McCreath et al. v. Ontario (Minister of Revenue), (1976) 8 N.R. 313 (SCC)

• Judge: Laskin, C.J.C., Martland, Judson, Spence and Dickson, JJ.
• Court: Supreme Court (Canada)
• Case Date: February 25, 1976
• Jurisdiction: Canada (Federal)
• Citations: (1976), 8 N.R. 313 (SCC);1976 CanLII 186 (SCC);[1976] CTC 178;[1977] 2 SCR 264;[1977] 1 SCR 2;67 DLR (3d) 449;[1977] 2 SCR 256;[1977] 2 SCR 198;1976 CanLII 1259 (SCC);1976 CanLII 93 (SCC);[1977] 1 SCR 195;1976 CanLII 150 (SCC);1976 CanLII 187 (SCC);1976 CanLII 20 (SCC);73 DLR (3d) 1;[1976] 3 WWR 664

McCreath v. Ont. (1976), 8 N.R. 313 (SCC)

MLB headnote and full text

McCreath et al. v. Minister of Revenue for Province of Ontario

Indexed As: McCreath et al. v. Ontario (Minister of Revenue)

Supreme Court of Canada

Laskin, C.J.C., Martland, Judson, Spence and Dickson, JJ.

February 25, 1976.

Summary:

This case arose out of an assessment of tax pursuant to the Ontario Succession Duty Act. The deceased was the settlor of a trust in 1948. The trustee was directed in its discretion to pay the income from the trust to the settlor and her children. The corpus of the trust was to be distributed in accordance with the last will of the settlor. The settlor died in 1968 when the value of the corpus of the trust was $25,016,600. The trial court granted the estate of the settlor an exemption under the Ontario Succession Duty Act because the creation of the trust in 1948 was a disposition made more than five years before death pursuant to s. 5(1) (g) of the Ontario Succession Duty Act.

On appeal to the Ontario Court of Appeal, the appeal was dismissed and the judgment of the trial court was affirmed.

On appeal to the Supreme Court of Canada, the appeal was allowed and the judgment of the Ontario Court of Appeal was set aside. The Supreme Court of Canada held that the creation of the trust in 1948 was not a valid disposition for purposes of the Ontario Succession Duty Act. The Supreme Court of Canada stated that the corpus of the trust was "property passing on death" because the settlor retained an interest in the 1948 trust by making herself one of the possible objects of the discretionary trust.

The Supreme Court of Canada held that the estate of the settlor was not entitled to an exemption under s. 5(1) (g) of the Ontario Succession Duty Act because the creation of the 1948 trust was a colourable gift and was not a bona fide disposition pursuant to s. 5(1) (g) of the Ontario Succession Duty Act. The Supreme Court of Canada stated that s. 5(1) (g) is inapplicable where the donor of property retains income benefits - see paragraph 31. The Supreme Court of Canada stated that the corpus and income from property cannot be severed for purposes of the exemption in s. 5(1) (g) if the donor retains income benefits - see paragraph 31.

Estate and Inheritance Taxes - Topic 2166

Taxable property - Property passing on death - Validity of prior inter vivos dispositions - Whether the deceased retained an "interest" in the property disposition pursuant to s. 1(p) (viii) of the Ontario Succession Duty Act - The deceased was the settlor of a trust in 1948 - The trustee was directed in its discretion to pay the income from the trust to the settlor and her children - The corpus of the trust was to be distributed in accordance with the last will of the settlor - The settlor died in 1968 when the value of the corpus of the trust was $25,016,600 - The Supreme Court of Canada held that the 1948 disposition was invalid for purposes of the Ontario Succession Duty Act - The Supreme Court of Canada held that the corpus of the trust was "property passing on death" because the settlor retained an interest in the 1948 settlement by making herself one of the possible objects of the discretionary trust.

Estate and Inheritance Taxes - Topic 2206

Taxable property - Property passing on death - Exemptions - Dispositions made more than five years before death pursuant to s. 5(1) (g) of the Ontario Succession Duty Act - The deceased was the settlor of a trust in 1948 - The trustee was directed in its discretion to pay the income from the trust to the settlor and her children - The corpus of the trust was to be distributed in accordance with the last will of the settlor - The settlor died in 1968 when the value of the corpus of the trust was $25,016,600 - The Supreme Court of Canada held that the settlor was not entitled to the exemption under s. 5(1) (g) - The Supreme Court of Canada stated that the 1948 settlement was a colourable gift and was not a bona fide disposition within the meaning of s. 5(1) (g) of the Succession Duty Act - The Supreme Court of Canada stated that s. 5(1) (g) is inapplicable where the donor of property retains income benefits - See paragraph 31 - The Supreme Court of Canada stated that the corpus and the income from property cannot be severed for purposes of the exemption under s. 5(1) (g) if the donor retains income benefits - See paragraph 31.

Estate and Inheritance Taxes - Topic 104

Statutory interpretation - Application of property law concepts - The Supreme Court of Canada stated that the niceties of property law should not be "fastened upon with mechanical rigidity" to determine the effect of a modern taxation statute whose purpose is plain - See paragraph 17.

Words and Phrases

Property passing on the death of the deceased - The Supreme Court of Canada discussed the meaning of the phrase "property passing on the death of the deceased" as found in s. 1(p) of the Ontario Succession Duty Act - See paragraphs 9 to 17.

Words and Phrases

Interest - The Supreme Court of Canada discussed the meaning of the word "interest" as found in s. 1(p)(viii) of the Ontario Succession Duty Act - See paragraph 11.

Words and Phrases

Disposition - The Supreme Court of Canada discussed the meaning of the word "disposition" as found in s. 5(1)(g) of the Ontario Succession Duty Act - See paragraphs 18 to 30.

Cases Noticed:

Attorney General v. Heywood (1887), 19 Q.B.D. 326, folld. [para. 12].

Attorney General v. Farrell, [1931] 1 K.B. 81 (C.A.), folld. [para. 13].

Gartside v. Inland Revenue Commissioners, [1968] A.C. 553 (H.L.), dist. [para. 14]; refd to. [para. 34].

Re Weir's Settlement, [1970] 1 All E.R. 297 (C.A.), refd to. [paras. 16, 34].

Sainsbury v. Inland Revenue Commissioners, [1969] 3 All E.R. 919 (Ch.), refd to. [para. 16].

Re Cochrane, [1905] 2 I.R. 626, affd. [1906] 2 I.R. 200, dist. [para. 23].

Commissioner for Stamp Duties of New South Wales v. Perpetual Trustee Co., [1943] A.C. 425 (P.C.), dist. [para. 23].

St. Aubyn v. Attorney General, [1952] A.C. 15 (H.L.), dist. [para. 23].

Oakes v. Commissioner of Stamp Duties of New South Wales, [1954] A.C. 57, dist. [para. 23].

Minister of National Revenue v. National Trust Co., [1949] S.C.R. 127, dist. [para. 24].

Gorkin (Adilman Estate) v. Minister of National Revenue, [1962] S.C.R. 363, folld. [para. 26].

Commissioner of Internal Revenue v. Estate of Church (1948), 335 U.S. 632, folld. [para. 28].

Statutes Noticed:

Succession Duty Act, R.S.O. 1960, c. 386, sect. 1(p)(viii) [para. 8]; sect. 5(1)(g) [para. 8]; sect. 6, sect. 12 [para. 7].

Counsel:

Blemus Wright and Graham Stoodley, for the appellant;

J.J. Robinette, Q.C., for the respondents;

E.M. Henry, Q.C., for Miss Michelle McCreath.

This appeal was heard by the Supreme Court of Canada at Ottawa, Ontario on March 20 and 21, 1975. Judgment was delivered by the Supreme Court of Canada on February, 25, 1976 and the following opinions were filed:

DICKSON, J. - see paragraphs 1 to 32.

JUDSON, J. - see paragraphs 33 to 38.

LASKIN, C.J.C., MARTLAND and SPENCE, JJ. concurred with DICKSON, J.