Ryan, J (concurred in by Pratte and Urie, JJ):
1 This is an appeal by the appellant, The Bank of New York, from the judgment of the Trial Division dated February 6, 1974 in so far as it dismissed the appeal of the appellant from a notice of assessment dated March 28, 1966, assessing the appellant personally under section 49 of the Dominion Succession Duty Act, RSC 1952, c 89 (as amended), for the unpaid amount of duties payable by the appellant in its representative capacity as an executor of the estate of A M Collings Henderson, deceased. The Trial Division did allow the appeal from the assessment to the extent of referring the notice of assessment back to the respondent for the purpose of reducing the value of the property of the estate of the late A M Collings Henderson situated in Canada at the date of his death by the amount of the value of the warrants to purchase shares in Campbell Chibougamau Mines Limited that had been included in the assessment and recalculating the amount of duties payable in respect of the succession to the estate accordingly, and for the purpose of deducting from the duties otherwise payable an amount of $173,480.82 ascertained in accordance with subsection 12(2) of the Act; the appeal was, however, dismissed in all other respects.
2 The respondent, by way of cross-appeal, gave notice that, upon the hearing of the appeal, the respondent intended to contend that the decision that is the subject of the appeal should be varied to substitute a finding that the situs of the warrants to purchase shares in Campbell Chibougamau Mines Limited was in Canada for the finding of the Trial Division that the warrants did not have their situs in Canada.
3 The appellant was incorporated in the United States of America. It had at all material times its head office and principal place of business in the City of New York. It carried on a general commercial banking business and acted as an executor and trustee of estates and trusts. It was not licensed or registered under the laws of Canada or of any province of Canada. It had no office or place of business in Canada.
4 A M Collings Henderson died February 2, 1957, resident and domiciled in the State of New York. Under his will, the appellant, together with the widow of Mr Henderson, Janet Beach Henderson, and attorney, Jack N Blinkoff, were appointed executors and trustees. Letters testamentary and letters of trusteeship were issued to the executors and trustees by the Surrogate's Court of the County of New York in the State of New York, April 2, 1957. These letters were not resealed by any court in a Canadian jurisdiction and no application for ancillary administration was made by the executors in any such court. The deceased's assets were situated variously in Canada and the United States, and particularly in the State of New York and the Provinces of Ontario and Quebec. The assets included shares owned by the deceased in Campbell Chibougamau Mines Limited and in Campbell Chibougamau Mining and Smelting Company, Inc, and warrants to purchase shares of Campbell Chibougamau Mines Limited also owned by him.
5 The administration of the estate of the deceased was carried on by the executors, including the appellant, until December 19, 1963. On that date the Surrogate's Court of the County of New York granted leave to the appellant to resign as an executor and trustee of the estate and revoked the letters testamentary and letters of trusteeship issued to the appellant. Since then the appellant has had nothing to do with the administration of the estate.
6 Duties in the aggregate amount of $1,703,250.80 were assessed by the respondent in August 1959 in respect of successions derived from the deceased. Payments were made on account of the liability for duties in the amount of $428,227.10.
7 While the appellant was an executor, cash and securities realized in the course of administration were carried in a trust ledger maintained by the appellant in the City of New York under the heading “Trust Account of the Estate of A M Collings Henderson”. On January 31, 1961 an official cheque of The Bank of New York in the amount of $5,000 was delivered in New York to Janet Beach Henderson in payment of a legacy to her under Mr Henderson's will and the amount of the cheque was charged to the trust account.
8 In March 1966 the appellant received from the Department of National Revenue, Taxation Division a succession duties notice of assessments on Form SD7, addressed to the appellant in New York City, dated March 28, 1966, repeating the statement of distribution and duties assessed contained in the notice of assessment of August 1959, and carrying an endorsement in these words:
This assessment is for the tax payable by you pursuant to sec 49 of the Dominion Succession Duty Act RSC 1952, c 89, since you delivered or transferred property of A M Collings Henderson, deceased, to Janet Beach Henderson, successor, without either first paying all of the duties assessed and levied under the Dominion Succession Duty Act, as evidenced by a Notice of Assessment dated 6 Aug, 1959, which you were liable to pay in your representative capacity as an executor of the estate of A M Collings Henderson, deceased, or without furnishing security satisfactory to the Minister of National Revenue.
9 The critical question in this appeal is whether, by virtue of section 49, the appellant is personally liable for the unpaid portion of the duties. The section provides:
49. Before delivering or transferring any property of the deceased or any interests in such property to any heir, legatee, donee or other successor, the executor shall first pay all the duties assessed and levied under this Act to the extent to which he is liable in his representative capacity or shall furnish security satisfactory to the Minister for the payment of such duties, and any executor who acts in contravention of this provision is personally liable for the duties, and in addition is liable to a penalty equivalent to double the amount of such duties.
10 Was the appellant an executor under this section, having in mind that it was appointed an executor by the will of the testator, domiciled and resident in New York, and that it was acting under letters testamentary issued by the Surrogate's Court of the County of New York? In a word, does “executor”, as the term is used in the section, embrace a “foreign executor”?
11 Paragraph 2(f) of the Dominion Succession Duty Act defines “executor”:
2. In this Act,
12 By virtue of subsection 13(2) of the Act all of the duties assessed and levied under the Act are payable by the executor; his liability under the subsection is a liability in his capacity as executor only and is limited to an amount not exceeding the value of the property administered by him. In this case, there is no doubt that the successors under the will of Mr Henderson were liable to Canadian succession duties because assets of the estate had their situs in Canada. A purpose of section 49 is to facilitate collection of duties by preventing any distribution of assets to beneficiaries until all duties are paid. An executor who contravenes this section by a premature distribution incurs personal liability to the extent of all duties unpaid. The force of the section, in a case such as this one, would be lost if an executor, granted letters testamentary by a court outside Canada, could escape liability by declining to seek ancillary probate in a Canadian jurisdiction. The view that the reach of the section extends at least to an executor deriving status under the will of a person domiciled abroad and obtaining letters testamentary from a court of the domicile corresponds to the purpose of the section; it fits comfortably when applied to a federal statute dealing with the taxation of successions in a federal system within which (with very limited exceptions) the administration of the estates of deceased persons is a matter falling within provincial jurisdiction. I find it difficult to see why, for purposes of section 49, an executor whose letters are issued by a provincial court should be in a different position from one whose letters are derived from a competent court in a foreign state, particularly where the state is the state of the testator's domicile. That there may be problems at the enforcement stage is not to my mind significant for present purposes. The appellant is, accordingly, an executor within section 49.
13 It is not in dispute that the $5,000 legacy was paid to the widow by an official cheque of the appellant and that the trust account of the estate was debited. I confess that I had some difficulty in deciding that this payment was a delivery or payment to a legatee of “any property of the deceased”, the words used in the section. Obviously a person ceases to own property the moment he dies, and it would have been very easy to designate in the section “any property of the estate” rather than “any property of the deceased”. To adopt the view that the wording actually used would render the section inapplicable to a transfer of assets of the estate would, however, be to deprive the section of any effective operation. True, a distinction might be taken between, on the one hand, property of the deceased in the sense of property owned by him immediately before his death and delivered in specie to a legatee and, on the other, proceeds realized by the executor from the sale of such property and paid to a legatee. Such a distinction would, however, be very artificial and would be inconsistent with the purpose of the section. I have concluded that, for purposes of section 49, the delivery of the cheque to the widow was a delivery of property of the deceased before all the duties assessed and levied had been paid or before the required security for payment of the duties had been provided. The appellant is thus personally liable for the unpaid duties, even though in the circumstances this consequence may seem harsh.
14 I have considered and rejected as untenable the submission that the appellant is liable only for duty attributable to the $5,000 legacy. I would adopt the reasoning of the learned trial judge on this point.
15 The learned trial judge did not find it necessary to decide that section 49 is applicable to a foreign executor. He concluded that the appellant had become an executor de son tort by virtue of intermeddling with assets of the estate in Canada and thus, because of the definition of “executor” in paragraph 2(f) of the Act, was an executor under section 49. There was ample evidence to support this finding and the appellant has accepted it. The appellant submitted, however, that the payment or transfer of property relied on by the respondent as activating section 49 was a payment by the appellant in its capacity as executor under the New York will and grant and not as executor de son tort; on the assumption that, for purposes of section 49, the appellant as an executor de son tort, was an executor, there was, it was argued, no contravention by the appellant acting as an executor de son tort. On the view I have taken that section 49 is applicable to the appellant as executor under the New York will and grant of letters testamentary, I do not find it necessary to decide this point. It was submitted in the alternative that, if the appellant was liable in its capacity as executor de son tort, its liability was limited to assets administered in that capacity, that is to say, the assets with which the appellant had intermeddled. Again, it is not necessary to decide this point.
16 The appellant also argued that, assuming the appellant was an executor and had delivered or paid property of the deceased to a legatee under section 49, the Minister had no authority to assess the duties or impose a penalty in respect of the appellant's personal liability under that section, and therefore that the assessment was a nullity. To test this submission, one must read sections 23 and 24 of the Act:
23. (1) After examination of the statement or statements so made and delivered the Minister shall assess the duty or duties payable under this Act and shall send notice of such assessment by registered mail to the executor and such notice shall be deemed to be notice to all persons liable for payment of the duties imposed by this Act.
(2) Where there is no executor liable or accountable for any duty or duties, notice of assessment shall be sent by registered mail to the successor.
24. Subject to the provisions of section 36 and notwithstanding any prior assessment, or if no assessment has been made, the executor and the other person or persons liable for any duties payable under this Act continue to be liable for the said duties and to be assessed therefor and the Minister may at any time assess, re-assess, or make additional assessments upon any persons, and in respect of any property the subject matter of a succession, for duties, interest and penalties.
17 The appellant's submission was that the assessments, re-assessments and additional assessments referred to in section 24 relate only to assessment of the duty or duties payable under the Act and referred to in section 23, and confer no authority to make an assessment in respect of the personal liability of an executor under section 49. I see no reason for so limiting the scope of the words in section 24, particularly the words authorizing the Minister at any time to “... assess, re-assess, or make additional assessments upon any persons ... for duties, interest and penalties”. I find it particularly difficult so to limit section 24 when I read subsection 58(3) of the Act.[FN1: <p>Sections 57 and 58 of the Act provide:<blockquote><p>“57. All duties, interest, penalties and costs assessed or imposed or ordered to be paid under the provisions of this Act, shall be deemed to be a debt due to Her Majesty and shall be recoverable as such in the Exchequer Court of Canada or in any other court of competent jurisdiction in the name of Her Majesty or in such other manner as in this Act provided.</p><p>58. (1) All duties, interest and penalties payable under this Act remaining unpaid, whether in whole or in part, after four months from the date of mailing of the notice of assessment may be certified by the Deputy Minister.</p><p>(2) On the production to the Exchequer Court of Canada, such certificate shall be registered in the said Court and shall, from the date of such registration, be of the same force and effect, and all proceedings may be taken thereon as if the certificate were a judgment obtained in the said Court for the recovery of a debt of the amount specified in the certificate, including interest to date of payment as provided for in this Act and entered upon the date of such registration.</p><p>(3) Where a certificate is registered pursuant to subsection (2) in respect of the liability of an executor, any writ of execution issued under and by virtue of such registration shall be executed only against the property of the deceased being administered by him unless he has been guilty of contravening section 49 in which case it may be executed against property owned by him personally.</p><p>(4) All reasonable costs and charges attendant upon the registration of such certificate shall be recoverable in like manner as if they were part of such judgment.”</p></blockquote></p>] I do not find it necessary to decide whether the assessment in this case in respect of the liability imposed by section 49 was a duty or a penalty; whichever it was, it could be assessed by the Minister.
18 This case is closely associated with another case, a case in which the executors of the estate of A M Collings Henderson, Jack N Blinkoff and Janet Beach Henderson, appealed an assessment against the estate for succession duties. Mr Justice Cattanach heard both cases at first instance. The issues in the executors' appeal were the value for duty of the shares of Campbell Chibougamau Mines Limited and Chibougamau Mining and Smelting Company, Inc,, and whether the warrants to purchase shares of Campbell Chibougamau Mines Limited, owned by Mr Henderson immediately prior to his death and physically located in New York State, should be included in the dutiable assets. Obviously the amount for which The Bank of New York was personally liable by virtue of section 49 of the Dominion Succession Duty Act, if liable at all, was dependent on the determination of these very issues. It thus made sense that the issues should not be tried twice over, so an agreement was made, an agreement set out by Mr Justice Cattanach in the composite reasons for judgment which he delivered for both cases:
The appeals were not consolidated nor was it requested that they should be.
It was agreed among counsel that the outcome of the estate valuation in the appeal of the executors and the resultant determination of the amount of succession duty payable in Canada will be accepted as determinative of the same issues in the appeal of the Bank of New York with respect to its personal liability.
19 The learned trial judge held, in the executors' appeal, that the situs of the purchase warrants was not in Canada and, therefore, that they should not have been included in the dutiable assets of the estate; otherwise he dismissed the appeal. The executors appealed that judgment, in so far as they were unsuccessful, to this Division; the Minister cross-appealed in respect of the share warrants. We heard that appeal and cross-appeal immediately before hearing the appeal and cross-appeal in the present case. In line with the agreement before the Trial Division, we proceeded, for purposes of the present appeal and cross-appeal, on the understanding that the outcome of the executors' appeal to us in respect of the valuation of the assets of the estate and of the Minister's cross-appeal in that case in respect of the situs of the share purchase warrants and the resultant determination of the amount of succession duties payable in Canada would be accepted as determinative of those issues with respect to the personal liability of The Bank of New York. I would note that, contemporaneously with our judgment in this appeal, we are dismissing the appeal of the executors and the cross- appeal of the Minister in the other case (Jack N Blinkoff and Janet Beach Henderson, Executors of the Estate of A M Collings Henderson, deceased v. MNR (No A-158-73)).[FN2: <p>Ed: See p 485.</p>]
20 I would dismiss both the appeal of The Bank of New York and the cross- appeal of the Minister.
21 There should be no costs payable to or by either party in respect of the cross-appeal because the issue involved in it was in effect disposed of in the other case. The respondent is entitled to costs in respect of the appeal.
Email this Content