Supreme Court of Canada
Minister of National Revenue v. Simon et al., [1977] 2 S.C.R. 812
Date: 1977-03-08
The Minister of National Revenue Appellant;
and
Dame Lucie Simon and General Trust of Canada Respondents.
1977: February 8; 1977: March 8.
Present: Laskin C.J. and Judson, Pigeon, Beetz and de Grandpré JJ.
ON APPEAL FROM THE FEDERAL COURT OF APPEAL
Taxation—Estate tax—Regime of community of acquests—Death of one spouse—Property does not pass to the surviving spouse—Deceased not competent to dispose of the property—Estate Tax Act, 1958 (Can.), c. 29, ss. 2, 3, 3(1)(f) and 58.
If the spouses stipulated in their marriage contract that the community property would belong to the survivor, is there a passing of property to the wife on the death of the husband? The Minister, alleging that such a passing had taken place, assessed the wife accordingly; however, this assessment was set aside by the Tax Appeal Board, whose finding was upheld by the Trial Division of the Federal Court and by the Federal Court of Appeal.
Held: The appeal should be dismissed.
Because the surviving spouse became owner of all the property of the community, retroactively to the date of the marriage, there is no passing of property within the meaning of the Act. Moreover, although the husband was responsible for administering the property of the community, he was not competent to dispose of this property within the meaning of this same Estate Tax Act.
Sura v. Minister of National Revenue, [1962] S.C.R. 65; The Royal Trust Company et al. v. The Minister of National Revenue, [1968] S.C.R. 505, applied.
APPEAL from a judgment of the Federal Court of Appeal, affirming a judgment of the Trial Division upholding the decision of the Tax Appeal Board setting aside an assessment by the Minister. Appeal dismissed.
[Page 813]
Alban Garon, Q.C., and Roger Roy for the appellant.
J. Lambert Toupin, Q.C., and Michel Messier for the respondents.
The judgment of the Court was delivered by
DE GRANDPRÉ J.—This appeal poses the following question: when spouses stipulate in their marriage contract that the community property shall belong to the survivor, is there a passing of property to the wife on the death of the husband, within the meaning of ss. 2 and 3 of the Estate Tax Act, 1958 (Can.), c. 29?
The question arises in a simple context:
(a) by notarized deed dated July 4, 1911, in Belgium, a marriage contract was concluded between François Faure and Lucie Simon, by which they stated that they adopted the regime of community of acquests, in accordance with ss. 1498 and 1499 of the Belgian Code civil; the parties agree on the fact that the Quebec Civil Code is to the same effect;
(b) this marriage contract contained the following stipulation:
[TRANSLATION] The future spouses stipulate, as a marriage covenant, that the whole of the community shall belong, with full right of ownership, to the surviving spouse, whether or not there are children or descendants born of this marriage;
(c) François Faure died on August 5, 1966;
(d) in calculating the property passing on death respondents, in their capacity as executors, excluded the whole of the community of acquests.
Appellant contended that there was a passing within the meaning of the Act. In his assessment, he included in computing the value of property passing on the death of François Faure the latter’s share in the community of acquests. This assessment was set aside by the Tax Appeal Board, and this finding was concurred in by the Federal Court, Trial Division and Appeal Division.
[Page 814]
For the purposes of answering the question put to the Court, I do not believe that it is necessary to analyse the nature of the community, reduced to its acquests, as the parties invited the Court to do. Were the spouses co-owners of this property during the existence of the community? Do we have here a type of partnership or an institution sui generis? These question I will leave unanswered.
Whatever the nature of the community may be, on its dissolution by the death of the husband, giving rise to application of the above-mentioned stipulation in the marriage covenants, the widow became owner of all the property, retroactively to the date of the marriage. In Sura v. Minister of National Revenue, speaking of the share of the community property going to the spouse in a case in which the exclusive right of the survivor was not at issue, Taschereau J., as he then was, stated (at p. 71):
[TRANSLATION] …if the wife was not co-owner of the community property, she would have to pay succession duties on dissolution of the community, because there would then be a passing of property from her husband. However, this is not the case here, because there was no passing, but partition, in which she took the share coming to her, which had belonged to her since the marriage. What she received did not come from the estate of her husband.
In support of his views, Taschereau J. cited as authorities several authors, including Mignault, who stated, in volume six of his Droit Civil, at p. 337, that in the event of renunciation the interest is retroactively terminated, the other spouse being [TRANSLATION] “deemed to have always been the sole owner of the property which made up the community”. To these authorities, I would add Troplong, Le Droit Civil Expliqué, second edition, Du contrat de mariage, volume III, p. 679, No. 2184:
[TRANSLATION] …by the retroactive effect of the occurrence of the condition of survival, the surviving spouse is deemed to have been the owner ab initio, from the time of the acquisitions. The predeceased, on the other hand, is deemed never to have had any interest; he passes nothing to his heirs.
[Page 815]
I accept without hesitation the finding of the Sura decision, which dealt with the case of an ordinary community, as I said. This reasoning, applied to the whole of the property when the marriage covenants contain a complete stipulation in favour of the survivor, leads necessarily to the conclusion that there was here no “passing” giving rise to assessment, unless this word has been given a broader meaning by the legislator.
This is what appellant submitted to the Court, declining to rely in this Court on s. 3(1)(f); we therefore do not have to decide on it. He relies on ss. 3 and 58, the relevant portions of which should now be cited:
3. (1) There shall be included in computing the aggregate net value of the property passing on the death of a person the value of all property, wherever situated, passing on the death of such person, including, without restricting the generality of the foregoing,
(a) all property of which the deceased was, immediately prior to his death, competent to dispose;
(2) For the purposes of this section,
(a) a person shall be deemed to have been competent to dispose of any property if he had such an estate or interest therein or such general power as would, if he were sui juris, have enabled him to dispose of that property;
…
(e) notwithstanding anything in this section, the expression in paragraph (a) of subsection (1) ‘property of which the deceased was, immediately prior to his death, competent to dispose’ does not include the share of the spouse of the deceased in any community of property that existed between the deceased and such spouse immediately prior to his death.
58. (1) In this Act,
(a) …
(i) “general power” includes any power or authority enabling the donee or other holder thereof to appoint, appropriate or dispose of property as he sees fit, whether exercisable by instrument inter vivos or by will, or both, but does not include any power exercisable in a fiduciary capacity under a disposition not made by him, or exercisable as a mortgagee;
[Page 816]
Appellant’s argument is that immediately before his death François Faure was competent to dispose of half of the community of acquests, and as a result the word “passing” must be more broadly interpreted, and that the fact that Francois Faure, under art. 1292 C.C., was bound to obtain the consent of his wife with respect to certain dispositions is not an obstacle to such an interpretation. The reply to this argument is found in The Royal Trust Company et al. v. The Minister of National Revenue. Fauteux J., as he then was, wrote, delivering the judgment of the Court (at p. 513):
While, in a loose sense, it may be said that the husband is competent to dispose, in his lifetime, of community assets, under the general administrative power conferred on him by Art. 1292 et seq. of the Civil Code of the province of Quebec, he is not free, not competent to dispose of such assets in any sense contemplated by ss. 3(1)(a), 3(2)(a) and 58(1)(i) quoted above. The premise, on which rests the second branch of the dilemma propounded by appelants, is not valid. In my opinion, these provisions of s. 3(2)(e) do not support appellants’ interpretation of s. 3(1)(a).
I would dismiss the appeal with costs.
Appeal dismissed with costs.
Solicitor for the appellant: D.S. Thorson, Ottawa.
Solicitors for the respondents: Martineau, Walker, Allison, Beaulieu, Mackell & Clermont, Montreal.
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