
trusts
and
on
the
application
of
statutory
provisions
imposing
taxes
in
respect
of
interests
in
trust
property.
These
included
in
particular
Minister
of
Revenue
for
Ontario
v
J
S
McCreath,
[1977]
1
SCR
2;
[1976]
CTC
178
and
Gartside
et
al
v
IRC,
[1968]
AC
553,
but
while
these
cases
are
illuminating
as
to
the
rights
there
in
question
in
relation
to
the
particular
taxing
provisions
under
consideration
I
do
not
regard
them
as
applicable
or
as
of
assistance
in
resolving
the
very
different
questions
that
arise
on
subsection
75(1).
I
should
add
that
in
my
view
the
provisions
of
this
trust
are
quite
different
and
readily
distinguished
from
those
considered
in
Re
Rispin
(1912),
25
OLR
633,
affd
(1912)
46
SCR
649
where
the
will
merely
authorized
the
trustee
in
his
discretion
to
pay
income
to
the
testator’s
son
during
his
lifetime
and
gave
the
son
no
rights,
whether
absolute
or
defeasible,
in
capital
or
income.
The
present
trust
deed
is
also
readily
distinguishable
for
the
same
reasons
from
that
considered
in
Gartside
et
al
v
IRC
(supra).
Here
if
there
is
no
exercise
of
discretion
to
prejudice
the
right
of
a
child
and
if
he
does
not
die
prematurely,
both
the
capital
and
the
income
of
his
share
must
ultimately
come
to
him.
In
my
view
the
property
transferred
by
the
appellant
to
the
children
by
or
as
a
result
of
the
trust
deed
and
the
transfer
of
the
shares
to
the
trustee
included
the
right
to
both
the
capital
and
the
income
of
the
trust
property,
subject
to
the
provisions
of
the
deed,
and
that
in
my
opinion
is
sufficient
to
satisfy
the
requirements
for
the
application
of
the
opening
words
of
subsection
75(1),
notwithstanding
that,
by
reason
of
actions
or
events
that
might
subsequently
occur,
the
three
children
might
be
deprived
of
it
in
whole
or
in
part
in
favour
of
other
members
of
the
class
of
beneficiaries
under
the
trust.
The
wording
of
the
remainder
of
subsection
75(1),
which
must
next
be
considered,
is
“any
income
.
.
.
for
a
taxation
year
from
the
property
or
from
property
substituted
therefor
shall
.
.
.
be
deemed
to
be
income
.
.
.
of
the
transferor
and
not
of
the
transferee
.
.
In
A
Pichosky
v
MNR,
[1964]
Ex
CR
946
at
948;
[1964]
CTC
177
at
177;
64
DTC
5105
at
5106,
the
President
of
the
Exchequer
Court
(as
he
then
was)
concluded
on
the
similar
wording
of
the
former
subsections
21(1)
and
22(1),
the
predecessors
of
the
present
subsections
74(1)
and
75(1),
that
the
income
referred
to
is
income
that,
but
for
the
subsection,
would
be
taxable
as
income
of
the
transferee.
The
learned
judge
said:
In
my
view,
subsection
(1)
of
section
21
and
subsection
(1)
of
section
22
clearly
provide
only
for
income
that
otherwise
would
be
taxable
in
the
hands
of
the
transferee
being
taxable
in
the
hands
of
the
transferor.
I
think
this
view
is
clinched
by
the
enacting
words
at
the
end
of
subsection
(1)
of
section
21,
which
provide
that
the
income
from
the
property
or
the
property
substituted
therefor
shall
be
deemed
to
be
income
of
the
transferor
“and
not
of
the
transferee’’.
Similar
words
are
to
be
found
in
subsection
(1)
of
section
22.
It
seems
to
me
that
that
interpretation
is
consistent
not
only
with
the
wording
of
the
subsections
but
with
other
provisions
of
the
Act
as
well.
Under
it
the
transferor
is
liable
for
tax
only
on
income
in
respect
of
which
the
person
under
18
years
of
age
would
otherwise
be
liable
for
tax.
If
it
were
not
so
limited,
in
a
case
such
as
the
present,
the
appellant
and
the
trustee
could
both
be
liable
for
tax
on
the
same
income.
In
my
opinion
it
is
not
open
to
the
Crown
to
treat
the
transferee
as
being
at
one
moment
the
person
under
18
years
of
age
and
at
another
moment
the
trustee,
when,
under
the
trust,
the
trustee
has
the
authority
to
retain
and
accumulate
the
income
to
a
time
when
events
may
have
deprived
the
person
under
18
years
of
age
of
any
right
to
it.
In
my
view
the
interpretation
in
the
Pichosky
decision
is
correct.
Applying
it
to
the
present
case,
since
under
the
terms
of
the
trust
the
income
in
question
would
not,
without
more,
be
income
of
the
children
of
the
appellant
for
the
taxation
years
in
question
the
subsection
could
not
apply
to
make
the
appellant
liable
to
tax
in
respect
of
income
of
the
trust.
Put
in
another
way
the
appellant
would
not
be
liable
under
the
subsection
because
the
persons
under
18
years
of
age
would
not
themselves
have
been
liable
to
tax
in
respect
of
the
income
of
the
trust
as
their
income
for
the
taxation
years
in
question.
At
this
point,
however,
it
becomes
necessary
to
consider
the
effect
of
the
elections,
under
subsection
104(14)
made
in
respect
of
the
1975
and
1976
in-
come
of
the
trust.
The
facts
with
respect
to
them
are
summarized
as
follows
in
paragraph
9
of
the
appellant’s
memorandum:
9.
Preferred
beneficiary
elections
with
respect
to
each
child
were
made
jointly
by
the
Trustee
and
each
such
child
for
the
1975
and
1976
taxation
years
pursuant
to
the
provisions
of
the
Income
Tax
Act
with
respect
to
the
said
dividends.
The
total
amounts
included
in
the
incomes
of
the
beneficiaries
were
$6,222.22
in
1975
and
$12,444
in
1976.
One
may
wonder
how
the
children
participated
in
the
elections
but,
presumably,
someone
did
so
on
their
behalf
and
for
their
benefit.
It
does
not
seem
possible
to
me,
however,
that
the
income
of
the
trust
can
be
treated
as
their
income
for
taxation
purposes
and
still
be
in
fact
income
that
is
subject
to
the
terms
of
the
trust.
If
it
is
to
be
treated
as
income
of
the
children
for
the
taxation
years
in
question
it
must
be
because
they
are
entitled
to
it
by
reason
of
the
trustee
having
decided
that
it
was
to
be
theirs
rather
than
to
hold
it
subject
to
the
trust
terms
under
which
they
might
at
some
future
date
be
deprived
of
it.
Apart
from
that,
subsection
104(14)
would
not
apply.
It
reads:
(14)
Where
a
trust
and
a
preferred
beneficiary
thereunder
jointly
so
elect
in
respect
of
a
taxation
year
in
prescribed
manner
and
within
prescribed
time,
such
part
of
the
accumulating
income
of
the
trust
for
the
year
as
is
designated
in
the
election,
not
exceeding
the
preferred
beneficiary’s
share
therein,
shall
be
included
in
computing
the
income
of
the
preferred
beneficiary
for
the
year,
and
shall
not
be
included
in
computing
his
income
for
a
subsequent
year
in
which
it
was
paid.
(Emphasis
added)
In
my
view
by
making
elections
under
this
provision
to
avoid
taxation
of
the
income
as
that
of
the
trust
the
trustee
acknowledged
the
right
of
the
children
to
the
income
and
invited
the
Minister
to
assess
them
accordingly.
That
in
my
view
could
only
be
done
on
the
basis
that
there
had
been
an
exercise
of
the
trustee’s
authority
to
pay
the
whole
of
the
income
for
the
taxation
years
in
question
to
the
children
and
to
irrevocably
confer
on
them
the
right
to
it.
The
authority
to
pay
income
to
beneficiaries,
in
my
opinion,
includes
the
authority
to
declare
or
designate
income
as
held
for
them
to
the
exclusion
of
the
continuance
of
the
trustee’s
authority
to
deprive
them
of
it
and
to
the
exclusion
of
the
possibility
of
their
being
deprived
of
it
upon
the
happening
of
events
referred
to
in
the
trust
deed.
One
further
point
that
should
be
noticed
is
whether
the
income
thus
allocated
to
the
children
by
the
trustee
is
to
be
regarded
as
income
from
property
transferred
to
them
by
the
appellant
in
view
of
the
necessity
of
an
act
by
the
trustee
to
make
it
irrevocably
theirs.
In
my
view,
while
such
an
act
by
the
trustee
was
required,
the
source
of
the
income
was
the
property
rights
transferred
to
the
children
which
rights
included
the
right
to
the
whole
of
the
income
if
and
when
allocated
or
paid
to
them
by
the
trustee
prior
to
1991.
It
came
to
them
earlier
by
reason
of
the
act
of
the
trustee
but
was
still,
in
their
hands,
the
income
of
property
transferred
to
them
by
the
appellant.
I
would
dismiss
the
appeal
with
costs.
Heald,
J:—This
is
an
appeal
from
a
judgment
of
the
Trial
Division
dismissing
the
appellant’s
appeal
from
the
decision
of
the
Tax
Review
Board
confirming
the
Minister’s
income
tax
assessments
for
the
appellant’s
1975
and
1976
taxation
years.
The
issue
in
this
appeal
is
whether
or
not
the
income
of
a
trust
for
the
years
1975
and
1976
should
be
assessed
as
income
of
the
appellant
(the
settlor
of
the
trust),
pursuant
to
subsection
75(1)
of
the
Income
Tax
Act.*
The
appellant
is
a
medical
doctor
and
was,
at
all
material
times,
a
Canadian
resident.
On
December
1,
1971,
he
established
the
Harold
J
Sachs
Family
Trust,
naming
his
wife,
Merida
Phyllis
Sachs
as
trustee
therein.
The
beneficiaries
of
the
trust
were
the
children
of
the
appellant
and
his
wife.
At
all
material
times
the
children
were
under
18
and
the
appellant’s
wife
was
over
18
years
of
age.
On
December
1,1971,
there
was
only
one
child
(born
on
October
31,
1971).
Since
then,
there
are
three
additional
children,
one
born
in
1974,
one
in
1975
and
one
in
1977.
On
December
1,
1971,
immediately
after
the
creation
of
the
trust,
the
appellant
sold
to
the
trustee
in
her
capacity
as
trustee
pursuant
to
the
trust,
all
of
the
shares
that
he
owned
in
Glacier
Realties
Limited
(hereafter
Glacier)
for
the
sum
of
$40,000
to
be
paid
by
promissory
note,
without
interest.
Immediately
after
the
sale,
the
trustee
gave
the
appellant
a
promissory
note
in
the
amount
of
$40,000
dated
December
1,
1971.
The
shares
then
formed
part
of
the
trust
estate.
The
material
article
of
the
Trust
Deed
for
the
purposes
of
this
appeal
is
Article
VIII
which
reads
as
follows:
ARTICLE
VIII:
PAYMENT
OF
INCOME
AND
CAPITAL
The
Trustee
shall
invest
and
keep
invested
the
Trust
Estate
until
the
first
day
of
December,
1991
(hereinafter
referred
to
as
the
‘‘distribution
date”)
and
may,
from
time
to
time,
pay
none,
some
or
all
of
the
net
income
derived
therefrom
or
none,
some
or
all
of
the
capital
thereof
to
or
for
the
benefit
of
one,
some
or
all
of
the
children
of
the
Settlor
as
the
Trustee
shall,
in
his
absolute
and
uncontrolled
discretion,
determine;
any
income
not
so
paid
or
applied
in
any
calendar
year
to
be
added
to
form
part
of
the
Trust
Estate;
on
the
distribution
date
the
Trust
Estate
shall
be
divided
into
as
many
equal
shares
as
there
shall
be
children
of
the
Settlor
then
alive;
any
child
of
the
Settlor
who
shall
not
be
then
alive,
but
who
shall
have
children
him
or
her
surviving,
shall
be
considered
alive
for
the
purposes
of
such
distribution;
the
Trustee
shall
keep
the
share
from
(sic)
each
such
child
invested
and
shall
pay
income
and
capital
to
such
child
upon
such
terms
and
in
such
manner
as
hereinbefore
provided
until
such
child
shall
attain
the
age
of
twenty-five
(25)
years,
whereupon
one-third
(
/a)
of
his
or
her
shall
be
paid
to
him
or
her
for
his
or
her
own
use
absolutely;
the
remainder
of
such
share
shall
be
kept
invested
as
aforesaid
and
the
income
and
capital
shall
be
paid
as
aforesaid
until
such
child
shall
attain
the
age
of
thirty
(30)
years
whereupon
the
amount
of
such
share
remaining
shall
be
paid
to
him
or
her
for
his
or
her
own
use
absolutely;
provided,
however,
that
in
the
event
that
any
such
child
shall
die
prior
to
the
distribution
date,
or
surviving
the
distribution
date
shall
die
prior
to
attaining
the
age
of
twenty-five
(25)
years
or,
having
attained
the
age
of
twenty-five
(25)
years,
shall
die
prior
to
attaining
the
age
of
thirty
(30)
years,
leaving
children
him
or
her
surviving,
then
the
interest
of
such
child
in
his
or
her
share
shall
be
subject
to
the
defeasance
and
the
share
of
such
child
or
the
amount
thereof
remaining
shall
be
held
in
trust
for
the
children
of
such
deceased
child
alive
at
the
date
of
such
deceased
child’s
death
in
equal
shares
per
stirpes,
upon
such
terms
and
in
such
manner
as
herein
provided;
in
the
further
event
that
such
deceased
child
shall
die
in
such
manner
as
aforesaid,
leaving
no
children
him
or
her
surviving,
then
the
share
of
such
deceased
child
or
the
amount
thereof
remaining
shall
be
subject
to
defeasance
and
shall
be
held
in
trust
for
the
brothers
and
sisters
of
such
deceased
child
alive
at
the
date
of
the
death
of
such
deceased
child
in
such
manner
as
herein
provided;
in
the
further
event
that
there
shall
be
no
children
of
the
Settlor
alive
at
the
distribution
date
or
all
of
them
shall
die
prior
to
attaining
the
age
of
twenty-five
(25)
years
or,
if
one
or
some
of
them
shall
have
attained
the
age
of
twenty-five
(25)
years
but
shall
die
prior
to
attaining
the
age
of
thirty
(30)
years
leaving
no
children
them
surviving,
to
pay
over
the
Trust
Estate
to
or
for
the
benefit
or
MERIDA
PHYLLIS
SACHS
for
her
own
use
absolutely.
In
the
taxation
years
1975
and
1976,
the
Trust
received
taxable
dividends
from
Glacier.
Preferred
beneficiary
elections
with
respect
to
each
child
were
made
jointly
by
the
trustee
and
each
child
for
the
1975
and
1976
taxation
years
pursuant
to
the
provisions
of
the
Income
Tax
Act
with
respect
to
the
said
dividends.
In
assessing
the
appellant
for
his
1975
and
1976
taxation
years,
the
Minister
of
National
Revenue
proceeded
on
the
assumption
that
the
dividends
received
by
the
Trust
from
Glacier
were
deemed
to
be
in-
bome
of
the
appellant
and
not
of
the
beneficiaries
of
the
Trust
and
his
authority
for
this
assumption
is
said
to
be
subsection
75(1)
of
the
Income
Tax
Act
(supra).
At
the
hearing
before
us,
counsel
for
the
appellant
made
three
basic
submissions:
1.
That
for
subsection
75(1)
of
the
Income
Tax
Act
to
apply,
it
would
be
necessary
to
find
a
vesting
of
the
capital
of
the
Glacier
shares
in
the
infant
children
of
the
appellant;
2.
That,
on
the
facts
of
this
case,
there
was
not,
a
vesting
of
the
Glacier
shares
in
appellant’s
infant
children;
and
3.
That,
in
the
event
the
Court
determines
that
there
was
a
transfer
of
property
within
the
meaning
of
subsection
75(1)
to
a
person
under
18
years
of
age,
subsection
75(1)
will
only
operate
to
attribute
to
the
appellant
the
income
of
the
eldest
child
since
that
child
was
the
only
child
born
prior
to
December
1,
1971,
the
date
of
the
transfer
of
the
shares
to
the
trustee.
Turning
now
to
the
first
of
these
three
submissions,
I
agree
that
before
subsection
75(1)
can
apply,
there
must
have
been
a
vesting
in
the
infant
children.
In
dealing
with
the
predecessor
section
of
the
Income
Tax
Act
to
subsection
75(1),
Thurlow,
J
(as
he
then
was)
in
the
case
of
Joseph
B
Dunkelman
v
MNR,
[1959]
CTC
375;
59
DTC
1242,
expressed
the
view
that
all
that
was
necessary
for
the
section
to
apply
was
.
.
that
the
taxpayer
shall
have
so
dealt
with
property
belonging
to
him
as
to
divest
himself
of
it
and
vest
it
in
a
person
under
19
years
of
age.*
In
that
judgment,
Mr
Justice
Thurlow
cited
with
approval
similar
views
expressed
by
President
Thorson
of
the
Exchequer
Court
in
David
Fasken
Estate
v
MNR,
([1948]
Ex
CR
580;
[1948]
CTC
265;
49
DTC
491),
and
by
Lord
Radcliffe
in
St
Aubyn
v
Attorney
General,
([1952]
AC
15).
Turning
now
to
the
question
as
to
whether,
on
the
facts
here
present,
there
can
be
said
to
be
a
vesting
of
the
property
of
which
the
taxpayer
has
divested
himself
in
persons
under
18
years
of
age,
it
is
my
view
that
if
one
were
to
be
restricted
to
a
consideration
of
the
Trust
Deed
only,
it
would
be
clear
that,
because
of
the
terms
of
Article
VIII
thereof,
it
cannot
be
said
that
there
is
a
vesting
in
the
objects
of
the
trust.
An
estate
is
contingent
if
the
accrual
of
the
owner’s
title
depends
upon
the
occurrence
of
some
event.*
Before
it
can
be
said
that
a
beneficiary
is
entitled
to
a
vested
interest,
two
things
must
concur:
(a)
his
identity
must
be
established;
(b)
his
right
to
the
interest
(as
distinguished
from
his
right
to
possession)
must
not
depend
upon
the
occurrence
of
some
event,
j-
Pursuant
to
this
Trust
Deed,
no
single
member
of
the
class
of
discretionary
beneficiaries
had,
at
all
relevant
times,
any
right
to
receive
any
portion
of
the
income
or
corpus
of
the
estate;
likewise,
when
considered
collectively,
the
situation
is
the
same.
The
situation
of
a
beneficiary
under
a
discretionary
trust
was
described
by
Lord
Wilberforce
in
the
case
of
Gartside
et
al
v
IRC,
[1968]
1
All
ER
121
at
134
as
follows:
No
doubt
in
a
certain
sense
a
beneficiary
under
a
discretionary
trust
has
an
“interest”:
the
nature
of
it
may,
sufficiently
for
the
purpose,
be
spelt
out
by
saying
that
he
has
a
right
to
be
considered
as
a
potential
recipient
of
benefit
by
the
trustees
and
a
right
to
have
his
interest
protected
by
a
court
of
equity.
Certainly
that
is
so,
and
when
it
is
said
that
he
has
a
right
to
have
the
trustees
exercise
their
discretion
“fairly”,
or
“reasonably”
or
“properly”
that
indicates
clearly
enough
that
some
objective
consideration
(not
stated
explicitly
in
declaring
the
discretionary
trust,
but
latent
in
it)
must
be
applied
by
the
trustee
and
that
the
right
is
more
than
a
mere
spes.
But
that
does
not
mean
that
he
has
an
interest
which
is
capable
of
being
taxed
by
reference
to
its
extent
in
the
trust
fund’s
income:
it
may
be
a
right
with
some
degree
of
concreteness
or
solidity,
one
which
attracts
the
protection
of
a
court
of
equity,
yet
it
may
still
lack
the
necessary
quality
of
definable
extent
which
must
exist
before
it
can
be
taxed.
Counsel
for
the
respondent
relies
on
comments
made
by
Dickson,
J
in
the
case
of
Minister
of
Revenue
for
the
Province
of
Ontario
v
McCreath
et
al,
[1977]
1
SCR
2;
[1976]
CTC
178.
In
that
case,
the
comments
relied
on
are
contained
on
pp
10
to
15
and
relate
to
a
consideration
therein
as
to
whether
the
testatrix
has
reserved
to
herself,
in
a
Trust
Deed,
an
interest
in
the
corpus
of
the
Trust
so
as
to
make
it
“property
passing
on
her
death”
as
defined
in
subparagraph
1
(p)(viii)
of
The
Succession
Duty
Act
of
Ontario.
In
the
McCreath
case
supra,
the
relevant
section
of
the
Trust
Deed
read
as
follows:
1.
...
(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
Settlor,
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
discretion
determine.
Based
on
the
Trust
Deed
in
that
case,
Dickson,
J
held
that
the
“property
passing”
was
the
equitable
interest
in
a
voting
trust
certificate
representing
99,986
common
shares
in
a
company,
which
were
transferred
by
the
settlor
to
the
trustee.
He
then
went
on
to
say
at
p
10
of
the
report:
If
the
“property”
for
purposes
of
subsection
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
subject-matter
of
the
trust.
Collectively
she
and
her
children
were
entitled
to
all
of
the
income.
He
then
concluded
that
the
settlor
had
retained
an
interest
in
the
settled
property
for
purposes
of
subparagraph
1
(p)(viii)
by
making
herself
one
of
the
possible
objects
of
the
discretionary
trust.
In
my
view,
the
McCreath
case
Supra
is
distinguishable
from
the
case
at
bar
because
of
significant
differences
in
the
terms
of
the
trust
deed.
As
noted
supra
from
the
terms
of
clause
1(a)
of
the
trust
deed
and
as
observed
by
Dickson,
J,
collectively
the
settlor
and
her
children
were
entitled
to
all
of
the
income.
The
obligation
of
the
trustee
by
clause
1(a)
is
.
.
to
pay
or
apply
the
whole
net
income
of
the
trust
fund
in
each
year
to
or
for
the
benefit
of
the
Settlor,
and
her
issue
.
.
In
the
case
at
bar,
the
trustee’s
obligation
until
December
1,
1991
is
to
keep
the
trust
estate
invested
but
there
is
no
requirement
to
pay
any
of
the
income
or
corpus
to
or
for
the
benefit
of
any
of
the
beneficiaries.
Even
after
December
1,1991,
there
is
no
vesting
of
any
of
the
shares
of
the
trust
in
any
of
the
beneficiaries
until
they
attain
the
full
age
of
25
years.
Thus,
the
terms
of
the
two
trust
deeds
are
quite
different
and
since
in
this
case
collectively
the
beneficiaries
had
no
entitlement
to
the
income,
it
seems
to
me
that
the
rationale
for
the
statements
made
by
Dickson,
J
in
the
McCreath
case
supra
would
not
apply
to
the
case
at
bar
if
the
only
matters
to
be
considered
herein
were
the
clauses
of
the
trust
deed
itself.
However,
in
this
case,
in
1975
and
1976,
Glacier
paid
taxable
dividends
to
the
trust
and
preferred
beneficiary
elections
with
respect
to
each
child
were
made
jointly
by
the
trustee
and
each
child
for
1975
and
1976,
pursuant
to
subsection
104(14)
of
the
Income
Tax
Act.*
In
my
view,
in
so
distributing
the
dividends
to
the
beneficiaries,
the
trustee
has
exercised
her
discretion
in
favour
of
the
infant
beneficiaries
thereby
transferring
at
least
a
portion
of
the
“property”
of
the
trust
to
those
beneficiaries.
Subsection
104(14)
refers
to
the
“preferred
beneficiary’s
share”
in
“the
accumulating
income
of
the
trust”.
By
completing
the
election
under
subsection
104(14),
and
by
distributing
dividends
pursuant
thereto,
it
seems
to
me
that
the
trustee
has
created
a
vested
interest
in
the
accumulating
trust
income.
Accordingly,
on
the
basis
of
the
rationale
of
the
McCreath
case
supra,
if
the
beneficiaries
have
an
interest
in
the
income
of
the
trust,
a
fortiori,
they
also
have
an
interest
in
the
property
forming
the
subject-matter
of
the
trust.
Such
being
the
case,
the
following
comments
of
Dickson,
J
in
the
McCreath
case
supra
at
15
thereof
apply
equally
here:
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
.
..
Accordingly,
and
for
the
foregoing
reasons,
I
have
concluded
that
there
was
a
vesting
of
the
subject
matter
of
the
trust,
sufficient
to
render
applicable,
the
provisions
of
subsection
75(1)
of
the
Income
Tax
Act.
Dealing
with
the
third
submission
by
appellant’s
counsel,
in
view
of
my
conclusion
that
the
vesting
in
this
case
occurred
when
the
trustee
made
the
election
under
subsection
104(14)
and
since
that
election
applied
to
all
of
the
infant
children,
I
do
not
agree
that
the
vesting
under
subsection
75(1)
can
only
occur
at
the
time
of
the
creation
of
the
trust.
I
therefore
reject
this
argument.
since
I
agree
that
the
Minister
correctly
applied
the
provisions
of
subsection
75(1)
to
the
factual
situation
here
present,
it
follows
that,
in
my
view,
the
appeal
should
be
dismissed
with
costs.