CARTWRIGHT, J. (all concur) :—This is an appeal from a judgment of Dumoulin, J. pronounced on August 6, 1963, dismissing the appellants’ appeal from the confirmation of an assessment of estate tax made by the respondent in respect of the death of the late Robert Newmarch Hickson.
There is no dispute as to the facts.
Robert Newmarch Hickson died on June 19, 1960, domiciled in the Province of Quebec. He was survived by his widow, the appellant Dame Orian Hays Hickson; no children were born of his marriage ; he left a will executed in notarial form on October 27, 1959. By this will he appointed the appellants his executors and after making a number of particular legacies gave the residue of his estate to his widow in the following words :
“And all the rest residue and remainder of the property real and personal moveable and immoveable of every sort nature and description of which I may die possessed or in which I may have any interest or over which I may have the power of appointment or disposal (including any lapsed legacies) I give and bequeath to my wife the said Dame Orian Hays Hickson as her absolute property. ’ ’
Lady Hickson, the mother of Robert Newmarch Hickson, had predeceased him by many years, leaving a will executed in notarial form on April 22, 1931. After making a number of particular legacies she bequeathed the residue of her estate to be divided in equal shares amongst her five children but provided that the share of her son Robert Newmarch Hickson should be subject to the condition expressed as follows in Article IX of the will:
/■‘I direct that one-half of the share of my son Robert Newmarch Hickson in the residue of my Estate, less the sum of Forty Thousand Dollars which I have given him some years ago, shall belong to him in absolute ownership, and the other _. half of his share I give and bequeath the usufruct thereof during his lifetime to my said son Robert Newmarch Hickson and the ownership to the children of my said son, and if he leaves n() children to his heirs, legal or testamentary.”
-‘ At the date of the death: of Robert Newmarch Hickson, the executors of Lady Hickson held the last mentioned half of his share in his mother’s residuary estate which had a value of $363,702.19. The question to be determined on this appeal is whether this fund forms part of the aggregate taxable value of the property passing on the death of Robert Newmarch Hickson.
The learned trial judge held that Article IX of Lady Hickson R will created a substitution of the fund in question of which Robert Newmarch Hickson was the institute and his children the substitutes, that he left no children the substitution lapsed thereby vesting the full ownership of the fund in him and giving him ‘ ‘‘a general power to appoint, appropriate or dispose of this property as he sees fit by will”. If I have understood the reasons of the learned trial judge correctly, it would follow from the finding that at the time of his death Robert Newmarch Hickson was the full owner of the fund, that it formed part of his estate and estate tax would be payable upon it under Section 2(1) of the Estate Tax Act (1958) 7 Elizabeth II, c. 29, hereinafter referred to as ‘‘the Act’’. In this view it would be unnecessary to consider the effect of Sections 3 and 58 of the Act.
Counsel for the respondent supports the reasons as well as the judgment of the learned trial judge but also argues, in the alternative, that the judgment should be upheld on the ground that Robert Newmarch Hickson had such a general power to dispose of the fund as to bring the case within Section 3 of the Act.
Counsel for the appellant, while not so admitting, was content to argue the appeal on the assumption that Article IX of Lady Hickson’s will did create a substitution and I propose to deal with the matter on that basis.
It is clear that Robert Newmarch Hickson was the institute of the substitution, that its opening took place at his death, and that had he left children him surviving they would have been the substitutes. With respect, I am unable to agree with the learned trial judge that the substitution lapsed. The will of Lady Hickson provided for the possibility of the institute dying without children and in that event, which happened, named as substitutes f ‘his heirs legal or testamentary’’.
.. By the residuary clause of his will, quoted above, his widow was constituted the testamentary heir of Robert Newmarch Hickson; the character of the gift to her in this clause is that of a universal legacy ; this character is not altered by the circumstance that a number of particular legacies had been made to others; this clearly appears from the provisions of Article 873 of the Civil Code.
The effect of the concluding words of Article LX of Lady Hickson ’s will, ‘ ‘ and if he leaves no children to his heirs, legal or testamentary” is to give the fund on the death of Robert Newmarch Hickson to his testamentary heir, These words envisage two possible events, one that Robert Newmarch Hickson should die intestate and the other, which happened, that he should die testate. By Article 597 of the Civil Code it is provided that the person to whom either abintestate succession or testamentary succession devolves is called heir and that abintestate succession takes place only in default of testamentary succession.
When the substitution opened, at the death of Robert Newmarch Hickson, his widow as substitute took the fund directly from the grantor, Lady Hickson, and not from the institute her husband. It is so provided by Article 962 of the Civil Code,
In the simple case of a substitution created by X, of which Y is the institute and Z the substitute and the substitution opens on the death of Y, it is clear that the property would form no part of the estate of Y. The difficulty in the present case arises from the fact that the substitute is not named as an individual in the instrument creating the substitution but is designated, in the events that have happened, as the testamentary heir of the institute.
The alternative argument of counsel for the respondent is that, in these circumstances, by the combined effect of Sections 3(1) (a), 3(2) and 58 of the Act the fund in question is required to be included in the aggregate net value of the property passing on the death of Robert Newmarch Hickson. There is no doubt of the power of Parliament to enact that, by a statutory fiction of law, property shall, for purposes of federal taxation, be deemed to form part of the estate of a deceased person although it would not have done so under either the civil law or the common law. The question is whether the words used by Parliament have that effect having regard to the facts of the ease at bar.
The sections referred to read as follows :
“3. (1) There shall be included in computing the aggregate net value of the property passing on the death of a person the value of all property, wherever situated, passing on the death of such person, including, without restricting the generality of the foregoing,
(a) all property of which the deceased was, immediately prior to his death, competent to dispose ;
3. (2) For the purposes of this section,
(a) a person shall be deemed to have been competent to dispose of any property if he had such an estate or interest therein or such general power as would, if he were sui juris, have enabled him to dispose of that property ;
08. (1) In this Act,
(i) GENERAL POWER — general power includes any power or authority enabling the donee or other holder thereof to appoint, appropriate or dispose of property as he sees fit, whether exercisable by instrument inter vivos or by will, or both, but does not include any power exercisable in a fiduciary capacity under a disposition not made by him, or exercisable as a mortgagee ;
The provision which imposes tax, if it is imposed, is Section 3(1) (a) and the question is whether Robert Newmarch Hickson immediately prior to his death was competent to dispose of the fund. Section 3(2) and Section 58 give extended meanings to the phrases ‘‘competent to dispose’’ and ‘‘general power’’.
Subject to an argument made by Mr. Marler with which, for reasons that will appear, I do not find it necessary to deal, the words of these sections appear to provide that property is to be deemed to form part of the estate of a deceased person if he had power to dispose of it by will ‘‘as he sees fit’’. In my opinion, it is clear that Robert Newmareh Hickson had no such power over the fund in question. Article IX of Lady Hickson’s will does not in terms confer any power upon him ; regardless of the terms of her will he had the power, which every man has, to dispose of his own property by will or, by refraining from making a will, to die intestate and leave the distribution of his estate to the operation of law. In fact he chose the former course and, by that portion of his will quoted above, constituted his widow his universal legatee and therefore his testamentary heir. His widow takes the fund not through the exercise of any power given to Robert Newmarch Hickson but because Lady Hickson has designated as substitute his testamentary heir. It is true that Robert Newmarch Hickson was free to name anyone he pleased to be his testamentary heir and that the person so named would become as substitute entitled to the fund; but he could not dispose of the fund to anyone else. A simple example may be given. Suppose Robert Newmarch Hickson having made his widow his testamentary heir went on in the next clause of his will to provide that ‘‘the half-share held by the executors of the late Lady Hickson pursuant to Article IX of her will shall be paid to my cousin X”. It is obvious that this clause would be without effect. A person who can name anyone he pleases to be the recipient of a fund but only on condition that he makes that person his testamentary heir cannot be said to be free to dispose of the fund ‘‘as he sees fit ’ ’.
I have reached the conclusion that Robert Newmarch Hickson did not have power to dispose of the fund by will as he saw fit and as it is clear that apart from the provisions of the Act the fund formed no part of his estate the appeal must succeed. This makes it unnecessary to consider the interesting question, raised by Mr. Marler, whether a person who has a power, however general, which is exercisable only by will and only in the event of his leaving no children can be held to be competent to dispose of the subject matter of the power “immediately prior to his death ’ ’ and I express no opinion upon it.
I would allow the appeal with costs throughout, set aside the judgment of the Exchequer Court and direct that the assessment be referred back to the Minister in order that an assessment may be made excluding the fund of $363,702.19 from the aggregate taxable value of the estate of the late Robert Newmarch Hickson.
Judgment accordingly.
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