Re Carr, [1948] CTC 68

ROACH, J.A.:—By a policy of insurance issued on the 8th day of October, 1942, the Manufacturers Life Insurance Company insured the life of the late Arthur W. Carr in the principal sum of fifty thousand dollars, the policy being payable to the estate of the insured. The insured effected the policy and at all times paid the premiums thereon.

By an instrument in writing dated the 4th day of December, 1942, entitled "‘Designation of beneficiary’’ the insured appropriated and designated the sum payable under that policy on his death as follows:

"‘My wife Jane Ripley Carr and children and grandchildren surviving at the date of my death shall be the preferred beneficiaries of such policy and I direct that the entire proceeds of such policy together with any dividends thereon shall be payable to”

the executors and trustees of his will

‘‘to be held by them as trustees of my insurance trust in trust for my said wife, children and grandchildren upon such terms, conditions and provisions as by instrument in writing of even date I am setting forth.’’

By that instrument he specifically exonerated the insurance company from any liability or responsibility to see the application of the proceeds of the policy and directed that the insurance company should be fully discharged upon paying such proceeds to his trustees.

By another instrument in writing bearing date the 4th day of December, 1942, the deceased declared the trusts upon which his trustees should hold the proceeds of the policy. For the present purposes it will suffice to say that by such declaration the income to be earned by the proceeds of the policy in the hands of the trustees is payable to his wife, children and possible grandchildren in equal shares and subject to certain conditions and contingencies not here material and eventually the corpus is to be paid to the children and the children of any deceased child in equal shares. It is therein expressly provided that the periodic payments in favour of the wife or children or grandchildren shall not be commutable.

The late Arthur W. Carr died on the 17th day of November, 1945. The proceeds of the policy were paid in due course to his trustees. The amount paid to the trustees was $50,586.69, the excess over $50,000.00 being dividends on the policy. Under date June 17, 1947, the Treasurer for the Province of Ontario caused a statement of succession duties payable to be served pursuant to sec. 31 of the Succession Duty Act 1939. In that statement succession duties were computed on the present value of the income from the insurance moneys payable to the widow and the three children who had survived the deceased and on the present value of the remainder in such insurance moneys payable to each of the three children. The total of those present values therefore is the total of the moneys paid by the insurance company to the trustees and the duties thereon have been accordingly allocated. Under date July 11, 1947, the executors of the estate of the deceased served a notice of appeal upon the Treasurer of the Province of Ontario objecting to such assessment upon the grounds that by virtue of sec. 4(1) (J) of the Succession Duty Act, the payments to the wife and children under the circumstances which I have hereinbefore related were exempt from succession duties. The assessment was confirmed by the Provincial Treasurer on July 16, 1947 and notice of dissatisfaction served by the executors on August 12, 1947.

In due course the appeal was heard by the Honourable Mr. Justice Barlow and by his judgment dated the 9th day of January, 1948, the appeal was dismissed. From that Judgment the executors now appeal to this Court.

The charging section of the Succession Duty Act is sec. 5, reading in part as follows:

" " Subject to sections 3 and 4, on the death of any person whether he dies domiciled in Ontario or elsewhere,

"‘(a) where any property situated in Ontario passes on his death, duty shall be levied on such property in accordance with the dutiable value thereof. ‘ ‘

Sec. 1(p) provides that—

‘ Property passing on the death of the deceased’ . hall include,—

"‘(ii) any annuity, Income or other interest purchased or in any manner provided by the deceased either by himself alone or in concert or by arrangement with any other person to the extent of the interest therein accruing or arising on the death of the deceased:

(iii) that portion of the money payable as a result of the death of the deceased under a contract of insurance as is in the same ratio to the whole that the amount of the premiums paid by the deceased on such contract bears to the total amount of the premiums paid.”

Sec. 4(1) provides that—

"‘No duty shall be levied on any of the following property, nor on any person to whom there are any transmissions of any of the following property, with respect to such transmissions, nor to any person to whom any of the following dispositions are made, with respect to such dispositions, and such property and dispositions shall not be included in the aggregate value nor included for the purpose of determining any rate of duty,—

"" (i) any non-commutable annuity, income or periodic payment effected in any manner other than by will or testamentary instrument and paid for by the deceased during his lifetime, and paid to or enjoyed by the wife or dependent father or mother or any dependent brother, sister or child of the deceased after the death of the deceased, to the extent of $1,200 per annum with respect to any one person and to the extent of $2,400 per annum in the aggregate.”

It is plain to me that the moneys paid by the insurance company came within sec. 1(p) (iii) and that the exempting section can have no application to the facts of this case. The deceased in his lifetime did not pay for an ‘‘annuity or income or periodic payment”. What he paid for was the benefit under the contract of insurance, the whole capital thereof, together with dividends, being payable in a lump sum to his trustees on his death. What he paid for his trustees received. His direction to them that upon receipt of the proceeds of the policy they should invest the same and thereafter make periodic payments, first of income and later of capital, cannot possibly have the effect of changing the specie of that which he paid for in his lifetime. There is no ambiguity in section 4(1) (j) and the facts of this case simply do not come within that section.

During the argument reference was made to the judgment of the House of Lords in Barclay’s Bank Limited and others v. Attorney-General, [ 1944] A.C. 372, and counsel for the appellants and for the respondent each relied on it. The question there was whether estate duty on certain policies of life insurance was exigible under sec. 3(1) (c) of the English Finance Act 1894, which provided that property passing on the death of the deceased and subject to death duty included, inter alia, certain property defined by reference to sec. 38(2) of the Customs and Inland Revenue Act, 1889. Under the 1889 amendment the charge extended to " money received under a policy of insurance effected by any person . . . on his life where the policy is wholly kept up by him for the benefit of the donee. . . .” It was held that in the circumstances of that case the policy had not been "‘wholly kept up by the deceased” and, as I read the judgment, for that reason the proceeds of the policies did not come within sec. 2(1) (c) as the Attorney-General had contended. Here there is no controversy as to who paid the premiums so that actually what was decided in the Barclay’s Bank case is not in controversy here.

The appeal should be dismissed with costs.

Appeal dismissed.