In the Matter of the Trusts under the Will of Sir Albert Edward Kemp

In the Matter of the Trusts under the Will of Sir Albert Edward Kemp

The trustees must indemnify the widow only to the extent that the total amounts paid by them in any year under clauses 3 and 4 (to the extent those amounts are or are deemed assessable as income) bear to the widow's total assessable income for that year; this proportional apportionment governs repayment, includes repayments that are themselves assessable (tax-on-tax), treats deductions and exemptions as belonging to the widow except agreed proportional charitable donation deductions, includes subsequent income taxes (e.g. Ontario tax), and requires payment primarily from estate income and, if deficient, from capital.

Citation
[1940] SCR 353
Parties
Appellant; Widow and Beneficiary: Lady Virginia Kemp (Lady Kemp); Respondents; Trustees and Applicants for Interpretation: Executors and Trustees of the Will of Sir Albert Edward Kemp; Respondents; Beneficiaries Objecting to Indemnity Scope: Residuary beneficiaries (adult and infant); Testator: Sir Albert Edward Kemp (deceased)
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
4 March 1940
Procedural Posture
Will Construction; Trusts; Estate; Income Taxation / Appeal to Supreme Court of Canada From Court of Appeal for Ontario (final Appeal)
Outcome
Appeal dismissed subject to variation of Court of Appeal order; Court varied order to require proportional apportionment including clause 4 payments as part of the numerator
Legal Topics
Indemnity for Income Tax, Construction of Will, Apportionment of Tax, Income Tax Assessability, Deductions and Exemptions
Source Language
English
Wills Trusts Taxation Estates Succession Duties Indemnity for Income Tax Construction of Will Apportionment of Tax +2 more

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Parties

Lady Virginia Kemp (Lady Kemp)

Appellant; Widow and Beneficiary

Executors and Trustees of the Will of Sir Albert Edward Kemp

Respondents; Trustees and Applicants for Interpretation

Residuary beneficiaries (adult and infant)

Respondents; Beneficiaries Objecting to Indemnity Scope

Sir Albert Edward Kemp (deceased)

Testator

Procedural Posture

Will Construction; Trusts; Estate; Income Taxation / Appeal to Supreme Court of Canada From Court of Appeal for Ontario (final Appeal)

Legal Issues

  1. 1 Whether trustee indemnity for income tax under will clause includes income from other sources and repayments of tax
  2. 2 Whether trustees must repay whole or only a proportion of income tax assessed against widow
  3. 3 Whether deductions and exemptions under tax Acts are to be apportioned or belong to the widow

Ratio Decidendi

The trustees must indemnify the widow only to the extent that the total amounts paid by them in any year under clauses 3 and 4 (to the extent those amounts are or are deemed assessable as income) bear to the widow's total assessable income for that year; this proportional apportionment governs repayment, includes repayments that are themselves assessable (tax-on-tax), treats deductions and exemptions as belonging to the widow except agreed proportional charitable donation deductions, includes subsequent income taxes (e.g. Ontario tax), and requires payment primarily from estate income and, if deficient, from capital.

Court Disposition

Appeal dismissed subject to variation of Court of Appeal order; Court varied order to require proportional apportionment including clause 4 payments as part of the numerator

Orders

  • Trustees must repay only such proportion of the whole income tax assessed against Lady Kemp in each year as the total amount paid by trustees under clauses 3 and 4 in that year (to the extent assessable as income) bears to Lady Kemp's total assessable income in that year
  • Repayments by trustees that are themselves assessable (tax-on-tax) are to be included in the apportionment calculation