Lawrence v The King

The judgment of their Lordships was delivered by

Lorp THanxertTon. The late Isaac Kendall Kerr died
on December 3, 1929, domiciled and resident in the Province
of Alberta. He left a large estate, and the respondents in
the original appeal, both of whom are resident in the city of
Calgary, obtained letters probate as executrix and executor

(1) [1914] A. C. 176. (6) (1884) 10 App. Cas. 141.
(2) [1922] 1 A. C. 215. (7) [1924] S. C. R. 207.

(3) [1922] 1 A. C. 215, 228. (8) [1919] A. C. 679.

(4) 8 Alb. L. R. 308. (9) [1930] A. C. 161.

(5) [1912] A. ©. 212. (10) [1930] A. C. 357, 363.
. (11) [1928] A. C. 117.

715

J.C.
1933

~~
PROVINCIAL
TREASURER
or ALBERTA
v.
KERR.

716 HOUSE OF LORDS [1933]

J.c. of his will. Thereafter duties amounting to $54,754.21
1933 were assessed under the Alberta Succession Duties Act by
Provincrat the Provincial Treasurer in respect of the property of the
eo 'Ateunrs, deceased, and the respondents, along with a surety, entered
Keng, into the bond afterwards referred to in order to secure pay-
— ment of these duties.

The respondents challenged the validity of the imposition
of these duties by the Province and a special case was agreed
to by the parties, which was referred, pursuant to the Alberta
Rules of Court, to the Appellate Division of the Supreme
Court of Alberta. In this case two questions were referred
for determination, and the decision of the Appellate Division,
given July 22, 1932, has led to the original appeal by the
Provincial Treasurer and the Attorney-General for Alberta
(hereinafter called '' the Province''), and a cross-appeal by the
executrix and executor (hereinafter called '' the executors'').

The property in respect of which the duties were imposed
is described in the special case as follows :—

"(2.) The property owned by the said Isaac Kendall Kerr
at the time of his death consisted of—(a) certain personal
property of the aggregate value of $265,703.58 composed of
shares and other securities of various companies which had
no head office in the Province of Alberta, and none of which
had any registration or transfer office within the said
Province, together with other personal property locally
situate outside of the said Province. The share certificates
and other documents evidencing such shares and other
securities were found in the City of Calgary, in the Province
of Alberta. (6) Certain real property and personal property
having an aggregate value of $274,697.03. The real property
is situate within the Province of Alberta and the personal
property consists of shares and other securities in companies
with head office and transfer office situate within the Province
of Alberta, and other personal property locally situate within
the said Province. (3.) Within two years prior to his death
the said Isaac Kendall Kerr transferred to Clara E. Kerr,
one of the plaintiffs, certain real estate situate within the
Province of Alberta, together with certain personal estate."

A. C. AND PRIVY COUNCIL.

No question is raised as to the duties in respect of the
property in para. 3, and the following questions were sub-
mitted for the opinion of the Court: '"(1.) Whether or not
the succession duties levied in respect of the property men-
tioned in sub-s. (a) in para. 2 of the special case are valid
and payable to the defendants or either of them.
(2.) Whether or not the succession duties levied in respect
of the property mentioned in sub-s. (b) in para. 2 of the
special case are valid and payable to the defendants or either
of them."

The determination of the validity of the imposition of the
duties depends on the application of the limits placed upon
the taxing powers of a Province by s. 92 of the British North
America Act, 1867—namely, " Direct taxation within the
Province in order to the raising of a revenue for Provincial
purposes," to the provisions of the Alberta Succession Duties
Act. As regards the first question, which relates to personal
property locally situate outside the Province, the issue is
twofold—namely, whether the taxation is direct and whether
it is within the Province. On the second question, which
covers real and personal property situate within the Province,
the issue is whether the taxation is direct.

Dealing first with the question of taxation " within the
Province," the general law as to the power of taxation of a
sovereign state has been thus stated: Blackwood v. The
Queen (1): "There is nothing in the law of nations which
prevents a Government from taxing its own subjects on the
basis of their foreign possessions. It may be inconvenient
to do so. The reasons against doing so may apply more
strongly to real than to personal estate. But the question
is one of discretion, and is to be answered by the statutes
under which each state levies its taxes, and not by mere
reference to the laws which regulate successions to real and
personal property."

There can be no doubt that the Alberta Succession Duties
Act purports to impose taxation on the basis (inter alia) of
personal property situate outside the Province, and therefore,

(1) 8 App. Cas. 82, 96.
A. C. 1933. 3 30

717

J.C
1933

~~
PROVINCIAL
TREASURER
or ALBERTA
v.
KERR.

718 HOUSE OF LORDS [1933]

J.C. if it possessed unlimited sovereign power, it would be entitled
1933 to impose such taxation on its subjects. Accordingly, the

——

Provinorat present question only arises because of the limitations placed
Tene on the legislative powers of the Province by s. 92 of the
Kun British North America Act, 1867, and, for this reason, the
— cases on legacy and succession duties in England are of little
assistance for the present purpose. 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 the taxpayers'
interests in property 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. In considering the
limits placed on Provincial taxation, the Courts have
invariably had regard to the basis or subject-matter in
respect of which the taxation is imposed, and their Lordships
agree with the statement of Anglin C.J. in Rex v. Cotton (1),
where he said: "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."

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. (2)

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.

In Lambe v. Manuel (3) a claim was made by the Province
of Quebec for succession duties on movable property locally

(1) (1912) 45 Can. S. C. R. 469, 536. (2) [1922] 1 A. C. 215.
(3) [1903] A. C. 68.

A. C. AND PRIVY COUNCIL.

situate in that Province, which formed part of the succession
of a testator domiciled in Ontario. The claim was rejected
on the view that, on its true construction, the Quebec Succes-
sion Duty Act only applied, in the case of movables, to
transmissions of property resulting from the devolution of
a succession in the Province of Quebec. Sect. 1191B of the
Quebec Act of 1892, on which the issue turned, provided as
follows: ' All transmissions, owing to death, of the property
in, usufruct, or enjoyment of, moveable and immoveable
property in the province shall be liable to the following
taxes. " 'Thus the taxes were held to be imposed
in respect of transmissions.

The Quebec Act of 1892 and the later Act of 1906, which
re-enacted the words above quoted with alterations immaterial
to this point, were considered in the case of Cotton v.
Rex (1), and were construed as imposing the duties in respect
of the transmission of the property. It was held, on
construction, that neither of these Acts imposed any duty
upon the transmission of movable property outside the
Province, and also that the taxation was not direct, in respect
that it was imposed on "' someone who was not intended him-
self to bear the burden but to be recouped by someone else."'

In Woodruff v. Att.-Gen. for Ontario (2), the deceased
having died domiciled in the Province of Ontario, that
Province claimed succession duty in respect of movable
property locally situate in the United States. It was held to
be an attempt to levy a tax on property locally situate outside
the Province, which was beyond their competence. The
Ontario Act of 1897, s. 4, sub-s. 1, provided "the following
property shall be subject to a succession duty,' which clearly
was not a tax in respect of the transmission of a succession.

The case of Rex v. Lovitt (3) provides an interesting
contrast to Lambe's case (4). The testator, who died domiciled
in Nova Scotia, was possessed of certain personal property
locally situate in the Province of New Brunswick, in respect
of which the latter Province claimed succession duty. It

(1) [1914] A. C. 176. (3) [1912] A. C. 212.
(2) [1908] A. C. 508. (4) [1903] A. C. 68.

A.C, 1933. 3 3 D

719

J.C.
1933

—
PROVINCIAL
TREASURER
or ALBERTA

Vv.

KERR.

720 HOUSE OF LORDS [1933]

J.C. was held that, although called a succession duty, the tax in
188 question was laid on the corpus of the property, and its
oe payment was made a term of the grant of ancillary probate,
or Arserta and the claim to duty was upheld. The New Brunswick
Kar. Succession Duty Act, 1896, s. 5, sub-s. 1, enacted: " All
eek property, whether situate in this province or elsewhere,

. passing either by will or intestacy . .. . shall

be subject to a succession duty." :

In Alleyn v. Barthe (1), though an argument to the contrary
was submitted, the judgment clearly proceeds on the footing
that the taxation was imposed in respect of the transmission,
and it may be noted that by the Quebec Succession Duty
Act, 1909, as revised in 1914, s. 1387B: " All transmissions
within the Province, owing to the death of a person domiciled
therein, of movable property locally situate outside the
Province at the time of such death,' were made liable to
the duties; this provision is substantially the same as that
under construction in Lambe's case (2). The main question in
Alleyn's case (1) was whether the taxation was direct, but, in
delivering the judgment of this Board, Lord Phillimore, after
referring to the statutory provisions, states: "' The condi-
tions therein stated upon which taxation attaches to property
outside the Province are two: (1.) that the transmission
must be within the Province; and (2.) that it must be due
to the death of a person domiciled within the Province. The
first of these conditions can, in their Lordships' opinion,
only be satisfied if the person to whom the property is trans-
mitted is, as the universal legatee in this case was, either
domiciled or ordinarily resident within the Province; for,
in the connection in which the words are found no other
meaning can be attached to the words ' within the Province '
which modify and limit the word 'transmission.' So
regarded, the taxation is clearly within the powers of the
Province."

The identification of the subject-matter of the tax is
naturally to be found in the charging section of the statute,
and it will only be in the case of some ambiguity in the terms

(1) [1922] 1 A. C. 215. (2) [1903] A. C. 68.

A. C. AND PRIVY COUNCIL.

of the charging section that recourse to other sections is
proper or necessary. In the present case, s. 7, sub-s. 1, is the
charging provision, and as amended provided as follows :—

"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, the
percentage payable on the share of any beneficiary being
fixed by the following, or by some one or more of the following
considerations, as the case may be :—

(a) the net value of the property of the deceased ;

(b) the place of residence of beneficiary ;

(c) the degree of kinship or absence of kinship of the
beneficiary to the deceased :"'

In their Lordships' opinion, the terms of this section,
which is very similar to that considered in Lovitt's case,
clearly show that the subject-matter of the taxation is the
property and not the transmission of property; it is in
marked contrast to the terms of the Quebec section considered
in the cases of Lambe and Alleyn. It may be added that
s. 9 of the Alberta Act, on which the Province sought to
rely, does not modify this view, but merely provides a
particular liability for payment of the tax.

The Province next contended that, although locally
situate outside the Province, the personal property of a
person, who dies domiciled within the Province, is to be
treated as '"' within the Province" for the purposes of s. 92
of the British North America Act, by reason of the applica-
tion of the rule embodied in the maxim "' mobilia sequuntur
personam." 'This argument appears to proceed on a mis-
understanding of the meaning and effect of that rule. If A
dies domiciled in the United States of America, leaving
movable property locally situate in England, the latter
country has complete jurisdiction over the property, but
the law of England, in order to decide on whom the property

devolves on the death of A, will not apply the English law
3 3 D 2

721

J.C,
1933

a)
PROVINCIAL
TREASURER
or ALBERTA

v.
KERR.

HOUSE OF LORDS [1933]

of stccession, but will ascertain and apply the American
law. In other words, it is the law of England—not the law
of America—that applies the principle of mobilia sequuntur
personam in exercising its jurisdiction over the movable
property in England, the locus of the latter remaining un-
changed; in no sense could the property be described as
" within America."

The Province further maintained that, as the bond given
by the executors limited their liability to the duties in respect
of property '"' coming into their hands," and the property
here in question had admittedly come into their hands, the
taxation was in respect of property within the Province;
but, in their Lordships' opinion, the bond merely defines the
extent of the security taken from the executors, and its terms
cannot affect the validity or invalidity of the duties imposed
under s. 7 of the Act. While that is sufficient to dispose of
the contention, it may well be doubted whether '' coming
into their hands" means anything more than that the
executors have completed their title to the property in ques-
tion, the local situation of the property remaining unchanged.

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.

There remains the question of " direct taxation.' The
principle to be applied in such cases is now well settled.
Is the duty imposed on the very person whom the legislature
intended or desired should pay it, without any expectation
or intention that he should indemnify himself at the expense
of some other person? Under the Alberta Succession
Duties Act the duties in question were imposed on the
executors on their application for probate, and letters probate
could not be issued without the consent of the Provincial
Treasurer, whose duty was to secure payment of the duties
or obtain security therefor by a statutory bond before giving
such consent. There can be no doubt that normally the
application for probate will be by executors, and the issue

A. C. AND PRIVY COUNCIL.

is whether the legislature intended or desired that an executor
should pay the duties without any expectation that such
executor should indemnify himself at the expense of some
other person. In their Lordships' opinion the determina-
tion of this issue depends on the answer to a simple test,
which was applied in the cases of Cotton (1) and Alleyn (2),
already referred to—namely, whether the executor is person-
ally liable for the duties. If the executor is so liable, then
the tax is imposed on the executor, with the obvious intention
that he should indemnify himself out of the beneficiaries'
estate, and the taxation is indirect. If the executor is not
personally liable for the duties, then the tax is truly imposed
on the beneficiaries and the taxation is direct.

In Cotton's case, the provisions of the Quebec Succession
Act, 1906, were construed by this Board as entitling the
collector of inland revenue to collect the whole of the duties
on the estate from the person making the declaration and
as providing, in the ordinary case, for payment of the duties
by some one who was not intended himself to bear the burden
but to be recouped by some one else, and the taxation was
held to be indirect. Three erroneous views as to this decision
have been subsequently propounded, two of which were
corrected in Burland v. The King (2), which was decided
by this Board at the same time as Alleyn's case. The first
suggestion was that the illustration of the declaration by
the notary, before whom the will was executed, was based
on inaccurate information, and that the value of the decision
was thereby impaired; but it was pointed out in Burland's
case that the case of the executor, or administrator, or legatee
by a particular title might equally well have been taken,
and that the error did not affect the force of the decision.
The second suggestion in Burland's case was that the point
was not necessary for the decision in Cotton's case, which
had already been determined by other independent considera-
tions ; but it was held that the decision in Cotton's case on
the invalidity of the statute was just as complete and funda-
mental as the decision in the earlier part of the judgment

(1) [1914] A. C. 176. (2) [1922] 1 A. C. 215.

723

J.C.
1933

aes
PROVINCIAL
TREASURER
oF ALBERTA
v.
KERR.

724

J.C.
1933

—~
PROVINCIAL
TREASURER
or ALBERTA

Vv.
KERR.

HOUSE OF LORDS [1933]

on the construction of the statute. The third suggestion,
which has been adopted in certain decisions in Canada,
including the present case, is that the decision on direct
taxation in Cotion's case was confined to taxation in respect
of movable property not within the Province.

In their Lordships' opinion, that view is not justified
either in fact or in principle. Two passages from the judg-
ment may be cited (1): (1.) '' This question is the following :
whether a succession duty of the kind contended for by the
respondent could be imposed by the provincial legislature
without exceeding its powers. In considering this point
we may assume that the operative clause specifically extends
to the taxation of all the property of the testator as defined
in the statute, or, to express it more simply, that the limiting
words, 'in the province, have been deleted from that
clause,' and (2.) "' For the purpose of deciding this question
it will be necessary to examine closely the legislation imposing
it. The provisions of the Act leave much to be desired in
respect of clearness. The definition of " property' contained
therein is admittedly too wide if it is intended to form a
basis for provincial taxation, since it would include the
movable property of any person who might be resident in
the province at the time of his death, whether domiciled
therein or not. But, putting aside such considerations, the
appellants not only admit, but contend, that the Act imposes a
succession duty upon all movable property, wherever situated,
of a testator domiciled in the province."

In principle also the local situation of the property com-
prised in the estate of the deceased appears to be irrelevant
to the issue whether the executor is personally liable for
payment of the duties, in the absence of any distinction in
this respect drawn by the Act itself as regards duties in
respect of different classes of property. Im the Quebec Act,
which was a tax on transmission, no such distinction was drawn,
nor is any such distinction to be found in the present case.

In Burland v. The King (2) the testator had died in 1907,
and the Quebec Act was again in question. It was held that

(1) [1914] A. C. 176, 189, 193. (2) [1922] 1 A. C. 215.

A. C. AND PRIVY COUNCIL.

certain amendments to the Act, which had followed imme-
diately after the decision in Cotion's case, were insufficient
to avoid the applicability of that decision, and the taxation
was held to be indirect. But in Alleyn's case, which was
decided at the same time as Burland's case, the testator
died in 1913, by which time further important amendments
had been enacted, which led to a contrary conclusion. In
their Lordships' opinion, it is clear that the reason for this
conclusion was the new provision in art. 1387g of the Quebec
Act, which was in the following terms: "No notary,
executor, trustee or administrator shall be personally liable
for the duties imposed by this section. Nevertheless the
executor, the trustee or the administrator may be required
to pay such duties out of the property or money in his
possession belonging or owing to the beneficiaries, and if he
fails to do so may be sued for the amount thereof, but
only in his representative capacity, and any judgment
rendered against him in such capacity shall be executed
against such property or money only."

The Alberta Succession Duties Act contains no similar
clause excluding personal lability of an executor, etc., and,
in their Lordships' opinion, it is clear, under ss. 11 and 12
of the Act, that an executor who applies for probate becomes
personally liable for the amount of the duties determined by
the Provincial Treasurer, and must either pay them or give
security for their payment by a bond in the statutory form,
and, further, that under the terms of the bond the executor
is personally liable for payment of the duties in respect of
any of the property coming into his hands. It follows that
the taxation is indirect and beyond the competency of the
Province.

Reliance was placed in the Court below on the case
In re Cust (1), but it will be clear from the views their Lord-
ships have expressed as to the principle laid down by the
cases of Cotton and Alleyn, that the decision of the Court
which decided Cust's case on appeal was erroneous, and must
be taken as overruled. Rex v. Lovitt (2), referred to in that

(1) 8 Alb. L. R. 308. (2) [1912] A. C. 212.

725

J.C.
1933

eS
PROVINCIAL
TREASURER
or ALBERTA
v
KERR.

726 HOUSE OF LORDS [1933]

©

J.C. decision, was the case of a local probate duty charged by the

1933 Province, where the property was locally situate, for the

Provincrat collection or local administration of the particular property,

Le 'Arennra and was not a case of pure taxation, as in Cotton's case (1) and

Kuun, vhe present one. The question of direct or indirect taxation

a is not referred to in the judgment, and the only reference

to it in the argument was in a contention that the tax was

imposed on a transmission in another Province and was

therefore not direct; but it was held that the tax was not on
transmission but on the corpus of the property.

Their Lordships are therefore of opinion that the succession
duties levied in respect of the property mentioned in both
sub-ss. (a) and (b) in para. 2 of the special case are not valid.
In the case of sub-s. (a) the taxation is neither direct nor
within the Province, and in the case of sub-s. (b) the taxation
is not direct.

Their Lordships will accordingly humbly advise His
Majesty that the appeal for the Province should be dismissed,
and that the cross-appeal for the executors should be allowed,
and that the judgment of the Appellate Division of the
Supreme Court of Alberta should be varied by substituting
for the words "are valid and payable" at the end of the
second declaration the words "are invalid and are not pay-
able,' and should otherwise be affirmed. By agreement of

parties there will be no order for costs.