JACKETT,
P.:—This
is
an
appeal
from
a
re-assessment
under
the
Estate
Tax
Act,
chapter
29
of
the
Statutes
of
1958,
as
amended,
in
respect
of
the
estate
of
Francis
Herbert
Crispo.
The
question
raised
by
the
appeal
is
whether
the
Minister
was
in
error
in
re-assessing
so
as
to
include,
in
the
computation
of
the
‘‘aggregate
net
value’’
of
the
property
passing
on
the
deceased’s
death,
certain
payments
made
after
his
death
to
his
widow
by
a
company
that
had,
some
time
before
his
death,
acquired
the
business
carried
on
by
the
deceased
during
most
of
his
business
life.
The
answer
to
this
question
depends
upon
the
application
to
the
facts
of
Section
3(1)
(1)
(ii)
of
the
Act,
which
reads
in
part
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,
(1)
property
disposed
of
by
any
person
on
or
after
the
death
of
the
deceased
(ii)
under
the
terms
of
any
agreement
made
by
the
deceased
for
valuable
consideration
given
by
him
providing
for
the
disposition
of
such
property
on
or
after
his
death,
whether
or
not
such
agreement
is
or
was
enforceable
according
to
its
terms
by
the
person
to
whom
such
property
was
so
disposed
of
;’’
The
deceased
had,
since
he
was
a
young
man,
carried
on
a
business
as
‘‘manufacturer’s
agent,
importer
and
distributor’’
under
the
name
of
‘‘F.
H.
Crispo
&
Company’’.
In
the
main,
the
business
consisted
of
importing
goods
from
the
United
States
and
selling
them
in
Canada.
Almost
all
the
goods
so
imported
were
acquired
from
either
one
of
two
United
States
manufacturers.
About
60
per
cent
of
them
were
acquired
from
a
New
York
man
with
whom
the
deceased
had
had
close
business
and
social
associations
ever
since
they
were
young
men
together
in
the
United
States.
About
30
per
cent
of
the
goods
imported
by
the
deceased
were
acquired
from
a
Chicago
manufacturer
with
whom
the
deceased
had
also
become
friendly
over
the
years.
While
the
deceased
had
been,
in
fact,
the
sole
importer
into
Canada
of
the
New
York
manufacturer’s
wares
and,
for
some
time,
the
sole
importer
into
Canada
of
the
Chicago
manufacturer’s
wares,
there
was
no
agreement
in
either
case
that
this
state
of
things
should
continue.
Either
manufacturer
could,
at
any
time,
have
started
selling
to
other
persons
desiring
to
import
their
wares
into
Canada.
While
his
volume
of
sales
was
relatively
large,
the
deceased
had
a
very
small
business
organization
consisting,
in
effect,
of
a
small
office
staff
and
a
couple
of
salesmen
as
well
as
himself.
One
of
the
salesmen,
Robert
David
Archer,
had,
over
the
years,
gradually
acquired
greater
seniority
until
he
had
become
manager
of
the
business
under
the
deceased.
By
1958,
Archer
was
being
paid
a
salary
in
the
neighbourhood
of
$20,000
per
annum.
In
1958,
as
a
result
of
medical
advice,
the
deceased
decided
to
sell
his
business
and
negotiated
an
agreement
with
Archer
under
which
Archer
acquired
the
business
on
terms
that
it
would
be
vested
in
a
company
to
be
incorporated
and
known
as
F..
H.
Crispo
Company
Limited’’.
The
agreement
contemplated
that,
at
the
time
of
transfer,
the
‘‘assets’’
and
‘‘liabilities’’
would
be
“equal”.
Presumably,
the
deceased
was
to
withdraw
assets
before
the
transfer
to
the
extent,
if
any,
that
he
had
more
in
the
business
than
the
liabilities
of
the
business.
The
deceased
covenanted
not
to
compete.
The
shares
of
the
company
were
to
be
issued
to
Archer
or
his
wife
except
for
one
common
share
to
be
issued
to
the
deceased
and
$15,000
worth
of
redeemable
preferred,
which
was
to
be
issued
to
the
deceased
and
was
to
be
redeemed
fifteen
days
after
the
transfer
of
the
business.
The
agreement
also
contained
provisions
for
the
deceased
being
associated
with
the
Company.
It
provided
that
the
deceased
“shall
be
employed
by
the
Company
as
a
consultant
and
shall
also
be
a
director’’
(paragraph
4)
and
that
‘‘the
duties’’
of
the
deceased
‘‘as
consultant
to
the
Company
shall
be
determined
only
by
him’’
(paragraph
5).*
The
agreement
further
provided
that
the
deceased
be
paid
by
the
Company
a
salary
of
$5,000
per
annum
effective
from
the
transfer
of
the
business
(paragraph
5)
and
certain
additional
amounts
or
bonuses
depending
on
the
Company’s
net
earnings
(paragraph
6).
The
agreement
provided
that
the
deceased
shall
be
paid
the
above-mentioned
salary
so
long
as
he
shall
live”
but
that
there
should
be
no
bonus
after
his
75th
birthday
(paragraph
7).
Finally,
the
agreement
provided
that,
if
the
deceased
were
survived
by
his
wife
‘‘then
she
shall
be
employed
by
the
Company
as
consultant
for
the
remainder
of
her
life
at
a
fixed
salary
of
$10,000
until
the
end
of
the
fiscal
year
of
the
Company
following
her
7
0th
birthday
and
thereafter
her
fixed
salary
shall
be
$5,000
per
annum’’
(paragraph
7).
(The
agreement
was
in
due
course
confirmed
and
ratified
by
the
Company,
which
acknowledged
that
it
was
bound
by
its
terms.
)
The
proposed
Company
was
incorporated,
the
business
was
transferred
to
it,
the
deceased
became
the
holder
of
a
single
common
share,
was
made
a
director
and
functioned
as
a
consultant
to
the
Company,
in
which
capacity
he
was,
of
course,
very
useful.
(The
deceased
also
received
the
$15,000
worth
of
preferred
and
it
was
redeemed.
Archer
and
his
wife
acquired
the
balance
of
the
issued
shares
and
became
the
other
two
directors.
)
After
the
deceased’s
death
on
August
31,
1960,
the
widow
was
elected
a
director
of
the
Company
in
the
place
of
her
husband
and
the
Company
commenced
paying
her
the
salary
mentioned
in
the
agreement.
Apart
from
her
duties
as
a
director,
any
actual
services
that
she
performed
for
the
Company
were
so
unsubstantial
as
to
warrant
their
being
classified
as
nominal.
She
took
an
interest
in
the
business
and
kept
in
touch
with
Archer,
who
chatted
with
her
from
time
to
time
in
a
general
way
concerning
major
business
problems
such
as
the
acquisition
of
new
lines
of
goods.
From
the
time
of
the
deceased’s
death
until
February
1963,
the
Company
paid
his
widow
the
‘‘salary’’
contemplated
by
the
1958
agreement.
In
that
month
a
new
agreement
was
entered
into
between
the
widow
and
the
Company.
However,
in
order
to
avoid
confusion,
I
propose
to
consider
the
correctness
of
the
Minister’s
assessment
in
respect
of
the
payments
during
the
period
ending
in
February
1963,
without
referring
to
what
happened
in
that
month.
The
Minister’s
case,
according
to
the
submission
of
counsel
for
the
Minister,
is
that
each
payment
of
salary
to
the
widow
is
‘
property
disposed
of
by
any
person
.
.
.
after
the
death
of
the
deceased
.
.
.
under
the
terms
of
any
agreement
made
by
the
deceased
for
valuable
consideration
given
by
him
providing
for
the
disposition
of
such
property
on
or
after
his
death’’
within
the
meaning
of
those
words
in
Section
3(1)
(1)
(ii)
of
the
Estate
Tax
Act,
which
I
repeat
here
for
convenience.
“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,
(1)
property
disposed
of
by
any
person
on
or
after
the
death
of
the
deceased
(ii)
under
the
terms
of
any
agreement
made
by
the
deceased
for
valuable
consideration
given
by
him
providing
for
the
disposition
of
such
property
on
or
after
his
death,
whether
or
not
such
agreement
is
or
was
enforceable
according
to
its
terms
by
the
person
to
whom
such
property
was
so
disposed
of
;’’
The
Minister
contends
that
each
payment
of
salary
by
the
Company
to
the
widow
was
“property
disposed
of’’
by
the
Company,
that
such
property
was
‘‘disposed
of’’
under
the
“terms”
of
the
1958
agreement
and
that
the
1958
agreement
was
made
by
the
deceased
for
valuable
consideration.
The
‘‘terms’’
of
the
1958
agreement
under
which
counsel
for
the
Minister
attempts
to
bring
the
payments
consist
of
that
part
of
paragraph
7
that
provides
that
‘‘she
shall
be
employed
by
the
Company
as
consultant
for
the
remainder
of
her
life
at
a
fixed
salary
of
$10,000
until
.
.
.
her
7
Oth
birthday
and
thereafter
.
.
.
$5,000
per
annum’’,
This
is
not
in
‘‘terms’’
a
covenant
for
payment
of
any
amount
to
the
widow
but
for
the
creation
of
a
relationship
between
the
widow
and
the
Company
by
an
agreement
between
them
under
which
certain
salary
payments
would
be
made.
Counsel
faced
up
to
this
difficulty
by
submitting
that
the
Court
must
read
that
part
of
paragraph
7
of
the
1958
agreement
as
though
it
in
‘‘terms’’
was
a
mere
covenant
by
the
Company
to
pay
the
widow
the
amounts
in
question.
This
latter
submission
was
really
part
and
parcel
of
the
theme
running
through
the
whole
argument
for
the
Minister
that
the
true
bargain
between
the
deceased
and
Archer
was
a
sale
of
the
goodwill
and
assets
of
the
business
together
with
his
part
time
services
during
his
lifetime
for
the
$15,000
payable
by
the
pre-
ferred
shares
device,
annual
payments
to
be
made
to
the
deceased
during
his
life
and
annual
payments
to
be
made
to
his
widow
after
his
death
and
that,
regardless
of
what
the
agreement
says,
it
was
no
part
of
the
bargain
that
the
widow
should
become
a
consultant
to
the
Company
either
as
an
employee
or
as
an
independent
contractor.
Certainly,
if
it
were
established
that
the
real
bargain
was
as
counsel
submitted
and
that
the
contents
of
the
written
documents,
in
this
respect
at
least,
did
not
therefore
truly
represent
the
real
bargain,
the
Court
would
have
to
decide
the
case
having
regard
to
the
real
bargain
and
not
to
the
written
document.
The
feature
of
the
facts
that
tends
to
lend
support
to
the
Minister’s
contention
is
that
the
widow
had
no
business
experience
and
that
it
was
never
contemplated,
either
in
1958
or
later,
that
she
should
take
any
real
part
in
the
activities
of
the
business.
That
the
operator
of
a
business
would
agree
to
pay
such
a
person
as
a
“consultant”
$10,000
per
year,
on
the
face
of
it,
seems
so
improbable
as
to
suggest
that,
whatever
the
reason
for
the
payment,
it
is
not
a
payment
for
her
services.
If,
therefore,
there
were
no
explanation,
I
should
have
had
to
give
serious
consideration
to
the
question
whether,
having
regard
to
the
circumstances,
the
real
bargain
must
be
found
to
have
been
an
agreement
to
make
annual
payments
to
the
widow
as
part
of
the
consideration
for
the
transfer
of
the
business
to
the
company
in
1958.
However,
I
am
relieved
from
considering
that
question
because
Archer
gave
evidence,
which
is
uncontradicted
and
which
I
accept,
that
the
clause
for
the
employment
of
the
widow
after
the
death
of
the
deceased
was
inserted
on
his
suggestion*
because,
in
effect,
he
was
strongly
of
the
view
that
the
probability
of
losing
the
United
States
supplier
relationships
(upon
which
the
very
existence
of
the
business
depended)
was
substantially
diminished
as
long
as
the
deceased
continued
to
be
a
part
of
the
Company’s
organization
and,
similarly,
but
probably
to
a
lesser
extent,
after
the
death
of
the
deceased,
he
would
feel
more
secure
concerning
the
retention
of
his
United
States
suppliers
if
the
widow
were
part
of
the
organization.
It
is
clear,
notwithstanding
much
talk
about
consultations
with
the
widow,
suggestions
by
her,
etc.,
that
the
real
reason
why,
in
1958,
Archer
wanted
an
arrangement
under
which,
upon
the
deceased’s
death,
the
widow
would
become
associated
with
the
company
in
some
capacity,
was
that
he
thought
that
the
“
Crispo”
relationship
with
the
New
York
and
Chicago
people
would
have
an
advantage
to
the
Company.
He
did
not
really
expect
her
to
perform
services
and
she
only
performed
the
most
perfunctory
sort
of
Services
such
as
attending
shareholder
and
director
meetings.
He
did,
however,
want
her
associated
with
the
Company.
He
did,
in
fact,
associate
her
with
the
Company
and
he
paid
her
for
that
association
exactly
as
contemplated
in
the
1958
agreement
and
for
the
same
reason
as
that
which
caused
him
to
put
the
clause
about
the
widow
into
that
agreement.
The
sole
question
of
fact
that
has
to
be
decided
is,
as
I
have
already
indicated,
whether
the
written
agreement
whereby
Archer
agreed
that
the
Company
would
employ
the
widow
as
consultant
at
a
salary
of
$10,000
per
annum
represented
the
real
bargain
made
by
the
deceased
and
Archer
in
1958
or
whether
the
real
bargain
was
a
simple
contract
by
Archer
that
the
Company
would
make
annual
payments
to
the
widow.
While
an
undertaking
to
employ
the
widow
at
a
salary
of
$10,000
per
annum
until
she
attains
the
age
of
70
and
thereafter
at
a
salary
of
$5,000,
although
she
was
not
expected
to
perform
any
service
in
the
ordinary
sense,
does
not
seem
to
be
the
sort
of
undertaking
that
a
businessman
would
enter
into
unless
he
received
some
outside
consideration
therefor,
the
real
test
is
what
motivated
Archer
in
entering
into
this
particular
undertaking.
Archer’s
testimony
satisfied
me
that,
in
his
view,
in
1958,
having
regard
to
the
earnings
of
the
business,
the
extent
to
which
the
continuance
of
the
business
depended
upon
the
United
States
relationships
and
the
extent
to
which
the
probability
of
continuing
those
relationships
after
the
death
of
the
deceased
would
be
improved
by
having
the
widow
associated
with
the
business,
the
clause
whereby
the
Company
agreed
to
employ
the
widow
was
one
that
was
in
the
interest
of
the
proposed
company.
Archer
seemed,
when
he
gave
evidence,
to
be
of
the
view
that
his
1958
opinion
had
been
shown
to
have
been
sound
because
he
has
had
difficulties
with
the
current
management
of
the
New
York
firm
that
would,
in
his
view,
have
resulted
in
loss
of
the
company’s
relationship
with
that
firm
had
it
not
been
for
the
widow’s
relationship
with
the
family
controlling
that
firm.
In
the
light
of
Archer’s
evidence,
therefore,
I
reject
the
submission
of
counsel
for
the
Minister
that
paragraph
7
of
the
agreement
does
not
represent
a
part
of
the
true
bargain
between
the
parties.
The
Company
did
not,
therefore,
make
the
salary
payments
to
the
widow
under
an
agreement
between
the
deceased
and
the
Company.
For
that
reason,
Section
3(1)(1)
does
not
apply
to
the
payments
made
before
February
1963.
The
distinction
between
a
payment
‘under
the
terms
of
any
agreement’’
and
a
payment
by
virtue
of
an
arrangement
or
relationship
created
by
an
agreement
made
“under
the
terms
of
any
agreement’’
is
not
mere
‘‘hair-splitting’’
as
might
at
first
appear.
What
paragraph
(1)
(ii)
of
Section
3(1)
contemplates
is
that
property
disposed
of
under
the
terms
of
an
agreement
that
was
made
by
the
deceased
for
valuable
consideration
given
by
the
deceased
and
that
provided
for
that
disposition
should
be
included
in
the
‘
aggregate
net
value
’
In
other
words,
where
the
deceased
paid
for
property
in
his
lifetime,
it
should
be
included
in
his
estate
for
tax
purposes
even
though
it
was
delivered
directly
to
a
beneficiary
on
or
after
his
death.
Neither
the
words
of
paragraph
(1)
(ii),
nor
the
apparent
justification
for
its
being
in
the
law,
extend
to
treating
as
part
of
the
estate
of
the
deceased
remuneration
paid
by
a
third
party
under
a
contract
of
service
or
a
contract
for
services
merely
because
the
deceased
had
made
it
a
term
of
an
agreement
made
by
him
with
the
third
party
that
the
contract
of
service
or
the
contract
for
services
should
be
entered
into.
In
such
a
case,
the
remuneration
is
consideration
for
the
service
or
services
to
which
the
third
party
was
entitled
from
the
recipient
and
it
is
not,
in
effect,
a
gift
from
the
deceased.
Similar
reasoning
would
apply
to
a
contract
whereby
a
deceased
had
obtained
an
agreement
for
consideration
from
his
partners
to
take
a
member
of
the
deceased’s
family
into
the
partnership
after
his
death.
Compare
the
facts
in
Mr.
W.
v.
M.N.R.,
[1952]
Ex.
C.R.
416;
[1952]
C.T.C.
209.
It
cannot
be
assumed
that
Parliament
intended
to
Sweep
into
the
estate
of
a
deceased
all
the
profits
or
remuneration
received
after
his
death
by
a
person
who
was
an
object
of
his
benevolence
during
the
whole
of
such
other
person’s
life
merely
because
the
deceased
gave
some
consideration,
no
matter
how
small,
for
such
person
being
employed
or
taken
into
partnership
when,
in
terms,
the
statutory
provision
applies
only
to
the
very
thing
paid
for
by
the
deceased
and
delivered
on
or
after
his
death.
If
Section
3(1)
(1)
does
not
apply
to
the
payments
before
the
agreement
of
February
1963,
there
can
be
no
possible
basis
for
applying
that
provision
to
the
payments
made
after
that
agreement.
There
is
no
need,
therefore,
to
review
the
circumstances
giving
rise
to
that
agreement
or
its
terms.
The
appeal
is
allowed
and
the
re-assessment
is
referred
back
to
the
Minister
for
re-assessment
on
the
basis
that
the
payments
made
by
F.
H.
Crispo
Company
Limited
to
the
widow
of
the
deceased
are
not
covered
by
Section
3(1)
(1)
of
the
Estate
Tax
Act.
The
Minister
will
pay
to
the
appellants
their
costs
to
be
taxed.
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