Citation: 2008TCC349
Date: 20080611
Dockets: 2007-3624(IT)I
2007-4570(IT)I
BETWEEN:
JEAN-CLAUDE MESSIER and
PIERRE MESSIER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
These appeals were
heard on common evidence under the informal procedure. Both Appellants are
challenging the assessments by which the Minister of National Revenue
("the Minister") included in each of their respective incomes
for the 2005 taxation year an amount of $15,000 that they apparently received
for their services as liquidators of the succession of their uncle Raoul Messier, who died
on March 21, 2005.
[2]
The Appellants
acknowledge that they were liquidators of Raoul Messier's succession and
that they each received the sum of $15,000 on May 18, 2005. However,
what they contest is the taxation of that amount. They consider it to be a
particular legacy that their uncle bequeathed to them in his will, not
remuneration for services rendered.
[3]
It does not appear to be
contested that, if the amount is indeed remuneration for the performance of the
duties of their office as liquidators of the succession, it is taxable in their
hands. Indeed, in an old decision, the Supreme Court of Canada held that the
additional remuneration received by a legatee for the performance of his duties
as testamentary executor (the office called "liquidator" in the new Civil Code
of Québec ("Civil Code") was taxable under the terms of
the Income Tax Act (ITA) (see MacKenzie Estate v. Canada,
[1937] S.C.R. 192).
[4]
Such remuneration would
be taxable under paragraph 3(a) and section 5 of the ITA and under
the definition of "office" contained in section 248 of the ITA.
Those provisions read as follows:
SECTION 3: Income for taxation year
The income of a taxpayer for a taxation year for the purposes of this
Part is the taxpayer’s income for the year determined by the following
rules:
(a) determine the total of all amounts each of which
is the taxpayer’s income for the year (other than a taxable capital gain from
the disposition of a property) from a source inside or outside Canada,
including, without restricting the generality of the foregoing, the taxpayer’s
income for the year from each office, employment, business and property,
SECTION 5: Income from office or employment
(1) Subject to this Part, a taxpayer’s income for a
taxation year from an office or employment is the salary, wages and other
remuneration, including gratuities, received by the taxpayer in the year.
SECTION 248: Definitions
(1) In this Act,
. . .
"office" means the position of an individual entitling the
individual to a fixed or ascertainable stipend or remuneration and includes a
judicial office, the office of a minister of the Crown, the office of a member
of the Senate or House of Commons of Canada, a member of a legislative assembly
or a member of a legislative or executive council and any other office,
the incumbent of which is elected by popular vote or is elected or
appointed in a representative capacity and also includes the position of a
corporation director, and "officer" means a person holding such an
office;
[5]
Under the Civil Code,
the duties of a liquidator do indeed constitute an office for which the
liquidator may be entitled to remuneration if he or she is already an heir and
the testator provides for remuneration. The applicable provisions of the Civil Code
are articles 783 et seq.:
CHAPTER II – LIQUIDATOR OF THE SUCCESSION
SECTION I - DESIGNATION AND RESPONSIBILITIES OF THE LIQUIDATOR
783. Any person fully capable of exercising his civil
rights may hold the office of liquidator.
A legal person authorized by law to
administer the property of others may hold the office of liquidator.
784. No person is bound to accept
the office of liquidator of a succession unless he is the sole heir.
785. The office of liquidator devolves
of right to the heirs unless otherwise provided by a testamentary disposition;
the heirs, by majority vote, may designate the liquidator and provide the
mode of his replacement.
786. A testator may designate one or several
liquidators; he may also provide the mode of their replacement.
A person designated by a testator to
liquidate the succession or execute his will has the quality of liquidator
whether he was designated as administrator of the succession, testamentary
executor or otherwise.
787. A person designated by a testator to liquidate the
succession or execute his will has the quality of liquidator whether he was
designated as administrator of the succession, testamentary executor or
otherwise.
If one of the liquidators is prevented
from acting, the others may perform alone acts of a conservatory nature and
acts requiring dispatch.
788. The court may, on the application
of an interested person, designate or replace a liquidator failing
agreement among the heirs or if it is impossible to appoint or replace the
liquidator.
789. The liquidator is entitled to the reimbursement of
the expenses incurred in fulfilling his office.
He is entitled to remuneration if he is
not an heir; if he is an heir, he may be remunerated if the will so provides or
the heirs so agree.
If the remuneration was not fixed by the
testator, it is fixed by the heirs or, in case of disagreement among the
interested persons, by the court.
790. The liquidator is not bound to take out
insurance or to furnish other security guaranteeing the performance of his
obligations, unless the testator or the majority of the heirs demand it or the
court orders it on the application of any interested person who establishes the
need for such a measure.
If a liquidator required to furnish
security fails or refuses to do so, he forfeits his office, unless exempted by
the court.
791. Any interested person may apply to the court for
the replacement of a liquidator who is unable to assume his responsibilities of
office, who neglects his duties or who does not fulfil his obligations.
During the proceedings, the liquidator
continues to hold office unless the court decides to designate an acting
liquidator.
792. Where the liquidator is not designated, delays to
accept or decline the office or is to be replaced, any interested person may
apply to the court to have seals affixed, an inventory made, an acting
liquidator appointed or any other order rendered which is necessary to preserve
his rights. These measures benefit all the interested persons but create no
preference among them.
The costs of inventory and seals are
chargeable to the succession.
793. Acts performed by a person who, in
good faith, believed he was liquidator of the succession are valid and may be
set up against all persons.
[6]
In the case at bar, the
question that arises is whether the amount of $15,000 that each of the
Appellants received constitutes remuneration for the performance of the duties
of their office (a remunerative legacy) or, rather, a particular legacy
(a mere liberality) in which case the amount received would not be taxable
because it would not be income from an office within the meaning of section 5
of the ITA.
[7]
The best guidance in
drawing this distinction is the testator's intent, as expressed in the
provision of the will. Here is what one author has stated on the subject:
[TRANSLATION]
How does one distinguish between a remunerative legacy and a mere
liberality contained in a particular legacy? The testator's intent, as
expressed in the provision of the will, remains the best guide, and it is only
if the terms are worded carefully and precisely that this intent can be
understood clearly.[56]
____________________________
56. M.
Roy, "Chronique testamentaire – La rémunération de l’exécuteur
testamentaire" (1983) 5 R.P.F.S. 206-207.
[8]
Another author writes:
[TRANSLATION]
Consequently, in interpreting the provisions of the will as a whole,
a certain amount of caution must be exercised with respect to the compensation
of testamentary executors. The testator's intent is very important in this
regard, and it is only through careful drafting that this intent will emerge
clearly from the terms used in a will that provides for such remuneration.
For example, a specific legacy of $1,000 to an executor cannot be
considered remuneration if the provisions of the will as a whole do not appear
to refer to the executor's office. Rather, one would have to conclude that the
legacy in question was merely a particular legacy that stems from a truly gratuitous
intent to give. The situation is different if the will provides that the
executor is entitled to a fee of $1,000 for work done as an executor. Even if
the amount is not characterized as a fee, the fact that the testator intended
to condition the payment upon acceptance of the office of executor would show
that gratuitous intent was wholly lacking.
. . . . the provision of the will remains the sole writing capable
of distinguishing between a remunerative legacy and mere liberality expressed
in the form of a particular legacy. . .
[9]
In the instant case,
the two Appellants are among 15 universal legatees of the succession of Raoul Messier.
The will also provides for a whole series of particular legacies to nieces and
nephews by marriage, and to various public institutions.
[10]
In Article V of the
will (Exhibit A‑4), the two Appellants are designated liquidators of the
succession. Article V reads:
[TRANSLATION]
ARTICLE V
LIQUIDATOR
1.
DESIGNATION
I designate the said Jean-Claude and Pierre MESSIER
as liquidators of my succession, and, if one of them should die, refuse to
act or become legally incapable of acting, the remaining liquidator may act
alone.
Should it be impossible to replace my liquidator as
stated hereinabove, my legatees, by majority vote, shall make such
replacement by notarial deed en minute, provided that they have all
attained the age at which they may take their share and that none of them has
been declared incapable; otherwise, the court may, upon an application by an
interested party, appoint a liquidator.
2. RESIGNATION
My liquidator may, at any time, even after liquidation
has begun, resign his office providing he renders an account of his
administration, and such resignation is evidenced by notarial deed en minute.
The cost of rendering account shall be borne by the succession.
3.
LIQUIDATOR'S REMUNERATION
For the services to be rendered
to my succession, whether in liquidating my succession or in administering the
whole or part of the property thereof, my liquidator shall, upon submission of
supporting documents, be entitled to the reimbursement of his expenses,
travelling costs and loss of salary.
Each of my liquidators shall
receive, for fulfilling the duties of his office, a legacy in the amount
of fifteen thousand dollars ($15,000), which may be collected from the
succession capital.
4.
PARTITION
My liquidator shall have the full power to carry out
the partition of my succession whether in money or in kind.
He may carry out the composition, evaluation and
allotment of shares alone and under the terms and conditions that he deems fair
and reasonable.
Notwithstanding what is stipulated in my said Will, my
liquidator may, as required to ensure the proper administration of my
succession, defer the partition of the succession property in whole or in part.
5.
ALIENATION
My liquidator may, alone,
alienate by onerous title all my movable and immovable property, encumber it
with real rights or change its destination, and perform all acts which are
necessary or useful, including all manner of investments.
However, he shall not alienate property bequeathed as
a particular legacy to a legatee of full age who is fully capable, but shall
execute the delivery of such legacy as soon as conveniently possible, subject
to the provisions pertaining to the reduction of particular legacies.
6.
FULL ADMINISTRATION
My liquidator shall be charged with the full
administration of the property of my succession.
7.
RELEASE
My liquidator may grant releases with or without
consideration.
8.
LEGATEES WHO ARE NOT YET OF REQUISITE AGE OR ARE INCAPABLE OR UNDER PROTECTIVE
SUPERVISION
My liquidator shall have the
administration of all the property bequeathed herein to legatees who are not
yet of requisite age, or are incapable or under protective supervision.
He shall deliver to each
legatee their respective share at the time that they have attained the age of
majority or when such incapacity has ceased. In the interval, my liquidator
shall administer each of my said legatee's shares and may use the income or
even encroach on the capital, if necessary, for such legatee's maintenance,
support, education or other needs.
Until final delivery of each of my legatees' shares,
my liquidator shall act as administrator charged with the full administration
of the property of others.
However, my liquidator may terminate his
administration in respect of a legatee who is under protective supervision,
or is incapable and has a homologated mandate in the event of incapacity, by
effecting remittance and rendering accounts to the legatee's tutor, curator or
mandatary.
[11]
Paragraph 3 of Article V specifically
provides for the liquidator's remuneration. The liquidator is entitled not only
to be reimbursed for his services to the succession, but also, to $15,000 in
compensation for fulfilling the duties of his office.
[12]
The Appellants submit
that since the will states that the amount is [TRANSLATION] "a
legacy", it does not constitute remuneration, but, rather,
a particular legacy or a mere liberality. In my opinion, the Appellants'
position does not reflect the testator's intent. The particular legacies are
specifically set out in Article III of the will (Exhibit A‑4).
[13]
The amount of $15,000
allotted to each Appellant is referred to in Article V under the heading
"Liquidator's Remuneration". In addition, the testator clearly states
that [TRANSLATION] "[e]ach of my liquidators shall receive, for
fulfilling the duties of his office, a legacy in the amount of fifteen
thousand dollars ($15,000). [Emphasis added.]
[14]
Moreover, Marielle
Gagné, the notary who drafted this will, acknowledged in her testimony that the
Appellants would not have been entitled to this amount if they had renounced
the duties of their office. It is true that she testified that, in her view,
the testator, Raoul Messier, was very grateful to his two nephews (the
Appellants) and that he probably wanted to give them an additional gift.
She also said that if the Appellants had renounced their responsibilities
as liquidators, the other legatees would undoubtedly have agreed to give each
of them $15,000.
[15]
In my opinion, these
last comments made by Ms. Gagné are mere assumptions, and do not reflect
what is set out in the will.
[16]
Ms. Gagné said that she
usually employs different terminology where the testator wishes to remunerate
the liquidator. She gave the following examples (Exhibit A‑3):
[TRANSLATION]
For the services rendered to my succession by my liquidator, whether
in liquidating my succession or in administering the whole or part of the
property thereof, my liquidator shall be entitled, in addition to the
reimbursement of his expenses, travelling costs and loss of salary, to a
remuneration of ______ dollars ($ ).
As a token of my gratitude for the services to be rendered to my
succession, whether in liquidating my succession or in administering the
whole or part of the property thereof, my liquidator shall be entitled, in
addition to the reimbursement of his expenses, travelling costs and loss of
salary, to the sum of ____ hundred dollars ($ ____), which shall be
indexed according to the inflation rate as established by Statistics Canada, the
reference year being 2008.
Any person, other than my spouse, who acts as liquidator, shall
receive the sum of _______ for fulfilling the duties of his office. Should
there be more than one executor, the said amount shall be shared equally by
them.
My liquidator shall not be remunerated for the services to be
rendered to my succession, whether in liquidating my succession or in
administering the whole or part of the property thereof; however, he shall be
entitled to the reimbursement of his expenses, travelling costs and loss of
salary.
[17]
A reference was also
made to the will of Albertine Messier, Raoul Messier's sister, which
was also prepared by Ms. Gagné. Under the heading [TRANSLATION]
"Liquidator's Remuneration", the following is stated:
3.
LIQUIDATOR'S REMUNERATION
For the services to be rendered
to my succession, whether in liquidating my succession or in administering the
whole or part of the property thereof, my liquidator shall, upon submission of
supporting documents, be entitled to the reimbursement of his expenses,
travelling costs and loss of salary.
If the said Jean-Claude and
Pierre Messier act as liquidators, they shall receive, for fulfilling the
duties of their office, a legacy in the amount of ten thousand dollars
($10,000) each, which may be collected from the succession capital.
. . .
[18]
Albertine Messier died
in 1999, and the Appellants each received $10,000 under the above provision of
the will. The Minister later reassessed the Appellants on the same basis as the
instant matter, but, at the objection stage, the Minister ultimately agreed to
consider the amount as a legacy (Exhibit A-1, Document F).
[19]
The Minister is not
bound by a previous decision of one of its officials, if that decision was
erroneous. (For example, see Brenda G. Klassen v. The Queen, 2007 FCA
339, at paragraph 27.)
[20]
In my opinion, Ms.
Gagné's testimony cannot serve to put a different gloss on a testamentary
provision which in my view speaks for itself. One the one hand, Ms. Gagné says
that Raoul Messier's intent was to make a particular legacy, and that, if
this had not been the case, she would have drafted differently the clause by
which $15,000 is bequeathed to each of the Appellants.
[21]
At the same time, she
acknowledges that if the Appellants had refused to act as liquidators, they
would not have been entitled to $15,000 each under the will. The other
legatees' consent would have been required in such an event.
[22]
Thus, Ms. Gagné implicitly
acknowledges that the amount of $15,000 was bequeathed to each Appellant for
fulfilling the duties of their office, which is what is clearly stated in the
will. Unlike remuneration for the fulfilment of the duties of an office, a
particular legacy does not entail any obligation or responsibility for a legatee.
[23]
In my view, the will is
clear enough in stating that the testator bequeaths $15,000 to each of the
Appellants for their services to the succession, despite the use of the words [TRANSLATION]
"a legacy", which follow the reference, at paragraph 3 of
Article V of the will, to the fulfilment of the duties of their office.
[24]
Given the way in which
the will is drafted, I find that the amount of $15,000 received by each
Appellant during the 2005 taxation year constitutes income from an office,
which is taxable under the terms of paragraph 3(a), section 5, and the
definition of "office" in section 248 of the ITA.
[25]
For these reasons, the
appeals are dismissed and the assessments are confirmed.
Signed at Ottawa, Canada, this 11th day of June 2008.
"Lucie Lamarre"
Translation certified true
on this 23rd day of July 2008.
Brian McCordick,
Translator
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