Attorney-General of British Columbia v. Canada Trust Company and Olga Ellett, Executors and Trustees of the Estate of Francis Ely Ellett, Deceased, [1979] CTC 134

Mcintyre, JA:—Complying with the provisions of subsection 27(3) of the Court of Appeal Act, RSBC 1960, c 82, as amended, I would dismiss this appeal for the reasons given by the learned trial judge with which I agree.

I

Lambert, JA:—This case concerns the scope of Provincial taxing power. It raises three questions. They turn on the interpretation of subsection 92(2) of the British North America Act, 1867, which reads:

(2) Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.

and subsection 6A(1) of the Succession Duty Act, RSBC 1960, c 372, which was added to the Act in 1972 by SBC 1972, c 59, section 14, and which reads:

6A.(1) Where property of a deceased was situated outside the Province at the time of the death of the deceased, and the beneficiary of any of the property of the deceased was a resident at the time of the death of the deceased, duty under this Act shall be paid by the beneficiary in respect of that property of which he is the beneficiary.

The first question is whether a Province may levy a tax from a beneficiary in the Province on an inheritance of property outside the Province from a person domiciled outside the Province. In my opinion, it may not. The second question is an alternative to the first. It is not general, like the first, but relates specifically to the section in issue. It is whether section 6A of the Succession Duty Act of British Columbia, given its full literal application, is a constitutionally valid tax of the type contemplated in the first issue. In my opinion, it is not. The third question is whether section 6A should be interpreted to give it a limited application that would render it constitutionally valid. In my opinion, it should not.

These are important but perhaps ephemeral questions. The Succession Duty Act was repealed in 1977.

II

Francis Ely El left died in September 1975. He was domiciled in Alberta. His estate consisted of furniture and an automobile, together valued at $2,962.17, and securities transferable outside British Columbia, of companies located outside British Columbia, valued at $233,259.67.

Francis Ely Ellett had made a will and a codicil. Letters Probate were issued to his widow, Olga Ellett, and to The Canada Trust Company out of the Surrogate Court of the Judicial District of Edmonton, in the Province of Alberta, in November 1975.

The furniture and automobile are bequeathed by the will to Mrs Ellett. The remainder of the estate is vested in Mrs Ellett and The Canada Trust Company as Trustees. They are required to pay the income to Mrs Ellett throughout her life. We do not know whether the Trustees have a power under the will to encroach on capital. On Mrs Ellett’s death the Trustees are directed to distribute one-quarter of the estate to Mr Ellett’s sister, Florence Elizabeth Johnson, and the other three-quarters of the estate to Mr Ellett’s stepson, Robert J Cushley and his wife Kathleen Cushley, in equal shares.

At the date of death, Mrs Ellett, like her husband, was resident and domiciled in Alberta; Mrs Johnson and Mr and Mrs Cushley were resident and domiciled in British Columbia; and The Canada Trust Company carried on business in Edmonton, Alberta, and elsewhere.

In April 1976 the Minister of Finance of British Columbia assessed “the Estate” for succession duty in the amount of $30,636.70. The assessment, with interest, was paid by Olga Ellett and The Canada Trust Company, the executors in Alberta, in July 1976, under protest and with a denial of liability.

In August 1976 Olga Ellett and The Canada Trust Company, as executors and trustees of the estate, issued a Writ of Summons claiming a declaration that section 6A of the Succession Duty Act was illegal, void and ultra vires and claiming repayment of the duty that had been paid. In that action a special case was stated, by consent of the parties, under R33 of the Supreme Court Rules on the following question of law:

The questions for the opinions of the Court is whether the said Section 6-A of the Succession Duty Act is ultra vires of the Legislative Assembly of British Columbia and the said estate was not legally assessed thereunder, (sic)

After argument in the Supreme Court of British Columbia, Berger J answered the question or questions affirmatively and this appeal is brought by the Attorney General of British Columbia from that decision.

It is noteworthy that while an assessment has been issued, it has been issued to ‘‘the Estate” in Alberta, and while the tax has been paid, it has been paid by the executors in Alberta. The remaindermen in British Columbia have received nothing. They may never receive anything. If they do receive anything they may at that time be resident elsewhere.

III

The argument advanced on behalf of the appellant and in support of the constitutionality of section 6A is straight-forward. It is set out in the following paragraph.

In Bank of Toronto v Lambe (1887), 12 App Cas 575, it was decided that a tax on banks established outside Quebec but doing business in Quebec, measured by their paid-up capital and the number of their places of business in Quebec, was valid under 92(2) of the BNA Act. Lord Hobhouse, on behalf of the Judicial Committee of the Privy Council, said at 584:

Any person found within the province may legally be taxed there if taxed directly.

A succession duty, and in particular section 6A of the Succession Duty Act, imposes direct taxation. That section imposes that tax on beneficiaries. Those beneficiaries are persons found within the Province. Therefore, section 6A is constitutionally valid.

As a clincher it is said that a Province can tax its residents on income from a source outside the Province and why not on an inheritance from a source Outside the Province.

The fallacy in the argument, in my opinion, lies in the assertion that the subject matter, for the purposes of the construction of subsection 92(2) of the BNA Act, of section 6A or of any other tax levied with respect to an inheritance from a single estate, is the beneficiary.

No Province had attempted to tax a resident beneficiary on an inheritance from a deceased outside the Province, of property from outside the Province, until 1972. However the constitutional basis for such a tax had been mentioned by a number of scholars and commentators, and with varying degrees of confidence they had stated their opinions that such a tax was constitutionally sound. In particular, we are referred by counsel for the appellant to: H E Manning, Succession Duties, [1926] 3 DLR 449 at 456; Professors Kennedy and Wells, The Law of the Taxing Power in Canada (1931), The University of Toronto Press, at 66; Professor Falconbridge, Administration and Succession in the Conflict of Laws (1934), 12 Can Bar Rev 66, at 78; J R Anderson, Succession Duties—Double Taxation (1937), 15 Can Bar Rev 620, at 624; Professor Vincent C MacDonald, Taxation Powers in Canada (1941), 19 Can Bar Rev 75, at 91; Professor Laskin, Taxation and Situs: Company Shares (1941), 19 Can Bar Rev 617, at 625; Professor Laskin (1960), Canadian Tax Foundation Proceedings, at 171; Professor Gerald V Laforest, The Allocation of Taxing Power under the Canadian Constitution (1967), at 86, and at 119; The Ontario Committee on Taxation (1967), Vol III, at 148; W D Goodman, The New Provincial Succession Duty System: An examination of the Succession Duty Acts of the Atlantic Provinces, Manitoba and Saskatchewan (1972), Canadian Tax Foundation at 12; and The Advisory Committee on Succession Duties Report (1973), (Report of the Langford Committee in Ontario) at 48. There is a close congruity between this list and the references discussed by Gordon Bale, Esq, in (1978),56 Can Bar Rev 668.

While such unanimity of opinion should not be lightly disregarded, it should be noted, on the other side of the scales, that the matter had not been judicially considered at the times when the comments listed above were made and there is no indication in the context of the comments that the arguments relating to the first question in this case had been fully considered by the commentators.

IV

In this part I propose to set out my reasons for my conclusion on the first question; that it is not within the competence of a Provincial Legislature to levy a tax from a beneficiary in the Province on an inheritance of property outside the Province from a person domiciled outside the Province.

We are concerned with the construction that should be given to subsection 92(2) of the BNA Act. That construction must be the construction that would have been given to that subsection in 1867, remembering always that when the BNA Act was enacted it was intended to have sufficient flexibility to adapt to changing times and circumstances.

The BNA Act reflects two separate methods of categorizing taxes. The first method of categorization divides taxes which are direct from taxes which are not direct. The second method of categorization divides taxes which are within the Province from taxes which are not within the Province.

In deciding whether a tax is direct, the key lies in whether the ultimate burden of the tax is carried by the person from whom the tax is levied, in which case it is direct, or whether there is a tendency and an ability to pass on the ultimate burden of the tax, in which case it is not direct.

In deciding whether a tax is within the Province, the key lies in identifying the subject or subject-matter of the tax. If that subject is inside the Province, the tax is taxation within the Province; and if that subject is not inside the Province the tax is not taxation within the Province.

City of Halifax v Fairbanks Estate, [1928] AC 117, was a decision of the Judicial Committee of the Privy Council on the question of whether a business tax on an occupier was direct taxation. Viscount Cave said that the interpretation of subsection 92(2) was a question of law and not of economics and that if a tax was generally considered to be a direct tax in 1867, then it was a direct tax for the purpose of subsection 92(2) no matter how the ultimate burden of the tax fell. The division into direct and indirect only required the application of the views of mid-nineteenth century political economists when the tax was a novel one and had to be categorized as the Legislators in the United Kingdom Parliament in 1867 would have categorized it, had it been presented to them.

In my opinion, the same principles must apply to the categorization of taxes by subject as being within the province or not within the Province. The questions must be: was the tax a familiar tax in 1867; if so, what was then regarded as its subject; was that subject considered, in 1867, to be inside the Province?

Before turning to those three questions as they apply in this case, I propose to indicate what I understand to be the subject of a tax. That matter was considered by this Court and by the Supreme Court of Canada in Alworth v Minister of Finance, [1976] 4 WWR 701; [1978] 1 SCR 447, Laskin, CJC, said at 451:

Moreover, a Province is not put to a choice of imposing a direct tax on persons or on property (or income) but may constitutionally tax on both bases. Too much ought not to be made, therefore, of the observation of Lord Thankerton in Provincial Treasurer of Alberta v Kerr, [1933] AC 710, at p 718 that:

Generally speaking, taxation is imposed on persons, the nature and amount of the liability being determined either by individual units, as in the case of a poll tax, or in respect of the taxpayers’ interests in property or in respect of transactions or actings of the taxpayers. It is at least unusual to find a tax imposed on property and not on persons—in any event, the duties here in question are not of that nature.

Although that case in one of its aspects concerned, as does the present one, the question whether a provincial statute had imposed its taxation within the Province or had unconstitutionally reached outside, it related to succession duty legislation and does not call for further consideration here.

Essentially, what is involved in the present case is an appreciation of the incidence of the tax, based, as that appreciation must be, on the subject-matter of the statute and the source of the income in respect of which the tax is levied. I regard it as too mechanical to find that an in personam tax is imposed here merely because the charging section stipulates that a “taxpayer” must pay it. The obligation to pay, a common one in tax legislation, does not necessarily determine the incidence of the tax. The definition of taxpayer is not limited to persons who reside in the Province but points rather to a class of persons identified with the operations in respect of which tax is imposed, regardless of their place of residence. It is the income derived from those operations, which themselves are limited to the Province, that, in my view, carries the burden of the tax. Whether the tax be characterized as an income tax or a tax respecting certain economic activity in the Province the result is the same, namely, that it is taxation within the Province. It would be to substitute form for substance and, indeed, empty the charging section of substance (by inviting easy evasion) to hold that a personal tax is imposed by the Act.

In that case the subject of the tax was income. The income arose in the Province and, therefore, the tax was validly imposed and residents of Minnesota were required to pay it. The passage quoted from the opinion of Lord Thankerton in Provincial Treasurer of Alberta v Kerr, [1933] AC 710, points up the distinction that has been made by Laskin, CJC. As Lord Thankerton says, taxation is imposed on persons. But that is only to say that taxes can only be paid by legal persons. At 721 Lord Thankerton says:

In their Lordships’ opinion, the terms of this section, which is very similar to that considered in Lovitt’s case, clearly show that the subject-matter of the taxation is the property and not the transmission of property; it is in marked contrast to the terms of the Quebec section considered in the cases of Lambe and Alleyn. It may be added that s 9 of the Alberta Act, on which the Province sought to rely, does not modify this view, but merely provides a particular liability for payment of the tax.

At that point, Lord Thankerton is discussing the subject-matter of the tax and not the person who must bear the tax. Considered in that way, the Alworth case and the Kerr case both support the proposition that the subject-matter of the tax is distinct from the person who must pay the tax; and that it is the subject-matter of the tax that must be within the Province.

That is not to say that legal persons may not be the subject-matter of the tax and, indeed, the A/worth case confirms that they may be both the bearer of the tax and its subject-matter. The Income Tax Act of British Columbia taxes residents of British Columbia on world income and non-residents of British Columbia on British Columbia income and it has two subjectmatters, legal persons and income. The Logging Tax Act of British Columbia, on the other hand, taxes residents and non-residents of British Columbia on income arising from logging operations in British Columbia, and as the A/worth case decides, it has only one subject-matter, namely, income from logging operations. It, therefore, does not levy a tax on residents of British Columbia in respect of their income from a logging show in Minnesota.

The A/worth case has also made it clear that in identifying the subjectmatter of a taxing statute the Act as a whole should be examined and that the charging section alone is an insufficient guide. I propose to refer again to this point in Part V of this opinion.

I revert now to the questions that I framed earlier in this part as determinative, in the case of succession duties, of the question of whether the tax was taxation within the Province: was the tax a familiar tax in 1867; if so, what was then regarded as its subject; was that subject considered, in 1867, to be inside the Province?

Death taxes were well known in 1867; indeed they have financed the extravagance of kings since the days of Nebuchadnezzar.

In England in 1867 there was a probate duty that had been levied under sucessive Acts since the Probate Duty Act, 1801, 41 Geo III, c 86; there was a legacy duty first levied under the Legacy Duty Act, 1796, 36 Geo III, c 52; and there was a succession duty, first levied under the Succession Duty Act, 1853, 16 & 17 Viet c 51.

The probate duty was a tax in respect of personal property required to be covered by a grant of representation in England. It was payable by the executor who applied for the grant.

The legacy duty was a tax in respect of personal property devolving under a will or on an intestacy and extended to gifts made in contemplation of death. It was payable by the beneficiary.

The succession duty was a tax in respect of real and personal property transmitted to a successor on the death of his predecessor. It was payable by the successor.

In Thomson v Advocate General (1845), 12 Cl & Fin 1; 8 ER 1294, the question was whether the Legacy Duty Act applied to personal property passing to a beneficiary in Scotland under the will of a testator domiciled in Demerara, where the law of Holland was in force. The House of Lords asked for the attendance of the Judges. It was decided unanimously by seven Judges and three Law Lords that the Legacy Duty Act did not apply, notwithstanding that on its wording it was not limited to legacies passing under the law of the United Kingdom. The Lord Chancellor concluded by saying that the decision did not extend to the Probate Duty Act where the tax would continue to be levied in cases where the estate passed under foreign law but where a Grant of Representation was required in England.

In Attorney-General v Napier (1851), 6 Ex 217; 155 ER 520, it was decided that legacy duty was payable with respect to personal property situated abroad where the deceased was domiciled in England and the property passed under English law.

In Wallace v The Attorney-General (1865), 1 Ch App 1, the Lord Chancellor, Lord Cranworth, decided that the rule established in Thomson v Advocate General for legacy duty applied also for succession duty levied under the Succession Duty Act, 1853, and, therefore, that the Succession Duty Act did not apply to real or personal property passing to successors in England and France under the will of Lord Henry Seymour who died domiciled in France. Lord Cranworth noted that when the Succession Duty Act was passed, in 1853, Parliament must be presumed to have known the decision in Thomson v Advocate General but that Parliament had not chosen to express an explicit intent to make the taxes apply to English beneficiaries or successors in cases where their entitlement arose, and the transmission took place, under foreign law and under the authority of a foreign administrative and judicial system.

Those three cases turn on the interpretation by English Courts of Acts of the United Kingdom Parliament. They do not suggest that Parliament could not have taxed United Kingdom beneficiaries or successors with respect to property passing under foreign law if Parliament had expressly done so. The sovereign Parliament of a sovereign State could clearly have done so. But those cases do support the position that the subject-matter of the legacy duty and the subject-matter of the succession duty was the transmission to the beneficiary and, in those cases, that occurrence took place under foreign law and thus abroad.

Accordingly, in my opinion, when the United Kingdom Parliament passed the BNA Act in 1867 it must be taken to have intended that taxes like those under the Legacy Duty Act, 1796, and those under the Succession Duty Act, 1853, would be “within the Province’’ only if the deceased was domiciled in the Province in the cases where the subject-matter of the tax was the transmission of the property to the beneficiary. Of course, in the cases where the subject-matter of the tax was the property, then the taxation would be within the Province if the property was within the Province. Similarly, as with the Probate Duty Act, the tax would be within the Province where the subject-matter of the tax was the grant of representation and that grant took place within the Province.

In short, where a tax was sought to be levied in respect of a transfer of property from a deceased person to a successor in title the subject-matter of the tax was considered by United Kingdom Legislators in 1867 to be the transmission of the property. Accordingly, when they used the phrase “within the Province” in subsection 92(2) they meant, with respect to such taxes, that the transmission of the property must arise within the Province, and that it did not do so unless the deceased was domiciled there.

That being so, a tax of that nature became for the purposes of the BNA Act permanently categorized. As long as the tax remains similar to those in the Legacy Duty Act, 1796, and the Succession Duty Act, 1853, it cannot be considered to be direct taxation within the Province unless the property is within the Province or the deceased was domiciled within the Province. The subject-matter of the tax cannot be declared to be the beneficiary; the tax cannot be declared to be personal; the draftsman cannot wave his wand over the charging section or any other section and convert, by sleight of hand, a tax whose subject-matter is a transmission or a tax whose subjectmatter is property into a tax whose subject-matter is a person, namely, a beneficiary or a successor.

To say that if the charging section reads “There shall be imposed, levied and collected, a tax on transmissions payable by the beneficiary” it is a tax on a transmission, but if it reads “A beneficiary shall pay a tax in respect of a transmission to him” or “A beneficiary shall pay a tax in respect of property passing to him” it is a tax on a person, is, in my opinion, to let words be the masters of concepts. The tax we are considering is a tax on a beneficiary in the Province on an inheritance of property outside the Province from a person domiciled outside the Province. That tax was a familiar tax in 1867. At that time its subject-matter was regarded as being a transmission. That subject was considered in 1867 to be outside the enacting jurisdiction.

What started out as a matter of interpretation of Legacy and Succession Legislation of the United Kingdom Parliament has become a restriction on the sovereignty of the Provincial Legislatures with respect to taxation of residents of the Provinces, through the constitutional limitations imposed by the division of legislative powers under the BNA Act.

In my opinion, therefore, even without considering the cases on the constitutionality of Provincial succession duty legislation, and basing the conclusion solely on interpretation of the BNA Act in the context of the circumstances in 1867, it is not within the competence of a Province to impose a tax on a beneficiary in the Province on an inheritance of property outside the Province from a person domiciled outside the Province. In my opinion this conclusion is supported by the succession duty cases discussed by Berger J in his judgment.

I propose to refer only to the case that may be said to represent the culmination of the cases on the constitutionality of succession duty, namely, Provincial Treasurer of Alberta v Kerr, [1933] AC 710. Section 7 of the Succession Duties Act of Alberta imposed a succession duty, in the case of an owner domiciled in the Province, on all the personal property of the owner situated outside the Province. Lord Thankerton categorized the subjectmatter of that succession duty as property and decided that since the subject-matter was outside the Province the Act was unconstitutional. He said at 718:

The Province maintained in the first place, that under the Alberta Succession Duties Act the subject-matter of taxation was the transmission of the property and not the property itself, and fell within the principle of the decision of this Board in Alleyn v Bart he, [1903] AC 68.

In their Lordships’ opinion, the principle to be derived from the decisions of this Board is that the Province, on the death of a person domiciled within the Province, is not entitled to impose taxation in respect of personal property locally situate outside the Province, but that it is entitled to impose taxation on persons domiciled or resident within the Province in respect of the transmission to them under the Provincial law of personal property locally situate outside the Province. (my underlining)

In my opinion, Lord Thankerton is setting out the constitutional basis for Succession duties whose subject-matter is property and the constitutional basis for succession duties whose subject-matter is a transmission. The words “in respect of” denote the characterization of the subject-matter of the tax. I consider that the paragraphs that I have quoted state the principle that the Judicial Committee applied in reaching its decision in that case. As I have indicated, I agree with that statement of principle and with the necessity for the words “under the Provincial law” in the statement. It is unnecessary for me to consider whether this Court is bound by the portion of the statement that deals with the constitutional basis for a tax in respect of transmissions where such a tax was not before the Judicial Committee in that case. I should say, however, that a considered statement of principle arrived at by a Committee composed of Lord Blanesburgh, Lord Atkin, Lord Thankerton, Lord Russell of Killowen, and Lord Macmillan, must carry considerable weight.

I therefore conclude, both on the basis of what I consider to have been intended by the United Kingdom Parliament in 1867, and also on the basis of the statement of principle by the Judicial Committee of the Privy Council in 1933 in the case of Provincial Treasurer of Alberta v Kerr that a tax on a person domiciled or resident within the Province in respect of a transmission to the person of property situate outside the Province is not valid unless the transmission is under the Provincial law. It is not under the Provincial law unless the deceased was domiciled in the Province.

The result is that Bank of Toronto v Lambe is applicable only to taxes whose subject-matter is persons; that is, to a tax which was known in 1867 and whose subject-matter was then regarded as persons; or to a tax which was conceived after 1867 and whose subject-matter, as conceived and enacted, was persons. The tax on banks in that case was such a tax.

V

I turn now to the second question. It is whether section 6A of the Succession Duty Act of British Columbia, given its full literal application, is a constitutionally valid tax of the type contemplated in the first question. The second question raises an alternative argument to the argument considered on the first question. The alternative argument relates specifically to the impugned section. For the purposes of this second question it is assumed, contrary to my conclusion on the first question, that a Province may levy a tax from a beneficiary in the Province on an inheritance of prop- erty outside the Province from a person domiciled outside the Province. The second question is whether British Columbia has done so.

In Provincial Treasurer of Alberta v Kerr, Lord Thankerton said at 720:

The identification of the subject-matter of the tax is naturally to be found in the charging section of the statute, and it will only be in the case of some ambiguity in the terms of the charging section that recourse to other sections is proper or necessary.

This passage from the opinion of Lord Thankerton was disapproved in the A/worth case. That case confirmed that in identifying the subject-matter of a taxing statute the Act as a whole should be examined and the charging section alone is an insufficient guide. In this connection, reference should be made to the judgment of Seaton, J A of this Court, [1976] 4 WWR 701, at 708-9, and the judgment of Laskin, CJC, for the Supreme Court of Canada, [1978] 1 SCR 447, at 452-3.

The British Columbia Succession Duty Act was first enacted in 1894 following the wave of Provincial enactments of these Acts that started with Ontario in 1892. In 1934 the charging sections of the Act, now sections 6 and 9, were enacted in the general form that was carried forward until their repeal in 1977 and in the form that was in effect in 1972 when section 6A was enacted. In 1972 section 6 and section 9 read, in part, as follows:

(1) All property of a deceased person, whether he was at the time of his death domiciled in the Province or domiciled elsewhere, situate within the Province passing to any person for any beneficial interest is, except as provided in section 5, subject to duty on the dutiable value thereof at the rate prescribed in the Table of Rates in Schedule C, as ascertained according to the following method: . ..

(1) Where the deceased person was at the time of his death domiciled in the Province, and where the property of the deceased comprises any personal property situate without the Province in respect of which any beneficial interest passes under the law of the Province to a person who is domiciled or resident in the Province, that person shall, except as provided in section 5, pay duty in respect of the transmission to him of that beneficial interest calculated on the dutiable value thereof at the rate prescribed in the Table of Rates in Schedule C, as ascertained according to the following method: .. .

Section 6 was a tax whose subject-matter was property; section 9 was a tax whose subject-matter was transmissions.

In 1972 section 6A was enacted in these terms:

(1) Where property of a deceased was situated outside the Province at the time of the death of the deceased, and the beneficiary of any of the property of the deceased was a resident at the time of the death of the deceased, duty under this Act shall be paid by the beneficiary in respect of that property of which he is the beneficiary.

(2) The beneficiary of the property of the deceased referred to in subsection (1) shall, except as provided in section 5, pay the duty in respect of that property calculated on the dutiable value thereof at the rate prescribed in the Table of Rates in Schedule C, as ascertained according to the following method: . . .

The words following the words quoted above in sections 6, 9 and 6A are identical in each case and read:

... Firstly, by ascertaining the class in the first column of the table within which the net value of the property of the deceased falls; secondly, by ascertaining which of the remaining columns of the table is applicable having regard to the degree of relationship or the non-relationship of the beneficiary to the deceased; and, thirdly, by taking the rate set out in the column so ascertained opposite the class so ascertained in the first column.

In my opinion, if the words ‘‘Where the deceased person was at the time of his death domiciled in the Province’’, and “under the law of the Province” were omitted from section 9 then there would be no significant difference in the nature of the tax imposed under the new section 6A from the tax imposed under section 9. The fact that section 9 says “in respect of the transmission to him”, and section 6A says “in respect of the property” does not change the categorization of the subject-matter of the tax, particularly since section 6A cannot be categorized as having property as a subjectmatter since the property to which it applies is outside the Province.

Thus, on an examination of the charging sections, I consider that no conclusive answer can be reached as to the subject-matter of the tax imposed by section 6A, but to the extent that a provisional answer can be reached, it is that the subject-matter of section 6A is the same as the subject-matter of section 9, namely, transmissions.

Before considering the remainder of the Act, I propose to refer briefly to the events immediately preceding the enactment of section 6A. Canada had confined the Estate Tax Act, RSC 1970, c E-9, to deaths occurring before 1972 and had prospectively vacated the field of estate tax and of any other tax on death except income and capital gains tax. Canada also agreed to collect succession duties imposed by any Province that wished to levy succession duties, provided that a more or less uniform Act, drafted in Ottawa, was adopted so that the administration would be on a uniform basis. Manitoba, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and Saskatchewan accepted the offer and enacted the uniform Act. British Columbia, Ontario and Quebec retained their own existing legislation, with amendments. The charging section of the uniform Act, as adopted in Nova Scotia for example, SNS 1972, c 17, reads:

(1) Subject as hereafter otherwise provided, duty shall be paid on all property of a deceased that is situated, at the time of the death of the deceased, within the Province.

(2) Subject as hereafter otherwise provided, where property of a deceased was situated outside the Province at the time of the death of a deceased and the successor to any of the property of the deceased was a resident at the time of the death of the deceased, duty shall be paid by the successor in respect of that property to which he is the successor.

Subsection (1) is the traditional tax whose subject-matter is property. Subsection (2) is, in my view, the traditional tax whose subject-matter is a transmission. However, subsection (2) is not restricted to cases where the deceased is domiciled in the enacting Province, a point to which I will turn in the next part of this opinion. There is, in the uniform Act, only one tax on property outside the Province.

British Columbia enacted section 6A at roughly the same time as the Atlantic Provinces, Manitoba and Saskatchewan adopted the uniform Act. But British Columbia did not repeal section 9. Consequently British Columbia, unlike those Provinces, was left with two separate charging sections for property outside the Province. Counsel for the appellant argues that section 6 is a tax whose subject-matter is property; that section 9 is a tax whose subject-matter is transmissions; and that section 6A is a tax whose subject-matter is persons. Counsel for the respondent says that section 6 is a tax whose subject-matter is property; section 9 is a tax whose subjectmatter is transmissions; and that section 6A is also a tax whose subjectmatter is transmissions and that, as such, it is unconstitutional. If the ap- pellant is right then one would expect to see references in the remainder of the Act to taxes in respect of property, taxes in respect of transmissions and taxes in respect of persons. If the respondent is right then one would expect to see references in the remainder of the Act to taxes in respect of property and taxes in respect of transmissions, but one would not expect to see references to taxes in respect of persons.

In fact, the Act is replete with references to taxes in respect of property and taxes in respect of transmissions, but there are no references to taxes in respect of persons. I therefore conclude, on the basis of an examination of the Act as a whole, in accordance with the A/worth case, that the respondent is right, that the appellant is wrong, and that the subject-matter of section 6A is not persons but transmissions.

I refer, by way of example, to the following sections of the Succession Duty Act. I have underlined some of the key words.

10A.(1 ) There may be deducted from the duty imposed under this Act in respect of property or the transmission of a beneficial interest in property passing on the death of the deceased the amount (if any) by which the duty otherwise payable exceeds one-half of the amount (if any) by which the net value of all of the property passing on the death of the deceased exceeds ten thousand dollars.

(3) There may be deducted from the duty imposed under this Act in respect of property or the transmission of a beneficial interest in property passing to or for the benefit of a great-grandfather, great-grandmother, nephew, niece, uncle, aunt, and first cousin of the deceased the amount . . .

11. Where estate, legacy, or succession duty is payable and paid in any jurisdiction that may be designated by the Lieutenant-Governor in Council on the transmission of a beneficial interest in property, the duty imposed under this Act on any person with respect to the transmission shall be reduced by the amount of the duty so paid that does not exceed the amount of the duty so imposed.

13. Where a general power to appoint any property (sic) either by instrument inter vivos, or by will, or both, is given to any person, the duty levied in respect of such property or the transmission thereof is payable in the same manner and at the same time as if the property itself had been given, devised, or bequeathed to the person to whom such power is given.

20.(1) On receipt by the Minister of the affidavit of value and relationship filed pursuant to any provision of this Act, or on receipt by the Minister of the report of the authorized officer pursuant to section 19, the Minister may determine the amount of succession duty (if any) payable under this Act, the property subject thereto or the transmission in respect of which it is payable, and the person liable therefor, and may review, vary, or rescind any determination made by him.

22. Where property or the transmission of a beneficial interest in property in respect of which duty is imposed under this Act includes any future or contingent estate, income, or interest, the duty on such estate, income, or interest may be paid within two years from the death of the deceased, and, where so paid, the duty shall be on the value of such estate, income, or interest as at the death of the deceased.

Section 6A is only administratively functional if the sections quoted above, and others similarly limited, apply to the tax that it imposes. To be both constitutional and administratively functional, section 6A would require the interpretation that it imposed a tax whose subject-matter was persons but a tax where property or a transmission was subject to the tax or was the matter in respect of which duty was imposed.

In my opinion that interpretation twists the words chosen to express the legislative scheme embodied in the Act to the point where they are devoid of any relatively constant understandable meaning. I therefore conclude, on the second question, that section 6A, given its full literal application, is invalid, as being a tax whose subject-matter is property or a transmission that is not within the Province as required by subsection 92(2) of the BNA Act.

VI

I turn now to the third question. It is whether section 6A should be interpreted to give it a limited application that would render it constitutionally valid.

It is an established principle of construction of statutes in Canada that if a statute is susceptible to two alternative interpretations, one of which would render it constitutionally valid and the other would render it constitutionally invalid, then the former interpretation should be preferred.

It is, perhaps, another aspect of the same rule, that if a statute in its literal interpretation could result in both a constitutional application and an unconstitutional application, but if it was given a limited interpretation and application it would be constitutionally valid, then it should be given the limited interpretation and application if the words will bear that interpretation and the rules relating to severability are complied with. I consider that this aspect of the rule is supported by the decisions in Attorney-General of British Columbia v Smith, [1967] SCR 702; Reference Re Municipal District Act, [1943] 3 DLR 145; and McKay v The Queen, [1965] SCR 798.

The question, in short, is whether section 6A should be confined in its application to cases where the deceased is domiciled in British Columbia so that the transmission is considered to occur within British Columbia, even though there is no such restriction in the section.

There is support for such a construction in Thompson v Advocate General and in Wallace v The Attorney General, which I have referred to in Part IV of this opinion. In the first case the Legacy Duty Act and in the second case the Succession Duty Act were given restricted applications, that were not required by the wording of the Acts, in order to make the Acts consistent with the established principle of private international law that the law that determines the succession to movable property is the law of the domicile of the deceased at the time of death, and in order, therefore, to avoid giving the Acts a form of extra-territorial effect.

I consider that this principle has also been applied by MacKeigan, CJNS, on behalf of the Appeal Division of the Supreme Court of Nova Scotia, in considering subsection 8(2) of the Succession Duties Act of Nova Scotia (1972), SNS c 17, quoted in Part V of this opinion, in the cases of Cowan v The Minister of Finance of Nova Scotia (1977), 78 DLR (3d) 66; [1977] CTC 230, (Trial Division), [1978] CTC 537, and in the case of Covert v Minister of Finance of Nova Scotia, [1977] CTC 252, [1978] CTC 554. Subsection 8(2) of the Nova Scotia Act is in all material respects identical to section 6A of the British Columbia Act.

The first issue in each of those cases was whether the Succession Duties Act had been avoided by use of certain tax planning arrangements involving Alberta companies. In both cases it was decided that it had not. The second issue in both cases was whether subsection 8(2) was constitutionally valid. In both cases it was decided that it was. In both cases the deceased was domiciled in Nova Scotia at the time of his death. In Cowan, MacKeigan, CJNS, dealt with the constitutional issue in these words:

The appellants also contended, as they did in the court below, that s 2(5) is ultra vires the Province of Nova Scotia. I fully agree with Mr Justice Hart that the section is intra vires and I respectfully adopt his reasons in which he reviewed the relevant authorities and the opposing arguments and concluded:

“The Nova Scotia Succession Duty Act under $8 makes resident successors to property of deceased persons situate outside the Province liable for payment of succession duties. Section 2 s-s(5) deems the shareholders of non-resident corporations becoming beneficially entitled to property of deceased persons as a result of their death to be successors to the extent of the increase in value of their shareholdings. In my opinion this is clearly direct taxation upon residents of the Province and establishes a method for the calculation of the benefit being received by the successor. It is not taxation on property outside the Province but rather on persons within the Province to the extent to which they have been benefited by transfers to non-resident corporations.”

I add that the legislation does not affect transmission in Alberta or title to personal property situate in Alberta. It does not seek to tax a beneficiary with respect to personal property passing to him by virtue of a transmission under the law of another province; here the beneficiaries became entitled under Nova Scotia law.

In the Covert case, MacKeigan, CJNS, adopts his reasons from the Cowan case.

In my opinion the conclusion reached by the Appeal Division of the Supreme Court of Nova Scotia on the constitutional issue in the Cowan case and in the Covert case is not inconsistent with the conclusion I have reached in this case.

The only remaining question is whether the British Columbia Succession Duty Act permits the achievement of the same result in British Columbia as was reached in Nova Scotia. In my opinion the same result is already achieved by section 9 of the British Columbia Act which applies in all the circumstances in which section 6A would apply if section 6A were given an interpretation that would make it apply only if the deceased was domiciled in British Columbia. There is no equivalent of British Columbia section 9 in the Nova Scotia Act. In these circumstances, it is my opinion that if s 6A were given the restricted interpretation necessary to make it valid then it would be mere duplication of section 9. In my opinion section 6A should not be retained in the Act on that basis since to do so would be both unnecessary and confusing.

On the third question, it is my opinion that section 6A should not be given a limited application that would render it constitutionally valid.

VII

I have decided that section 6A is invalid. I base that decision equally on my reasons on the first question as set out in Part IV of this opinion and on my reasons on the second question as set out in Part V of this opinion. My conclusion on the third question as set out in Part VI of this opinion prevents me from seeking to cure the invalidity. As is apparent from the many points of concurrence between his reasons and mine, I agree with the reasons of Mr Justice Berger who heard the stated case at first instance.

The tax sought to be imposed by subsection 8(2) of the Nova Scotia Act and by section 6A of the British Columbia Act has been described by commentators as an “accessions” tax, as if to distinguish it from a “successions” or “transmissions” tax. I understand that it is thereby suggested that the subject-matter somehow changes from “transmissions” to “accessions” and since the accession is said to occur within the Province so the tax is said to be within the competence of the Provincial Legislatures. It is not clear to me what the commentators mean by an accessions tax. If it means the recipient’s side of a succession or transmission then I am not satisfied that even that aspect occurs within the Province if a deceased is domiciled outside the Province. It certainly doesn’t occur in a physical sense with respect to real property outside the Province.

Quite apart from that objection, I consider that the better meaning of an accessions tax is a tax imposed with respect to all receipts of property by a person in a taxation year whether by bequest, on an intestacy, by gift in contemplation of death or by other gift, and from all donors combined. Section 6A is clearly not such a tax. To call section 6A an accessions tax is, to my mind, hocus pocus.

I have reached my conclusion in this case very largely on the basis of the history of succession duties in the historical context of the British North America Act, 1867. If the results that flow from my decision were to be such that the fair and orderly collection of taxes by British Columbia was impeded, then my faith in the prescience of the framers of the BNA Act, 1867, would be diminished.

It may indeed be too late, without constitutional amendment, to adopt the principle of domicile of the deceased as the only principle applicable to determine the rights of a Province to levy succession duties. But a loophole that only exists when a deceased is prepared to move his domicile and which is only effective when the domicile is moved out of the country or to a Province whose Legislature has not chosen to levy a succession duty does not seem to me to shake the foundations of Confederation. On the other hand, a succession duty imposed in British Columbia ostensibly on the nurse from Australia who is here for two years on her way around the world, or on the official of a Japanese trading company who is here for a three year stint, both of whom are likely to be back in the lands of their domicile before obtaining any benefit from the inheritance from their relatives in Australia or Japan, seems to me to be a succession duty that would be unfair even if enforceable, and only haphazardly enforceable.

Under the British Columbia Act there is no effective credit for foreign duties except in cooperating Provinces and limited jurisdictions.

These considerations have not influenced my decision but they have alleviated my concern about declaring an enactment of the British Columbia Legislature to be unconstitutional.

I would dismiss the appeal.

Craig, JA (dissenting):—The appellant appeals from a ruling that section 6A of the British Columbia Succession Duty Act (no longer in force) is ultra vires.

The deceased died domiciled in the Province of Alberta. His Will was probated there. His estate consists entirely of personal property situate in the Province of Alberta. His widow, domiciled in Alberta, has a life estate. The remainder men are residents of British Columbia. The Minister of Finance for British Columbia, relying on subsection 6A(1) of the Succession Duty Act, assessed succession duties against the estate in the sum of $30,646.70 plus interest.

Subsection 6A(1) provides:

Where property of a deceased was situated outside the Province at the time of the death of the deceased, and the beneficiary of any of the property of the deceased was a resident at the time of the death of the deceased, duty under this Act shall be paid by the beneficiary in respect of that property of which he is the beneficiary.

The trial Judge, relying mainly on two decisions of the Privy Council, Alleyn v Barthe, [1922] AC 215 and Provincial Treasurer of Alberta v Kerr, [1933] AC 710; [1933] 4 DLR 81; [1933] 3 WWR 38, held that subsection 6A(1) was ultra vires.

In his reasons for judgment—reported (1978), 86 DLR (3d) 267—the trial Judge said at 270-1:

In the case at bar, we are concerned not with a tax levied on personal property within the Province, but a tax levied on a beneficiary with respect to personal property outside the Province. What is the extent of provincial taxing power in such a case? The fact that the beneficiary is resident within a province has not, in the past, been regarded by itself, as a sufficient basis for the imposition of succession duty.

In Alleyn v Barthe, [1922] AC 215, the Privy Council upheld the power of a province to impose a tax on transmission of personal property situate outside the province where the deceased was domiciled within the province. It was held that a Quebec statute imposing a duty upon “all transmissions within the Province, owing to the death of a person domiciled therein, of moveable property locally situate outside the Province at the time of such death’’ was not ultra vires. Thus, given a deceased domiciled within the Province, the Province could, by levying a tax on succession, reach personal property outside the Province.

In Provincial Treasurer of Alberta v Kerr, [1933] AC 710; (1933) r DLR 81; (1933), 3 WWR 38, the Privy Council held that a province has the power to tax a beneficiary domiciled or resident within the province in respect of the transmission to him under the law of the province of personal property situate outside the province. The Kerr case proceeded on the footing that the beneficiary within the province could be taxed where the transmission took place under the law of the same province. In the Kerr case, Lord Thankerton summarized the state of the law. He said at p 718 (AC):

“In their Lordship’s opinion, the principle to be derived from the decision of this Board is that the Province, on the death of a person domiciled within the Province, is not entitled to impose taxation in respect of personal property locally situate outside the Province, but that it is entitled to impose taxation on persons domiciled or resident within the Province in respect of the transmission to them under the Provincial law of personal property locally situate outside the Province.”

Alleyn v Barthe, on the one hand, and the Kerr case on the other hand, both came to the same thing. The Province can tax a beneficiary within the Province, with respect to the succession to personal property situate outside the Province, where the transmission takes place under the law of the taxing province. The one case involved a tax on transmission, the other a tax on a beneficiary, but jurisdiction to tax was founded in both instances on the fact that the transmission occurred under the law of the taxing province. This in turn depended on the deceased having been domiciled in the taxing province. Neither authority provides any basis for a province to tax a beneficiary with respect to personal property situate outside the province except where the deceased was domiciled in the taxing province, without abandoning transmission under the law of the taxing province as a condition of the exercise of such jurisdiction. Thus, whether section 6A of the British Columbia Succession Duty Act is regarded as imposing a tax on transmission or a tax on a beneficiary, the essential element of provincial taxing jurisdiction in Alleyn v Barthe and the Kerr case is not present.

In Alleyn v Barthe, supra, the Privy Council had to consider subsection 92(2) of the BNA Act, that is, the power of the province to impose direct taxation “within the Province’’ to raise revenue for provincial purposes, and the validity of Article 1387b of the Quebec Succession Duty Act and related articles.

In Alleyn v Barthe, the deceased died domiciled in Quebec. Alleyn was the executrix of his estate. The estate of the deceased included shares in various companies whose head offices were outside the province of Quebec. The Collector of Revenue made an assessment under the provisions of the Quebec Succession Duty Act on the basis that he could include the value of the shares of the companies whose head offices were situate outside of the province of Quebec when determining the value of the estate which was subject to succession duty. He relied, principally, on the provisions of Article 1387b of the Succession Duty Act.

It provided:

All transmissions within the Province owing to the death of the person domiciled therein, of movable property locally situate outside the Province at the time of such death, shall be liable to the following taxes . ..

After considering earlier legislation and earlier cases, Lord Phillimore, in giving judgment for the Privy Council, concluded that the taxation was direct taxation and the only relevant consideration was whether the taxa

He pointed out that Article 1387b was the relevant legislation and he said at 228:

The conditions there stated upon which taxation attaches to property outside the Province are two: (1.) That the transmission must be within the Province; and (2.) That it must be due to the death of a person domiciled within the Province. The first of these conditions can, in their Lordships’ opinion, only be satisfied if the person to whom the property is transmitted . . . was either domiciled or ordinarily resident within the Province; for in the connection in which the words are found no other meaning can be attached to the words “within the Province” which modify and limit the word “transmission”. So regarded the taxation is clearly within the powers of the Province. It is, however, pointed out that art. 13879 refers to “every person” to whom movable property outside the Province is transmitted as liable for the duty, but this must refer to every person on whom the duties are imposed, and those persons are, as has already been shown, persons within the Province.

On this construction the statute is clearly within the powers conferred by the British North America Act, 1867, and the taxes in dispute were rightly claimed.

It is important to appreciate that the province was purporting to tax “transmissions” within the Province, owing to the death of a person domiciled therein . . . and we must view the judgment in this context.

In Provincial Treasurer of Alberta v Kerr, supra, the Privy Council ruled that subsection 7(1) of the Alberta Succession Duties Act was ultra vires and, in so doing, considered, also, the effect of section 9 of the Act.

The Provincial Treasurer of Alberta made an assessment against property of the estate including certain valuable personal property

. . . composed of shares and other securities of various companies which had not head office in the Province of Alberta, and none of which had any registration or transfer office within the said Province, together with other personal property locally situate outside of the ... Province. The share certificates and other documents evidencing such shares and other securities were found in the City of Calgary . . .

The executors appealed this, and other, aspects of the assessment.

Subsection 7(1) of the Act provided in part:

Save as otherwise provided, all property of the owner thereof situate within the Province, and in the case of an owner domiciled in the Province, all the personal property of the owner situate outside the Province, and passing on his death, shall be subject to succession duties at the rate or rates set forth in the following table

section 9 of the Act provided:

Every person resident in the Province to whom passes on the death of any person domiciled in the Province any personal property situate outside the Province, shall pay to the Provincial Treasurer for the use of the Province a tax calculated upon the value of the property in accordance with the rates and subject to the considerations set forth in sections 7 and 8 of this Act.

In giving the judgment of the Privy Council, Lord Thankerton pointed out that the Alberta Succession Duties Act purported to impose taxation

.. . on the basis (inter alia) of personal property situate outside the Province . . .

and he went on to say at 718 as follows:

. . . Generally speaking, taxation is imposed on persons, the nature and amount of the liability being determined either by individual units, as in the case of a poll tax, or in respect of the taxpayers’ interests in property or in respect of transactions or actings of the taxpayers. It is at least unusual to find a tax imposed on property and not on persons—in any event, the duties here in question are not of that nature. In considering the limits placed on Provincial taxation, the Courts have invariably had regard to the basis or subject-matter in respect of which the taxation is imposed, and their Lordships agree with the statement of Anglin CJ in Rex v Cotton (1912), Can SCR 469, 526, where he said: “in order that a Provincial tax should be valid under the British North America Act, in my opinion the subject of taxation must be within the province.”

The Province maintained in the first place, that under the Alberta Succession Duties Act the subject-matter of taxation was the transmission of the property and not the property itself, and fell within the principle of the decision of this Board in Alleyn v Barthe (1922), 1 AC 215.

In their Lordships’ opinion, the principle to be derived from the decisions of this Board is that the Province, on the death of a person domiciled within the Province, is not entitled to impose taxation in respect of personal property locally situate outside the Province, but that it is entitled to impose taxation on persons domiciled or resident within the Province in respect of the transmission to them under the Provincial law of personal property locally situate outside the Province.

He then discusses several cases which, I assume, are the basis for his statement which I have just quoted that . . the principle to be derived from the decisions of this Board is . . He said as follows:

In Lambe v Manuel, [1903] AC 68, a claim was made by the Province of Quebec for succession duties on movable property locally situate in that Province, which formed part of the succession of a testator domiciled in Ontario. The claim was rejected on the view that, on its true construction, the Quebec Succession Duty Act only applied, in the case of movables, to transmission of property resulting from the devolution of a succession in the Province of Quebec. Sect 1191B of the Quebec Act of 1892, on which the issue turned, provided as follows: “All transmissions, owing to death, of the property in, usufruct, or enjoyment of, moveable and immoveable property in the province shall be liable to the following taxes . . Thus the taxes were held to be imposed in respect of transmissions.

I pause to point out that in this case the taxation was against “transmissions”.

He continued on 719 as follows:

The Quebec Act of 1892 and the later Act of 1906, which re-enacted the words above quoted with alterations immaterial to this point, were considered in the case of Cotton v Rex, [1914] AC 176, and were construed as imposing the duties in respect of the transmission of the property. It was held, on construction, that neither of these Acts imposed any duty upon the transmission of movable property outside the Province, and also that the taxation was not direct, in respect that it was imposed on “someone who was not intended himself to bear the burden but to be recouped by someone else.”

In Woodruff v Att-Gen for Ontario, [1908] AC 508, the deceased having died domiciled in the Province of Ontario, that Province claimed succession duty in respect of movable property locally situate in the United States. It was held to be an attempt to levy a tax on property locally situate outside the Province, which was beyond their competence. The Ontario Act of 1897, s 4, sub-s 1, provided “the following property shall be subject to a succession duty,” which clearly was not a tax in respect of the transmission of a succession.

The case of Rex v Lovitt, [1912] AC 212, provides an interesting contrast to Lambe’s case [1903] AC 68. The testator, who died domiciled in Nova Scotia, was possessed of certain personal property locally situate in the Province of New Brunswick, in respect of which the latter Province claimed succession duty. It was held that, although called a succession duty, the tax in question was laid on the corpus of the property, and its payment was made a term of the grant of ancillary probate, and the claim to duty was upheld. The New Brunswick Succession Duty Act, 1896, s 5, sub-s 1, enacted: “All property, whether situate in this province or elsewhere, . . . passing either by will or intestacy . . . shall be subject to a succession duty.”

In Alleyn v Barthe, [1922] 1 AC 215, though an argument to the contrary was submitted, the judgment clearly proceeds on the footing that the taxation was imposed in respect of the transmission, and it may be noted that by the Quebec Succession Duty Act, as revised in 1914, s 1387B: “All transmissions within the Province, owing to the death of a person domiciled therin, of movable property locally situate outside the Province at the time of such death,” were made liable to the duties; this provision is substantially the same as that under construction in Lambe’s case, [1903] AC 68. The main question in Alleyn’s case, [1922] 1 AC 215, was whether the taxation was direct, but, in delivering the judgment of this Board, Lord Phillimore, after referring to the statutory provision, states: “The conditions therein stated upon which taxation attaches to property outside the Province are two: (1.) that the transmission must be within the Province; and (2.) that it must be due to the death of a person domiciled within the Province. The first of these conditions can, in their Lordships’ opinion, only be satisfied if the person to whom the property is transmitted is, as the universal legatee in this case was, either domiciled or ordinarily resident within the Province; for, in the connection in which the words are found no other meaning can be attached to the words ‘within the Province’ which modify and limit the word ‘transmission.’ So regarded, the taxation is clearly within the powers of the Province.”

The identification of the subject-matter of the tax is naturally to be found in the charging section of the statute, and it will only be in the case of some ambiguity in the terms of the charging section that recourse to other sections is proper or necessary. In the present case, s 7, sub-s 1, is the charging provision, and as amended provided as follows:

(I have already quoted the relevant parts of this subsection.)

He continued at 721:

In their Lordships’ opinion, the terms of this section, which is very similar to that considered in Lovitt’s case, clearly show that the subject-matter of the taxation is the property and not the transmission of property; it is in marked contrast to the terms of the Quebec section considered in the cases of Lambe and Alleyn. It may be added that s 9 of the Alberta Act, on which the Province sought to rely, does not modify this view, but merely provides a particular liability for payment of the tax.

The Province next contended that, although locally situate outside the Province, the personal property of a person, who dies domiciled within the Province, is to be treated as “within the Province” for the purposes of s 92 of the British North America Act, by reason of the application of the rule embodied in the maxim mobilia sequuntur personam. This argument appears to proceed on a misunderstanding of the meaning and effect of that rule. If A dies domiciled in the United States of America, leaving movable property locally situate in England, the latter country has complete jurisdiction over the property, but the law of England, in order to decide on whom the property devolves on the death of A, will not apply the English law of succession, but will ascertain and apply the American law. In other words, it is the law of England—not the law of America—that applies the principle of mobilia sequuntur personam in exercising its jurisdiction over the movable property in England, the locus of the latter remaining unchanged; in no sense could the property be described as “within America.”

The Province further maintained that, as the bond given by the executors limited their liability to the duties in respect of property ‘‘coming into their hands,” and the property here in question had admittedly come into their hands, the taxation was in respect of property within the Province; but, in their Lordships’ opinion, the bond merely defines the extent of the security taken from the executors, and its terms cannot affect the validity or invalidity of the duties imposed under s 7 of the Act. While that is sufficient to dispose of the contention, it may well be doubted whether “coming into their hands” means anything more than that the executors have completed their title to the property in question, the local situation of the property remaining unchanged.

Accordingly, their Lordships are of opinion that the duties under s 7, so far as imposed on personal property locally situate outside the Province, did not come within the limits placed on Provincial taxation by s 92 of the British North America Act.

Counsel for the respondents referred to the Woodruff case and particularly to that part of the judgment appearing at 513:

The pith of the matter seems to be that, the powers of the provincial Legislature being strictly limited to “direct taxation within the province” (British North America Act, 30 & 31 Vict c 3, s 92, sub-s 2), any attempt to levy a tax on property locally situate outside the province is beyond their competence. This consideration renders it unnecessary to discuss the effect of the various sub-sections of s 4 of the Succession Duty Act, on which so much stress was laid in argument. Directly or indirectly, the contention of the Attorney-General involves the very thing which the Legislature has forbidden to the province—taxation of property not within the province.

While the distinction may be a fine one, I think that the legislation here does not purport to be a tax on property locally situate outside the province, nor tax on property whose transmission takes place outside the province. The tax is on the beneficiary. The amount of the tax is determined by the value of the property which is locally situate outside the province or which is transmitted outside the province.

On principle, I cannot see any significant difference between the nature of the tax in this case and the nature of the tax in the case of Bank of Toronto v Lambe (1887), 12 AC 575. The Quebec Legislature passed legislation which provided that every bank carrying on business of banking in the province had to pay a tax which was calculated by the amount of the paid-up capital of the bank. The Bank of Toronto had its principal place of business in Toronto but had an agency in Montreal. The amount of paid-up capital attributable to residents of Quebec was significantly less than the paid-up capital of the bank. The bank contended that the legislation was ultra vires because (1) it purported to impose an indirect tax and (2) it was not taxation “within the Province” within the meaning of subsection 92(2) of the BNA Act.

The Privy Council ruled that it was a direct tax and that it was taxation “within the Province”. With regard to this aspect of the case, Lord Hobhouse in giving the judgment of the Privy Council, said at 584-5:

It is urged that the bank is a Toronto corporation, having its domicil there, and having its capital placed there; that the tax is on the capital of the bank; that it must therefore fall on a person or persons, or on property, not within Quebec. The answer to this argument is that class 2 of sect 92 does not require that the persons to be taxed by Quebec are to be domiciled or even resident in Quebec. Any person found within the province may legally be taxed there if taxed directly. This bank is found to be carrying on business there, and on that ground alone it is taxed. There is no attempt to tax the capital of the bank, any more than its profits. The bank itself is directly ordered to pay a sum of money; but the legislature has not chosen to tax every bank, small or large, alike, nor to leave the amount of tax to be ascertained by variable accounts or any uncertain standard. It has adopted its own measure, either of that which it is just the banks should pay, or of that which they have means to pay, and these things it ascertains by reference to facts which can be verified without doubt or delay. The banks are to pay so much, not according to their capital, but according to their paid-up capital, and so much on their places of business. Whether this method of assessing a tax is sound or unsound, wise or unwise, is a point on which their Lordships have no opinion, and are not called on to form one, for as it does not carry the taxation out of the province it is for the Legislature and not for Courts of Law to judge of its expediency.

In my opinion, the reasoning in the Lambe case is appropriate in this case. The legislation purports to tax the beneficiary residing in the province of British Columbia—that is the subject of the taxation is within the province. The amount of the tax is governed by the value of the property locally situate outside the province. It may be unfair that a beneficiary who is subject to a life estate has to pay a tax years before he may receive the money, if, indeed, he receives the money at all, bearing in mind that in most cases there will be a power of encroachment and the life tenant may very well use all the capital before dying. However, that is a matter for the Legislature to determine and regulate.

I do not propose to deal with all the cases to which counsel referred since I think that when one examines the Barthe case and the Kerr case carefully and appreciates that they relate to specific pieces of legislation which are not the same as the legislation in this particular case, and when one examines the legislation in this case with reference to the judgment of the Privy Council in the Bank of Toronto v Lambe, it is open for one to conclude that the legislation in this case is intra vires the British Columbia Legislature.

Accordingly I would allow the appeal.