Supreme Court of Canada

Attorney General of British Columbia v. Canada Trust Co. et al., [1980] 2 S.C.R. 466

Date: 1980-06-27

The Attorney General of British Columbia (Defendant) Appellant;

and

The Canada Trust Company and Olga Ellett, executors and trustees of the Estate of Francis Ely Ellett, deceased (Plaintiffs) Respondents;

and

The Attorney General of Canada, The Attorney General of Quebec, The Attorney General of Nova Scotia and The Attorney General of Manitoba Interveners.

1979: November 29; 1980: June 27.

Present: Martland, Ritchie, Pigeon, Dickson, Beetz, Estey and Chouinard JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Constitutional law—Taxation—Succession duties—Whether residence of beneficiary within taxing province furnishes sufficient basis for imposition of succession duty where property situated outside province and deceased dies domiciled elsewhere—Whether tax in personam or in rem—Succession Duty Act, R.S.B.C. 1960, c. 372, s.6A.

The late Francis Ely Ellett died September 2, 1975, domiciled and ordinarily resident in Alberta. By his will he left a life estate to his widow Olga Ellett, domiciled in Alberta, and the remainder to three relatives resident in British Columbia. The estate consisted of personal property located in Alberta, having a gross value of $236,221. The Minister of Finance of British Columbia, relying upon s. 6A of The Succession Duty Act, purported to assess succession duty in the sum of $30,646. The duty was paid by the executors on behalf of the remaindermen under protest and payment was accompanied by a denial of liability. The executors then issued a statement of claim seeking a declaration that s. 6A was ultra vires the Legislative Assembly of British Columbia, and claiming repayment of the sums paid to the Province.

The Supreme Court of British Columbia pronounced s. 6A ultra vires of the Province and the appeal was dismissed by a majority by the Court of Appeal. On the appeal to this Court, the following constitutional question was stated: Is s. 6A of The Succession Duty Act of

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British Columbia within the legislative competence of the Legislature of British Columbia?

Held: The appeal should be allowed.

The underlying question in the appeal was whether the residence of a beneficiary within a taxing province furnishes a sufficient basis for the imposition of a succession duty where the property is situated outside the province and the deceased dies domiciled elsewhere. The Legislatures of the provinces have authority to make laws in relation to “direct taxation within the Province” (B.N.A. Act, s. 92(2)), which encompasses estate tax and succession duties, both of which have been described as direct taxes. In the face of clear authority, it would seem unarguable that a province could levy a succession duty on a beneficiary found within the province, and calculate the tax with reference to the value of property situate elsewhere and passing on the death of a person domiciled elsewhere. If the Canadian Constitution is to be regarded as a living tree and legislative competence as essentially dynamic—which they are—, the phrase “within the province” need not be given the construction that it would have borne in 1867, and even if a fixed 1867 category approach be adopted in respect of “direct” and “indirect”, there is no authority which would warrant its application in the interpretation of the phrase “within the province” and there is no reason in principle why “persons within the Province” should not also be a permissible subject-matter for succession duty legislation. When a province decides to impose a succession duty, it is not in the position of having to choose to levy a direct tax upon property, or upon the basis of the artificial sub-category, “transmission of property”, or upon the beneficiaries. The province may, constitutionally, tax on any or all of these bases, provided always that the subject-matter of the tax is situated within the province.

The correct approach to the identification of the subject-matter of a taxing statute is to examine the Act, as a whole, and not merely the charging sections. Here, in view of the wording of the Act and of the presence of s. 6, which imposes a tax upon property situated within the province and of s. 9, which imposes a tax upon transmission of property, the only reasonable interpretation of s. 6A is that the tax is placed on the beneficiary who is within the province and the measure of that tax is the value of the property bequeathed. The fact that the Legislature chose to proceed by piecemeal amendments, resulting in an inelegant jumble of tax bases and inter-

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nal inconsistencies, is no reason to frustrate the obvious intention of the Legislature. Therefore, s. 6A imposes an in personam tax on a resident beneficiary, and the section is one which the Legislature is entitled to enact.

Bank of Toronto v. Lambe (1887), 12 App. Cas. 575; Kerr v. Superintendent of Income Tax et al., 1942 CanLII 25 (SCC), [1942] S.C.R. 435; Alworth v. Minister of Finance, 1977 CanLII 160 (SCC), [1978] 1 S.C.R. 447, applied; Burland v. The King; Alleyn-Sharples v. Barthe, 1921 CanLII 606 (UK JCPC), [1922] 1 A.C. 215; Provincial Treasurer of Alberta v. Kerr, 1933 CanLII 319 (UK JCPC), [1933] A.C. 710, distinguished; City of Halifax v. Fairbanks, 1927 CanLII 337 (UK JCPC), [1928] A.C. 117; Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan, 1977 CanLII 210 (SCC), [1978] 2 S.C.R. 545; R. v. Cotton (1912), 1912 CanLII 46 (SCC), 45 S.C.R. 469; C.P.R. v. Provincial Treasurer of Manitoba, 1953 CanLII 316 (MB QB), [1953] 4 D.L.R. 233; A.G. for B.C. v. King-come Navigation Co., 1933 CanLII 320 (UK JCPC), [1934] A.C. 45; Atlantic Smoke Shops Ltd. v. Conlon, 1943 CanLII 372 (UK JCPC), [1943] A.C. 550; Edwards v. A.G. of Canada, 1929 CanLII 438 (UK JCPC), [1930] A.C. 124; Proprietary Articles Trade Association v. A.G. for Canada, 1931 CanLII 385 (UK JCPC), [1931] A.C. 310; A.G. for British Columbia v. A.G. for Canada, 1937 CanLII 367 (UK JCPC), [1937] A.C. 391; Martin Service Station Ltd. v. M.N.R., 1976 CanLII 208 (SCC), [1977] 2 S.C.R. 996; Harding v. Commissioners of Stamps for Queensland, [1898] A.C. 769; R. v. Lovitt, [1912] A.C. 212; Winans v. Attorney General, [1910] A.C. 27; Toronto General Trusts v. The King, 1919 CanLII 510 (UK JCPC), [1919] A.C. 679; Royal Trust Co. v. Minister of Finance of British Columbia, 1921 CanLII 649 (UK JCPC), [1922] 1 A.C. 87, referred to.

APPEAL from a judgment of the Court of Appeal for British Columbia[^1], dismissing an appeal from a judgment of Berger J. Appeal allowed.

H.L. Henderson, E.R.A. Edwards and Marilyn C. Nash, for the appellant.

R.B. Hutchison, for the respondents.

Derek H. Aylen, Q.C., and James Mabbutt, for the intervener, the Attorney General of Canada.

Henri Brun and Jean-François Jobin, for the intervener, the Attorney General of Quebec.

J.W. Kavanagh, Q.C., and Mollie Gallagher, for the intervener, the Attorney General of Nova Scotia.

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Dirk Blevins, for the intervener, the Attorney General of Manitoba.

The judgment of the Court was delivered by

DICKSON J.—Two issues are raised in this appeal: the first, a constitutional question as to provincial competence to tax a resident beneficiary to whom property situate outside the province has passed on the death of a person domiciled outside the province; the second, whether s. 6A of The Succession Duty Act, R.S.B.C., 1960, c. 372, as amended by 1972 (B.C.) c. 59, imposes an in personam tax on a resident beneficiary or an in rem tax on property, or the transmission of property, situated outside the province.

I

The late Francis Ely Ellett died September 2, 1975, domiciled and ordinarily resident in Alberta. By his last will he left a life estate to his widow, Olga Ellett, domiciled in Alberta, and the remainder to three relatives resident in British Columbia. The estate consisted of personal property located in Alberta, having a gross value of $236,221. The Minister of Finance of British Columbia, relying upon s. 6A of The Succession Duty Act, as amended, purported to assess succession duty in the sum of $30,646. The duty was paid by the executors on behalf of the remaindermen under protest and payment was accompanied by a denial of liability. The executors then issued a statement of claim seeking a declaration that s. 6A was ultra vires the Legislative Assembly of British Columbia, and claiming repayment of the sums paid to the Province.

The matter came before Berger J., who pronounced s. 6A ultra vires the Province[^2]. The judge held that the legislative authority of the Province to impose a succession duty on a beneficiary with respect to personal property outside the province is

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limited to cases in which the deceased is domiciled within the province at his death. The Attorney General appealed. The appeal was dismissed[^3], (Lambert J.A. writing, Craig J.A. dissenting; Mclntyre J.A., as he then was, in compliance with the provisions of s. 27(1) of the Court of Appeal Act, R.S.B.C, 1960, c. 82, had earlier delivered his opinion agreeing with Berger J.).

The constitutional bounds of the provincial taxing powers, in the view of Lambert J.A., are to be determined by reference to what was generally considered in 1867 to be taxation within the province; in 1867, the subject-matter of estate taxes and succession duties was the transmission of property; a transmission could only occur within a province if the deceased was domiciled therein. In the alternative, he held that even if the Province could levy a succession duty on persons, as opposed to the transmission of property, s. 6A did not achieve that purpose. Finally, he held it was impossible to interpret s. 6A in a restricted fashion so as to render it intra vires. To construe it as having application only where the deceased was domiciled in the province would be merely to duplicate s. 9 of the Act.

The Attorney General appealed to this Court, with leave of the Court of Appeal of British Columbia. The following constitutional question was stated:

Is s. 6A of The Succession Duty Act of British Columbia within the legislative competence of the Legislature of British Columbia?

The Attorney General of Canada, as well as the Attorneys General of Quebec, Nova Scotia and Manitoba, intervened to support the validity of the legislation.

II

The underlying question in the appeal is whether the residence of a beneficiary within a taxing province furnishes a sufficient basis for the imposi-

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tion of a succession duty where the property is situated outside the province and the deceased dies domiciled elsewhere. The argument is that matters of estate, with respect to personalty, are governed by the law of the domicile of the deceased. The property was transmitted to the beneficiaries under Alberta laws; the transmission occurred in Alberta and therefore escaped the grasp of British Columbia. To appreciate the significance of this question, some reference to historical background is required. Under the division of taxing powers contemplated by the British North America Act, 1867, both federal Parliament and provincial Legislatures may impose succession duties and both levels have done so. Until 1972, the provinces largely confined themselves to imposing succession duties on (i) property actually situate within the province, (ii) personal property situate outside the province, but passing from a deceased person domiciled in the province to a beneficiary within the province. This latter form of tax is commonly known as a tax on “transmissions”.

Until 1972, Ontario, Quebec and British Columbia levied succession duties on both bases. On January 1 of that year, the federal government abolished federal estate and gift taxes and withdrew from the field. In an effort to capture the revenues thus freed, six more provinces—Manitoba, Saskatchewan and the four Atlantic provinces—entered the field and passed basically uniform succession duty Acts. These Acts are said to contain provisions taxing on the basis of the residence of the beneficiary. In this context, the Province of British Columbia enacted, in mid-1972, s. 6A, and certain other amendments to its Succession Duty Act. The Province thereby sought to wield, in the succession duty field, a power not theretofore exercised, and to avail itself of what it submits is the potential offered by s. 92(2) of the B.N.A. Act.

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In 1977, The Succession Duty Act of British Columbia was repealed; so too the Acts of six other provinces. Lest the question be thought largely academic, however, it should be noted that there exists presently in Quebec a provision (Loi sur les droits successoraux, 1978 (Qué.), c. 37, art. 3) having substantially the same import as s. 6A of the former British Columbia Act. There is also, of course, nothing to prevent any province re-introducing the repealed legislation.

III

The Legislatures of the Provinces have authority to make laws in relation to “Direct Taxation within the Province…” by virtue of head 2 of s. 92 of the B.N.A. Act. On the aspect of “Direct Taxation”, the trial judge correctly observed that the Province has power to impose direct taxes on persons within the province and on property within the province; this jurisdiction encompasses estate tax and succession duties, both of which have been described as direct taxes: per Viscount Cave L.C. in City of Halifax v. Fairbanks Estate[^4], at p. 125. Succession duty taxes beneficiaries. It is demanded from the very person who it is intended should pay it. There is no one to whom the beneficiary can pass on the burden. On general principles then, the tax imposed by s. 6A qualifies as a direct tax; see Canadian Industrial Gas & Oil Ltd. v. The government of Saskatchewan[^5]. The trial judge found it to be a direct tax and this finding was not disturbed by the Court of Appeal.

The starting point for examination of the aspect of “within the Province” is the statement of Anglin C.J. in Rex v. Cotton[^6], at p. 536:

In order that a provincial tax should be valid under the British North America Act, in my opinion the subject of taxation must be within the province.

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The validity of this principle of constitutional law has never been questioned. It has long been recognized that a person may be the subject-matter of a tax and that a province may validly impose a tax on any person found within its borders. Indeed, the ultimate burden of any property tax or so-called “tax on transmissions” falls upon persons. The constitutionality of a tax imposed on a person found within the province is unaffected by the mere fact that the quantum of tax is measured by extra-provincial attributes.

These fundamentals of constitutional law were first given expression almost one hundred years ago by the Privy Council in Bank of Toronto v. Lambe[^7], where Lord Hobhouse stated:

…class 2 of sect. 92 does not require that the persons to be taxed by Quebec are to be domiciled or even resident in Quebec. Any person found within the province may legally be taxed there if taxed directly. This bank is found to be carrying on business there, and on that ground alone it is taxed… the legislature has not chosen… to leave the amount of tax to be ascertained by variable accounts of any uncertain standard. It has adopted its own measure… The banks are to pay so much, not according to their capital, but according to their paid-up capital, and so much on their places of business. (pp. 584-5)

While this statement may require some qualification in respect of artificial persons in the light of later cases, it stands unchallenged in respect of natural persons.

In Kerr v. Superintendent of Income Tax and Attorney-General for Alberta[^8], at p. 439, this Court upheld a provincial statute imposing a tax assessed by reference to extra-provincial sources of income. Rinfret J. stated:

…the person is validly charged because he is a resident within the province; and it must be conceded that the legislature in such a case may use the foreign property together with the local property as the standard by

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which the person resident within the province is to be charged.

The legality of the tax, under those circumstances, results from the fact that the person is found within the province.

The principle was applied in C.P.R. v. Provincial Treasurer of Manitoba[^9], at pp. 236-7, by Freedman J., as he then was, and recently affirmed by this Court in Alworth v. Minister of Finance[^10], where Laskin C.J., speaking for a unanimous Court, stated:

In short, it was open to a Province to impose a tax on persons in the Province and to measure it by extra-provincial attributes without the tax losing its character as taxation within the Province.

Moreover, a Province is not put to a choice of imposing a direct tax on persons or on property (or income) but may constitutionally tax on both bases. (p. 451)

In the face of clear authority, it would seem unarguable that a province could levy a succession duty on a beneficiary found within the province, and calculate the tax with reference to the value of property situate elsewhere and passing on the death of a person domiciled elsewhere.

It is true that the cases above cited all dealt with taxes other than succession duties. It becomes necessary, therefore, to consider whether there is, in constitutional theory, any compelling reason to regard succession duties as a separate and distinct category to which general principles regarding the scope of s. 92(2) are inapplicable.

It should be observed in limine that the views of the British Columbia Courts in this case run counter to scholarly opinion expressed in a lengthy series of articles which assert the legislative competence of the provinces to impose succession duties on the basis of the residence of the beneficiary.

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In 1926, H.E. Manning, writing in [1926] 3 D.L.R. 449, stated, at p. 452:

It is clear that the tax may be imposed on the beneficiary as a person, employing the amount of his interest in the estate as the measure of the tax (Bank of Toronto v. Lambe (1887), 12 App. Cas. 575)…

and at p. 456:

Where the decedent was not but the beneficiary is domiciled within the jurisdiction the mobilia rule clearly does not apply. Lambe’s case, supra, doubtless makes it intra vires the Legislature to impose a tax upon the beneficiary personally, but the Provinces do not usually see fit to attempt such taxation in express terms.

The reason suggested for not levying such a tax was that enforcement would be impossible, because provincial authorities would not be aware of the fact of death outside the province when there was no property in the province. This consideration, perhaps of practical concern, is extraneous, however, to the question of constitutional competence.

J.R. Anderson wrote in “Succession Duties—Double Taxation” (1937), 15 Can. Bar. Rev. 620, at p. 624:

Where the beneficiary is resident in the province but the decedent was not so resident, and the property is outside the province, the provinces do not as a rule attempt to tax the transmission to the beneficiary. It is doubtless intra vires the Legislature to impose a tax upon the beneficiary personally, but the provinces do not usually see fit to attempt such taxation in express terms.

In 1934, Dean John Falconbridge wrote in “Administration and Succession in the Conflict of Laws” in (1934), 12 Can. Bar. Rev. 67, at p. 72:

In the case of a province of Canada, however, the legislative power is territorially limited. The provincial legislature may impose a tax upon a person within the province or upon property within the province; …

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Dean Vincent C. MacDonald, in an article entitled “Taxation Powers in Canada”, appearing at (1941), 19 Can. Bar. Rev. 75, cites with approval (at p. 91) Dean Falconbridge’s three classes of succession duties, the third of which is:

(c) A Province may impose a direct tax on persons domiciled or resident in the Province in respect of the transmission to them of property under or by virtue of Provincial law.

and elaborates in a footnote:

Since a tax on transmission is really a tax on the person to whom it takes place the rule that the subject-matter must be within the Province is satisfied if the beneficiary is resident or domiciled within. For similar rules by another Canadian authority see QUIGG, SUCCESSION DUTIES IN CANADA, 2nd ed., at p. 40.

The same general views were stated by the present Chief Justice of this Court, then Professor Laskin, writing in (1941), 19 Can. Bar. Rev. 617, at p. 618 and p. 625, and in (1960), Can. Tax. Found. 171, at p. 173. See also LaForest (1967), Can. Tax Papers, at p. 86 and p. 119; Bale (1977), 55 Can, Bar Rev. 1; (1978), 56 Can. Bar Rev. 652; (1979), 1979 CanLII 2822 (BC CA), 4 E.T.R. 83; Goodman (1972), Can. Tax Papers; the Ontario Committee on Taxation (Smith Report) (1967) vol. 3, p. 148.

In 1973, the Advisory Committee on Succession Duties (Langford Committee) concluded, at p. 48:

The opinions which the Committee has received indicate that such a tax, on what is sometimes referred to as an “accessions basis” is undoubtedly valid constitutionally. If Ontario is entitled to levy an income tax on residents of Ontario in respect of their foreign income, (which is indisputable), it is also entitled to levey succession duty on such residents in respect of their inheritances of property situated outside Ontario. This type of tax is often called on tax on “accessions”.

Any distinction, for constitutional purposes, between receipt of income and receipt of capital in

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the nature of a bequest, indeed seems tenuous. It is not apparent why any additional limitation should be placed on the powers of taxation of the province in the matter of succession duties. Two strands of argument were relied on in the Courts below in concluding that succession duties are an exception to the general principles discussed above.

Mr. Justice Lambert’s principal line of reasoning proceeded as I have earlier indicated. The phrase “within the Province” must be given the construction that the phrase would have borne in 1867; succession duties were familiar taxes in 1867 and the subject-matter was regarded as “transmissions”; a transmission in 1867 was within a province only if the deceased died there; consequently, succession duties have been permanently categorized and are “within the Province” only when the deceased dies domiciled within the province. Mr. Justice Lambert’s secondary ground of decision, and the principal ground for Mr. Justice Berger, is that the authorities, in particular the decisions of the Privy Council in Burland v. R.; Alleyn‑Sharples v. Barthe[^11], and Provincial Treasurer of Alberta v. Kerr[^12], had conclusively decided that the power of the Province to impose succession duties under s. 92(2) on beneficiaries domiciled in the province in respect of the transmission to them of property situate outside the province was limited to cases where the deceased was also domiciled in the province.

In reaching his conclusion as to the correct approach to the construction of the phrase “within the Province”, Mr. Justice Lambert relied solely on Halifax v. Fairbanks, supra, and the statement of Viscount Cave that if a tax was generally considered to be a direct tax in 1867, then it was a direct tax for the purpose of s. 92(2), no matter how the burden of the tax fell. There are, with respect, in my view, two observations to be made in this regard.

First, the Fairbanks notion of fixed categories of taxes was substantially cut back in Attorney General for British Columbia v. Kingcome Navigation

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Co.[^13], where the Privy Council held, in effect, that there is but one test to determine whether a tax is direct or not and the test is that of John Stuart Mill. Professor Frank Scott noted in (1934), 12 Can. Bar. Rev. 303, at p. 305, that this restating of the ratio decidendi in the Fairbanks case amounted to a virtual overruling and commented: “Henceforth it appears that the question of what the tax was universally considered to be in 1867 is irrelevant.” In Atlantic Smoke Shops Ltd. v. Conlon[^14], Viscount Simon L.C. stated, at p. 565, that Lord Cave’s reference in Fairbanks to “two separate and distinct categories” of taxes should not be understood as relieving the courts from the obligation of examining the real nature and effect of the particular tax in the present instance.

Second, even if a fixed 1867 category approach be adopted in respect of “direct” and “indirect”, I know of no authority which would warrant its application in the interpretation of the phrase “within the Province”.

It has been stated repeatedly on high authority that a constitutional document must remain flexible and elastic, in the words of Lord Sankey in Edwards v. Attorney General of Canada[^15], at p. 136, “a living tree capable of growth and expansion within its natural limits”. There is nothing static or frozen, narrow or technical, about the Constitution of Canada. In Proprietary Articles Trade Association v. Attorney General for Canada[^16], Lord Atkin refused to accept that “criminal law”, in s. 91(27), was an historically fixed category. He stated, at p. 324:

“Criminal law” means “the criminal law in its widest sense”: Attorney-General for Ontario v. Hamilton

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Street Ry. Co. It certainly is not confined to what was criminal by the law of England or of any Province in 1867. The power must extend to legislation to make new crimes.

In Attorney General for British Columbia v. Attorney General for Canada[^17], at pp. 402-3. Lord Thankerton rejected the suggestion that federal competence to legislate with respect to insolvency was intended to be stereotyped. It is, no doubt, germane to consider cases in which other taxing statutes imposing succession duties or estate taxes were under review but, in my view, pre-1867 English case authorities dealing with domestic succession duty rules have little relevance or applicability to the resolution of constitutional questions unique to Canada. Rules of statutory construction developed in a unitary state for the purpose of limiting the otherwise unlimited scope of taxing acts afford little guidance in the resolution of current Canadian constitutional problems. If the Canadian Constitution is to be regarded as a “living tree” and legislative competence as “essentially dynamic” (per Beetz J. in Martin Service Station Ltd. v. M.N.R.[^18], p. 1006), then the determination of categories existing in 1867 becomes of little, other than historic, concern.

This is borne out by a line of post-1867 cases in which the Privy Council allowed the creation of a new subject-matter, “property actually situate within the Province belonging to persons not domiciled therein”, by recognizing the mobilia sequuntur personam doctrine as a principle of construction which could be rebutted by clear words in a statute: Harding v. The Commissioner of Stamps for Queensland[^19]; The King v. Lovitt[^20]; Winans v. Attorney General[^21]; Toronto General Trusts v.

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The King[^22]; Royal Trust Company v. Minister of Finance of the Province of British Columbia[^23]. In these cases, the Privy Council consistently upheld succession duties imposed on property situate within the taxing jurisdiction, regardless of the residence of the deceased, although the mobilia principle would exempt from the payment of succession duties movable property situate within the jurisdiction and belonging to a testator domiciled elsewhere. It is clear from these cases that long after 1867 the Privy Council regarded English principles governing succession duties as rules of construction and not hardened constitutional imperatives. There was no constitutional impediment to a province enacting a succession duty of a novel kind. If the subject-matter (there property; here persons) was “within the Province”, the Legislature had competence, and the only question was whether it had used apt words to implement the measure. Even if the subject-matter of succession duty legislation were thought to be “transmissions” in 1867, “property” emerged after 1867 as a valid subject-matter. There is no reason in principle why “persons within the Province” should not also be a permissible subject-matter for succession duty legislation. The only question remaining is whether there is any compelling case authority which precludes such a result.

Mr. Justice Berger, at trial, and Mr. Justice Lambert, in the Court of Appeal, relied on the decision of the Privy Council in Alleyn-Sharples v. Barthe, supra. This case is readily distinguished. The statute under consideration (1914) (Que.), c. 10, art. 1387b, read:

All transmissions within the Province, owing to the death of a person domiciled therein, of moveable property locally situate outside the Province at the time of such death, shall be liable to the following taxes calculated upon the value of the property so transmitted, after deducting debts and charges as hereinafter mentioned.

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The statute imposed a tax on the transmission, not on the property, nor on the resident beneficiary. The requirement that the deceased die domiciled within the taxing province sprang from the taxing provision itself. It is in this light that the case must be read. Alleyn stands only for the proposition that when a tax is imposed on a transmission, the situs of that transmission is “within the Province” only if the legatee is either domiciled or ordinarily resident there. There is no suggestion that the tax would have been constitutionally invalid if the requirement that the deceased be domiciled “within the Province” had been omitted.

As Berger J. correctly points out, the case does not provide any authority for a province to tax a benficiary with respect to personal property outside the province where the deceased died domiciled outside the province. On the other hand, the contrary is also true: the case provides no authority for the proposition that a tax on a resident beneficiary can only be imposed where the deceased died domiciled within the taxing province. Where a “transmission” is the subject‑matter of the tax, it will be an essential element of provincial taxing power that a transmission take place under the law of the taxing province and it may be, although we are not called upon to decide, that the transmission is not under provincial law unless the deceased was domiciled in the province. However, where the subject-matter is “persons” and those persons are actually within the province, the requirements of s. 92(2) are clearly satisfied.

The second case relied upon in the British Columbia Courts is Provincial Treasurer v. Kerr, supra. The relevant sections there (s. 9 and s. 7 of The Succession Duties Act, R.S.A., 1922, c. 28, as amended) provided:

9. Every person resident in the Province to whom passes on the death of any person domiciled in the Province any personal property situate outside the Province, shall pay to the Provincial Treasurer for the use of the Province a tax calculated upon the value of the

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property in accordance with the rates and subject to the considerations set forth in sections 7 and 8 of this Act.

7. (1) Save as otherwise provided, all property of the owner thereof situate within the Province, and in the case of an owner domiciled in the Province, all the personal property of the owner situate outside the Province, and passing on his death, shall be subject to succession duties at the rate or rates set forth in the following table…

One might think that s. 9 clearly imposed a tax on a resident beneficiary and not on property or on “transmissions”. Indeed, the Privy Council appeared to say just that:

Generally speaking, taxation is imposed on persons, the nature and amount of the liability being determined either by individual units, as in the case of a poll tax, or in respect of transactions or actings of the taxpayers. It is at least unusual to find a tax imposed on property and not on persons—in any event, the duties here in question are not of that nature. (p. 718)

This was followed, however, by an examination of the charging section, s. 7(1), which resulted in the conclusion that the subject-matter of the taxation was the property and not the transmission of property:

Accordingly, their Lordships are of opinion that the duties under s. 7, so far as imposed on personal property locally situate outside the Province, did not come within the limits placed on Provincial taxation by s. 92 of the British North America Act. (p. 722)

Since it was the finding of the Privy Council that the duties under s. 7 were on “property”, then of course it follows that the section sought to reach, in part, a subject-matter outside the province. The case has no direct application to the question now before us as to whether, when the tax is on the resident beneficiary, residence within the province alone is sufficient.

The Courts below relied on the following oft-quoted passage as authority for the proposition that, in the case of property situate outside the province, residence within the province of both the testator and beneficiary is a precondition to the valid imposition of a tax:

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The Province maintained in the first place, that under the Alberta Succession Duties Act the subject matter of taxation was the transmission of the property and not the property itself, and fell within the principle of the decision of this Board in Alleyn v. Barthe.

In their Lordships’ opinion, the principle to be derived from the decisions of this Board is that the Province, on the death of a person domiciled within the Province, is not entitled to impose taxation in respect of personal property locally situate outside the Province, but that it is entitled to impose taxation on persons domiciled or resident within the Province in respect of the transmission to them under the Provincial law of personal property locally situate outside the Province. (p. 718)

I agree that this statement of principle is an accurate statement of the “transmission doctrine”, as generally understood, but I point out that it precedes the conclusion, at p. 721, that “the subject-matter of the taxation is the property and not the transmission of property”. The principle was expressed in the context of an enactment which did not attempt to impose a tax upon, or in respect of a transmission, but rather upon personal property situated outside Alberta, and was clearly obiter dictum. The above passage, in my view, may be taken as an illustration of what a province may validly do, but not as an exhaustive formulation of the minimum requirements which must be satisfied as a condition of constitutional validity. Lord Thankerton’s discussion does not flow from an appreciation of the constitutional limits of the province’s taxing power, but rather from an appreciation of the cases concerning a “tax on transmissions”, cases which, as I have suggested, were concerned with rules of construction.

The words “in respect of the transmission to them under the Provincial law” should not be taken as limiting the provincial taxing power, but rather as reflecting the facts of the case before the Board. There, the decedent and the beneficiary were both domiciled in the province.

The third case set up as a barrier to the result that would otherwise be dictated by principle is the

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recent judgment of this Court in Alworth v. Minister of Finance, supra. Two difficulties are said to exist: first, that the Court in Alworth recognized a distinction between income tax and succession duty tax: second, that although the language of the taxing section in Alworth stated “the taxpayer shall pay a tax…” the Court held it was not an “in personam” tax. I shall deal now with the first issue, reserving the second point for the later discussion on the construction of the British Columbia Act.

On the first point, the passage alleged to give rise to the problem is found at p. 452 of the report:

Although that case [Provincial Treasurer v. Kerr] in one of its aspects concerned, as does the present one, the question whether a provincial statute had imposed its taxation within the Province or had unconstitutionally reached outside, it related to succession duty legislation and does not call for further consideration here.

I do not think the Court intended, in this passage, to create any rule recognizing a distinction in principle between income tax and succession duty legislation. In Alworth, the question was whether the tax was imposed on “income” or on “persons”. The Court examined the statutory definitions of “taxpayer” and “income”, and concluded it was the income that carried the burden of the tax. The choice was two-fold: persons or income. In succession duty legislation, the choice may be broader, “persons”, “property”, and “transmissions”. It is of some significance that the quoted passage in Alworth follows immediately a reference to the Kerr case. The Kerr case has been regarded as ambiguous in its treatment of the subject-matter of the Alberta statute. That ambiguity relates to the concept of a tax on “transmissions” which is a concept peculiar to succession duty cases. Kerr was therefore of no immediate relevance to the “persons” and “property” discussion in Alworth.

I am satisfied there is no reason in principle or authority why, in the context of succession duties, the provinces cannot tax on the basis of the resi-

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dence of the beneficiary without regard for the situs of the property or the domicile of the decedent. In other words, it is within provincial competence to tax a resident beneficiary in respect of property situated outside the province and passing on the death of a person domiciled outside the province. It does not matter whether the decedent died domiciled in the province or outside, so long as the beneficiary or beneficiaries are within the province. When a province decides to impose a succession duty, it is not in the position of having to choose to levy a direct tax upon property, or upon the basis of the artificial subcategory, “transmission of property”, or upon the beneficiaries. The province may, constitutionally, tax on any or all of these bases, provided always that the subject-matter of the tax is situated within the province.

IV

I turn now to the question whether s. 6A of the Succession Duty Act, as properly construed, imposes a tax on a resident beneficiary, or upon property situated outside the province. It is crucial to keep in mind in this discussion that s. 6A was added as one of a number of amendments made in 1972, to a basic Succession Duty Act that dates back to 1934. Section 6A is one of three charging sections now found in the Act. The other two are ss. 6 and 9. I set out the relevant portions of these three sections below:

6. (1) 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, as ascertained according to the following method:

6A. (1) Where property of a deceased was situated outside the Province at the time of the death of the deceased, and the beneficiary of any of the property of the deceased was a resident at the time of the death of the deceased, duty under this Act shall be paid by the beneficiary in respect of the property of which he is the beneficiary.

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(2) The beneficiary of the property of the deceased referred to in subsection (1) shall, except as provided in section 5, pay the duty in respect of that property calculated on the dutiable value thereof at the rate prescribed in the Table of Rates in Schedule C, as ascertained according to the following method;

9. (1) Where the deceased person was at the time of his death domiciled in the Province, and where the property of the deceased comprises any personal property situate without the Province in respect of which any beneficial interest passes under the law of the Province to a person who is domiciled or resident in the Province, that person shall, except as provided in section 5, pay duty in respect of the transmission to him of that beneficial interest calculated on the dutiable value thereof at the rate prescribed in the Table of Rates in Schedule C, as ascertained according to the following method:

It will be observed that s. 6 speaks in terms of “property”, s. 6A, of “the beneficiary”, and s. 9, of “transmissions”.

The ambiguity found in s. 6A is that, unlike s. 6, for example, it does not expressly state that the beneficiary is “subject to duty”.

I accept as correct the approach to interpretation stated in Alworth:

Essentially, what is involved in the present case is an appreciation of the incidence of the tax, based, as that appreciation must be, on the subject-matter of the statute and the source of the income in respect of which the tax is levied. I regard it as too mechanical to find that an in personam tax is imposed here merely because the charging section stipulates that a “taxpayer” must pay it. The obligation to pay, a common one in tax legislation, does not necessarily determine the incidence of the tax. (p. 452)

I adopt the position, which finds support in Alworth, that the “correct approach” to the identification of the subject-matter of a taxing statute is to examine the Act, as a whole, and not merely the charging sections. For example, I believe it is clear that the phrase “subject to duty” is used consistently throughout the Act in the sense of “imposing a duty on”. This is the sense, for example, in s. 6, where it clearly imposes a duty on

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“property… situate within the Province”. Section 19, 20, 31 and 36(2)(d) similarly use the word “subject” or the phrase “subject to” only in the sense of the subject-matter of the tax.

The phrase “liable to” likewise exhibits a single consistent meaning throughout the Act. “Liable” is used in s. 12 to create a legal obligation on a person to pay the tax, although the subject-matter of the tax remains the property or the transmission. The word is used in the same sense in ss. 31 and 41(1).

On the other hand, they key phrase “in respect of” does not appear to be used consistently throughout the Act, but rather appears to have two meanings. It is used in many sections in the same sense as “subject to”, i.e. to point to the subject-matter of the tax. (See ss. 10A(1), 10A(3), 12(3), 13, 18, 20(1), 22, 26(1) and (2), 30(1) and (2), 32, 37(2), and 51(1) and (2).) On the other hand, the phrase would appear to bear the meaning “with reference to” or “in relation to” in the following sections: 2(1) (definition of resident), 3A, 23, 34(2), 35(2) and 47.

In the listing above, I have made no reference to ss. 6A, 9, and 14A. These sections merit detailed consideration.

First, s. 9. It is clear from the sections cited above (all of which were found in the Act before the 1972 amendments) where “in respect of” is used to point to a subject-matter of taxation, that the draftsman intended s. 9 to impose a tax on the transmission of property. Indeed, the case has proceeded throughout on the basis that the section has that effect.

We move now to s. 6A and the heart of the problem. What is the meaning to be attributed to the phrase “in respect of” and the phrase “shall be paid by the beneficiary”? The answer can be given only after a consideration of: (i) the relationship s. 6A bears to ss. 6 and 9, and (ii) the consequences that would flow from one answer as opposed to the other, (iii) the context of the phrases.

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I do not think the phrase “in respect of that property” in s. 6A can possibly mean that a tax is being imposed on property, since s. 6A is expressly limited to property situate outside the province. The draftsman can not be thought to have drafted such an obvious utra vires measure. The only other possible subject-matter, apart from “beneficiaries”, is “transmissions”; yet that is precisely the ground covered by s. 9. The impute to the draftsman an intention merely to duplicate s. 9 is equally absurd, and it is necessary to do so. The other sections referred to above show that “in respect of” is sometimes used in the Act to mean “with reference to”. Therefore, it should be given that meaning here in order to give sense and purpose to the section and avoid incongruous results. The only reasonable interpretation is that the tax is placed on the beneficiary who is within the province and the measure of that tax is the value of the property bequeathed.

Are there any compelling reasons why this conclusion cannot be reached? Lambert J.A. states that the Act is replete with reference to taxes in respect of [on] property and taxes in respect of [on] transmissions and makes no references to taxes in respect of [on] persons. This is not entirely correct, as ss. 15A and 39A both speak of persons required to pay duty under the Act. The crucial fact to recall, however, referred to earlier, is that s. 6A was enacted in 1972 as an amendment to the basic Act. The provisions to which Mr. Justice Lambert referred were present in the Act before 1972, at a time when the only subject-matters were property and transmissions. The fact that the Legislature chose to proceed by piecemeal amendments, resulting in an inelegant jumble of tax bases and internal inconsistencies, is no reason to frustrate the obvious intention of the Legislature. It is useful, I think, to refer also to other sections introduced in 1972, in particular s. 14A(1) which reads in part:

…[w]here property passing on the death of the deceased includes a family farm or a family business, …passes on the death of the deceased to… a special beneficiary of the deceased, the person who is subject to,

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or personally liable for, the duties payable under this Act imposed in respect of the dutiable value of a family farm, or a family business, …may pay those duties… (Emphasis added.)

As I noted above, “subject to” is used consistently throughout the Act in the sense of “tax imposed on”. “Liable for” obviously means a person liable under s. 12(2) or (3) where the tax is imposed on “property” or “transmissions”. Section 14A appears to be the only section where the phrase “subject to” is used with “person”. It is found with the 1972 amendments and it points conclusively to s. 6A as imposing a tax on a resident “beneficiary”.

There remains but to mention several cases that deal with the matter of locating the subject‑matter of a taxing provision: Alworth, supra; Kerr v. Superintendent of Income Tax, supra; and C.P.R. v. Provincial Treasurer of Income Tax, supra. It is obvious that if one determines the subject-matter of the tax from the whole of the Act, which I think is the proper approach, then it follows that the words used in the charging provision are not alone determinative. Identical words in parallel charging sections of similar Acts may, after careful study of the whole of the Acts, result in the discovery of different subject-matters. Cases on the point will have little value as precedent.

In Alworth, the charging provision of the Act is s. 3, which is as follows:

Every taxpayer shall for each taxation year pay a tax of fifteen per centum calculated on his income derived from logging operations in British Columbia.

This clearly pointed to the taxpayer as the subject-matter of the tax. The Court, however, as I have indicated, examined the definition of taxpayer and concluded, at p. 452:

The definition of taxpayer is not limited to persons who reside in the Province but points rather to a class of persons identified with the operations in respect of which tax is imposed, regardless of their place of residence. It is the income derived from those operations,

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which themselves are limited to the Province, that, in my view, carries the burden of the tax. Whether the tax be characterized as an income tax or a tax respecting certain economic activity in the Province the result is the same, namely, that it is taxation within the Province. It would be to substitute form for substance and, indeed, empty the charging section of substance (by inviting easy evasion) to hold that a personal tax is imposed by the Act.

In Kerr v. Superintendent of Income Tax and Attorney-General for Alberta, supra, The Income Tax Act, 1932 (Alta.), c. 5, contained the following charging section:

8. (1) There shall be assessed, levied and paid upon the income during the preceding year of every person—

a tax at the rates applicable to persons other than corporations and joint stock companies set forth in the first schedule of this Act upon the amount of income in excess of the exemptions provided in this Act, and every person in respect of whose income any tax has been so assessed and levied shall pay the amount of the tax so assessed and levied together with an additional sum of three dollars:

Here, as in the case at bar, the charging section arguably pointed to a tax on income (property) rather than on a person. Nevertheless, this Court held it was a tax “in personam”. Rinfret J. said, at p. 439:

Assuming that some ambiguity is to be found in the charging section of the Alberta Act—and perhaps a little more so since the amendment of 1934 already referred to—I must come to the conclusion that, taking the statute as a whole and reading sec. 8(1) in the light of the other sections and of the general tenor of the statute, the basis and subject-matter in respect to which the taxation here in question is imposed is the person who receives the income, and that it is not a specific tax upon the property, a tax on the thing apart from the person; and, therefore, it is a personal tax

C.P.R. v. Provincial Treasurer of Manitoba, supra, is plain and straightforward. There, the charging section (s. 26 of The Manitoba Corporation Income Tax Act, 1947 (Man.), c. 52) reads:

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26(1) Every corporation shall pay an income tax equal to five per centum of that portion of its income that is attributable to its operations in Manitoba during each of the fiscal years of the corporation.

Freedman J., as he then was, compared this charging section with the one in Kerr, just discussed, and concluded, at p. 241:

But s. 26 of the Act before me says that “every corporation shall pay an income tax equal to five per centum.” Is there any ambiguity here? I see none. It appears to me that the tax is by the charging section clearly imposed upon the person—the corporate person, that is—in respect of its income. If in the Kerr case the statute was held to impose a tax on the person rather than a tax on income apart from the person, how much stronger is the case for a similar conclusion here!

I read the words “duty under this Act shall be paid by the beneficiary” in s. 6A as designating the beneficiary as the subject-matter, as well as the payer, of the tax, and the words “in respect of that property” in the sense of “as related to”, or “on the basis of”, the property of which he is the beneficiary. I agree with counsel for the Attorney General of Canada that when the Legislature of British Columbia added s. 6A, it must have intended to place a new tax burden on someone or something. The conclusion would seem inescapable that the intention was to place the new tax burden on the beneficiary in British Columbia, not only because he is directly ordered to pay, but also because the pre-1972 legislation had already placed a burden on the only other possible targets, property, and transmissions.

I hold that s. 6A, the charging section, imposes an in personam tax on a resident beneficiary, and that the section is one which the Legislature is entitled to enact.

I would allow the appeal, set aside the judgment of the Courts below, and declare that s. 6A of The Succession Duty Act of British Columbia is within the legislative competence of the Legislature of

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British Columbia. The Attorney General of British Columbia should pay the costs of the respondents in this Court and, in accordance with the agreement of the parties, the respondents will pay his costs in the Court of first instance. There should be no costs payable to or by the intervenants.

Judgment accordingly.

Solicitors for the defendant, appellant: Harman & Co., Victoria.

Solicitors for the plaintiffs, respondents: Crease & Co., Victoria.

[^1]: 1979 CanLII 2822 (BC CA), [1979] 2 W.W.R. 683. [^2]: (1978), 1978 CanLII 1938 (BC SC), 86 D.L.R. (3d) 267. [^3]: 1979 CanLII 2822 (BC CA), [1979] 2 W.W.R. 683. [^4]: 1927 CanLII 337 (UK JCPC), [1928] A.C. 117. [^5]: 1977 CanLII 210 (SCC), [1978] 2 S.C.R. 545. [^6]: (1912), 1912 CanLII 46 (SCC), 45 S.C.R. 469. [^7]: (1887), 12 App. Cas. 575. [^8]: 1942 CanLII 25 (SCC), [1942] S.C.R. 435. [^9]: 1953 CanLII 316 (MB QB), [1953] 4 D.L.R. 233 (Man. Q.B.). [^10]: 1977 CanLII 160 (SCC), [1978] 1 S.C.R. 447. [^11]: 1921 CanLII 606 (UK JCPC), [1922] 1 A.C. 215. [^12]: 1933 CanLII 319 (UK JCPC), [1933] A.C. 710. [^13]: 1933 CanLII 320 (UK JCPC), [1934] A.C. 45. [^14]: 1943 CanLII 372 (UK JCPC), [1943] A.C. 550. [^15]: 1929 CanLII 438 (UK JCPC), [1930] A.C. 124. [^16]: 1931 CanLII 385 (UK JCPC), [1931] A.C. 310. [^17]: 1937 CanLII 367 (UK JCPC), [1937] A.C. 391. [^18]: 1976 CanLII 208 (SCC), [1977] 2 S.C.R. 996. [^19]: [1898] A.C. 769. [^20]: [1912] A.C. 212. [^21]: [1910] A.C. 27. [^22]: 1919 CanLII 510 (UK JCPC), [1919] A.C. 679. [^23]: 1921 CanLII 649 (UK JCPC), [1922] 1 A.C. 87.