JACKETT, P.:—This is an appeal from a decision of the Tax Appeal Board dated. February 27, 1970, allowing an appeal from an assessment made under the Estate Tax Act on January 26, 1968, by reducing the aggregate net value of the property passing on the death of the late William Theo Shaw, who died on December 9, 1966, as fixed by that assessment, by an amount of $75,000 being the amount paid under certain insurance policies by reason of the accidental death of the deceased.
The appeal was argued on a special case stated by the parties.
During his life, the deceased entered into certain contracts of insurance with certain insurers, the particulars of which are as follows :
(a) Accident Insurance "Policy No. N-619404 issued by Loyal Protective Life Insurance Company providing for the payment of $5,000 in the event of the accidental death of the deceased.
(b) Group Accident Insurance. Policy No: 11574, Certificate 299, issued by the Union Mutual Life Insurance Company providing for payment of. $50,000 in the event of the accidental death of the deceased.
(c) Life Insurance Policy No. 3167416-5 issued by the London Life Insurance Company providing for the payment of $20,000 in the event of death and providing for an additional payment of $20,000 in the event‘of accidental death of the deceased. ,• *: . ' •
Copies of the actual insurance policies have not been placed before the Court but a copy of the certificate issued under the Union Mutual Group Accident Insurance Policy is attached to the special case.
The other facts are agreed by the special case to be as follows :
The respondent, Mary Collette Shaw, wife of the deceased was named as the beneficiary of the Loyal Protective Life Insurance Company Policy. No beneficiary was named by the deceased with respect to the other two policies of insurance. (Notwithstanding this agreement by the parties, the copy of the certificate issued under the Union Mutual Group Accident Policy shows that ‘‘The Estate of William Theo Shaw’’ had been named thereby as “Beneficiary”; and, in my view, this provision in the contract document must prevail over the agreement by the parties.*)
During his lifetime, the deceased paid the insurers all the amounts which under the contracts of insurance he had covenanted to pay, and no other person had any claim to ownership of the said policies of insurance.
The deceased died on December 9, 1966 as a result of : injuries sustained in an automobile accident.
The respondents are the executors of the deceased.
Upon the accidental death of the deceased, the insurers, pursuant to the provisions of the contracts of insurance, paid sums of $5,000, $50,000 and $20,000 respectively to the respondents. The $20,000 referred to herein is the additional $20,000 paid by the London Life Insurance Company upon: accidental death; the $20,000 paid by them on death is not in issue in this appeal.
In computing the aggregate net value of property passing on the death of the deceased under the provisions of the Estate Tax Act, the appellant included the sums of $5,000, $50,000, $20,000 paid by the insurance companies and issued a notice of assessment, dated January 26, 1968.
The respondents objected to the said assessment nd I appealed to the Tax Appeal Board.
By a judgment dated February 27, 1970 the Tax Appeal Board allowed the appeal, reduced the aggregate net value of property passing on the death of the deceased by the amount of $75,000 and referred the matter back to the appellant for re-assessment accordingly.
The appeal was argued in this Court on the assumption that, by virtue of the policies and the appropriate governing provin- cial insurance legislation, the amounts in question became payable, upon the accidental death of the deceased, either to his legal representatives or to the named beneficiary.
There is nothing in the facts to show what is the proper law of thé insurance contracts in question. During argument, however, reference was made to The Insurance Act of Ontario, as it appears in the Revised Statutes of 1960, and I am assuming for the purposes of these reasons that it is the applicable law.
I propose to consider first the question raised concerning the $20,000 paid under the London Life Insurance Policy.
By the London Life Insurance Policy, the insurer undertook to pay to the ‘‘Beneficiary’’ upon the death while the policy was in force of the ‘‘Life Insured’’ (being the deceased) the “Face Amount’’ stated in the policy, which was $20,000. In addition, the insurer agreed thereby that, if the death resulted, during the continuance of the policy, ‘‘from bodily injury .. .”’ and such death was caused solely by ‘‘external; violent and accidental means . . .’’, it would pay in addition to the face amount of the policy the amount of the ‘‘Double Indemnity Accident Benefit Shown . . .’’, which was $20,000. Both the “Face Amount’’ of $20,000 and the ‘‘Double Indemnity Accident Benefit’’ of $20,000 were paid and the appellant included them both in the “aggregate net value of property passing on death” as determined by the assessment under attack, relying on Section 3(1) (m) of the Estate Tax Act, which reads, in part:
8. (1) There shall be included in computing the aggregate net value of the property passing on the death of a person the value of all property, wherever situated, passing on the death of such person, including, without restricting the generality of the foregoing,
(m) any amount payable under a policy of insurance effected on the life of the deceased . . .
The Tax Appeal Board held that the $20,000 double indemnity accident benefit was not properly included as property passing on the death.
I am of opinion that, as to the amount of $20,000 in question, the appeal must succeed. The London Life Insurance policy is “a policy of insurance effected on the life of the deceased’’, no matter what definition of those words one adopts, and the double indemnity accident benefit is an amount payable under that policy. That the double indemnity accident benefit is an amount payable under the policy is obvious. That the policy is a policy of insurance that was effected on the ‘‘life’’ of the deceased is clear from the essential nature of the contract, which is a con- tract Whereby a fixed amount is payable on the ‘death” of the deceased and an increased amount is payable at the same time if the ‘ * death ’ ’ was caused by ‘ ‘ violent and accidental ’ ’ means. It is a contract for payment of a benefit upon the termination of the life, which benefit varies according to the manner of such termination. The Court. can, I think, take judicial knowledge of the fact (which everyone who has done business, as an agent or prospective insured; with insurance companies in Canada knows) that one of the classes of life insurance sold by Canadian life insurance companies is double indemnity insurance. So far as I am aware, there is no insurance legislation in Canada that classifies ‘‘double indemnity insurance’’ otherwise than as life insurance. See, for example, the Ontario Insurance Act, R.S.O. 1960, c. 190, paragraph 17 of Section 1 of which reads as follows :
17. “double indemnity insurance” means insurance undertaken by an insurer as part of a life insurance contract whereby the terms of the policy provide for the duration of such insurance for. more than one year and for payment only in the event of the death of the insured by accident of an additional amount of insurance money not exceeding the amount payable in the event of death from other causes;
I turn now to the other two policies, which may for present purposes be dealt with together. In both cases, there is an obligation to pay ‘‘insurance money’’ in the event of “accident to the person . . . insured’’. In the one case, there is an obligation to pay specified lump sums if such an accident results in certain permanent injuries, such as loss of a hand and a foot or the sight of an eye, or if such an accident results in loss of life. In the other case, there is a corresponding obligation plus an obligation to pay benefits in respect of periods of disability resulting from accident or sickness. These are, in my view, ‘‘accident insurance” policies within the meaning of the expression in common parlance in Canada and within the relevant definition in the Ontario Insurance Act (supra), viz.:
1. In this Act, except where inconsistent with the interpretation of any Part,
1. “accident insurance” means insurance by which the insurer undertakes, otherwise than incidentally to some other class of insurance defined by or under this Act, to pay insurance money in the event of accident to the person or persons insured, but does not include insurance by which the insurer undertakes. to pay insurance money both in the event of death by accident and in the event of death from any other cause;
Presumably, the deceased’s wife was designated as a beneficiary under the Loyal Protective Policy by virtue of Section 244 of the Ontario Insurance Act, which reads:
244, (1) Where insurance money is payable upon death by accident, the insured, or, in the case of group accident insurance, the person insured, may designate in writing a beneficiary to receive the insurance money or part thereof and may alter or revoke in writing any prior designation.
(2) If the beneficiary is not living at the time of the death of— the person insured, the insurance money is payable to the insured or his estate, or, in the case of group accident insurance, the estate of the person insured, unless the instrument by which the beneficiary is designated otherwise provides.
(3) A beneficiary designated under subsection (1) may upon the death of the person insured enforce for his own benefit the payment of insurance money payable to him and payment to the beneficiary discharges the insurer, but the insurer may set up any defence that it could have set up against the insured, or the person insured in the case of group accident insurance, or the personal representative of either of them.
Having regard to Section 228 ( 3), this provision also applies to a group accident insurance and would, therefore, also be authority for designation of the. deceased’s “estate” (which is, of course, another way of referring to the persons who, after his death, become the executors of his will or his personal representatives) as beneficiary under the Union Mutual Group Accident Insurance Policy.
The appellant included the amounts of $5,000 and $50,000 that were paid under the two accident policies in the aggregate net value of the property passing on the death of the deceased under Section 3(1) (j) of the Estate Tax Act, the English version of which reads:
3. (1) There shall be included in computing the aggregate net value of the property passing on the death of a person the value of all property, wherever situated, passing on the death of such person, including, without restricting the generality of the foregoing,
(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;
and. the French version of which reads:
3. (1) Dans le calcul de la valeur globale nette des biens transmis au décès d’une personne, on doit inclure la valeur de tous les biens, quelle qu’en soit la situation, transmis au décès de cette personne, y compris, sans restreindre la généralité de ce qui précède,
(j) toute annuité ou tout autre intérêt acheté ou établi par le défunt, soit par lui seul, soit de concert ou. d’accord avec une autre personne, dans la proportion de l’intérêt bénéfi- ciaire né ou acquis en l’espèce par survivance ou autrement au décès du de cujus;
The Tax Appeal Board has held that the appellant was wrong in concluding that Section 3(1) (j) applied to the two amounts paid under the accident policies. In this Court, the appellant contends that Section 3 ( 1 ) (j) does support the. assessment as far as these two amounts. are concerned, and the respondent contends that it does not. i . :
The Estate Tax Act was, in 1958, a completely new taxing statute. Paragraph (j) of Section 3(1) was, however, taken almost verbatim from several similar statutes dating at least back to the United Kingdom Finance Act, 1894* and, while there have been no decisions that bear on the question as to the application of Section 3 ( 1 ) (j) in the present circumstances, there have been: many decisions that would have to be considered if the problem arose under one of the other provisions that read in almost the same words as paragraph (j). The words, as used in such other provisions, have been given an application that has been affected by the context of the whole of the statutes in which such ‘other provisions have been found. The context in which Section 3(1) (j) is found in the Estate Tax Act is completely different, and, for that reason alone, I do not think it can be assumed that Parliament intended paragraph (j) to have whatever effect may have been assigned to the same words by decisions interpreting such earlier provisions.! I am strengthened in my decision to take this position by the. fact that an intensive study of decisions concerning such other provisions, with the very careful and thorough assistance of experienced counsel, leaves me in a state of some bewilderment as to the effect. of the provision in the Finance Act, 1894 and by the fact that the Canadian decisions on provincial legislation have contented themselves with applying the available decisions with reference to the Finance Act, 1894. I propose, therefore, to consider whether Section 3(1) (j) supports the inclusion of the amounts paid under the accident policies on the basis that there are no decisions that have any bearing on the matter.t
The question that has to be decided at the outset is whether there is here ‘‘any annuity or other interest purchased or pro- vided: by the deceased’’ within the meaning of those words in paragraph (j). If that question is decided in the negative, that will be an end of the matter as far as Section 3(1) (j) is concerned.
What we have, in each case, is a contract, by virtue of which, when it is read with the governing provincial insurance legislation, a certain amount became payable to a designated beneficiary on the happening of a certain event (the accidental death of the deceased)/ Neither that contract nor the payment for which it provides is an annuity. The question to be decided is, therefore, whether one or the other is an ‘‘interest’’ within the meaning of that word in the English version or an “intérêt” within the meaning of that word in the French version.
I know of no sense belonging to the word “intérêt” that is in any way appropriate to that word as used in Section 3(1) (j). See, for example, Dictionnaire Quaillet de la Langue Française at page 989.
I have only been referred to one sense that the English word interest” has that is in any way appropriate. That sense appears in The Concise Oxford Dictionary, 5th edition, at page 635, as follows:
1. Legal concern, title, right, (in property) . . .
Used in this sense, Section 3(1) (j) refers to an “interest” in something, which interest has been purchased or provided by the deceased. A common use of the word “interest” in such a context is to refer to a life interest in property, a reversionary interest in property, or a leasehold interest in property. I have no doubt that the word can also be used to refer to the “interest” of an absolute owner of property but it would be a rare use. A much more common use of the word would be to refer to such interest as a beneficiary may have in trust property. The word “interest” is not, however, according to my understanding of the ordinary use of English language, appropriate to refer to an obligation to pay money upon the happening of an event some time in the future or to the actual payment when made. Such an obligation is not an “interest” in property. It is an obligation to find and transfer (pay) unascertained property (money) at some as yet undetermined time in the future. There is no interest in any property created by entering into the contract.* The contract merely creates a conditional obligation to pay money. Finally, there is no sense of the word ‘‘interest’’ that. extends. to a payment of money as such.
My conclusion is, therefore, that the inclusion of the two amounts paid under the accident policies cannot be justified under Section 3(1) (j).
In this Court, for the first time, the appellant attempted to justify the inclusion of the amounts in question by reference to statutory provisions that were not relied upon by him when he made the assessment under attack. These alternative positions are only of importance, for present purposes, as far as the amounts paid under the accident policies are concerned, as I have concluded that the amount paid under the double indemnity life insurance policy was properly included under the provision relied on when the assessment was made.
The respondent takes the preliminary objection, on this branch of the case, that the Minister is restricted, on an appeal from an assessment, to the provisions of the statute on which he relied in making the assessment. Having regard to the conclusions that I have reached, on the Minister’s alternative grounds, it is not, strictly speaking, necessary for me to deal with this preliminary objection. My view is, however, that there is no substance in it. By Section 12(1) of the Estate Tax Act, the Minister has a duty to assess ‘‘the amount of tax payable”. By Section 22(1), any person who objects to an assessment made by the Minister ‘‘of the amount of tax payable” may serve a notice of objection and, by Section 23(1), where a person has served such a notice of objection to an assessment, he may appeal to the Tax Appeal Board to have the “assessment” vacated or varied. Section 24(1) provides for an appeal from the decision of the Board to this Court. In my view, on a correct appreciation of these provisions, the question that has to.be determined at each stage is whether the ‘‘amount of tax payable” as assessed is in excess of the amount contemplated by the statute. If it is not in excess of that amount, the appeal should be dismissed even though the Minister based himself on a wrong provision. On the other hand, if to support the assessment ‘on some alternative provision, the Minister has to rely on facts other than those that he found or assumed in making the assessment, the onus is on the Minister, in my view, to allege and establish such facts. Compare Smythe v. M.N.R., [1969] C.T.C. 558; [1968] 2 Ex. C.R. 189, per Gibson, J. at page 202, Conway Estate v. M.N.R., [1965] C.T.C. 283; [1966] Ex. C.R. 64, per Thurlow, J. at pages 68-9, and M.N.R. v. Pillsbury Holdings Lid., [1964] C.T.C. 294; [1965] 1 Ex. C.R. 676, per Cattanach, J. at page 686. It is this latter onus that I had in mind in the concluding portion: of my judgment in M.N.R. v. Worsley Estate, [1966] C.T.C. 804; [1967] 1 Ex. C.R, 473.
I turn to the appellant’s two alternative bases for supporting the inclusion of the amounts paid under the accident policies.
In the first place, the ‘appellant contends that the two accident policies were property passing on the death of the deceased within the opening words of Section 3(1) of the Estate Tax Act. As already indicated, in my view, in the case of both of these policies, there was, immediately before the accidental death of the deceased, a beneficiary that had been designated for the purposes of Section 244 of the Ontario Insurance Act. Such beneficiary was, by virtue of Section 244(3), the “obligee” in whom inhered any property rights in respect of accidental death existing by virtue of the contracts before the death, and such beneficiary continued to be the obligee in whom any such rights inhered after the death. It follows that no such rights were property passing on the death of the deceased.
The appellant’s second alternative basis for supporting the inclusion of the amounts paid under the accident policies was that the two accident policies were property of which, immediately prior to death, the deceased was competent to dispose. This contention was mentioned in this Court for the purpose of keeping the position open for the appellant on an appeal from the judgment of this Court. The point was not pressed in this Court having regard to the decision in M.N.R. v. Worsley Estate (supra).*
My conclusion is, therefore, that the judgment appealed from should be quashed and that the assessment appealed from should be referred back to the appellant for re-assessment on the basis that the amounts of $5,000 and $50,000 received under Accident Insurance Policy No. N-619404, issued by Loyal Protective Life Insurance Company, and Group Accident Insurance Policy No. 11574, Certificate 299, issued by the Union Mutual Life Insurance Company, respectively, should not be included in the aggregate net value of the property passing on death.
AS indicated, I have considered the matter on the assumption that the Ontario Insurance Act is applicable and on the basis that the deceased’s estate was nominated as beneficiary under the Group Policy. If either party is of the view that I am mistaken on either or both of these assumptions and that such mistake or mistakes affects the outcome, I should be glad to hear counsel with regard thereto and to reconsider my conclusions.
With regard to costs. success is divided but, in my view, the appeal is successful on a point that did not account for more than one-quarter of the work involved in the appeal. In the circumstances, the respondent will be entitled to one-half the amount of costs of the appeal taxed on the ordinary basis.
Subject to either party applying for further argument in relation to the matters referred to above, an ‘application may be made under Rule 172(1) (b) for judgment as indicated. above.
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