Boettger: Residence of a Trust

In Boettger c. Agence du revenu du Québec (2017 QCCA 1670; not available in English), the QCCA upheld the decision of the trial court (2015 QCCQ 7517), holding that the province of residence of the Nancy Smith spousal trust ("the NS trust") was Quebec rather than Alberta. The QCCA's decision reiterates the principles established in Fundy Settlement (2012 SCC 14) and enumerates a number of factual elements that will guide a practitioner's analysis in determining the residence of a trust. Such an analysis should seek to identify who actually controls and manages the trust's business and where that management is located; the analysis should not be restricted to actions carried out after the trust is created, or to the trust agreement's limitation of the trustees' powers and obligations.

At the QCCA, the appellant, a trustee of the NS trust, essentially claimed that the trial judge had chosen the wrong facts on which to base her decision in determining the trust's residence. The appellant argued that the errors made by the trial judge involved her consideration of tax motivation, irrelevant facts, and omitted facts.

The QCCA concluded that the tax motivation underlying the establishment of the trust was not what had guided the trial judge in her decision. Instead, her analysis was based on factual findings that demonstrated that the control of the NS trust's activities and business management actually rested in the hands of the settlor. The court noted that
  • billing was directly addressed to the settlor and the settlor's company without any mention of a copy being forwarded to the trustee;

  • meetings and discussions pertaining to the trust's business were held in the presence of the settlor and the settlor's various advisers without the trustee ever being consulted; and

  • the trustee did not know the settlor or the beneficiary of the trust, having met them only after the declaration of trust was signed.

The QCCA rejected the appellant's position that the trial judge had given weight to irrelevant facts. The court concluded that it was crucial to consider all the facts that made it possible to identify who was truly controlling and managing the NS trust's business and to determine the place where decisions were being made, instead of examining only the actions carried out after the establishment of the trust.

The QCCA also found that the judge had omitted no determining elements likely to have a negative impact on her decision establishing Quebec as the NS trust's residence. The appellant had argued that the trial judge had failed to consider, for example, (1) the consent to act as a trustee by the appellant, which had been given after a review of the draft declaration of trust, and (2) the distribution of $28,000 by the trustee even though that amount was not identified in the documents submitted by the settlor.

Audrey Magali Leduc
Morency Avocats LLP, Montreal
[email protected]

Canadian Tax Focus
Volume 8, Number 2, May 2018
©2018, Canadian Tax Foundation