Usufruct Canada

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Usufruct Canada


Prevost Car Inc. v. The Queen, 2008 TCC 231 (CanLII)

[40]   The concept of "beneficial ownership" or "beneficial owner" is not recognized in the civil law of Quebec or other civil law countries who are members of OECD. Paragraph 248(3)(f) of the Act attempts to harmonize civil law and common law for purposes of the Act. Subsection 248(3) states that in applying the Act in Quebec usufruct, right of use in habitation and substitution, are deemed in certain circumstances to be a trust. Paragraph (f) concludes that:
(f) property in relation to which any person has, at any time,
(i) the right of ownership,
(ii) a right as a lessee in an emphyteutic lease, or
(iii) a right as a beneficiary in a trust
shall, notwithstanding that such property is subject to a servitude, be deemed to be beneficially owned by the person at that time.

[72]   Respondent's counsel informs me that the phrase "beneficial owner" does not appear in English dictionaries. The words do appear separately, of course. The word "beneficial" in the Canadian Dictionary of the English Language is defined primarily as "producing or promoting a favourable result" or "receiving or having the right to receive proceeds or other advantages". The word "beneficial", counsel states, connotes both a factual ("receiving") and legal ("right to") meaning.[24] The Shorter Oxford Dictionary(1973) defines "beneficial" as "of or pertaining to the usufruct of property; enjoying the usufruct", usufruct being a civil law concept. In The New Shorter Oxford Dictionary "beneficial" is defined as "Of, pertaining to, or having the use of benefit of property etc.".

[97]   I want to give a very short example of a civil law concept affecting ownership of property. Article 908 of the Civil Code of Quebec states that property, according to its relation to other property, is divided into capital, and fruits and revenue. Article 947 of the Civil Code grants the owner of property the right to use, enjoy and dispose of the property fully and freely. These are rights that in common law belong to the beneficial owner of property. In civil law, one person may be the bare owner ("nu-propriétaire") of the property but another person, called the usufructary, may use and enjoy the property and the usufructary is the owner of the usufruct in his or her own right, subject to the obligation of preserving the substance of the property: Civil Code, article 1120. The usufructary receives the income from the property as owner of the income. He or she is not accountable to the bare owner for any income. That person is similar to the "beneficial owner" in common law of the income. When a property is held by a nominee, agent or trustee in a civil law jurisdiction and a common law jurisdiction, that person acknowledges the relationship that he or she is not actually the owner of the property.

[98]   In common law, a trustee, for example, holds property for the benefit of someone else.[40] The trustee is the legal owner but does not personally enjoy the attributes of ownership, possession, use, risk and control. The trustee is holding the property for someone else and that, ultimately, it is that someone else who has the use, risk and control of the property. Also, in common law, one person may have a life interest in property and another may have a remainder interest in the same property. The owner of the life interest receives income from the property and owns the income; the owner of the remainder interest owns the capital of the property. There is no division of property in common law as there is in civil law. The word "beneficial" distinguishes the real or economic owner of the property from the owner who is merely a legal owner, owning the property for someone else's benefit, i.e., the beneficial owner.
[99]   In both the common law and the civil law, the persons who ultimately receive the income are the owners of the income property. It may well be, as respondent's counsel argues, that when the terms "beneficial owner", "beneficially owned" or "beneficial ownership" are used in the Act, it is either used in conjunction with property, such as shares or some other property but is never used in conjunction with the income which is derived from the property. i.e., dividends from shares. However, dividends, whether coin or something else, are in and by themselves also property and are owned by someone. Section 12 of the Act includes in computing income of a taxpayer for a taxation year income from property, including amounts of dividends received in the year. The taxpayer required to include the amount of dividends in income is usually the person who is the owner − the beneficial owner − of the dividends, except, for example, when the Act deems another person to have received the dividend or requires a trust to include the dividend in its income.[41] The words "beneficial owner" in plain ordinary language used in conjunction with dividends is not something alien.