Rolf Drescher v. Minister of National Revenue, [1982] CTC 2769, 82 DTC 1769

M J Bonner:—This is an appeal from an assessment of income tax for the appellant’s 1978 taxation year. The issue is whether the person taxable as recipient of interest income in the amount of $49,458.91 from two consecutive term deposits of the sum of $1,000,000 won in a lottery is the appellant, or whether he, his wife and his daughter are each taxable on one-third of that interest. The Minister based his assessment on the assumption that, and contended that, it was the appellant alone who won the prize, invested it and received the interest. The appellant contended that beneficial ownership of the prize and of the income derived from its investment were equally held and shared by himself, his wife and his daughter, Evelyn. That sharing arose, it was said, from an implied trust.

The money was won in a lottery known as “The Provincial”. A person wishing to participate in that lottery buys a numbered ticket. If that number is drawn the name and address of the holder of the ticket are then filled in on the ticket stub. The holder then attends at the office of the lottery corporation and establishes that he is the holder by producing the ticket. After verification that the ticket is a winner and not a forgery and, as well, after publicity procedures are completed, the lottery corporation issues a cheque to the holder.

It is plain that Ron Bunio, an employee of Elmcrest Furniture, the Drescher family business, was the seller of the winning ticket. Mr Bunio, for some time, had made a practice of selling lottery tickets at the Elmcrest premises. His customers included all three members of the Drescher family, all of whom worked at Elmcrest. Mr Bunio stated that he could not say who bought the ticket from him. The name of the purchaser of a Provincial ticket is not recorded by the seller at the time of purchase.

The evidence of Mr Bunio, together with that of both the appellant and his wife, points to a conclusion that the purchaser of the winning ticket can never be identified with certainty. Mr and Mrs Drescher both testified they did not know who bought it. It might have been any one of the three members of the family. The uncertainty arises from the fact that all three were habitual buyers of lottery tickets and that all three made a practice of placing the tickets which they had purchased on a clip kept in the family home. None of them made any attempt to identify or differentiate between tickets bought by any one member of the family as opposed to the other two.

In this case, following publication of the winning number, the appellant, accompanied by his wife, brought the winning ticket to the office of the lottery corporation. Evelyn Drescher was unable to attend on that day because she was writing an examination. The appellant printed his name and address on the ticket stub. Publicity pictures were taken of the appellant and his wife. Later that day, the appellant, his wife and daughter went to the airport and picked up a cheque payable to the appellant in the amount of $1,000,000. That cheque bore the following printed endorsement:

The endorsement of this cheque constitutes a recognition of the complete and final payment of the prize payable on my THE PROVINCIAL ticket. With this payment received and accepted in accordance with the Regulation, I hereby give to the Corporation the right to publish my name, address, photograph or picture without any claim whatsoever.

Below that endorsement the appellant signed as winner and printed his name, address and telephone number.

The next day the appellant called his bank, stated that he had won the prize and arranged for the investment of the money in a thirty-day term deposit in his name. When the deposit matured the appellant transferred the money to a different bank where it was once again invested in a term deposit in his name. The evidence did not indicate whether the interest from the first and second term deposits was, when received, kept by the appellant, shared by the appellant with his wife and daughter, or simply reinvested.

The appellant was asked whether he had given any particular instructions to the bank as to the name of the depositor. His answer was somewhat enigmatic. He said that the second deposit was supposed to be placed in the names of himself, his wife and his daughter. He did not say that the bank had been given instructions to that effect.

The trust asserted is one which is said to have arisen from an intention on the part of all three members of the family to share any lottery prizes which might be won. It is not suggested that there was an express trust. In support of the submission that there was an implied trust the appellant’s counsel relied on four main factors:

(a) The practice of keeping tickets bought by all three members of the appellant’s family on a clip in the appellant’s home and the failure to record or note who purchased individual tickets.

(b) The naming of all three members of the family as depositors when the prize money was invested in the third term deposit which matured in 1979.

(c) The action of all three members of the family in each investing one- third of the prize money in Royal Elm Canada Ltd following ;maturity of the third term deposit. Royal Elm was an investment company, the shares of which were held equally by all three.

(d) The fact that the issued shares of two of the three Drescher family corporations were equally divided among all three.

Counsel submitted that the evidence just reviewed showed that the intention of all members of the family was “all for one, one for all”. He relied on the decision of the Manitoba Court of Queen’s Bench in Re Wozney and Wozney et al, [1974] 44 DLR (3d) 637. In that case a husband who had earned four lottery tickets decided to keep them for the family rather than sell them. He discussed his decision with his wife and expressed the intention of sharing any prize with all four members of the family. Each stub was then filled in with the name of a different family member. As it happened, the winning ticket was one held in the name of an infant daughter. In the circumstances of that case, it was held that there was . . an agreed intention by the applicant (husband) and his wife to create a trust in equal shares for the benefit of all members of the family . . and that the proceeds were subject to an implied trust in favour of all four family members.

The present case is quite different. There is no evidence that any of the three possible owners of the winning ticket either intended to or did settle his or her property in the ticket in trust for all three. Both Mr and Mrs Drescher denied any discussion of sharing, such as there was in the Wozney case. Mr Drescher testified that no such discussion took place prior to the winning of the prize because, as he said, the chances of winning were so small.

Returning to the four factors relied on by the appellant’s counsel, I observe that, in light of the reasons given by Mr Drescher for the lack of any discussion of sharing, the practice of keeping the tickets on the clip appears to be more consistent with a failure to foresee the confusion which might result from that practice than with a dedication of the property in the tickets by the various purchasers thereof to some sort of a sharing trust.

The belated action in naming all three members of the family as makers of the third term deposit is, having regard to the appellant’s prior conduct in collecting the prize, advising the bank manager that he had won and investing the prize in his own name, more consistent with a decision to divide made after maturity of the second term deposit than with a recognition of an arrangement made at the outset for the pooling of interests in the tickets held. This comment applies equally to the third factor relied upon by the appellant’s counsel.

I regard the fourth factor as of little weight. The shares of one of the Drescher family companies were not held equally. It is apparent that equal sharing among the family members was not a rule of universal application.

The appellant’s actions connected with the collection of the prize suggest that he regarded himself alone as winner of the prize money. He did absolutely nothing to indicate that he held the property subject to a trust. He made no attempt to divide the prize money. Counsel for the appellant pointed to the fact that the publicity photographs taken at the lottery corporation office pictured both the appellant and his wife. Nothing in the evidence can support a conclusion that this fact points to Mrs Drescher as a person who was recognized by either the appellant or the lottery corporation, at the time, as a winner or one of three winners. None of the evidence indicated that it was the practice of the lottery corporation to exclude from publicity photographs any member of the immediate family of the apparent winner. Furthermore, it is difficult to imagine that the lottery corporation would have paid the prize money over to the appellant alone if its officials had been made aware of the existence, or even the possible existence, of any claim by a member of the appellant’s family to a share of the winnings.

Similarly, outward appearances connected with the investment of the prize money in the first two term deposits indicate that the appellant acted as if he alone was investor. Although the appellant could conceivably have acted as trustee in investing the money, any recognition of a trust or sharing arrangement on the part of the appellant or his wife or his daughter would undoubtedly have led to a division of the interest after receipt thereof. Had such a division taken place, it could readily have been proved. No attempt was made to show that such a division did take place or that the interest income was simply reinvested along with the capital.

Having regard to the confusion as to who bought the lucky ticket and won the money, it might have been an entirely proper solution to resolve the question of ownership of the prize money by agreement made after winning it. In fact, a written declaration of trust was prepared and signed in 1979. Interestingly enough, that document recites not that the lottery tickets had been held in trust for all three and that the prize had been collected by the appellant as trustee for all three, rather it recites that “.. . it is expedient to construe the pooled lottery tickets as purchases on behalf of all of them jointly in equal shares” (emphasis added). In any event, no such resolution of the ownership problem was shown to have been reached at any time before the appellant obtained the prize money and invested it in the first two term deposits. I cannot find that in doing so the appellant acted as trustee. His apparent ownership of the prize money and his apparent right to retain the interest were not, at the time, questioned in any way.

It has not been shown that the assessment is wrong. In the result, the appeal will be dismissed.

Appeal dismissed.