THe
Chief
Justice—The
pertinent
words
of
clause
4
of
the
will
are
these:
I
direct
*
*
*
that
all
income
taxes
which
may
be
payable
in
respect
of
the
said
above
provisions
for
my
wife
shall
be
paid
out
of
my
estate
by
my
Trustees.
My
conclusion
is
that
the
indemnity
under
clause
4
is
a
complete
indemnity
as
to
the
part
of
Lady
Kemp’s
income
taxes
in
respect
of
which
that
clause
takes
effect.
To
be
precise,
she
is
entitled
in
each
year
to
be
indemnified
by
the
Trustees
against
(inter
alia)
any
tax
payable
in
respect
of
moneys
received
by
her
under
the
words
of
the
clause
quoted
above.
I
should
add
that
I
agree
with
the
Court
of
Appeal
as
to
the
principle
by
which
the
amount
payable
as
indemnity
under
clause
4
is
to
be
calculated;
and
I
think
that
principle
governs
the
calculation
of
the
amount
payable
pursuant
to
the
view
herein
expressed.
The
formal
order
of
the
Court
of
Appeal
should
be
amended
accordingly.
The
judgment
of
Rinfret
and
Davis
JJ.
was
delivered
by
Davies
J.—No
question
of
the
liability
of
Lady
Kemp
for
income
taxes
(either
Dominion
or
provincial)
in
respect
of
the
particular
moneys
in
question
is
raised
in
this
appeal.
The
only
question
is:
To
what
extent
is
Lady
Kemp
entitled
to
be
reimbursed
by
the
trustees
of
her
husband’s
will
in
respect
of
income
taxes
assessed
against
and
paid
by
her
on
certain
moneys
received
by
her
from
the
trustees
under
the
said
will?
From
the
residuary
part
of
her
husband’s
estate
she
was
given
a
one-sixteenth
portion
outright,
the
income
from
a
further
one-sixteenth
portion
so
long
as
she
lives,
and
the
income
from
a
further
one-eighth
portion
so
long
as
she
remains
the
widow
of
Sir
Edward
Kemp.
While
the
exact
amounts
are
not
disclosed
in
the
material
filed,
it
is
admitted
that
they
are
very
substantial
amounts.
No
question
is
raised
with
respect
to
whatever
income
tax
Lady
Kemp
may
have
to
pay
on
that
part
of
her
total
income
which
arises
from
these
several
sources;
none
of
it
is
made
free
from
income
tax
under
the
provisions
of
the
will.
Further,
Lady
Kemp
had
at
the
time
of
her
marriage
to
Sir
Edward
Kemp,
and
retains,
investments
from
which
she
receives
additional
income.
The
question
raised
in
these
proceedings
for
the
interpretation
of
the
will
is
solely
concerned
with
certain
moneys
that
are
paid
to
Lady
Kemp
by
the
trustees
of
her
husband’s
will
in
respect
of
the
maintenance
and
management
of
his
large
residential
property
in
the
City
of
Toronto
known
as
‘‘Castle
Frank.”
Sir
Edward
dealt
with
that
property
at
the
very
commencement
of
his
will.
He
devised
it
to
his
trustees
upon
certain
trusts
and
refers
to
it
as
my
residence
and
lands
in
the
City
of
Toronto,
known
as
“Castle
Frank,"
including
houses,
out-houses
and
other
buildings
thereon,
and
all
the
appurtenances
used
and
enjoyed
therewith
(all
of
which
are
to
be
understood
as
being
included
in
the
term
“Castle
Frank”).
During
the
lifetime
of
Lady
Kemp,
"‘so
long
as
she
shall
remain
my
widow,
and
so
long
as
she
desires
to
make
use
of
the
same
as
her
residence,
’
’
the
trustees
of
the
will*
are
directed
‘‘to
keep
up’’
Castle
Frank
in
a
suitable
condition
for
that
purpose,
and
all
costs
and
charges
for
the
payment
of
taxes,
insurance
and
for
repairs,
renewals
and
other
like
expenditures
for
the
proper
structural
upkeep
of
the
said
houses
and
buildings
shall
be
borne
by
my
estate
and
be
paid
by
my
trustees.
Permission
is
given
to
Lady
Kemp
during
her
lifetime
so
long
as
she
remains
Sir
Edward’s
widow
to
occupy
Castle
Frank
as
her
residence
free
of
rent.
The
furniture,
plate,
pictures
and
other
personal
chattels
‘‘constituting
the
ordinary
contents
of
said
house’’
are
given
outright
to
Lady
Kemp.
Then
follows
this
provision
:
While
my
said
wife
shall
occupy
Castle
Frank
as
her
home
and
residence,
my
trustees
shall
also
bear
the
expense
of
the
maintenance
and
management
thereof
;
and
to
cover
such
cost,
my
trustees
shall
pay
to
my
wife
the
sum
of
Two
Thousand
Two
Hundred
and
Fifty
Dollars
($2,250)
each
month
in
advance
so
long
as
she
continues
to
reside
in
Castle
Frank
and
to
use
it
as
her
home.
Lady
Kemp
has
been
occupying
Castle
Frank
as
her
home
and
residence
and
has
been
assessed
for
income
tax
in
respect
of
her
total
annual
income
including
the
receipt
by
her
of
the
amount
of
the
allowance
made
for
the
maintenance
and
upkeep
of
the
Castle
Frank
property.
It
is
important
to
observe
that
the
particular
language
of
the
will
is
that
while
Lady
Kemp
shall
occupy
Castle
Frank
as
her
home
and
residence,
the
trustees
of
the
will
‘‘shall
also
bear”
the
expense
of
‘‘the
maintenance
and
management
thereof’’
and
‘‘to
cover
such
cost”
the
trustees
are
to
pay
Lady
Kemp
$2,250
each
month
in
advance.
This
provision,
among
others,
in
favour
of
Lady
Kemp
shall
be
a
first
charge
upon
my
estate,
and
shall
be
provided
for
and
paid
by
my
trustees
in
priority
to
any
other
legacies
payable
under
my
said
will,
*
*
*
and
all
income
taxes
which
may
be
taxable
in
respect
of
the
said
above
provisions
for
my
wife
shall
be
paid
out
of
my
estate
by
my
trustees.
It
is
perfectly
plain
that
the
testator’s
intention
was
that
the
amount
of
the
allowance
to
the
widow
for
the
maintenance
and
management
of
the
Castle
Frank
property
should
not
be
cut
down
in
her
hands
by
the
imposition
of
any
income
tax.
The
effect
of
the
language
of
the
testator
was
that
Lady
Kemp
was
to
be
completely
indemnified
against
all
income
taxes,
in
respect
of
the
amount
of
that
allowance,
that
she
might
be
called
upon
to
pay.
It
is
contended
by
counsel
for
Lady
Kemp
in
effect
that
this
money,
which
Sir
Edward
obviously
considered
necessary
for
the
purpose
for
which
it
was
provided,
should
be
treated
as
in
an
air-tight
compartment
by
itself
and
that
the
receipt
of
the
amount
of
this
allowance
for
the
maintenance
and
management
of
Castle
Frank
should
not
increase
the
burden
of
income
taxes
payable
by
Lady
Kemp
over
and
above
whatever
amount
she
would
have
had
to
pay
in
any
year
were
this
allowance
not
received
by
her.
On
the
other
hand,
counsel
for
other
residuary
beneficiaries
contended
that
the
proper
approach
to
the
problem
is
to
take
Lady
Kemp’s
total
income
from
all
sources
in
any
year
and
the
total
amount
of
income
taxes
levied
against
her
in
respect
thereof
and,
after
ascertaining
the
proportion
of
the
one
to
the
other,
apply
that
percentage
or
rate
to
that
portion
of
her
total
income
which
is
received
as
the
allowance
for
the
maintenance
and
management
of
the
Castle
Frank
property.
If
the
latter
contention
prevails
then
it
is
perfectly
plain,
although
the
exact
figures
are
not
given
to
us,
that
Lady
Kemp
will
not
receive
indemnity
from
the
trustees
for
so
much
of
the
income
tax
she
is
required
to
pay
in
any
year
that
she
would
not
be
required
to
pay
but
for
the
receipt
of
the
amount
of
the
allowance
in
question.
The
moneys
paid
to
Lady
Kemp
are
not
impressed
with
a
trust
but
are
paid
upon
a
condition;
and
unless
Lady
Kemp
is
indemnified
by
the
trustees
for
so
much
of
her
income
tax
as
she
would
not
otherwise
be
required
to
pay
but
for
this
allowance,
the
plain
intention
of
her
husband
may
be
frustrated
by
judicial
decision.
We
are
not
to
look
for
some
course
that
may
appear
to
us
to
be
more
fair
and
equitable
among
all
the
members
of
the
family
than
that
which
commended
itself
to
and
was
plainly
expressed
by
the
testator.
After
all,
in
the
interpretation
of
a
particular
will
with
its
own
particular
language,
very
little
assistance
may
be
gained
from
decisions
on
other
instruments
and
on
other
language.
And
if
I
may
say
so,
with
the
greatest
respect,
the
vice
in
some
decisions
on
somewhat
similar
language
is
the
approach
made
to
the
problem
on
the
basis
of
determining
whether
the
particular
income
should
be
regarded
as
"‘the
bottom
slice’’
or
the
"‘upper
slice’’
or
the
"‘middle
slice
‘
of
the
total
income
of
the
person
affected.
That
approach,
it
seems
to
me,
is
entirely
unwarranted.
It
has
led
to
the
conclusion
that
the
fair
and
equitable
way
of
dealing
with
the
matter
is
to
take
neither
the
bottom
slice
nor
the
upper
slice,
but
to
work
out
a
general
average
which,
for
convenience,
is
sometimes
spoken
of
as
the
middle
slice.
It
seems
to
me
that
this
approach
to
the
solution
of
the
problem
may
lead
one
entirely
away
from
a
testator’s
intention
where
it
is
plain
that
a
particular
sum
for
a
particular
purpose
shall
not
be
cut
down
in
the
hands
of
the
recipient
as
a
result
of
the
imposition
of
income
taxes.
In
such
a
case
it
may
well
be
that
the
intended
indemnity
against
income
taxes
occasioned
by
the
receipt
of
the
particular
sum
can
only
be
complete
when
the
indemnity
goes
to
that
sum
of
money
which
the
recipient
is
required
to
pay
in
income
taxes
that
would
not
be
payable
were
it
not
for
the
receipt
of
the
particular
sum.
That
was
the
the
conclusion
of
McTague,
J.,
who
heard
the
motion
for
interpretation
in
the
first
place,
although
he
rather
seemed
to
base
his
conclusion
upon
his
view
that
the
allowance
arises
out
of
some
obligation
on
the
part
of
Lady
Kemp
to
reside
in
and
keep
up
Castle
Frank,
and
that,
she
having
assumed
such
obligation,
her
husband’s
intention
was
that
no
income
tax
burden
should
be
placed
upon
her
as
a
result
of
her
compliance
with
his
wishes.
With
respect,
however,
I
do
not
think
that
there
is
anything
in
the
nature
of
an
obligation
upon
Lady
Kemp
under
the
clause
in
question
and
that
this
case
cannot
be
distinguished
from
other
cases
upon
that
ground.
The
Court
of
Appeal
took
a
different
view
and
followed
the
principle
applied
by
Sargant
J.
(as
he
then
was)
in
In
re
Bowring
(1).
Lady
Kemp
appealed
from
that
judgment
to
this
Court.
Were
it
not
for
the
judgments
of
Sargant
J.
(as
he
then
was)
in
the
Bowring
case
(1)
and
of
the
Court
of
Appeal
in
the
Fleetwood-Hesketh
case
(2),
I
would
have
accepted
the
contention
of
counsel
for
Lady
Kemp.
While
those
decisions
are
not
binding
upon
us,
they
are
judgments
that
carry
the
greatest
weight
and
I
do
not
feel
justified
in
taking
a
contrary
view.
The
principle
is
clearly
stated
by
Lawrence,
L.J.,
in
the
Fleetwood-Hesketh
case
(2)
at
the
foot
of
p.
58—"‘the
proper
way
of
apportioning’’
the
total
tax
‘‘between
the
parties
is
not
to
marshal”
the
several
parts
of
the
total
income
so
that
some
part
“may
come
first
and
profit
by
the
*
*
*
lighter
burden
of
the
lower
scale
of
payments
and
thus
throw
the
burden
of
the
heavier
rate
upon’’
some
other
part,
‘‘but
to
apportion
the’’
tax
“payable
on
the
total
income
of
the
wife
upon’’
all
the
component
parts
of
that
income
‘‘in
the
proportion
which
the
amount
of
the
one
bears
to
the
amount
of
the
other.’’
Sankey,
L.J.
(as
he
then
was)
agreed
with
that
judgment.
Greer,
L.J.,
at
p.
61,
in
referring
to
the
sliding
scale
of
rates
for
ascertaining
the
total
super-tax
payable,
said
it
was
merely
a
convenient
method
of
describing
how
the
total
amount
payable
on
any
given
income
is
to
be
estimated,
and
not
as
a
direction
that
the
income
is
to
be
separated
into
slices,
of
which
the
lowest
is
to
be
free
from
super-tax
and
the
highest
is
to
bear
the
heaviest
charge,
and
intermediate
parts
bear
burdens
graduated
according
to
their
relative
positions.
Greer,
L.J.,
said
further
that
he
thought
the
decision
of
Sargant,
J.
(as
he
then
was)
in
In
re
Bowring
‘‘is
useful
as
providing
a
formula.’’
(1)
[1918]
W.N.
265;
34
T.L.R.
575.
(2)
[1929]
2
K.B.
55.
Another
point
raised
in
the
appeal
was
the
question
whether
the
indemnity
applied
to
the
tax
upon
the
tax—that
is,
whatever
be
the
amount
of
the
indemnity
paid
by
the
trustees
in
any
year,
that
amount
becomes
taxable
against
Lady
Kemp
the
next
year
as
part
of
her
total
income—and
the
question
is
whether
the
indemnity
extends
to
the
tax
upon
the
tax.
I
think
the
authorities
clearly
indicate
that
it
does.
Michelham
f
s
Trustees
v.
Commissioners
of
Inland
Revenue
(1)).
Sub-paragraph
(2)
of
paragraph
1
of
the
judgment
of
McTague
J.,
as
varied
by
the
Court
of
Appeal,
should
be
amended
by
adding
the
words
"‘and
of
clause
4’’
after
the
words
"‘under
the
provisions
of
clause
3’’
in
the
seventh
line
of
the
printed
copy
of
the
said
sub-paragraph
as
the
same
appears
on
p.
35
of
the
Appeal
case.
The
variation
sought
by
the
respondents
in
their
factum
was
not
the
matter
of
any
appeal
or
cross-appeal
on
their
part
but
in
any
event
cannot
be
granted.
I
am
satisfied
that
the
order
in
respect
of
deductions
and
exemptions
was
a
matter
of
consent.
CROCKET
J.—I
agree
with
the
Court
of
Appeal
that
there
is
nothing
in
paragraph
4
of
this
will
to
indicate
that
the
testator
intended
that
Lady
Kemp
should
be
relieved,
not
only
of
all
liability
to
pay
all
income
taxes
in
respect
of
the
moneys
payable
to
her
under
the
provisions
of
paragraph
3
for
the
maintenance
and
upkeep
of
the
Castle
Frank
property
as
her
home
and
residence,
but
that
the
trustees
should
reimburse
her
as
well
for
any
increase
in
her
own
personal
income
tax
rate,
which
should
result
from
the
addition
to
her
own
independent
income
by
reason
of
the
monthly
and
other
payments
made
to
her
by
the
trustees
under
those
provisions,
or,
in
other
words,
that
she
should
be
indemnified
at
the
expense
of
the
residuary
legatees
for
any
and
all
moneys
which
she
should
be
required
to
pay
as
income
taxes
upon
her
whole
net
income
over
and
above
the
income
taxes
which
would
otherwise
have
been
payable
by
her.
The
relevant
words
of
the
direction
of
the
trustees
are
"‘all
income
taxes
which
may
be
payable
in
respect
of
the
said
above
provisions
for
my
wife.’’
The
direction,
to
my
mind,
is
clearly
limited
to
the
payments
provided
for
in
the
Castle
Frank
gift.
Had
the
intention
been
to
reimburse
Lady
Kemp
as
well
for
any
extra
income
tax
for
which
she
would
become
liable
as
a
result
of
this
gift,
‘‘it
would,’’
as
Robertson,
C.J.,
says,
‘‘have
been
a
simple
matter
to
say
so.’’
With
all
respect,
however,
I
cannot
agree
with
the
Court
of
(1)
(1930),
144
L.T.R.
163.
Appeal
that
the
explicit
direction
in
paragraph
4
to
the
trustees
to
pay
out
of
the
estate
11
all
income
taxes
which
may
be
payable
in
respect
of
the
said
above
provisions
for
my
wife!’
is
to
be
construed
as
excluding
the
moneys,
which
the
trustees
are
thus
required
to
pay
in
her
behalf,
from
the
benefits
of
the
Castle
Frank
gift.
In
my
opinion,
paragraphs
3
and
4
must
be
read
together,
and
clearly
shew
that
immunity
from
income
tax
liability
to
the
extent
indicated
was
intended
as
part
of
this
gift.
The
widow
was
to
receive
the
monthly
payments
specified
and
other
benefits
unimpaired
and
undiminished
by
any
liability
for
payment
of
income
tax
thereon.
If
Lady
Kemp
herself
paid
these
taxes
directly
with
her
income
tax
upon
other
independent
income,
she
was
entitled
to
be
recouped
out
of
the
estate
to
the
amount
thereof.
Whether
the
trustees
paid
her
the
money
to
meet
the
income
tax
payments
before
they
became
due
or
recouped
her
afterwards,
the
money
under
the
provisions
of
the
Income
Tax
Act
was,
in
my
opinion,
part
of
her
income
for
income
tax
purposes,
as
it
was
also
part
of
the
intended
gift.
See
Michelham
f
s
Trustees
v.
Commissioners
of
Inland
Revenue
(1).
For
these
reasons
I
am
of
opinion
that
the
formal
judgment
of
the
Court
of
Appeal
should
be
varied
so
as
to
provide
that
the
trustees
must
repay
to
Lady
Kemp
under
paragraph
4
of
the
will
such
proportion
of
the
whole
of
the
income
tax
assessed
against
her
in
respect
of
each
year’s
income
under
each
statute
imposing
an
income
tax
upon
her
income
as
the
total
amount
expended
or
paid
out
in
such
year
by
the
trustees
under
the
provisions
of
paragraphs
3
and
4
of
the
will
(to
the
extent
that
the
same
is
or
is
deemed
to
be
assessable
as
income
against
Lady
Kemp
under
the
provisions
of
such
statute)
bears
to
the
total
amount,
which
is
or
is
deemed
to
be
assessable
as
income
against
Lady
Kemp
in
such
year
under
the
provisions
of
such
statute.
To
this
extent
and
to
this
extent
only
I
would
allow
the
appeal,
with
costs
to
all
parties
out
of
the
estate,
those
of
the
solicitors
for
the
trustees
as
between
solicitor
and
client.
KERWIN
J.—This
is
an
appeal
by
Lady
Kemp
and
a
crossappeal
by
the
other
residuary
beneficiaries
under
the
will
of
Sir
Albert
Edward
Kemp
from
the
order
of
the
Court
of
Appeal
for
Ontario,
which
reversed
the
order
of
McTague
J.
in
its
most
important
provisions.
The
matter
arose
on
an
originating
motion
by
the
executors
and
trustees
of
the
will
for
an
order
construing
and
interpreting
the
will,
and
for
the
opinion,
advice
and
direc-
(1)
(1930)
144
L.T.R.
163.
tion
of
the
Court
upon
certain
questions
arising
out
of
the
trusts
declared
thereby.
Clauses
3
and
4
of
the
will
read
:—
3.
I
GIVE
AND
DEVISE
to
my
said
Trustees
my
residence
and
lands
in
the
City
of
Toronto,
known
as
“Castle
Frank,"
including
houses,
out-houses
and
other
buildings
thereon,
and
all
the
appurtenances
used
and
enjoyed
therewith
(all
of
which
are
to
be
understood
as
being
included
in
the
term
“Castle
Frank”)
upon
the
following
trusts:
(a)
During
the
lifetime
of
my
wife,
Virginia,
so
long
as
she
shall
remain
my
widow,
and
so
long
as
she
desires
to
make
use
of
the
same
as
her
residence,
to
keep
up
Castle
Frank
in
a
suitable
condition
for
that
purpose;
and
all
costs
and
charges
for
the
payment
of
taxes,
insurance
and
for
repairs,
renewals
and
other
like
expenditures
for
the
proper
structural
upkeep
of
the
said
houses
and
buildings
shall
be
borne
by
my
estate
and
be
paid
by
my
Trustees.
(b)
To
allow
my
said
wife
during
her
lifetime,
and
so
long
as
she
shall
remain
my
widow,
to
occupy
Castle
Frank
as
her
home
and
residence,
free
of
rent.
(c)
The
furniture,
plate,
pictures
and
other
personal
chattels
constituting
the
ordinary
contents
of
said
house
at
the
time
of
my
death,
I
give
and
bequeath
to
my
wife,
together
with
any
automobile
or
automobiles
which
I
may
then
own.
(d)
While
my
said
wife
shall
occupy
Castle
Frank
as
her
home
and
residence,
my
Trustees
shall
also
bear
the
expense
of
the
maintenance
and
management
thereof;
and
to
cover
such
cost,
my
Trustees
shall
pay
to
my
wife
the
sum
of
Two
Thousand
Two
Hundred
and
Fifty
Dollars
($2,250)
each
month
in
advance
so
long
as
she
continues
to
reside
in
Castle
Frank
and
to
use
it
as
her
home.
(e)
If
my
wife
shall
cease
to
occupy
Castle
Frank
as
her
home
for
any
of
the
reasons
aforesaid,
I
desire
my
said
Trustees
to
raise
out
of
my
general
estate
the
sum
of
Seventy-five
Thousand
Dollars
($75,000),
which
sum
will
enable
her,
if
she
so
desires,
to
purchase
or
build
or
otherwise
provide
a
suitable
house
for
herself,
including
the
necessary
land
in
connection
therewith,
and
to
pay
the
said
sum
to
my
wife
as
soon
as
conveniently
may
be
after
she
shall
inform
my
Trustees
of
her
desire
to
give
up
her
occupation
of
Castle
Frank;
the
said
sum
of
Seventy-five
Thousand
Dollars
($75,000)
is
intended
to
be
an
absolute
gift
to
my
wife,
and
she
shall
not
be
obliged,
unless
she
wishes
to
do
so,
to
expend
that
sum
or
any
part
of
it,
in
purchasing,
building
or
otherwise
acquiring
any
residence;
the
receipt
of
my
wife
therefor
shall
be
an
absolute
discharge
of
my
Trustees
for
the
payment
of
the
said
sum
of
Seventy-five
Thousand
Dollars
($75,000).
(f)
Upon
my
said
wife
ceasing
to
occupy
Castle
Frank
as
her
residence,
the
monthly
allowance
to
her
of
Two
Thousand
Two
Hundred
and
Fifty
Dollars
($2,250)
for
the
upkeep
thereof,
as
provided
in
Paragraph
2
(d)
of
this
Will,
shall
cease;
and
in
that
event,
I
give
her
in
lieu
thereof,
and
direct
my
Trustee
to
pay
to
her
while
she
shall
remain
my
widow,
a
monthly
allowance
of
Two
Thousand
Dollars
($2,000).
4.
I
DIRECT
that
the
above
provisions
in
favour
of
my
wife
shall
be
a
first
charge
upon
my
estate,
and
shall
be
provided
for
and
paid
by
my
Trustees
in
priority
to
any
other
legacies
payable
under
my
said
Will,
and
I
further
direct
that
any
Succession
Duties,
and
all
income
taxes
which
may
be
payable
in
respect
of
the
said
above
provisions
for
my
wife
shall
be
paid
out
of
my
estate
by
my
Trustees.
By
clause
16,
the
testator
made
the
following
additional
provisions
for
the
appellant
:—
(a)
He
gave
her
a
one-sixteenth
portion
of
his
residuary
estate
absolutely.
(b)
He
gave
her
the
income
for
life
from
a
further
onesixteenth
portion
of
his
residuary
estate.
(c)
He
gave
her
the
income
during
widowhood
from
a
further
one-eighth
portion
of
his
residuary
estate.
From
the
time
of
the
appellant’s
marriage
to
the
testator
in
1925
until
his
death,
the
average
monthly
expense
of
the
maintenance
and
management
of
Castle
Frank
exceeded
the
sum
of
$2,250.
Since
her
husband’s
death
the
appellant
has
continuously
occupied
Castle
Frank
as
her
home
and
residence
and
she
has
received
the
stipulated
monthly
sum
in
advance
for
the
maintenance
and
management
thereof,
all
of
which
she
has
expended
for
those
purposes.
At
the
time
of
the
marriage
and
the
making
of
the
will,
the
appellant
had,
to
the
knowledge
of
the
testator,
a
private
income
of
her
own,
which
she
continued
and
still
continues
to
receive.
The
questions
propounded
to
the
Court
arise
because
under
the
Dominion
Income
War
Tax
Act
the
appellant
is
assessed
to
income
tax
on
the
benefits
conferred
upon
her
under
clause
3
of
the
will.
Without
attempting
a
precise
listing
of
what
benefits,
as
between
the
appellant
and
the
taxing
authorities,
are
so
taxable,
it
may
be
stated
generally
that
they
include
at
present
the
occupation
of
Castle
Frank
rent
free,
the
upkeep
thereof,
and
the
monthly
payments
of
$2,250.
According
to
clause
4
of
the
will,
"‘all
income
taxes
which
may
be
payable
in
respect
of
the
said
above
provisions
for
my
wife
shall
be
paid
out
of
my
estate
by
my
trustees.
”
It
is
clear
that,
however
that
expression
may
be
construed,
it
must
bear
the
same
meaning
if
the
appellant
should
cease
to
occupy
Castle
Frank
and
should
receive
the
monthly
allowance
of
$2,000
mentioned
in
paragraph
(f)
of
clause
3.
Under
the
Income
War
Tax
Act,
the
income
tax
payable
is
computed
by
the
application
to
the
whole
net
income
of
the
taxpayer,
of
rates
which
increase
on
a
gradual
scale
as
the
amount
of
the
net
income
increases,
and
by
the
imposition
of
a
surtax
on
incomes
that
exceed
a
certain
amount.
The
appellant,
therefore,
in
adding
the
benefits
received
under
clause
3
of
the
will
to
her
private
income
and
to
her
income
under
clause
16,
pays
a
higher
rate
than
if
those
benefits
had
not
been
conferred
upon
her.
Lady
Kemp’s
contention
on
the
first
question
submitted
to
the
Court
is
that
the
income
tax
that
would
have
been
payable
by
her
if
there
were
no
such
benefits
should
be
computed,
and
that
under
clause
4
of
the
will
the
trustees
should
pay
the
difference
between
that
sum
and
the
total
amount
of
the
tax
for
which
she
is
actually
liable.
That
was
the
conclusion
of
Mr.
Justice
MeTague,
but
the
Court
of
Appeal,
adopting
the
argument
of
the
other
residuary
beneficiaries,
determined
that
the
proper
method
was
that
the
trustees
should
pay
only
such
proportion
of
the
income
tax
assessed
against
Lady
Kemp
as
the
total
amount
paid
out
by
them
under
clause
3
bears
to
the
total
amount
assessable
as
income
against
her.
In
my
opinion
the
Court
of
Appeal
is
right.
The
testator
provided
an
income
for
his
widow
other
than
that
mentioned
in
clause
3;
he
knew
that
she
had
a
private
income;
he
knew
that
she
would
be
required
to
pay
income
tax
on
both
these
items
of
income
and
made
no
provision
that
such
tax
should
be
paid
by
his
trustees.
It
was
only
income
taxes
which
might
be
payable
"
in
respect
of
‘
‘
the
provisions
made
by
him
for
Lady
Kemp
under
clause
3
that
he
directed
should
be
paid
out
of
his
estate.
If
taxation
under
the
Act
were
a
fixed
rate
on
the
dollar,
each
part
of
Lady
Kemp’s
income
would
bear
its
proportionate
share,
but
how
may
it
be
said
that
the
total
mount
of
the
additional
tax
payable
by
reason
of
adding
to
her
other
income
the
benefits
conferred
by
clause
3
is
payable
"‘in
respect
of’’
the
latter?
If
it
is
not
to
be
paid
out
of
the
estate
under
that
clause,
there
is
no
other
rule
or
law
by
which
the
appellant
may
require
payment
by
the
trustees.
The
contention
advanced
by
the
other
residuary
beneficiaries
and
adopted
by
the
Court
of
Appeal
gives
full
effect
to
the
clause.
The
second
question
arises
in
this
way.
Whatever
sum
the
trustees
pay
for
income
taxes
in
respect
of
the
provisions
for
Lady
Kemp,
made
in
clause
3,
is
treated,
under
the
Act,
as
part
of
Lady
Kemp’s
income.
I
might
here
say
that
my
own
view
is
that
clause
4
directs
the
trustees
to
pay
these
income
taxes
in
the
year
in
which
they
are
payable
and
that
the
obligation
is
not
upon
Lady
Kemp
to
pay
the
total
and
then
seek
a
repayment
from
the
trustees.
If
the
repayment
by
the
trustees
is
made
in
the
same
year,
it
can,
of
course,
make
no
difference
but
it
might
conceivably
do
so
if
the
repayment
were
delayed
until
the
following
year.
However,
the
problem
would
still
remain
as
to
whether
the
extra
income
tax
payable
by
Lady
Kemp,
because
of
the
payment
or
repayment
by
the
trustees,
should
be
paid
entirely
by
the
estate,
or
whether
the
principle
of
apportionment
adopted
in
answering
the
first
question
should
apply.
Mr.
Justice
McTague
held
that
this
extra
tax
should
be
paid
by
the
trustees
under
clause
4
of
the
will.
The
objecting
residuary
beneficiaries
agree
that
it
is
quite
clear
that
to
the
extent
that
the
repayments
of
tax
swell
Lady
Kemp
‘s
total
assessable
income
they
necessarily
increase
the
total
amount
of
income
tax
payable
by
her,
and
on
the
principle
of
apportionment
adopted
in
answering
the
first
question,
this
increases
the
tax
which
each
part
of
Lady
Kemp’s
income
must
bear.
But,
it
is
submitted,
the
estate
should
not
bear
more
of
such
increased
income
tax
than
the
proportion
thereof
which
the
provisions
for
Lady
Kemp
under
clause
3
of
the
will
(to
the
extent
that
they
form
part
of
her
assessable
income)
bear
to
her
total
assessable
income.
It
is
argued
that
for
the
purpose
of
computing
the
proportion,
the
amounts
reimbursed
to
Lady
Kemp
in
respect
of
income
tax
under
clause
4
of
the
will
should
be
treated
as
part
of
her
income
apart
from
clause
3
of
the
will.
The
Court
of
Appeal
agreed
with
this
argument;
that
1s,
while,
in
the
answer
to
question
I,
‘‘repayment
of
income
tax
under
clause
4
of
the
will’’
is
treated
as
part
of
Lady
Kemp’s
assesssable
income,
according
to
the
answer
to
question
II,
the
trustees
must
repay
to
Lady
Kemp
only
such
proportion
of
the
whole
of
the
income
tax
assessed
against
her
in
respect
of
each
year’s
income
as
the
total
amount
expended
or
paid
out
in
such
year
by
the
trustees
under
the
provisions
of
clause
3
of
the
will
bears
to
the
total
amount
of
Lady
Kemp’s
assessable
income.
I
quite
agree
that
such
extra
income
tax
is
not
entirely
payable
in
respect
of
the
provisions
made
for
Lady
Kemp
by
clause
3
of
the
will
and
is,
therefore,
not
to
be
paid
by
the
trustees.
However,
I
am
of
opinion
that,
reading
together
clauses
3
and
4
of
the
will,
the
payments
or
repayments
to
be
made
by
the
trustees
form
part
of
the
benefits
conferred
by
clause
3
and
that
the
proportion
of
Lady
Kemp’s
income
tax
with
respect
to
any
year,
to
be
paid
by
the
trustees,
should
be
the
proportion
that
the
total
amount
paid
out
by
them
in
such
year
under
the
provisions
of
clause
3
and
clause
4
bears
to
the
total
amount
deemed
to
be
assessable
income
of
Lady
Kemp
in
such
year,
and
I
would
vary
the
order
of
the
Court
of
Appeal
accordingly.
The
residuary
beneficiaries
other
than
Lady
Kemp
did
not
cross-appeal
but
they
argue
that
the
answer
given
by
the
Court
below
to
question
III
is
inconsistent
with
the
answers
given
to
questions
I
and
II.
The
answer
to
question
III
deals
with
deductions
and
exemptions
allowed
to
Lady
Kemp
by
the
Income
Tax
Acts.
I
would
have
thought
that,
the
net
taxable
income
being
ascertained,
the
trustees
would
receive
no
benefit
from
the
deductions
and
exemptions
except
that,
of
course,
neither
they
nor
Lady
Kemp
would
pay
any
tax
upon
them.
However,
throughout
the
course
of
the
proceedings
Lady
Kemp
has
agreed
that
the
trustees
should
be
entitled,
in
each
year,
to
that
pro-
portion
of
any
deductions
allowed
to
her
in
respect
of
charitable
donations
which
the
payments
made
to
Lady
Kemp
under
clause
4
of
the
will,
during
such
year,
bear
to
Lady
Kemp’s
total
income
during
such
year.
The
orders
of
McTague
J.
and
the
Court
of
Appeal
include
the
terms
of
this
agreement
but
also
provide
that,
with
that
exception,
deductions
and
exemptions
allowed
to
Lady
Kemp
are
to
be
calculated
as
belonging
to
and
intended
for
her
exclusive
benefit
and
not
for
the
benefit
of
the
trustees.
Bearing
that
in
mind,
I
read
the
answer
to
question
I
as
providing
that
by
it
Lady
Kemp’s
income
is
to
be
determined
on
the
footing
of
her
total
assessable
income
without
subtracting
any
deductions
and
exemptions,
leaving
the
latter
to
be
dealt
with
by
the
answer
to
question
III.
The
judgments
of
the
Court
of
Appeal
in
Michelham
f
s
Trustees
v.
Commissioners
of
Inland
Revenue
[FN: (1980), 144 L.T. 168.]
and
in
In
re
Reckitt
,[FN: [1932] 2 Ch. 144.]
and
the
other
judgments
cited
at
bar
were
decided
on
the
terms
of
other
wills
differently
phrased
and
under
the
provisions
of
a
taxing
Act
modelled
in
a
form
far
different
from
ours,
and
I
have
been
unable
to
secure
any
assistance
from
them
in
coming
to
a
conclusion
in
this
case.
I
would
vary
the
order
of
the
Court
of
Appeal
to
the
extent
indicated.
All
parties
should
have
their
costs
out
of
the
estate,
those
of
the
trustees
as
between
solicitor
and
client.
Appeal
dismissed
subject
to
a
variation
in
the
judgment
appealed
from.
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