Re : Brookfield, [1949] CTC 50

GRAHAM, J.:—The Court has to decide whether or not succession duty was payable to the Province of Nova Scotia upon certain property to which, at the time of his death, W. II. Brookfield was " entitled ‘ or which passed upon his death, by reason of dispositions made by him in his lifetime.

He made his will on October 6, 1936, and died domiciled in Nova Scotia November 14, 1944. Administration, with the will annexed, was granted on July 18, 1945, to the Royal Trust Co., whose Nova Scotia office is at Halifax. The value of the assets exceeded $450,000.

He had had shares of United States corporations to which he was beneficially entitled (which corporations had no share registries nor transfer offices in Nova Scotia), registered respectively in the names of employees of the Royal Trust Co. at Halifax. Each of these employees had then endorsed in blank the certificate or certificates standing in his name, and had signed and attached thereto a declaration of trust stating, inter alia, that he had no right, title or interest in the shares; and had delivered the certificate or certificates to the Royal Trust Co. That company thereafter held the certificates at its Halifax office for Brookfield ‘‘for management and safekeeping’’. The conditions under which it so held and managed the property were set out in a memorandum given it by Brookfield.

The trust company, as administrator, paid in May, 1946 to the Collector of Succession Duties for Nova Scotia, $65,258.97, which included $14,347.09 paid on property to which Brookfield was said to be entitled by reason of the facts set out in the preceding paragraphs.

Later, the Royal Trust Co., paid to the United States Collector of Internal Revenue $17,897.92, Canadian funds, for federal estate tax on the shares ; and then claimed a refund of $14,347.09 from the Collector of Succession Duties for the Province of Nova Scotia, basing the claim upon sec. 9(8) of the Succession Duty Act, 1945 (N.S.), c. 7, which is as follows:

1’9. Succession duty shall not be leviable or payable:—

"‘(8) On the property which passed on the death of the deceased and which is brought or sent as aforesaid into Nova Scotia after his death if any succession legacy or death duty or tax has been paid on such property elsewhere than in Nova Scotia and such duty or tax is equal to or greater than the duty payable on property in this Province, but if the duty or tax so paid elsewhere is less than the duty payable on property in this Province than on the property upon which such duty or tax has been paid elsewhere only the difference between the duty payable under this Act and the duty or tax so paid elsewhere shall be payable.”

The collector of succession duties refused to make the rebate on the ground that the tax was not on ‘‘property brought or sent’’ into Nova Scotia within the meaning of sec. 9(8) ; but was on ‘‘property situate in Nova Scotia” at the time of the death, on which succession duty was payable, under secs. 3 and 8 and other relevant provisions of the Succession Duty Act.

If that contention is untenable, the administrator is entitled to a refund of $14,847.09.

The question for the opinion of the Court is: ‘‘ Whether succession duty was leviable and payable for the use of the Province of Nova Scotia in respect of the property to which the said

W. Herbert Brookfield was at the time of his death entitled or which passed upon his death by reason of the facts related in the preceding paragraphs.’’

It was submitted that Brookfield had not full property in the shares; but had a title—legal and equitable’’—which enabled him to vest them in himself—Colonial Bank v. Cady (1890), 15 App. Cas. 267; that his title differed in qualify from full ownership, and was choses in action enforceable here; and therefore situate here. Favorke v. Steinkopff, [1922] 1 Ch. 174; that his right to complete possession was under Nova Scotian trusts, the evidence of which right were certificates situate in Nova Scotia; that the cases which hold that the situs of a share for succession duty purposes is where it can be effectively dealt with as between the shareholder and the company, (1.e., the registry office) were distinguishable—R. v. Williams, [1942] 3 D.L.R. 1, [1942] A.C. 541, because in them the testator owned shares, that is, was the registered owner in actual possession of the rights of a shareholder ; and that Brookfield was not in possession of the shares in that sense. However, the first contention fails because no chose in action had to be enforced to enable the administrator ” to acquire title. Any trusts that had existed, ended when the certificates endorsed in blank were delivered to the trust company and put by it at Brookfield’s disposal.

The second ground, upon which the right to tax was based, is that the certificates endorsed in blank by the registered holders and delivered to the trust company, were in the circumstances, themselves property situate in Nova Scotia—“documents of value’’ in the hands of the administrator, ‘‘and therefore liable to the tax imposed here’’. Stern v. The Queen, [1896] 1 Q.B. 211, is direct authority for holding that such documents are taxable. In that case a testator in England had owned and had had in his possession or in that of his agent, American shares registered in the name of other persons and endorsed in blank. After his death they were taxed in England. Mr. Justice Wright, who delivered the judgment of the Court, after stating that the certificates vouched a title to the shares and that delivery of

them in England affected the title, said: "‘That the certificate itself . . . [was] a marketable security operative, though not completely operative, to pass the title and having a marketable value here’’; and, ""That it 1s, itself, a . . . document of value in the hands of the executor within the jurisdiction of the Ordinary. Therefore . . . Crown is entitled to succeed’’. The certificates in the present case, like those in the above case, are in themselves valuable, marketable securities operative, to pass a like property when similarly dealt with. That being so, the decision in the Stern case directly sustains the contention of the Province that the certificates in this case are documents of value in the hands of the administrator here and so taxable here.

The rights of the holder of such a certificate and transfer endorsed in blank may exist in one place, whereas the share itself may be property in another place? ‘

Counsel for the trust company argued that the certificates were to be regarded not as property situate in Nova Scotia, but. only as evidence found here of Brookfield’s right to shares in the United States. As to that Viscount Maugham, in R. v. Williams, [1942] 3 D.L.R. at p. 16, [1942] A.C. at p. 560 said: "‘The certificates endorsed and signed as they were cannot be regarded as mere evidence of title.” Counsel further contended that the imposition of the provincial tax violated the rule that a share has only one local situs, viz., where it can be effectively dealt with as between the shareholder and the company, and that a tax could be levied only there. In support of his contention he cited À. v. National Trust Co., [1933] 4 D.L.R. 465, [1933] S.C.R. 670. In which case the sitîis of railway bonds guaranteed by the Dominion Government was in issue, and Duff, C.J.C., said: "‘Property, whether movable or immovable, can, for the purposes of determining sit its as among the different Provinces of Canada in relation to . . . a tax imposed by a provincial law upon property transmitted owing to death, have only one local situation. ‘ ‘

But the operation of a decision is to be determined in light of the circumstances with which the Court was dealing. In the above case the property differed widely from that taxed here; and the real question here was not discussed. But the material differentiating circumstance is that the above case was a contention between Provinces and this case is not. This case is therefore distinguishable from the above case and accordingly is not ruled by it.

It was however argued that in any event the provisions of

the Canada-United States of America Tax Convention Act, 1944-45 (Can.), c. 31, which provides that shares of a company organized in the United States be deemed property situate there prevented the imposition of this tax; but that Act does not purport to affect the right of the Province to tax such property as was held by Brookfield, and in any event it deals with a tax under the Dominion Succession Duty Act, 1940-41 (Can.), e. 14.

I accordingly have come to the conclusion that the $14,347.09 succession duty paid by the administrator was leviable and payable for the use of the Province of Nova Scotia.

Hall, J., coneurred with DOULL, J.

DOULL, J.:—In this case, the facts are that W. Herbert Brookfield was domiciled in Nova Scotia, resident in Nova Scotia at the time of his death and that he died in Nova Scotia on November 14, 1944. He left a will appointing executors but as they were unable or unwilling to act, the Royal Trust Co. was granted administration of the estate with the will annexed.

At the time of the death of the said deceased, succession duty was levied by both the Province of Nova Scotia and the Dominion Government. The administrator paid the duty in each ease.

Subsequent to the dates of these payments, the Federal Government of the United States claimed payment of a sum of $17,897.92 as United States Succession Duty on certain shares, in com- panies the head offices of which were in the United States. This was paid to the Collector of Internal Revenue of the United States and a refund was made by the Dominion authorities of the Dominion duty applicable to these shares.

The administrator is now claiming a similar refund from the Provinee of Nova Scotia.

Before considering the position of the administrator in regard to the Province, it may be as well to note the reason why the Dominion made its refund without objection.

By a convention made between the Dominion and the United States, dated June 8, 1944 and applicable to all cases where the deceased died after June 14, 1941, the parties agreed that the situs of company shares for the purpose of succession duty should be in the country (Canada or the United States) in which the company had been organized. The law in Canada and in the United States had been different and not clearly settled and this convention was for the purpose of making a simple rule.

Notwithstanding the supplementary argument of counsel for the administrator, I am of opinion that this convention can have no application to a question of situs arising under the Nova Scotia Succession Duty Act. I do not agree with the suggestion that the Dominion Parliament has power to change the Nova Scotia enactment, if such enactment is within the power of the Nova Scotia Legislature under the B.N.A. Act, but in the present case, no such question arises for the convention by its terms deals only with ‘ ‘ the tax imposed under the Dominion Succession Duty Act f ’. Equally true it is that while Canada is defined as the “Provinces, the Territories and Sable Island’’, the definition is only “in a geographical sense’’. The convention does not purport to affect any provincial power.

The shares in question had been purchased in the names of different persons who were employees of the Royal Trust Co. with money supplied by the deceased, these purchasers in each case endorsed the certificates in blank, signing a power of attorney in blank authorizing the transfer of the shares upon the books of the company. These endorsements were completed with all necessary formalities, and were in the possession of the deceased at the time of his death. The name of the deceased did not appear upon the certificates in any place, they were received and held by him as bearer certificates. In so far as the transfer offices of these companies were concerned, the death of the deceased made no difference whatever, whether before or after his death, any purchaser might have them transferred to himself.

Of several possible artificial rules, our law has chosen as the proper rule that the situs of a share registered in the name of the owner is the place where it can be effectively dealt with, that is, at the transfer office of the corporation: Brassard v. Smith, [1925] 1 D.L.R. 528, [1925] A.C. 371, 38 Que. K.B. 208.

It is also apparently clear that if the shares are the property of the registered owner, the mere fact that he has endorsed them in blank, makes no change in the situs: R v. Williams, [1942] 3 D.L.R. 1, [1942] A.C. 541.

On the other hand certain companies issue bearer shares, a well-known example being Imperial Oil. These shares pass by delivery of the certificate and their situs is the place where they are found. In such a ease, an effective transfer even as regards the corporation is made by the delivery of the certificate.

The Williams case, supra, is authority for the proposition that the phrase used in Brassard v. Smith, [1925] 1 D.L.R. 528, [1925] A.C. 371, 38 Que. K.Q. 208, in laying down the principle “clearly means ‘where the shares can be effectively dealt with as between the shareholder and the company, so that the transferee will become legally entitled to all the rights of a member,’ e.g., the right of attending meetings and voting and of receiving divi- dends.’’

The present case differs from the Williams case in that in the present case, the deceased had not such property in the shares as is described in the above phrase. He had not at the time of his death, and never had the right of attending meetings, or of voting or of receiving dividends. The fact of his death made no change as regards the Company.

Under these circumstances the present case seems to be on all fours with the case of Stern v. The Queen, [1896] 1 Q.B. 211. In that case Baron de Stern was at the time of his death domiciled and resident in England. In his estate were shares in American Railway Companies which had their head offices and transfer offices in the United States. While Baron de Stern owned the shares, he was not the registered owner—none of the shares were in his name—but the certificates were in other names and were endorsed in blank. The Court of Appeal held that the certificates so endorsed were property in England.

This distinction is made by Robertson, C.J.O., in Treasurer of Ont. v. Blonde, [1941] 3 D.L.R. 225 at p. 236, [1941] O.R. 227 at p. 247: "‘The nature of the testator’s property in shares registered in his own name as here, is to be distinguished from that which is taken by one who holds the certificates for shares registered in the name of another who has signed in blank a form of transfer endorsed on the certificates, and has then delivered the certificates so endorsed.”

To the contention that Stern v. The Queen governs the present ease, counsel for the administrator says that the Canadian ‘‘one local situation’’ rule did not apply in England, but here is effective.

Falconbridge, Conflict of Laws, 1947 ed., pp. 431-2, comments on Stern v. The Queen as follows: "‘If the certificate is in fact in country X, and the share registry is in country Y, the certificate is a document of value . . . although not completely operative to transfer the title to the shares, and therefore it may be the subject of taxation in X, if the legislation of X is not subject to territorial limitations similar to those which are applicable to provincial legislation in Canada, and at the same time, the shares themselves may be the subject of taxation in Y.”

Reference is made to the case of R. v. National Trust Co., [1933] 4 D.L.R. at pp. 466-7, [1933] S.C.R. at p. 673, where Duff, C.J.C., laid down certain principles applicable to a tax imposed by a provincial law upon property transmitted by death. These principles were (1) that property movable or immovable for the purpose of determining situs as among the different Provinces of Canada in relation to the incidence of a tax imposed by a provincial law upon property transmitted by death, can have only one local situation, and (2) that in defining the authority of the Province in part at all events, by reference to the local situation of such property, the British Parliament had in view the principles of the common law, and (3) a provincial Legislation can only by legislation fix the situs for the purpose of taxation.

I do not think that any of these principles prevents in the particular case before us, the application of the rule in Stern v. The Queen, supra. The principles governing the Stern case were certainly common law principles. No other Province of Canada is involved in the present controversy, and finally the only property which the deceased possessed was the right to the shares in question and not the shares themselves, and it was only the right which was affected by the death.

In the result therefore, I hold that the Province of Nova Seotia was right in exacting the tax and is not required to make a refund.

ARCHIBALD, J., concurred with DOULL, J.