Liberal Petroleums Trust, Re, (1985) 64 A.R. 243 (QB)

• Judge: Egbert, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: August 02, 1985
• Citations: (1985), 64 A.R. 243 (QB)

Liberal Petroleums Trust, Re (1985), 64 A.R. 243 (QB)

MLB headnote and full text

In The Matter Of The Trustee Act, R.S.A. 1980, c. T-10 as amended;

In The Matter Of a Trust Deed known as the Liberal Petroleums Trust;

And In The Matter of the Alberta Rules of Court

(No. 8501-14787)

Indexed As: Liberal Petroleums Trust, Re

Alberta Court of Queen's Bench

Judicial District of Calgary

Egbert, J.

August 2, 1985.

Summary:

A trustee applied for directions respecting a problem created by the Income Tax Act in the distribution of funds between resident and nonresident beneficiaries. The Alberta Court of Queen's Bench issued directions accordingly.

Equity - Topic 62

Maxims - He who gets the benefit must bear the burden (apportionment) - The Alberta Court of Queen's Bench discussed the maxim "cujus est commodum ejus debet esse incommodum" (he who gets the benefit must bear the burden) as it related to which beneficiaries of a trust should bear an income tax burden imposed on the trust - See paragraphs 12 to 41.

Income Tax - Topic 5466

Trusts - Liability for tax - Between beneficiaries - Resident v. nonresident beneficiaries - The Income Tax Act, s. 104(8), imposed income tax on trusts for "designated income" paid to nonresident beneficiaries - The Alberta Court of Queen's Bench discussed who should bear this tax burden and held that both resident and nonresident beneficiaries should have their rateable share of trust proceeds reduced and not just the nonresident beneficiaries.

Trusts - Topic 4088

Administration - Powers of trustees - Alteration of terms of trust - The Alberta Court of Queen's Bench referred to the rule that a trustee, unless the settler gives him the power, has no authority to vary the terms of the trust - See paragraph 9.

Trusts - Topic 4341

Administration - Beneficiaries - Allocation of liabilities - Apportionment - The Alberta Court of Queen's Bench discussed the equitable principle of apportionment as it related to which beneficiaries of a trust would bear an income tax burden imposed on the trust - See paragraphs 12 to 41.

Trusts - Topic 4346

Administration - Beneficiaries - Allocation of liabilities - Tax - Resident v. nonresident beneficiaries - The Income Tax Act, s. 104 (8), imposed a tax on trusts respecting "designated income" paid to nonresident beneficiaries - A particular trust required the trustee to distribute the funds rateably amongst the beneficiaries - The trustee applied for a determination of whether only the nonresident beneficiaries should have the tax deducted from their share or whether both resident and nonresident beneficiaries should bear the tax burden - The Alberta Court of Queen's Bench held that under the terms of the trust all the beneficiaries should bear the tax burden equally and have their shares reduced, not just the nonresident beneficiaries.

Cases Noticed:

Allhusen v. Whittel (1867), L.R. 4 Eq. 295, not appld. [paras. 12, 13, 37].

Re Lotzkar (1965), 50 D.L.R.(2d) 338, ref'd to. [para. 13].

Barnardo's Homes National Incorporated Association v. Commissioners for Special Purposes of the Income Tax Acts, [1921] 2 A.C. 1, ref'd to. [para. 14].

Re McEuen, [1913] 2 Ch. 704, ref'd to. [para. 15].

Fraser v. Murdoch (1881), 6 A.C. 855, dist. [paras. 17 to 22].

Hardoon v. Belilios, [1901] A.C. 118, dist. [paras. 17 to 22].

Hill v. Yorkshire and Canadian Trust Limited, [1971] 2 W.W.R. 121, ref'd to. [para. 23].

Jervis v. Wolferstam (1874), L.R. 18 Eq. 18, ref'd to. [para. 23].

James v. May (1873), L.R. 6 H.L. 328, ref'd to. [para. 23].

Re National Finance Co. (1863), 3 Ch. App. 791, ref'd to. [para. 23].

Castellan v. Hobson (1870), L.R. 10 Eq. 47, ref'd to. [para. 23].

Hughes-Hallet v. Indian Mammoth Gold Mines Company (1982), 22 Ch. D. 561, ref'd to. [para. 23].

Hemming v. Maddick (1872), 8 L.J. 395, ref'd to. [para. 23].

Loring v. David (1886) 32 Ch. D. 625, ref'd to. [para. 23].

Balsh v. Hyham (1728), 2 P.Wms. 453, ref'd to. [para. 23].

Phen v. Gillan (1845), 5 Hare 1, ref'd to. [para. 23].

Matthews v. Ruggles-Brise, [1911] 1 Ch. 194, ref'd to. [para. 23].

Clarkson v. McLean (1918), 42 O.L.R. 1, ref'd to. [para. 23].

Day v. Day (1903), 4 N.S.W.S.R. 21, ref'd to. [para. 23].

Hobbs v. Wayet (1887), 36 Ch. D. 256, ref'd to. [para. 23].

In re Croft, [1892] 1 Ch. 652, dist. [para. 26].

Foster v. Ley (1835), 2 Bing. M.C. 269, dist. [para. 28].

Re Waller, [1916] 1 Ch. 153, dist. [para. 29].

Hales v. Freeman (1819), Brod. & Bing. 391, dist. [para. 32].

Bate v. Payne (1849), 13 Q.B. 900, dist. [para. 33].

Re McMaster Estate Assessment, [1901] 2 O.L.R. 474, dist. [para. 36].

Re Denison (1894), 25 O.R. 197, dist. [para. 36].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 66(15)(c), sect. 104(2), sect. 104(6) [para. 5 and Appendix]; sect. 104(8) [para. 1 and Appendix]; sect. 104(6), sect. 104(13), sect. 108(1)(d.1), sect. 117, sect. 122(1), sect. 122(2), sect. 212(1), sect. 212(11.2), sect. 215(1) [para. 5 and Appendix].

Authors and Works Noticed:

Lewin on Trusts (16th Ed.), p. 234 [para. 37].

Waters, D.M.W., Law of Trusts in Canada (2nd Ed.), pp. 787 [para. 38]; 845 [para. 12]; 847[para. 13]; 1055 [para. 9].

Counsel:

I.M. Robison, Q.C., for Guaranty Trust Company of Canada;

D.T. Hatch, Q.C., for nonresident beneficiaries;

J.C. Armstrong, for resident beneficiaries.

This application was heard before Egbert, J., of the Alberta Court of Queen's Bench, who delivered the following decision on August 2, 1985: