Supreme Court of Canada
The King v. National Trust Co.,  S.C.R. 670
His Majesty The
King (Plaintiff) Appellant;
Company (Defendant) Respondent.
1933: May 18, 19; 1933: October 3.
Present: Duff C.J. and Rinfret, Lamont, Smith,
Gannon and Crocket JJ.
ON APPEAL FROM THE COURT OF KING’S BENCH,
APPEAL SIDE, PROVINCE OF QUEBEC
Constitutional law—Succession duties—Bonds
or debentures of railway companies (G.T.P. Ry. Co. and C.N. Ry. Co.) having
head offices in the province of Quebec, at Montreal, where they were registered
and transferable—Owner at his death domiciled in the province of
Ontario—Whether subject to succession duties under section 5 of the Quebec
Succession Duties Act, R.S.Q., 1925, c. 29, as modified by (Q.) 18 Geo. V, c.
17—Powers of provincial legislature to fix situs of intangible
The Crown, in the right of the province of
Quebec, by its action claimed the sum of $15,776.95, as re-presenting
succession duties alleged to be due by the respondent as sole trustee and
executor of the estate of the late Sir Clifford Sifton who died in New York in
1929 and was at the time of his death domiciled in the province of Ontario.
Amongst the assets of his estate were certain bonds or debentures of the Grand
Trunk Pacific Railway Company and the Canadian National Railway Company,
respectively, guaranteed by the Government of Canada. These bonds or
debentures, registered in Montreal, were at the time of Sir Clifford Sifton’s
death in the possession of the latter in Toronto. Succession duties were paid
to the Government of the province of Ontario; but the Government of the
province of Quebec also claimed succession duties on the ground that these
bonds or debentures were to be considered for succession duty purposes as
property situate in the province of Quebec according to the definition of the
word “property” in section 5 of the Succession Duties Act (R.S.Q., 1925,
c. 29), because the two companies debtors had their head offices at Montreal and
the bonds and debentures were registered and transferable on the companies’
registers in that city.
these bonds or debentures had not, in the relevant sense, a local situation
within the province of Quebec, and, therefore, were not subject to the payment
of succession duties in that province. Brassard v. Smith ( A.C.
that a provincial legislature is not competent to prescribe the conditions
fixing the situs of intangible property (which has no physical existence) for
the purpose of defining the subjects in respect of which its powers of
.taxation under section 92 (2) B.N.A. Act may be put into effect. Therefore,
section 5 of the Quebec Succession Duties Act is ultra vires of
the legislature of that province, when invoked by it for the purpose of
claiming succession duties upon property which has no local situation in that
province, within the definition laid down implicitly, if not explicitly, by
decisions of the Judicial Committee of the Privy Council. Woodruff v. Atty.
Gen. for Ont. ( A.C.
508); Rex v. Lovitt ( A.C. 212); Toronto General Trusts Corp.
v. The King ( A.C. 679); Royal Trust Co. v. Atty. Gen. for
Alberta ( A.C. 144); English, etc., Bank v. Commissioners
of Inland Revenue ( A.C. 238); Commissioners of Stamps v. Hope (
A.C. 476); N.Y. Life Ins. Co. v. Public Trustee ( 2 Ch. 101);
Atty. Gen. v. Bouwens ((1838) 4 M.& W. 171) discussed and
Comments on the legal institution of the
common law known as specialty. Debentures authorized by the Parliament of
Canada and charged by statute upon the Consolidated Revenue Fund have the
character of specialties. The Grand Trunk Pacific Ry. Co. has statutory powers
to create bonds having the character of specialties. The bonds in this case
must, as respects the obligation of the railway company, be considered
specialties, although the head office of the company is fixed by statute in
Quebec; and, in view of the statute law applicable to the case, it must be held
such a specialty has its situs in Ontario. Neither, for the reasons fully
stated in the judgment, have the bonds of the Canadian National Railway Company
in question in this case a situs in Quebec.
Judgment of the Court of King’s Bench (Q:R.
54 K.B. 351) affirmed.
APPEAL from the decision of the Court of King’s
Bench, appeal side, province of Quebec,
affirming the judgment of the Superior Court, Surveyer J., and dismissing the
appellant’s action with costs.
The material facts of the case, and the
questions at issue are stated in the above head-note and in the judgment now
Chs. Lanctot, K.C., and Aimé Geofjrion,
K.C., for the appellant.
A. Chase Casgrain, K.C., for the
The judgment of the Court was delivered by
Duff C. J.—The statutory enactments
under consideration are sections 3 and 5 of the Quebec Succession Duties Act. So far as pertinent, the provisions
of these sections are as follows:—
3. All property, moveable or immoveable,
the ownership, usufruct or enjoyment whereof is transmitted owing to death,
shall be liable to the following taxes calculated upon the value of the
property transmitted, after deducting debts and charges existing at the time of
death * * *
5. The word “property” within the meaning
of this division includes all property, moveable or immoveable, actually
situate within the province, and all debts which were owing to the deceased at
the time of his death, or are payable by reason of his death, and which are
either payable in the province, or are due by a debtor domiciled therein; the
whole whether the deceased at the time of his death had his domicile within or
without the province, or whether the transmission takes place within or without
The property in respect of which the dispute
arises consists of certain bonds or debentures of the Grand Trunk Pacific
Railway Company and the Canadian National Railway Company, respectively,
guaranteed by the Government of the Dominion of Canada. These bonds were the
property of Sir Clifford Sifton who, at the time of his death on the 17th of
April, 1929, was domiciled in the province of Ontario where the bonds were in
The enactments of the statute purport to impose
a tax upon property transmitted owing to death; and, therefore, they only
affect subjects having a situs within the province (Woodruff v. Attorney
General for Ontario; Rex
v. Lovitt; Toronto
General Trusts Corporation v. The King; Brassard v. Smith; Provincial Treasurer of Alberta v.
Kerr, P.C. Appeal No. 1 of 1933).
The question we have to consider is whether or
not these bonds have, in the relevant sense, a local situation within that
Some propositions pertinent to that issue may,
we think, be collected from the judgments of the Judicial Committee of the
Privy Council, if not laid down explicitly, at least, as implicit in them.
First, property, whether moveable or immoveable, can, for the purposes of
determining situs as among the different provinces of Canada in relation to the
incidence of a tax imposed by a provincial law upon property transmitted owing
to death, have only one local situation. In applying this proposition, of
course, it is necessary to distinguish between a tax upon property and a tax
upon persons domiciled or resident in the province. (Toronto General Trusts
Corp. v. The King; Brassard
v. Smith; Provincial
Treasurer of Alberta v. Kerr).
Then, it seems to be a corollary of this
proposition that situs, in respect of intangible property (which has no
physical existence) must be determined by reference to some principle or
coherent system of principles; and again, the courts appear to have acted upon
the assumption that the British Legislature, in defining, in part, at all
events, by reference to the local situation of such property, the authority of the
province in relation to taxation, must be supposed to have had in view the
principles of, or deducible from, those of the common law. (The King v. Lovitt; Toronto General Trusts Company v. The
King; Brassard v. Smith;
Royal Trust Co. v. Attorney General for Alberta.
We think it follows that a provincial
legislature is not competent to prescribe the conditions fixing the situs of
intangible property for the purpose of defining the subjects in respect of
which its powers of taxation under s. 92 (2) may be put into effect.
On this appeal we are concerned with debts, or
obligations to pay money. As is well known, rules for the determination of such
situs for various purposes have been drawn from those which defined the
jurisdiction of the ecclesiastical tribunals respecting probate. (The Royal
Trust Co. v. The Attorney General for Alberta;
English, etc., Bank v. The Commissioners of Inland Revenue. In those
rules, a broad distinction was observed between
specialties and simple contract debts. The latter were bona notabilia in
the jurisdiction in which the debtor had his personal residence; the former,
where the instrument constituting the specialty was found at the death of the
testator. The case of judgment debts which were deemed to be situated where the
judgment was recorded, may be regarded as a special one.
Situs has been ascribed in conformity with these
rules to such property, when regarded as items in a succession, “for the
purposes of representation and collection,” for the purpose of giving effect to
testamentary dispositions, of ascertaining the incidence of stamp duties and of
determining the incidence of death duties. (English, etc., Bank v. The
Commissioners of Inland Revenue.)
In the Royal Trust Co. v. Atty. Gen.
for Alberta the
rule in relation to specialties was held to govern, for the now relevant
purpose, the local situation of “statutory obligations of the Dominion of
Canada evidenced by bonds” which were “authenticated in the manner prescribed
by the Legislature”; and which were by statute (The Consolidated Revenue
Act, s. 7) charged upon the Consolidated Revenue Fund; and it was there
decided that the locality of such statutory obligations, evidenced by
particular bonds, was at the place where the bonds were found at the death of
In the evolution of the legal principles derived
from the rules governing the earlier practice and their application to new
states of fact, novel questions will naturally arise. A corporation debtor may
have more than one residence, and, consequently, it may be necessary to
determine which of these is the residence of the corporation for the purpose of
the inquiry. The reason given by Lord Field in Commissioner of Stamps v.
assigning the locality of the debt to the place of the personal residence of
the debtor is that there the assets for paying the debt may be presumed to be.
Another reason has been given, viz., that there, in the ordinary course,
payment of the debt may be enforced, or that there the debt is “properly
recoverable.” (N.Y. Life Ins. Co. v. Public Trustee, per Atkin
West-lake, 7th ed. 209; Dicey, p. 342).
The circumstances of a particular case may be
such that, to them, none of the rules as formulated and applied in decided
cases or books of authority is strictly appropriate; and then one must have
recourse to analogy, and to the principles underlying the decisions or the
rules as formulated or deducible therefrom. (N.Y. Life Ins. Co. v. Public
Applying the rules and principles so ascertained,
is it established that these bonds are locally situated in the province of
The Crown puts its case on two grounds: First,
it is said that the domicile, in each case, of the primary debtor, is in Quebec
and that the locality of the obligation is, therefore, there. The contention of
the respondent, that the situs of the obligation is determined in each case by
the fact that it is a specialty, is met by the argument that the obligation
receives its character from the law of Quebec, and that the institution of the
common law, known as specialty, is not recognized by the law of that province.
Secondly, it is argued that the bonds, in both cases, being registered in
Quebec, and being, as the Crown contends, transferable only on the company’s
register in that province, the situs of the obligation is, by virtue of that
circumstance, in that province, even assuming that the rule as to specialties
would otherwise be applicable, and that the facts do not bring the case within
the rule under which residence is the criterion.
It is convenient to examine, first the last
The Crown argues that, as the bonds were
transferable only on the company’s register in the province of Quebec, the
situs is fixed in that province by force of the rule laid down in the judgment
of the Judicial Committee in Brassard v. Smith. The subjects of taxation in respect of
which the controversy in that case arose were shares in the capital stock of
the Royal Bank of Canada. It was held that, since, by the provisions of the Bank
Act, the place of registration of the shares was in Nova Scotia, and there,
and only there, except in circumstances having no relevancy, the shares could
be validly transferred, they had locality in that province, and not in Quebec.
The test applied is stated in the judgment of Lord Dunedin at p. 376 as,
the circumstance that the subjects in
question could be effectively dealt with within the jurisdiction
(that is to say, in Nova
It is an important rule that the scope of a
decision should not, speaking generally, be determined by reference to
expressions in the judgment, and without regard to the subject matter upon
which the court is pronouncing. Judgments must be read, as the phrase is, secundum
subjectam materiem. Their Lordships in Brassard v. Smith were not dealing with debts., They were
dealing with shares in the capital stock of a corporation, a different kind of
property, and the judgment of the Judicial Committee in the Royal Trust Co.
v. Attorney General for Alberta
requires us, we think, to hold that the decision of the matter now in debate is
not ruled by the observation just quoted from the judgment of their Lordships
in Brassard v. Smith.
It was sought to liken (says Lord Merivale
in the course of the judgment in the Royal Trust Co’s case)
the bonds to the shares of a joint stock company so as to apply the principle
affirmed in Brassard v. Smith, that in the case of
such shares the test of local situation is supplied by the question, “Where
could the shares be effectively dealt with?” But these securities were
statutory bonds and not shares. The conditions of the bonds as to registration
are in no way analogous to the provisions in articles of association for the
incorporation of shareholders in a joint stock company by the entry of their
names on the register of shareholders at its authorized place of being.
It may not be out of place to observe that the
phrase cited by Lord Dunedin from the judgment in this court in Smith v.
Lévesque is, in
the latter judgment, shewn to be a quotation from Mr. Dicey’s book at p. 342,
and that in the passage in that book where the phrase quoted occurs, the situs
as determined by the test expressed in that phrase, when applied to debts, is “the
country where” the debt is “properly recoverable or can be enforced”; which, it
may be added, is the test given in the judgment of Atkin L.J. in New York
Life Ins. Co. v. Public Trustee.
The judgment in Attorney General v. Bouwens, at the pages mentioned in the judgment
delivered in this court (pp. 191-2), distinguishes simple contract debts
from debts by specialty, as well as from debts embodied in negotiable
instruments, that is to say, instruments the
delivery of which effects a transfer of the debt. Negotiable instruments are
treated as instruments
of a chattel nature capable of being
transferred by acts done here, and sold for money here
as “in fact a simple chattel”; therefore, it is
such an instrument follows the nature of
other chattels as to the jurisdiction to grant probate.
The criterion expressed in Mr. Dicey’s words may
fairly be said to be that approved in the judgment in Attorney General v.
respects negotiable instruments and other kinds of intangible property which
are “dealt with” ordinarily and naturally by transferring them. But, we do not
doubt (independently of the binding force of the judgment in the Royal Trust
Co. v. Attorney General for Alberta)
that there is nothing in the judgment in Brassard v. Smith, or in the judgment in Attorney General
v. Bouwens, the principle of which that judgment
adopts, to justify the conclusion that a specialty debt, non-negotiable, has
(either necessarily, or prima facie) its situs at a place where
some formality has to be observed in order effectually to transfer it.
On the contrary, the rules by which the courts
have uniformly governed themselves in ascertaining the locality of specialties
or simple contract debts (except in the case of negotiable instruments) have
been those already stated, unless the circumstances have been such (as, for
instance, in Toronto General Trust Corporation v. The King) as to make them inapplicable. If the
criterion adopted in Brassard v. Smith were
to be considered appropriate to debts (other than specialties and negotiable
instruments) then the words “the place where it can be effectively dealt with”
must be understood, as Mr. Dicey uses them, in relation to such debts, as
denoting “the place where it is properly recoverable or can be enforced.” (See Attorney
General v. Glendinning per
The bonds now under consideration were, in
neither case, negotiable (transferable by delivery) at the date of the testator’s
death. As regards the bonds of the Grand Trunk Pacific Railway Company, we
shall presently give our reasons for the conclusion that they are specialties.
the bonds of the Canadian National Railway,
somewhat different considerations come into play. We are not satisfied that the
obligation of the company itself, under these bonds, is a specialty debt; but
the argument of the Crown, immediately under discussion, as respects these
bonds, fails, nevertheless, on the facts. The clause dealing with the subject
of registration is in the following terms:
Unless registered tins bond shall pass by
delivery. This bond may be registered as to the principal sum in the name of
the holder on the books of the company at the head office of the corporate
trustee in the borough of Manhattan city and state of New York, or at the
office of the company in the city of Montreal, Dominion of Canada, such
registration being noted thereon. After such registration no transfer shall be
valid unless made at one of said offices by the registered holder in person or
by his attorney duly authorized, and similarly noted hereon, but this bond may
foe discharged from registration by being in like manner transferred to bearer,
and thereupon transferability by delivery shall be restored; and this bond may
again from time to time be registered or transferred to bearer as before.
We have quoted the pertinent provision in its
entirety. It is quite plain that a bond registered in Montreal may be
transferred in New York, and a bond registered in New York transferred in
Montreal. Duplicate registers are obviously contemplated. Registration at
either place is registration in both. The language of the bond is explicit and
cannot properly be read as requiring transfer at the place of registration.
It is worth while, perhaps, to compare the
language of this bond with the language of the Grand Trunk Pacific Railway
Company’s bond, in which it is unequivocally stated that, after registration of
the bond, transfer can be effectuated only “on the company’s books at the
office where such registration was made.”
Coming then to the contentions (a) that
the rule as to specialties is irrelevant, and (6) that the locality of the
obligation is determined, in each case, by the residence of the corporation.
We shall first consider whether the bonds are,
in the present connection, to be treated as specialties.
The view to which we have already referred,
viz., that the rules for determining situs, in applying the enactment of s. 92
(2) of the B.N.A. Act, must rest upon the principles of the common law of
England, does not, by any logical necessity, involve the consequence that an
obligation in its scope and nature governed by the rules of the law of Quebec
is, for this purpose, a specialty, merely
because such obligation created in like circumstances in one of the other
provinces of the Dominion and having inter partes the like scope and
effect, would, by the rules of the common law, fall within the category of
specialty. It is unnecessary now to discuss or consider any such question.
The bonds with which we are concerned are the
guaranteed bonds of Dominion railway companies. There can, we think, be no
controversy as to the power of the Parliament of Canada to authorize a Dominion
railway company to execute specialties. Normally, the undertaking of such a
company is a work extending through two or more provinces of Canada; and such
companies must, frequently, in the ordinary course, become concerned in
transactions in provinces other than Quebec, which involve the execution of
deeds of conveyance and deeds of covenant. The authority of the Dominion must
necessarily extend to empowering such companies to execute instruments having
the effect of a common law specialty, and the exercise of this power cannot be
affected by the circumstance that the head office of the company is fixed by
statute in Quebec.
It is unnecessary to consider what restrictions
may affect the exercise of the power as respects transactions which, apart from
Dominion legislation, would, ordinarily, under the accepted principles of
private international law, be governed by the civil law of Quebec. There can be
no doubt that, as regards bonds charged by trust deed or otherwise upon the
company’s undertaking as a whole, Parliament is competent to empower the
company to execute transfers by deed having the effect of a deed at common law,
to execute covenants having the force of, and being, specialties, at common
law, and to give the same effect to the bonds and debentures to which
securities attach; as well as to bonds and debentures not so secured, issued in
the exercise of the borrowing powers of the Company. Nor have we any doubt that
such is the effect of the statutes and Orders in Council by which the bonds now
in question were authorized.
First of the Grand Trunk Pacific Railway
Company. That company’s bonds were guaranteed by the Government
of Canada pursuant to the provisions of a statute known as the Grand Trunk
Pacific Guarantee Act, 1914 (c. 34 of the statutes of that year).
By this statute, His Majesty, upon certain
conditions, which have been fulfilled, may “for the purpose of aiding the
company provide” certain monies
and upon and subject to the conditions
hereinafter set out guarantee payment of the principal and interest of an issue
of bonds to be made by the company.
The statute enacts (s. 4) that the bonds are to
be secured by a trust deed or deeds “granting fixed and floating mortgages or
charges”; and, by s. 5,
The kind of securities to be guaranteed
hereunder and the forms thereof, and the forms and terms of the new trust deed,
and the trustee, and the times and manner of the issue of the guaranteed
securities, and the disposition of the moneys to be raised thereon, by sale,
pledge or otherwise, and the forms and manner of guarantee or guarantees shall
be such as the Governor in Council approves, and such terms, provisions and
conditions as the Governor in Council may consider expedient or necessary shall
be included in the new trust deed.
It is unnecessary to go further for the purpose
of establishing the power of the company to create bonds having the character
The bonds are under the seal of the company. A
seal is not necessary for compliance with the forms and conditions prescribed
by the Railway Act (s. 132 (2), c 170, R.S.C 1927). It cannot be
presumed that the execution of the bonds under seal, as prescribed by the
Governor in Council, was an idle ceremony merely. The bonds must, we think, as
respects the obligation of the company, be considered specialties.
As to the guarantee of the Government of Canada,
the Parliament of Canada has exclusive jurisdiction by force of the enactments
of s. 91 to make laws in relation to the
subject of the “Public Debt.” We see no reason to think that the subject
defined in these words does not include the form and the effect of the
instruments authorized by Parliament to evidence the public obligations; and
the case already cited (Royal Trust Co. v. Attorney General for
conclusive authority for the proposition that debentures authorized by
Parliament and charged by statute upon the Consolidated Revenue Fund have the
character of specialties.
By s. 6 of the Guarantee Act, it is
The said guarantee shall be deposited with
the trustee, signed by the Minister of Finance or such officer as is designated
by the Governor in Council, and upon being signed and deposited as aforesaid
His Majesty shall become liable as guarantor for the payment of principal and
interest of the guaranteed securities according to the tenor thereof, and the
said payment shall form a charge upon the Consolidated Revenue Fund, and the
guarantee so signed and deposited shall be conclusive evidence that the
requirements of this Act respecting the guaranteed securities and the new trust
deed and all matters relating thereto have been complied with.
In exercise of his powers under s. 5 (quoted
above) the Governor in Council approved the form and the terms of a mortgage
and of the bonds and the form and manner of the guarantee; and authorized the
Minister of Finance, upon the due execution, delivery and deposit of the
mortgage in the form approved, to sign and deposit with the trustee, the Royal
Trust Co., a guarantee of the bonds. This guarantee is in the form of a
certificate by which the Minister of Finance certifies
that the bonds * * * are guaranteed as to
the payment of both principal and interest by the Dominion of Canada.
One of the stipulations of the bond itself is
that it shall not become valid or obligatory for any purpose until
authenticated by the certificate of the trustee endorsed upon it. In the
certificate the trustee certifies that the
bond is one of a series * * * guaranteed by
the Government of Canada, described in the within-mentioned mortgage, executed
by the Grand Trunk Pacific Railway Company to the undersigned as trustee.
Another stipulation of the bond is this:—
A copy of the guarantee of the Government
of the Dominion of Canada is endorsed on this bond.
By Art. 4 (2) and (3) of the mortgage it is
provided as follows:—
Section 2. The said guarantee shall be
deposited with the trustee, signed by the Minister of Finance or such officer
as is designated by the Governor in Council, and upon being signed and
deposited as aforesaid, His Majesty shall become liable as guarantor for the
payment of the principal and interest of the said bonds according to the tenor
thereof, and the said payment shall form a charge upon the Consolidated Revenue
Fund. A copy of the said guarantee, with a facsimile of the signature of the
Minister of Finance, or such other officer, may be engraved upon the said
Section 3. No extension, waiver, or other
modification of the obligations of the company, given or granted pursuant to
the provisions in this mortgage contained by the trustee, or by all or any of
the bondholders, or by such bondholders and trustee acting together, shall
release or discharge the Government from its obligations as guarantor of the
said bonds or upon its covenants herein contained.
From all this it is quite clear that, by force
of s. 6 of the Guarantee Act, quoted above, His Majesty is liable
“as guarantor for the payment of principal and
interest” of each of the bonds “according to the tenor thereof”; and that “ the
said payment,” that is to say, “the payment of principal and interest” of the
bonds, forms “a charge upon the Consolidated Revenue Fund.”.
The debt under the guarantee is, therefore, not
only the debt of His Majesty, it is a debt by statute and as such is charged
upon the Consolidated Revenue Fund. As regards the guarantee, these
circumstances bring the obligation plainly within the principle of the Royal
Trust Co. v. Attorney General for Alberta.
As to the situs of the specialty,—the bond was
in the possession of the testator in the province of Ontario. The copy of the
guarantee endorsed upon the bond in compliance with the terms of the approval
of the Governor in Council, acting under statutory authority, together with the
certificate of the trustee in the form approved by the Governor in Council
acting under the same authority, constituted, and were intended to constitute,
a representation to persons dealing in the bonds that the conditions of the
statutory guarantee had been complied with, and that the charge, conditionally
created by the statute, was operative. (Ex parte, Asiatic Banking Corp.; Bhugwandass v. Netherlands &c. Insce Co..
The bond, in the hands of the holder, in itself, constitutes the evidence, and
it alone constitutes the evidence, of the holder’s individual right to demand
payment in execution of the guarantee. Again, on the principle of The Royal
Trust Co. v. Attorney General for Alberta, the
proper conclusion seems to be that the specialty had its situs in Ontario.
The definition of His Majesty’s liability under
art. 4, s. 2, of the mortgage, which is to arise upon the fulfilment of the condition
laid down in that section, is expressed in language which is identical with the
language of s. 6.
The Grand Trunk Pacific Railway Company’s bonds
are, therefore (as respects both the obligation of the company and the
guarantee of the Government) specialties which had their situs in Ontario at
the critical date.
Secondly, of the Canadian National Railway
These bonds were executed by the Canadian
National Railway Company, under the authority conferred by s. 26 of c. 13 of the
Dominion statutes of 1919; and, pursuant to an Order in Council of the 13th of
September, 1924, a guarantee was signed by the acting Minister of Finance on
behalf of His Majesty. This Order in Council, and the guarantee given pursuant
to it, were authorized by The Appropriation Act (No. 3) of 1924, being
c. 75 of the statutes of that year and schedule “A” thereto.
By the last mentioned statute, the Governor in
Council was empowered to pay and to apply a sum not exceeding $159,543.39 for
the charges arid expenses of the public service from the 1st of April, 1924, to
the 31st of March, 1925, not otherwise provided for (being the aggregate of
two-thirds—the residue—of the amount of each of the several items, less
deductions set forth in schedule “A”). Item 137 relates to a sum of $56,000,000
appropriated to meet expenditures made, and indebtedness incurred, by or on
behalf of the Canadian National Railway Company or any one or more of its
constituent companies; and it is enacted as follows:
The amount herein authorized may be applied
from time to time, in the discretion of the Governor in Council:—
(a) To meet expenditures made or
indebtedness incurred by the company in respect of railways, properties and
works entrusted to the company as aforesaid.
(b) By way of loans in cash,
or by way of guarantee, or partly one way and partly the other, subject,
however, as follows:—
If by way of loans, the amount or amounts
advanced shall be repayable on demand, with interest at the rate fixed by the
Governor in Council, from time to time, payable half-yearly, secured if and
when directed by the Governor in Council by mortgage or mortgages upon such
properties, in such form and containing such terms and conditions, not
inconsistent herewith, as the Governor in Council may approve.
If by way of guarantee, any such guarantee
may be of the principal and interest of the notes and obligations or securities
of one or more of the said companies specified by the Governor in Council, and
may be signed by the Minister of Finance, on behalf of His Majesty, in such
form and on such terms and conditions as the Governor in Council may determine
to be appropriate and applicable thereto.
While the language is not as precise as in the
section already quoted from the Guarantee Act of 1914, the effect of the
Appropriation Act and the schedule seems to be very clearly this: the
Governor in Council may, by guarantee given within the period mentioned, of the
principal and interest of notes and obligations or securities of the Canadian
National Railway Company or one or more of its
constituent companies, charge the Consolidated Revenue Fund with the payment of
such notes, obligations or securities; the guarantee to be executed by the
Minister of Finance on behalf of His Majesty, in such form and on such terms
and conditions, as the Governor in Council may determine.
The form of the bonds, and of the trust deed
referred to in it, were duly approved by the Order in Council mentioned. By the
trust deed, an original counterpart of the guarantee is to be deposited with
the corporate trustee, and a copy of it to be endorsed upon all the bonds with
the same effect as if the original guarantee were endorsed thereon; the
guarantee, when deposited with the corporate trustee, is to be absolute and unconditional;
it is unnecessary for the trustees or for any holders of the bonds to take any
steps or proceedings for enforcing their rights against the company in order to
preserve or enforce their rights against the Government.
The bond itself declares the
payment of the principal and interest of
the bonds of this issue as and when the same become respectively due and
payable is unconditionally guaranteed by His Majesty the King acting in the
right of the Dominion of Canada, by guaranty, a copy of such guarantee being
hereon endorsed with the same effect as if the original guarantee were hereon
It is also stipulated that the bonds shall not
be obligatory for any purpose until authenticated by the certificate of the
corporate trustee under the trust agreement endorsed thereon.
The nature of the guarantee clearly appears to
be that of an unconditional obligation resting upon His Majesty to pay the
principal and interest of the bonds according to their tenor. The approval of
the form of the bond and of the trust agreement by the Governor in Council,
acting as the delegate of the legislature, and its direction to the Minister of
Finance to execute the guarantee have the same effect as if such approval and
direction formed part of an Act of Parliament. The debt incurred is a debt
created by statute. And, once again, the individual right of the holder is
evidenced by the bond, and by the bond alone, that is to say, by the instrument
as a whole, the promise of the company, the declarations contained in the bond
and the copy of the guarantee attached to, and the certificate of the trustee
endorsed upon it. The instrument, in so far as it
embodies an obligation of His Majesty
unconditionally to pay principal and interest when due according to the terms
of the bond, seems clearly, on the principle to which effect was given in The
Royal Trust Co. v. Attorney General for Alberta, to be a specialty and to have had its
situs, where it was at the testator’s death, in his possession in the province
It is necessary, however, to consider the nature
of the obligation of the company, which is not under the company’s seal.
First, we think the obligation of the company
itself is not a specialty debt. It is not a specialty in form; and the
obligation is clearly not a debt by statute within the meaning of the rule
applied in the Royal Trust Co’s case.
Then, treating the company’s obligation as a
simple contract debt. The company has its head office in Montreal. The company
has, therefore, a residence there. The bonds as we have seen were registered
there. On both grounds, as we have already noticed, it is argued that the situs
of this obligation was in Quebec.
The effect of registration in Montreal has been
What weight is to be attached to the fact that
the head office of the company is in Quebec?
The evidence afforded by the public statutes and
the evidence in the appeal book touching the amalgamation of the Canadian
National Railway Company with the Grand Trunk Pacific Railway Company require
us to take notice of the fact that the Canadian National Railway Company
carries on business in other provinces, including Ontario, as well as in
Quebec. The debt of the company is primarily payable in New York. But the
company is bound to provide for payment of the bonds at Toronto and at Ottawa
as well as in New York and Montreal. Payment is not, moreover, contemplated at
the head office of the company, or indeed at any office of the company. In each
of the places mentioned the bonds are payable at the principal office of the
Bank of Montreal.
Either of the reasons, above mentioned, for the
rule fixing the situs of simple contract debts by reference to the residence of
the debtor, would justify the assignment of locality to the bonds in Toronto or
Ottawa as well as in Montreal.
New York is, as mentioned, the primary place of
payment, and, again, there is sufficient evidence in the public statutes that
the Canadian National Railway Company carried on business in the state of New
York at the pertinent date, to require us to take judicial notice of that fact;
although we cannot judicially know however notorious it may be, that the
Canadian National Railway Company at that date carried on business in New York
In light of these facts, the residence of the
debtor, in the circumstances stated, does not seem to afford, in itself, a
criterion for the selection of any one among these jurisdictions as the situs
of the bonds.
On the other hand, there are other
considerations derived from the circumstances that are not without considerable
The guaranteed bond is the sole evidence of the
holder’s individual right as against the company as well as against the Crown.
Since the instrument embodies a specialty debt, that of the Crown, and since,
being in Ontario, it was an asset there, and it could not justifiably be dealt
with there, possession of it, for the purpose of transferring it, could not
lawfully be assumed there, except by sanction of an Ontario probate, or an
Ontario grant of administration (Attorney General v. N.Y. Breweries. Moreover, as an asset having its
situs in Ontario, it could not justifiably be reduced into possession in
Ontario, for presentation on behalf of the estate of Sir Clifford Sifton for
payment in New York or Montreal, except under such sanction.
Probate or administration in Ontario would not,
of course, alone entitle the executors to receive payment elsewhere than in
Ontario. But the point I am now emphasizing is that, if the bond became due on
the date named in it, or by the happening of any of the events having that
effect under the trust deed, payment would, in the ordinary course, be provided
for in Ontario, where Sir Clifford Sifton resided in his lifetime, and where on
his death his legal personal representative in Ontario would be entitled to
receive payment; and, in the last mentioned event, nobody would be entitled to
take possession of it in Ontario for the purpose of presenting it for payment
but such legal personal representative. Moreover, on fulfilment of the
conditions entitling the holder of the bond to
enforce payment directly against the company, the debt would be “properly
recoverable,” in every sense, in Ontario.
Furthermore, the primary right of the holder of
the bond, on default, is not to enforce the obligation directly against the
company, it is to call upon the trustees to proceed on behalf of the holders of
all the outstanding bonds. That right would appear to be a right primarily
exercisable and situate in New York where the trustees are.
Again, in the event of default continuing for
sixty days, the trustees are entitled to require payment to themselves in New York. The rights of the trustees could
be asserted in Ontario or in New York as well as in Quebec.
It is unnecessary, therefore, for the purpose
either of transfer or of collection, to resort to the province of Quebec, while
for the purpose of asserting the holder’s primary rights in case of default,
resort to the trustees in New York is necessary, and, for the purpose of
getting possession of the bond, probate or administration in Ontario, in the
event of death, is necessary.
The question before us is a question as to the
locality of certain assets of the estate of the testator. These assets are
guaranteed bonds. In assessing the assets to succession duty, no attempt has
been made, and probably such an attempt would be merely idle, to segregate the
value of the obligation of the company from the value of the obligation of the
Government, as an asset. In point of fact, the company was empowered only to
issue a guaranteed bond, the payment of which was charged upon the Consolidated
Revenue Fund. In view of the considerations just mentioned, it seems to be
difficult to assign one situs to the bond as guarantee and another to the
simple contract obligation of the company. There is a sense in which it may be
said that the obligation of the company, if that obligation had a separate
situs in Quebec, would receive its value from the fact that it is guaranteed by
a statutory charge and that the situs of this charge is non ad rem; but
the value derived from the statutory charge is nevertheless a value primarily
attaching to something in Ontario; and, at the date of the event which
happened, the event on which succession duties became payable, viz., the death
of Sir Clifford Sifton, this thing was part of the bona notabilia of
his estate in Ontario, and could not rightfully
be taken possession of or realized except by an executor or administrator
acting under the sanction of Ontario law.
For these reasons it seems to be the more
conformable to the rules determining the situs of bona notabilia from
which the principles by which we are governed are derived, to hold that this
asset had not a situs in Quebec.
The appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitor for the appellant: Charles Lanctot.
Solicitors for the respondent: Casgrain, Weldon, Demers & Lynch-Staunton.