Estate of Norman Salisbury Edgar v. Minister of National Revenue, [1974] CTC 2065, 74 DTC 1067

The Assistant Chairman:—This appeal is from an assessment dated April 26, 1972, and confirmed by the Minister on February 15, 1973, wherein an estate tax in the amount of $24,450 was levied in respect of the estate of Norman Salisbury Edgar.

Norman Salisbury Edgar died November 16, 1970 and was survived by his wife Norma and four sons—David, Richard, Peter and Bruce. The will of the deceased dated November 8, 1963 provides:

(a) that the deceased’s wife and the National Trust Company Limited would be the executors and trustees of the Will—(Clause 2, page 1, of the Will);

(b) that all just debts, funeral and testamentary expenses and all estate, inheritance and succession duties or taxes payable in connection with any property passing on his death should be paid out of, and charged to, the capital of his general estate—(Clause 4(d), page 5, of the Will);

(c) that the residue of his estate be kept invested and the net income derived therefrom be paid to his wife until her death—(Clause 4(e), page 5, of the Will);

(d) that notwithstanding anything in his Will, the deceased expressly authorized the Trustees at any time and from time to time during the lifetime of his wife, or so long as any of his children shall be living and under the age of twenty-one years, to pay to, or apply for, the maintenance or benefit of his children such amount or amounts out of the capital of the residue of his estate as his trustees in their uncontrolled discretion deem advisable—(Clause 7, page 7, of the Will).

Probate was granted to Norma Elaine Edgar and National Trust Company Limited as executors by the Surrogate Court of Northern Alberta, Judicial District of Edmonton, on February 26, 1971. On March 30, 1971 the executors submitted to the Department of National Revenue (Taxation) an estate tax return concerning the estate of the deceased.

On June 3, 1971 Norma Elaine Edgar, the widow of the deceased, obtained an order under the provisions of The Family Relief Act, RSA 1970, c 134. The order stated, inter alia, as follows:

The applicant shall receive all of the estate except for—

(a) 1,000 preferred shares of Echo Investments Limited. Certificate P 1, Par Value $1.00, Market Value $1.00—Norman S Edgar. Value at Nov 16, 1970— $1.00

(b) Echo Investments Limited demand promissory note non-interest bearing dated April 5, 1968, with Norman S Edgar as promisee.

Original amount of Note	$234,450.43
Value at Nov 16, 1970	$108,049.00

provided that with respect to the two assets aforementioned not given to the applicant, nothing in this Order shall abrogate the encroachment powers of the trustees as set out in clause 7 of the Will of the Deceased.

On June 7, 1971 the Department of National Revenue at Edmonton was advised of the issuance of the order. However, on April 26, 1972 the Minister of National Revenue, by notice of assessment of estate tax payable, assessed the tax payable at $24,450 and charged it against the portion of the estate passing to the widow pursuant to the above- mentioned order.

In the opening remarks of his submission, counsel for the respondent was evidently concerned by the number of wills that had been altered by means of provincial Acts similar to The Family Relief Act of Alberta which is pertinent to this appeal, whereby substantially greater portions of a testator’s estate than were originally willed by the deceased passed to his heirs without attracting estate taxes.

Although the appellant’s concern may be well-founded, I feel absolutely certain that it is not within the jurisdiction of this Board to decide whether or not the Provincial Supreme Courts are empowered by Family Relief or Maintenance Acts to rewrite the deceased’s will. In my view, the Board in deciding on the validity of the estate tax assessment must accept as legal and valid the order made by the courts under such Acts. However, I believe that there would be general agreement in thinking that the Board must take into account that the purpose of a court under The Family Relief Act is quite different from estate tax assessment purposes, and some administrative problems for the Department of National Revenue might well arise as a result.

Here again, even though the Board may fully realize the existence of such problems and appreciate their difficulty, I am of the opinion that the Board cannot, and should not attempt by its decisions to solve administrative problems arising out of a conflict of laws independently of, or by forcing the purport of, the Acts with which it is seized. That authority lies elsewhere.

In this appeal, since estate taxes are a liability of the estate, the only question to be decided by the Board in determining the validity of the estate tax assessment, is whether the preferred shares of Echo Investments Limited and the promissory note for $108,049 constitute the deceased’s estate, or whether the estate is made up of the unitem- ized values passed on to the widow pursuant to the order of the Supreme Court under The Family Relief Act of that province.

If the deceased’s estate, subsequent to the order, were made up of what the widow received pursuant to the order, as claimed by the respondent, what then would be the remaining Echo Investments Limited shares and the promissory note which constituted a substantial part of the deceased’s original general estate? I do not believe it reasonable to consider that the effect of the order was to make the shares and the promissory note specific gifts which would not attract an estate tax to the trustees, as held by the respondent, simply because these two assets were specifically mentioned in the order. It appears to me that it would not be in accord with the purpose of The Family Relief Act and it would be contrary to the intention of the deceased’s will for the Court to change the deceased’s original estate and to burden the assets received by the widow with all the expenses mentioned in clause 4(d) of the will, as well as the liabilities for the maintenance of the children (clause 7), when in fact other substantial assets exist in the deceased’s estate. Why indeed would the Court wish to make a specific gift of $108,049 to the trustees which would be totally free of debts or encroachments contrary to the testator’s wishes?

As I see it, the deceased’s estate was made up of a series of assets, all but two of which were given to the widow by the court order in keeping with clause 7 of the deceased’s will and in conformity with The Family Relief Act of Alberta. In my opinion the court order caused certain assets from the deceased’s general estate to pass to the widow as specific gifts. Even though these assets were not itemized in the order, they are identifiable as all the assets of the deceased’s estate, except for two specific assets. As a result of the order, the Echo Investment Limited shares and the promissory note remained as a substantial residue of the deceased’s estate from the capital of which the trustees were authorized by clause 7 of the will to pay certain amounts for the maintenance of the deceased’s children and to which the estate tax, among others, was to be charged pursuant to clause 4(d) of the will of the deceased.

In claiming that the values passed on to the widow by the court order constitute the estate against which the estate tax was properly levied, the respondent relies heavily on the Concise Oxford Dictionary definition of the word “estate” as “the collective assets and liabilities of a person” which is used in the wording of the Order itself which states:

It is hereby ordered that the Applicant shall receive all of the estate except for . . . [italics mine] (1,000 shares of Echo Investment Limited and the promissory note constituting the exceptions)

The Order continues:

provided that with respect to the two assets fitalics mine] aforementioned not given to the applicant, nothing in this Order shall abrogate the encroachment powers of the Trustees as set out in clause 7 of the Will of the Deceased.

Counsel holds that the order is clearly worded, that the estate of the deceased with its assets and liabilities, including the estate tax, were passed on to the widow by the court order, and he concludes that plain meaning should be given to plain words.

It is all very well to give plain meaning to plain words as counsel for the respondent suggests. However, even plain words have to be interpreted in relation to the facts of a given issue. I am of the opinion that the word “estate” which the Concise Oxford Dictionary defines as “the collective assets and liabilities of a person”, and the word “assets” which is defined by the Concise Oxford Dictionary as “enough goods to enable an heir to discharge debts”, both of which appear in the court order, could not because of their etymological similarity have been used by the Supreme Court of Alberta in order to determine, for estate tax purposes, which of the assets of the deceased’s estate would attract an estate tax pursuant to the Estate Tax Act.

In my view, the purpose and the effect of the court order are to transfer additional assets to the widow from the deceased’s estate. It does not, nor in my view can it, invalidate clause 4(d) and clause 7 of the deceased’s will by interchanging the assets which constituted the residue of the deceased’s original estate for assets which were passed on to the widow by the court order as specific gifts.

I hold that an estate tax was improperly levied against assets received as specific gifts by the widow of the late Norman Salisbury Edgar pursuant to an order of the Supreme Court of Alberta under The Family Relief Act.

The appeal is therefore allowed and the matter is referred back to the Minister for reassessment accordingly.

Appeal allowed.