Jodrey Estate v. Province of Nova Scotia and Attorneys General of British Columbia and Quebec, (1980) 32 N.R. 275 (SCC)

• Judge: Martland, Ritchie, Pigeon, Dickson, Beetz, McIntyre and Chouinard, JJ.
• Court: Supreme Court (Canada)
• Case Date: July 18, 1980
• Jurisdiction: Canada (Federal)
• Citations: (1980), 32 N.R. 275 (SCC);41 NSR (2d) 181;[1980] CTC 437;[1980] ACS no 101;8 ETR 69;32 NR 275;76 APR 181;1980 CanLII 229 (SCC);[1980] SCJ No 101 (QL);[1980] 2 SCR 774

Jodrey Estate v. N.S. (1980), 32 N.R. 275 (SCC)

MLB headnote and full text

Jodrey's Estate v. Province of Nova Scotia and the Attorneys General of British Columbia and Quebec (Intervenors)

Indexed As: Jodrey Estate v. Province of Nova Scotia and Attorneys General of British Columbia and Quebec

Supreme Court of Canada

Martland, Ritchie, Pigeon, Dickson, Beetz, McIntyre and Chouinard, JJ.

July 18, 1980.

Summary:

This case arose out of the assessment of succession duties by the Province of Nova Scotia upon the grandchildren of the deceased. Section 2(5) of the Succession Duties Act, S.N.S. 1972, c. 17, provided that the shareholders of a nonresident company, which became "beneficially entitled" to a deceased's property, were deemed to be the successors of the deceased's property for purposes of succession duties. To avoid succession duties the deceased left the residue of his estate to the Alberta subsidiary of an Alberta company in which his grandchildren owned the shares. On the death of the deceased the Province assessed the grandchildren for succession duties on the ground that they were deemed successors to the bequest to the subsidiary, because the parent company was "beneficially entitled" to the property of the deceased as the result of the bequest to the subsidiary. The deceased's estate filed a notice of objection to the assessment, but the Minister of Finance confirmed the assessment. On appeal the Nova Scotia Supreme Court, Trial Division, confirmed the assessment, adopting its reasons in MacKeen Estate v. Nova Scotia (1978), 25 N.S.R.(2d) 572; 36 A.P.R. 572, a case in which identical issues were raised. The Nova Scotia Court of Appeal dismissed the estate's appeal, adopting its reasons for judgment in the MacKeen case (1978), 28 N.S.R.(2d) 3; 43 A.P.R. 3. The estate appealed.

The Supreme Court of Canada dismissed the appeal and affirmed the assessment. The Supreme Court of Canada held that s. 2(5) of the Succession Duties Act was intra vires of the Province as direct taxation within the province, being a tax on residents in the province and not tax upon property outside the province. See paragraphs 59 to 68. The Supreme Court of Canada held that the grandchildren were properly deemed successors to the bequest to the subsidiary, because the parent company was "beneficially entitled" to the property of the deceased as a result of the bequest to the subsidiary. See paragraphs 17 to 58.

Dickson, J., dissenting, was of the opinion that the succession duties assessment should be set aside, because the parent company was not "beneficially entitled" to the property of the deceased, because it could not be regarded as the beneficial owner of the assets of the subsidiary. See paragraphs 70 to 142.

Company Law - Topic 313

Nature of corporations - Lifting the corporate veil - Related companies - To avoid succession duties on his death a businessman left the residue of his estate to the subsidiary of a company in which his grandchildren were the shareholders - The majority of the Supreme Court of Canada in holding that the grandchildren were subject to succession duties found it unnecessary to lift the corporate veil - See paragraphs 42 to 47 - However, Dickson, J., of the Supreme Court of Canada in a dissenting judgment discussed the law pertaining to lifting the corporate veil and was of the opinion that it would be wrong to lift the corporate veil and find that the parent company was the beneficial owner of the assets of the subsidiary, which received the residue of the estate - See paragraphs 120 to 135.

Constitutional Law - Topic 6830

Provincial jurisdiction - Direct taxation within the Province - British North America Act, 1867, s. 92(2) - Succession duties - Validity of taxation of Nova Scotia residents respecting bequests to non-resident corporations - Section 2(5) of the Succession Duties Act, S.N.S. 1972, c. 17, provided that the shareholders of a nonresident corporation, which became beneficially entitled to the deceased's property, were deemed to be successors of the deceased's property for purposes of succession duties - The Supreme Court of Canada held that s. 2(5) was intra vires of the Province of Nova Scotia - The Supreme Court of Canada held that the tax was upon residents in the Province and was therefore taxation within the Province and not a tax upon property outside the Province - See paragraphs 59 to 68.

Estate and Inheritance Taxes - Topic 101

Statutory interpretation - General principles - Dickson, J., of the Supreme Court of Canada in a dissenting judgment discussed the general principles of the interpretation of fiscal legislation - See paragraphs 86 to 94.

Estate and Inheritance Taxes - Topic 2156

Taxable property - Succession or property passing on death - Bequests to corporations - Deemed succession to shareholders - Effect of bequests to subsidiary - Whether the parent company was "beneficially entitled" to bequest to subsidiaries - Section 2(5) of the Succession Duties Act, S.N.S. 1972, c. 17, provided that the shareholders of a non-resident company, which became "beneficially entitled" to the deceased's property, were deemed to be the successors of the deceased's property for purposes of succession duties - To avoid succession duties a businessman left the residue of his estate to the Alberta subsidiary of an Alberta company in which his grandchildren owned the shares - Both companies were incorporated on his instructions - When he died, his estate argued that the parent Alberta company was not "beneficially entitled" to the deceased's property, which was left to its subsidiary - The Supreme Court of Canada held that the grandchildren of the businessman were liable to succession duties on his death - The Supreme Court of Canada held that the grandchildren were deemed successors to the bequest to the subsidiary, because the parent company was "beneficially entitled" to the property of the deceased as a result of the bequest to the subsidiary - See paragraphs 17 to 58.

Words and Phrases

Beneficially entitled - The Supreme Court of Canada discussed the meaning of the words "beneficially entitled" as found in s. 2(5) of the Nova Scotia Succession Duties Act, S.N.S. 1972, c. 17.

Cases Noticed:

MacKeen Estate v. Nova Scotia (1978), 28 N.S.R.(2d) 3; 43 A.P.R. 3, affirming 25 N.S.R.(2d) 572; 36 A.P.R. 572, refd to. [paras. 15 and 21].

Uniacke v. Attorney-General, [1947] 1 Ch. 615, consd. [paras. 24 and 98].

Re Chodikoff, [1971] 1 O.R. 321, dist. [paras. 33 and 106].

Rodwell Securities Ltd. v. Inland Revenue Commissioners, [1968] 1 All E.R. 257, dist. [paras. 37 and 115].

Littlewoods Mail Order Stores Ltd. v. McGregor, [1969] 3 All E.R. 855, folld. [para. 42].

D.H.N. Food Distributors Ltd. v. Tower Hamlets London Borough Council, [1976] 1 W.L.R. 852, folld. [para. 46].

McCreath et al. v. Minister of Revenue for the Province of Ontario, [1977] 1 S.C.R. 2; 8 N.R. 313, appld. [paras. 48 and 139].

Macaura v. Northern Assurance Company Limited and others, [1925] A.C. 619, dist. [paras. 57 and 126].

The Canada Trust Company and Ellett v. The Attorney-General of British Columbia, [1979] 2 W.W.R. 683, not folld. [para. 62].

Tennant v. Smith, [1892] A.C. 150, consd. [para. 86].

Attorney-General v. The Earl of Selborne, [1902] 1 K.B. 388, consd. [para. 86].

Commissioners of Inland Revenue v. The Duke of Westminister, [1936] A.C. 1, consd. [para. 87].

Corporation of the City of Toronto v. John Russell, [1908] A.C. 493, consd. [para. 93].

Sansom et al. v. Peay, [1976] 3 All E.R. 375, consd. [para. 94].

Re J. Bibby & Sons Ltd. Pensions Trust Deed, Davies v. Inland Revenue Commissioners, [1952] 2 All E.R. 483, consd. [para. 100].

Re Steed and Raeburn Estates, [1949] S.C.R. 453, consd. [para. 101].

Cossitt v. M.N.R., [1949] 4 D.L.R. 705, consd. [para. 103].

Wanklyn et al. v. M.N.R., [1953] 2 S.C.R. 58, consd. [para. 104].

People v. McCormick (1904), 208 Ill. R. 437, consd. [para. 108].

Montana Catholic Mission v. Missoula County (1905), 200 U.S. 118, consd. [para. 108].

Montreal Trust Company v. Minister of National Revenue (Torrance Estate), [1958] S.C.R. 146, consd. [para. 114].

Littlewoods Mail Order Stores Ltd. v. Inland Revenue Commissioners, [1969] 3 All E.R. 855, consd. [para. 124].

Bank voor Handel en Scheepvaart v. Slatford and another, [1951] 2 All E.R. 799, consd. [para. 126].

Salomon v. Salomon, [1897] A.C. 22, consd. [para. 126].

E.B.M. Co. Ltd. v. Dominion Bank, [1937] 3 All E.R. 555, consd. [para. 126].

Daimler Co. Ltd. v. Continental Tyre and Rubber Co. (Great Britain) Ltd., [1916] 2 A.C. 307, consd. [para. 126].

Standard Oil Co.'s Claim, [1927] B.Y. Int'l L. 156, consd. [para. 126].

Army and Navy Department Stores Ltd. v. M.N.R., [1953] 2 S.C.R. 496, consd. [para. 128].

Pioneer Laundry and Dry Cleaners Ltd. v. Minister of National Revenue, [1938-39] C.T.C. 411 (P.C.), consd. [para. 131].

Ransom v. Higgs (1974), 50 T.C. 1, consd. [para. 141].

Ebbw Vale Urban District Council v. South Wales Traffic Area Licencing Authority, [1951] 2 K.B. 366 (C.A.), consd. [para. 129].

Statutes Noticed:

Succession Duties Act, S.N.S. 1972, c. 17, sect. 1(ae) [paras. 7, 79]; sect. 2(5) [paras. 7, 79, 95]; sect. 8 [paras. 7, 60, 79]; sect. 9 [para. 7].

Trustee Act, R.S.N.S. 1967, c. 317, sect. 40 [para. 109].

Authors and Works Noticed:

Drache, Lifting the Corporate Veil: Legislative and Judicial Incursions for Income Tax Purposes (1977), 29 Tax Conference Report 673 [para. 131].

Durnford, The Corporate Veil and Tax Law (1979), 27 Can. Tax J. 282 [para. 131].

Fraser and Stewart, Company Law of Canada (5th Ed. 1962), p. 20 [para. 129].

Gower, Modern Company Law (4th Ed.), p. 123 et seq. [para. 130].

Mitchell, Taxation and The Corporate Veil (1966), 14 Can Tax J. 534 [para. 131].

Palmer, Company Law (22nd Ed.), vol. 1, paras 18-22, 18-23 [para. 130].

Tamaki, Lifting The Corporate Veil in Canadian Income Tax Law, [1961-62] 8 McGill L.J. 159 [para. 131].

Waters, The Law of Trusts in Canada (1974), pp. 833-835 [para. 97].

Counsel:

J.T. MacQuarrie, Q.C., R.N. Pugsley, Q.C. and R. Jones, for the appellants;

T.B. Smith, Q.C., J.W. Kavanagh, Q.C. and Alison Scott Butler, for the respondents;

H.L. Henderson and Marylyn C. Nash, for the intervenant Attorney General of British Columbia;

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

This case was heard on November 22, 1979, at Ottawa, Ontario, before MARTLAND, RITCHIE, PIGEON, DICKSON, BEETZ, McINTYRE and CHOUINARD, JJ., of the Supreme Court of Canada.

On July 18, 1980, the judgment of the Supreme Court of Canada was delivered and the following opinions were filed:

MARTLAND, J. - see paragraphs 1 to 69;

DICKSON, J., dissenting - see paragraphs 70 - 142.

PIGEON, BEETZ and CHOUINARD, JJ., concurred with MARTLAND, J.

RITCHIE and MacINTYRE, JJ., concurred with DICKSON, J.