Supreme Court of Canada
Minister
of National Revenue v. Fitzgerald, [1949] S.C.R. 453
Date:
1949-05-09
In The Matter Of The Estate Of George V. Steed,
Deceased
And
In The Matter Of The Estate Of James Kenneth
Raeburn, Deceased.
The Minister Of National Revenue Appellant;
and
Wendell Thomas Fitzgerald Respondent.
and
His Majesty The King Appellant;
and
John Walter Walsh And Wendell Thomas Fitzgerald Respondents.
1948: November 18, 19, 22; 1949: May 9.
Present: Rinfret C.J. and Kerwin, Rand, Kellock and Locke JJ.
ON APPEAL FROM THE EXCHEQUER COURT OF CANADA
Revenue—Succession duties—Whether property situated in
Canada—Chose in action—Situs—Dominion Succession Duty Act, 4-5 Geo. VI, c. 14,
ss. 6 (b), 2 (k).
W. domiciled in B.C., Canada, bequeathed to his wife "the
sum of one hundred and fifty thousand dollars or one-half of my estate
whichever may be the larger sum", making this bequest a first charge on
the estate. W. died in Vancouver in 1921. His widow, also domiciled in B.C.,
died in 1924 leaving the residue of her property to Bonnie S., domiciled in
California, U.S.A., who died in January 1941 and left all her property to her
husband George S., also domiciled in California, and appointed him executor. He
died in 1944 and left all his estate to his nephew R., domiciled in California.
R. died in 1944 leaving portions of the estate bequeathed by George S. to
members of his family. The estate of W. in B.C. consisted chiefly of real
property and the executor delayed the sale of it until November 1945, when the sum
of $250,000 was realized therefrom. The respondent Fitzgerald was appointed by
a California Court administrator with the will annexed of Bonnie S. and by
virtue of a Power of Attorney from him the respondent Walsh was appointed
ancillary administrator of the estate of Bonnie S. in B.C. Upon his death he
was succeeded by Tupper who is now the sole executor of the will of W. and of
W's widow. The Minister of National Revenue assessed duties on the
[Page 454]
succession from George S. to R. and on the succession from R.
to his family. On appeal to the Exchequer Court by the administrator, the
assessments were set aside.
Section 2(k) of the Act reads as follows:
"Property includes property, real or personal, movable or immovable, of
every description, and every estate and interest therein or income therefrom
capable of being devised or bequeathed by will or of passing on the death, and
any right or benefit mentioned in section three of this Act".
Held, affirming the judgment below, (Locke J.
dissenting), that there was no "property situated in Canada" within
the meaning of sec. 6 of the Succession Duty Act, as neither George S.
nor R. had, in the British Columbia estate, the interest that is required by
sec. 2(k) of the Act. All that devolved upon their deaths was a
right to have the estate of Bonnie S. administered and that right was a chose
in action properly enforceable in the country of Bonnie S.'s domicile, i.e. in
California.
Per Locke J. (dissenting): Raeburn in his personal
capacity and those claiming under his will each succeeded to an interest in
property situate in British Columbia out of which the legacies were payable,
within the meaning of sec. 2(k) of the Dominion Succession Duty Act, and
such successions were liable to duty. (In re Smyth (1898) 1 Ch. 89; Attorney-General
v. Watson (1917), 2 K.B. 427 and Skinner v. Attorney-General
[1940] A.C. 350 followed: Attorney-General v. Sudeley [1897]
A.C. 11 and Doctor Barnado's Homes v. Special Income Tax
Commissioners [1921] A.C. 1 distinguished).
APPEALS by the Minister of National Revenue from the
decision of the Exchequer Court , O'Connor J., setting aside the
assessments made under the Dominion Succession Duty Act, 1940-41,
Statutes of Canada, c. 14, in the estate of George V. Steed, deceased, and in the
estate of James Kenneth Raeburn, deceased.
J. W. Pickup, K.C. and John J. Connolly, K.C. for the
appellant.
C. F. H. Carson, K.C. and Alfred Bull, K.C. for the
respondents.
The judgment of the Chief Justice and of Kerwin J. was
delivered by
Kerwin J.:—This
is an appeal against a judgment of the Exchequer Court
pronounced in two appeals from assessments made under the Dominion
Succession Duty Act, chapter 14 of the 1940-41 Statutes of Canada and in an
action commenced in the Exchequer Court by a writ of
[Page 455]
immediate extent. The proceedings in this action and in the
two assessment appeals were consolidated as the question to be determined is
the same in all three.
That question depends upon whether there was "property
situated in Canada" within the meaning of section 6 of the Succession
Duty Act firstly upon the death of George Steed, and secondly, upon the
death of James Kenneth Raeburn, both of whom were domiciled in California, in
the United States of America. Section 6, so far as relevant, reads as follows:—
6. Subject to the exemptions mentioned in section seven of
this Act, there shall be assessed, levied and paid at the rates provided for in
the First Schedule to this Act duties upon or in respect of the following
successions, that is to say, …
(b) where the deceased was at the time of his death
domiciled outside of Canada, upon or in respect of the succession to all
property situated in Canada.
It is admitted that upon each death there was a
"succession" as defined by section 2 (m) of the Act:—
(m) "succession" means every past or future
disposition of property, by reason whereof any person has or shall become
beneficially entitled to any property or the income thereof upon the death of
any deceased person, either immediately or after any interval, either certainly
or contingently, and either originally or by way of substitutive limitation,
and every devolution by law of any beneficial interest in property, or the
income thereof, upon the death of any such deceased person, to any other person
in possession or expectancy * * *
"Deceased person" is defined by section 2(d)
to mean a person dying after the coming into force of the Act. The Act
came into force on June 14, 1941; George Steed died August 16, 1944, and
James Kenneth Raeburn was killed while serving in the United States Armed
Forces December 13, 1944.
In order to appreciate the nature of the property which, on
behalf of the appellants, it is alleged was situate in Canada, it is necessary
to state certain events that occurred before George Steed's death. One Adolphus
Williams, domiciled in British Columbia, died at Vancouver in 1921, having made
his last will and testament and codicils. By the will the testator bequeathed
to his wife Katherine the sum of $150,000 "or
one-half of my estate whichever may be the larger sum to be paid to her by my
trustees as hereinafter mentioned free of succession duty, and I
[Page 456]
direct that the bequest to my wife
shall be a first and prior charge on my estate and shall not be subject to any
abatement whatsoever." By virtue of the will and first codicil, Walter
William Walsh, the testator's wife Katherine and
William Godfrey were appointed trustees and executors, and by the second
codicil the testator directed his trustees to pay to his wife in equal consecutive
monthly instalments, commencing immediately after his death, interest at 5 per
cent per annum on the legacy on such portion thereof as might from time to time
remain unpaid, and directed that this interest, as well as the legacy, should
be a first and prior charge on his estate and not subject to any abatement
whatsoever. These directions mean nothing more than that the widow was entitled
to be paid the legacy and interest in priority to any other legatee.
Probate was granted to the three executors. The bulk of the
estate consisted of real estate in Vancouver. The widow received interest on
the legacy but no part of the principal and she died domiciled in British
Columbia in 1924, having made her last will and testament and a codicil thereto
whereby she devised and bequeathed all her property to her trustees to pay
debts and transfer the residue to her sister Isabella Steed, generally known as
and hereafter called Bonnie Steed. Probate was granted to the named executors,
William Godfrey and Walter William Walsh.
Bonnie Steed was the wife of George Steed and she died
January 10, 1941, domiciled in California, having made her last will and
testament wherein she devised and bequeathed all her property to her husband
and appointed him executor. No proceedings to prove this will in California
were taken during the lifetime of George Steed but on March 26, 1941, probate
was granted in British Columbia to him, limited to his wife's estate in that
province.
George Steed, domiciled in California, died August 16, 1944,
and by his will he left all his property to his nephew, James Kenneth Raeburn,
and appointed him executor. Probate of this will was granted in the name of Mr.
Raeburn by a California court on December 22, 1944, in ignorance of the fact
that he had been killed on the 14th of that month. Subsequently, in March 1945,
the California court granted letters of administration with the will annexed of
[Page 457]
George Steed to Mr. W. T. Fitzgerald, who also in November of that year was granted
letters of administration with the will annexed of Mr. Raeburn. By his will,
Mr. Raeburn divided among various people what he had inherited from his uncle
George Steed but appointed no executor.
It appears that Mr. Walsh, the surviving executor of
Adolphus Williams considered it expedient to hold the several parcels of real
estate in the hope that they would increase in value and that something would
be available for the legatees mentioned in the will of Adolphus Williams other
than the latter's widow Katherine. The real estate was
not sold until November 5, 1945, at which time, upon receiving the purchase
price, Mr. Walsh segregated a sufficient sum to pay the balance of Katherine Williams' legacy and all accrued interest thereon,
and placed such sum in the bank in his name in trust.
However, the important date so far as George Steed is
concerned is that of his death, August 16, 1944. Upon his death, all that any
one claiming under him was entitled to, in relation to the Vancouver real
estate of Adolphus Williams, was a right to have the estate of Bonnie Steed
administered. The crux of the matter is to ascertain where that right was
naturally and properly enforceable, per Lopes and Kay L.JJ. in the Court of
Appeal in Sudeley v. Attorney General , whose
judgments were explicitely approved in the House of Lord . That
right was the property which devolved upon the death of George Steed, and that
property had its situs, not in Canada, but in Bonnie Steed's domicile,
California. It matters not that George Steed took out probate of his wife's
will in British Columbia limited to her property there, since George Steed's
executor, Raeburn, died without having been effectively granted probate of
George's will and without he, himself, having appointed an executor. Upon
George Steed's death there was no personal representative of Bonnie Steed in
Canada. Neither, it is true, was there one in California but that was her
domicile, and the right of any one claiming under George Steed to have the
estate of the latter's wife administered was naturally and properly enforceable
in the country of her domicile. As a matter of fact, on January 11, 1946,
letters of administration with
[Page 458]
the will annexed of Bonnie Steed were granted in California
to Mr. Fitzgerald and on February 6, 1948, letters of administration with the
will annexed of all the unadministered estate within British Columbia, of
Bonnie Steed, were granted to Mr. Walsh. Before that namely on November 5,
1945, Mr. Walsh had set aside the balance of Mrs. Williams' legacy and interest,
and holding that sum in his capacity as administrator with the will annexed of
Bonnie Steed, his duty apparently would be to remit that sum, less debts and
administration expenses to Mr. Fitzgerald, the administrator in the country of
Bonnie Steed's domicile. An order to that effect was made in the Supreme Court
of British Columbia upon Mr. Walsh's motion for directions and what prevented
those directions being carried out was the issuance of the writ of immediate
extent.
Mr. Pickup relied upon the judgment of the House of Lords in
Partington v. Attorney General but that was merely a
decision as to what duty was payable in view of the particular steps taken by
the plaintiff Partington. In Re Berchtold , is a
decision on the conflict of laws and it is dangerous and misleading to attempt
to apply conflict of laws cases to those of taxation.
The only remaining decision of importance put forward as
bearing on the matter is that of the House of Lords in Skinner v. Attorney
General . The point there was whether there was
"property in which the deceased or any other person had an interest
ceasing on the death of the deceased" within section 2, subsection 1,
paragraph (b) of the Finance Act, 1894, which reads as follows:—
11. (1) Property passing on the death of the deceased shall be
deemed to include the property following, that is to say: …
(b) Property in which the deceased or any other
person had an interest ceasing on the death of the deceased, to the extent to
which a benefit accrues or arises by the cesser of such interest; but exclusive
of property the interest in which of the deceased or other person was only an
interest as holder of an office, or recipient of the benefits of a charity, or
as a corporation sole;
By testamentary dispositions a testator devised and
bequeathed his property to two nephews, subject to specific and pecuniary
legacies, including an annuity to his wife. He died domiciled in Northern
Ireland and his assets in
[Page 459]
England were of such little value that no estate duty was
payable there in respect thereof. However, his executors invested the greater
part of the estate in English securities and it was under those circumstances
that upon the death of the testator's widow the English authorities claimed
estate duty in respect of the testator's estate in so far as it was then
represented by English securities.
In his speech, which was approved by all the other peers,
Lord Russell of Killowen, with reference to the provisions of the
Finance Act set out above, stated at page 358:—
It appears to me to be beyond question that an annuitant,
whose annuity is payable out of a testator's estate and who is therefore
interested in the whole estate, is necessarily also interested in all the parts
which compose the whole; and that her right to take proceedings (if necessary)
to have the estate administered for the purpose of providing her annuity, is
merely the right of enforcing or realizing that interest which she has in the
whole and its parts.
At page 359 he pointed out that in the Sudeley (2)
case the interest which was being repudiated was a proprietary interest, and
proceeded:—
The case is not in any way a decision that the widow or her
executors had no interest in the mortgages, and it is certainly no authority
against the view that an annuitant whose annuity is charged on the estate of a
testator "has an interest" in the different items of which that
estate from time to time consists.
These extracts from Lord Russell's speech indicate the
difference between the Skinner case, on the one hand, and the Sudeley
case and the present one, on the
other. Here, we are not dealing with a statute imposing a tax on the passing of
property in which a deceased had an interest, ceasing on his death, but with
one which imposes a tax upon a succession to property situate in Canada, By
section 2 (k) of the Succession Duty Act:—
property includes property, real or personal, movable or
immovable, of every description, and every estate and interest therein or
income therefrom capable of being devised or bequeathed by will or of passing
on the death, and any right or benefit mentioned in section three of this Act;
Undoubtedly, as it is put by Lord Halsbury in the Sudeley
(2) case, in a loose and general way of speaking, George Steed had an
interest in the British Columbia real estate held by Mr. Walsh as trustee of
Adolphus Williams
[Page 460]
but what is referred to in (k) is not such a
nebulous interest but a proprietary interest, either legal or such an equitable
one that is recognized by our Courts, and that Steed did not have. All that
devolved upon his death was a right to have the estate of Bonnie Steed
administered; and that right was a chose in action properly enforceable and
therefore situated in California and not in Canada.
The same result necessarily follows in connection with the
death of James Kenneth Raeburn and the appeal should therefore be dismissed
with costs.
Rand J.:—This
appeal arises out of an unusual situation, the facts of which, however, can be
shortly stated.
Adolphus Williams, whom I shall call A, dies in 1921,
domiciled and resident in British Columbia where his property is situate,
bequeathing his wife, to be called B, one-half of his estate but to be not less
than $150,000. The executor of A continues an investment which constitutes the
bulk of the assets for the purposes of the estate and in the result B becomes
entitled to the minimum sum. The time required for this, however, carries the
administration beyond the year 1944. B dies, domiciled in British Columbia, in
1924, leaving her estate to Bonnie Steed, called C, a domiciled resident of
California. C dies in January, 1941, leaving her estate to George Steed, her
husband, called D. D dies in August, 1944, leaving his estate to a nephew,
James Raeburn, called E, of California, who lost his life while serving in the
armed forces of the United States in December, 1944. Administration with the
will annexed was granted in California to the respondent Fitzgerald in the
estates of D and E: and the question is whether those two estates are liable
for succession duty under the Succession Duty Act of the Dominion which
came into force in June, 1941.
Although the definitions of "property" and
"succession" in the Act are sufficiently broad to cover any
property interest which is descendible, the determination of this controversy
rests, I think, on a comparatively simple ground which is not affected by them.
An executor holds strictly a representative capacity; he
stands in and enforces the right of the testator. At com-
[Page 461]
mon law a legatee
could not bring an action against an executor before at least the executor
assented to the legacy; and a fortiori that rule is applicable where the
bequest is residual and unascertained. It is equally clear that rights in
action, as assets of the estate, can be asserted in a court only by the legal
representative.
But in addition to his capacity of representing the
deceased, the executor in equity is looked upon as quasi-trustee for the
beneficiaries; and the beneficiary is entitled to resort to that court to have
the duty of the executor enforced. The "interest" in property that is
transmitted results from that right and becomes, therefore, an equitable
interest, subject to the rules which underlie equitable administration,
The applicable section of the Act is 6 (b) and
the duty is based on the operation of the territorial law in vesting a title to
property which is within its jurisdiction. The res here as to B and C is
undoubtedly in Canada. C acquired a direct right against the representative of
B in respect of an interest in property resulting from a personal equitable
right in the representative of B against the representative of A. But when C
died, domiciled and resident outside of Canada, what was then the legal
position? I think it was this: as equity in working out the rights and
interests in property which it confers considers that done which ought to be
done, the relation of the law of Canada to C must be determined as if the
executor of B had reduced the assets of the estate to possession; in that
situation, after administering in Canada, his duty, which the law of British
Columbia would authorize him to carry out, was to transfer the property to the
person entitled, C, in California. When it would then appear that C was dead, a
new transmission came to the notice of the court in Canada, while the property
was still there; but subject to the administration of that property as an asset
of C in Canada, the duty of the executor of B became to deliver the asset over
to the representative of C either in Canada or in California. At that point the
transmission by Canadian law ends; the personal representation of C remains
until the estate is fully administered in California; the death of a particular
executor does not affect that representation; and the desti-
[Page 462]
nation of the Canadian property is to that estate in
California. The interests of D and E arise out of rights existing by virtue of
the law of California as the new situs of the res and are enforceable against
the personal representatives there. The concern of Canadian law with the estate
of C would be for the ascertainment of the persons entitled under the
domiciliary law and the tax deduction to be made from the sum otherwise to be
sent out of the country. Since the obligation lies between a Canadian personal
representative and a Californian personal representative, with what is
equivalent to a corporate existence on both sides, the death of a beneficiary
of the estate of C neither appears to the Canadian law nor is it relevant to
any action by it. In contemplation of law, therefore, and as it would in fact
be carried out in formal procedure as the duty of the executor in Canada, the
funds have become possessed by the executor at the domicile in California, they
have ceased to be property in Canada, and the Canadian law has nothing further
to do with them.
In this conception a present equitable interest which can be
realized only in the course of a series of administrations is deemed to exist;
but a present "transmission" takes place only subject to the rules
and conditions which attach to equitable operation. In that contemplation, if
execution of a series of future administrations carries the realized property
beyond the jurisdiction, transmission by the local law obviously ceases;
present equitable interests arise by that law only up to that point. Succeeding
interests may arise and be recognized by the local jurisdiction, but they would
not be taken as having been created locally. This view of the nature of
transmission seems to underlie the statement of Dicey, 5th Ed. at page 336
where he says: "There can be no succession to property without
administration."
The case of Partington v. Attorney-General ,
was pressed upon us. There a domiciled resident of the United States became entitled
to personal property of a deceased person in England. Administration of the
estate was granted to the solicitor to the Treasury. The legatee died before
receiving the bequest and her husband died without
[Page 463]
administering her estate. A son by attorney was then granted
administration of both estates, and the question arose whether probate duty
became payable on each. The majority opinion in the House of Lords, that it
did, was based largely upon two circumstances: that administration of both had
actually been granted; and that under a rule followed in England administration
of the estate of a deceased wife must be taken out either by the husband or by
his legal representative. Lord Westbury dissented. He viewed the situation in
this way: the principal administration in each case would be in the United
States; the legal representative of the mother either by himself or certainly
after administration taken out in England, could give a discharge to the
administrator of the original estate, and with that done the English courts
would no longer be interested in the property which would thereafter be
administered according to the law of the domicile. He impliedly rejected the
view that administration of the father's estate in England was necessary to establish
the right of the son to represent his mother there; and if the son had been
named the executor of his mother's will it would seem to be beyond doubt that
the father's estate would never be brought in question before the English
courts: certainly that would appear to be so in relation to succession duty.
The situation so conceived is that here. The only question before Canadian
courts is the power to discharge the executor of B: that is possessed by the
administrator of C: The estates of D and E do not come in question. The
power of discharge is the converse aspect of the view of the equitable
operation in respect of "interests" already expressed and obviously
leads to the same result. The two grounds mentioned, together with the fact that
it was probate duty there as against succession duty, distinguish it from the
present controversy, to which the opinion expressed by Lord Westbury is, I
think, unassailable in its application.
I would, therefore, dismiss the appeal with costs.
Kellock J.:—The
Crown in the first appeal claims duty upon the succession consequent upon the
death of the late George V. Steed, who died domiciled in California,
[Page 464]
entitled to the residue of the estate of his deceased wife,
Bonnie Steed, also of California domicile. In the second appeal the claim is
for duty upon the succession consequent upon the death of one Raeburn, who died
domiciled in California, entitled to the residue of the estate of George V.
Steed.
The Dominion Succession Duty Act came into force on
the 14th of June, 1941. Bonnie Steed died on the 10th of January of that year,
leaving a will under which she appointed her husband sole executor and sole
beneficiary. Bonnie Steed was entitled under the will of her sister, the late Katherine Williams, to the residue of the latter's estate,
all of the assets of which were locally situated in British Columbia. Bonnie
Steed also had other assets to the value of some $10,000 in California. Katherine Williams had died on the 9th of April, 1924, being
in her turn entitled to substantial benefits under the will of the late
Adolphus Williams, all of whose assets were also in British Columbia. At the
date of the death of George Steed on August 16, 1944, the estate of Adolphus
Williams had not been fully administered. That did not take place until
November of 1945. Consequently, the estates of his widow and of Bonnie Steed
were also unadministered.
In the meantime J. K. Raeburn, the sole executor and sole
beneficiary under the will of George Steed, had died in December 1944;
domiciled in California. W. T. Fitzgerald was appointed by the California court
as administrator with the will annexed of the estate of George Steed on the
12th of March, 1945, and on the 28th of November, 1945, Ftzgerald was also
appointed administrator with the will annexed of the estate of Raeburn. George
V. Steed had, on March 26, 1941, taken out letters probate in British Columbia
limited to the estate of Bonnie Steed there. On the 16th of January, 1946,
Fitzgerald was appointed in California administrator with the will annexed of
Bonnie Steed. Pursuant to a power-of-attorney given by Fitzgerald, Walter
William Walsh, who was the surviving executor of the estate of Adolphus
Williams, was, on February 5, 1946, appointed by the court in British Columbia administrator
de bonis non of the estate of
Bonnie Steed.
[Page 465]
The Crown's claim as against the estate of George V. Steed
is rested upon the fact of his death prior to the actual distribution of the
British Columbia assets of the estate of Bonnie Steed in the lifetime of George
V. Steed. It is said that there was a succession to property in British
Columbia within the meaning of the Succession Duty Act on the death of
George Steed which is taxable under the provisions of 6 (b) of
that Act.
"Property" is defined by section 2(k) of
the statute as including real and personal property and every estate and
"interest" therein capable of being devised or bequeathed by will or
of passing on death. The question in each appeal is whether there was, upon the
death of George Steed and of Kenneth Raeburn, respectively, any succession to
property or an interest therein in Canada consequent thereon.
Dealing first with the situation arising upon the death of
George Steed, the assets of the estate of Bonnie Steed, of which he was
residuary beneficiary, consisted of certain assets in California where she was
domiciled and where her executor was also domiciled and also an interest in the
residuary estate of Katherine Williams. I think the
situation becomes clear if one disregards the fact that George Steed was also
the sole executor of Bonnie Steed and if the situation be considered as though
another person still living were the executor. When the executor of Katherine Williams had realized upon her residuary estate and
was in a position to pay, it would have been necessary to take out
administration to the estate of Bonnie Steed in British Columbia, Bonnie Steed
being then dead and there being no person qualified by the law of British
Columbia to give a discharge. Bonnie Steed's representative would have been
liable to succession duty in such event but the law of British Columbia would
have had no further concern with the moneys so paid over beyond enforcing the
claim of the personal representative appointed by the law of the domicile of
Bonnie Steed, namely, California, to payment over of such moneys.
The argument on behalf of the Crown is that it would be the
duty of the executor of Katherine Williams before
paying the administrator in British Columbia of the estate
[Page 466]
of Bonnie Steed, to inquire whether any of the beneficiaries
of that estate, or those claiming under them, were then dead, and to refuse to
pay such part of the proceeds of Katherine Williams'
estate from which any such deceased person might ultimately obtain a benefit
without payment of succession duty under the Dominion Act or without a
release under that Act having been obtained.
It seems to me that in the absence of clear language in the
legislation such is not the case. I think this view finds support in the
judgment of Lord Westbury in Partington v. Attorney-General .
The fact that this judgment was a dissenting judgment does not affect the
present point.
In Partington's case one, Mary Shard,
had died in England in 1819 intestate, leaving one, Isabel Cook, her
next-of-kin, domiciled in the United States. The latter died in 1825 without
having taken out letters of administration and Isabel Cook's husband, Ellis
Cook, also died in 1830 without having taken out letters of administration to
his deceased wife. After his death the appellant, under a power-of-attorney,
took out letters of administration in England to the estate, first of Ellis
Cook and then of Isabel Cook, and it was held that probate duty was payable in
respect of both estates. In his judgment Lord Westbury pointed out that the
administration of the estate of Isabel Cook was necessary to enable that
administrator to give a valid discharge to the administrator of Mary Shard but
neither the personal estate of Isabel Cook nor that of Ellis Cook had to be
distributed or administered in England. He was therefore of opinion that there
was no basis for the levying of duty in respect of the estate of Ellis Cook.
The personal representative of Mrs. Shard was of course entitled to receive a
discharge upon the distribution of the assets in his hands. As Isabel Cook was
dead, Mrs. Shard's administrator was entitled to have a discharge from a
personal representative of Isabel Cook appointed in England. It was therefore
necessary to take out letters of administration to Isabel Cook in England but
solely for the purpose of giving such a discharge. Beyond that the law of
England was not interested. In Lord Westbury's
[Page 467]
view therefore the course that ought to have been adopted by
the parties was to have taken out administration to the estate of Isabel Cook
in the appropriate court in the United States and ancillary letters of
administration in England. Notwithstanding that this course was not in fact
followed, Lord Westbury would have decided the liability on the part of the
estate of Ellis Cook to duty as though that course had in fact been followed.
The Lord Chancellor, Lord Hatherley, however, held that both
estates were liable to duty as would have been the case had both been domiciled
in England. Administration having in fact been taken out in England in respect
of both estates it was not, in his view, for their Lordships to say that they
were not bound by this course of action. He was unwilling to decide what might
have been the case if the course suggested by Lord Westbury as the proper
course had in fact been followed. The judgment of Lord Chelmsford and that of
Lord Colonsay also proceeded on the basis of the course actually adopted by the
parties. Lord Cairns was, however, of the view that, notwithstanding the course
followed, both estates were liable to duty.
In my opinion in the case at bar the representative of
Bonnie Steed was entitled to receive that to which Bonnie Steed was entitled
under the will of Katherine Williams and to give a good
discharge therefor. The accident that George Steed was not only beneficiary but
executor and was dead when the time came for payment over does not affect the
principle. I do not think the law of British Columbia could be further
interested once the moneys reached the hands of the personal representative in
British Columbia of Bonnie Steed, whose duty it then was to remit to the
administrator in the domicile; Eames v. Hacon .
I pause at this point to deal with an argument of Mr.
Pickup, that because in fact George Steed proved the will of Bonnie Steed in
British Columbia before there was any administration taken out to her estate in
California, British Columbia was thereby constituted as the local situation of
all her estate and the main forum of its administration, with the result that
George Steed died entitled to the residue of Bonnie Steed's estate, all of
which was situate
[Page 468]
in Canada. In my opinion this argument is not entitled to
prevail. I think the case must be viewed apart from such accidents.
Administration was always necessary in California and was ultimately taken out
there and the administration in British Columbia ultimately granted subsequent
to the death of George Steed was purely ancillary.
There is a further consideration which confirms the view to
which I have come, as above expressed. In Lord Sudeley v. Attorney-General
, a case dealing with probate duty, it
was held that the residuary legatee of a testator who died domiciled in England
where his estate was undergoing administration, but whose property included
mortgages on real property in New Zealand, was not entitled to any part of the
mortgages in specie but to require the testator's executors to administer his
personal estate and to receive her share and that this was an English asset of
the estate of the residuary beneficiary. The judgment of Lopes L.J., in the
Court of Appeal was approved. At p. 363 that learned
judge said:
The right of the executors of Frances (the widow and
residuary legatee of the testator) as against the executors of her husband is a
right to have his estate administered. Administration where? The husband was
domiciled in England, his will was proved in England, his executors are in
England, and his estate is being administered in England, and the money
recoverable will be brought to England. The executors of the husband can only
be sued in the English Courts by the executors of Frances. It is an English
chose in action, recoverable in England, and is, in my opinion, an English and
not a foreign asset * * *
With respect to estate duties in England the law is thus
stated in Dymond on Death Duties, 10th Edition, at page 93:
In the case of absolute interests in an unadministered
estate the right of a residuary legatee, under English law and many other legal
systems, is not to the specific assets of the testator. He is entitled merely
to require the executors to administer the estate, and to pay him the clear
residue, or a share thereof, as the case may be. The same rule applies under an
intestacy. If, therefore, a residuary legatee or person entitled under an.
intestacy dies while the original estate is still under administration, the
locality of his interest, as an asset in his estate, is determined by the
residence of the debtors, viz., the personal representatives of the original
testator or intestate (Sudeley v. A.-G. (1897) A.C. 11; Barnardo's
Homes v. Special Commissioners of Income Tax (1921) 2 A.C. 1; Re
Steinkopff, Favorke v. Steinkopff (1922) 1 Oh. 174), and by the
forum of administration, the latter being determined by the domicile of the
testator or intestate. In practice, as between Northern Ireland and Eire
[Page 469]
and Great Britain the domicile is treated as the material
factor; … The Revenue has conceded the application of the general principle
stated above to cases where the deceased beneficiary was also the sole personal
representative of the other deceased person.
The author points out at page 87 that as regards claims for
estate duty on property situate in Ireland such property ranks as colonial or
foreign property.
If the question be looked at therefore in accordance with
the view of the text writer, the locality of the interest of George Steed in
the estate of his deceased wife was situate in California, where the executor
was domiciled and where the main administration would proceed. It has not been
considered by any text-writer, so far as I have been able to find, that
anything said in Skinner v. Attorney-General is
relevant to the situation referred to by Dymond.
It was contended in the case at bar, however, that the
decision in Skinner's (1) case was, however, relevant. In that case the House
was concerned with a claim of the revenue to estate duty under section 2, 1 (b)
of the Finance Act, 1894, in respect of investments in England made by
the executors of a deceased person who died domiciled in Northern Ireland where
his estate was undergoing administration, leaving annuities, among others, to
his widow. Estate duty was claimed upon the death of the widow on the ground
that the widow had had an "interest" in the English investments
ceasing on her death within the meaning of the legislation.
It was held that section 2, 1 (b) did apply.
In the course of his judgment Lord Russell of Killowen considered the decision
in Sudeley's case and said that it was not in any way a decision that
the widow in that case, or her executors, had no interest in the New Zealand
mortgages, but that the gist of the decision was that she had no interest in
the mortgages so as to make them an asset of her estate.
Assuming that the view of Lord Russell was that for the
purposes of such legislation as the Finance Act, the widow in Sudeley's
case was to be considered as having an interest within the meaning of that Act,
and applying that view to the case at bar, George Steed had not only his
claim against the executor of Bonnie Steed in California, but an interest in
the assets of Bonnie Steed, one of which
[Page 470]
was an interest in the assets of the estate of Katherine Williams in British Columbia. In other words,
George Steed had an interest in the interest of Bonnie Steed in Katherine Williams' residuary estate. When one comes to
Kenneth Raeburn, he, similarly, had an interest in the interest of George Steed
in the interest of Bonnie Steed in the residuary estate of Katherine
Williams.
In my opinion, while "property" is defined by
section 2(k) of the statute as including every estate and
"interest" in real and personal property capable of being devised or
bequeathed by will or of passing on death, I see no reason for construing this
statute, without more express language, as including an interest in an interest
or more remote interests.
In my opinion therefore the appeal should be dismissed with
costs.
Locke J.
(dissenting):—The bequest by Adolphus Williams to Katherine
Wylie Williams, his wife, was the sum of $150,000 or one-half of his
estate, whichever might be the larger sum, and it was directed that this
bequest should be a first and prior charge on the estate and not subject to any
abatement. After making certain further smaller bequests all of the testator's
real and personal property was devised to trustees to sell and call in and
convert into money and out of the proceeds to pay the debts and the legacies
bequeathed by the will, and the trustees were empowered to postpone the
conversion of any of the testator's property for so long as they should think
best in the interest of the estate. The trustees were further empowered at the
request of the wife to convey any part of the real and personal estate at their
own fair market value in satisfaction of her legacy. By a codicil it was
provided that the named trustees should pay interest on the legacy to the wife
in monthly instalments at the rate of five per cent from the date of the death
of the testator. By the will of Katherine Wylie
Williams made on July 15, 1922, following the death of her husband, after
directing the payment of debts, funeral, testamentary expenses, probate and
succession duties, and providing a legacy of $5,000 to John Walter Walsh, the
trustees were required
[Page 471]
"to convey, assign, transfer and set over all the rest
and residue of my property, both real and personal, unto my sister Isabella
Steed, wife of George V. Steed, of the City of San Francisco, in the State of
California" and in the event of her prior death to transfer such residue
to George V. Steed. In the exercise of the discretion given to them by the will
of Adolphus Williams, his trustees delayed the conversion into money of the
Castle Hotel property in Vancouver, which was the main asset of the estate,
until November of 1945 when they were able to effect a sale for $250,000 cash
and to provide for the balance of the legacy of $150,000 and accumulated
interest for the first time since the death of the testator. In the interval
Mrs. Williams had died in the year 1924 and her sister Isabella Steed, who is
referred to in the proceedings as Bonnie Steed, on January 10, 1941. Mrs.
Williams had received some payments by way of interest upon her legacy and
Bonnie Steed some small payments of principal, and the balance payable to the
estate of Katherine Wylie Williams at the date of the
sale of the property was $134,952.66, the balance of the principal amount of
the legacy, and $24,-394.67, accumulated interest.
Adolphus Williams, his wife Katherine and
Bonnie Steed all died prior to the date upon which the Dominion Succession
Duty Act came into force and the duty imposed did not attach to the
successions in any of these estates. The will of Bonnie Steed made on December
9, 1924, at San Francisco, where she resided with her husband and was
domiciled, after directing payment of her debts bequeathed "all my
property, real, personal and mixed of whatsoever kind and wheresoever
situated" unto her husband and appointed him executor. Following the death
of Mrs. Steed her husband applied for probate of her will to the Supreme Court
of British Columbia, limited to the estate within that province and letters
probate were issued on April 1, 1941, and at the time of the death of George V.
Steed on August 16, 1944, no other probate had been obtained in California or
elsewhere. By the will of George V. Steed made in California on February 4,
1941, he bequeathed "all my property of whatsoever kind and wheresoever
situated" unto James Kenneth Raeburn, his wife's
[Page 472]
nephew, and 'by the will of Mr. Raeburn dated October 11,
1944, he left the estate which he had inherited from George V. Steed to his
sister and other relations, in varying proportions. Raeburn was killed while on
active service with the American Forces in December 1944. It is upon the
successions in these two estates that the duties in question have been levied.
The assessment made upon the estate of Steed is upon what is
said to be a succession of the value of $159,347.33 which, according to the
notice of assessment, consisted of money on deposit with the main branch of the
Royal Bank of Canada at Vancouver standing in the name of W. W. Walsh in trust.
In the estate of Raeburn the dutiable value of the successions is stated to be
$143,205.29. The notice in connection with this estate does not assume to
designate any particular place as the situs of the moneys bequeathed. While
Raeburn had been named the executor of George V. Steed and an application for
probate made on his behalf granted in the Supreme Court of California on
December 22, 1944, in ignorance of the fact that he had been killed in action
earlier that month, his will did not name an executor. Raeburn who by virtue of
sec. 75 of the Administration Act, cap. 5, R.S.B.C. 1936 would have had
all the powers and rights of George V. Steed as executor of the estate of
Bonnie Steed in British Columbia, did not exercise those rights and nothing has
been done pursuant to these powers from the date of Steed's death. On March 12,
1945, letters of administration with the will annexed of the will of Raeburn
were granted to the respondent Fitzgerald by the Superior Court of California
and on January 11, 1946, a like appointment was made in that court in relation
to the will of Bonnie Steed. Thereafter Fitzgerald, by power of attorney,
authorized the appointment of Mr. Walsh as ancillary administrator of the
Bonnie Steed estate in British Columbia and letters of administration with the
will annexed de bonis non were granted in the Supreme
Court of British Columbia on February 5, 1946. Upon the death of Mr. Walsh, Mr.
R. H. Tupper was appointed to succeed him as administrator de
bonis non of this estate.
[Page 473]
Property is defined by sec. 2 of the Dominion Succession
Duty Act as including inter alia "property, real or personal,
movable or immovable, of every description, and every estate and interest
therein or income therefrom capable of being devised or bequeathed by will or
of passing on the death." Succession is defined as meaning:
every past or future disposition of property, by reason
whereof any person has or shall become beneficially entitled to any property or
the income thereof upon the death of any deceased person, either immediately or
after any interval, either certainly or contingently, and either originally or
by way of substitutive limitation, and every devolution by law of any
beneficial interest in property, or the income thereof, upon the death of any
such deceased person, to any other person in possession or expectancy, and also
includes any disposition of property deemed by this Act to be included in a
succession.
The duties imposed by the Act are levied where the deceased
was at the time of his death domiciled outside of Canada "upon or in
respect of the succession of all property situate in Canada" and the point
for determination is as to whether the succession of Raeburn under the will of
George V. Steed and of Nan Raeburn, Thomas W. Raeburn, Elizabeth W. R. Allan
and William J. M. Raeburn, under the will of J. K. Raeburn, were successions to
property situated in Canada.
I do not think that the proper determination of this
question depends upon the fact that by the will of Adolphus Williams the
bequest to his wife was declared to be a first charge upon the estate, since I
think this was simply intended as a direction that the wife should be paid in
preference to all other legatees and that there was no intention to create a
charge in the sense of an encumbrance upon the real and personal assets. Nor do
I think that the fact that letters probate of the will of Bonnie Steed were
obtained in British Columbia by her executor affects the matter since no one
now is vested with the status of executor of the estate in British Columbia and
the claim to the moneys in question is made by the administrator with the will
annexed, properly authorized by the court in the jurisdiction in which Mrs.
Steed was domiciled and died. I am, however, of the opinion that George V.
Steed at the time of his death had an interest in the assets of the estate of
Adolphus Williams, within the meaning of
[Page 474]
subs. (k) of sec. 2 of the Act, and
that the rights of Raeburn and of his legatees under the respective wills gave
to these persons an interest in that property.
As of the date of the death of Steed on August 16, 1944, the
remaining assets of the Adolphus Williams estate consisted of the Castle Hotel
property and some other less valuable properties in Vancouver, and the unpaid
portion of the legacy to Katherine Williams with accumulated
interest was to be paid out of moneys realized from the sale of the property,
in priority to the other legacies. It was this right which the trustees of Katherine Williams were required by her will to transfer and
set over unto Bonnie Steed and it was this right which passed to George V.
Steed under the bequest of the residue of his wife's estate and of which he
died possessed. The right to receive the amount of the bequest from the
executors of Katherine Williams was vested in Steed qua
executor of his wife's estate. I am, however, of the opinion that Steed in his
personal capacity had not only what was referred to by Romer, J. in In re
Smyth , as an equitable chose in action
entitling him to require the executor to administer the estate but also an
interest in the assets out of the proceeds of which the legacy was to be paid. In
A.-G. v. Watson , a testator bequeathed an annuity of
£1,000 per annum to be paid out of his residuary estate and primarily out of
the income thereof during the life of the annuitant or such less period as in
the will mentioned. By s. 2, sub-s. 1 of the Finance Act, 1894, property
passing on the death of a deceased was deemed to include property in which the
deceased had an interest ceasing on the death of the deceased to the extent by
which a benefit accrued or arose by the cesser of such interest, and upon the
death of the annuitant the question arose as to whether he had an interest in
the testator's residuary estate within the meaning of this section. Lush, J.
said at p. 431:—
On behalf of the defendants it has been contended that the
annuitant had no interest in the corpus, and that no annuitant can be said to
have an interest in the property out of which the annuity is payable unless the
property has been actually appropriated and set apart to answer the annuity. If
that is so of course the contention on behalf of the Crown fails, because there
has been no express appropriation or setting apart of any specific property to
answer this annuity. But in my judgment that is not the true interpretation to
be placed upon s. 2, sub-s. 1 (b),
[Page 475]
of the Finance Act, 1894. The object of the section
is to make estate duty payable whenever there has been a succession in fact, or
that which is equivalent to a succession—whenever there has been a cesser of an
annuity by reason of the death of the annuitant, which cesser causes a benefit
to accrue to that property. And I think one is bound to construe the words
"had an interest" in the wider sense and not to restrict the words, and
put upon them the narrower meaning for which Mr. Disturnal has contended on
behalf of the defendants. In my judgment this annuitant had, according to the
ordinary use of language, an interest in the corpus of this property; she had
an annuity accruing from day to day, payable out of the property, and it was to
that property that the annuitant would necessarily look for the payment of her
annuity. It is true she had no estate in the property, but she had an interest
in it, because that was the source of the annuity bequeathed to her by the
testator. It was the fund to which she could look and to which she was entitled
to have recourse, and even to claim to have realized for the purpose of paying
the annuity.
In Skinner v. Attorney-General ,
this decision was approved, Lord Russell of Killowen saying that an annuitant
whose annuity is payable out of a testator's estate and who is, therefore,
interested in the whole estate is necessarily also interested in all the parts
which compose the whole and that her right to take proceedings (if necessary)
to have the estate administered for the purpose of providing her annuity is
merely the right of enforcing and realizing that interest which she has in the
whole and its parts.
In the present case the learned trial judge in coming to the
conclusion that the administrator of the estate of George V. Steed had no
interest, legal or equitable, in the assets of the estate of Adolphus Williams,
considered that the matter was concluded by the decision of the House of Lords
in Attorney-General v. Sudeley , which was followed in Dr. Barnardo's
Homes v. Special Income Tax Commissioners . In Sudeley's
case a testator who had died domiciled in England by his will, after
bequeathing certain legacies, gave the residue of his real and personal estate
to his executors in trust for his wife for life, and by a codicil gave
one-fourth of his "said residuary real and personal estate" to his
wife absolutely. The will was proved in England by his executors domiciled
there and the estate included mortgages on real property in New Zealand. The
wife died and her will was proved in England and at the date of her death her
husband's estate had not been fully administered, the clear residue had not
been ascertained
[Page 476]
and no appropriation had been made of the New Zealand
mortgages to the particular shares of the ultimate residue. It was contended by
the executors of the wife that no probate duty was payable under her will upon
what they contended to be her fourth interest in the New Zealand mortgages
since this was an asset the situs of which was New Zealand. It was held that
the rights of the wife's executors was not to one-fourth or any part of the
mortgages in specie but to require her husband's executors to administer his
personal estate and to receive from them a fourth of the clear residue and that
this was an English asset of the wife's estate and, accordingly, probate duty
was payable under her will upon one-fourth of the value of the mortgages.
Dealing with the contention of the executors, Lord Herschell said that the
whole fallacy of the argument rested on the assumption that the testatrix was
entitled to any part of the mortgages as an asset and that he did no consider
that she or her executors had "any estate, right or interest, legal or
equitable, in these New Zealand mortgages so as to make them an asset of her
estate." In Skinner's case Lord Russell pointed out that this passage from
Lord Herschell's speech made it clear that the interest which had been
repudiated was a proprietary interest and that it was not an authority for the
proposition that the widow or her executors had no interest in the mortgages,
and was certainly no authority against the view that an annuitant whose annuity
is charged against the estate "has an interest" in the different
items of which that estate from time to time consists. As Lord Russell pointed
out, the whole point of the decision was that the widow did not own any part of
the mortgages.
The decision in Dr. Barnardo's Homes case
does not appear to me to be at variance with this view of the law. There Dr.
Barnardo's Homes National Incorporated Association named as the residuary
legatee of an estate claimed that certain income received from investments of
the estate following the testator's death but before the residue had been
ascertained was exempt from income tax on the footing that the residue was its
property. Following the decision in Lord Sudeley's case
it was held that until the residue was ascertained the institution had no
property
[Page 477]
in any specific investment forming part of the estate or the
income therefrom and that accordingly income tax had been properly levied.
I think the rights of George V. Steed as at the time of his
death were of the same nature as that of the annuitant in In re Smyth
and in Skinner's case and that the matter is not
affected by the fact that in Steed's case an action against the executors of Katherine and Adolphus Williams for the protection of his
rights would normally be made by him in his capacity of executor of the estate
of his deceased wife. It was to the real property held by the trustees of
Adolphus Williams that Steed was entitled to look for the payment of the legacy
and had the personal representative of his wife's estate been someone other than
himself and had it been necessary to take some step for the protection of his
legacy or to compel the administration of the estate of either Katherine or Adolphus Williams, Steed could have brought such
an action in his own name had the personal representative declined to act,
joining the representative of his wife's estate as a party defendant. As
pointed out by Lord Russell of Killowen in Skinner's case,
his right to take proceedings, if necessary, to have the estate administered
for the purpose of providing the legacy was merely the right of enforcing or
realizing the interest which he had in the whole estate. In my opinion, the
decisions in Sudeley's case and in that of Dr. Bar-nardo's
Homes do not affect the matter to be decided
here. The definition of "property" in sec. 2(k) of the Dominion
Succession Duty Act says that the term includes every interest in property,
real or personal, and not merely proprietary interests. If there could be any
doubt as to the sense in which the word "proprietary" was used by
Lord Russell in Skinner's case it would be dispelled by the
context. It was used to distinguish between the interest of one who claims a
right of property in or ownership of assets, and one who has an interest
arising out of /the fact that an annuity is to be paid out of the income of
such assets or the proceeds of their sale. In my opinion, Steed had no such
proprietary interest in the assets of the
[Page 478]
estate of the late Adolphus Williams in the sense that that
term is used in Skinner's case, but that appears to me to be
aside from the point.
The tax imposed by the Dominion Succession Duty Act is
upon the succession and in the estate of Steed the succession of the interest
was to Raeburn and I consider that his rights as against the assets in the
hands of the executors of Adolphus Williams did not differ from those of his
predecessor. When Mr. Raeburn made his will it was in the form of a letter
addressed to his sister and was apparently made while he was on active service.
The exact nature of the bequests to Nan Raeburn, Thomas W. Raeburn, Elizabeth
W. R. Allan and William J. M. Raeburn, was expressed to be fractional portions
of the estate which he had inherited from the late George V. Steed and in the
case of Nan Raeburn certain bonds, an insurance policy and some cash which had
not formed part of the inheritance. In the case of these legatees a further
administration intervenes but, for the same reason which leads me to conclude
that George V. Steed died possessed of an interest in the assets of the estate
of Adolphus Williams within the meaning of sec. 2(k) of
the Dominion Succession Duty Act, I think these legatees succeeded to
such an interest.
The appeal should be allowed with costs and the judgment in
the Exchequer Court set aside. There should be a declaration that the moneys
deposited in the Royal Bank of Canada in trust are liable to payment of
succession duty at the appropriate rate on the dutiable value of the
successions referred to in the assessment notices. The appellant should have
the costs of the proceedings in the Exchequer Court.
Appeal dismissed with costs.
Solicitors for the appellant: Clark, Robertson,
Mac-Donald & Connelly.
Solicitor for the respondent Fitzgerald: E. G.
Gowling.
Solicitor for the respondent Walsh: Alfred Bull.
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