Paré,
J:—This
case,
stated
under
Article
448
of
the
Code
of
Civil
Procedure
with
the
consent
of
all
interested
parties,
raises
for
the
decision
of
this
Court
the
correctness
or
otherwise
of
the
assessment
made
by
the
Quebec
Succession
Duties
Department
under
section
38
of
the
Succession
Duties
Act,
RSQ
1964,
c
70,
in
respect
of
the
death
of
the
late
Edmund
Howard
Smith
who
died
on
January
5,
1970.
The
facts
that
gave
rise
to
the
present
litigation
are
these:
On
June
8,
1962
the
deceased
was
the
only
shareholder
and
creditor
in
a
company
called
Clarke
Place
Investments
Limited.
On
that
date,
another
company
called
Clarke
Place
Investments
Inc
was
incorporated.
On
July
20,
1962,
by
deed:
of
donation
executed
before
H
B
McLean,
Notary,
the
deceased
gave
the
sum
of
$1,000
to
the
Montreal
Trust
Company,
in
trust
for
the
plaintiff’s
grandchildren
named
in
paragraph
2
of
the
joint
factum
made
under
Article
448
of
the
Code
of
Civil
Procedure.
On
September
4,
1962
the
deceased
sold
to
Clarke
Place
Investments
Inc
all
of
his
shares
in
the
capital
stock
and
all
of
his
claims
against
Clarke
Place
Investments
Limited,
of
which
he
was
the
only
shareholder
and
creditor,
the
net
worth
of
this
latter
company
being
as
of
that
date
the
sum
of
$4,014,329.24.
In
consideration
of
said
sale,
the
newly
formed
company,
Clarke
Place
Investments
Inc,
issued
to
the
deceased
25,000
5%
non-cumula-
tive
redeemable
preferred
shares
of
the
par
value
of
$100
each
and
1,000
being
all
of
the
authorized
common
shares
of
the
par
value
of
$1
each,
in
its
capital
stock.
This
company
also
delivered
to
the
deceased
its
promissory
note
payable
on
demand
in
the
amount
of
$1,513,329.94
With
interest
at
the
rate
of
5%
per
annum
until
payment.
On
this
same
date
of
September
4,
1962
the
deceased
offered
to
sell
for
$1,000
to
the
Montreal
Trust
Company,
in
its
capacity
of
trustee,
under
the
deed
of
donation
herein
above
referred
to,
the
1,000
common
shares
issued
to
him
that
very
day
by
Clarke
Placements
Investments
Inc.
Acceptance
of
this
offer
by
the
Montreal
Trust
Company
in
its
said
capacity
was
also
of
the
same
date
of
September
4,
1962.
When
Mr
Edmund
Howard
Smith
died
on
January
5,
1970,
the
trustee
still
held
these
one
thousand
common
shares
and
they
were
worth
$1,716,276.
It
was
on
that
last
amount
that
the
Quebec
Succession
Duties
Department
levied
duties
and
this
on
the
ground
that
the
object
of
the
donation
made
by
the
deceased
in
1962
was
not
a
sum
of
$1,000
but
the
1,000
common
shares
in
the
capital
stock
of
Clarke
Place
Investments
Inc.
The
first
question
of
law
upon
which
this
Court
is
called
upon
to
decide
is
the
following:
1.
Under
the
Quebec
Succession
Duties
Act
(RSQ
1964,
c
70,
and
amendments)
and
in
the
circumstances
described
in
paragraphs
3
to
7
inclusive
above,
are
Quebec
Succession
Duties
leviable
on
or
in
respect
of
(a)
the
said
sum
of
$1,000,
being
the
sum
given
by
the
Deceased
to
Montreal
Trust
Company,
or
(b)
the
said
common
shares
of
Clarke
Place
Investments
Inc?
The
creation
of
a
trust
fund
for
a
mere
sum
of
$1,000
to
be
shared
between
six
grandchildren
which
provided
for
a
payment
to
each
of
them
of
one-third
of
his
share
upon
attaining
the
age
of
25,
one-half
of
the
remainder
upon
his
attaining
the
age
of
30,
and
the
remainder
thereof
upon
his
attaining
the
age
of
35,
already
suggests
the
conclusion
that
the
intention
of
the
donor
was
not
to
give
his
grandchildren
a
mere
fraction
of
that
$1,000
but
the
shares
that
were
to
be
soon
after
substituted
for
that
sum
of
$1,000.
This
is
further
evidenced
by
the
following
facts:
(a)
the
incorporation
of
the
new
company;
(b)
the
creation
of
the
$1,000
trust
fund;
(c)
the
sale
by
the
donor
of
his
shares
to
the
newly
formed
company;
(d)
the
sale
to
the
trustee
of
all
of
his
common
shares
therein;
and
(e)
all
this
having
been
done
within
a
very
short
period
of
time
and
with
no
apparent
reason
other
than
that
of
ultimately
causing
the
donor’s
1,000
shares
in
Clarke
Place
Investments
Inc
to
pass
into
the
hands
of
the
donees.
The
presumptions
arising
from
these
facts
constitute,
in
the
absence
of
any
explanation
or
rebuttal
by
the
plaintiffs,
prima
facie
evidence
that
the
payment
of
the
sum
of
$1,000
by
the
donor
to
the
trustee
was
solely
made
with
a
view
to
providing
it
with
sufficient
funds
to
enable
the
purchase
of
the
donor’s
1,000
common
shares
in
that
company
formed
for
that
very
purpose.
The
principle
in
law
to
be
applied
is
that
whatever
name
be
given
to
a
contract
or
a
transaction
by
the
parties,
it
does
not
change
its
true
nature
which
remains
characterized
by
their
intention
and
the
purpose
sought
for
by
them.
This
is
also
true
where
the
parties
have
achieved
their
purpose
under
the
disguise
of
a
series
of
transactions
which
must
then
be
considered
as
a
mere
machinery
to
cover
their
true
intention.
In
this
particular
instance,
the
whole
or
the
main
purpose
the
donor
must
be
taken
to
have
had
in
mind,
while
proceeding
as
he
did,
was
to
cause
the
1,000
common
shares
held
by
him
in
Clarke
Place
Investments
Inc
to
pass
into
the
hands
of
the
trustee
as
a
gift
for
his
grandchildren.
I
unhesitatingly
come
therefore
to
the
conclusion
that
the
property
which
has
been
disposed
of
by
gratuitous
title
and
is
deemed
to
have
been
transmitted
owing
to
death,
under
section
27
of
the
Act,
is
not
the
$1,000
donation
made
on
July
20,
1962
but
the
1,000
common
shares
of
Clarke
Place
Investments
Inc
which
were
acquired
by
the
trustee
on
September
4,
1962.
The
second
question
concerns
the
rates
of
duty
which
shall
be
applied
on
property
transmitted
to
Philip
Howard
Smith,
one
of
the
heirs
of
the
late
Edmund
Howard
Smith.
The
said
Philip
Howard
Smith
is
the
adopted
child
of
Gardner
Howard
Smith,
one
of
the
sons
of
the
deceased.
The
defendant
has
applied
to
this
grandchild
of
the
deceased
the
rates
set
forth
in
subsection
(3)
of
section
9
of
the
Succession
Duty
Act,
which
rates
are
those
applicable
to
strangers
in
blood
to
the
deceased.
The
question
which
is
to
be
decided
by
this
Court
is:
Under
the
Quebec
Succession
Duties
Act,
are
the
duties
on
or
in
respect
of
the
property
transmitted
or
deemed
to
be
transmitted
to
the
said
Philip
Howard
Smith
to
be
at
the
rates
provided
by
subsection
(3)
of
Section
9
of
the
Act
or
at
the
rates
provided
by
Subsection
1
of
said
Section
9?
The
plaintiffs
argue
that
the
Quebec
Succession
Duties
Department
have
erred
in
treating
Philip
Howard
Smith,
the
legally
adopted
son
of
a
son
of
the
deceased,
as
a
stranger
in
blood
to
the
deceased
and
not
as
a
direct
descendant
of
the
deceased,
as
they
should
have
in
accordance
of
subsection
(1)
of
section
9
of
the
Act.
They
aver
that
Philip
Howard
Smith,
while
in
fact
no
blood
relative
of
the
deceased,
was,
in
law,
his
direct
descendant
because
of
his
legal
adoption
by
the
son
of
the
deceased
and
this
pursuant
the
disposition
of
paragraph
38(a)
of
the
1969
Adoption
Act,
which
reads
as
follows:
DIVISION
VI
—
EFFECTS
OF
ADOPTION
38.
From
the
date
of
the
judgment
granting
the
adoption:
(a)
the
adopted
child
shall
become,
in
all
respects
and
with
respect
to
all
persons,
the
legitimate
child
of
the
adopter
and
that
of
his
consort
if
the
latter
joined
in
the
motion
for
adoption;
With
this
I
agree.
Legitimacy
is
an
attribute
of
birth
whereby
a
child,
in
accordance
with
the
provisions
of
Article
218
of
the
Civil
Code
is
deemed
to
have
been
conceived
during
marriage
and
is
therefore
held
to
be
a
child
of
the
husband.
If
a
child
is
deemed
to
have
been
con-
ceived
by
the
husband,
he
must
also
be
deemed
to
be
a
child
in
blood.
In
law,
a
legitimate
child
is
therefore
a
child
in
blood
and
a
descendant.
Furthermore,
it
is
significant
that
the
Legislature,
in
July
of
this
year,
in
repealing
section
10
of
the
Succession
Duties
Act,
did
not
amend
section
9
thereof.
For
these
reasons,
this
court
doth
declare:
A.
It
is
on
or
in
respect
of
the
said
common
shares
of
Clarke
Place
Investments
Inc
still
held
by
the
Montreal
Trust
Company
at
the
time
of
the
death
and
having
the
value
at
that
time
of
$1,716.276
that
the
Quebec
succession
duties
are
leviable;
B.
It
is
the
rates
of
duty
provided
for
by
subsection
(1)
of
section
9
of
the
Succession
Duties
Act,
not
the
rates
provided
by
subsection
(3)
of
section
9,
that
are
applicable
to
the
property,
the
ownership,
usufruct
or
enjoyment
whereof
was
transmitted
or
is
deemed
to
have
been
transmitted
owing
to
the
death
of
the
deceased
to
the
plaintiff
Philip
Howard
Smith;
The
whole
with
costs
against
defendant.
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