Succession de Feu Cléophas Saint-Aubin c. La Reine, 2003 TCC 608 (CanLII) Date: 2003-09-04 Docket: 2000-1641(IT)G Parallel citations: (2003), 59 D.T.C. 912 URL: http://www.canlii.org/en/ca/tcc/doc/2003/2003tcc608/2003tcc608.html Reflex Record (noteup and cited decisions) Docket: 2000-1641(IT)G BETWEEN: ESTATE OF THE LATE CLÉOPHAS SAINT-AUBIN, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] Appeal heard on May 15, 2003, at Montreal, Quebec Before: The Honourable Judge Pierre Archambault Appearances: Counsel for the Appellant: Jacques Renaud Counsel for the Respondent: Nathalie Labbé ____________________________________________________________________ JUDGMENT The appeal from the assessment made under the Income Tax Act for the 1993 taxation year is allowed, with costs to the Respondent, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment taking into account that the estate realized a capital gain of $753,500, in accordance with the attached Reasons for Judgment. Signed at Montreal, Quebec this 4 th day of September 2003. "Pierre Archambault" Archambault, J. Translation certified true on this 15 th day of March 2004. Gerald Woodard, Translator Citation: 2003TCC608 Date: 20030904 Docket: 2000-1641(IT)G BETWEEN: ESTATE OF THE LATE CLÉOPHAS SAINT-AUBIN, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Archambault, J.T.C.C. [1] The estate of the late Cléophas Saint-Aubin ( Estate ) is appealing a new assessment made by the Minister of National Revenue ( Minister ) under the Income Tax Act for the 1993 taxation year. The Minister made the new assessment by applying the rule ( 21-year rule ) set forth in subparagraph 104(4)( b)(i) and subsection 104(5) of the Act .[1] Pursuant to this rule, the estate is deemed to have disposed of all capital property on January 1, 1993, and the Minister added a taxable capital gain totalling $640,200 to the estate's income for the 1993 taxation year. [2] Not having indicated any taxable capital gain in its income, the estate invokes three basic means against the new assessment. First, according to the estate, the Minister was not entitled to make a new assessment, as it was made outside the normal reassessment period and the estate made no misrepresentation attributable to neglect, carelessness or wilful default in filing its return for the 1993 taxation year. Secondly, even if the Minister could make a new assessment outside the normal reassessment period, the estate is not a trust as defined in subsection 104(1) of the Act and, as a result, the 21-year rule does not apply to it. The executors are simply agents of the institutes of a substitution created by the will of the late Cléophas Saint-Aubin. [3] Finally, even if the Minister could make a new assessment outside the normal reassessment period and the estate was in fact a trust, the new assessment should be vacated as a result of the provision set forth in section 32 of the Crown Liability and Proceedings Act ( CLPA) , a provision applied by the Supreme Court of Canada in its recent ruling in Markevich v. Canada , 2003 SCC 9 (CanLII) , 2003 SCC 9, [2003] S.C.J. no 8 (Q.L.). FACTS [4] Cléophas Saint-Aubin, a plumber, died on September 25, 1931. [2] His last wishes were indicated in a holographic will signed on November 20, 1929, and duly probated by the Quebec Superior Court on October 15, 1931. As the second disputed issue deals mainly with the nature of the institution created by that will - whether it is in fact a substitution or a trust, or whether it is instead an unsettled estate - it is appropriate here to cite most provisions of the will: [3] [translation] I, the undersigned, hereby declare the following to be my last will and testament: 1. 2. 3. I want my debts to be paid as soon as possible without, however, causing problems for my estate. 4. 5. I leave all that I have at the time of my death to any children that I may have at that time, but as usufruct and enjoyment and as institutes of a substitution only , for them to retain throughout their lives as explained hereinafter. I want my estate to be divided on the death of my last grandchild to the third generation in equal shares per stirpes, starting with my children, which shall be the final distribution . 6. As an express condition of my will, it is my desire and intention that the property left by me on my death and that acquired by my executors and their successors not be or be able to be allocated to or mortgage in any way any common-law or conventional dower in favour of wives or children, their descendants or each of them. 7. All income from the property in my estate as collected by my executors or their successors, a portion of which shall be capitalized and a portion allocated to my children and grandchildren , shall be non-transferable by them and unseizable by their creditors, even for support, for as long as long as this substitution lasts by my will. 8. My daughter, granddaughters and great-granddaughters shall themselves, independent of and without authorization from their husbands, receive or collect their shares of income, annuities, rent, etc. to which they are entitled under the terms of this will for as long as the substitution lasts. 9. Buildings in my estate, and those that shall be acquired, shall be maintained and all necessary repairs shall be made, and shall be insured for approximately two thirds of their value (buildings). In the event of a fire, the buildings shall be repaired or rebuilt using the insurance money. If that is not enough, income or capital shall be used . 10. The executors shall be entitled to five dollars ($5), for each meeting to deal with the affairs of my estate. Such meetings shall occur when there are important matters to resolve and at least once per year . 11. My executors may designate an agent , who may be released at their discretion at any time, to be paid by commission to not to exceed 5% of net income. If any of my children or grandchildren are qualified and wish to be the agent, they shall be given preference. 12. To facilitate the provisions of my will and ensure the audit of income from my property to my children and descendants according to my wishes, I choose and designate as executors , my son Cléophas, my daughter Consuelo, my former colleague at the Collège, Dr. Arthur Trudeau, and Oscar Pierre Dorais, lawyer. I ask that my executors, as early as possible, initiate my children into business . No woman other than my daughter may be executor of my estate. Neither my wife, Antonia M. C. Robillard, nor any member of her family may be directly or indirectly involved in the affairs of my estate or be designated as legal guardian. This is my express will. The majority of my executors who are family members may designate replacements for executors who have passed away or been dismissed for any reason. Such designations shall be approved by a Superior Court judge for as long as my estate exists . It is my wish that replacement executors be chosen, insofar as possible, from among my male descendants who are deemed able to fulfil such a role. For an outsider to be designated, the consent of two thirds of my adult children and descendants is required. It is my wish that the powers that I give to my executors last and be exercised by them for as long as such substitution lasts. 13. Children who I leave on my death, adult or minor, who are my lineage, shall equally share the net income as follows: until my debts are paid, they shall receive only that amount that is strictly necessary, which shall not exceed fifteen hundred dollars ($1,500.00) per year. After all my debts are paid, they shall receive half of all net income per stirpes. The rest shall be capitalized. Thirty years following my death, they shall be entitled to two thirds of net income instead of half. It is my wish that money accumulated be invested in property on commercial streets or lent, but not in excess of two thirds of the municipal appraisal, government bonds and debentures as deemed beneficial by my executors. If they get good prices for my properties, they may be sold, but in such a case, consent is required from two thirds of my adult male children and descendants. 14. In the event that any of my grandchildren and descendants dies without having any children, their share shall be shared equally among their brothers and sisters per stirpes. If any of my executors failing to work in the interests of my estate may be removed by a Superior Court judge. 15. If any of my children or descendants enters religious life, they shall be disinherited and their share shall be equally shared per stirpes between their brothers and sisters, unless they leave the religious life within five years, after which time this clause shall take effect. They shall not, however, be entitled to income from their share during the time in which they are in religious life. Their income shall be accumulated as capital in the estate . 16. ... 17. In the event that, to carry out my wishes, it is necessary to legally name one or more legal guardians for the substitution(s) created by this will, it is my wish, insofar as is possible, that the persons whom I have named above as executors and their replacements be also named as legal guardians for said substitution or estates as needed.