Estate of Severine Dalsoren Eide v. Minister of National Revenue, [1974] CTC 2071

The Chairman (orally: September 19, 1972):—This is an appeal by the Estate of Severine Dalsoren Eide against a notice of assessment dated November 20, 1970, assessing tax and interest under the Estate Tax Act on an inheritance of the late Mrs Eide from Elias A Dalsoren, who died intestate on December 19, 1965, domiciled and resident in British Columbia.

The taxpayer appellant takes the position that the Minister of National Revenue is wrong in assessing tax under paragraph (n) of section 38 of the Estate Tax Act, SC 1958, c 29, upon which it was initially indicated by the respondent that his assessment rests. As the appeal developed, the Minister was found to rely also on paragraph

(b) of the said section 38 of the Act.

The facts are simple and not in dispute, and np evidence was called. The situation is that, before the Dalsoren estate was administered by the Public Administrator, or official administrator, in British Columbia, Mrs Eide died. At that time the estate of Elias Anderson Dalsoren had not been distributed and the inheritance of Mrs Eide had not been paid to her.

Mrs Eide was at all material times resident and domiciled in Norway. The Minister and the appellant are agreed that the right in question e the assets ef the Dalsoren Estate was -a chose in action of the estate of Severine Dalsoren Eide.

The appellant cites several cases on paragraph 38(n), including the Estate of Charles Alexander Bernard MacRury v MNR, 41 Tax ABC 423; 66 DTC 575, where Mr Weldon, then a member of the Tax Appeal Board, held that paragraph (n) contemplated a chose in action in default, whether through some misdoing by the administrator or for some breach of contract. It is agreed by the appellant that in this instance there is no ex delicto, to use the words of the statute, involved. The official administrator did nothing improper, he was merely slow in acting, and if there had been more haste and the money had been paid over to Mrs Eide in Norway before her death, this problem would not have arisen.

Both parties have cited and relied extensively on the decision of the Supreme Court of Canada in MNR v Fitzgerald, [1949] SCR 453; [1949] CTC 101; 49 DTC 580, and both attempt to turn the words of the learned jurists in that case to their own advantage.

The question narrows down, as I have said, to whether or not the chose in action is a right that is exercisable in Norway by the Estate of Severine Dalsoren Eide, or whether, under the Estate Tax Act, it is a right exercisable in Canada against the Dalsoren Estate by the administrator of the Eide Estate.

The Fitzgerald case, on the face of it, appears fairly to say, in the judgment of Mr Justice Rand, as he then was (pp 460-61 [105]):

An executor holds strictly a representative capacity; he stands in and enforces the right of the testator. At common law a legatee could not bring an action against an executor before at least the executor assented to the legacy; and a fortiori that rule is applicable where the bequest is residual and unascertained. It is equally clear that rights in action, as assets of the estate, can be asserted in a court only by the legal representative.

But in addition to his capacity of representing the deceased, the executor in equity is looked upon as quasi-trustee for the beneficiaries; and the beneficiary is entitled to resort to that court to have the duty of the executor enforced. The ‘interest’ in property that is transmitted results from that right and becomes, therefore, an equitable interest, subject to the rules which underlie equitable administration.

Beginning near the middle of page 461 [105], the following passage gives me a problem:

. . . But when C died, domiciled and resident outside of Canada, what was then the legal position? I think it was this: as equity in working out the rights and Interests In property which it confers considers that done which ought to be done, the relation of the law of Canada to C must be determined as If the executor of B had reduced the assets of the estate to possession; In that situation, after administering In Canada, his duty, which the law of British Columbia would authorize him to carry: out, was to transfer the property to the person entitled, C, In California.

Again, in that decision, the Court takes the position that equity says that “that shall be taken to be done which ought to be done”; and what ought to have been done in this case was for the assets to be transferred to the Eide Estate in Norway.

I have been referred, also, in the course of argument; to the case of Lord Sudeley v Attorney-General, [1897] AC 11, which dealt with probate duty, and there it was held that a residual legatee of a testator who died domiciled in England while his estate was undergoing administration, but whose property included mortgages on real property, was not entitled to any part of the mortgages in specie. The judgments of Lopes and Kay, LJJ in Attorney-General v Sudeley, [1896] 1 QB 354, were approved by the Appeal* Court and it might be noted that, at page 363 of the report of the Court of Queen’s Bench, the learned Lord Justice Lopes said:

. . . The right of the executors of Frances (the widow) as against the executors of her husband is a right to have his estate administered. Administered where? The husband was domiciled in England, his will was proved in England, his executors are in England, and his estate is being administered in England, and the money recoverable will be brought to England. The executors of the husband can only be sued in the English Courts by the executors of Frances. It is an English chose in action, recoverable in England, and Is, in my opinion, an English and not a foreign asset, . . . .

That would seem to fit on all fours with my view of what the Eide Estate was faced with in this instance. Mrs Eide died in Norway, her estate was being administered in Norway, the beneficiaries of the estate were in Norway, the assets would have to be brought to Norway and administered and distributed there. Therefore, in my view, if I have interpreted the Fitzgerald case correctly—and I am relying solely on my interpretation of the Fitzgerald case—the chose in action was enforceable in Norway, illogical though it may seem to be at first blush. If this is so, then, like Mr Justice Kellock, I am reinforced in this belief by the quotation I have just given from the Lord Sudeley case.

For these reasons, and feeling strictly bound by the Fitzgerald case and by my interpretation of it that the chose in action in question is enforceable only in Norway, the appeal should succeed and the matter be referred back to the Minister of National Revenue for reassessment on the basis that the appeal is allowed in full.

I am grateful to counsel for both sides for their assistance in determining what on the face of it seemed a relatively simple problem, but, as the case developed, the depth in which the arguments were presented indicated that there is only a delicate line between one view and the other.

The appeal will therefore be allowed in full.

Appeal allowed.