FRASER, J.:—This motion is brought by Canada Permanent Trust Company and Beverley Chodikoff, executors and trustees of the will of the deceased, Marvin Edwin Chodikoff. For convenience I will refer to the executors and trustees as the trustees and to the late Marvin Chodikoff as the deceased.
The motion is brought for the determination and declaration of the rate of Ontario succession duty to be applied with respect to certain dispositions made by the deceased during his lifetime.
The respondent, the Minister of Revenue of the Province of Ontario submits that the dispositions are dutiable at the rate fixed by Section 7(5) of The Succession Duty Act, R.S.O. 1960,
c. 386, to which I will refer as the Act, as amended being the rate applicable to dispositions to strangers. The trustees submit that the appropriate rate is the lower rate made applicable by Section 7(1) of the Act to dispositions to certain specified persons closely connected to the deceased by blood or marriage.
The deceased died testate and domiciled in Ontario on February 2, 1965. Probate was granted to the said Beverley Chodikoff, the widow of the deceased, and to Leon Petegorsky, father of the said Beverley Chodikoff, the executors named in the will of the deceased. For convenience I will refer to Leon Petegorsky as Petegorsky.
Petegorsky died May 31, 1966, and pursuant to the provisions for that purpose contained in the will, double probate of the will of the deceased was granted August 16, 1966 to the said Beverley Chodikoff and the Canada Permanent Trust Co.
The deceased in August 1959 incorporated a holding company in the name of Bemar Investments Limited (to whom I will refer as Bemar). It was a private company and was taxed under the Income Tax Act, R.S.C. 1952, c. 148, as a personal corporation. It had two classes of shares—class ‘‘A’’ and class “B”, both with a par value of $10 per share. The letters patent provide, inter alia, that on any dissolution or winding-up of the company or any division of its capital that, after payment of certain dividends set out in the letters patent, the holders of the class “B - shares will receive payment with respect to their shares at par and that the balance of the assets will be divided pro rata among the holders of the ‘‘A’’ shares. Thus the entire benefit of any increase in assets went to the holders of the class “A” shares. For present purposes there is no need to set out the various other privileges and rights attached to each class of shares.
By indenture of trust dated December 15, 1959, between Petegorsky as settlor and one Beament as sole trustee, Petegorsky established a trust to which I will refer as the ‘‘ Chodikoff Trust’’, for the benefit of the said Beverley Chodikoff and of the issue of herself and the deceased.
On December 16, 1959 Beament, as trustee of the Chodikoff Trust, subscribed for 10 class “A” shares of Bemar at par which were paid for and issued. as fully paid and non-assessable. At the same time the deceased personally subscribed for 997 class “B” shares at par and also paid for the incorporators’ three class ‘‘B’’ shares and accordingly became the owner of 1,000 class “B” shares being all the issued class “B” shares of that company.
By deed of assignment dated January 27, 1960, the trusts and the assets of the Chodikoff Trust were transferred to Toronto General Trust Corporation, the predecessor of Canada Trust Co., as successor trustee of those trusts.
From December 16, 1959 to February 2, 1965, of the issued shares of Bemar, 10 of the class “A” continued to be registered in the name of and beneficially owned by the sole trustee of Chodikoff Trust and 1,000 class ‘‘B’’ shares continued to be beneficially owned by the deceased and registered in his own name or in that of his nominees.
Prior to the incorporation of Bemar the deceased in January 1956 had caused to be incorporated a corporation named Mark Richmond Real Estate Limited, to which I will refer as Mark. Mark was a private company with a capitalization of 300 preference and 40 common shares all of a par value of $100 each. Mark purchased and developed real property and managed it as a commercial rental property.
In the lifetime of the deceased no preference shares of Mark were issued and up to June 29, 1960, only three common shares had been issued — one share to Beverley Chodikoff, one share to the deceased and one share to a nominee of the deceased for qualifying purposes but which was beneficially owned by the deceased. On June 29, by supplementary letters patent, each of these common shares was divided into 100 common shares with a par value of $1 each, leaving the said Beverley Chodikoff the owner of 100 common shares and the deceased the beneficial owner of 200 common shares of which 100 were registered in the name of his nominee.
The parties filed an agreed statement of facts and the facts set out above have been taken from that statement of facts and schedules attached thereto.
Paragraphs 12 to 15 of that statement read as follows:
12. On the 19th day of July, 1960, the Decedent:
(a) sold and transferred 198 common shares of Mark to Bemar at a price of $1.00 per share; and
(b) caused Bemar to subscribe for 500 common shares of Mark at a price of $1.00 per share and caused Mark to allot and issue 500 of its common shares out of its treasury to Bemar pursuant to such subscription,
and Bemar paid for these shares accordingly.
13. On the said 19th day of July, 1960, the common shares of Mark had a fair market value in excess of $1.00 per share and accordingly the above described transactions on that date constituted dispositions by the Decedent under the provisions of the said Succession Duty Act and such dispositions have a total value for the purposes of the said Act of $119,358.00.
14. No succession duty statement has as yet been served by the Minister of Revenue under either subsections (1) or (2) of Section 34 of the said Succession Duty Act, but the Succession Duty Branch has supplied to the solicitors for the Applicants a Statement of Succession Duty dated the 15th day of April 1969, and an amended Statement of Succession Duty dated the 30th day of July, 1969, copies of which are annexed hereto as Schedule “D”, and which have been the subject of protracted negotiations between the solicitors for the Applicants and officials of the Succession Duty Branch. In those Succession Duty Statements, the dispositions referred to in paragraph 13 above are brought into tax as dispositions to Bemar at the rates prescribed by subsection (5) of Section 7 of the said Act and not as dispositions to the beneficiaries of the Marvin Chodikoff Number One Trust at the rates prescribed by subsection (1) of the said Section 7.
In the course of the argument it was agreed that of the $119,358 valuation put on the dispositions in question $33,858 was referable to the transfer of 198 shares of Mark from the deceased to Bemar and that $85,500 was referable to the issue of 500 treasury shares of Mark to Bemar, and that in the event of it being decided by me, or by a higher Court, that a different rate of duty was applicable to each of these two dispositions an assessment would be made accordingly.
With respect to the 198 shares of Mark transferred by the deceased to Bemar the question is whether that disposition falls under Section 1(f) (i) as one by which the deceased passed property to Bemar or whether it is a means by which the deceased benefited the cestui que trust of the Chodikoff trust and therefore falls under Section 1(f) (ii).
The Act is elaborate and complex, partly because of the necessity of avoiding the imposing of any tax that might be held to be indirect and therefore ultra vires, and partly to ensure that the taxes intended to be imposed are collected notwithstanding the ingenuity of reluctant taxpayers and their professional advisers.
It is fundamental that the object of the interpretation is to determine what intention is conveyed by the language used and that to construe any particular part regard must be had to the Act as a whole. I need only refer to Maxwell on Interpretation of Statutes, llth ed., pp. 1, 2, 18 and 19 and cases there cited. It is also fundamental that taxing Acts are strictly construed and that being so that tax must be imposed by clear and unambiguous language. In case of doubt the construction most beneficial to the subject is to be adopted: see Maxwell, supra, at p. 278 et seq,, and cases there cited.
Speaking very generally the Act seems intended to impose, in so far as the Province has power to do so, succession duty with respect to all transfers of material benefits passing from a deceased person to those whom he seeks to benefit. The power of the Province may depend on the situs of the property or the domicile of the deceased. Accordingly, under some sections the duty is levied on property and in others on persons. The rate of duty depends on the size of the estate, the relationship of the beneficiary to the deceased, and the value of the property passing to or the benefit conferred on the beneficiary. Again speaking generally, what the respondent seeks is to apply the Act so that where a disposition has been made directly to a member of a family of a deceased one rate of duty applies but where a benefit of equal value is conferred by means of a corporation a different and higher rate applies. While it. is within the competence of the Legislature to so provide, having regard to the purpose and scheme of the Act as a whole the provision in question should not be construed to reach such a result unless the language is clear and compelling.
For present purposes the relevant part of Section 6 is clause (c). Under it the duty is to be levied on the person to whom the disposition is made. From the wording of that clause and also of the other parts of Section 6 it is apparent that those clauses of Section 6 are mutually exclusive and that it is intended that with respect to one matter duty will be levied only once on the person or the property as the case may be.
A literal reading of Section 1(f) (i) could bring the transfer of the 198 shares of Mark to Bemar within it. However, an examination of that clause and of the other parts of Section 1(f) lead to the conclusion that a distinction must be drawn between the means used and the end intended to be achieved. Normally, it is intended that some natural person or persons will be benefited. Its various clauses seem intended to catch any disposition notwithstanding the use of corporations or trustees as instruments: or means.
Although The Interpretation Act, R.S.O. 1960, e. 191, s. 30, paragraph 28, provides that a person includes a corporation, unless the context otherwise requires; in my view, in the instant case, the context does otherwise require. The whole purpose of the Act is to tax certain types of successions and dispositions which are made for the benefit of natural persons. The corporation is only a means to that end and the use of ‘by any means”? in the Act is intended to cover such arrangements. I am, therefore, of the opinion that in the sections under consideration the context does require. that person not include a corporation. The law is clear that a corporation is a separate entity : Salomon v. Salomon & Co., [1897] A.C. 22, [1895-99] All E.R. Rep. 33; Macaura v. Northern Assurance Co. Ltd. et al., [1925] A.C. 619; Guarantee 00.- of North America et al. v. Aqua-Land Exploration Ltd., [1966] S.C.R. 133, 54 D.L.R. (2d) 229. In the course of the argument there was some discussion about “piercing the corporate veil’’. In this connection counsel for the trustees placed considerable reliance on certain dicta of Lord Denning, M.R., in the recent case of Littlewoods Mail Order Stores Ltd. v. McGregor, [1969] 3 All E.R. 855 at p. 860.
The doctrine laid down in Salomon v. Salomon & Co. Ltd., [supra] has to be watched very carefully. It has often been supposed to cast a veil over the personality of a limited company through which the courts cannot see. But that is not true. The courts can and often do draw aside the veil. They can, and often do, pull off the mask. They look to see what really lies behind. The legislature has shown the way with group accounts and the rest. And the courts should follow suit. I think that we should look at the Fork company and see it as it really is—the wholly-owned subsidiary of the taxpayers. It is the creature, the puppet, of the taxpayers in point of fact; and it should be so regarded in point of law.
However, the other members of the Court gave separate reasons agreeing in the result but did not specifically adopt the words quoted.
In the case just referred to and in 0.1.13. v. Land Securities Investment Trust, Ltd., [1969] 2 All E.R. 480, which it followed, the question before the Court was whether certain payments were properly deductible expenses under an English taxing Act.
In Tunstall v. Steigmann, [1962] 2 All E.R. 417, the Court of Appeal held that a person who had incorporated a corporation for her own advantage could not refuse to accept the consequential legal disadvantages.
In my view the trustees cannot disregard the corporate entity created by the deceased under whom they claim nor can they require anyone else to do so. However, I am also of the opinion that this is of little moment for present purposes as the instant case falls to be decided by determining the proper construction of the Act and its application to the facts.
In the case at bar the natural persons who benefit are the members of the family of the deceased who are cestuis que trustent of the Chodikoff Trust. They are the persons the deceased intended to benefit and I am of opinion that they are benefited and that Section 1(f) (ii) is the subclause under which the tax must be levied. Section 1(f) (i) is inapplicable as no property passed to anyone but Bemar and Bemar was only the ‘‘means’’.
The issue of 500 treasury shares of Mark to Bemar does not involve any passing of property by the deceased or to the natural persons intended to benefit. Even had I been prepared to hold that this issue of shares falls under Section 1(f) (iiia) [enacted 1962-63, c. 135, s. 1], for reasons similar to those already stated in connection with transfers of the 198 shares, I would have found it necessary to hold that the persons to whom the dispositions were made were the cestuis que trustent of the Chodikoff Trust. However, although as to this I have some doubt, I am of the opinion that this disposition falls under Section 1(f) (ii) rather than under Section 1(f) (iiia) and that the latter is more apt to catch transactions where shares are issued directly to the person intended to be benefited or to a trustee or nominee for him. For present purposes, as I am unwilling to accept Bemar as the taxable beneficiary, it is immaterial whether Section 1(f) (ii) or Section 1(f) (iiia) is the appropriate subclause. In either case the rate of duty applicable is the same.
Where, as here, the wording is not clear it is also permissible to look at the result which will follow from any possible construction of the Act. To apply Section 30, paragraph 28 of The Interpretation Act in this case as asked by the respondent would be entirely out of harmony with the view I have expressed as to the purpose and scheme of the Act. It would result in the rate of duty applicable being in part dependent on the means or instrument used to transfer the property or benefit rather than on the relationship of the beneficiary to the deceased. It might also result in a case such as the present in duty being levied on a corporation which received property or benefit and the natural person who was the intended beneficiary also paying duty on the increased value of the shares. That is only one of a number of anomalies or problems which would result if effect was given to the argument of the respondent.
For the reasons indicated I determine and declare that both of the dispositions in question are taxable at the rates prescribed by subsection (1) of Section 7 and not those prescribed by subsection (5) of that section. The applicant is entitled to its costs after taxation thereof. An order may issue accordingly.