FOURNIER,
J.:—This
is
an
appeal
by
the
executors
of
the
estate
of
George
Arthur
Drummond,
late
of
the
city
of
Montreal,
in
the
Province
of
Quebec,
from
an
assessment
dated
April
15,
1952,
made
under
the
Dominion
Succession
Duty
Act,
Statutes
of
Canada,
1940-41,
c.
14
and
amendments.
Mr.
Drummond
died
on
or
about
December
19,
1948,
leaving
an
estate
of
a
gross
value
of
$1,443,205.81.
In
their
return
to
the
Dominion
Succession
Duties
Department
the
executors
claimed
as
a
deduction
from
the
gross
estate
the
sum
of
$344,000,
being
the
capitalized
value
of
monthly
annuities
payable
to
Mrs.
Zdenka
Drummond
and
to
Georgette
Patricia
Marie
Drummond
under
an
agreement
between
the
deceased
and
Mrs.
Zdenka
Drummond.
The
Department,
in
its
assessment,
disallowed
that
item
as
a
deduction.
An
appeal
was
taken
and,
so
far
as
that
item
was
concerned,
it
was
disallowed
and
the
assessment
affirmed
by
the
Minister
on
the
ground
that
the
assessment
had
been
made
in
accordance
with
the
provisions
of
the
Act
and
in
particular
that
the
amount
not
being
a
debt
created
for
full
consideration
in
money
or
money’s
worth
had
been
properly
disallowed
as
a
deduction
under
the
provisions
of
paragraph
(a)
of
subsection
(2)
of
Section
8
of
the
Act.
The
appellant
having
given
notice
of
dissatisfaction,
the
matter
came
before
this
Court.
The
facts,
based
on
documents
filed
at
the
trial
by
the
appellant
and
admitted
by
the
respondent,
may
be
summarized
as
follows:
George
Drummond
was
married
in
1935
to
Yvonne
Zdenka.
A
child,
Georgette
Drummond,
only
issue
of
their
marriage,
was
born
on
December
31,
1936.
The
wife
obtained
a
divorce
from
her
husband
by
an
Act
of
Parliament
on
June
3,
1939.
Subsequently
to
the
divorce,
to
wit
on
July
20,
1939,
George
Drummond
entered
into
an
agreement
with
his
former
wife
by
the
terms
of
which
he
provided
monthly
allowances
for
his
ex-wife
and
for
his
daughter.
The
agreement
was
signed
and
executed
in
the
city
of
London,
England.
The
parties
agreed
and
declared
that
all
the
covenants
and
provisions
should
be
deemed
to
have
been
made
and
executed
at
the
domicile
of
George
Drummond,
in
the
city
of
Montreal,
and
interpreted
for
all
purposes
by
the
laws
of
the
province
of
Quebec.
The
Preamble
of
the
agreement
at
the
outset
states
that
by
a
contract
of
marriage
dated
May
28,
1935,
George
Drummond
had
agreed
to
pay
to
his
future
wife
a
sum
of
$60,000,
which
sum
was
paid
as
Mrs.
Drummond
admits
having
received.
A
further
sum
of
$10,000
was
also
received
by
Mrs.
Drummond
from
her
husband.
It
is
declared
that
their
marriage
had
been
legally
dissolved
and
“WHEREAS
it
is
the
intention
and
wish
of
Mr.
Drummond
notwithstanding
the
said
divorce
and
the
said
Marriage
Contract
(now
at
an
end)
to
respect
and
satisfy
a
natural
obligation
towards
Mrs.
Drummond
and
to
provide
for
her
maintenance
in
manner
following
and
subject
to
the
terms
and
conditions
hereinafter
provided
in
full
discharge
of
all
and
every
liability
howsoever
imposed
on
Mr.
Drummond
for
maintenance
and/or
alimony
as
Mrs.
Drummond
hereby
accepts
and
admits
by
her
signature
to
this
agreement.
AND
WHEREAS
MR.
Drummond
and
Mrs.
Drummond
have
one
child
only
issue
of
their
marriage
namely
Georgette
Patricia
Marie
Drummond
born
on
the
Thirty
first
day
of
December
One
thousand
nine
hundred
and
thirty
six
.
.
.
and
Mr.
Drummond
has
agreed
to
pay
such
annuity
and/or
allowance
to
and
for
the
benefit
maintenance
and
education
of
the
child
in
manner
hereinafter
provided
in
full
discharge
of
all
and
every
liability
howsoever
imposed
on
Mr.
Drummond
for
maintenance
of
the
child
during
her
minority
as
Mrs.
Drummond
by
her
signature
hereby
admits.
NOW
THIS
DEED
WITNESSETH
as
follows:
1.
IN
pursuance
of
the
said
agreement
and
for
good
and
valuable
consideration
which
Mr.
Drummond
acknowledges
to
have
received
to
his
entire
satisfaction
and
in
consideration
of
the
premises
Mr.
Drummond
hereby
irrevocably
covenants
with
Mrs.
Drummond
with
warranty
and
guarantee
that
the
annuities
or
sums
of
money
hereinafter
mentioned
will
be
duly
paid
to
her
as
follows
:
.
.
.
”
Then
the
deed
provides
that
Mr.
Drummond
will
during
the
whole
period
of
the
life
of
his
former
wife
pay
to
her
every
month
a
certain
sum
for
her
sole
and
separate
use
and
benefit
and
for
the
maintenance
and
support
of
herself.
It
also
provides
that
he
will
pay
to
her
for
their
child
during
the
child’s
lifetime
a
certain
sum
every
month
for
her
sole
and
separate
use
and
benefit
and
for
the
support
and
maintenance
of
herself—
the
amounts
to
be
paid
to
the
mother
until
such
time
as
the
child
shall
attain
the
age
of
21
or
marry
under
that
age.
These
allowances
are
to
be
expended
by
her
for
the
sole
use
and
benefit
and
for
the
maintenance
and
education
of
the
child.
By
the
deed
Mrs.
Drummond
becomes
entitled
to
the
sole
custody,
control,
maintenance
and
guardianship
of
the
child
while
a
minor
under
the
age
of
21
and
unmarried,
Mr.
Drummond
agreeing
not
to
interfere
in
the
management,
education
or
bringing
up
of
the
child.
There
remains
clause
2
of
the
agreement
which
was
urged
by
counsel
for
the
appellant
as
a
consideration.
“2.
That
Mrs.
Drummond
will
out
of
Mrs.
Drummond’s
annuity
or
Mrs.
Drummond’s
increased
annuity
as
the
case
may
be
at
all
future
times
support
and
maintain
herself
and
so
long
as
the
child’s
annuity
and
child’s
increased
annuity
as
the
case
may
be
shall
be
paid
to
her
under
the
provisions
of
this
Deed
shall
support
maintain
bring-up
and
educate
in
a
manner
suitable
to
her
position
in
life
the
child
and
pay
for
all
such
board
lodging
clothes
tuition
and
other
matters
ordinary
and
extraordinary
as
Mrs.
Drummond
or
the
child
may
require
regardless
of
whether
the
child’s
annuity
or
the
child’s
increased
annuity
as
the
case
may
be
be
sufficient
of
itself
to
pay
for
the
said
requirements.”
As
to
the
verbal
evidence,
it
established
that
the
terms
of
the
agreement
were
implemented,
during
the
lifetime
of
the
deceased,
and
on
his
instructions,
by
the
Royal
Trust
Company,
out
of
his
personal
management
account,
and
after
his
death,
out
of
his
estate,
and
the
sums
specified
still
continue
to
be
paid.
The
payments
are
charged
to
the
income
of
the
estate
and
the
surplus
dealt
with
in
accordance
with
the
terms
of
the
will.
A
statement
of
the
capitalized
value
of
the
monthly
annuities
specified
in
the
agreement
of
July
20,
1939,
was
filed
as
Exhibit
A-6.
It
shows
the
value
as
at
December
19,
1948,
of
the
annuities
to
Yvonne
Zdenka
Drummond
and
to
her
daughter.
The
capital
value
of
Mrs.
Drummond’s
annuities
is
$230,300
and
that
of
the
child’s
$114,500.
By
his
last
will
the
deceased
named
and
appointed
the
appellant
sole
executor
and
trustee
and
disposes
of
his
estate
in
part
to
his
daughter
and
in
part
to
his
former
wife,
with
considerable
details
and
complications
should
one
or
the
other
live.
Clause
3
of
the
will
provides
as
follows:
“I
direct
my
Executor
to
pay
all
my
just
debts,
funeral
and
testamentary
expenses
as
soon
as
possible
after
my
death
and
I
further
direct
that
all
succession
or
legacy
duties,
seizin
tax
or
estate
or
inheritance
taxes
on
my
property
or
Estate
or
any
part
thereof,
and
all
other
taxes
on
my
Estate,
shall
be
paid
out
of
the
capital
of
my
Estate.”
No
particular
mention
is
made
of
the
annuity
agreement,
nor
is
it
cancelled
or
interfered
with
in
any
way.
Counsel
for
the
appellant
contends
that
the
capitalized
value
of
the
annuities
created
by
agreement
between
Mr.
Drummond
and
his
former
wife
constitutes
a
debt
which
by
the
provisions
of
Section
8(1)
(a)
of
the
Act
is
deductible
as
an
allowance
from
the
gross
estate.
On
the
other
hand,
counsel
for
the
respondent
argues
that
the
liability
of
the
deceased,
or
his
estate,
purported
to
be
created
by
the
agreement
does
not
constitute
a
debt
created
bona
fide
for
full
consideration
in
money
or
money’s
worth
wholly
for
the
deceased’s
own
use
and
benefit
and
to
be
paid
by
his
estate
;
it
is
barred
as
a
deduction
by
the
provisions
of
Section
8(2)
(a).
The
relevant
parts
of
this
section
read
as
follows:
‘
8.
(1)
In
determining
the
aggregate
net
value
and
dutiable
value
respectively,
an
allowance
shall
be
made
for
debts
and
encumbrances
.
.
.
(a)
any
debt
or
encumbrance
charged
upon
or
payable
out
of
property
passing
to
a
successor
shall
be
deducted
from
the
value
of
that
property
;
(2)
Notwithstanding
anything
contained
in
the
last
preceding
subsection
allowance
shall
not
be
made,
(a)
for
any
debt
incurred
by
the
deceased
or
encumbrance
created
by
a
disposition
made
by
him
unless
such
debt
or
encumbrance
was
created
bona
fide
for
full
consideration
in
money
or
money’s
worth
wholly
for
the
deceased’s
own
use
and
benefit
and
to
be
paid
out
of
his
estate
;’’
To
succeed
with
the
claim
of
deductibility,
the
appellant
must
show
that
it
comes
within
the
ambit
of
the
provisions
of
the
above
section
and
subsections
of
the
Act.
It
must
be
established
that
the
terms
of
the
agreement
indicate
in
fact
and
in
law
that
a
debt
was
incurred
or
an
encumbrance
created;
that
it
was
incurred
or
created,
as
the
case
may
be,
for
full
consideration;
that
the
consideration
be
in
money
or
money’s
worth;
that
it
was
wholly
for
the
deceased’s
own
use
and
benefit;
that
it
was
to
be
paid
out
of
his
estate.
As
to
it
being
a
debt,
the
deed
states
that
Mr.
Drummond
irrevocably
covenants
with
his
former
wife
with
warranty
and
guarantee
that
the
annuities
or
sums
of
money
mentioned
will
be
duly
paid
to
her
by
him
during
his
lifetime
and
that
the
covenants
and
provisions
of
the
deed
shall
inure
to
the
benefit
of
and
be
binding
upon
the
respective
parties
and
their
heirs,
executors,
administrators,
successors
and
assigns
and
shall
be
deemed
to
have
been
made
and
executed
at
Montreal,
in
the
province
of
Quebec,
and
interpreted
for
all
purposes
by
the
laws
of
the
province
of
Quebec.
The
general
provisions
of
obligations
are
dealt
with
in
articles
982
and
983
of
the
Civil
Code.
“982.
It
is
essential
to
an
obligation
that
it
should
have
a
cause
from
which
it
arises,
persons
between
whom
it
exists,
and
an
object.
983.
Obligations
arise
from
contracts,
quasi-contracts,
.
.
.
and
from
the
operation
of
the
law
solely.”
The
requisites
to
the
validity
of
contracts
are
:
“984.
There
are
four
requisites
to
the
validity
of
a
contract:
Parties
legally
capable
of
contracting;
Their
consent
legally
given;
Something
which
forms
the
object
of
the
contract;
A
lawful
cause
or
consideration.”
The
document
under
review
was
signed
and
executed
by
parties
legally
capable
of
contracting.
Their
consent
seems
to
have
been
legally
given.
The
payment
of
monthly
allowances
to
his
former
wife
and
their
child
was
the
object.
Was
there
a
legal
consideration
which
met
the
terms
of
or
fell
within
the
meaning
of
the
following
words
of
Section
8(2)
(a)
of
the
Act:
‘for
full
consideration
in
money
or
money’s
worth
wholly
for
the
deceased’s
own
use
and
benefit
to
be
paid
out
of
his
estate’’?
A
perusal
and
analysis
of
the
agreement
should
give
the
answer
to
the
question
of
whether
or
not
the
value
of
certain
annuities
as
at
December,
1948,
is
deductible
for
succession
duty
purposes
under
the
Act.
The
agreement
declares
in
its
preamble
that
a
marriage
contract
had
existed
between
the
parties;
that
its
obligations
had
been
fulfilled
plus
an
additional
amount
of
$10,000
paid
by
Mr.
Drummond
to
his
former
wife.
The
marriage
contract
had
come
to
an
end.
Counsel
for
the
appellant
mentioned
that
there
was
no
longer
any
claim
under
the
marriage
contract.
The
marriage
had
been
dissolved
by
divorce.
The
parties,
therefore,
were
no
longer
man
and
wife
;
they
were
strangers
to
each
other.
Under
those
circumstances,
Mr.
Drummond,
in
a
signed
document,
sets
out
his
intention
and
wish
to
satisfy
a
natural
obligation
towards
his
former
wife
and
provide
for
her
maintenance
in
full
discharge
of
all
and
every
liability
imposed
on
Mr.
Drummond
for
maintenance
and/or
alimony
as
Mrs.
Drummond
accepts
and
admits
by
her
signature
of
the
agreement.
So
the
obligation
to
pay
for
maintenance
and/or
alimony
has
the
satisfying
of
a
natural
obligation
and
the
discharge
of
some
liability
as
its
cause
or
consideration.
What
natural
obligation
and
what
liability?
I
find
nowhere
in
the
Civil
Code
any
legal
obligation
to
pay
for
the
maintenance
of/or
alimony
to
strangers.
As
to
natural
obligations,
they
are
recognized
by
the
civil
law,
but
with
limitation.
Article
1140
of
the
Code
reads:
‘1140.
Every
payment
presupposes
a
debt;
what
has
been
paid
where
there
is
no
debt
may
be
recovered.
There
can
be
no
recovery
of
what
has
been
paid
in
voluntary
discharge
of
a
natural
obligation.”
It
follows
that
a
natural
obligation
is
not
enforceable
in
law.
By
indulging
in
one’s
wish
to
satisfy
a
natural
obligation
one
satisfies
an
obligation
which
cannot
constitute
a
consideration
in
money
or
money’s
worth
wholly
for
the
benefit
and
use
of
that
person.
Also
the
payment
of
monthly
allowances
to
obtain
discharge
of
non-established
or
non-existent
liabilities
cannot
be
said
to
be
for
full
consideration
in
money
or
money’s
worth.
Counsel
for
the
appellant
urged
that
the
agreement
was
not
a
gift
but
a
bilateral
undertaking
with
mutual
consideration;
I
cannot
agree
with
this
contention.
But
even
if
it
were,
it
does
not
of
necessity
follow
that
the
consideration
was
appreciable
in
money
or
money’s
worth.
Billette—Traité
de
Droit
Civil
Canadien—Donations
et
Testaments—Vol.
1,
p.
227,
No.
305,
describing
the
essential
elements
of
a
gratuity,
says:
“305.
Ce
qui
caractérise
à
proprement
parler
une
libéralité
ou
gratuité,
c’est
l’absence
de
contrepartie
à
la
prestation
ou
à
l’obligation.
.
.
.
Il
n’y
a
que
la
prestation,
appréciable
en
argent,
actuelle
ou
future,
qui
puisse
servir
de
contrepartie
à
une
obligation
ou
prestation
dans
un
contrat
onéreux.
Il
suit
que
seront
aussi
considérées
des
libéralités
ou
gratuités,
les
obligations
ou
prestations
qui
auront
pour
contrepartie,
une
obligation
ou
prestation
non
appréciable
en
argent.”
It
is
contended
that
the
terms
of
clause
2
of
the
deed
is
paramount
to
a
contract
of
hire
of
the
services
of
Mrs.
Drummond
by
Mr.
Drummond
to
take
care
of
their
child.
Let
us
read
the
clause.
“2.
.
.
.
That
Mrs.
Drummond
will
out
of
Mrs.
Drummond’s
annuity
or
Mrs.
Drummond’s
increased
annuity
as
the
case
may
be
at
all
future
time
support
and
maintain
herself
..
.”?
This
is
the
first
obligation—she
will
maintain
herself
out
of
her
annuity.
And
elause
2
continues
as
follows
:
“.
.
.
and
so
long
as
the
child’s
annuity
and
child’s
increased
annuity
as
the
case
may
be
shall
be
paid
to
her
under
the
provisions
of
this
Deed
shall
support
maintain
bring-up
and
educate
in
a
manner
suitable
to
her
position
in
life
the
child
and
pay
for
all
such
board
lodging
clothes
tuition
and
other
matters
ordinary
and
extraordinary
as
Mrs.
Drummond
or
the
child
may
require
regardless
of
whether
the
child’s
annuity
or
the
child’s
increased
annuity
as
the
case
may
be
be
sufficient
of
itself
to
pay
for
the
said
requirements.”
All
that
this
agreement
pledges
Mrs.
Drummond
to
do
is
to
satisfy
her
own
legal
obligation
to
maintain
and
bring
up
the
child
with
her
means.
The
divorce
had
dissolved
the
marriage,
but
it
had
not
affected
the
relationship
of
father
and
mother
to
the
child
nor
the
obligation
resulting
from
that
relationship.
Both
the
father
and
the
mother
were
obliged
to
see
to
the
maintenance
of
their
child.
This
is
a
legal
obligation
clearly
expressed
in
the
following
articles
of
the
Civil
Code.
“165.
Husband
and
wife
contract,
by
the
mere
fact
of
marriage,
the
obligation
to
maintain
and
bring
up
their
children.
168.
The
obligations
which
result
from
these
provisions
are
reciprocal.
169.
Maintenance
is
only
granted
in
proportion
to
the
wants
of
the
party
claiming
it
and
the
fortune
of
the
party
by
whom
it
is
due.”
The
obligations
of
the
parties
towards
their
child
were
fixed
by
law
and
an
agreement
between
the
father
and
the
mother
could
not
release
one
or
the
other
of
their
obligation
to
maintain
and
bring
up
their
child.
The
mother
had
means.
She
had
received
$70,000,
as
acknowledged
by
her
in
the
agreement,
and
she
was
receiving
a
considerable
monthly
allowance.
By
agreeing
to
supplement
the
child’s
allowance
if
she
or
the
child,
not
the
father,
thought
it
was
necessary,
she
was
only
doing
her
duty
by
her
child
and
fulfilling
her
obligation
as
provided
by
law.
She
was
not
doing
something
for
the
benefit
or
use
of
the
deceased,
nor
something
which
could
be
a
consideration
or
constituting
a
debt
due
by
the
father.
The
second
purpose
of
the
agreement
is
set
out
in
the
preamble
and
reads:
‘AND
WHEREAS
Mr.
Drummond
and
Mrs.
Drummond
have
one
child
only
issue
of
their
marriage
namely
Georgette
Patricia
Marie
Drummond
.
.
.
Mr.
Drummond
has
agreed
to
pay
such
annuity
and/or
allowance
to
and
for
the
benefit
maintenance
and
education
of
the
child
in
manner
hereinafter
provided
in
full
discharge
of
all
and
every
liability
howsoever
imposed
on
Mr.
Drummond
for
the
maintenance
of
the
child
during
her
minority
.
.
.”?
But
the
agreement
goes
further,
it
provides
the
child
with
an
allowance
for
her
lifetime.
To
that
undertaking
he
was
not
obligated
by
law.
He
was
only
partly
responsible
for
the
maintenance
and
the
bringing
up
of
his
child
during
his
lifetime.
He
agreed
to
pay
the
allowances
in
proportion
to
his
income.
The
whole
scheme
was
based
on
his
income.
They
varied
with
his
in-
come,
increased
or
decreased
with
the
variations
in
the
amount
of
his
income.
I
believe
this
to
be
the
correct
interpretation
of
the
terms
of
the
deed.
This
being
so,
his
personal
income
ceased
on
his
demise
and
his
instructions
and
directions
to
his
executor
to
continue
paying
the
allowances
were
not
based
on
any
legal
obligation
or
debt
incurred
for
full
consideration
in
money
or
money’s
worth
for
his
benefit
or
use.
In
the
deed
it
is
declared
that
its
covenants
and
provisions
will
inure
to
the
benefit
of
and
be
binding
on
the
parties
and
their
heirs,
executors,
administrators,
successors
and
assigns.
How
could
they
be
binding
on
the
heirs,
executors,
administrators
of
Mrs.
Drummond?
Would
they
continue
receiving
the
annuities
and
take
care
of
the
child?
I
can
more
easily
see
how
they
could
be
binding
on
Mr.
Drummond’s
executors
who
would
attend
to
the
management
of
his
property.
The
deed
was
implemented
before
his
death
out
of
his
personal
management
account
and
after
his
death
out
of
his
estate.
The
allowances
were
not
paid
out
of
his
capital
but
of
his
income.
After
his
death,
the
payments
were
made
out
of
his
estate
and
entered
into
a
separate
account.
There
was
no
transfer
of
property
to
guarantee
the
payments
and
no
part
of
the
deceased’s
estate
was
ever
set
apart,
neither
in
the
deed
nor
in
the
will,
for
the
implementation
of
the
undertaking.
It
seems
to
have
been
assumed
that
the
annuities
were
debts
payable
on
a
variable
scale
in
proportion
to
the
income.
So
the
amounts
of
the
deceased’s
income
or
the
revenues
of
his
estate
were
undetermined.
This
being
the
case,
it
would
be
impossible
to
determine
the
capitalized
value
of
such
conditional
annuities
or
allowances
and
to
divert
from
his
succession
any
part
of
his
estate
for
the
payment
of
same.
An
obligation
was
undertaken
but
without
legal
cause
or
consideration.
I
have
read
all
the
references
made
to
me
but
could
find
no
case
cited
in
which
the
facts
had
any
similarity
with
those
established
herein
or
could
have
led
me
to
think
that
the
decisions
would
have
any
bearing
in
the
present
litigation.
I
am
of
the
opinion
that
at
the
time
of
Mr.
Drummond’s
death,
the
capitalized
value
of
the
monthly
annuities
or
allowances
he
instructed
and
directed
his
executor
to
pay
after
the
event
to
his
former
wife
and
to
his
child
was
not
exempt
from
the
taxing
provisions
of
the
Dominion
Succession
Duty
Act.
The
undertaking
to
provide
and
the
payment
of
the
annuities
were
based
on
a
natural
obligation
in
one
case
and
a
non-existent
obligation
in
the
other.
In
neither
case
was
there
the
legal
obliga-
tion
to
incur
or
create
a
debt
or
encumbrance
within
the
meaning
of
the
provisions
of
Section
8(2)
(a)
of
the
Act.
Therefore,
I
find
that
the
capitalized
value
of
the
annuities
provided
by
the
deed
and
payable
after
the
deceased’s
demise
was
not
debts
or
encumbrances
created
bona
fide
for
full
consideration
in
money
or
money’s
worth,
wholly
for
the
deceased’s
own
use
and
benefit,
and
to
be
paid
out
of
his
estate,
and
is
not
deductible
for
succession
duty
purposes.
For
the
above
reasons,
the
Court
confirms
the
Minister’s
assessment
and
dismisses
the
appeal
with
costs.
Judgment
accordingly.
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