Hart,
J:—Colonel
J
C
MacKeen
was
a
lifelong
resident
of
Nova
Scotia.
When
he
died
on
September
30,
1972,
he
was
survived
by
his
wife,
Dorothy,
and
four
daughters.
Three
of
the
daughters,
Sally
Norwood,
Catherine
Burkart,
and
Christina
Shaw,
were
resident
in
Nova
Scotia,
and
the
other
daughter
Jane
Fagan,
was
resident
in
Massachusetts.
Dorothy
MacKeen
was
a
resident
of
Nova
Scotia
at
the
time
of
his
death.
Shortly
before
Colonel
MacKeen
died,
the
federal
government
had
abandoned
the
estate
tax
field,
and
the
Province
of
Nova
Scotia
passed
a
Succession
Duty
Act
imposing
duties
on
residents
of
Nova
Scotia
who
became
successors
to
the
assets
of
deceased
persons.
After
these
legislative
changes
occurred,
Colonel
MacKeen
decided
to
rearrange
his
affairs
and
made
plans
for
the
distribution
of
his
substantial
estate
at
the
time
of
his
death.
This
proceeding
has
arisen
as
a
result
of
the
scheme
of
distribution
which
he
adopted,
with
the
Minister
of
Finance
claiming
$483,443.91
with
interest
of
$92,715.27
against
the
widow
and
three
daughters
as
resident
successors
under
the
Nova
Scotia
Succession
Duty
Act,
and
the
executors
claiming
that
no
such
duty
is
attracted
by
the
plain
meaning
of
the
legislation,
or,
in
the
alternative,
that
the
legislation
is
unconstitutional
since
it
is
ultra
vires
the
Legislature
of
Nova
Scotia.
The
relevant
sections
of
the
Nova
Scotia
Succession
Duty
Act,
SNS
1972,
c
17,
are
as
follows:
8.
(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.
2.
(5)
Where
a
corporation
which
is
not
resident
in
the
Province,
other
than
a
corporation
without
share
capital,
by
reason
of
the
death
of
a
deceased
acquires
or
becomes
beneficially
entitled
to
property
of
the
deceased,
(a)
the
corporation
shall
be
deemed
not
to
be
the
successor
of
the
property
except
to
the
extent
that
the
value
of
the
shares
of
the
share-
holders
of
the
corporation
is
not
increased
in
value
by
thé
corporation
acquiring
or
becoming
beneficially
entitled
to
the
property;
and
(b)
each
of
the
shareholders
of
the
corporation
shall
be
deemed
to
be
a
successor
of
property
of
the
deceased
to
the
extent
of
the
amount
by
which
the
value
of
his
shares
in
the
corporation
is
increased
by
the
corporation
acquiring
or
becoming
beneficially
entitled
to
the
property.
Assuming
for
the
moment
that
this
legislation
is
intra
vires,
duties
would
have
attached
to
any
property
of
Colonel
MacKeen
which
was
situate
within
the
province
at
the
time
of
his
death,
or
to
any
of
his
property
situated
outside
the
province
that
he
should
leave
to
his
wife
or
daughters
resident
within
the
province
at
the
time
of
his
death.
Furthermore,
should
Colonel
MacKeen
have
left
property
to
a
corporation
not
resident
in
the
province
in
which
his
wife
and
daughters
held
shares,
they
would
be
deemed
to
be
successors
of
his
property
to
the
extent
to
which
the
value
of
their
shares
in
this
foreign
corporation
were
increased
by
the
gift.
Succession
duties
would
then
be
payable
by
the
resident
successors
under
the
statute.
With
this
situation
confronting
him,
Colonel
MacKeen
then
adopted
the
following
scheme
of
distribution.
On
June
23,
1972
Rockingham
Investments
Limited
(hereinafter
called
"Rockingham”)
was
incorporated
under
The
Companies
Act
of
Alberta
with
an
authorized
capital
of
$20,000
divided
into
15
common
shares
of
the
value
of
$1,000
each
and
5,000
6%
non-
cumulative
redeemable
voting
preferred
shares
of
a
par
value
of
$1
each.
The
capital
of
Rockingham
was
increased
on
September
25,
1972
to
$21,000
divided
into
16
common
shares
of
a
par
value
of
$1,000
each
and
5,000
6%
non-cumulative
redeemable
voting
preferred
shares
of
the
par
value
of
$1
each.
The
16
common
shares
were
issued
to
Colonel
MacKeen
and
10
preferred
shares
each
were
issued
to
Messrs
Wood,
Matthews
&
Mader,
barristers,
who
became
the
directors
and
officers
of
the
company.
At
all
material
times
the
share
certificates
remained
in
the
Province
of
Alberta
and
the
company
was
a
resident
Alberta
corporation.
On
June
26,
1972
Colonel
MacKeen
and
Rockingham
entered
into
an
agreement
whereby
he
sold
certain
assets
to
the
company
in
exchange
for
the
16
common
shares
of
Rockingham
and
a
promissory
note
in
his
favour
in
the
amount
of
$1,715,211.21.
As
of
the
date
of
Colonel
MacKeen’s
death
these
shares
were
physically
situate
in
the
Province
of
Alberta
and
transferable
only
in
that
province
and
the
note
was
payable
only
in
the
Province
of
Alberta.
The
shares
and
the
note
were
known
as
the
"Rockingham
Securities”,
and
although
they
remained
assets
of
Colonel
MacKeen
until
the
time
of
his
death
they
were
not
at
that
time
"property
of
a
deceased
that
is
situated,
at
the
time
of
the
death
of
the
deceased,
within
the
Province”.
On
June
23,
1972
eight
other
companies
were
incorporated
in
the
Province
of
Alberta.
Four
of
these
were
wholly
owned
subsidiaries
of
the
other
four.
Each
of
the
subsidiaries
had
an
authorized
capital
of
$20,000
divided
into
20,000
common
shares
of
a
par
value
of
$1
each.
Only
three
of
these
shares
were
issued
to
Messrs
Wood,
Matthews
&
Mader
as
the
registered
shareholders,
but
the
shares
were
held
in
trust
for
the
parent
company.
The
first
subsidiary
was
called
Point
Pleasant
Investments
Limited
(hereinafter
called
“Point
Pleasant”)
and
it
was
the
wholly-owned
subsidiary
of
Francklyn
Investments
Limited
(hereinafter
called
“Francklyn”).
Francklyn
had
an
authorized
capital
of
$20,000
divided
into
15,000
common
shares
of
a
par
value
of
$1
each
and
5,000
6%
non-cumulative
redeemable
voting
preferred
shares
of
a
par
value
of
$1
each.
Ten
of
its
common
shares
were
issued
to
Dorothy
MacKeen
and
ten
preferred
shares
each
to
Messrs
Wood,
Matthews
&
Mader,
who
became
the
officers
and
directors
of
the
company.
Both
Point
Pleasant
and
Francklyn
were
resident
Alberta
corporations
with
all
of
their
officers
and
directors
being
residents
of
that
province.
The
head
office
of
each
company
and
all
of
the
shares
issued
by
them
were
physically
situate
in
Alberta
and
the
shares
transferable
only
in
that
province.
The
other
subsidiary
and
parent
company
combinations
were
exactly
the
same,
with
the
exception
of
the
owner
of
the
common
shares
of
each
parent
company.
Chester
Investments
Limited
was
the
wholly
owned
subsidiary
of
Blue
Water
Investments
Limited
of
which
Sally
Norwood
was
the
owner
of
the
ten
issued
common
shares.
Citadel
Investments
Limited
was
the
subsidiary
of
Iberian
Investments
Limited
of
which
Catherine
Burkart
was
the
owner
of
the
ten
issued
common
shares.
Sambro
Investments
Limited
was
the
subsidiary
of
Hollis
Investments
Limited
of
which
Christina
Shaw
was
the
owner
of
the
issued
ten
common
shares.
On
September
23,
1972
Colonel
MacKeen
made
his
will,
which
is,
in
part,
as
follows:
3.
I
direct
that
my
said
Executors
shall,
except
as
hereinafter
especially
provided
out
of
the
capital
moneys
of
the
residue
of
my
estate
which
shall
come
into
their
hands
pay
any
and
all
succession
duties,
estate
taxes
and
inheritance
taxes
that
may
be
payable
in
connection
with
any
gift
or
benefit
given
by
me
either
in
my
lifetime
or
by
survivorship
or
by
any
clause
of
this
my
Will
or
any
codicil
thereto
or
in
connection
with
any
insurance
on
my
life,
and
whether
such
duties
and
taxes
be
payable
in
respect
of
estates
or
interests
which
fall
into
possession
at
my
death
or
at
any
subsequent
time,
and
I
hereby
authorize
my
said
Executors
to
pay
any
such
duties
or
taxes
prior
to
the
due
date
thereof
or
to
commute
the
duty
or
tax
on
any
interest
in
expectancy.
It
is
my
intention
that
any
such
gift
or
benefit
and
any
such
insurance
shall
be
received
by
the
recipient
free
from
all
duties
and
taxes.
4.
I
give
and
bequeath
all
of
my
shares
in
Rockingham
Investments
Ltd.,
a
body
corporate
with
Head
Office
in
Calgary,
Alberta,
and
any
promissory
note
or
notes
of
Rockingham
Investments
Limited
owned
by
me
(which
shares
and
notes
are
hereinafter
collectively
called
the
‘Rockingham
Securities’)
to
my
Executors
to
hold
the
same
in
trust
and
to
pay
the
net
income
derived
therefrom
during
the
lifetime
of
my
wife,
Dorothy
MacKeen,
to
Point
Pleasant
Investments
Ltd.,
a
body
corporate,
with
Head
Office
in
Calgary,
Alberta.
Upon
the
death
of
my
wife,
or
on
my
death
if
my
wife
should
predecease
me
(which
time
is
referred
to
in
this
Clause
4
as
the
‘time
of
division’),
my
Executors
shall
divide
the
Rockingham
Securities
into
four
equal
parts
and
deal
with
the
same
as
follows:
panies
could
exert
sufficient
control
of
the
parent
and
its
subsidiary
to
bring
about
this
practical
result.
Counsel
for
the
estate
seemed
to
confine
himself
to
the
practical
application
of
the
law
as
a
taxing
statute
to
show
that
the
scheme
of
distribution
adopted
by
the
deceased
did
not
attract
succession
duties
under
the
legislation.
I
do
not
believe
there
is
any
great
difficulty
in
determining
the
ordinary
meaning
of
the
relevant
provisions
of
the
Nova
Scotia
Succession
Duty
Act,
but
before
stating
this
meaning
I
wish
to
discuss
the
various
authorities
cited
by
counsel
indicating
the
proper
emphasis
to
be
placed
on
the
construction
of
statutes
of
this
type.
Counsel
for
the
Crown
has
directed
the
Court
to
the
following—
Maxwell
on
the
Interpretation
of
Statutes,
12th
edition,
page
140:
Although
statutes
imposing
pecuniary
burdens
are
construed
strictly
in
favour
of
those
on
whom
the
burden
is
sought
to
be
imposed,
and
in
revenue
statutes
in
particular
the
subject
is
aided
by
presumptions
such
as
that
against
double
taxation,
the
question
is
primarily
that
of
the
‘full
and
fair
application
of
particular
statutory
language
to
particular
facts
as
found.
The
desirability
or
the
undesirability
of
one
conclusion
as
compared
with
another
cannot
furnish
a
guide
in
reaching
a
decision.’’
“So
often,
particularly
in
Tax
Statutes,
the
spirit
and
intention
of
the
Act
.
.
.
is
subject
to
such
uncertainty
.
.
.
that
it
may
provide
a
misleading
rather
than
a
reliable
guide,
and
in
any
case
affords
a
less
certain
guide
than
the
construction
of
the
words
without
a
resort
to
conceptions
of
spirit
and
intention.’’
The
language
used
is
not
to
be
either
stretched,
in
favour
of
the
Crown
or
narrowed
in
favour
of
the
taxpayer.
So
where
the
court
has
to
consider
a
provision
expressly
designed
to
prevent
tax
evasion,
which
uses
unnecessarily
wide
language
to
achieve
its
purpose,
that
language
will
be
given
effect
to
even
though
the
section
is
thereby
made
to
apply
to
cases
which
it
was
probably
never
intended
to
catch.
and
further
at
page
143:
It
is,
however,
essential
not
to
confound
what
is
actually
or
virtually
prohibited
or
enjoined
by
the
statutory
language
with
what
is
really
beyond
the
enacting
part,
though
it
may
be
within
the
policy,
of
the
Act:
for
it
is
only
to
the
former
case
that
the
principle
under
consideration
applies,
and
not
to
cases.
where,
however
manifest
the
object
of
the
Act
may
be,
the
language
is
not
fairly
co-extensive
with
it.
An
Act
of
Parliament
is
always
Subject
to
evasion
in
this
sense,
for
there
is
no
obligation
not
to
do
what
the
legislature
has
not
really
prohibited
nor
to
do
what
it
has
not
really
commanded.
It
is
not
evading
an
Act
to
keep
outside
it.
Thus
a
hiring
for
a
few
days
less
than
a
year,
though
its
avowed
object
was
to
prevent
the
servant
from
obtaining
a
settlement,
was
not
regarded
as
any
evasion
of
the
Act
which
gave
a
settlement
on
a
year’s
service.
A
shopkeeper
who
was
licensed
only
to
sell
beer
for
consumption
off
the
premises
was
held
to
be
in
breach
of
the
relevant
statute
if
he
sold
beer
to
be
drunk
on
a
bench
which
he
provided
for
his
customers
close
to
the
shop,
the
intention
making
it,
virtually,
a
sale
for
consumption
on
the
premises:
but
a
mere
sale
through
a
window
to
a
person
who
stood
on
the
road
outside
was
held
not
to
be
an
evasion,
even
though
the
buyer
drank
the
beer
immediately
on
receiving
it.
After
referring
to
several
authorities
which
stand
for
the
proposition
that
the
plain
meaning
of
the
statutory
words
must
be
followed,
counsel
for
the
Crown
states
that
if
any
ambiguity
should
be
found
that
the
interpretation
should
relate
to
the
mischief
sought
to
be
remedied
by
the
statute.
In
support
of
this
proposition
he
quotes
an
extract
from
the
speech
of
Lord
Diplock
(dissenting)
in
Black-
Clawson
Ltd
v
Papierwerke
AG,
[1975]
AC
591
at
638:
Statutes
in
the
sixteenth
century
and
for
long
thereafter
in
addition
to
the
enacting
words
contained
lengthy
preambles
reciting
the
particular
mischief
or
defect
in
the
common
law
that
the
enacting
words
were
designed
to
remedy.
So,
when
it
was
laid
down,
the
“mischief”
rule
did
not
require
the
court
to
travel
beyond
the
actual
words
of
the
statute
itself
to
identify
“the
mischief
and
defect
for
which
the
common
law
did
not
provide,”
for
this
would
have
been
stated
in
the
preamble.
It
was
a
rule
of
construction
of
the
actual
words
appearing
in
the
statute
and
nothing
else.
In
construing
modern
statutes
which
contain
no
preambles
to
serve
as
aids
to
the
construction
of
enacting
words
the
“mischief”
rule
must
be
used
with
caution
to
justify
any
reference
to
extraneous
documents
for
this
purpose.
If
the
enacting
words
are
plain
and
unambiguous
in
themselves
there
is
no
need
to
have
recourse
to
any
“mischief”
rule.
To
speak
of
mischief
and
of
remedy
is
to
describe
the
obverse
and
the
reverse
of
a
Single
coin.
The
former
is
that
part
of
the
existing
law
that
is
changed
by
the
plain
words
of
the
Act;
the
latter
is
the
change
that
these
words
made
in
it.
The
acceptance
of
the
rule
of
law
as
a
constitutional
principle
requires
that
a
citizen,
before
committing
himself
to
any
course
of
action,
should
be
able
to
know
in
advance
what
are
the
legal
consequences
that
will
flow
from
it.
Where
those
consequences
are
regulated
by
a
statute
the
source
of
that
knowledge
is
what
the
statute
says.
In
construing
it
the
court
must
give
effect
to
what
the
words
of
the
statute
would
be
reasonably
understood
to
mean
by
those
whose
conduct
it
regulates.
That
any
or
all
of
the
individual
members
of
the
two
Houses
of
the
Parliament
that
passed
it
may
have
thought
the
words
bore
a
different
meaning
cannot
affect
the
matter.
Parliament,
under
our
constitution,
is
sovereign
only
in
respect
of
what
it
expresses
by
the
words
used
in
the
legislation
it
has
passed.
This
is
not
to
say
that
where
those
words
are
not
clear
and
unambiguous
in
themselves
but
are
fairly
susceptible
of
more
than
one
meaning,
the
court,
for
the
purpose
of
resolving—though
not
of
inventing—an
ambiguity,
may
not
pay
regard
to
authoritative
statements
that
were
matters
of
public
knowledge
at
the
time
the
Act
was
passed,
as
to
what
were
regarded
as
deficiencies
in
that
branch
of
the
existing
law
with
which
the
Act
deals.
Counsel
for
the
Crown
further
referred
to
subsection
8(5)
of
the
Interpretation
Act,
RSNS
1967,
c
151,
which
is
as
follows:
8.
(5)
Every
enactment
shall
be
deemed
remedial
and
interpreted
to
insure
the
attainment
of
its
objects
by
considering
among
other
matters:
(a)
the
occasion
and
necessity
for
the
enactment;
(b)
the
circumstances
existing
at
the
time
it
was
passed;
(c)
the
mischief
to
be
remedied;
(d)
the
object
to
be
attained;
(e)
the
former
law,
including
other
enactments
upon
the
same
or
similar
subjects;
(f)
the
consequence
of
a
particular
interpretation;
(g)
the
history
of
legislation
on
the
subject.
The
next
case
referred
to
was
Attorney-General
v
Smith-Marriott,
[1899]
2
QB
595,
where
Mr
Justice
Darling
said
at
page
601
:
It
has
been
contended
that
we
must
construe
Acts
of
this
kind
in
some
peculiar
way—that
the
case
must
come
within
the
very
words
of
the
Act
of
Parliament.
I
agree
that
neither
the
Crown
nor
anybody
else
is
entitled
to
demand
against
any
one,
by
virtue
of
an
Act
of
Parliament,
anything
which
is
not
granted
by
the
words
of
that
Act
of
Parliament.
But
I
do
not
think
that
if
by
putting
the
narrowest
possible
construction
upon
the
words
of
an
Act
of
Parliament
they
can
be
made
to
cover
a
particular
case,
that
meaning
and
no
other
must
be
given
to
the
Act
of
Parliament.
Taking
the
strongest
expression
which
has
been
cited,
an
expression
used
in
the
judgment
of
the
Court
of
Exchequer
in
Phillips
v
Morrison,
“The
party
who
seeks
to
bring
an
instrument
within
the
Stamp
Act
must
shew
clearly
that
it
falls
within
it,”—I
think,
here,
that
the
Crown
has
shewn
clearly
that
this
case
falls
within
the
words
of
the
Finance
Act,
1894.
Then
that
judgment
goes
on
to
say,
“he
must,
so
to
speak,
hit
the
bird
in
the
very
eye.”
It
is
contended
that
that
remark
means
that
we
must
put
a
very
narrow
construction
upon
these
taxing
Acts,
and
that
we
are
not
to
look
at
this
Act
of
Parliament
as
we
should
at
any
other.
I
car
only
say
that
it
appears
to
me
that
to
read
these
words
in
that
way
shews
again
the
danger
in
law
courts
of
using
picturesque
language,
and
that
that
expression
—borrowed
no
doubt
from
the
pastime
of
the
popinjay—does
not
make
me
feel
bound
to
give
to
the
words
of
this
Act
of
Parliament
a
meaning
which
I
do
not
think
they
naturally
bear.
A
decision
of
the
Supreme
Court
of
Canada
was
next
mentioned.
The
case
of
Minister
of
Revenue
for
Ontario
v
McCreath
[1976]
CTC
178;
67
DLR
(3d)
449,
dealt
with
whether
a
settlor
who
retained
the
right
to
some
income
and
the
right
to
direct
the
disposition
of
the
corpus
of
the
trust
upon
her
death
came
within
the
provisions
of
The
Succession
Duty
Act
of
Ontario.
Dickson,
J
said
at
page
180
[452]:
This
case
mirrors
the
ongoing
struggle
between
taxing
authorities,
casting
an
ever
wider
net
to
garner
succession
duties
or
estate
taxes,
and
taxpayers
adopting
ever
more
sophisticated
means
of
escaping
that
net.
One
cannot
reproach
the
taxpayer
or
his
professional
advisors
for
so
arranging
affairs
as
legitimately
to
minimize
tax
impact
but
there
are
times
when
the
schemes
devised
introduce
rather
fine
legal
distinctions
and
the
line
determining
tax
liability
becomes
difficult
to
draw.
The
complexity
is
enhanced
by
the
importation
of
concepts
from
traditional
conveyancing
law
and
the
injection
of
fine
subtleties
from
the
law
of
trusts.
The
casuistry
reaches
its
apogee
in
the
case
of
inter
vivos
transactions
in
which
the
donor
wants
to
retain
effective,
but
unobtrusive,
lifetime
control
of
the
property
gifted
and
yet
create
the
impression,
through
the
language
of
the
gifting
instrument,
that
he
or
she
has
disposed
wholly
and
irrevocably
of
the
subject-matter
of
the
gift.
Again
at
page
191
[465],
Dickson,
J
says:
If,
as
I
have
found,
an
interest
was
reserved
to
Mrs
McCreath
in
the
property
passing,
within
the
meaning
of
subclause
1(p)
(viii),
it
would
follow
that
the
disposition
made
by
her
was
not
such
that
the
possession
and
enjoyment
of
the
property
by
the
persons
to
whom
the
disposition
was
made
was
retained
to
the
entire
exclusion
of
Mrs
McCreath,
within
the
meaning
of
clause
5(1)(g).
It
seems
to
me
that
Mrs
McCreath,
during
her
lifetime,
remained
effectively
in
control
of
that
which
she
affected
to
dispose
of,
not
only
by
the
possible
income
interest,
but
also
because
of
the
right
to
designate
by
will
which
of
her
children
should
receive
the
corpus
on
her
death
and
subject
to
what
terms
and
conditions.
One
must
look
at
the
substance
of
the
matter
to
see
what
the
donor
parted
with
and
what
she
retained.
Mrs
McCreath
derived
actual
benefit
from
the
voting
trust
certificates
or
the
underlying
shares
or
their
dividends.
The
transfer
of
the
shares
of
Mount
Royal
Paving
&
Supplies
Limited
to
the
trustee
was,
in
my
opinion,
a
colourable
gift
and
not
a
bona
fide
disposition
of
the
type
which
clause
5(1)(g)
is
intended
to
exempt.
Subclause
1(p)
(viii)
and
clause
5(1)(g)
have
a
common
purpose,
taxation
of
those
who
purport
to
gift
their
property
during
life
but,
in
reality,
fail
to
do
so.
The
sections
should
be
complementary
as
in
the
English
and
Canadian
Acts
and
not
interpreted
absurdly
so
as
to
catch
the
donor
at
one
point
and
then
free
him
at
another.
If
subclause
1
(p)(viii)
and
clause
5(1
)(g)
are
to
work
harmoniously
within
the
total
context
of
the
Act,
clause
5(1)(g)
must
be
restricted
to
situations
where
the
donor
totally
excludes
himself
from
the
subject
property.
Counsel
for
the
Crown
next
referred
to
Lethbridge
v
Attorney-
General,
[1907]
AC
19,
where
Lord
Atkinson
said
at
page
26:
My
Lords,
I
concur
in
the
opinion
that
the
decision
of
the
Court
of
Appeal
in
this
case
was
wrong
and
should
be
reversed,
and
that
the
decision
of
Phillimore,
J
should
be
restored.
It
has
many
times
been
decided
that
in
dealing
with
questions
arising
on
the
Finance
Act
of
1894
and
the
Succession
Duty
Acts
regard
should
be
had
to
the
substance
of
the
transactions
on
which
these
questions
turn
rather
than
to
the
forms
of
conveyancing
which
the
parties
to
them
may
have
adopted
to
carry
out
their
objects.
In
the
Lethbridge
case
the
House
of
Lords
decided
that
the
transfer
of
a
number
of
insurance
policies
from
a
father
to
a
son
was
a
valid
sale,
and
that
the
father
retained
no
interest
which
would
entitle
the
taxing
authority
to
say
that
anything
passed
from
the
father
to
the
son
at
the
time
of
his
death.
Although
it
may
have
looked
on
the
surface
as
if
the
proceeds
of
the
policies
payable
on
the
death
of
the
father
were
a
benefit
provided
by
the
father
for
the
son
this
was
not
the
substance
of
the
transaction.
The
next
case
cited
dealing
with
the
substance
rather
than
the
form
of
a
transaction
was
In
re
Harmsworth,
[1967]
1
Ch
826,
where
Buckley,
J
said
at
page
833:
I
must,
therefore,
analyse
the
legal
nature
of
the
relevant
transaction
in
this
case
to
discover
whether
it
can
truly
be
termed
a
purchase.
For
this
purpose,
it
is,
I
think,
right
to
have
regard
to
substance
rather
than
form
in
this
sense
but
no
further;
that
is
to
say,
conveyancing
forms
will
not
inhibit
the
court
from
holding
the
transaction
to
be
a
sale
and
purchase
if
its
true
legal
nature
and
effect,
regarding
the
transaction
as
a
whole,
is
that
of
a
sale
and
purchase,
but
it
is
insufficient
merely
to
say
that
the
effect
of
the
transaction
could
have
been
achieved
by
a
sale
and
purchase.
At
page
838
he
reached
the
following
conclusion:
For
these
reasons,
I
reach
the
conclusion
that,
upon
the
true
view
of
the
facts
of
this
case,
the
moiety
fund
passed
on
the
death
of
Lady
Harmsworth
from
her
to
the
persons
who
then
became
entitled
to
interests
in
possession
in
it
by
reason
only
of
a
bona
fide
purchase
within
the
meaning
of
section
3
of
the
Finance
Act,
1894,
from
her
by
Sir
Leicester’s
executors
of
the
reversionary
interest
in
the
fund
expectant
on
her
death.
Counsel
for
the
estate
quoted
authorities
which
tended
to
show
that
taxing
statutes
should
be
interpreted
strictly
against
the
Crown
and
that
there
is
no
equity
to
be
shown
in
the
Crown’s
favour
when
dealing
with
legislation
of
this
sort.
The
first
case
referred
to
was
that
of
Tennant
v
Smith,
[1892]
AC
150.
In
that
case
the
House
of
Lords
was
considering
the
meaning
of
the
expression
“total
income
from
all
sources”
under
the
Customs
and
Inland
Revenue
Act.
At
page
154
Lord
Halsbury,
LC
says:
My
Lords,
to
put
this
case
very
simply,
the
question
depends
upon
what
is
Mr
Tennant’s
income.
This
is
an
Income
Tax
Act,
and
what
is
intended
to
be
taxed
is
income.
And
when
I
say
‘‘what
is
intended
to
be
taxed,”
I
mean
what
is
the
intention
of
the
Act
as
expressed
in
its
provisions,
because
in
a
taxing
Act
it
is
impossible,
I
believe,
to
assume
any
intention,
any
governing
purpose
in
the
Act,
to
do
more
than
take
such
tax
as
the
statute
imposes.
In
various
cases
the
principle
of
construction
of
a
taxing
Act
has
been
referred
to
in
various
forms,
but
I
believe
they
may
be
all
reduced
to
this,
that
inasmuch
as
you
have
no
right
to
assume
that
there
is
any
governing
object
which
a
taxing
Act
is
intended
to
attain
other
than
that
which
it
has^
expressed
by
making
such
and
such
objects
the
intended
subject
for
taxation,
you
must
see
whether
a
tax
is
expressly
imposed.
Cases,
therefore,
under
the
Taxing
Acts
always
resolve
themselves
into
a
question
whether
or
not
the
words
of
the
Act
have
reached
the
alleged
subject
of
taxation.
Lord
Wensleydale
said,
in
In
re
Micklethwait
(2),
“It
is
a
well-established
rule,
that
the
subject
is
not
to
be
taxed
without
clear
words
for
that
purpose;
and
also,
that
every
Act
of
Parliament
must
be
read
according
to
the
natural
construction
of
its
words.
A
similar
statement
was
cited
in
the
Attorney-General
v
Earl
of
Se/borne,
[1902]
1
KB
388,
where
Collins,
MR
said
at
page
396:
On
the
question
of
the
rule
of
construction
to
be
applied
to
the
statute,
I
think
the
passage
that
has
been
cited
from
the
judgment
of
Lord
Cairns
in
Partington
v
Attorney-General
is
important.
He
there
says:
“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
can
simply
adhere
to
the
words
of
the
statute.”
Therefore
the
Crown
fails
if
the
case
is
not
brought
within
the
words
of
the
statute,
interpreted
according
to
their
natural
meaning;
and
if
there
is
a
case
which
is
not
covered
by
the
statute
so
interpreted
that
can
only
be
cured
by
legislation,
and
not
by
an
attempt
to
construe
the
statute
benevolently
in
favour
of
the
Crown.
Counsel
for
the
estate
next
argues
that
in
the
absence
of
specific
statutory
provisions
such
as
those
appearing
in
the
federal
Income
Tax
Act
but
not
appearing
in
the
Nova
Scotia
Succession
Duty
Act
a
person
is
entitled
to
arrange
his
affairs
to
avoid
the
impact
of
taxation.
He
supports
this
proposition
by
reference
to
the
case
of
Commissioners
of
Inland
Revenue
v
Duke
of
Westminster,
[1936]
AC
1.
Lord
Tomlin
says
at
page
19:
Apart,
however,
from
the
question
of
contract
with
which
I
have
dealt,
it
is
said
that
in
revenue
cases
there
is
a
doctrine
that
the
Court
may
ignore
the
legal
position
and
regard
what
is
called
‘the
substance
of
the
matter,”
and
that
here
the
substance
of
the
matter
is
that
the
annuitant
was
serving
the
Duke
for
something
equal
to
his
former
salary
or
wages,
and
that
therefore,
while
he
is
so
serving,
the
annuity
must
be
treated
as
salary
or
wages.
This
supposed
doctrine
(upon
which
the
Commissioners
apparently
acted)
seems
to
rest
for
its
support
upon
a
misunderstanding
of
language
used
in
some
earlier
cases.
The
sooner
this
misunderstanding
is
dispelled,
and
the
supposed
doctrine
given
its
quietus,
the
better
it
will
be
for
all
concerned,
for
the
doctrine
seems
to
involve
substituting,
“the
incertain
and
crooked
cord
of
discretion’’
for
“the
golden
and
streight
metwand
of
the
law.”
Every
man
is
entitled
if
he
can
to
order
his
affairs
So
as
that
the
tax
attaching
under
the
appropriate
Acts
is
less
than
it
otherwise
would
be.
If
he
succeeds
in
ordering
them
so
as
to
secure
this
result,
then,
however
unappreciative
the
Commissioners
of
Inland
Revenue
or
his
fellow
taxpayers
may
be
of
his
ingenuity,
he
cannot
be
compelled
to
pay
an
increased
tax.
This
so-called
doctrine
of
‘‘the
substance”
seems
to
me
to
be
nothing
more
than
an
attempt
to
make
a
man
pay
notwithstanding
that
he
has
so
ordered
his
affairs
that
the
amount
of
tax
sought
from
him
is
not
legally
claimable.
The
principal
passages
relied
upon
are
from
opinions
of
Lord
Herschell
and
Lord
Halsbury
in
your
Lordships’
House.
Lord
Herschell
L.C.
in
He/by
v
Matthews
observed:
“It
is
said
that
the
substance
of
the
transaction
evidenced
by
the
agreement
must
be
looked
at,
and
not
its
mere
words.
I
quite
agree;”
but
he
went
on
to
explain
that
the
substance
must
be
ascertained
by
a
consideration
of
the
rights
and
obligations
of
the
parties
to
be
derived
from
a
consideration
of
the
whole
of
the
agreement.
In
short
Lord
Herschell
was
saying
that
the
substance
of
a
transaction
embodied
in
a
written
instrument
is
to
be
found
by
construing
the
document
as
a
whole.
Support
has
also
been
sought
by
the
appellants
from
the
language
of
Lord
Halsbury
L.C.
in
Secretary
of
State
in
Council
of
India
v
Scoble.
There
Lord
Halsbury
said:
“Still,
looking
at
the
whole
nature
and
substance
of
the
transaction
(and
it
is
agreed
on
all
sides
that
we
must
look
at
the
nature
of
the
transaction
and
not
be
bound
by
the
mere
use
of
the
words),
this
is
not
the
case
of
a
purchase
of
an
annuity.
Here
again
Lord
Halsbury
is
only
giving
utterance
to
the
indisputable
rule
that
the
surrounding
circumstances
must
be
regarded
in
construing
a
document.
Neither
of
these
passages
in
my
opinion
affords
the
appellants
any
support
or
has
any
application
to
the
present
case.
The
matter
was
put
accurately
by
my
noble
and
learned
friend
Lord
Warrington
of
Clyffe
when
as
Warrington
L.J.
in
In
re
Hinckes,
Dashwood
v
Hinckes
he
used
these
words:
“It
is
said
we
must
go
behind
the
form
and
look
at
the
substance
.
.
but,
in
order
to
ascertain
the
substance,
I
must
look
at
the
legal
effect
of
the
bargain
which
the
parties
have
entered
into.”
So
here
the
Substance
is
that
which
results
from
the
legal
rights
and
obligations
of
the
parties
ascertained
upon
ordinary
legal
principles,
and,
having
regard
to
what
I
have
already
said,
the
conclusion
must
be
that
each
annuitant
is
entitled
to
an
annuity
which
as
between
himself
and
the
payer
is
liable
to
deduction
of
income
tax
by
the
payer
and
which
the
payer
is
entitled
to
treat
as
a
deduction
from
his
total
income
for
surtax
purposes.
There
may,
of
course,
be
cases
where
documents
are
not
bona
fide
nor
intended
to
be
acted
upon,
but
are
only
used
as
a
cloak
to
conceal
a
different
transaction.
No
such
case
is
made
or
even
suggested
here.
The
deeds
of
covenant
are
admittedly
bona
fide
and
have
been
given
their
proper
legal
operation.
They
cannot
be
ignored
or
treated
as
operating
in
some
different
way
because
as
a
result
less
duty
is
payable
than
would
have
been
the
case
if
some
other
arrangement
(called
for
the
purpose
of
the
appellants’
argument
“the
substance”)
had
been
made.
Counsel
for
the
estate
claims
that
everything
that
was
done
by
Colonel
MacKeen
in
preparing
for
the
distribution
of
his
estate
at
his
death
was
bona
fide
and
attracted
no
tax.
He
states
that
the
many
cases
decided
under
the
provisions
of
Part
XVI
of
the
Income
Tax
Act
dealing
with
tax
evasion
and
tax
avoidance
do
not
apply
since
these
statutory
provisions
represent
intrusions
into
the
common
law
by
the
federal
taxing
authority,
which
are
not
present
in
the
Nova
Scotia
Succession
Duty
Act.
He
argues
that
no
concept
of
artificiality
of
a
transaction
can
be
considered,
but
merely
the
true
legal
nature
of
the
ingredients
of
the
scheme
of
distribution
as
decided
in
the
Duke
of
Westminster
case.
The
next
case
referred
to
by
counsel
for
the
estate
was
MNR
v
M
I
Smith
Estate
[1975]
CTC
335;
75
DTC
5242.
In
that
case
the
deceased
had
set
up
an
arrangement
to
freeze
the
value
of
her
shares
in
a
family
business
and
pass
on
to
her
sons
the
other
shares
which
were
designed
to
accumulate
the
increased
value
of
the
company
as
it
prospered.
After
her
death
the
Minister
of
National
Revenue
added
the
increased
capital
value
of
the
company
to
the
value
of
her
shares
under
subsection
4(1)
of
the
Estate
Tax
Act
claiming
that
the
shares
transferred
to
her
sons
were
not
acquired
by
them
as
a
result
of
a
bona
fide
purchase
made
from
the
deceased
for
a
consideration
in
money
or
money’s
worth.
The
Trial
Division
of
the
Federal
Court
reversed
the
decision
of
the
Minister
and
found
that
the
transaction
was
a
bona
fide
sale.
When
the
matter
was
taken
to
the
Appeal
Division
the
appellant’s
first
contention
was
that
the
bona
fide
purchase
referred
to
in
subsection
4(1)
is
referable
only
to
a
purchase
in
a
business
and
commercial
matter,
not
one
arising
in
the
course
of
creating
an
estate-freeze
plan
as
it
was
acknowledged
in
evidence
this
was.
Urie,
J
at
page
342
[5247]
says:
I
can
find
nothing
in
the
Act
which
gives
the
slightest
support
to
such
a
view.
To
give
the
phrase
such
a
narrow
interpretation
requires
the
Court
to
add
words
to
the
section
which
Parliament
excluded
therefrom.
Appellant’s
Counsel
was
unable
to
refer
the
Court
to
any
Canadian
cases
to
support
his
proposition
although
he
did
cite
some
English
authorities
in
which,
in
the
context
of
the
statutes
there
under
consideration,
“bona
fide
purchases’’
was
interpreted
to
mean
commercial
or
business
transactions.
In
my
opinion
these
decisions
do
not
have
any
application
to
this
case
or
to
the
Estate
Tax
Act.
He
continues
at
page
344
[5248]:
Admittedly,
what
the
taxpayer
did
was
to
indulge
in
estate
planning
to
reduce
the
tax
applying
to
her
estate.
It
is
trite
law
to
say
that
every
taxpayer
is
entitled
to
so
manage
his
affairs
as
to
minimize
the
incidence
of
tax
payable.
To
apply
to
subsection
4(1)
the
strained
interpretation
suggested
by
the
Appellant
in
order
to
bring
the
transactions
within
the
ambit
of
paragraph
3(1)(d)
or
(e)
as
dispositions
or
settlements
covered
thereby
could,
in
my
opinion,
be
permitted
only
if
the
words
used
were
clear
and
unequivocal.
As
I
have
observed
before
there
is
nothing
in
subsection
4(1)
confining
the
“bona
fide
purchase’’
to
commercial
or
business
transactions
to
the
exclusion
of
transactions
entered
into
for
the
purposes
of
estate
planning.
Purchases
made
for
estate
planning
purposes
can
be
just
as
bona
fide
as
those
made
in
commercial
transactions.
The
trial
judge
having
found
on
the
facts,
as
he
did,
that
the
transactions
were
bona
fide
neither
of
the
other
sections
can
apply.
Ryan,
J
who
concurred
in
the
majority
result
reached
the
same
conclusion
as
Mr
Justice
Urie
on
the
point
of
the
bona
fides
of
the
sale.
In
doing
so
he
referred
to
certain
English
authorities,
including
the
Lethbridge
case,
which
I
have
discussed
above.
After
considering
all
of
the
authorities
discussed
by
counsel
and
the
propositions
that
those
authorities
have
been
said
to
support
I
have
reached
the
conclusion
that
in
interpreting
the
Nova
Scotia
Succession
Duty
Act
I
must
be
guided
by
the
plain
meaning
of
the
Statute
as
a
whole.
Before
any
tax
is
attracted
by
the
Act
the
meaning
must
be
clear
and
unambiguous
so
that
the
taxpayer
is
clearly
brought
within
the
wording
of
the
statute.
The
Court
in
a
case
of
this
sort
is
not
permitted
as
in
a
court
of
equity
to
interpret
the
legislation
so
as
to
be
fair
and
just
to
the
Crown
or
other
taxpayers,
but
must
not
be
so
restrictive
in
its
interpretation
as
to
prefer
matters
of
form
to
those
of
substance
coming
clearly
within
the
meaning
of
the
Act.
I
do
not
believe
that
the
Court
has
any
right
to
set
aside
bona
fide
transactions
obviously
designed
for
the
avoidance
of
tax
on
the
ground
that
they
are
artificial
and
designed
to
minimize
or
avoid
payment
of
tax.
The
jurisprudence
which
has
arisen
around
the
provisions
of
Part
XVI
of
the
Income
Tax
Act,
which
deals
with
tax
evasion
and
avoidance,
does
not
apply
here
since
those
provisions
are
not
contained
in
the
Nova
Scotia
Succession
Duty
Act.
The
argument
of
the
Crown
that
the
scheme
of
distribution
adopted
by
Colonel
MacKeen
was
patently
designed
to
avoid
the
provisions
of
the
Act
and
that
the
Court
should
therefore
interpret
the
Act
so
as
to
catch
the
taxpayer
must
fail,
and
what
remains
to
be
determined
is
whether
or
not
the
taxpayer
has
successfully
brought
himself
outside
the
ambit
of
the
legislation.
The
charging
provision
of
the
Nova
Scotia
Succession
Duty
Act
is
section
8.
By
subsection
(1)
of
that
section
duty
is
payable
on
all
property
of
a
deceased
situate
within
the
Province
at
the
time
of
his
death.
By
subsection
(2)
if
any
property
of
a
deceased
situate
outside
the
Province
passes
to
a
successor
resident
within
the
province
at
the
time
of
the
death
the
successor
must
pay
duty.
By
clause
(2)(ae)
a
successor
is
defined
as
“any
person
who
becomes
beneficially
entitled
to
any
property
of
the
deceased
by
virtue
of
his
death”.
The
Crown
has
apparently
accepted
the
fact
that
neither
the
widow
nor
daughters
of
Colonel
MacKeen
became
beneficially
entitled
to
any
of
his
property
at
the
time
of
his
death
under
these
sections
of
the
Act,
but
are
deemed
to
be
successors
to
his
property
under
the
provisions
of
subsection
2(5)
of
the
statute.
Under
that
Subsection
each
shareholder
of
a
non-resident
corporation
which
acquires
or
becomes
beneficially
entitled
to
property
of
a
deceased
person
by
reason
of
his
death
is
deemed
to
be
a
successor
of
his
property
to
the
extent
of
the
amount
by
which
the
value
of
her
shares
in
the
corporation
is
increased
by
the
corporation
acquiring
or
becoming
beneficially
entitled
to
the
property.
The
widow
and
daughters
of
the
deceased
were
not
shareholders
of
the
subsidiary
Alberta
corporations
that
actually
acquired
property
of
the
deceased
but
were
shareholders
in
the
parent
Alberta
companies
that
owned
all
of
the
shares
of
the
subsidiary
companies
acquiring
the
bequests.
It
cannot
therefore
be
said
that
the
widow
and
daughters
of
the
deceased
were
shareholders
of
a
non-resident
company
that
acquired
property
of
the
deceased
by
reason
of
his
death,
and
the
only
argument
remaining
is
that
the
parent
corporations
were
non-resident
companies
that
“became
beneficially
entitled’’
to
property
of
the
deceased
by
reason
of
his
death.
Counsel
for
the
Minister
of
Finance
argues
that
this
expression
in
the
Act
“becomes
beneficially
entitled”
should
be
liberally
construed
so
as
to
find
that
the
shareholders
of
the
parent
corporations,
who
are
residents
of
the
Province,
are
in
fact
“successors”
and
must
pay
duty
to
the
extent
that
their
shares
are
increased
in
value
by
the
corporation
having
become
beneficially
entitled
to
property
of
the
deceased.
He
argues
that
the
gift
to
the
subsidiary
corporation
meant
that
the
parent
corporation
became
beneficially
entitled
to
the
property
of
the
deceased.
He
says
that
the
parent
company
could
simply
arrange
for
the
winding-up
of
the
subsidiary
company
and
it
will
then
be
the
parent
company
that
has
benefited
by
the
gift
from
the
deceased.
He
argues
that
the
interpretation
of
this
extra
corporate
level
should
not
be
allowed
to
frustrate
the
intention
of
the
Legislature
to
tax
resident
shareholders
of
foreign
corporations
actually
benefited
by
the
deceased.
Counsel
for
the
estate
says
that
the
expression
“beneficially
entitled”
has
a
well-defined
legal
meaning
requiring
the
recipient
of
the
gift
to
be
in
a
position
to
sue
for
and
recover
the
property
from
the
estate.
He
says
that
only
the
subsidiary
company
was
in
this
position
and
that
it
is
a
separate
corporate
unit
from
its
parent.
He
challenges
the
Crown’s
assumption
that
the
resident
shareholder
of
the
parent
company
could
bring
about
a
winding-up
of
the
subsidiary
or
that
the
parent
has
in
fact
any
property
right
in
the
assets
of
the
subsidiary
corporation.
Counsel
for
the
estate
argues
further
that
the
intention
of
the
Legislature
was
to
tax
resident
successors
who
were
shareholders
of
a
non-resident
company
to
which
a
deceased
made
a
direct
bequest
of
his
property.
He
points
to
the
other
provisions
of
the
Act
where
the
expression
“directly
or
indirectly”
is
used
in
reference
to
corporations.
This
may
be
found
in
clause
1(g),
clause
4(5)(h),
subsection
22(2)
and
section
27.
The
Act
also
makes
reference
to
a
corporation
associated
with
the
employer
or
former
employer
of
a
deceased
as
a
subsidiary
or
parent
corporation
to
the
employer
or
former
employer
in
clause
4(5)(b)
when
referring
to
payments
made
under
insurance
policies.
What
then
is
the
meaning
of
the
expression
“becomes
beneficially
entitled
to
property
of
the
deceased’
as
contained
in
subsection
2(5)
of
the
Act?
This
section
was
obviously
passed
to
prevent
the
transfer
of
assets
to
resident
successors
through
the
use
of
a
corporation
in
order
to
avoid
tax.
It
is
worded
in
such
a
way
to
include
not
only
the
case
where
the
deceased
left
his
property
directly
to
a
non-resident
corporation
so
that
the
corporation
can
be
said
to
have
acquired
the
property,
but
also
to
the
situation
where
the
corporation
becomes
beneficially
entitled
to
the
property.
By
the
definition
section
of
the
Act
“property”
includes
“money”
and
the
section
can
therefore
refer
to
a
corporation
which
becomes
entitled
to
any
money
of
the
deceased
by
reason
of
his
death.
Expressions
like
“beneficially
entitled
to”
and
“beneficial
owner”
are
well
known
to
the
law.
In
Fidelity
Trust
Co
v
Fenwick
(1921-22),
51
OLR
23,
Orde,
J
says
at
page
31
:
The
“beneficial
owner’’
is
he
who
“owns”
the
policy,
the
one
with
whom
the
insurer
has
contracted,
or
his
assignee,
and
to
whose
legal
personal
representatives
passes
the
right
to
enforce
the
contract.
In
Montreal
Trust
Company
(Torrance
Estate)
v
MNR,
[1958]
SCR
146;
[1958]
CTC
60;
58
DTC
1051,
Rand,
J
was
considering
the
meaning
of
the
expression
“become
beneficially
entitled
to
any
property”
under
paragraph
2(m)
of
the
Dominion
Succession
Duty
Act.
In
that
case
a
testator
had
left
certain
moneys
to
two
charities
on
condition
that
they
pay
the
duties
of
other
legatees,
and
the
issue
was
whether
those
legatees
in
respect
of
the
tax
benefit
had
become
beneficially
entitled
to
any
property
and
thereby
liable
to
additional
tax.
At
page
62
[1052,
149],
Rand,
J
says:
Mr
Marler
for
the
appellants
urged
as
the
test
to
determine
whether
a
successor
had
become
“beneficially
entitled
to
any
property”
that
formulated
by
Wynn-Parry,
J.
in
In
re
Miller’s
Agreement,
Uniacke
v
Attorney-General.
The
test
was,
that
it
must
be
“postulated
of
him
(the
successor)
that
he
has
a
right
to
sue
for
and
recover
such
property”.
In
the
word
“recover”
extends
to
the
application
of
money
to
one’s
benefit,
and
“sue
for”
to
an
ultimate
and
alternative
resort
as
the
effective
cause
of
payment,
I
am
disposed
to
accept
it.
In
Rodwell
Securities,
Ltd
v
Inland
Revenue
Commissioners,
[1968]
1
All
ER
257,
the
Chancery
Division
was
dealing
with
a
situation
in
which
a
wholly
owned
subsidiary
of
a
parent
company
transferred
land
for
a
valuable
consideration
to
a
wholly
owned
subsidiary
of
a
second
wholly
owned
subsidiary
of
the
parent
company.
Under
the
Finance
Act,
1930,
this
transfer
would
be
free
of
stamp
duties
if
there
was
a
conveyance
of
a
beneficial
interest
in
property
from
one
limited
liability
company
to
another
and
if
one
of
the
companies
is
the
beneficial
owner
of
not
less
than
90%
of
the
issued
share
capital
of
the
other
company,
or
not
less
than
90%
of
the
issued
share
capital
of
each
of
the
companies
is
in
the
beneficial
ownership
of
a
third
company
with
limited
liability.
Pennycuick,
J
found
that
there
had
been
a
transfer
of
a
beneficial
interest
in
property,
and
then
went
on
to
say
at
page
259:
The
facts
in
the
present
case
are
these.
There
is
a
company
which
was,
at
the
relevant
date,
known
as
Rodwell
London
and
Provincial
Properties,
Ltd.
This
“London
company’’
had,
always
at
the
relevant
date,
two
wholly-
owned
subsidiaries.
One
was
then
known
as
Rodwell
Group,
Ltd.,
the
Group
company,
and
the
other
was
Sun
Real
Estates,
Ltd.,
the
Sun
company.
The
Securities
company
was
the
wholly
owned
subsidiary
of
the
Group
company.
The
position
then
was
that
the
London
company
owned
all
the
Shares
in
the
Sun
and
Group
companies
and
the
Group
company
owned
all
the
shares
in
the
Securities
company.
On
Dec.
19,
1963,
the
Sun
company
executed
a
transfer
in
favour
of
the
Securities
company
of
a
property
known
as
39-47
Villiers
Street,
Westminster,
in
consideration
of
a
sum
of
£29,320.
An
application
was
made
for
exemption
from
stamp
duty
under
s.
42,
and
that
application
was
refused.
In
order
to
bring
an
instrument
within
the
charge
of
stamp
duty,
the
Revenue
must
show
that
the
instrument
falls
fairly
and
squarely
within
the
terms
of
the
charging
provision.
Equally,
in
order
to
bring
an
instrument
within
an
exemption
from
stamp
duty,
the
taxpayer
must
show
that
the
instrument
falls
fairly
and
squarely
within
the
terms
of
the
exempting
provision.
It
is
therefore
necessary
for
the
appellant
in
this
case
to
show
that
the
transfer
falls
within
the
terms
of
s.
42.
The
first
condition
in
that
section
is
that
the
effect
of
the
instrument
shall
be
to
convey
or
transfer
a
beneficial
interest
in
property
from
one
company
to
another,
and
that
condition
is
undoubtedly
satisfied
here.
The
second
condition,
so
far
as
is
now
relevant,
is
that
not
less
than
ninety
per
cent.
of
the
issued
share
capital
of
each
of
the
two
companies
in
question
shall
be
in
the
beneficial
ownership
of
a
third
company.
In
the
present
case
it
is
in
my
judgment
perfectly
clear
that
the
capital
of
the
Securities
company
is
not
in
the
beneficial
ownership
of
the
London
company.
The
position
is
that
the
London
company
owns
the
shares
in
the
Group
company,
so
that
the
whole
of
the
share
capital
in
the
Group
company
is
in
the
beneficial
ownership
of
the
London
company.
The
Group
company
in
turn
owns
the
whole
of
the
shares
in
the
Securities
company,
so
that
the
whole
of
the
issued
share
capital
in
the
Securities
company
is
in
the
beneficial
ownership
of
the
Group
company.
No
part
of
the
shares
in
the
Securities
company
is
in
the
beneficial
ownership
of
the
London
company.
In
order
to
escape
from
that
position,
counsel
for
the
Securities
company
has
to
get
through
the
company
structure
and
establish
that
the
exempting
provision
covers
the
position
where
one
company
has
the
entire
interest,
to
use
a
neutral
term,
in
another
company,
through
the
medium
of
a
subsidiary
of
the
first
company
of
which
the
second
company
is
in
itself
in
turn
a
subsidiary.
That
is
a
position
which
it
seems
to
me
is
not
covered
by
the
wording
of
s.
42.
Counsel
for
the
Securities
company
puts
it
in
this
way.
He
says
that
the
term
“beneficial
ownership’’
is
not
a
term
of
art
and
falls
to
be
construed
liberally;
the
term
“beneficial
owner”
includes
any
person
having
complete
control
over
the
disposition
of
property;
and
so
here
the
London
company
has
complete
control
over
the
disposition
of
the
shares
in
the
Securities
company.
If
the
section
contained,
instead
of
the
expression
“beneficial
ownership’’,
the
expression
“controlling
interest”,
I
apprehend
that
the
present
position
would
be
within
the
exempting
section.
Again
the
position
would
probably
be
so
if
the
section
contained
the
words
“directly
or
indirectly”.
However,
the
section
does
not
refer
to
controlling
interest
but
refers
to
beneficial
ownership,
and
it
does
not
contain
the
words
“directly
or
indirectly”.
After
considering
some
of
the
cases
referred
to
him,
Pennycuick,
J
continued
at
page
260:
Counsel
for
the
Securities
company
made
a
number
of
contentions.
He
said
that
to
give
effect
to
the
intention
of
the
legislature
one
must
break
down
the
artificial
personality
of
the
members
of
a
group
of
companies.
I
do
not
think
I
am
obliged
or
entitled
to
do
that.
It
is
worth
observing
that
where
you
have
a
chain
of
companies
it
is
always
possible,
by
arranging
the
transfer
in
a
certain
way,
to
obtain
the
benefit
of
exemption
under
the
section.
The
rest
of
counsel’s
contentions
really
amounted
in
one
set
of
terms
or
another
to
the
proposition
that
the
expression
‘beneficial
owner’’
requires,
and
must
be
given,
a
wide
and
liberal
construction.
I
can
answer
that
only
by
saying
that
it
seems
to
me
that
one
must
construe
the
expression
according
to
its
legal
meaning.
I
do
not
think
that
there
is
anything
in
the
context
of
the
section
which
requires
one
to
do
otherwise.
For
the
reasons
which
I
have
given,
it
seems
to
me
that
the
transfer
is
not
within
the
scope
of
the
exemption
under
s.
42
and
I
must
accordingly
dismiss
this
appeal.
Another
clear
example
of
the
use
of
the
term
“beneficial
owner”
may
be
found
in
the
agreement
of
facts
presented
to
the
Court
in
the
case
at
bar.
When
any
reference
is
made
to
the
shareholders
of
the
subsidiary
companies
two
categories
are
set
forth.
The
first
category
is
for
the
registered
shareholders
and
the
second
for
the
beneficial
shareholders,
and
in
each
case
the
registered
shareholders
are
the
three
barristers
and
the
beneficial
shareholders
are
the
parent
companies.
It
seems
to
me
that
the
plain
ordinary
meaning
of
the
expression
“beneficial
owner”
is
the
real
or
true
owner
of
the
property.
The
property
may
be
registered
in
another
name
or
held
in
trust
for
the
real
owner,
but
the
“beneficial
owner”
is
the
one
who
can
ultimately
exercise
the
rights
of
ownership
in
the
property.
I
believe
that
the
other
expression
‘‘beneficially
entitled
to’’
has
a
slightly
different
meaning
from
that
of
‘‘beneficial
owner”.
The
person
beneficially
entitled
to
property
may
be
further
removed
from
the
exercise
of
ultimate
ownership
of
the
property
than
the
“beneficial
owner”,
but
as
long
as
that
person
has
the
right
to
legally
establish
the
exercise
of
the
rights
of
ownership
over
the
property
then
it
may
be
said
that
he
is
beneficially
entitled
thereto.
This
distinction
between
the
two
expressions
is,
in
my
opinion,
clearly
shown
by
the
judgments
in
the
cases
of
Rodwell
Securities
and
Montreal
Trust
(Torrance
Estate).
In
the
Rodwell
Securities
case
the
court
was
dealing
with
the
situation
in
which
the
appellant
was
required
to
establish
beneficial
ownership
of
the
shares
of
two
separate
companies
in
one
third
company.
It
was
found
that
the
true
real
ownership
of
the
shares
was
in
a
subsidiary
company
rather
than
its
parent.
In
the
other
case
the
Supreme
Court
of
Canada
was
considering
the
meaning
of
the
expression
‘‘beneficially
entitled
to”
where
the
Court
found
that
it
was
sufficient
if
the
property
in
question
could
be
applied
to
one’s
benefit
by
resort
to
an
effective
cause
of
payment.
In
my
opinion
the
Legislature
of
Nova
Scotia
in
using
the
expression
“Where
a
corporation
.
.
.
becomes
beneficially
entitled
to
property
of
the
deceased”
it
was
using
it
in
the
broad
sense
to
cover
the
situation
where
the
corporation
is
put
in
a
position
to
ultimately
exercise
the
rights
of
ownership
over
property
of
the
deceased.
It
would
be
unnecessary
to
use
additional
words
such
as
“directly
or
indirectly”
or
“is
controlled
by”
to
effect
its
purpose.
“Becomes
beneficially
entitled
to”
is
broad
enough
to
cover
situations
in
which
the
property
is
registered
in
another
name
or
held
in
trust
or
placed
in
any
form
in
which
the
corporation
can
legally
recover
the
property
for
its
own
benefit.
The
subsidiary
companies
which
received
the
bequests
from
Colonel
MacKeen
were
in
all
cases
wholly
owned
subsidiaries
of
their
parents.
There
is
no
doubt
in
my
mind
that
the
parent
corporations
could
cause
the
subsidiaries
to
be
wound
up
and
the
value
of
their
assets
would
then
belong
to
the
parent
corporations:
The
bequest
of
Colonel
MacKeen
could
legally
be
brought
into
the
entire
control
of
the
parent
companies,
and
to
the
extent
that
the
shares
of
the
parent
companies
were
increased
in
value
the
resident
shareholders
of
those
companies
would
be
deemed
to
be
successors
to
the
property
of
the
deceased.
Another
approach
would
be
that
of
Lord
Denning,
MR
in
Littlewoods
Mail
Order
Stores
Ltd
v
McGregor,
[1969]
3
All
ER
855
at
860:
I
cannot
accept
this
argument.
I
decline
to
treat
the
Fork
company
as
a
separate
and
independent
entity.
The
doctrine
laid
down
in
Salomon
v.
Salomon
&
Co.,
Ltd.
[1897]
AC
22,
has
to
be
watched
very
carefully.
It
has
often
been
supposed
to
cast
a
veil
over
the
personality
of
a
limited
company
through
which
the
courts
cannot
see.
But
that
is
not
true.
The
courts
can
and
often
do
draw
aside
the
veil.
They
can,
and
often
do,
pull
off
the
mask.
They
look
to
see
what
really
lies
behind.
The
legislature
has
shown
the
way
with
group
accounts
and
the
rest.
And
the
courts
should
follow
suit.
I
think
that
we
should
look
at
the
Fork
company
and
see
it
as
it
really
is
—the
wholly-owned
subsidiary
of
the
taxpayers.
It
is
the
creature,
the
puppet,
of
the
taxpayers
in
point
of
fact-,
and
it
should
be
so
regarded
in
point
of
/aw.
The
basic
fact
here
is
that
the
taxpayers,
through
their
wholly-owned
subsidiary,
have
acquired
a
capital
asset—the
freehold
of
Jubilee
House.
I
find
therefore
that
within
the
plain
meaning
of
subsection
2(5)
of
the
Nova
Scotia
Succession
Duty
Act
Francklyn
Investments
Limited,
Bluewater
Investments
Limited,
Hiberian
Investments
Limited
and
Hollis
Investments
Limited
are
non-resident
corporations
which
by
reason
of
the
death
of
Colonel
MacKeen
became
beneficially
entitled
to
property
of
the
deceased
as
a
consequence
of
bequests
to
their
Subsidiaries,
and
that
Dorothy
MacKeen,
Sally
Norwood,
Catherine
Burkart
and
Christina
Shaw,
the
sole
common
shareholders
of
those
companies,
were
residents
of
Nova
Scotia
at
the
time
of
his
death
and
shall
be
deemed
to
be
successors
to
the
property
of
the
deceased
to
the
extent
of
the
amount
by
which
the
value
of
their
shares
are
increased
by
the
parent
corporations
having
become
beneficially
entitled
to
the
property.
I
now
turn
to
consideration
of
the
second
point
in
issue
which
is
whether
or
not
clause
2(5)(b)
of
the
Nova
Scotia
Succession
Duty
Act
is
ultra
vires
the
Province
of
Nova
Scotia.
Section
92
of
the
British
North
America
Act
says:
92.
In
each
Province
the
Legislature
may
exclusively
make
Laws
in
relation
to
Matters
coming
within
the
Classes
of
Subjects
next
herein-after
enumerated;
that
is
to
say,—
2.
Direct
Taxation
within
the
Province
in
order
to
the
raising
of
a
Revenue
for
Provincial
Purposes.
Counsel
for
the
estate
says
that
clause
2(5)(b)
of
the
Act
is
not
taxation
within
the
province
and
is
therefore
beyond
the
power
of
the
Legislature.
He
argues
that
the
section
is
an
attempt
to
tax
property
that
is
not
situate
within
the
province.
Counsel
for
the
Crown
claims
that
the
section
of
the
Act
is
well
within
the
powers
of
the
provincial
Legislature
because
it
is
designed
to
tax
persons
resident
within
the
province
rather
than
property.
The
leading
case
on
this
subject
is
Provincial
Treasurer
of
Alberta
v
Kerr,
[1933]
AC
710,
where
the
Judicial
Committee
of
the
Privy
Council
considered
the
constitutionality
of
The
Succession
Duty
Act
of
Alberta.
At
page
718
Lord
Thankerton
says:
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.
In
the
Kerr
case
the
eventual
finding
of
the
Privy
Council
was
that
the
tax
imposed
was
neither
direct
nor
on
persons
resident
within
the
province,
but
indirect
and
on
property
not
within
the
province.
This
result
was
referred
to
by
the
Supreme
Court
of
Canada
in
Kerr
v
Superintendent
of
Income
Tax,
[1942]
SCR
435;
[1943]
CTC
97,
where
a
provision
of
the
Alberta
Income
Tax
Act
was
challenged
on
the
basis
that
certain
income
was
taxed
which
was
derived
from
sources
outside
the
province.
After
holding
that
the
taxpayer
was
a
resident
of
the
Province,
Rinfret,
J
states
at
page
103
[439]:
In
the
exercise
of
its
powers
under
the
Constitution
of
Canada
“in
order
to
the
raising
of
a
revenue”
for
provincial
purposes,
a
province
may
no
doubt
directly
tax
a
person
in
respect
of
his
income.
In
that
case,
the
income
is
used
merely
as
a
just
standard
or
a
yard-stick
(to
use
the
expression
of
counsel
for
the
Attorney-General
of
Alberta)
for
computing
the
amount
of
the
tax.
In
such
a
case
the
person
is
validly
charged
because
he
is
a
resident
within
the
province;
and
it
must
be
conceded
that
the
legislature
in
such
a
case
may
use
the
foreign
property
together
with
the
local
property
as
the
standard
by
which
the
person
resident
within
the
province
is
to
be
charged.
The
legality
of
the
tax,
under
those
circumstances,
results
from
the
fact
that
the
person
is
found
within
the
province.
Kerwin,
J
says
further
at
page
107
[444]:
While,
therefore,
subsection
(1)
of
section
8
states
that
a
tax
shall
be
assessed,
levied
and
paid
upon
income,
it
is
to
be
noted
that
by
the
Same
subsection
the
tax
is
to
be
paid
in
one
year
upon
the
income
earned
during
the
preceding
year.
Taken
in
conjunction
with
the
words
used
in
clauses
(a),
(b)
and
(c)
of
the
subsection,—“residing
or
ordinarily
resident’’,
“sojourn’’,
“employed’’,
the
reference
to
income
“whether
derived
from
sources
within
Alberta
or
elsewhere”,
in
section
3
and
the
other
sections
noted
above,
I
am
of
opinion
that
the
Act,
taken
as
a
whole,
imposes
a
tax
on
a
person
such
as
the
appellant
who
is
found
in
the
province
with
respect
to
his
income,
including
that
derived
from
sources
outside
the
province.
This
case
was
followed
by
the
Manitoba
Court
of
Queen’s
Bench
in
CPR
v
Provincial
Treasurer
of
Manitoba,
[1953]
4
DLR
233,
where
Freedman,
J
(as
he
then
was)
said
at
page
236:
The
powers
of
taxation
of
the
Province,
so
far
as
applicable
to
the
present
appeal,
are
set
forth
in
s.
92(2)
of
the
B.N.A.
Act,
as
follows:
“Direct
Taxation
within
the
Province
in
order
to
the
raising
of
a
Revenue
for
Provincial
Purposes.”
It
is
admitted
that
the
tax
imposed
by
the
Act
is
a
“direct
tax’’.
Indeed
an
income
tax
is
generally
regarded
as
the
typical
example
of
a
direct
tax.
Moreover,
as
above
indicated,
it
is
also
conceded
that
the
Act
imposes
taxation
“in
order
to
the
raising
of
a
Revenue
for
Provincial
Purposes”.
But
it
is
contended
that
the
Act,
so
far
as
it
purports
to
apply
to
the
appellant,
contravenes
s.
92(2)
and,
most
specifically,
the
phrase,
“within
the
Province”,
by
reason
of
the
fact
that
it
imposes
taxation
on
property
locally
situate
outside
of
Manitoba.
In
support
of
its
position
the
appellant
argues
(1)
that
the
tax
imposed
by
the
Act
is
not
a
personal
tax
but
a
tax
on
income;
and
(2)
that
it
purports
to
tax
income
earned
outside
of
Manitoba.
The
respondent
on
the
other
hand
submits
(1)
that
the
tax
is
a
personal
tax
measured
by
the
taxpayer’s
income;
and
(2)
being
a
personal
tax
it
may
be
measured
by
income
wherever
earned,
even
outside
Manitoba.
A
Province
may
directly
tax
any
person
found
within
its
borders.
It
is
not
disputed
that
the
appellant
is
carrying
on
business
in
Manitoba
in
such
a
way
as
to
make
it
amenable
to
provincial
taxation.
In
imposing
a
direct
tax
on
such
a
person,
it
is
competent
for
the
Province
to
measure
same
by
income
derived
both
from
within
and
from
without
the
Province;
Kerr
v.
Supt.
of
Income
Tax,
[1942],
4
D.L.R.
289,
S.C.R.
435.
If,
however,
the
tax
is
not
a
tax
on
a
person,
but
is
rather
a
tax
on
specific
property
or
income
apart
from
the
person,
such
property
or
income
must
be
within
the
Province
(ibid.).
It
is
contended
by
the
appellant
that
the
scheme
of
taxation
imposed
by
the
Act
has
the
effect
of
taxing
income
derived
from
assets
locally
situate
outside
of
Manitoba.
Evidence
was
adduced
to
establish—and
in
my
view
it
does
establish—that
income
from
the
Royal
York
Hotel
in
Toronto,
Ontario,
as
well
as
income
from
profitable
lands
in
Alberta,
are,
under
the
formula
prescribed
by
the
Act
and
its
Rules,
brought
into
the
calculation
of
the
appellant’s
“Manitoba”
income,
with
the
effect
of
increasing
the
tax
payable
by
the
appellant
over
what
would
be
payable
if
income
earned
in
Manitoba
alone
were
considered.
This,
however,
does
not
dispose
of
the
question.
For
if
the
Act
imposes
a
personal
tax,
the
Province
may
indeed
have
regard
to
the
income
of
the
taxpayer
whencesoever
derived,
and
it
becomes
immaterial
whether
income
from
assets
in
Ontario,
Alberta
or
elsewhere
is
included
in
the
computation
of
the
tax.
Freedman,
J
then
quotes
the
extract
from
the
judgment
of
Rinfret,
J
in
the
Kerr
case
above
and
concludes:
It
is
apparent,
therefore,
that
the
crucial
point
for
determination
is
whether
the
tax
is
a
tax
on
the
person,
or
a
tax
on
income.
The
nature
of
the
tax
imposed
by
the
Act
must
therefore
be
examined.
Although
the
last
few
cases
deal
with
problems
under
income
tax
statutes
I
am
satisfied
that
the
principle
is
the
same
as
should
be
applied
under
the
Succession
Duty
Acts.
The
Nova
Scotia
Succession
Duty
Act
under
section
8
makes
resident
successors
to
property
of
deceased
persons
situate
outside
the
Province
liable
for
payment
of
succession
duties.
Subsection
2(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
find
therefore
that
subsection
2(5)
of
the
Nova
Scotia
Succession
Duty
Act
is
valid
legislation
within
the
legislative
competence
of
the
Province
of
Nova
Scotia
to
the
extent
that
the
shareholders
benefited
are
residents
of
this
province.
The
province
would
not,
of
course,
have
the
power
to
tax
non-resident
shareholders
of
these
corporations
but
only
those
who
are
resident
successors
under
subsection
8(2)
of
the
Act.
Two
questions
were
submitted
for
the
opinion
of
the
Court
on
this
appeal:
(a)
Whether
or
not
Dorothy
MacKeen,
Sally
Norwood,
Catherine
Burkart
and
Christina
Shaw
are
successors
to
the
amounts
of
$509,791.50,
$281,462.65,
$281,462.65
and
$281,462.65
respectively,
or
any
amounts
as
a
result
of
the
application
of
clause
(b)
of
subsection
(5)
of
section
2
of
the
Act.
The
answer
of
the
Court
to
this
question
is
that
Dorothy
MacKeen,
Sally
Norwood,
Catherine
Burkart
and
Christina
Shaw
are
successors
to
the
amounts
specified
within
the
meaning
of
clause
2(5)(b)
of
the
Succession
Duty
Act.
(b)
If
it
is
found
that
Dorothy
MacKeen,
Sally
Norwood,
Catherine
Burkart
and
Christina
Shaw
are
successors
within
the
meaning
of
clause
(b)
of
subsection
(5)
of
section
2
of
the
Act,
whether
clause
(b)
of
subsection
(5)
of
section
2
of
the
Act
is
ultra
vires
the
powers
of
the
Province
of
Nova
Scotia.
The
answer
to
the
second
question
is
that
clause
2(5)(b)
of
the
Succession
Duty
Act
is
intra
vires
the
province
with
respect
to
transmissions
to
successors
who
are
persons
resident
in
Nova
Scotia
at
the
time
of
the
death
of
the
deceased.
This
appeal
will
be
dismissed
with
costs
to
be
taxed
payable
out
of
the
estate
of
the
deceased.
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