MEREDITH, C.J.C.P.:—Unfortunately the case of Re Gibson and City of Hamilton, 45 O.L.R. 358, 48 D.L.R. 428, decided nothing except that, on the facts of that case, there had not been a valid assessment. Two of the four Judges who considered the questions which were raised in it thought that the income then in question was not assessable, and therefore that "the appeal should be allowed” on that ground; another of them thought that the income was assessable, but that it hand not been assessed in the proper municipality, and that, on that ground, the appeal should be allowed; and the fourth Judge merely ‘‘agreed in the result:” so manifestly that case is not an authority for the contention in this case on either side, and it is our duty on consider the questions asked in this stated case, and to give effect to our own conclusions regarding them.
The first question is: whether the Curry estate can be assessed in respect of the income in question.
It is pure income, of which the estate gets the full benefit— except as to $14,000, $8,000 of which is payable now to a legatee who resides in Ontario, and the rest is payable likewise, except that it is payable to a legatee who resides out of Ontario.
Why should it not be taxable in the hands of the testator’s representatives just as it would if the testator were living and had it in his own hands?
It is admitted for the estate that it can be taxed in respect of the $14,000; but as to the rest it is said, by the executor, that it cannot, because no one is beneficially entitled to it now, and also because it was not received by the trustees by or on behalf of a person resident out of Ontario; and the learned County Court Judge who stated this case, deeming that he was bound by the ease of the Gibson estate to do so, gave effect, as far as he could, to that contention; but the case is brought here for further consideration.
If an estate cannot be taxed, except in respect to income received for a person residing out of Ontario, then, through some extraordinary stupid clerical mistake, the Assessment Act fails in its manifest purpose, and causes manifest injustice, in a matter of much greater moment; all of which, it may be added, the executors have admitted, and have given effect to their admission, in consenting to be assessed and taxed in respect of $8,000 held by them for the legatee residing in Ontario.
But no such mistake has been made. The purpose of the Act is the taxation of all property which and persons whom the provincial Legislature has power to tax, except that property, and those persons, expressly exempted by its provisions.
The general words (sec. 5 of the Assessment Act, R.S.O. 1914, ch. 195) are:
“All real property in Ontario and all income derived either within or out of Ontario by a person resident therein . . . .”
Pausing there, it could not be reasonably said—and indeed it has not been said at all—that the income in question does not come within those words.
There is no reason why it should not be taxed; it is clear income "‘derived’’ within Ontario; and has been received by persons—the executors—resident in Ontario; and it was received by persons who cannot give the Province the benefit of it by expending it in the Province, but who are bound to put it to uses least beneficial to the public; they are bound to hoard it for a number of years ; and so it is income which especially should be taxed.
The words of the Act following those which were read are: "‘or received in Ontario by or on behalf of any person resident out of the same . . .’’—words which seem to have created the difficulties which this case is said to present.
But they create no difficulty unless they are read as curtailing the preceding words, when, in truth, their purpose is to extend them.
The earlier words covered every person—"‘person’’ having the very wide meaning given to it in the Interpretation Act—resident in Ontario; but, being so limited as to residence, it was necessary to add words so as to bring non-residents into the taxation-net : and so, by the later words, all non-residents who, directly or through any other person, received income in Ontario, were made also liable to taxation upon that income.
Nothing can reasonably be said against the taxation of the resident ; to exclude him and include the non-resident should be manifestly unjust if it could be held to be legal. Provinces have power to impose only ‘‘direct taxation within the Province”, for a specific purpose. But, when a non-resident is taxable, there is always this fact to be borne in mind: that he is liable to taxation, and is pretty sure to be taxed, and taxed heavily, on the same income, where he resides—double taxation. So that the taxation of a non-resident, and the exemption of a resident, in respect of the like income, should be an absurdity that no legislative body could have intended to enact ; and I could find no excuse for saying so, if I should say that the Ontario Legislature has so enacted.
Though the point is not raised, yet, as it illustrates that which I have said, in my opinion: the legatee who is a non-resident was, under the latter part of the section of the enactment which I have read, properly taxed through the estate; but the resident legatee, being absolutely entitled to the legacy immediately, should have been taxed directly. These differences account for the used of the word "‘received’’ in the one case and "‘de- rived’’ in the other. In the case of the agent for the non-resident person, the money must have been received by him; in the case of the resident principal it is enough if it is "‘derived’’ in Ontario, the source of derivation of the income must be Ontario; not the destination as in the other case. Properly it is enough if the principal is entitled to the income whether he chooses to receive it or not. But, properly, it is not enough as to the agent, it is not his tax; be can properly be taxed for another only when the other’s money, out of which the tax can be paid, has come into his hands.
This is further indicated in sec. 13 of the Act; which also provides for the place of such non-resident income taxation; it is to be at the place of business of the receiver om the income; in this case Windsor, where the business of the Curry estate is carried on.
If the income in question is not taxable, then any one and every one can by a very simple device escape all taxation upon all such income.
It is easy to create a trust, of all the taxable income of the persons creating it, under which, after any period that may suit the evader, the accumulated fund is to be paid to him, or, if he is not living, as his will provides; in the meantime he may enjoy himself upon his income that is not taxable and upon so much of his capital as he may see fit to devote to that purpose. And such periods may be renewed, to continue the purposes of the trust without any kind of inconvenience to its creator, or disturbance of its effect.
The income would be received by the trustee for an unknown, or uncertain, person or persons, and not for a person resident out of Ontario : very like this case.
Being unable, therefore, to find anything in reason, or in the Act, indicating that the income in question should not bear its burden as other incomes must; I answer the first question: Yes.
As to the second question: the income in question is not ‘‘rent or other income derived from real estate’’, nor is it exempted ""interest on mortgages:’’ it is interest upon money due from a debtor to a creditor : that the debtor cannot get a deed of the land he has purchased unless he pays it, cannot make it anything but ordinary income, not derived from a mortgage or from rent or real estate, but from money due on a contract to pay it.
I therefore answer this question: No.
Treated as an appeal, and it is so named in the Act, which provides for it, the Assessment Amendment Act, 1916, the appeal should be allowed, with costs.
LENNOX, J.:—This matter comes into this Court by way of appeal, upon a stated case, from the decision of the learned Judge of the County Court of the County of Essex, who held, upon the authority of Re Gibson and City of Hamilton, 45 O.L.R. 458, 48 D.L.R. 428, that the income, except as to $14,000 thereof, presently payable to the beneficiaries, is not assessable. I will postpone the consideration of the Gibson decision until I have, unaided, fromed the best opinion I can of the relevant provisions of the Assessment Act, R.S.O. 1914, ch. 195.
The deceased John Curry, until the time of his death, in May, 1912, was domiciled in the city of Windsor, and at his death all his estate, whether he purported to dispose of it by his will or not, immediately vested in his personal representatives, of whom the respondent, James Barber McLeod, was one, and is now the sole survivor, by force of the Devolution of Estates Act, R.S.O. 1914, ch. 119, sec. 3. Mr. McLeod is in a double sense the representative of the deceased and his estate, that is, he is, as he describes himself, the sole surviving executor of the will and trustee of the estate of the deceased, and he is a trustee by force of the Act, sec. 3, without being named by the testator. He is the person seized or possessed of the estate ; and, for so long as any part of the estate remains undistributed and he retains his office, he takes the place of his testator, and is the person to be assessed, from time to time, in respect of all undistributed portions of the estate to the same extent and with the same effect as the deceased, if he were still alive, would be for property remaining in his hands.
Sec. 22 of the Assessment Act, defining the "‘Duties of Assessors’’, does not permit an assessment to be made "‘against the name of any deceased person’’, but provides that it shall be made against the name, as here, of the person who should be assessed ‘‘in lieu of the deceased”, if the name of the personal representative can be ascertained, and, if not, ‘‘he may enter instead of such name, the words ‘Representatives of A.B., deceased’ (giving the name of such deceased person) :’’ sub- sec. 1(h) of sec. 22.
Subject to specified exceptions which do not affect this appeal (except subsec. 21, later referred to), sec. 5 enacts that ‘‘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 out of the same, shall be liable to taxation’’. With this section is to be read sec. 13, which provides: (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 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.”
Of the exemptions provided for by the paragraphs of sec. 5, there is only one suggested, or that could be suggested, as possibly applicable, namely para. 21, "‘Rent or other income derived from real estate, except interest on mortgages? ‘ This touches only $13,873.34 of the $86,310.57 net income in question. It is income received as interest on the outstanding purchasemoney of the land sold by the testator or his estate. It is suggested that, even if the other income is assessable, this, at all events, is exempt, and we are directly asked if it is not so. I may as well dispose of this question by saying now that, in my opinion, it is exactly upon the same plane as the other income. If balances of purchase-money are to be regarded as in the nature of a mortgage—and such moneys certainly constitute an equitable lien upon the land as against the vendees at least— it is not exempt, for interest on mortgages is expressly excepted from the exemptions of para. 21. Without that, however, the interpretation clause, sec. 2(e), affords a conclusive answer: "‘Income . . . shall include the interest, dividends or profits directly or indirectly received from money at interest upon any security or without security, or from stocks, or from any other investment, and also profit or gain from any other source.’’ The answer to this second question should be : No.
I interpret sec. 5 as imposing taxation on: (1) income of, or payable to, a resident of Ontario (a) from a source within the Province, or (b) from a source outside the Province; as, for instance, in the latter case, a resident of Ottawa carrying on a business or having investments in Hull, or a resident of Windsor having a similar source of revenue or income in Detroit; and
(2) income of an outsider, say a resident of Hull, or Detroit, or China, if such income is (a) received by the outsider personally in Ontario, or is (b) received by or on behalf of such outsider by his agent or representative in Ontario. In both cases I interpret “‘received’’ as the equivalent of, and, where necessary, including, ‘‘enjoyed, earned, obtained, acquired’’, and other like expressions; and I would not interpret this part of the section in the interest of the tax-evader, or in a way that would enable the person by whom the income was earned or to whom it accrued in Ontario, or his agent or representative, by crossing the bridge to Hull, or the ferry to Detroit, and deferring the actual receipt until he had retreated across the provincial boundary, to escape from payment.
The basis of fact upon which the learned County Court Judge rests his decision is that: ‘‘Under the provisions of the will the balance of the . . . net income, together with that of previous and subsequent years, is to be accumulated by the trustees for a period of 21 years, commencing on the llth May, 1912, and expiring on the 10th May, 1933, whereupon the accumulated trust fund is to be divided amongst persons at present unascertained, and whose rights and title will depend on the circumstances at the time fixed for the said division.’’ Well, how does the uncertainty help the respondent ? The answer is obvious and unanswerable: it does not help him, for there is in the statute no exemption by reason of uncertainty of ultimate destination. There are exceptions provided for by paragraphs of sec. 5, but this is not one of them, and the statute says that "‘all income”, that is, all income of the statutory description, "‘shell be liable to taxation’’, and there is no difficulty in the way. The will provides that the business of the estate shall be carried on and the earnings capitalized and accumulated, and the interest in effect compounded for 21 years after his death by the testator’s alter ego, the respondent, the trustee under his will, the statutory trustee under the Devolution of Estates Act, and the ‘‘ personal representative’’ pointed out as the taxable party by the Assess- ment Act, as I have said.
It would be unjust to suggest that the provisions of the will were intended as a device to evade payment of a fair and ratable contribution to the common burden—the basic and indispensable condition of organized society—but, all the same, the method adopted, if successful and generally followed, as it would be, would inevitably undermine our whole system of equal taxation, and subject the poorer classes to intolerable burdens. In principle, it would be the same if, avoiding the danger zone of perpetuities, the testator had tied up the property for lives in being plus 21 years, or, in all, say for about a century. The law does not contemplate or sanction a break in the continuity of ownership. The chain of succession is sometimes by implication only, as, for instance, an heir en ventre sa mère, or under the devolution of all property, in this Province, upon the personal representative, although none has been named in the will, or there is no will. All the same, the moment it happens that, in contemplation of law, there is no one seized or possessed, and theoret
ically enjoying or entitled to its incidents, and subject to its obligations, the property passes to the Crown.
Well, then, what happens in this case? This has happened, that until the last moment of the 21 years this part of the testator’s estate has not been disposed of; until the last moment it is uncertain whether any of the conemplated objects of bounty will take any of it, until then it is legally possible that it may ultimately go to the right heirs of the testator; and until then the legal ownership is vested in the respondent as nominated and statutory trustee thereof, with all its rights and incidental advantages—in accordance with the terms of the will—and subject to all the municipal obligations of seisin or possession and control, and, as I interpret the statute—without for the moment adverting to decisions—subject to the inconvenience of assessment, the common burden of taxation, and the obligation to pay. Still, keeping to the statute, and without extraneous aid, why should I think otherwise, how does the uncertainty aid the respondent? To my mind it emphasizes the reason and the need of the law as I understand it to be. I admit I am not greatly concerned as to who has the best of it, in the over-subtle argument as to the beneficiaries in or out of Ontario. There are no ascertained beneficiaries for the present, and consequently for the present there are no beneficiaries—there are persons who, in certain contingencies, may be benefitted after the 10th May, 1935, or they may not be—nobody knows. It is of no consequence, but, if these are existing persons, they are either "within Ontario” or they are not, and the statute takes care of both classes.
It was, however, argued that the decision of this appeal turns upon the conclusion come to in Re Gibson and City of Hamilton, 45 O.L.R. 458, 48 D.L.R. 428. In that case the testator’s domicile was at Beamsville. He had never lived in Hamilton, and of the five trustees, two only resided in that city, two in Toronto, and one in Winnipeg. The income assessed had been actually received by the trustees resident in Hamilton, and this appears to have been the only foundation upon which the municipality could claim the right to assess. By the terms of Mr. Gibson’s will, no one was presently entitled beneficially to the income assessed, nor could it be determined, until a future time, who would become beneficially entitled. Upon this latter point the circumstances are much the same as here. Upon appeal the learned Judge of the County Court of the County of Wentworth affirmed the right of assessment. An appeal was taken to this Court. The questions stated for the opinion of the Court were: (1) Was this income assessable anywhere? (2) If so, was it assessable in Hamilton? The learned Chief Justice of the Exchequer held that it was not assessable at all, and in this judgment Mr. Justice Riddell agreed. Mr. Justice Clute, on the other hand, held that the income in question was assessable in the municipality where the testator resided and carried on his business, but, as he did not reside or carry on business in the city of Hamilton the income was not assessable there; and in the result of this judgment Mr. Justice Sutherland agreed. I agree with the learned Chief Justice presiding in this Court that we are not bound by the decision of the Gibson case. It does not apply here, and, with the greatest respect for the opinion of the two distinguished and experienced Judges who held that the income in that case was not assessable at all, I have come to the conclusion—though necessarily with hesitation in the face of eminent opinion to the contrary—that the income in question is assessable and taxable. The Gibson case, as I understand it, only decides that, having regard to the circumstances there, the income was not assessable in Hamilton. In this case the testator was domiciled in Windsor, and his estate, and its continuing activities and money-making, and the sole trustee, are all in that municipality.
I would allow the appeal.
LATCHFORD, J., concurred.
RIDDELL, J.:—I am of opinion that this case is wholly covered by Gibson’s case, 45 O.L.R. 458, 48 D.L.R. 428, and would dismiss the appeal.
Appeal allowed.