The Honourable the Minister of Finance for the Province of British Columbia v. First National Bank of Nevada, Executor of the Estate of the Late Hugh Herbert Wolfenden, [1974] CTC 92, 74 DTC 6130

Ritchie, J (concurred in by the Chief Justice and Pigeon, J):— I agree with the reasons for judgment prepared for delivery by Mr Justice Laskin, but I am unable to partake of the view expressed by Mr Justice Spence and the majority of the Court of Appeal of British Columbia that ihe impugned legislation (subsection 94(1) of the Companies Act, RSBC 1960, c 67) was a colourable attempt under the guise of company law to alter the situs of shares so as to bring them within the Province.

I share the opinion expressed by Davey, CJBC in his dissenting reasons in the Court of Appeal that the impugned legislation is not ultra vires and, as I have indicated, I would dismiss the appeal for the reasons stated by my brother Laskin.

Spence, J (concurred in by Abbott and Judson, JJ):—I have had the opportunity to read the reasons for judgment of Mr Justice Laskin and I agree that the appeal should be dismissed for the reason which he gave therein.

The point upon which my brother Laskin determines the issue was, however, taken for the first time in this court and I feel therefore that I should express a view upon the grounds relied upon in the courts below. As Mr Justice Laskin has pointed out in his reasons, Hinkson, J, before whom the matter came in the first instance, said in his reasons:

Applying these principles to the 1937 amendment to the Companies Act, I conclude it was clearly a colourable attempt under the guise of company law to alter the situs of shares to bring the situs within the Province. Had this been attempted in 1921 it would have been equally colourable. No valid reason has been advanced as to why the Province can alter the situs of shares of a deceased shareholder for corporate purposes. An examination of the history of the legislation makes it clear to me that the purpose was to enable the Province to collect succession duty. I have reached the same conclusion in respect of the 1967 amendment to the Companies Act.

That view found favour with the majority in the Court of Appeal for British Columbia and Mr Justice McFarlane, with whom Mr Justice Branca agreed, said:

Hinkson, J concluded that the 1967 amendment of section 94 (like similar legislation enacted in 1937, SBC 1937, c 10, section 2) was beyond the legislative power of the legislature because “it was clearly a colourable attempt under the guise of company law to alter the situs of Shares to bring the situs within the Province”. The result of the change of situs, if valid, would be to subject the shares held by a non-resident now deceased to imposition of succession duty in this Province.

In my opinion the learned Judge reached the right conclusion and I agree with his expressed reasons for judgment.

I am also of the opinion that the impugned legislation was clearly a colourable attempt under the guise of company law to alter the situs of shares and to bring the situs within the province.

I have nothing to add to the reasons delivered by Hinkson, J and by the majority of the Court of Appeal for British Columbia and I am ready to dismiss the appeal for those reasons as well as those advanced by Mr Justice Laskin.

Laskin, J (concurred in by Abbott, Martland, Judson and Dickson, JJ):—The question in this case is whether certain shares in a British Columbia corporation had their situs in that Province so as to attract taxation under subsection 6(1) of the Succession Duty Act, RSBC 1960, c 372. That section, so far as material, reads as follows:

All property of a deceased person, whether he was at the time of his death domiciled in the Province or domiciled elsewhere, situate within the Province passing to any person for any beneficial interest is, except as provided in section 5, subject to duty on the dutiable value thereof at the rate prescribed in the Table of Rates in Schedule C. . . .

The Act in subsection 2(1) defines “passing” or “passing on death” to mean, inter alia, “passing under a will, intestacy, or otherwise, either immediately on the death of a person or on the expiration of an interval thereafter, either absolutely or contingently, and either originally or by way of substitutive limitation . .

Both at trial and in the British Columbia Court of Appeal the issue of situs was regarded as turning on the validity of subsection 94(1) of the Companies Act, RSBC 1960, c 67, as amended by 1967 (BC), c 12, section 9. This provision is in these terms:

A transfer of the share or other interest of a deceased member in a company made by his personal representative shall, although the personal representative is not himself a member, be as valid as if he had been a member at the time of the execution of the instrument of transfer and, notwithstanding the provisions of section 87, the transfer of the share or other interest of a deceased member shall be made on the register kept under section 82.

The amendment was in the concluding words, and the effect thereof was to require a transfer of shares of a deceased shareholder to be made only on the register kept at the registered office of the company situated in British Columbia, notwithstanding that the company had branch registers outside the Province, established under the authority of section 87 of the Companies Act, on which transfers of shares could ordinarily be effected.

It was common ground that, apart from the effect of subsection 94(1), the situs of the shares in the present case was outside of British Columbia. The shares were registered to their owner, one Hugh Herbert Wolfenden, on the company’s principal register in Vancouver at the time of his death on May 26, 1968 and had been so registered before the amendment to subsection 94(1) of the Companies Act in 1967. Wolfenden died domiciled in Nevada, having there the share certificates evidencing his shareholding. The company had branch registers in New York City as well as in Winnipeg, Toronto and Montreal, and it appears that Wolfenden had purchased his shares before the establishment of a branch register in New York. On these facts, counsel agreed that under the authority of The King v Williams, [1942] AC 541, and Treasurer of Ontario v Blonde; Treasurer of Ontario v Aberdein, [1947] AC 24, having regard as well to the judgment of this Court in The King v National Trust Co, [1933] SCR 670, Wolfenden’s shares were not situated in British Columbia unless subsection 94(1) had the effect of giving them locality there for succession duty purposes.

Hinkson, J, before whom the matter came by way of an agreed special case, was of the opinion that the amended subsection 94(1) (which had a forerunner in 1937 which was appealed in 1960) was a colourable attempt under the guise of company law to bring situs within the Province to enable it to collect succession duty. A majority of the British Columbia Court of Appeal agreed with his reasons and conclusion. Davey, CJBC in dissent had no doubt that “subsection 94(1) was enacted to give shares of a deceased shareholder a local situs under the principles of the common law and thereby render them liable to provincial succession duty”; but, in his opinion, this consequence did not make it ultra vires. If a provincial legislature could validly change situs by authorizing the establishment of branch registers through enactments relating to companies, it was his view that it could just as validly reverse the process in its company registration. It is not, of course, true, having regard to the judicially developed tests of situs of shares, that the existence of multiple share registers within and outside the Province is alone a controlling factor. The Chief Justice met this point by noting in his reasons that subsection 94(1) as amended did not change the principles of the common law for determining the situs of intangibles, but rather it changed the circumstances upon which the rules of the common law would operate. According to Davey, CJBC, it would be the application of the established principles that would put the shares in this case in the Province.

In my opinion, the question of the validity of subsection 94(1) does not arise until it is first determined that temporally it can have an operative effect upon the situs of shares in respect of their taxability under subsection 6(1) of the Succession Duty Act. This appears to have been assumed in the British Columbia Courts, but it is not an assumption that I would make. I put the issue here as follows: As of what time is the situs of shares to be determined for the purposes of subsection 6(1)? If the test for determining situs is to be applied at the very moment of the death of the registered owner, on the basis of a notional transfer of ownership by registration at a share transfer registry, then it must follow that subsection 94(1), which looks to a transfer after death, can have no effect. On the other hand, it may be urged that since the test for determining situs (where can the shares be effectively dealt with as between shareholder and company so as to enable a transferee to become a shareholder) looks to a succeeding transfer on a share registry of the company, it can only crystallize after death of the registered shareholder and hence subsection 94(1), if valid, would take effect. There is some support for the first view in the Blonde and Aberdein case and for the latter view in the Williams case.

The primary reference must be to subsection 6(1) of the Succession Duty Act, the charging provision, and I read it to impose a tax on the basis of situs at the very moment of death and hence to require a notional application of the test of situs at that time and not later. Whether the beneficial interest passes immediately to beneficiaries or after an interval or upon a contingency does not touch situs. It is “property of a deceased person . . . situate within the Province” that is made the subject of tax under subsection 6(1), and the import of this provision is that the ownership of the property and its situs are fixed on death. Otherwise, the statute would be attributing ownership to a person already dead when in law it would have passed to his personal representatives. No difficulty of attribution of situs on death exists in the case of intangible property represented by a specialty, any more than in the case of tangible property. But because the situs of shares has come to depend on a test that looks to a transfer on a share registry, a logical difficulty exists if one envisages a transfer a moment before death (and hence before the Succession Duty Act operates) and, similarly, a moment after death (when the Act has already taken effect).

The event upon which duty becomes payable, namely, death, involves at the same time a determined situs of property on which it must be paid if the property is in the Province. In my view, it would be compounding fiction to apply the test for situs of shares according to an event (as prescribed by the challenged subsection 94(1)) taking place after the death of the person whose death is the occasion for the imposition of tax. Application of the test at that time, by reference to a supposed transfer according to the statutory prescripion, would, admittedly, result in changing the situs as it would otherwise be. I am therefore of the opinion that subsection 94(1) can have no operative effect in respect of situs of shares for the purpose of taxation under subsection 6(1) of the Succession Duty Act and, accordingly, no question of validity arises. For the foregoing reasons I would dismiss the appeal with costs.