KERWIN, J.:—This is an appeal by J. R. Moodie Company Limited against a decision of the Exchequer Court affirming an assessment for excess profits tax for the year 1940 under The Excess Profits Tax Act, being chapter 32 of the Statutes of Canada of 1940 as amended. Under section 3 of that Act, there was to be assessed, levied and paid by the company a tax of seventy-five percentum of its "‘excess profits’’. That expression means that portion of the company’s profits in excess of the " 4 standard profits’’. This last expression means the average yearly profits of a taxpayer in the "‘standard period” in carrying on, what was in the opinion of the Minister of National Revenue, the same class of business as the business of the taxpayer in the year of taxation, or the standard profits ascertained in accordance with section 5 of the Act. For present purposes, "standard period’’ means the period comprising the calendar years 1936 to 1939, both inclusive.
On December 10th, 1940, the company applied for determination of its standard profits under section 5 of the Act as it then stood, on the ground that its business was abnormally depressed during the standard period. After the filing of that application, the Act was amended by chapter 15 of the Statutes of Canada 1940-41, assented to June 14th, 1941, and the relevant amendments were made applicable to the profits of the 1940 taxation period. One of these amendments repealed a provision whereby the Minister might adjust the standard profits by reference to any increase or decrease in depreciation allowances to such a basis that during the standard period they were comparable with similar allowances during the taxation period. In making its application, the company had shown in its capital employed a large sum for depreciation. The basis for such a claim having thus been taken away, the company applied under subsection 3 of section 5 as enacted in 1940-1941, but still claimed that its standard profits should be fixed at $45,000, the amount put forward by it in its original application.
Subsections (1) and (3) of section 5 as enacted by chapter 15 of the 1940-1941 Statutes are as follows:
"5.(1) If a taxpayer is convinced that his standard profits were so low that it would not be just to determine his liability to tax under this Act by reference thereto because the business is either of a class which during the standard period was depressed or was for some reason peculiar to itself abnormally depressed during the standard period when compared with other businesses of the same class he may, subject as hereinafter provided, compute his standard profits at such greater amount as he thinks just, but not exceeding an amount equal to interest at ten per centum per annum on the amount of capital employed in the business at the commencement of the last year or the fiscal period of the taxpayer in the standard period computed in accordance with the First Schedule to this Act:
Provided that if the Minister is not satisfied that the business of the taxpayer was depressed or that the standard profits as computed by the taxpayer are fair and reasonable he may direct that the standard profits be ascertained by the Board of Referees and the Board shall thereupon, in its sole discretion, ascertain the standard profits at such an amount as the Board thinks just, being however an amount equal to the average yearly profits of the taxpayer during the standard period or to interest at the rate of not less than five nor more than ten per centum per annum on the amount of capital employed at the commencement of the last year or fiscal period of the taxpayer in the standard period as computed by the Board in its sole discretion in accordance with the First Schedule to this Act.
(3) If on the application of a taxpayer whose business either was depressed during the standard period or was not in operation prior to the first day of January, one thousand nine hundred and thirty-eight, the Minister on the advice of the Board of Referees is satisfied that because,
(a) the business is of such a nature that capital is not an important factor in the earning of profits, or
(b) the capital has become abnormally impaired or due to other extraordinary circumstances is abnormally low
standard profits ascertained by reference to capital employed would result in the imposition of excessive taxation amounting to unjustifiable hardship or extreme discrimination or would jeopardize the continuation of the business of the taxpayer the Minister may direct that the standard profits be ascertained by the Board of Referees and the Board shall in its sole discretion thereupon ascertain the standard profits on such basis as the Board thinks just havine regard to the standard profits of taxpayers in similar circumstances engaged in the same or an analogous class of business.’’
On December 22nd, 1941, the Commissioner of Income Tax, who under relevant statutory authority had by appropriate action been vested with the powers of the Minister, referred the company’s application to the Board of Referees, which had been set up in accordance with the Act. It is important to note the exact terms of the reference :
“For advice as to whether or not departure from capital standard is justified and if such departure is justified for determination of standard profits under Section 5(3). If not, the Board is requested to ascertain standard profits under Section 5(1).”
After receiving from the Board a copy of its ‘Instructions to Taxpayers Compiling Standard Profits Claims on Form S.P.l”, the company’s auditors filed a supplementary statement of particulars, the last paragraph of which reads as follows :
“In view of the foregoing the Company authorizes us to maintain its claim of $45,000 as standard profit under the Excess Profits Tax Act under section 5(3) (b) of the Act.”
Pursuant to appointment, the company’s secretary and accountant appeared before the Board. These gentlemen had the opportunity of making any representations or argument that they desired but the only discussion between them and the members of the Board was with reference to the capital employed by the company at January 1st, 1939. The company’s representatives agreed to the amount thereof found by the Board, which was $3,450 less than the company claimed. This was on September 16th, 1942, and on the 22nd of the same month, the Board reported to the Minister as follows:
"‘Re: J. R. Moodie Company Limited,
HAMILTON, Ontario.
The Standard Profits Claim of the above-mentioned taxpayer was referred to the Board of Referees under date of 22nd December, 1941, in accordance with the provisions of The Excess Profits Tax Act, 1940, as amended.
The Board of Referees having examined the claim report as follows:
Under the provisions of subsection one of section five of The Excess Profits Tax Act, 1940, as amended the Board of Referees
(a) Find that the business of the taxpayer was depressed during the Standard Period.
(b) Compute the Capital Employed by the
taxpayer at 1st January, 1939 at $357,240.32 (c) Ascertain the Standard Profits of the taxpayer at $ 21,434.42 being an amount equal to interest at 6% per annum on the Capital Employed as above.’’
On September 26th, the Board forwarded its decision to the Commissioner of Income Tax, who subsequently endorsed his approval thereon. A Notice of Assessment for 1940 followed, which, inter alia, levied excess profits tax upon the basis of the standard profits found by the Board of $21,434.32.
On behalf of the company it was argued that the Board had in fact never considered the company’s application under section 5(3) and had never given a negative answer to the Minister’s request for advice thereunder as to whether or not departure from capital standard was justified. I can come to no other conclusion than that, irrespective of the question of onus, the Board did not overlook the specific provisions of subsection (5) of section 5 but, on the contrary, it decided in the negative and, therefore, proceeded to comply with the Act "‘to ascertain standard profits under section 5(1).” This is made quite clear by (1) the company’s amendment to its application to the Minister after the new statutory provision of 1940-41 ;
(2) the inclusion therein of a specific reference to section 5(3) of the Act as amended; (8) the specific mention of the same subsection in the orders of reference to the Board; and (4) the statement in the first paragraph of the Board’s decision, that the company’s claim was referred to it in accordance with the provisions of the Act as amended. To hold otherwise would be to conclude that the Board neglected its duty and the plain terms of the order of reference.
I cannot read the provisions of subsection (3) of section 5 as requiring that the Minister should first receive the advice of the Board and then direct that the standard profits be ascertained by it. Nor do I think that the Minister is bound to act upon any advice tendered him by the Board under the first part of that subsection. He may not agree with it but, here, he did so as is evidenced by the approval of the Commissioner of Income Tax endorsed upon the Board’s report.
The appeal should be dismissed with costs.
Rand, J. :—This appeal is against an assessment of excess profits for the year 1940, and the point of dispute is the fixing of the amount of standard profits.
In its income return of December 10th, 1940, the company, considering that its business was abnormally depressed during the standard period, placed its standard profits at $45,000, being 10% of the estimated capital employed in the business as of January Ist, 1939. At the same time it applied to the Minister to have standard profits ascertained by the Board of Referees under section 5 of The Excess Profits Tax Act, 1940 on the. ground mentioned.
On June 14th, 1941, section 5 was repealed and a new section substituted, subsection (3) of which enabled the Minister, in the case of a taxpayer whose business was depressed during the standard period, to refer to the Board the question whether, because,
“(a) the business is of such a nature that capital is not an important factor in the earning of profits, or
(b) the capital has become abnormally impaired or due to other extraordinary circumstances is abnormally low
standard profits ascertained by reference to capital employed would result in the imposition of excessive taxation amounting to unjustifiable hardship or extreme discrimination or would jeopardize the continuation of the business of the taxpayer . .
By the same amending Act, paragraph (b) of article 3 of the First Schedule was enacted which required a deduction, in the computation of capital employed, of all depreciation. These amendments were made retroactive to the original enactment of the statute. On August 1st, 1942, section 5 was again repealed and re-enacted. Subsection (3), unchanged for the purposes of this case, was likewise made applicable to the assessment for the year 1940.
On November 4th, 1941, the company’s auditors addressed a communication to the Income Tax authorities, in which its earlier claim for $45,000 as standard profits was maintained under section 5(3) (b). This was renewed in a further communication of January 8th, 1942.
On or about December 22nd, 1941, the Commissioner of Income Tax, acting for the Minister, referred the claim to the Board "for advice as to whether or not departure from capital standard is justified and if such departure is justified for determination of standard profits under section 5(3). If not, the Board is requested to ascertain standard profits under section 5(1).” On September 16th, 1942, the Board held a hearing at which the company was represented by its auditor and its secretary; and on September 22nd, 1942, the following report was submitted :
‘“The Standard Profits Claim of the above-mentioned taxpayer was referred to the Board of Referees under date of 22nd December, 1941, in accordance with the provisions of The Excess Profits Tax Act, 1940, as amended.
The Board of Referees having examined the claim report as follows:
Under the provisions of subsection one of section five of The Excess Profits Tax Act, 1940, as amended, the Board of Referees
(a) Find that the business of the taxpayer was depressed during the Standard Period.
(b) Compute the CAPITAL EMPLOYED by
the taxpayer at 1st January, 1939 at $357,240.32 (c) Ascertain the STANDARD PROFITS of the taxpayer at $ 21,434.42 being an amount equal to interest at 6% per annum on the Capital Employed as above.”
This decision was approved on behalf of the Minister. The company appealed to the Minister, who reaffirmed the assessment ; notice of dissatisfaction was thereupon given and the controversy brought into the Exchequer Court.
Mr. Campbell’s contention is that the procedure followed on the reference to the Board was irregular and in violation of the express language of subsection (3). In his construction of its language, a reference to the Board is for advice in the nature not only of opinion, but also of conclusions or findings of fact, upon all of which, whether the recommendation is favourable or adverse, the Minister is to exercise his judgment, and to decide whether he ‘‘is satisfied’’ that on the grounds mentioned the results would follow which the legislation is designed to alleviate.
That construction depends upon the precise meaning to be given the phrase ‘‘on the advice of the Board’’. The Board was created by Order in Council to aid the Minister in carrying out his duties under the statute, and particularly ‘‘to advise and aid him’’ in order that he might be ‘‘satisfied’’ that the conditions mentioned in section 5 as described were present.
The word ‘‘advice’’ in ordinary parlance means primarily the expression of counsel or opinion, favourable or unfavourable, as to action, but it may, chiefly in commercial usage, signify information or intelligence. The matters upon which the Minister was to be satisfied here were whether the capital had become abnormally impaired or was abnormally low, and that as a result an ascertainment of standard profits by reference to capital employed would impose excessive taxation amounting to unjustifiable hardship or extreme discrimination or would jeopardize the continuation of the business of the company. Now, these are, in one sense, matters of fact, but they also involve the exercise of judgment in the weight and significance to be attributed to the special circumstances and conditions of the business. The Minister is to be satisfied ‘‘on the advice of the Board’’ and unless the subsection is to be read ‘‘the Board . . . is satisfied that, etc.”, there must be matter in support of the opinion of the Board from which the Minister may satisfy himself accordingly. The advice to be furnished by the Board would, then, ordinarily contemplate at least its opinion on the main question and the facts or reasons upon which it was based.
But the controlling question is whether or not the Minister could decide that he was so satisfied adversely to the opinion of the Board; and although it is not free from difficulty, I have come to the conclusion that he could not. ‘‘On the advice of the Board’’ means, I think, “with” that advice: a reeommenda- tion is the condition of affirmative action by the Minister; if the opinion of the Board is against the conclusion required by the subsection, the Minister is not competent to give the direction authorized. On the other hand, the Minister may not be satisfied by nor is he bound to act on the advice. Neither is there any requirement for any special form of negative advice: if the opinion of the Board is against the claim, the matter would end there.
An examination of the reference to the Board shows that it was asked to decide ‘whether or not’’ departure from capital was justified. If the opinion should be negative, the Board was to ascertain standard profits under section 5(1). The important consideration is that the ascertainment under section 5(1) was to be the mode of a negative answer to the Minister: and that was the answer given.
Mr. Campbell contended that there was in effect an abdication of function by the Minister, a delegation to the Board of what the subsection required to be performed by the Minister ; but on what I think to be the true construction of the language of the subsection, that ground of objection disappears.
It was argued also that there is nothing in the report of the Board to indicate that it considered the claim under subsection
(3) ; but it would be to ignore the express language of the reference and the fact that the application was specifically made under the subsection to draw such an inference ; it would in fact be to attribute to the Board either a deliberate or an inexplicable disregard of its duty. It would ignore also the alternative in the language of the reference and the obvious appreciation of that alternative by the mode in which the Board indicated its negative finding.
I would, therefore, dismiss the appeal with costs.
Locke, J.:—The reference to the Board of Referees was for advice as to whether or not departure from a capital standard was justified and, if they considered such departure justified, requiring them to determine standard profits under subsection
(3) of section 5 of the Excess Profits Tax Act, 1940. If not so found justified, the Board was requested to ascertain standard profits under subsection (1) of section 5.
The argument for the appellant amounts to this: that, in the absence of more than is shown by the report of the Board of Referees to the Minister dated September 22nd, 1942, and which was thereafter approved by the Commissioner of Income Tax on his behalf, it should be presumed that the Board did not either advise the Minister, as they were required to do by the terms of subsection (3) of section 5, or consider the appellant’s claim under that subsection. In the absence of some other evidence from which these inferences might be drawn, I do not think that either presumption should be made. The manner in which the advice of the Board is to be communicated to the Minister is not prescribed by the subsection and may, therefore, have been given orally, in advance of the determination made under subsection (1) of section 5. I think further that, in view of the terms of the reference, the report of September 22nd, 1942, would of necessity convey to the Minister the fact that the Board did not consider upon the facts that a departure from a capital standard was justified and that accordingly the claim had not been considered under subsection (3). The fact that no mention was made of the claim under subsection (3) does not, in my opinion, raise any presumption that the claim had not been first considered (Davies v. Pratt (1855), 17 C.B. 183). In Broom f s Legal Maxims, 10th Ed. 642, it is said:
"‘Where acts are of an official nature, or require the concurrence of official persons, a presumption arises in favour of their due execution. In these cases the ordinary rule is, omnia praesumuntur rite et solemniter esse acta donec probetur in contrarium—everything is presumed to be rightly and duly performed until the contrary is shown. ‘ ‘
I think this principle applies to the present matter.
The appeal should be dismissed with costs.
ESTEY, J.:—The appellant under date of December 10, 1940, applied on Form S.P.l to the Minister of National Revenue for a reference to the Board of Referees to determine the standard profits on the basis that the business of the taxpayer was abnormally depressed within the meaning of section 5(1) of the Excess Profits Tax Act, 1940, c. 32. In the particulars supplied with S.P.l the following was included :
" " In view of the heavy losses sustained and the heavy liabilities thus carried the Company considers that the standard profit fixed at $45,000.00 would be a conservative amount to allow before it becomes liable to the tax of 75%.’’
On June 14, 1941, the Excess Profits Tax Act was amended by repealing section 4(1) (d) and by enacting a new section 5 (S. of C. 1940-41, c. 15, secs. 5, 6 and 18) and made retroactive to cover the 1940 taxation period. The repeal of section 4(l)(d) in effect disallowed the inclusion of an amount of $182,230.63 in the computation of the appellant’s capital employed. This reduced the total working capital to a point that the standard profits fixed at $45,000 could not be justified on the basis of a percentage of the capital employed.. The new section 5(3) made provision for, in certain cases, a computation of standard profits not upon a basis of a percentage of capital but as the Board of Referees may "‘in its sole discretion thereupon ascertain’’
The company, as a consequence of these statutory changes, made a further submission under date of November 4; 1941, addressing the same to the inspector of income tax at Hamilton, Ontario, and which concluded:
‘ " In view of the foregoing the Company authorises 11s to maintain its claim of $45,000.00 as standard profit under the Excess Profits Tax Act under Section 5(3) (b) of the Act.’’
Under date of January 8, 1942, a supplementary statement of particulars was supplied to the department in which the foregoing statement asking that the matter be dealt with under section 5(3) (b) of the Act was repeated. Section 5(3), as amended in 1941 (1940-41 $. of C., c. 15) reads as follows:
""5. (3) If on the application of a taxpayer whose business either was depressed during the standard period or was not in operation prior to the first day of January, one thousand nine hundred and thirty-eight, the Minister on the advice of the Board of Referees is satisfied that because,
(a) the business is of such a nature that capital is not an important factor in the earning of profits, or
(b) the capital has become abnormally impaired or due to other extraordinary circumstances is abnormally low
standard profits ascertained by reference to capital employed would result in the imposition of excessive taxation amounting to unjustifiable hardship or extreme discrimination or would jeopardize the continuation of the business of the taxpayer the Minister may direct that the standard profits be ascertained by the Board of Referees and the Board shall in its sole discretion thereupon ascertain the standard profits on such basis as the Board thinks just having regard to the standard profits of taxpayers in similar circumstances engaged in the same or an analogous class of business.”
The Commissioner referred the matter to the Board of Referees in the following language:
‘Dear Sir:
Pursuant to Section 5 of the Excess Profits Tax Act, 1940, reference to the Board of Referees is hereby made
For advice as to whether or not departure from capital standard is justified and if such departure is justified for determination of Standard Profits under Section 5(3). If not, the Board is requested to ascertain Standard Profits under Section 5(1).
» J
Subsequently a time was fixed for a hearing by the Board at which the appellant was represented by its secretary and auditor. The Board asked them to agree that the working capital was $357,240.32, and as it differed from the company’s figures by less than $4,000, they agreed. The auditor deposed: ‘‘We did not know how they were going to deal with it, and they did not tell us; we thought, from the interview, that we would get a reasonable standard.’’ Apparently nothing was said either with regard to subsections (1) or (3) of section 5 but he did state that he considered that all the relevant facts were set forth in the documents which they had prepared and forwarded to the Minister and it is not suggested that they were not all placed before the Board.
Under date of September 22, 1942, the Board made its reply to the Minister in the following language:
"‘Re: J. R. Moodie Company Limited,
Hamilton, Ontario.
The Standard Profits Claim of the above-mentioned taxpayer was referred to the Board of Referees under the date of 22nd December, 1941, in accordance with the provisions of The Excess Profits Tax Act, 1940, as amended :
The Board of Referees having examined the claim reports as follows:
Under the provisions of subsection one of section five of The Excess Profits Tax Act, 1940, as amended, the Board of Referees
(a) Find that the business of the taxpayer was depressed during the Standard Period.
(b) Compute the Capital Employed by the
taxpayer at Ist January, 1939, at $357,240.32 (c) Ascertain the Standard Profits of the
taxpayer at $ 21,434.42 being an amount equal to interest at 6% per annum on the Capital Employed as above.’’
Under date of September 29, 1942, the Commissioner of Income Tax advised the appellant that its application pursuant to section 5 of the Excess Profits Tax Act, 1940, had been considered by the Board of Referees and that its decision, a copy of which was enclosed, had been approved. The approval referred to had been given under section 5(5) of the Act.
It would appear that the provisions of section 5(3) have in all relevant particulars been complied with and therefore that the appellant’s contention to the contrary cannot be maintained. That the Minister was satisfied within the meaning of that subsection that the appellant’s business was depressed during the standard period must be assumed, otherwise he would not have asked the Board of Referees for its advice.
Parliament in section 5(3) expresses an intention that when the application is referred to the Board it should consider the position of the taxpayer and ascertain if "‘that because’’ of the existence of the circumstances in either (a) or (b) ‘‘standard profits ascertained by reference to capital employed would result in the imposition of excessive taxation amounting to unjustifiable hardship . . . .” That appears to be the duty of the Board and if it advises the Minister in the affirmative, it is then for the Minister to determine whether he is ‘‘satisfied’’ that the advice should be accepted and if so, then to direct the Board ‘‘in the exercise of its sole discretion” to ascertain the standard profits.
The Commissioner’s letter of reference was a specific request to the Board of Referees to consider the position of the appellant with a view to having its standard profits determined under section 5(3). It was only if the Board decided it could not advise the Minister that the appellant’s position was such as to bring it within the terms of that subsection that it should proceed to the ascertainment of the standard profits under section 5(1). It cannot be assumed that the Board disregarded the specific request of the reference nor that it failed to consider the possible existence of the factors specified in section 5(3) which would justify its advising the Minister ‘‘that because” of the presence thereof the appellant came within its terms. It was only after it had concluded that it could not affirmatively advise the Minister under section 5(3) that it ascertained the standard profits under section 5(1).
In the enactment of section 5(3) Parliament expresses the intention that the advice of the Board shall not be a mere expression of opinion but that it will be accompanied by such a review or report of the facts, dealing particularly with the existence of the circumstances mentioned in (a) and (b) in order that the Minister on the ‘‘advice of the Board’ ‘ may determine whether he is ‘‘satisfied that because’’ of the existence of the factors in (a) or (b) that the ascertainment of the “standard profits ascertained by reference to capital employed would result in the imposition of excessive taxation amounting to unjustifiable hardship.’’ The final decision ‘‘on the advice of the Board of Referees’’ must be made by the Minister. He may not be ‘‘satisfied’’ and reject the advice, but he can within the terms of the subsection only be satisfied ‘‘on the advice . . . that because” there exists either (a) or (b). If the Board cannot so advise, it follows the Minister cannot be satisfied within the meaning of that subsection. I can find no requirement in the statute that the Board must submit its negative advice in terms, but may do so in any manner, such as in this case, from which its decision to that effect is clearly indicated.
The appellant objects to the computation under section 5(1) on the ground that such can only be done after the taxpayer itself has computed its standard profits. The appellant had computed its standard profits at $45,000 and maintained the correctness thereof throughout these proceedings. That $45,000 was in excess of the maximum of ‘‘ten per centum per annum on the amount of capital employed’’ under section 5(1) as amended in 1941, or that it was computed by the taxpayer with a view to the ascertainment of its standard profits under section 5(3), does not deprive the Minister of his jurisdiction to ascertain the standard profits under section 5(1).
The appellant then contends that its application having specifically asked that the matter be considered under section 5(3) that the Minister should, before considering the computation of standard profits under any other subsection, have referred the matter back to the appellant. With this contention, in these circumstances, I do not agree. Throughout the correspondence was carried on in a manner to ascertain the relevant facts and appellant agrees that it had placed all of its submissions before the Minister, and it must be concluded, particularly in the absence of any suggestion to the contrary, that all of these were before the Board of Referees. The appellant was represented at the hearing. One of the representatives as to this hearing deposed :
"‘Q. Did you not make representations orally at the hearing,
stating that you wished consideration to be given under s.s. 3 of 5?
"‘A. No, we did not, as we thought the Board would be dealing with it.
"Q. Apart from your §.P.1. Claim did you make representations orally ?
"‘A. From the courteous reception we received we did not think it right to ask them how they were dealing with it. ‘ ‘
The duty of the Minister was to have the standard profits computed under the appropriate subsection of section 5. The appellant quite properly asked that its application be considered under section 5(3). But that did not limit or restrict the Minister in the performance of his duty. In these circumstances it would be expected that if the appellant had any request of such a nature that it would have made it known in the course of the correspondence, its written submissions or before the Board.
Throughout these proceedings the Commissioner of Income Tax was acting under an authority given by the Minister on August 8, 1940, by virtue of section 75(2) of the Income War Tax Act and section 14 of the Excess Profits Tax Act. The Minister thereby authorized the Commissioner to exercise all the powers of the Minister under the said Act.
The appeal should be dismissed with costs.
Appeal dismissed.
THE MONTREAL TRUST COMPANY, et al., es quai., Suppliants,
and
HIS MAJESTY THE KING, Respondent.
Superior Court of Quebec (Tyndale, Associate C.J.), February 20, 1950.
Quebec Succession Duties Act, R.S.Q., cap. 80, as enacted by 7 Geo. VI, cap. 18—Petition of Right by suppliants to recover $32,876.63 with interest, succession duties alleged to have been illegally exacted and paid under duress and under protest—Duties assessed on five gifts made more than five years prior to death of donor—Whether deceased reserved to himself the control of the properties donated within the meaning of section 24 of the statute—Whether, if Petition of Right granted, the claim for interest on the amount paid under protest is maintainable.
In this case, the suppliants sought recovery from the Crown, in the right of the Province of Quebec, of the sum of $32,876.63 with interest, on the ground that the said sum was paid under duress and under protest as succession duties illegally exacted from them in their quality of executors and trustees under the last will and testament of the late Gordon Walters MacDougall, deceased, who died in Montreal, where he was domiciled, on the 26th July, 1947.
The total amount of the succession duties paid by the suppliants was $124,686.07, of which the sum of $32,876.63 (the amount claimed in the present proceedings) represented the duties exacted by the Crown with respect to five deeds of gift inter vivos made by the deceased to his five children. All the gifts were, in fact, made more than five years before the death of the donor, but the Crown claimed that succession duties were nevertheless payable as the deceased had reserved to himself control of the properties during his lifetime. The executors, on the other hand, claimed that the gifts were absolute and that no control whatsoever had been reserved by the deceased.
HELD:
(i) That the Petition of Right is well founded in so far as the principal sum of $32,876.63 is concerned and the said sum together with the costs of the proceedings should be paid by the Province to the suppliants.
(ii) That the claim for interest on the said amount cannot be allowed. The King v. Carroll et al., [1948] S.C.R. 126.
(iii) On the execution of the deeds of gift the donor, in specific terms, “completely and irrevocably” divested himself of the ownership of the properties.
(iv) The donor did not reserve to himself in whole or in part the control or administration of the properties or any part thereof.
(v) There is no provision in the several deeds of gift similar to that considered in Bourque v. The King, [1948] C.T.C. 115, [1947] C.S. 348, whereby the revenues of the trust property were to be paid to the donor and his wife unless and until certain events took place. Consequently the facts and law applicable to the present case are distinguishable.
(vi) The only contingency in which the donor might have derived any benefit from the property would have been the case of the pre- decease of his daughter without issue and without leaving any relevant testamentary direction; in which event he would have received a share as one of her legal heirs. The contingency was obviously in no way under the control of the donor; and, in fact, the beneficiary (and all the other children of the deceased) survived the donor.
(vii) The expression “has reserved to himself" in section 24 of the Quebec Act must be taken to refer to:
(a) an immediate reservation; or
(b) some future event which is certain to occur; or
(c) some future event or action over which the donor has at least some degree of control.
(viii) That the Petition is accordingly allowed to the extent hereinbefore mentioned.
EDITORIAL NOTE: This is another in the series of cases which have come before the Courts in relation to the dual Question as to when a gift inter vivos can be said to have been made, and whether, once a gift has been made, control is reserved by the deceased over the subject matter in such a way as to render duty exigible.
The facts in the present case clearly indicate that the deceased completely and irrevocably parted with at least four of the properties donated more than five years prior to his death. Moreover, there was no provision in these four instruments such as that considered in National Trust Co. Ltd. v. Minister of National Revenue, [1947] C.T.C. 201, whereby the capital of the trust funds and accumulations of interest were to revert to the donor in the event of the prior death of the beneficiary. Accordingly these particular four gifts seemingly meet the tests applied in Re Hodson’s Settlement, Brookes v. Attorney- General, [1939] Ch. 348, on the question as to whether the properties passed during the lifetime of the deceased or at his death.
The other branch of the case presents more difficulty and concerns the question as to whether or not the deceased retained control over the properties, the subject matter of the gifts, sufficient to render duties exigible under and by virtue of section 24 of the Act. As to four of the instruments of donation, there can be little or no doubt that no control was reserved, and the Court rightly distinguished the circumstances from those which were considered in Bourque v. The King, [1948] C.T.C. 115, [1947] C.S. 348. The position is not so clear with respect to the fifth deed embodied in the Marriage Contract executed on 10th November, 1928. It might perhaps be open to question as to whether the clause in this instrument empowering the daughter to dispose of the trust property by will and not by deed was an indirect method employed by the deceased to control the disposal of the property through his daughter acting as his agent, more particularly having regard to the term in the trust document that in the absence of any testamentary disposition by the daughter the trust property shall “revert to the Donor and in the event of his decease shall be governed by the provisions of his Will”. Article 818 of the Quebec Civil Code quoted in the judgment of the Superior Court is apparently confined to outright gifts, and does not seem to be sufficiently wide in terms to meet cases, such as the present, whereby the ultimate disposal of the capital of the trust property is held up pending the making of a will by one of the beneficiaries. See Attorney-General v. Adamson, [1932] 2 K.B. 159 C.A., as to the effect of a power of appointment retained by the deceased himself upon the claim of the Crown for succession duty in circumstances where, although the trust properties passed to the trustee during the lifetime of the deceased, the beneficial interest did not reach the beneficiaries until after his death.
Apart from this phase of the question, and assuming that the Adamson case is not applicable to the circumstances in the present case, the Superior Court would seem to be justified in regarding the possibility of the trust property reverting to the donor or to his estate as being too remote in character to render duty payable. On the question of remoteness, see the decision of the House of Lords, and particularly the judgment of Lord Wright, in the Adamson case, reported [1933] A.C. 257.
The reasons given in the judgment for the disallowance of the claim for interest on the moneys paid are apparently well founded having regard to the decision in The King v. Carroll et al., [1948] S. C. R. 126.
W. F. Macklaier, K.C., and R. F. Clarkson, for Suppliants.
Gerard Trudel, K.C., for Respondent.
Tyndale, Assoc. C.J.:—The Court has examined the proceedings and the documents of record ; has heard the arguments of Counsels; and has, upon the whole, deliberated.
I.
The Suppliants seek recovery from the Crown, in the right of the Province of Quebec, of the sum of $32,876.63 with interest, on the ground that the said sum was paid under duress and under protest as succession duties illegally exacted from them in their quality of Executors and Trustees under the Last Will and Testament (Exhibit 8.1) of the late Gordon Walters MacDougall, who died in the City of Montreal, where he was domiciled, on the 26th July, 1947.
The total amount of the succession duties paid by the Suppliants was $124,686.07 and it is admitted that of that amount $32,876.63 represents the duties exacted by the Crown with respect to five donations inter vivos made by the deceased to his five children (Exhibits 8.2, 3, 4, 5 and 6).
The question before the Court is, therefore, whether or not the property covered by the said donations is or is not subject to succession duties. The revelant statute is, of course, the Quebec Succession Duties Act, R.S.Q., cap. 80, as enacted by 7 Geo. VI, cap 18.
The general principle governing succession duties is set forth in section 2 of the Act, which reads as follows:
2. All property, moveable or immoveable, the ownership, usufruct or enjoyment whereof is transmitted owing to death, shall be liable to duties, calculated upon the aggregate value of the property transmitted, at the rates fixed in section 9.’’ Division VI of the Act, comprising sections 21-27, is entitled " Disposition of Property assimilated to a Transmission owing to Death’’.
These sections deal, inter alia, with gifts inter vivos. In virtue of section 22, such gifts are, in general, not subject to duties if they have been made more than five years before the death of the donor. All the gifts now under consideration were, in fact, made more than five years before the death of the donor. But this does not solve the problem, because the contested duties were exacted in virtue of section 24, the admittedly relevant portions of which read as follows:
"24 (1). For the purposes of this act, the ownership, usufruct or enjoyment of any property shall be deemed to be transmitted owing to death whenever the gratuitous disposition has taken effect more than five years before the death of the person who has made it and whenever such person has reserved to himself, in whole or in part, the control, administration, ownership or enjoyment of such property or part thereof, until his death or until a period comprised in the five years previous to his death.
(2) This section shall apply also whenever the person making the disposition has reserved to himself, in whole or in part, the control, administration, ownership or enjoyment of such property or part thereof, until his death or until a period comprised in the five years previous to his death, in each of the following cases :
(a) . . . .
(b) Whenever the reserve is made or the control is exercised by a deposit of titles, securities, sums of money or valuable objects in a safe place or in the hands of an intermediary ; .
(c) Whenever the control or administration is exercised through a fiduciary or an interposed person; . . .’’
II.
The relevant facts are covered by the Exhibits and by a joint "‘Admission of Facts’’ signed by the Attorneys of the Parties on the 10th January, 1950.
The documents covering the donations in question are as follows:
EXHIBIT .2:
Marriage Contract executed between George Buchanan Foster and Barbara Helen MacDougall (daughter of the deceased) before H. M. Marler, Notary, on the 10th November, 1928, in which the deceased intervened and made a donation to his daughter of $25,000.00, appointing the Montreal Trust Company as Trustee.
EXHIBIT 8.3:
Donation in Trust, executed before Dakers Cameron, Notary, on the loth January, 1935, whereby the deceased gave to the Montreal Trust Company in Trust certain securities of the approximate value of $25,000.00, for certain purposes set out in detail, including the payment of the revenues to his daughter Elizabeth Evelyn MacDougall.
EXHIBIT 8.4:
Donation in Trust, executed before Dakers Cameron, Notary, on the 16th December, 1936, and similar in its general terms to Exhibit 8.3, the revenues in this instance to be paid to the deceased’s daughter Josephine Emma MacDougall.
EXHIBIT 8.5:
Donation in Trust, executed before Dakers Cameron, Notary, on the 22nd December, 1938. Here again, the general terms were similar to those of Exhibit 8.3; the recipient of the revenues in this instance being the deceased’s daughter Diana Marler MacDougall.
EXHIBIT .6:
Donation in Trust, executed before Dakers Cameron, Notary, on the 29th December, 1939—the recipient of the revenues in this instance being the deceased’s son Gordon Heward MacDougall. In general, the terms resemble those of Exhibits 3 - 5; but there are one or two special provisions peculiar to this deed.
III.
Admittedly, so far as the question in issue is concerned, the three Exhibits 8.3, 4 and 5 are identical in terms. The deed Exhibit 8.6 differs from the three mentioned only in that the Trustee is directed to employ part of the revenues of the Trust Property for the payment of the premiums of certain life insurance policies. Counsel for Respondent admits that this particular direction has no bearing on the question in issue; so that, for the purposes of the case, the four Deeds, Exhibits S.3, 8.4, 8.5 and 8.6, are in the same category.
It will, therefore, be convenient to analyse Exhibit 8.3 and consider its terms in the light of the applicable provisions of the Act.
(1) In this Deed, the deceased is described as "Donor’’ and the Montreal Trust Company as "‘Trustee’’. The recipient of the benefits is referred to as the "‘beneficiary’’ and the property in question as the ""Trust Property’’.
(2) The first clause reads as follows:
"The Donor doth by these presents give and grant by way of donation inter vives and irrevocably unto the Trustee, thereof accepting IN TRUST, the following Securities which at present day values are worth approximately Twenty-five thousand dollars, namely
(3) After the enumeration of the securities, it is stated that they have been delivered, at the execution of the Deed, to the Trustee who acknowledges receipt thereof.
(4) Then follows a lengthy clause opening with the following paragraph :
“TO HAVE AND TO HOLD the said securities or other property moveable or immoveable acquired in replacement thereof or representing the same hereinafter styled the ‘Trust Property’, unto the said Trustee on the Trusts and for the purposes following, namely: .. .’’
The ‘‘purposes’’ are described in six paragraphs lettered from (a) to (f). They may be summarized as follows:
(a) The revenues are to be collected by the Trustee and are to provide the expenses of administration and the fees of the Trustee.
(b) The net annual revenues are to be paid to ‘‘the beneficiary” (the Donor’s daughter Elizabeth Evelyn MacDougall) during her lifetime.
(c) At and after the beneficiary’s death, the capital is to be paid to her children in equal shares, any child of the beneficiary who may have predeceased her to be represented by such child’s children. The capital is to be paid as each child reaches the age of thirty years, the income being paid in the meantime to each child.
(d) Should the beneficiary die without issue, the capital is to be paid according to the directions in her Will; or, in default of such testamentary directions, to her legal heirs.
(e) The Donation is made for support and maintenance and shall be exempt from seizure, assignment or anticipation so long as the Trust Property remains in the hands of the Trustee.
(f) The Trust Property shall not form part of any community of property.
(5) Then follows a lengthy clause entitled ‘‘Powers of the Trustee’’, which powers are enumerated in paragraphs (a) to (e). It is unnecessary to discuss them in detail. It is sufficient to say first: that they include very wide powers of borrowing, leasing, alienation, compromise, settlement, investment, reinvestment, division, partition, valuation and the like; and second: that there is nothing in the clause which gives any power of direction or control to the Donor.
(6) The last clause is an Intervention by the beneficiary, who accepts the benefits conferred upon her.
IV.
So far as the undersigned is aware, the only judgment referring to section 24 of the Act in question is that of P. Demers, J., in Bourque et al. v. The King, [1948] C.T.C. 115, [1947] S.C. 348, which was cited by Counsel for the Respondent. In that case a Petition of Right to recover the succession duties paid under protest on a donation in trust was rejected—because the Court was of the opinion that the terms of the deed brought the gift under section 24. Those terms included the provision that the revenues of the trust property were to be paid to the donor and his wife unless and until certain events took place.
Counsel for the Suppliants cited, inter alia, the case of Curran et al. v. Davis, [1933] S.C.R. 283. There was no question in that case of succession duties; but the notes of the present Chief Justice of Canada (Rinfret, J., as he then was) contain a lucid and helpful commentary on articles 981(a) to 981 (n) of the Civil Code, which are found under the caption " " Of Trusts ‘ ‘ and which obviously apply to all the Deeds concerned in the present case.
The undersigned has also consulted two other decisions cited by Counsel for the Suppliants: Guaranty Trust Co. of New York et al. v. The King, [1948] C.T.C. 153, [1948] S.C.R. 183; and Minister of National Revenue v. National Trust Co. Ltd., [1948] C.T.C. 339, [1949] S.C.R. 127.
V.
It is apparent from the analysis of Exhibit S.3, that:
(1) On the execution of the Deed the Donor, in specific terms, “completely and irrevocably’’ divested himself of the ownership of the securities.
(2) The Donor did not reserve to himself, in whole or in part, the control or administration of the Trust Property or any part thereof.
(3) There is no provision comparable to the one mentioned above in connection with the Bourque case.
(4) The only contingency in which the Donor might have derived any benefit from the property would have been the case of the predecease of his daughter without issue and without leaving any relevant testamentary direction; in which event he would have received a share as one of her legal heirs. This contingency was obviously in no way under the control of the Donor; and, in fact, the beneficiary (and all the other children of the deceased) survived the Donor.
Can it, then, be said that because, when the Deed was executed, there existed the remote possibility that at some future time part of the property might come back to the Donor in his quality as legal heir of his daughter, he ‘‘reserved to himself in whole or in part, the . . . ownership or enjoyment of such property or part thereof’’?
In the opinion of the undersigned the answer to that question must be in the negative. The expression ‘‘has reserved to himself” must surely be taken to refer to:
(a) an immediate reservation; or
(b) some future event which is certain to occur; or
(c) some future event or action over which the Donor has at least some degree of control.
Any other interpretation would, in the view of the undersigned, be strained and unreasonable. This view seems to be supported by the decision of the Supreme Court of Canada in the National Trust case above cited.
The undersigned cannot accept the contention of Counsel for the Respondent that any donation in trust comes under section 24 of the Act if the Trustee is appointed by the Donor. That may be the effect of section 27(a) as enacted by the statute 13 Geo. VI, cap. 32; but by its terms, that section does not apply to gifts made prior to 2nd February, 1949.
Therefore, the Court comes to the conclusions that the gifts in Exhibits 8.3, 8.4, 8.5 and 8.6 are exempt from succession duties.
VI.
It is now necessary to examine the terms of Exhibit 8.2, which is In certain possibly relevant respects different from the others.
(1) The first point to note is that the document is a Marriage Contract (executed on the 10th November, 1928) between the Donor’s minor daughter Barbara Helen MacDougall and George Buchanan Foster, her intended husband; who, in fact, were duly married under the régime of separation as to property therein stipulated.
In this connection, reference may be made to article 818 C.C., which reads as follows:
" " Fathers and mothers, and other ascendants, relations in general, and even strangers, may, in a contract of marriage, give to the future consorts or to one of them, or to the children to be born of their marriage, even with substitution, the whole or a portion of their present property, or of the property they may leave at their death, or of both together.”
(2) The Donor, intervening in the Marriage Contract, "‘makes a gift to his daughter in advancement of her share in his succession and to any child or children who may be born of her the future wife accepting thereof for herself and them of the sum of TWENTY-FIVE THOUSAND DOLLARS which he promises and obliges himself forthwith to pay to the Trustee hereinafter named to be held by it the said Trustee and its successors in the Trust for the following purposes: The payment so to be made may be made either in money or in securities the securities and the value thereof to be designated by the said Donor. ’ ‘
It is admitted by the parties that securities to the amount of the gift were actually delivered to the Trustee partly on the 26th and partly on the 28th December, 1928.
(3) The "purposes’’ are enumerated in clauses numbered (1) to (3) in the intervention. They may be summarized as follows:
(a) The Trustee shall pay the net annual income to the Donor’s daughter during her lifetime.
(b) If the daughter dies leaving issue surviving her, the revenues shall be paid to or used for the benefit of such issue, saving certain conditional stipulations in favour of the daughter’s husband.
(c) Subject to the foregoing, the Trustee shall remain in possession of the Trust Property in Trust for all the surviving children of the Donor’s daughter who attain majority or marry before majority. Such children shall, at majority or marriage, become vested with their share of the Trust Property, but shall not (subject to discretionary advances by the Trustee) receive delivery of their respective shares until they respectively reach the age of 25 years.
(d) If the Donor’s daughter dies without issue her surviving and attaining majority or marrying before majority, the Trust Property (subject to such advances as may have been made as above mentioned), may be disposed of by the daughter in her Will as follows: As to one-fourth by legacies bequeathed "‘to such persons, charities and institutions as she may direct’’ and as to the remainder to any of the Donor’s descendants. If there be no such testamentary disposition by the daughter or to the extent that the legacies do not cover the Trust Property, then the Trust Property (or the remainder thereof) shall ‘‘revert to the Donor and in the event of his being deceased shall be governed by the provisions of his Will.’’
(4) The next clause enumerates the powers of the Trustees, none of which is relevant to the question in issue.
(5) By the next clause, the Donor appoints the Montreal Trust Company as Trustee (which Company signs the Marriage Contract in acceptance of the Trust). It is then stipulated that the Trustee shall always be a trust company with its head office in Montreal and ‘‘any vacancy occurring in the Trust during the Donor’s lifetime shall be filled by him and after his death shall be filled by a Judge of the Superior Court for the Province of Quebee in the District of Montreal on the advice of a Family Council to be held before a Notary.”
The rest of the intervention is irrelevant so far as the present case is concerned.
The fact that the Donation in Trust was made in a Marriage Contract is of no importance to the question in issue. It is true that gifts made in marriage contracts were at one time exempt; but this exemption was removed by the statute 24 Geo. V, cap. 14 (1934). It is also true that the gift in question was made before the exemption was removed; but subsection (4) of section 61 of the present Act states that section 24 thereof shall not apply to gifts made prior to the 2nd March, 1928, which can only mean that it does apply to gifts made after that date—as was the gift in Exhibit 8.2.
The other differences between the terms of Exhibit 8.2 and those of the four other exhibits already discussed do not appear to the undersigned to bring Exhibit 8.2 within the provisions of section 24. If the undersigned’s opinion as to the connotation of the expression "‘has reserved to himself’’ is sound, then the gift made by the Donor in Exhibit 8.2 is also exempt from succession duties.
VII.
There remains to be discussed the question of the interest which the Suppliants claim on the sum of $32,876.63 from the 21st March, 1949—the date upon which the said sum was paid under protest.
Counsel for Respondent contended that, irrespective of the principle that the Crown is not in any event bound to pay interest, no interest could be exacted because the claim is made under article 1047 C.C., which reads as follows :
"He who receives what is not due to him, through error of law or of fact, is bound to restore it; or if it cannot be restored in kind, to give the value of it.
(If the person receiving be in good faith, he is not obliged to restore the profits of the thing received.) ‘‘
The Crown, says its Counsel, was not in bad faith and therefore no interest is payable.
To this Counsel for Suppliants replies that the amount was paid not ‘‘through error of law or of fact’’ but under duress and under protest. The documents of record substantiate that such was the case.
On the other hand, it is a well recognized principle that there can be no recovery of interest against the Crown unless the statute or the contract in question specially provides for it. (See, inter alia, The King v. Carroll et al., [1948] S.C.R. 126.) There is no such provision in this case. Consequently, the Suppliants’ claim for interest cannot be allowed.
In view of the foregoing:
THE COURT:
WHEREAS the Suppliants in their quality as Executors and Trustees under the Last Will and Testament of the late Gordon Walters MacDougall claim from the Respondent the sum of $32,876.63, with interest from the 31st March, 1949, and costs :
WHEREAS the claim is based on the allegation that the said sum was illegally exacted as succession duties with respect to five donations inter vivos made by the said deceased to his five children respectively ;
WHEREAS the claim is contested on the ground that the said donations fall within the provisions of section 24 of the Quebec Succession Duties Act, as enacted by 7 Geo. VI, cap. 18 ;
SEEING the said section 24 and sections 2 and 22 of the said Act;
CONSIDERING that the said five donations were made more than five years before the date of the death of the said. deceased :
CONSIDERING that, under what the undersigned considers to be the proper interpretation of the said section 24 and the terms of the said gifts, the Donor did not ‘‘reserve to himself, in whole or in part, the control, administration, ownership or enjoyment’’ of the property donated or part thereof; and that, accordingly, the said gifts are not subject to succession duties;
SEEING the admission of the Respondent that the said amount of $32,876.63 is the amount which should be recovered if the said gifts are not subject to succession duties;
CONSIDERING that the claim for interest on the said amount cannot be allowed (The King v. Carroll et al., [1948] S.C.R. 126) ;
CONSIDERING that the Petition is otherwise well founded ;
DOTH MAINTAIN the Petition of Right, save as to the interest therein claimed; and DOTH ADJUDGE that His Majesty’s Government of the Province of Quebec pay to the Suppliants in their said quality the said sum of $32,876.63 and the costs of the proceedings.