The King Ex parte Bank of Nova Scotia v. Assessors of Rates and Taxes of Woodstock, N.B., [1924] SCR 457

Supreme Court of Canada

The King Ex parte Bank of Nova Scotia v. Assessors of Rates and Taxes of Woodstock, N.B., [1924] S.C.R. 457

Date: 1924-06-18

The King Ex Parte The Bank of Nova Scotia (Plaintiff)

and

The Assessors of Rates and Taxes for The Town of Woodstock (Defendants) Respondents.

1924: May 20; 1924: June 18.

Present: Idington, Duff, Anglin, Mignault and Malouin JJ.

ON APPEAL FROM THE APPEAL DIVISION OF THE SUPREME COURT OF NEW BRUNSWICK

Assessment and taxes—Bank branch—Personal property—Situs—Transmission of deposits to head office or other branches—Arbitrary assessment.

Of the deposits by customers of the branch of the Bank of Nova Scotia at W. sufficient is retained by the branch to meet the requirements of its local business and the surplus transmitted to the head office or another branch to be used there.

Held, per Idington and Duff JJ., Anglin and Malouin JJ. contra, that the money so transmitted by the branch is not an asset of the bank localized at W. and cannot be taxed by the municipality as personal property.

The bank was assessed by the municipality of W. on personal property valued at $65,600.

Held, per Mignault J. that no justification is given for such assessment which must have been made arbitrarily and without consideration of the real value of the personal property of the branch and cannot be allowed to stand.

Judgment of the Supreme Court of New Brunswick (50 N.B. Rep. 435) reversed, Anglin and Malouin JJ. dissenting.

APPEAL from the Appeal Division of the Supreme Court of New Brunswick[1] discharging a rule for a writ of certiorari to quash an assessment on the personal property of the Bank of Nova Scotia at its branch in Woodstock. The question for decision on this appeal and the material facts on which it is based are stated in the above head-note.

[Page 458]

Tilley K.C. and Fred. R. Taylor K.C. for the appellant. Branch banks are merely agencies of the banking corporation; Prince v. Oriental Bank Corporation[2]; Bain v. Torrance[3]; and the fact that for certain purposes they may be considered distinct is not inconsistent with this proposition; Clode v. Bayley[4]. Consequently the surplus funds sent abroad by the branch is not an asset at Woodstock.

The findings of fact by the assessors are only unimpeachable when they act judicially; Local Government Board v. Arlidge[5] per Lord Moulton at page 150. In this case they fixed an arbitrary sum as the value of personal property at Woodstock.

Tilley K.C. and Fred. R. Taylor K.C. for the appellant.

Baxter K.C. and Hartley K.C. for the respondents.

Idington J.—This is an appeal from the Supreme Court of New Brunswick dismissing an appeal by way of writ of certiorari from the assessment of the said bank by respondent in respect of its personal estate within said town. The said bank is only one of the branches of the said bank of which the head office is situate elsewhere than in the said town.

The agent in charge of said branch, in response to a public notice which rendered it his duty to do so, made a sworn statement of its property at and within the said town.

The part thereof relevant to its personal estate is as follows:—

What is the gross value of all the personal estate of the said bank within said town, as held and used in the said town or elsewhere in connection with the business done in the said town?

Answer,—
As at December 31, 1921, cash on hand ……………..	$ 14,584 05
Overdrafts and discounted bills ………………………..	298,183 57
Stamped cheques …………………………………...	203 20
Fixtures …………………………………..…………...	2,000 00
Total ……………………………………………………….	$314,970 82
Deposits by public ……………………………………….	562,909 74
Excess of liabilities over assets ………………………..	$247,938 92

[Page 459]

What is the net amount of the annual income, earnings or profit of the business of the said Bank of Nova Scotia within said town?

Answer: Net loss for year 1921, $3,042.36.

Do you so keep your books of account that you can speak with certainty and accuracy in answering the questions above?

Answer: Yes.

Notwithstanding the delivery thereof to the respondent in due time they assessed the said Branch Bank at Woodstock for the sum of $65,000 for personal estate.

From that the said bank appealed to the respondent and was heard toy them as required by the statute in such case provided.

Upon that appeal the said agent was duly sworn and testified at length explaining the said statement and how arrived at. I am satisfied from a perusal thereof and all else appearing in the case, that in fact there was no sum for which in law the said branch bank should be assessed for personal property, yet the respondent dismissed said appeal and continued the said assessment for $65,000.

From the said decision the said bank appealed to the town council, which in turn refused any relief.

Having exhausted the means of rectification without results in way of relief the bank then applied, as the law of New Brunswick provides, for an appeal by way of a writ of certiorari, to the Supreme Court of New Brunswick, and that court in turn discharged the rule with costs.

It seems a very clear case and arises I infer from a misapprehension of the law and the facts.

It seems quite evident that the depositors of money at said branch have to go there for the return of their deposits which are a clear indebtedness of that branch, and more than counterbalance anything in the way of personal property acquired by using said part of deposits at said branch.

That being a mere branch it is subject to the orders of the head office and, pursuant thereto, the surplus moneys of said depositors, not needed for the operation of said branch, are sent to other business centres where they can be successfully used.

The court below, and other authorities below it, seems to imagine that the town assessors can assess in respect of moneys so sent elsewhere.

[Page 460]

They cannot do so in law or by any law the local legislature can enact.

Any one conversant with the subject ought to know that the head office or the other branches using the said moneys are liable to be taxed for income derived therefrom and, beyond a shadow of doubt, usually are, by the cities or towns wherein such moneys are profitably used.

Neither in law nor in justice can the branch receiving such deposits be taxed for that over which it has no control.

The disregard of the evidence herein in question and consequent assumption on the part of the local authorities seems to me surprising after the discussion the subject has had for many years.

I am clearly of the opinion that this appeal should be allowed and the said assessment of the said appellant branch of the bank be quashed with costs throughout against the respondent.

Duff J.—The only question which has given me any concern on this appeal has been the question of the authority of the Supreme Court of New Brunswick to review the assessment. I have come to the conclusion that sections 124-125 of the Rates and Taxes Act, 1913, ch. 21, do confer such a power of review in proceedings by certiorari where the assessment has been based upon—to quote the language of s.s. (b) of s. 125—" a wrong principle in whole or in part."

That the assessment did proceed upon a wrong principle seems to be conclusively established. It has been assumed throughout and is, I understand, not seriously disputed, that section 2 of 53 Vic., ch. 40, is in force and applies, and therefore that it was the duty of the assessors to

deduct from each person's personal property the amount of his or her indebtedness, as the case may be, and assess the balance remaining of said personal property after making such deduction.

Therefore the amount of the "indebtedness" is to be deducted from the value of the personal property assessable under the Act of 1883. Now that means, I have no doubt, an indebtedness which can be localized in Woodstock just as the amount in respect of which the bank is assessable for real and personal estate is determined by the value of

[Page 461]

the real and personal estate held by the bank in the town or "in connection with the business done therein."

I agree with the argument presented on behalf of the appellant bank that the effect of Lovitt v. The King[6] is that deposits made at the branch in the ordinary way have a situs in Woodstock because in the ordinary course, so long as the branch is maintained, it is there and there only that payment of these deposits can, as of right, be demanded by the depositor.

The argument turned principally upon the question of the amount assessable in respect of personal property. On behalf of the respondent, it is contended that the whole mass of moneys received for deposit must be treated as an asset localized in Woodstock. I am unable to agree with this. These moneys may have been received in legal tender or through the transfer of some form of credit not falling within that class. The amount retained by the bank for the purpose of its business in Woodstock may properly be treated as localized there, but credits transferred elsewhere like gold or Dominion notes so transferred cannot, by any process of reasoning which I can follow, be localized at the branch where they were originally received merely because they were in fact received there. Such moneys and credits have a situs without doubt; but where that situs is is a question of fact, and on the material before the assessors in this case the only possible conclusion was that the situs of such moneys and credits was not in Woodstock.

It seems at first sight, no doubt, a plausible contention that the situs of the asset should be considered to be the same as the situs of the liability. It requires little reflection, however, to reveal that the two things have no necessary connection with one another. The liability is not a liability charged upon the moneys deposited; it is an obligation of the bank arising out of a contract of loan. The situs at any given moment of the moneys lent, which may have been transferred to another branch, cannot be governed by the situs of the obligation, which is primarily determined, under the authority of Lovitt's Case (1), by reference to the terms of the contract of deposit.

Nor does the evidence show that the moneys are held in Woodstock "in connection with" the business done there.

[Page 462]

The appeal should be allowed, and there should be a direction under ss. 124-125 of the statute above referred to for the rectification of the roll. The appellants should have their costs throughout.

Anglin J.—The sole question in this appeal is whether under s. 2 of the N.B. stat., 53 V., c. 40, the Bank of Nova Scotia is entitled to treat the average amount standing on its books to the credit of depositors in Woodstock as a liability deductible for purposes of assessment from the amount of assessable personal estate owned by it and held in the town of Woodstock or in connection with the business done therein (46 V., c. 26, s. 11), without offsetting against, or deducting from, such indebtedness not merely, as it has done, so much of such deposits as is invested in the town or through the medium of the bank's Woodstock branch but also the balance thereof transmitted by it for investment either to the head office or to branches of the bank situate elsewhere.

The facts are fully stated by Mr. Justice Crockett in delivering the judgment of the Appeal Division of the Supreme Court of New Brunswick[7]. A reasonable inference from the evidence of Mr. Roy L. Daniel, the local bank manager, there quoted, appears to be that, in respect of deposits transmitted by it to other branches, the Woodstock branch receives credit at the Toronto branch of the bank, which for this purpose is treated as the bank's head office, and is entitled to demand from it, or from some other branch of the bank having surplus funds, upon giving credit therefor at Toronto, any sums it may from time to time need in order to repay depositors. Mr. Daniel in his testimony spoke of the deposits of the Woodstock branch so transmitted to other branches, amounting to $349,393.90 at the time of the assessment, as an indebtedness of head office. He did not say to whom such indebtedness was owing, but it must be either to the Woodstock branch, which he said acts as a separate bank in regard to deposits, or to the depositors. If, as his evidence with regard to credits given in Toronto would indicate, the head office should be regarded as indebted to the branch bank for deposits transmitted by it for investment to other

[Page 463]

branches, then, as Mr. Justice Crockett points out, the credit so given the Woodstock branch should for assessment purposes, if not treated as personal property of the bank in the town of Woodstock or used in connection with its business done in that town, at least be offset against its liability to depositors as a deductible item under s. 2 of 53 V., c. 40. If, on the other hand, the indebtedness in respect to deposits so transmitted should be regarded as that of the head office to depositors, the deductible liability of the Woodstock branch should in that particular be reduced by the amount thereof. From either point of view the bank would appear to be chargeable with a surplus of personal property held by it in the town of Woodstock or in connection with the business done therein to an amount exceeding $100,000.

The total assessment for personal property appealed against is $65,600. How that amount was arrived at by the assessors is not very clear and is not now of much moment, the sole ground of appeal being that, if a proper deduction be made in respect of liability to local depositors, the bank's assessment for personal property is excessive—in fact should be nil.

If the bank's assessment, made on the same basis as the assessments of individual ratepayers, should have been for a sum in excess of $100,000 in respect of personal property, the only conclusion upon a complaint that the impeached assessment of the $65,600 is, "special, unequal and improper" would be that it should be increased. That is not sought. The evidence is that the appellant is assessed on the same footing as other banks having branches in the town. The appeal on the ground of inequality cannot prevail.

The provision of the statute of 1856 (19 V., c. 32, s. 47) prohibiting an assessment at an amount greater than that mentioned in the ratepayer's return of property and income when attested as prescribed, if then still in force, was, I think, repealed by section 4 of the Act of 1920 (10 Geo. V, c. 78). It is inconsistent with section 1 of that statute, which requires the assessors to obtain information and to assess to the best of their judgment any person who has failed to make a sworn return of all his property and in

[Page 464]

come. The conclusiveness of such return is dependent upon its accuracy and completeness. Unless accepted by the assessors it is their duty to assess according to their best judgment and the ratepayer has the opportunity of establishing by appeal the accuracy and completeness of his return if the assessment should be for a greater amount. That the statement of the ratepayer should in every case be accepted by the assessors as conclusive is inconsistent with the directions for assessment and the system of appeal provided for.

While in my opinion, upon the evidence an assessment in respect of personal property for a considerably larger sum would have been justifiable, the bank cannot successfully resist its assessment upon that item for $65,600.

For these reasons and those stated by Mr. Justice Crockett I would dismiss this appeal.

Mignault J.—The statutory authority for levying the tax for which the appellant was assessed is to be found in section 11 of the Act, 46 Victoria, chapter 26 (New Brunswick), of 1883, being an Act further to amend the several Acts relating to the town of Woodstock, in the county of Carleton. Section 11 reads as follows:

11. All joint stock companies or corporations who shall carry on business within the said town, or who shall have an agent, sub-agent or manager within said town, shall be rated and assessed in like manner as any inhabitant upon any real or personal property owned by any such company or corporation, and upon the income received by them, and the income of any company or corporation, being an insurance company, shall be appraised at twelve and one-half per centum of the premium and moneys received from said company by such manager, agent, or sub-agent; and for the purpose of enabling the assessors to rate such company or corporation with accuracy, the agent, sub-agent or manager thereof, shall, if required in writing by the assessors so to do, according to the form in the schedule to this Act, furnish to them a true and correct statement in writing under oath to be made before a Justice of the Peace, setting forth the whole amount of annual income received for such company or corporation within said town during the year preceding the making up of the assessment, and the amount of the real and personal estate held by or for such company or corporation in said town, or in connection with the business done therein; and in the event of the neglect or refusal on the part of such agent, sub-agent or manager to furnish the required information to the assessors within ten days after such application therefor, the assessors shall rate and assess the said company or corporation according to the best of their judgment, and there shall be no appeal from such rate or assessment; but nothing herein shall be deemed to make such demand of a statement necessary in order to make such assessment.

[Page 465]

The manager of the branch of the appellant bank at Woodstock furnished to the assessors a statement of its personal property, as of December 31, 1921, from which I take the following figures:

Cash on hand …………………………………………………	$ 14,584 05
Overdrafts and discounted bills ……………………………..	298,183 57
Stamped cheques …………………………………………….	203 20
Fixtures ………………………………………………...	2,000 00
Total ……………………………………………………	$314,970 82
Deposits by public …………………………………………….	562,909 74
Excess of liabilities over assets ……………………………..	$247,938 92

The assessors assessed the appellant upon real estate at the value of $5,700, as to which there is no dispute this being the appellant's own valuation. And they assessed the bank upon personal property at the value of $65,600. It is as to the latter assessment that complaint is made.

No one could state how the assessors arrived at this sum of $65,600 for personal property. It is not based upon the statement made by the manager of the branch, and the only defence offered is that according to this statement the personal property of the appellant's branch office at Woodstock should have been placed at a higher figure.

The recent decision of this court in Royal Bank v. Town of Glace Bay[8], is of no assistance here, except that it may be observed that there a general statute provided an easy means of establishing the amount of the personal property of a branch bank upon consideration of the amount of, its yearly income. Were such a rule applicable in the case of the town of Woodstock there would be no practical difficulty in determining the amount of the personal estate of the branch bank on a statement furnished by it of its income.

The statement in question, I think, could be of little or no assistance, except perhaps as to the item of fixtures, under the New Brunswick statute in so far as an assessment of personal property is concerned, for there was in this case no assessment of income. Were it to be used as a basis for assessment I would think, under the authority of The King v. Lovitt[9], that deposits made at the

[Page 466]

branch bank should be considered as a liability of that branch of the bank. Whether the amount deposited should be also considered as an asset would depend upon the circumstances.

But inasmuch as no justification is given for the assessment, at $65,600, of the appellant's personal property, I am forced to the conclusion that this assessment was arbitrarily made, without any consideration of the real value of the personal property of the branch office. This being so it obviously cannot stand.

I would therefore allow the appeal with costs throughout and set aside the assessment of the appellant in respect of its personal property.

Malouin J.—I would dismiss this appeal with costs. I agree with Mr. Justice Anglin.

Appeal allowed with costs.

Solicitor for the appellant: A. B. Connell.

Solicitor for the respondent: J. C. Hartley.