ORDE, J.:—The action is brought by the plaintiff, as the surviving executor and trustee under the last will and testament of the late John Curry, against the Municipal Corporation of the City of Windsor, for a declaration that the assessment of the plaintiff in respect of the income of the estate or trust in his hands is invalid, and also for a declaration that secs. 5 and 13 of the Assessment Act, R.S.O. 1914, c. 195, are ultra vires of the Provincial Legislature, for an injunction, and for other incidental relief.
The subject-matter of the action is already pending in another proceeding now before the Courts, arising upon a case stated for the opinion of the Appellate Division by the learned Senior County Court Judge of the County of Essex, upon an appeal to him from the judgment of the Court of Revision of the City of Windsor. By its judgment of the 7th April, 1921, the Appellate Division decided the question as to the liability of the estate to be assessed for income, in favour of the municipality: Re City of Windsor and McLeod (1921) 50 O.L.R. 305. From that judgment an appeal to the Supreme Court of Canada is now pending, but is, I am informed, not to be heard until an appeal to be taken in due course from the judgment in this action is brought before that Court.
The question as to the constitutionality of the sections of the Assessment Act now attacked was not raised in the Appellate Division. Apparently all that was disposed of there was the question whether or not the income in question was assessable by the Municipal Corporation of Windsor within the terms of the Assessment Act. But on his appeal to the Supreme Court of Canada from the judgment the present plaintiff has raised the question of ultra vires.
Whether or not it was open to the Court of Revision, or to any Court sitting in review of its decisions, to deal with the question of constitutionality, may perhaps be a nice point. If that question was open to the Court of Revision or to the Appellate Division, it is doubtless still open to the Supreme Court of Canada if it sees fit to allow the objection to be raised there, though not raised earlier. But the plaintiff, rather than take the risk either that the point is not within the jurisdiction of the Court of Revision or of a refusal by the Supreme Court of Canada to allow the point to be raised at this late stage of the proceedings, has launched this action in order to bring the question squarely before the Court. The defendants by their defence plead the proceedings and judgment in the other action as being a complete defence. Had there been no appeal to the Supreme Court of Canada from the judgment of the Appellate Division, then if the question could have been raised before the Court of Revision or the Appellate Division, that defence would be a complete answer. Transit in rem judicatam. If it were quite clear that the question might have been properly raised in the other proceedings, there would have been good ground for staying this action until after the Supreme Court of Canada had disposed of the appeal now before it, but no such motion has been made; and, while it is quite proper for the defendants to plead the estoppel, if any, created by the other proceedings, it seems to be recognized by both parties that there is sufficient doubt as to the efficacy of this plea to justify the bringing of this action in order that the question of ultra vires may be effectively dealt with in one or other, or both, of the proceedings now pending.
The statement of claim, as already stated, asks for a declaration ‘‘that the assessment for income is invalid on the grounds hereinbefore set forth’’. That prayer is wide enough to include an expression of opinion as to whether or not the income in question was validly assessed under the provisions of the Assess- ment Act. That question was, however, clearly before the Court of Revision, the County Court Judge, and the Appellate Division, in the other case, and is dealt with fully by those tribunals. It is not open to the plaintiff by a separate proceeding to seek another judgment upon the same question. The old principle that questions of exemption or illegality were outside the jurisdiction of the Court of Revision, laid down in Nickle v. Douglas (1874-5) 35 U.C.R. 126; 37 U.C.R. 51, and followed in more recent cases such as Toronto Railway Co. v. City of Toronto [1904] A.C. 809 at p. 816, is, I think, now done away with by the amendment of 1910 embodied in sec. 83 of the Assessment Act: Foster v. Township of St. Joseph (1917) 39 O.L.R. 114, 525. In so far as the plaintiff seeks in this action a declaration as to whether or not the Assessment Act effectively assesses the income in question or the plaintiff in respect of it, he is and will be precluded and bound by the final judgment in the other proceedings.
So that the only question which it is open to me to determine is as to the power of the Ontario Legislature to tax an executor or trustee in respect of income which he receives for and pays over to another person. In saying that that is the only question ogen to me, I wish to guard myself against the inference that I am ruling that it is open to me. It may be that, under the sweeping provisions of sec. 83 of the Assessment Act, the question of legislative power to impose the tax in question may be within the scope of the jurisdiction of the Court of Revision, though there must always be a difficulty in suggesting to a Court, which exists and exercises its powers by virtue of a particular statute, that any part of that statute is beyond the powers of the Legislature. However this may be, I am assuming, by reason of the circumstances under which this action has been brought, as already explained, to deal with the question of ultra vires, though in the final result the Eupreme Court of Canada may decide that it was open for determination in the other proceedings.
The plaintiff contends that secs. 5 and 13 of the Assessment Act, in so far as they purport to impose taxes upon income received by an executor or truste for persons resident out of. Ontario, are beyond the powers of the Ontario Legislature, because the tax is not "‘direct taxation within the Province’’, within the meaning of para. 2 of sec. 92 of the British North America Act.
The opening words of sec. 5 of the Assessment Act are as follows :
(5. All real property in Ontario and all income derived either within or out of Ontario by any person resident therein, or received in Ontario by or on behalf of any person resident out of the same, shall be liable to taxation, subject to the following exemptions : ‘ ‘—
Then sec. 11 declares how taxable income shall be assessed against the persons who derive it, and sec. 12 fixes the municipality in which the assessment is to be made.
Sec. 13 is as follows :
"‘13.—(1) Every agent, trustee or person who collects or receives, or is in any way in possession or control of income for or on behalf of a person who is resident out of Ontario, shall be assessed in respect of such income.
"‘2. Every person assessed under this section shall be assessed at his place of business, if any, or, if he has no place of business, at his residence.’
The objection to the power of the Legislature to impose the tax in question is based upon the argument that the tax is indirect because the tax is assessed against a trustee or executor who is not the person who must ultimately pay or bear it, that person being the non-resident cestwi que trust or beneficiary.
In the present case the assessment is made against the ‘‘ Estate John Curry’’ in respect of $100,000 income. I gather from the statement of income put in as an exhibit in the other proceedings, and printed at page 5 of the case in appeal in the Supreme Court of Canada, which was itself put in as an exhibit in the present case, that this assessment was intended to cover the whole income received by the plaintiff in his capacity of executor and trustee, and that the municipality made no effort to distinguish between that portion of the income which would be payable to residents of the Province and that portion payable to non-residents.
I think it is fairly clear that the Assessment Act did not contemplate this method of assessment in the ordinary case of a person who receives income immediately distributable, for example, between two persons, one resident within and the other without Ontario. As the person resident within Ontario is directly subject to assessment himself, and as he may reside in some other municipality than that in which the agent or trustee resides, the assessment of the whole income against the collecting agent or trustee would deprive the other municipality of its right to collect taxes properly leviable by it. When both trustee and cestui que trust reside in the same municipality, no harm will be done.
The situation is this respect is not so simple in the present case, because of the direction in the will to accumulate a portion of the income and the uncertainty as to the beneficiaries who will ultimately be entitled to the income. If the Assessment Act is to be construed as limiting the power to tax a trustee or executor in respect of such income as he receives for payment or distribution abroad, then as to any remaining income not immediately payable to any person there would be no person who could be assessed, and the income might escape, at all events until it became ultimately payable, when the tax upon the accumulating income might be imposed either upon the resident beneficiary or upon the trustee before payment over to the non-resident beneficiary. The Appellate Division (Riddell, J. dissenting) in the other case, 90 O.L.R. 305, has dealt with this question and has distinguished Re Gibson and City of Hamilton (1919) 45 O.L.R. 458, and it is not open to me to deal with that question here. But I mention this aspect of the case, because the argument that the tax is indirect merely because it is imposed upon the plaintiff as trustee and executor, if sound, would extend not only to the portion of the income in his hands payable to persons resident out of Ontario, but to the portion payable to persons resident within the Province. The question of "‘directness’’ or "‘indirectness’’ has nothing to do with residence. So that, if in the result it should be held that the assessment of a trustee in respect of income ultimately payable to another is ultra vires, while the difficulty might be overcome for the future in respect of the share of the income actually received from the trustee by those beneficiaries who reside in Ontario, by means of a direct assessment upon them, there would seem to be no means whereby the municipality could tax the income directed to be accumulated, because of the non-existence of any person resident in Ontario who could be assessed in respect thereof, until the period of accumulation had expired.
In dealing with the question whether or not the assessment of a trustee constitutes a direct or indirect tax, the matter was treated on the argument as if the tax had been imposed upon the trustee, and because so imposed and because the trustee was entitled to indemnify himself or to collect the tax from the beneficiaries, the tax would necessarily be indirect. But I think this is an entirely erroneous view of the nature of the tax. By sec. 0, real property and income are declared to be liable to taxation. It is property which is subjected to the tax and not persons, and nowhere in the Assessment Act, so far as I am aware, except in the case of business assessments, is any liability imposed upon any one for the payment of taxes except as incidental to the ownership or occupation or control of property in some form, and only in respect of such ownership, occupation, or control. The "business assessment’’ imposed by sec. 10 is perhaps an exception to the general principle that taxes under the Act are levied upon property only; but, even if the business tax is regarded as a tax upon persons, it is imposed with reference to the occupancy of lands and not otherwise.
I need not go over the ground which has been covered so often before, as to what constitutes ‘‘direct taxation within the Province”. The judgment of the Judicial Committee in Bank of Toronto v. Lambe (1887) 12 App. Cas. 575, has established the meaning to be given to the phrase, and the definition has been recently fully discussed and applied by my brother Middleton in Treasurer of Ontario v. Canada Life Assurance Co. (1915) 33 O.L.R. 488.
"A direct tax is one which is demanded from the very persons who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another ; such are the evcise or customs. The producer or importer of a commodity is called upon to pay a tax on it, not with the intention to levy a peculiar contribution upon him, but to tax through him the consumers of the commodity, from whom it is supposed he will recover the amount by means of an advance in price :’’ quoted from Mill’s Political Economy, book V, c. 3, sec. 1, in Bank of Toronto v. Lambe, 12 App. Cas. 575 at p. 582.
That the Legislature has power to impose a direct tax upon property within the Province, both real and personal, and therefore to impose a direct tax upon income as a species of property within the Province, regardless of the residence of the person entitled, is, I think, too clear for argument. The maxim mobilia sequuntur personam has no applicability in matters of taxes where a provincial legislature sees fit, by a clear exercise of its powers, to tax personalty physically situate within the Province, even where the tax is in the nature of a succession duty: Rex v. Lovitt [1912] A. C. 212 at p. 222. If therefore it is within the power of the Legislature to impose a direct tax upon property consisting of income actually earned or derived or brought into this Province, though belonging to or ultimately payable to a person residing outside the Province, is there anything in the manner in which the Assessment Act purports to exercise that power which is ineffective by reason of the failure to exercise the power properly? It is urged that the assessment of the plaintiff (and, for the purposes of this case, the assessment in the name of ‘‘Estate John Curry’ ‘ is treated as in effect an assessment of the plaintiff in his capacity as trustee and executor) in the manner directed by sec. 13 is in excess of the Legislature’s powers in that it imposes upon the plaintiff a liability to pay the tax, for which he must seek to indemnify himself out of the funds in his hands or from the beneficiary, and that such a method of assessing and collecting the tax brings it within the forbidden category of indirect taxation.
There is in the judgment of the Judicial Committee in the case of Cotton v. The King [1914] A.C. 176, a course of reasoning which might lend colour to the argument that a tax imposed upon property, even locally within the jurisdiction, might be an indirect tax if a trustee or other person, not ultimately liable to pay it, is rendered liable in the first instance, but I think a careful reading of that judgment must result in the conclusion that that argument had reference only to that portion of the estate locally situate beyond the boundaries of the Province and to the attempt by the Legislature of Quebec to do indirectly what it could not do directly.
The Cotton case has been recently discussed by the Judicial Committee in two cases, dealt with together, Burland v. The King and Alleyn v. Barthe [1922] 1 A.C. 215. In those cases the Judicial Committee held that the amending legislation which imposed the tax upon the succession, in so far as property outside Quebec is concerned, and which exempts the executor, trustee, or administrator from all personal liability for the duties, has effectively met the difficulty in the Cotton case: see p. 228. It is not to be overlooked that, at p. 227, the exemption from personal liability of the executor, trustee, or administrator was already applicable in so far as property within the Province was concerned. But, as I read these two decisions, I cannot regard them as having decided on way or the other that, where property physically within the Province is made the subject of direct taxation, the mere fact that some person who is entitled to indemnify himself out of the property itself, or as against some beneficiary, is subject to a personal liability in respect of the tax, changes the character of the tax into an indirect one. No one has ever suggested that in taxing land the fact that the taxes are assessed in the name of the trustee or executor in whom it may happen to be vested makes the taxes any the less a direct tax upon the land, notwithstanding the fact that under sec. 94 of the Assessment Act (while the tax is also a charge upon the lands and can be collected by the sale thereof) the taxes can be recovered in an action against the owner or tenant assessed therefor. Sec. 95 renders any person by whom taxes are payable liable to an action for their recovery, and this would, I think, include a trustee or executor under sec. 13, but he is really in no different'position in this regard that if he were assessed as the owner of a parcel of land belonging to the estate.
Apart from the aspect of the case with which I have been dealing, I am strongly inclined to the opinion that sec. 13 has no application to a ease like this at all. The only thing which creates a doubt in my mind is the use of the word "‘trustee’’, but it may be that the word as used there is not intended to include a trustee in whom the estate is vested. The significant words are "‘who collects or receives, or is in any way in possession or control of income for or on behalf of a person who is resident out of Ontario’’. I have italicised the words "‘for or on behalf of’? because I think they furnish the key to the real scope of the section, namely, that it is intended to cover cases of agency or cases analogous thereto. An executor or trustee (in the real sense) does not receive or collect or control income "‘for on on behalf of’’ anybody. By virtue of his status and his legal ownership of the estate or fund in his hands, the income which he receives or collects, is, qu& income, his. See In re McMaster Estate Assessment (1901) 2 O.L.R. 474. He alone can sue for its recovery from the persons liable to pay, and the cestui que trust or beneficiary would have no status if he tried to collect direct. That the trustee is under a liability to distribute the income when collected to other persons does not rest upon any principle of ownership in or right to the income (other than an equitable one) prior to its collection by the trustee. There may be several beneficiaries, some resident and some non-resident, among whom the income, when collected, is distributable after deducting the expenses of collection or administration. How is it possible to say what part of the income so received belongs to one or other of the beneficiaries until the trustee or executor has allocated it? The McMaster case clearly supports the view that the income for purposes of taxation is the income of the trustee and not that of the beneficiary. But income collected by an agent would be the property of the principal both before and after collection. The agent would sue for it in the name of the principal, or, even if there might be a right to sue vested in the agent, the principal could in most cases displace the agent and sue in his own name.
If this view is the correct one, then there would be no room for argument that the assessment of an executor or trustee in a case like the present is a species of indirect taxation, because the income, being collectable by him and by him alone, is directly taxable against him, whether the tax is regarded as a tax imposed upon the property or upon the person or upon both.
For these reasons, I am of the opinion that sees. 5 and 13 of the Assessment Act are not ultra vires the Legislature of Ontario, and that the action should be dismissed with costs. The costs incurred by the Attorney-General for Ontario ought also to be paid by the plaintiff.