FERGUSON, J.A.:—The assessment was made in October, 1923, for taxes payable in 1924. In prior proceedings between the same parties, in reference to an assessment of McLeod by the city corporation in respect of the income received in 1920, it was determined that the Assessment Act, R.S.O. 1914, c. 195, as it then stood, did not provide for the assessment of McLeod in respect of income received and to be retained by him for unknown or unascertained persons: McLeod v. Windsor [1923] 3 D.L.R. 550; [1923] S.C.R. 696.
Concurrently with his appeals under the Assessment Act in reference to the assessment made in 1920, McLeod prosecuted an action against the corporation of the City of Windsor in which he sought to have it declared that sees. 5 and 13 of the Assess- ment Act imposed an indirect tax, and were consequently ultra vires of the Provincial Legislature. That action was tried before Orde, J., and dismissed: see McLeod v. Windsor [1923] 3 D.L.R. at p. 551; 52 O.L.R. 562.
McLeod appealed to the Supreme Court of Canada (a) from the judgment of this Court in the assessment proceedings and
(b) from the judgment of Orde, J. The Supreme Court of Canada allowed the assessment appeal, but dismissed the appeal in the action. Having in the assessment appeal arrived at the conclusion that McLeod was not assessable because his case was not covered by secs. 5 and 13 of the Act as it then stood, the Court was of opinion that it was not necessary to determine the constitutional validity of these sections, and also that, not being affected by these sections of the Act, McLeod had not the status necessary to entitle him to maintain the action to determine their validity.
The assessment here in question being made in 1923 for taxes payable in 1924, it seems to follow that the validity of the assessment and the right to collect thereon should be determined by reference to the statute in force at the date of the assessment. By an Act passed in 1922 (Ont.), c. 78, the Assessment Act, R.S.O. 1914, c. 195, was amended as of January 1, 1923 : see sec. 30.
By sec. 2 of the amending Act, sec. 2 of the Assessment Act is amended by adding clause (ka), as follows:
(ka) ‘Person’ shall include any partnership, any body corporate or politic and the heirs, executors, administrators or other legal representatives of a person to whom the context can apply according to law. ‘ ‘
By sec. 12 of the amending Act, 1922, it was enacted that sec. 13 of the Assessment Act should be amended by adding thereto the following subsections:
"‘(3) Notwithstanding anything contained in this section or any other section of this Act, every agent, administrator, trustee, executor or person who collects or receives or is any way in possession or control of income for or on behalf of an estate and which income is not wholly distributed annually shall be assessed, in respect of the income not so distributed, on behalf of the estate in the municipality wherein the testator was domiciled at the time of his death.
"‘(4) Income which has been assessed against any agent, administrator, trustee, executor or other person on behalf of an estate under the foregoing subsection 3 shall not be again assessed, when received by the beneficiary or person entitled thereto.’’
The appeal comes to us on a case stated pursuant to sec. 81 of the Assessment Act; and, after stating the facts as agreed upon by the parties, the Judge asks the opinion of the Court on the following questions :
1. Whether the income received by the said trustee from the Ontario estate is assessable for income under the Assessment Act. 2. Whether the income received by the said trustee from the estate of the said deceased in Michigan is assessable for income under the said Act. 3. Whether the income received by the said trustee, so far as the same is payable or may be payable to Galdys Alma Curry, is assessable under the said Act. 4. If so, is not the Assessment Act ultra vires of the Provincial Legislature by reason of its imposing indirect taxation? 5. Whether the assessment of the income received by the said trustee, during the accumulation period mentioned in the deceased’s will, for Verene May McLeod, or for any grandchildren entitled thereto, is indirect taxation and is ultra vires of the Provincial Legislature. 6. Whether the accumulated income of this estate, being made divisible among unascertained persons, falls within the definition of ‘‘income’’ under the Assessment Act, and as such assessable under the provisions of the Assessment Act.
7. Whether or not, under the circumstances set forth in para. 9, J. B. McLeod, sole surviving trustee of the said estate, is not estopped by the said judgment of Orde, J., from maintaining the claims made by him herein.
All the income sought to be assessed is admittedly in the hands of McLeod and in his custody in the Province of Ontario, and it was not contended that the Province could not authorize an assessment of property actually within the Province, and direct the payment of the taxes from that property, but it was contended that because part of the income in McLeod’s hands came into his possession in the State of Michigan, as income derived from the Michigan estate, and was subsequently transferred to McLeod’s bank account in Windsor, the Michigan income was not assessable under the wording of sec. 13 as amended.
In my opinion, the intention and purpose of the Legislature, as expressed in these sections, is that the trustee shall be taxable in respect to such moneys as he has in his possession in Ontario, irrespective of the source of the income, and that the main question on this appeal is: Is the tax imposed by the assessment of McLeod a direct or indirect tax? If it is an indirect tax, it becomes unnecessary to determine the other questions asked by the Judge appealed from.
That the Supreme Court of Canada and this Court were both of opinion that under the Act prior to amendment in 1922 the person assessed was personally liable for the payment of the taxes 1s, I think, clearly indicated by the following pronouncement of Anglin, J., agreed in by, I think, all the Court, in McLeod v. Windsor [1923] 3 D.L.R. at p. 570 :
^Assessment is the only basis of municipal taxation under the Ontario system. As put by Sir William Mulock, C.J.EX., in fe Gibson and City of Hamilton [(1919)] 48 D.L.R. 428 at p. 431, ‘there can be no taxation of income without previous assessment of some person in respect of such income’. A person assessed in respect of income is thereby made personally liable to pay a tax upon it at a rate imposed according to other provisions of the law.”
Before us counsel for the Attorney-General did not contend that the Act as amended did not impose a personal liability on the trustee to pay the tax or limit his liability to payment out of the funds in his hands, but argued that, according to the true intent and meaning of the legislation, the tax was to be both demanded from the trustee and ultimately paid and borne by him personally.
On the other hand, counsel for the city corporation contended that, according to its true intent and meaning, the Act directed an assessment of the income and imposed a liability on the trustee to pay out of the income only, and limited the trustee’s personal liability to such funds of the estate as he had available to pay the tax. The intention of the Legislature, as expressed in sec. J, is to make all property as such liable to assessment and to collect taxes in respect thereof; but, as pointed out in the Gibson case and in the prior McLeod case, the Act provides no machinery or procedure for the assessment of income other than by the assessment of some person in respect thereof; and, except in the case of certain lands, provides no machinery for the collection of a tax from a source other than the person assessed. I have only been able to find two exceptions to the general scheme of assessment and collection, and they are found in reference to assessments of land. See sees. 37, 39 and 94. The scheme of the Act for the assessment of land is to make both the land and the person assessed liable to pay the tax (sec. 94). except in the assessment of (1) lands held in trust, in which ease it is, by sec. 37(12) provided that the trustee’s liability to pay the taxes shall be limited to the trust funds he has in hand; (2) Crown lands occupied by some one other than the Crown, in which case it is, by sec. 39, provided that the person assessed and his interest in the lands, rather than the lands of the Crown, shall be liable for the tax.
Subsee. (3) of sec. 13 (added in 1922) and sec. 95 do not place a limitation on the liability of the trustee assessed in respect of income such as is by sec. 37(12), placed upon the liability of a trustee assessed in respect of lands—and, after the decisions in the Gibson case and the prior McLeod case, I am of opinion that it is not now open to this Court to hold that the Act does not impose a personal liability upon McLeod to pay the taxes, irrespective of whether he has or has not in his hands funds available for payment of taxes. It seems to follow that the answer to the question, Is the tax imposed upon McLeod a direct tax or an indirect tax? turns on the intention and purpose of the legislation as to who shall ultimately pay and bear the tax.
It is, by Cotton v. The King, 15 D.L.R. 283; [1914] A.C. 176, and Burland v. The King, 62 D.L.R. 515; [1922] 1 A.C. 215, well-established that if the intention and purpose of the legislation was and is that the trustee from whom the tax is demanded shall collect it from some one else, then the tax is indirect. On the other hand, it seems by Rex v. Lovitt [1912] A.C. 212, to be equally well-established that if the intent and purpose of the Legislature was and is that the trustee assessed in respect of income received for his cestur trust shall not pass it on to or collect it from the persons beneficially entitled to the income, but shall himself both pay and bear the tax, the tax is a direct tax.
A direct tax is defined in the Cotton case, Bank of Toronto v. Lambe (1887) 12 App. Cas. 575, and the Burland case as one which is (15 D.L.R. at p. 290) "‘demanded from the very person who it is intended or desired should pay it’’, and an indirect tax is one which is "‘demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another’’.
In the former case of McLeod v. Windsor [1923] 3 D.L.R. 555, Duff, J., discussed what are direct and what are indirect taxes, also the factors that should be considered and kept in mind in arriving at a conclusion as to the intention of the legislation as to who should bear the tax. At p. 565 he said:
"‘The meaning and effect of the words ‘direct taxation’ as they appear in item 2 of sec. 92 of the B.N.A. Act have been considered in many cases, and as Lord Moulton says in Cotton v. The King, 15 D.L.R. 283 at p. 292; [1914] A.C. 176, it ‘is no longer open to discussion” that the meaning to be attributed to that phrase is substantially the definition quoted in 15 D.L.R. at p. 291, from the treatise of John Stuart Mill in these words: ‘ A direct tax is one which is demanded from the very persons who it is intended or desired should pay it’.” And at p. 567 Duff, J., said :
‘ ‘Where personal liability is imposed upon a trustee or agent in respect of income received by him as such and the tax is not charged upon the income and there is no recourse against it by the taxing authority and the trustee is under no duty to the taxing authority to retain the income in his hands and apply it in payment of the tax, we should appear to have a case in which the trustee is the very person from whom the taxing authority demands the tax, it being left to him to secure his indemnity from those who are ultimately intended to sustain the burden.
‘‘The case is, of course, quite different where no personal liability is imposed, where, for example, the liability of the trustee or agent is limited to the amount in his hands for his beneficiary, as in the case of Burland v. The King, 62 D.L.R. 515; [1922] 1 A.C. 215.”
It seems clear to me that the amended Act provides for the assessment of the trustee, and also imposes a personal liability on the trustee to pay, and that the tax is not charged upon the income, and that the Act does not impose upon the trustee any duty to apply the income to the payment of the tax, and that the liability of the trustee is not limited to the funds in his hands for his beneficiary, all of which, however, may be consistent with an intention that the trustee should not only pay but should himself bear the tax — but such an interpretation would, I think, be inconsistent with sec. 13(4), which provides that the income assessed under subsec. (3) shall not be again assessed in the hands of the beneficiary. Subsec. (4) seems to me to be based upon the hypothesis that the beneficiary has been charged by the assessment of his trustees and to indicate expressly that the intention of the Legislature was and is that the trustee paying taxes in respect of income received for his beneficiary shall pass the tax on to the beneficiary—and to my mind it would be unreasonable to suppose that the Legislature intended the trustee rather than the person beneficially entitled to the income to pay and bear the tax. I am of the opinion that the whole structure of the scheme for the imposition of taxes on income, or in respect of income, in the hands of persons in possession or control thereof for the benefit of others, depends on a system designed to make the trustee pay taxes which he is not intended to bear, but to obtain from other persons, and that consequently the tax sought to be imposed upon and collected from McLeod is an indirect tax, ultra vires of the Province, and illegal: Re Grain Futures Taxation Act (Man.) [1924] 3 D.L.R. 208; [1924] 8.C.R. 317.
The conclusion I have arrived at as to the tax being an indirect one is sufficient to dispose of the appeal in favour of the appellant, and it is perhaps unnecessary to discuss and answer the other questions submitted by the County Court Judge; but, as the case may go farther, I think it advisable to say that I am of opinion:
(1) That any property actually in Ontario is subject to direct taxation by the Province, but that the Act as drawn does not impose a direct tax upon the income in possession of trustees, but rather a tax upon the trustee fixed by reference to the amount of the income, with the intention that the trustee shall indemnify himself by charging the tax to his beneficiaries.
(2) That the judgment of Orde, J., in McLeod v. Windsor [1923] 3 D.L.R. at p. 551, does not conclusively determine the question of ultra vires or intra vires raised in this proceeding, because (a) the statute considered by Orde, J., has been since amended, (b) the Supreme Court of Canada, in dismissing the appeal from the judgment pronounced by Orde, J., expressly refrained from pronouncing upon the question, being of the opinion that in the action then before the Court the appellant McLeod had no status to question the constitutional validity of the legislation.
(3) That, although the assessment in 1923 is in respect of income received in 1922 (see see. 11(2)), yet such income was assessable in 1923.
The appellant is entitled to costs here and below, payable by the corporation of the City of Windsor.
Appeal allowed.