The Central Trust Company of Canada and Charles C Hickey, Executors Under the Last Will and Testament of Denzil Olaf Macneill v. Minister of National Revenue, [1973] CTC 2248, 73 DTC 189

The Chairman (orally):—This is an appeal by the Central Trust Company of Canada and Charles C Hickey, under the last will and testament of Denzil Olaf MacNeill, from an assessment by the Minister of National Revenue under the Estate Tax Act, RSC 1970, c E-9, whereby the Minister has disallowed, as an exemption under paragraph 7(1 )(b) of the said Act, a certain sum of money alleged by the appellants to be absolute and indefeasible to the widow.

This is a matter, of course, that must be determined solely upon the interpretation of the will and for the purpose of giving effect, in so far as it is possible to ascertain them, to the wishes of the testator. I think when a deceased has taken the trouble to set down in writing his wishes as to the disposition of his estate, the court or quasi-judicial tribunal reviewing the matter should not look for technical or legal meanings in the words contained in such writing in order to reach an opinion as to what it thinks the testator may have meant.

On the other hand, the court or board must be bound 'by general principles of law relating to the interpretation of documents and, particularly when one is dealing with the words of a taxing statute, one is dealing, not, as is the case in civil litigation, with a matter between two individuals, but with a matter between the state and an individual, the result of which could affect the entire taxable population of the country.

Counsel for the Minister in this case has very ably placed before the Board the interpretation that the respondent has put upon the wording of paragraphs 3(1) and 3(11) of the testator’s will and both parties are in agreement that the overall document must be looked at as a whole and not dissected to achieve any particular purpose. To put it simply, Parliament in its wisdom has seen fit to grant to a testator’s widow an exemption under paragraph 7(1 )(b) of the Estate Tax Act, so that a settlement or trust may be established for her benefit, as was done in the case of Mrs MacNeill, which, if it is indefeasible within a given period of time, or within a reasonable time under the circumstances, is exempt from the calculation of the net aggregate value of the estate for estate tax purposes.

I think that the general law of trusts recognizes that there must be three basic principles to establish a trust, which can be found in any textbook on the subject, and those are: a certainty of words, a certainty of subject matter, and the certainty of the object.

There is no question but that in this case the subject of the trust was the shares in a limited company established in 1963 under the name of MacNeill Stores Limited. The object, of course, is the widow. I am also faced with the question of whether or not, in attempting to establish this trust, there has been a certainty of words sufficient, not only to create the trust, but also to bring it within the applicable wording of the relevant section of the Estate Tax Act.

Only one witness has been called, a Mr Hickey, who is a chartered accountant of some 17 years’ standing and who was the company’s auditor. He gave evidence that, from the year 1966 on, the company, after taxes and capital cost allowance, made a net profit out of which dividends of somewhere in the neighbourhood of $15,000 per year could be payable.

The date of the will in question is 1969: May 14, 1969, to be exact; and the testator died on March 2, 1971. Therefore, at the date of the will, I think the pattern of the business was well established and there was no uncertainty, or there could be no reasonable uncertainty, in the mind of the testator as to the stability of the business.

The business has been described as a small family concern similar to that of the Stedman Stores, which is a well-known name, and although carried on in a small community, it did serve a larger metropolitan area of the province.

Counsel for the respondent has cited two cases: Estate of Herbert Turner Matson v MNR, [1971] Tax ABC 708; 71 DTC 504, and Estate of Paul Dontigny v MNR, [1972] CTC 2647; 72 DTC 1537, recently upheld in the Federal Court of Canada by Pratte, J under the name of Estate of Paul Dontigny v Her Majesty the Queen, [1973] CTC 529; 73 DTC 5398.

I accept these cases in the spirit in which they were brought forward, namely, to assist the Board in reaching its final conclusion. I think that those cases are clearly distinguishable from the case at hand, as most of such cases depend on their individual facts.

When one is dealing with the interpretation of sections of an Act or a paragraph in a will, which is the case before me today, it is very difficult to transpose oneself into the shoes of the person who created the words, but one must look at all the surrounding circumstances and this helps one, even without legal insights, to arrive at the true meaning and intent of the words to be interpreted.

In this case, the situation really, in my mind, boils down to whether or not paragraph 3 of the testator’s will creates two separate and distinct funds or trusts. The first trust is solely in favour of the widow to the extent of 50%, to be made up entirely of the shares of the company, and the second fund is the other 50% of the total estate, to be made up of the remaining shares and all other assets.

It would not be a difficult situation to deal with had not the testator proceeded, on page 3 of his testamentary document,‘to levy certain charges upon the estate in relation to his house, or a house, in Summerside, Prince Edward Island, occupied by his mother.

There is also the usual provision for encroachment for the benefit of the children, of which there were four, and I have in previous cases generally been inclined to the thought that this amounts to no more than setting down in writing an instruction to do what any normal parent would be obliged in any event to do, and that in itself, in my view, would not be sufficient to make an otherwise-indefeasible settlement ineligible for the exemption provided by paragraph 7(1 )(b) of the Act.

The question really is: did the testator mean to charge the entire estate, as the respondent asserts, with the obligations set forth with respect to the mother’s house?

I must say—with no disrespect, because I don’t know the circumstances under which the will was drawn—that this is not the most adequate example of draftmanship that one might display in dealing with the typical problem that faced this testator. However, placing myself as nearly as possible in the shoes of the testator and, more particularly, in the mind of the testator, I find it difficult to believe that he would have involved himself in such difficulties or gone to such lengths or given such detailed instructions to draft two separate paragraphs under the so-called “distribution of the residue” portion of the will, if he did not in fact intend to sever and place aside for his widow at least 50% of his estate.

I am reinforced in this belief by reading page 2 of the copy of the will before me, where, in paragraph 3, subparagraph (I), the testator says, in the second sentence, that he directs his trustees—and I quote: “to pay to my said wife the whole income derived from this trust for the term of her natural life.”

It seems to me he was specifically trying to convey to anyone who might subsequently be forced to interpret his words that “this trust” was the trust contained in paragraph 3(l) of the will, because he goes on immediately, in subparagraph (II) of paragraph 3, to mention: “50% to be held in trust, which fund to consist of the remainder of the assets of my estate”.

It is true there is some ambiguity in the overall wording, but I cannot escape the conclusion that, notwithstanding the ambiguity of the wording that was used in this document, there was a clear attempt to set down the testator’s wishes that his widow should receive, as a minimum, an unencumbered sum, from this rather substantial estate, consisting of 50% of the estate, made up of his most valuable assets at that time, namely, the shares in the limited company.

Therefore, on a simple reading of the plain words contained in the testamentary document, I am satisfied that the testator intended to create, and succeeded in creating, an indefeasible trust or settlement within the meaning of subparagraph 7(1)(b)(ii) of the Estate Tax Act, and therefore the appeal should be allowed and referred back to the Minister for reassessment on the basis that the said trust consisted of 50% of the residue of the estate.

Appeal allowed.