Ritchie,
J.
(all
concur)
:—This
is
an
appeal
from
a
judgment
of
the
Exchequer
Court
of
Canada
which
had
allowed
an
appeal
from
an
assessment
made
by
the
Minister
of
National
Revenue
under
the
Estate
Tax
Act,
S.C.
1958,
c.
29,
whereby
estate
tax
in
the
sum
of
$59,592.04
was
assessed
in
respect
of
the
estate
of
Kate
Daintry
Malloeh.
The
question
to
be
determined
on
this
appeal
is
posed
in
the
special
case
stated
by
consent
of
the
parties
in
the
following
terms
:
The
question
for
the
opinion
of
the
Court
is
whether
or
not
any
part
of
any
estate,
legacy,
succession
or
inheritance
duties
or
any
combination
of
such
duties
(including
any
tax
payable
under
Part
I
of
the
Estate
Tax
Act)
is,
either
by
direction
of
or
arrangement
made
or
entered
into
by
the
deceased
whether
by
her
will
or
by
contract
or
otherwise,
or
by
any
statute
or
law
imposing
such
duties
or
relating
to
the
administration
of
the
estate
of
the
deceased,
payable
out
of
the
property
comprised
in
the
gift
to
the
Appellant
Foundation
or
payable
by
it
as
a
condition
of
the
making
of
such
gift.
If
this
question
is
answered
in
the
affirmative
then,
in
my
opinion,
the
last
paragraph
of
Section
7(1)(d)
of
the
Estate
Tax
Act
(sometimes
referred
to
as
the
‘‘minus
paragraph’’)
is
applicable
for
the
purpose
of
computing
the
aggregate
taxable
value
of
the
property
passing,
and
the
proper
method
of
determining
the
amount
of
estate
tax
to
be
subtracted
in
accordance
with
those
provisions
is
the
method
of
‘‘successive
approximations”
which
was
explained
in
the
reasons
for
judgment
of
Mr.
Justice
Judson
in
M.N.R.
v.
Bickle
ct
al.,
[1966]
S.C.R.
479:
[1966]
C.T.C.
207,
and
which
was
adopted
by
the
Minister
in
the
present
case.
In
allowing
the
present
appeal
Mr.
Justice
Gibson
would
have
answered
the
question
in
the
negative
and
the
effect
of
that
answer
is
to
reduce
the
assessment
of
estate
tax
from
$59,592.04
to
$50,057.32.
It
is
the
difference
between
these
two
figures
which
forms
the
subject
matter
of
his
appeal.
The
respondent
corporation,
which
is
the
residuary
legatee
of
the
estate
of
Kate
Daintry
Malloch,
is
a
non-profit
corporation
without
share
capital
and
is
duly
qualified
and
registered
as
a
Canadian
charitable
organization,
all
the
resources
of
which
have
since
its
inception
been
invested
to
produce
income
all
or
a
substantial
part
of
which
has
been
devoted
to
the
making
of
gifts
to
other
organizations
in
Canada
constituted
exclusively
for
charitable
purposes
and
similarly
qualified
and
registered.
The
matter
to
be
determined
on
this
appeal
resolves
itself
into
the
question
as
to
whether
the
gift
made
to
the
respondent
corporation
is
a
gift
of
the
residue
of
the
estate
and
whether
the
tax
payable
under
Part
I
of
the
Estate
Tax
Act
is
payable
out
of
that
gift,
either
by
reason
of
the
terms
of
the
will
or
the
provisions
of
any
statute
relating
to
the
administration
of
the
estate.
In
this
regard
it
is
first
necessary
to
consider
the
relevant
provisions
of
the
will,
Clause
III
of
which
reads
as
follows:
III
I
GIVE
AND
BEQUEATH
to
my
said
daughter
MAR^
DAINTRY
COLE,
my
jewelry,
furs
and
all
other
personal
effects,
and
all
articles
of
household
use
and
ornament
belonging
to
me
for
her
own
use
or
disposal
as
she
may
see
fit.
Clause
IV
of
the
will
is
summarized
in
the
stated
case
as
follows
:
IV
I
GIVE
DEVISE
AND
BEQUEATH
the
remainder
of
my
property
and
estate
of
every
nature
and
kind
and
wheresoever
situate
to
my
Trustees
upon
the
following
trusts,
namely:
(1)
To
pay
my
just
debts,
funeral
and
testamentary
expenses
and
all
succession
duties,
estate
and
inheritance
taxes
that
may
be
payable
in
connection
with
any
gift
or
benefit
given
by
me
to
any
persons
either
in
my
lifetime
or
by
survivorship
or
by
this,
my
Will
or
any
codicil
thereto,
it
being
my
intention
that
all
such
debts,
expenses,
duties
and
taxes
shall
be
paid
out
of
my
general
estate
so
that
all
benefits
and
dispositions
given
or
made
by
me
in
my
lifetime
or
by
my
Will
shall
be
free
and
clear
therefrom.
(2)
As
soon
as
possible
after
my
death
to
pay
the
following
legacies
:
(3)
(a)
To
pay
to
my
daughter,
Mary
Daintry
Cole,
the
sum
of
Three
Hundred
Thousand
Dollars
($300,000.)
or,
at
her
option,
to
transfer
to
her
stocks
and
securities
of
equivalent
value
for
the
whole
or
part
of
the
same
sum.
(4)
To
pay
and
transfer
all
the
rest
and
residue
of
my
estate
to
F.
DAVID
MALLOCH
MEMORIAL
FOUNDATION,
a
Corporation
without
share
capital
incorporated
under
the
laws
of
Ontario,
with
the
direction
that
the
monies
or
property
so
given;
or
property
substituted
therefor,
shall
be
held
permanently
by
said
Foundation
and
invested
for
the
purpose
of
gaining
or
producing
income
to
be
used,
applied
or
donated
for
such
charitable
and
educational
purposes
as
the
Directors
of
the
Foundation
may
from
time
to
time
determine.
The
aggregate
net
value
of
the
estate
after
debts
was
$837,836.85.
After
deducting
Ontario
succession
duties,
the
value
of
the
residue
to
the
charitable
foundation,
without
taking
estate
tax
into
account,
was
$418,416.11.
The
Minister
of
National
Revenue,
proceeding:
on
thé
assumption
that
the
will
gave
the
residue
to
the
foundation,
charged
with
the
burden
of
payment
of
the
estate
tax,
assessed
the
tax
at
$09,
592.04.
Counsel
on
behalf
of
the
Minister
pointed
out
that
the
amount
payable
as
tax
is
deemed
to
be
a
debt
due
to
Her
Majesty
and
incurred
by
the
deceased
immediately
prior
to
her
death,
and
in
this
regard
reference
was
made
to
Section
18(1)
of
the
Estate
Tax
Act,
S.C.
1958,
c.
29,
which
provides
that
18.
(1)
Where
any
amount
is
payable
as
tax
under
this
Part
pursuant
to
section
13
by
the
executor
of
the
estate
of
a
deceased,
that
amount
shall,
for
the
purposes
of
any
applicable
statute
or
law
relating
to
the
administration
of
estates,
be
deemed
to
be
a
debt
due
to
Her.
Majesty
incurred
by
the
deceased
immediately
prior
to
his
death.
It
was
further
contended
on
behalf
of
the
Minister
that
the
applicable
statutory
provision
relating
to
the
administration
of
this
Ontario
estate
was
Section
5
of
The
Devolution
of
Estates
Act,
R.S.O.
1960,
c.
106
which
provides
:
5.
Subject
to
section
37
of
the
Wills
Act
the
real
and
personal
property
of
a
deceased
person
comprised
in
a
residuary
devise
or
bequest,
except
so
far
as
a
contrary
intention
appears
from
his
will
or
any
codicil
thereto,
is
applicable
rateably
according.
to
their
respective
values
to
the
payment
of
his
debts,
funeral
and
testamentary
expenses
and
the
costs
and
expenses
of
administration.
The
contention
is
that
when
the
last
two
sections
are
read
together,
it
becomes
apparent
that
the
amount
payable
under
the
Estate
Tax
Act
is
a
debt
of
the
estate
which
is
payable
out
of
residue,
and
with
all
respect
for
the
views
expressed
by
Mr.
Justice
Gibson,
I
am
unable
to
reach
any
other
conclusion
from
a
consideration
of
the
combined
effect
of
the
two
statutory
provisions.
In
allowing
this
appeal,
Mr.
Justice
Gibson
appears
to
have
adopted
the
view
that
the
gift
to
the
organization
was
not
a
gift
of
the
residue
of
the
estate,
Saying
:
In
my
view,
no
part.
of
the
estate
tax
and
succession
duties
were
directed
by
the
will
of
the
deceased
to
be
payable
out
of
the
property
comprised
in
the
gift
to
the
Foundation
but
instead,
it
is
only
in
the
residue
of
the
residue
of
this
estate.
that
the
Foundation
has
any
property
interest.
This
must
mean
that
Mr.
Justice
Gibson
considered
that
the
testatrix
had
disposed
of
her
main
estate
in
Clause
III
by
giving
her
‘‘jewelry,
furs
and
all
other
personal
effects,
and
all
articles
of
household
use
and
ornament’’
to
her:
daughter,
and
that
the
provisions
of
Clause
IV,
whereby
she
disposed
of
all
her
property,
constituted
a
gift
of
the
residue,
and
that
when
she
directed
her
executors
‘‘To
pay
and
transfer
all
the
rest
and
residue’’
of
her
estate
to
the
respondent.
foundation,
she
was
disposing
of
the
residue
of
the
residue.
I
am
unable
to
accept
this
reasoning
and
am
of
opinion
that
the
gift
to
the
foundation
was
a
gift
of
the
true
residue.
Although
Mr.
Justice
Gibson
recognized
the
fact
that
estate
taxes
are
deemed
to
be
a
debt
of
the
estate
under
the
provisions
of
the
Estate
Tax
Act,
he
concluded
that
Nowhere
in
The
Devolution.
of
Estates
Act,
and
particularly
at
section
2
or
at
section
5
is
there
a
statutory
imposition
of
such
succession
duties
or
estate
tax,
nor,
further,
any
requirement
that
such
duties
and
estate
taxes
be
payable
out
of
the
property
comprised
in
the
gift
to
this
Foundation.
This
reasoning
must
be
predicated
on
the
learned
judge’s
finding
that
the
gift
to
the
foundation
was
not
‘‘a
residuary
devise
or
bequest’’
because
the
provisions
of
Section
5
clearly
state
that
such
a
devise
or
bequest
is
applicable
to
the
payment
of
debts.
As
I
am
unable
to
accept
the
learned
judge’s
premise,
I
cannot
subscribe
to
his
conclusion.
The
question
here
raised
must,
accordingly,
in
my
opinion,
be
resolved
on
the
basis
that
the
estate
tax
is
payable
out
of
residue,
and
the
answer
must
therefore
depend
on
the
true
construction
to
be
placed
on
Section
7(1)(d)
of
the
Estate
Tax
Act
which
is
sometimes
referred
to
as
the
‘‘minus
paragraph’’
and
which
reads
as
follows:
7.
(1)
For
the
purpose
of
computing
the
aggregate
taxable
value
of
the
property
passing
on
the
death
of
a
person,
there
may
be
deducted
from
the
aggregate
net
value
of
that
property
computed
in
accordance
with
Division
B
such
of
the
following
amounts
as
are
applicable:
(d)
the
value
of
any
gift
made
by
the
deceased
whether
during
his
lifetime
or
by
his
will,
where
such
gift
can
be
established
to
have
been
absolute
and
indefeasible,
to
(i)
any
organization
in
Canada
that,
at
the
time
of
the
making
of
the
gift
and
of
the
death
of
the
deceased,
was
an
organization
constituted
exclusively
for
charitable
purposes,
all
or
substantially
all
of
the
resources
of
which,
if
any,
were
devoted
to
charitable
activities
carried
on
by
it
or
to
the
making
of
gifts
to
other
such
organizations
in
Canada,
all
or
substantially
all
of
the
resources
of
which
were
so
devoted,
or
to
any
donee
described
in
subparagraph
(ii),
and
no
part
of
the
resources
of
which
was
payable
to
or
otherwise
available
for
the
benefit
of
any
proprietor,
member
or
shareholder
thereof,
minus
such
part
of
any
estate,
legacy,
succession
or
inheritance
duties
or
any
combination
of
such
duties
(including
any
tax
payable
under
this
Part)
as
is,
either
by
direction
of
or
arrangement
made
or
entered
into
by
the
deceased
whether
by
his
will
or
by
contract
or
otherwise,
or
by
any
statute
or
law
imposing
such
duties
or
relating
to
the
administration
of
the
estate
of
the
deceased,
payable
out
of
the
property
comprised
in
such
gift
or
payable
by
the
donee
as
a
condition
of
the
making
of
such
gifts
;
.
.
.
It
will
be
seen
from
what
I
have
said,
that
I
am
of
opinion
that
the
residuary
gift
for
which
provision
is
made
in
Clause
IV
(4)
of
the
will
of
Kate
Daintry
Malloch
is
an
absolute
and
indefeasible
gift
to
a
charitable
organization
as
defined
in
Sec-
tion
7(1)
(d)
and
that
the
provisions
of
the
will,
together
with
the
applicable
provisions
of
the
Estate
Tax
Act
and
The
Devolution
of
Estates
Act,
constitute
a
direction
to
pay
the
estate
duty
out
of
the
residue
which
is
given
to
the
charitable
foundation.
I
am
accordingly
of
opinion
that
the
question
posed
by
the
case
stated
should
be
answered
in
the
affirmative
and
that
the
provision
of
the
‘‘minus
paragraph”
of
Section
7(1)
(d)
of
the
Estate
Tax
Act
is
applicable
for
the
purpose
of
computing
the
aggregate
taxable
value
of
the
property
passing,
and
the
proper
method
of
determining
the
amount
of
estate
tax
to
be
subtracted
in
accordance
with
those
provisions
is
the
method
of
‘‘successive
approximations’’
which
was
explained
in
the
reasons
for
judgment
of
Mr.
Justice
Judson
in
M.N.R.
v.
Bickle
et
al.
(supra),
and
which
was
adopted
by
the
Minister
in
the
present
case.
For
all
these
reasons,
I
would
allow
this
appeal
with
costs,
set
aside
the
Judgment
of
the
Exchequer
Court
and
restore
the
assessment
made
by
the
Minister
of
National
Revenue.
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