Supreme Court of Canada
Burton et al. v. Minister of National Revenue, [1969]
S.C.R. 732
Date: 1969-06-06
Frederick Burton,
Malcolm Swartz and Martin Goldsmith, executors of the Estate of Harry M.
Schiller Appellants;
and
The Minister of
National Revenue Respondent.
1969: March 10, 11; 1969: June 6.
Present: Cartwright C.J. and Ritchie, Hall,
Spence and Pigeon JJ.
ON APPEAL FROM THE EXCHEQUER COURT OF CANADA
Taxation—Estate tax—Provincial tax
credit—Situs of shares—Deceased domiciled in Ontario, a prescribed
province—Company incorporated in Saskatchewan, a non-prescribed
province—Shareholders register brought to prescribed province—Estate Tax Act,
1958 (Can.), c. 29, ss. 9(1), 9(8)(d), (e)—The Companies Act, R.S.S. 1955, c.
124, ss. 76(1), 77, 78a.
The deceased died in 1965, resident and
domiciled in Ontario. At that time, he owned all the shares of a company
incorporated in Saskatchewan. In 1958, he moved from Saskatchewan to Ontario
and took the company’s shareholders register with him. Neither the Companies
Act of Saskatchewan nor the articles of association of the company
authorized the keeping of a register anywhere except in the province of
Saskatchewan. The executors of the estate contended that the shares were to be
treated as having a situs in Ontario and that the estate was therefore entitled
to a provincial tax deduction under s. 9(1) of the Estate Tax Act, 1958
(Can.), c. 29. Alternatively, the executors contended that if their situs could
not be identified with reasonable certainty, that the shares were deemed to be
situated in Ontario in accordance with the provisions of s. 9(8)(e)
of the Act. The Exchequer Court upheld the Minister’s contention that the
shares were situated in Saskatchewan and that the estate was not entitled to
the deduction. The executors appealed to this Court.
Held: The
appeal should be dismissed.
The situs of a company’s shares is at the
place where its share register is required by law to be kept and the physical
presence of the register in another jurisdiction has no effect upon the matter.
(Erie Beach Co., Ltd. v. A.G. for Ontario, [1930] A.C. 161). The word
“maintained” as used in s. 9(8)(d)(i) of the Estate Tax Act must
be construed as meaning “maintained” in accordance with the requirements of the
statute under which the company was incorporated, and in the present case this
must mean in the province of Saskatchewan.
Revenu—Impôt successoral—Crédit pour taxes
provinciales—Situs des actions d’une compagnie—Défunt domicilié en Ontario, une
province prescrite—Compagnie constituée en Saskatchewan, une province non
prescrite—Registre des actionnaires apporté dans la province prescrite—
[Page 733]
Loi de l’impôt sur les biens transmis par
décès, 1958 (Can.), c. 29, art. 9(1), 9(8)(d), (e)—The Companies Act,
S.R.S. 1955, c. 124, art. 76(1), 77, 78a.
Lors de son décès en 1965, le de cujus résidait
et était domicilié en Ontario. A ce moment, il détenait toutes les actions
d’une compagnie qui avait été constituée en Saskatchewan. En 1958, il a
déménagé de Saskatchewan à l’Ontario et il a apporté avec lui le registre des
actionnaires de la compagnie. Ni le Companies Act de Saskatchewan ni les
conventions d’association de la compagnie n’autorisaient la tenue d’un registre
ailleurs que dans la province de Saskatchewan. La succession prétend que les
actions de la compagnie doivent être considérées comme ayant leur situs en
Ontario et qu’elle avait en conséquence droit à un crédit pour taxes
provinciales en vertu de l’art. 9(1) de la Loi de l’impôt sur les biens
transmis par décès, 1958 (Can.), c. 29. Alternativement, la succession
prétend que si leur situs ne peut pas être déterminé avec une certitude
raisonnable, que les actions sont censées être situées en Ontario en vertu des
dispositions de l’art. 9(8)(e) de la Loi. La Cour de l’Échiquier a
maintenu la prétention du Ministre que les actions étaient situées on
Saskatchewan et que la succession n’avait pas droit au crédit. La succession en
appela à cette Cour.
Arrêt: L’appel
doit être rejeté.
Le situs des actions d’une compagnie est à
l’endroit où la loi exige que le registre soit tenu et la présence physique du
registre dans une autre juridiction n’a aucun effet sur la question (Erie
Beach Co., Ltd. c. A.G. for Ontario, [1930] AC. 161). Le mot «tenu» tel
qu’employé dans l’art. 9(8)(d)(i) de la Loi doit être interprété comme
signifiant «tenu» selon les exigences du statut en vertu duquel la compagnie a
été constituée, et dans le cas présent ceci signifie dans la province de
Saskatchewan.
APPEL d’un jugement du Président Jackett de
la Cour de l’Échiquier du Canada, en matière d’impôt successoral. Appel
rejeté.
APPEAL from a judgment of Jackett P. of the
Exchequer Court of Canada1, in an estate tax matter. Appeal
dismissed.
Gordon W. Ford, Q.C., for the appellants.
F.J. Dubrule and M.J. Bonner, for the
respondent.
The judgment of the Court was delivered by
RITCHIE J.:—This is an appeal brought by the
Executors of the Estate of Harry M. Schiller, from a judgment rendered by
President Jackett of the Exchequer Court of
[Page 734]
Canada,
whereby he confirmed the assessment made by the Minister of National Revenue
under the Estate Tax Act in relation to the shares held by the late
Mr. Schiller in Schiller’s Limited, a company incorporated under The
Companies Act, of Saskatchewan.
The following portions of The Companies Act, R.S.S.
1955, c. 124 as amended by c. 18 of the Statutes of Saskatchewan 1956, appear
to me to be particularly relevant:
76. (1) Every company shall keep in one or
more books a register of its members, and shall enter therein the names of the
subscribers to the memorandum and the name of every other person who agrees to
become a member of the company, together with the following particulars:
(a) the full name, address and
occupation of every such subscriber and person, and of every person to whom
section 91 or 92 applies, and who requests the company to enter his name
in a representative capacity;
(b) the date at which each person
was entered in the register as a member;
(c) the date at which any person
ceased to be a member;
(d) the kind and class of the shares
held by each member, their nominal amount or par value, if any, and the amount
paid or agreed to be considered as paid on each share;
(e) particulars of the transfer by
any member of his shares;
(f) in the case of a person to whom
section 91 or 92 applies, a description of the capacity in which such
person represents any share in the company so held by him, and the name of the
estate or person so represented.
77. On the application of the transferor of
any share in a company, the company shall enter in its register of members the
name of the transferee in the same manner and subject to the same conditions as
if the application for the entry were made by the transferee.
Section 78a
78a The register of members shall be
kept at the registered office of the company; provided that the register may be
kept at an office in the province of a trust company licensed under The
Companies Inspection and Licensing Act, and so long as the register is so
kept the trust company shall be subject to the provisions of this Act
respecting the register in the same manner and to the same extent as if the
register were kept at the registered office of the company, but the trust
company shall under no circumstances be entitled to a lien on the register.
The Company in question was incorporated on May
26, 1927. By its Memorandum of Association it was provided that the registered
office was to be situate at the City of Regina in the Province of Saskatchewan
and no provision was ever made, either in the Company’s Articles of Association
or otherwise for any other registered office or branch registry.
[Page 735]
From the time of its incorporation until the
date of his death, the late Mr. Schiller owned or controlled all the
issued common shares of the Company; he was its president and exercised the
full degree of control and management consequent upon his ownership of the
shares and his office as president. Until March, 1953, Mr. Schiller
resided in the City of Regina where he was domiciled and where the business of
the Company was conducted, but from that date until his death he became
resident and domiciled in the City of Toronto to which City he removed the
Minute Book, Share Register Book and Shareholders’ Register of the Company, and
where he conducted all its affairs, although the Company continued to file
annual returns as required by The Companies Act of Saskatchewan wherein
it reported the address of its “Registered Office” as being 1702 Hamilton
Street in the City of Regina, which was a building owned by it.
It is agreed between the parties that the
Province of Ontario is a “prescribed Province” within the meaning of s. 9
of the Estate Tax Act, whereas Saskatchewan is not such a Province.
Under the provisions of s. 9(1) of the Estate
Tax Act provision is made for the deduction from the tax otherwise payable
upon the aggregate taxable value of property passing on the death of a person:
9.(1)(a) in the case of a person who
was domiciled in a prescribed province at the time of his death,
(i) the part of the tax otherwise payable
that is applicable to
(A) such of the property passing on the
death of that person as was situated in that or any other prescribed
province, and…
multiplied by
(ii) one-half;…
The italics are my own.
The fact that this deduction would be properly
applicable to the late Mr. Schiller’s shares in the company if they had a
situs in the Province of Ontario and would have no application if they were to
be treated as having a situs in Saskatchewan, gives rise to the objection here
taken by the Schiller estate.
In the present case the Minister has determined
that the shares in question are situate in Saskatchewan and that the estate of
the deceased is therefore not entitled to the deduc-
[Page 736]
tion provided under s. 9(1); whereas the
appellants contend that as all the Company’s documents, including its Register
of Shares, were physically situate in Ontario where the deceased was domiciled
at the time of his death, they are to be treated as having a situs in that
Province and that the estate is accordingly entitled to a deduction under
s. 9(1)(a)(i) (A) or in the alternative that if their situs cannot
be identified with reasonable certainty, that the shares are deemed to be
situate in Ontario in accordance with the provisions of s. 9(8)(e)
of the Estate Tax Act.
Section 9(8) of the Estate Tax Act provides
statutory rules for determining the situs of shares passing on the death of a
person, and the relevant portions of s. 9(8)(d) and (e) read
as follows:
(d) shares, stocks and
debenture stocks of a corporation and rights to subscribe for or purchase
shares or stocks of a corporation (including any such property held by a
nominee, whether the beneficial ownership is evidenced by scrip certificates or
otherwise) shall be deemed to be situated
(i) in the province where the deceased was
domiciled at the time of his death if any register of transfers or place of
transfer is maintained by the corporation in that province for the transfer
thereof, and
(ii) otherwise,
(A) in the nearest province, relative to
the province where the deceased was domiciled at the time of his death, that is
not a prescribed province and in which any register of transfers or place of
transfer is maintained by the corporation for the transfer thereof,…
(e) property for which no specific
provision is made in any other paragraph of this subsection, or the situs of
which, determined as provided therein, cannot with reasonable certainty be
identified, shall be deemed to be situated in the place where the deceased was
domiciled at the time of his death;…
It is agreed between the parties that at the
time of Mr. Schiller’s death the Share Register of the Company was
physically situate in Toronto where entries were made in it from time to time
as appears therein, but neither The Companies Act of Saskatchewan nor
the Articles of Association of the Company authorized it to keep a Register of
Members or a branch Register of Members anywhere except in the Province of
Saskatchewan, and the whole question raised by this appeal is whether, notwithstanding
the provisions of the Saskatchewan Companies Act requiring the Register
of Members of a company to be kept in that Province, the fact that such
Register was kept in the
[Page 737]
Province of Ontario at the time of
Mr. Schiller’s death, had the effect of giving the Company’s shares a
situs in the Province of Ontario within the meaning of s. 9(8)(d)
of the Estate Tax Act. In my view this case is governed by the
direct authority of the decision of the Privy Council in Erie Beach Company,
Limited v. The Attorney-General for Ontario.
In that case the question for determination was whether the shares of a
company incorporated under the Ontario Companies Act were situate in the
Province of Ontario or the State of New York for succession duty purposes. Under
the Ontario Companies Act (R.S.O. 1914, c. 178) companies incorporated
under that statute were required to keep a Register of Shares and Shareholders
at the head office “within Ontario”, but Mr. Bardol, who owned or
controlled all the shares in the company, managed his business from his office
in Buffalo, New York, where the books, records and documents of the company
were kept, and such transfers as took place were made and recorded. In
delivering the judgment on behalf of the Privy Council, Lord Merrivale said:
In Attorney-General v. Higgins 1914
A.C. 176, as in Brassard v. Smith, 1925 A.C. 371, duty upon shares was
in question. In Attorney-General v. Higgins, supra, Baron Martin held
that when transfer of shares in a company must be effected by a change in the
register, the place where the register is required by law to be kept determines
the locality of the shares. Lord Dunedin, in delivering the judgment of this
Board in Brassard v. Smith, epitomized the crucial inquiry in a
sentence—‘Where could the shares be effectually dealt with?’ The circumstances
relied upon by the appellants which show the predilection of the members of the
plaintiff company for transacting its business in Buffalo—so far as they
might—have, in their Lordships’ opinion, no material weight. The shares in
question can be effectually dealt with in Ontario only. They are therefore
property situate in Ontario and subject to succession duty there.
I take this to be authority for the proposition
that the situs of a company’s shares is at the place where its share register
is required to be kept by law and that the physical presence of the share
register in another jurisdiction has no effect upon the matter. I am
accordingly of opinion that the words “…if any register of transfers or place
of transfer is maintained by the corporation in that province…” as they are
used in s. 9(8)(d)(i) of the Estate Tax Act must be construed as
meaning “maintained” in accordance
[Page 738]
with the requirements of the statute under which
the company in question was incorporated and that in the present case this must
mean in the Province of Saskatchewan.
The learned President of the Exchequer Court has
written careful reasons for judgment in which he has concluded that for the
purpose of the Estate Tax Act the shares of Schiller’s Limited are
deemed to be situate in Saskatchewan at the date of Mr. Harry Schiller’s
death in accordance with the provisions of s. 9(8)(d). I am in
agreement with this conclusion and would dismiss this appeal with costs.
Appeal dismissed with costs.
Solicitor for the appellants: B.M.
Singer, Toronto,
Solicitor for the respondent: D.S.
Maxwell, Ottawa.
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