Attorney General of the Province of Quebec v. Dame Margaret Joi Stonehouse, [1979] CTC 233

Pratte, J [TRANSLATION]:—Appellant is appealing from the decision of the Court of Appeal of the province of Quebec which, affirming the judgment of the Superior Court (Bélanger, J), ruled that the sum of $125,000 due by the Life Insurance Company of North America (the insurer) following the death of respondent’s husband, John H Jackson (the insured), under two group accident insurance policies (#ABL-604080 and OK-2997) was not part of the estate of the insured for the purposes of the Succession Duties Act and was not subject to the payment of duties under the said Act.

The insured died accidently in an airplane crash on November 11, 1969. He was covered under two group accident insurance policies which had been taken out by his employer with the insurer. The text of the two policies, if not identical, is nonetheless to the same effect: in either case, the proceeds of insurance are payable only if the insured dies or sustains accidental bodily injury in the course of his duties; the amount payable is predetermined; it varies, however, depending on whether the accident caused the death of the insured or injuries of the kind specified in the policies.

On the accidental death of the insured, the sum of $125,000 became payable by the insurer to respondent in her capacity as universal legatee of the insured.

By her action, respondent claimed from appellant the reimbursement of the amount of duties assessed in respect of the insurance proceeds which amount she had paid under protest.

The only question at issue is whether the proceeds of insurance should be deemed to be a property the ownership of which was transmitted owing to the death of the insured, within the meaning of the first paragraph of subsection 26(1) of the Succession Duties Act (RSQ 1964, c 70):

Notwithstanding any provision inconsistent herewith, the proceeds of insurance policies, including those issued or appropriated pursuant to the Husbands and Parents Life Insurant Act (c 296), due by an insurer by reason or on account of the death of the person on whose life the insurance was effected, shall be deemed to be property whereof the ownership, usufruct or enjoyment is transmitted owing to such death and shall be subject to payment of the duties provided for by section 9, according to the degree of relationship which existed between the beneficiary and the person on whose life the insurance was effected, even when the latter did not himself take out the insurance or pay the premiums thereon.

After stating that fiscal legislation should be construed strictly, the Court of Appeal, like the Superior Court, held that the legislative provision was not applicable to the insurance proceeds paid to respondent for two reasons: (a) the insurance proceeds were payable under an accident insurance policy, whereas section 26 refers only to life insurance policies, and (b) the insurance proceeds became payable on account of an accident and not “by reason or on account of the death” of the insured, the death serving only to establish the amount of the indemnity.

Section 26 refers to “the proceeds of insurance policies . . . due by an insurer by reason or on account of the death of the person on whose life insurance was effected ..

I see nothing in this provision that would restrict its application solely to life insurance.

First of all, it appears to me that if such had been the legislator’s intention he would have clearly stated it by using the words “life insurance policies” rather than the much broader expression “insurance policies”.

Furthermore, and with respect for the contrary opinion expressed by the Court of Appeal and the Superior Court, the words, “sur la tête de” in no way imply that life insurance is the only insurance contemplated in the provision. This expression is generally used in matters of insurance of the person to designate the person in respect to whose life, death, health or dismemberment insurance is being effected; its use is not limited to life insurance; it is used in accident insurance as well.

In Les Assurances Terrestres en droit français, 4th edition, Vol 1, No 444, page 697, André Besson, when referring to accident insurance, wrote that it [TRANSLATION] ‘‘may first of all be individual, that is, effected on the life of one person alone,”; still referring to accident insurance, the same author wrote that insurers require a declaration of “similar insurance . . . effected with other insurers . . . on the life of the insured” (No 446, page 702). Planiol and Ripert (Traité pratique de droit civil français, 2nd edition, Vol XI, No 1373, page 796) describe individual accident insurance as insurance which is “effected on the life of one person alone”.

Reference can also be made to the following passage of the Jurisclasseur civil (Appendix I, “Assurances”, Part VIII, bis H, Part H):

[TRANSLATION]

33. Thus accident insurance may be made on the life of another without the authorization of the third party (L 1930, s 57—see supra, J-C1, “Responsabilité civile’’, Part VIII bis G or J-C1. Civil—Appendices, see “Assurances”, Part G'.

34. Similarly, accident insurance is not prohibited on the life of certain persons without capacity (L 1930, s 58—See J-C1 supra).

The following extract from Dalloz, Nouveau répertoire de droit (2nd edition), under “Assurances Terrestres” (No 496), clearly shows that the expression “sur la tête de” does not have the limited meaning attributed to it by the Court of Appeal:

[TRANSLATION]

Insurance of the person encompasses all types of insurance in which the risk covered is an occurrence concerning the actual body of the insured person (life or death, accident, illness, disability, marriage or birth of children). In these types of insurance, more than in any others, it is necessary to distinguish: the proposer— the person who applies for the contract and undertakes to pay the premiums, as well as meet the other obligations of the contract; the insured (or the life insured): the person or persons involved in the occurrence (death, illness, survivorship), the unexpected happening of which causes the insurer to become responsible; and the beneficiary: the person who is entitled to the benefits promised in the contract. A single person, or several different persons, may act in these three capacities.

The use of the expression “sur la tête de” is not limited to insurance. Be it sufficient to refer to Arts 1902, 1903, 1905 and 1906 of the Civil Code.

Art 1902. La rente peut être soit sur la tête de la personne qui la constitue ou qui la reçoit, ou sur la tête d’un tiers qui n’a aucun droit d’en jouir.

Art 1903. Elle peut être constituée sur une ou plusieurs têtes.

Mais si elle l’est pour plus de quatre-vingt-dix-neuf ans, ou trois vies successives, et qu’elle affecte des immeubles, elle est éteinte après ce terme, suivant les dispositions contenues en l’article 390.

Art 1905. Le contrat de rente viagère créée sur la tête d’une personne qui était morte au jour du contrat ne produit aucun effet et le prix peut en être répété.

Art 1906. La règle énoncée dans l’article qui précède s’applique également lorsque la personne sur la tête de laquelle la rente est constituée, est, à l’insu des parties, attaquée d’une maladie dangereuse, dont elle meurt dans les vingt jours de la date du contrat.

It therefore appears that the expression “sur la tête de” is not used solely to designate the person whose life is insured under a life insurance policy; the expression is used in a general sense to mean the person whose life, death, health or dismemberment is the occurrence which causes the benefits to become payable.

The legislator’s use of the words “sur la tête de” therefore does not indicate that he wanted to restrict the application of section 26 to the proceeds of life insurance policies; since nothing in the section indicates that such was the legislator’s intention, it follows that the expression must be given its usual meaning, which includes insurance against bodily injuries including those resulting in the death of the person insured.

The history of section 26 only confirms that conclusion. The present provision came into force on February 26,1953 (1-2 Eliz Il, c 45 section 5); it had been section 27 (7 Geo VI, c 18). Formerly, section 27 read in part as follows:

27.1 Notwithstanding any provision in any other act, the following are deemed to be property, the ownership, usufruct or enjoyment whereof is transmitted owing to the death of the person by whose death they become payable:

a. Sums due under life insurance policies, effected or appropriated under the provisions of section 3 of the Husbands’ and Parents’ Life Insurance Act (c 301);

and

b. All other sums due by an insurer, by reason of the death of a person whose life the former has insured, when they devolve by gratuitous title.

In 1953, the words “by reason of the death of a person whose life the former has insured” were replaced by “by reason or on account of the death of the person on whose life the insurance was effected”. It appears to me that by this amendment the legislator sought to dispel any doubt as to the scope of the former provision; he therefore clearly indicated that he did not intend section 27 to be applied only to life insurance, as might have been the case under the provision that was replaced.

It may be worth noting that the text adopted in 1953 is, on the point that is relevant here, almost identical to that of Art 65 of the Code de l’enregistrement of France, which since the law of December 31, 1942 has read as follows:

[TRANSLATION]

All sums, annuities or emoluments whatever, due by an insurer by reason or on account of the death of the insured, that is, the person on whose life the insurance was effected, give rise to succession duties, subject to any rights of community that may exist, and depending on the degree of relationship between the beneficiary by gratuitous title and the insured, even when the latter had not personally and directly taken out the insurance and had not paid the premiums.

In France it is recognized that this provision applies both to accident insurance and to life insurance: Picard and Besson, Les Assurances terrestres en droit français, 2nd edition, Vol 1, No 529, pages 736 and 737; Besson, La réforme du régime des droits de mutation applicable aux assurances en case de décès, (1944) 15 Revue Générale Ass Terr 209, especially at page 214.

However, respondent contends that the English version of section 26 clearly indicates that the provision applies only to life insurance. In the English text the French expression “sur la tête de qui l’assurance a été contractée’’ is translated by “on whose life the insurance was effected”. In reasons concurred in by his brother judges, Rinfret, JA, as he then was, stated the following on this point:

[TRANSLATION]

In the present circumstances, the trial judge properly equated the French word “tête” with the English word “life”:

The use of the words “la tête” instead of the words “the life” cannot change the meaning of the Section to the point of including accident insurance.

With respect, I cannot share that point of view. The words “on whose life the insurance was effected” do not necessarily have the limited meaning attributed to them by the Court of appeal and the Superior Court; this is conclusively established by the English version of Arts 1902,1903,1905 and 1906 of the Civil Code (the French text of which we have already given) where the word “tête” is always translated by the word “life”.

Art 1902. The rent may be upon the life of the person who constitutes it, or who receives it, or upon the life of a third person who has no right to the enjoyment of it.

Art 1903. It may be constituted upon one life or upon several lives.

But if it be for more than ninety-nine years or three successive lives, and affect real estate, it becomes extinct thereafter as provided in article 390.

Art 1905. A life-rent constituted upon the life of a person who is dead at the time of the contract produces no effect, and the consideration paid for it, may be recovered back.

Art 1906. The rule declared in the last preceding article applies equally when the person upon whose life the rent is constituted is, without the knowledge of the parties, dangerously ill of a malady of which he dies within twenty days after the date of the contract.

Respondent referred us to the decision of this Court in Metropolitan Life Ins Co v Montreal Coal and Towing Co (1904), 35 SCR 266. In that case, the question was whether the applicant for a life insurance policy had made a false statement when he had failed to mention the accident insurance policies he held in answer to the following question in the proposal:

State amount of insurance you now carry on your life, with name of company or association, by whom granted and the year of issue? (Enumerate each).

The majority decision of this Court held that the expression “insurance . . . on your life’’ used in the proposal was ambiguous and, given the context, referred to life insurance, properly speaking, and not to accident insurance. However, that decision does not mean that the same expression used in another context could not have a different meaning; even less does it mean that the words “on whose life the insurance was effected” refer exclusively to life insurance.

Respondent also referred us to two decisions of the Exchequer Court in MNR v Worsley Estate, [1966] CTC 804; 67 DTC 5011 and MNR v Shaw Estate, [1971] CTC 15; 71 DTC 5041. In the first case the Exchequer Court held that the proceeds from an accident insurance policy were not an amount payable “under a policy of insurance . . . under which any life insurance was effected on the life of..(Estate Tax Act, section 3, enacted by 8-9 Eliz II, c 29 section 1). In the second case, the question was whether the proceeds from an accident insurance policy were property passing on the death of aperson within the meaning of paragraph 3(1)(j) of the Estate Tax Act, which read as follows:

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,

(j) any annuity or other interest purchased or provided by the deceased, either by himself alone or in concert or by arrangement with any other person, to the extent of the beneficial interest therein arising or accruing by survivorship or otherwise on the death of the deceased;

In either case, the provisions to be interpreted, like the context, were different from those of section 26, and I do not see that these two decisions of the Exchequer Court support the interpretation adopted by the Court of Appeal and the Superior Court in the case at bar.

The second ground relied on in the decision of the Court of Appeal is that the proceeds of the insurance did not become payable “by reason or on account of the death” of respondent’s husband, because the right to the insurance proceeds resulted from an accident while the death served only to establish the quantum of the amount due. With respect, this reasoning seems to me to be ill-founded. I do not see how it can be said that the proceeds of an insurance policy are not due “by reason or on account of the death of the insured” because the death of the insured results from an accidental rather than a natural cause; a death does not cease to be a death because it is accidental. In the case of a life insurance policy, the amount is due whether the death is natural or accidental; in the case of an accident insurance policy, nothing is due by the insurer if the death is not accidental, but if it is, it is still the death of the insured that obligates the insurer to pay the indemnity provided for.

In France, before the Law of December 31,1942 was passed, Art 65 of the Code de l’enregistrement (Art 6 of the Law of June 21,1875) read as follows:

[TRANSLATION]

65. For the purposes of the collection of succession duties, all sums, annuities or emoluments whatever owed by the insurer by reason of the death of the insured shall be considered as forming part of the estate of an insured, subject to any rights of community, if a community exists.

Beneficiaries by gratuitous title of such sums, annuities or emoluments are subject to succession duties, depending on the nature of their title and their relationship with the deceased, in accordance with the general law.

In interpreting this provision the Court of Cassation ruled, in a decision on October 14, 1941 (019421.53), that the provision applied to the sums payable under an accident insurance policy on the ground that [TRANSLATION] “for the collection of such duties, the law makes no distinction as to whether the proceeds of the insurance result solely from the death of the insured or whether they are conditional on that death’s being the consequence of an accident’’. See also: Gaz Pal, 1928.2.707; Rec Per Ass 1930, 52.

Nor can the decision of the Court of Appeal be justified on the ground that fiscal legislation should be interpreted strictly. In his reasons Rinfret JA, as he then was, said the following:

[TRANSLATION]

It would be superfluous, I believe, to cite a line of authority to establish that “fiscal legislation should be interpreted strictly. What the legislator said must be determined from the words he used, even when exemptions are taken into account” (Rivard, Les Droits sur les successions dans la province de Québec, No 673.)

It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties. The subject is not to be taxed unless the language of the Statute clearly imposes the obligation.” (Maxwell, Interpretation of Statutes.)

This rule does not have the implications attached to it by the Court of Appeal and the Superior Court; it simply means that the legislator cannot be presumed to have intended to impose a tax. In Partington v A-G (1869), LR 4 HL 100, at page 122, Lord Cairns stated:

I am not at all sure that, in a case of this kind—a fiscal case—form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you simply adhere to the words of the statute.

Much more recently, Viscount Simon expressed the same idea (Canadian Eagle Oil Co, Ltd v The King, [1946] AC 119, at page 140) as follows:

In the words of the late Rowlatt J, whose outstanding knowledge of this subject was coupled with a happy conciseness of phrase, “in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” (Cape Brandy Syndicate v Inland Revenue Commissioners, [1921] 1 KB 64, 71.)

In the case at bar, the text of section 26 is categorical, precise and general; precisely because it is fiscal legislation it must be applied to the letter, and as the Rouen Court stated (November 4, 1929, Rec Per Ass 1930, at page 53) concerning Art 6 of the Law of June 21, 1875 (Code de Tenrégistrement), [TRANSLATION] “it is not possible, under the guise of interpretation, to introduce into it distinctions or limitations that do not exist . . . where taxes are concerned, the legislator’s intent must be sought in the text of the Act establishing them and . . . the provisions in which he clearly expressed it must be applied strictly and literally as required by their terms”.

Against the appeal, respondent also submitted that the scope of subsection 26(1) ought to be restricted to life insurance policies only, because they alone were covered by some of the control measures provided by the Act.

Respondent referred especially to paragraph (b) of subsection 46(1), which makes reference to paragraph 45(f):

Until the certificate mentioned in the preceding section has been delivered:

(f) No insurer may make a valid payment of the amount due by reason of a death; but if the insurer has a business office in this Province, it may, without waiting for the payment of the duties and the issuance of the certificate prescribed in the preceding section, pay to the consort, son or daughter, father or mother, son-in-law or daughter-in-law, stepson or stepdaughter of the deceased, domiciled in this Province, a sum not exceeding three thousand dollars, but the sum so paid shall remain subject to all the other provisions of this act.

The Minister of Revenue, or the Deputy Minister of Revenue, or the collector having jurisdiction, may, on such conditions as he may deem advisable, authorize any operation contemplated in this section, if the same is required for paying duties imposed by this act or debts of the estate.

46.(1) Every insurer availing itself of the provisions of paragraph f of the preceding section shall transmit in duplicate to the collector having jurisdiction, within the first ten days of every month, a detailed statement, duly certified, of the payments so made during the previous month.

Such return must indicate:

(a) the name in full, last domicile and address of the deceased and the date of death;

(b) the number of each policy or certificate issued by it on the life of the deceased and the amount payable thereunder,

(c) the date and amount of the payment made;

(d) The name in full, age and address of every person to whom a payment has been made and his relationship to the deceased.

(Emphasis added.)

Paragraph 45(f) first sets out a general rule: “No insurer may make a valid payment of the amount due by reason of a death”. In the light of this wording, as under subsection 26(1), no distinction can be made between the amount due by reason of a death resulting from accidental as opposed to natural causes. It must therefore be said that the prohibition imposed by the first part of paragraph 45(f) applies to the payment of any proceeds of insurance due by reason of death, whether it is accidental or natural.

The second part of paragraph 45(f) permits the payment on certain conditions, of a sum not exceeding $3,000 to the close relatives of the deceased insured; nothing in the text indicates that the life insurer can alone avail himself of this option.

Under subsection 46(1), the insurer who makes a payment under paragraph (f) of section 45 must inform the competent collector that he has done so by transmitting to him “within the first ten days of every month, a detailed statement, duly certified, of the payments so made during the previous month”. This obligation applies to payments made under an accident insurance policy as well as those made under a life insurance policy. However, respondent points out that pursuant to paragraph (b), the insurer’s return must indicate, inter alia, the number of each insurance policy issued “on the life of the deceased” and the amount payable under it. Respondent contends that the wording of paragraph (b) refers only to life insurance policies, properly speaking, so that the insurer against accidents who avails himself of paragraph 45(f) is not required to provide to the collector the information prescribed in paragraph (b) of subsection 46(1); according to respondent, the scope of section 46, paragraph 45(f) and subsection 26(1) as a whole should be limited to life insurance alone so as to have perfect harmony between each of these provisions.

Respondent’s contention does not appear to me to be well founded.

Even if paragraph 46(1)(b) were to apply only to life insurance policies, there would be no incompatibility with the other provisions under consideration, especially subsection 26(1). The only consequence would be that the insurer against bodily injuries who had made a payment under paragraph 45(f) would not be required to indicate in his return to the collector the information mentioned in paragraph (b) of subsection 46(1). Nevertheless, he would still be required to provide a monthly statement and indicate therein the other information mentioned in paragraphs (a), (c) and (d) of section 46. Perhaps this is a defect in the statute, but such a defect in a collateral provision could not have an effect on the scope of the main provisions of the Act. We are a long way from the situation in Colquhoun v Brooks (1889), 14 AC 493 and McKenna v Eaton-Turner, [1936] 1 KB 1, where it was argued that the legislator had failed to provide the appropriate mechanism for the assessment or collection of the tax the payment of which was being demanded.

Respondent also relied on the fact that the form of affidavit that must accompany the statement of the assets and liabilities of the estate mentioned in section 34 refers only to “insurance policies effected on the life of the deceased or of which it was the beneficiary’. That affidavit form was prescribed by Order in Council No 1417 of May 29, 1937, whereas subsection 26(1), as now drafted, dates from 1953. I do not see how the text of the form approved by the Lieutenant-Governor in Council in 1937 could govern the interpretation of a statute passed by the Legislature in 1953.

Consequently, I am of the opinion that the appeal should be allowed, the judgments of the Court of Appeal and of the Superior Court both set aside the respondent’s action against appellant dismissed; in view of the agreement between the parties, which was confirmed to us at the hearing, it is not necessary to award costs in this Court or in the courts below.