Eurig Estate (Re)
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Facts[edit]
| Eurig Estate (Re) | |
|---|---|
 | |
| Hearing: April 27, 1998 Judgment: October 22, 1998 | |
| Citations | [1998] 2 S.C.R. 565 |
| Docket No. | 25866 |
| Prior history | [1997] O.J. No. 101 (QL) - Ontario Court of Appeal affirmed lower court’s decision [1994] O.J. No. 2570 (QL) - Found that probate fees were considered a fee not a tax, and properly authorized by law |
| Ruling | Appeal allowed |
| Holding | |
| Probate fees were considered direct taxes intra vires the province. However, the impugned legislation was unconstitutional as there was no legislative authority to impose the tax. | |
| Court Membership | |
| Chief Justice | Lamer |
| Puisne Justices | Bastarache, Binnie, Cory, Gonthier, Iacobucci, L’Heureux-Dube ́, McLachlin, Major JJ |
| Reasons given | |
| Majority | Lamer C.J. and L’Heureux-Dube ́, Cory, Iacobucci and Major JJ |
| Concurrence | McLachlin and Binnie JJ |
| Dissent | Gonthier and Bastarache JJ. |
The appellant Mrs. Marie Eurig was named as executrix of her late husband's estate, and was required to pay $5,710 to obtain letters probate. The ad valorem fee structure meant that the fee increased based upon the value of the estate. The Administration of Justice Act permitted the Lieutenant Governor in Council to make regulations requiring payment of fees in respect of court proceedings. The appellant challenged the constitutionality of the Province's probate fee regime.
Lower Court Decision[edit]
Ms. Eurig applied to the Ontario Court General Division for letters probate without paying the required fee. Her application was denied and she paid the fees under protest. In 1994, she made an application to have the letters probate granted without a fee, as the fee was unlawful. Morrison J. of the Ontario Court (General Division) rejected this application.[1] He categorized probate fees as a fee as opposed to a tax, as they were not universally applied, and could be avoided through estate planning.[2]
The Court of Appeal for Ontario dismissed the appeal. Morden A.C.J.O also categorized probate fees as fees, rather than taxes. While the fee was compulsory, it was not aimed at raising a revenue. The court took the position that probate fees were used to off-set administrative costs of the Province's court systems. The court also found that the fee structure was properly authorized by the Administration of Justice Act.[3]
Supreme Court of Canada Decision[edit]
Relying on their previous decision in Lawson, the Supreme Court set out the formula for determining whether a levy is a tax or a fee. The levy will be considered a tax where it is:
- (1) Enforceable by law
- Taxes are compulsory, while fees are only required to be paid when one seeks the services for which it is imposed
- (2) Imposed under the authority of the Legislature
- Per section 53 of the Constitution Act, 1867 taxes can only originate in the legislature. There must be an express delegation of taxing authority.
- (3) Levied by a public body, and
- (4) Intended for a public purpose
- To be categorized as a constitutionally valid “fee”, there must be a nexus between the amount charged, and cost of providing the service. Fees do not need to precisely correspond to the cost of service and some surplus is permitted.[4]
If something is categorized as a tax, it can either be direct or indirect. Direct taxes, such as income tax, are collected directly from the payor. Provinces have the constitutional authority to impose direct taxes under section 92(2) of the Constitution Act, 1867. Indirect taxes are demanded from one party, with the expectation that they will pass on the cost to a third party. Generally, provinces do not have the constitutional authority to impose indirect taxes.[4]
The majority found that probate fees were clearly levied by a public body. They considered probate to be “a practical and legal necessity”, thus compulsory and enforceable by law. The Supreme Court unanimously determined that the purpose of probate charges was to provide a surplus for general revenue. There was no evidence suggesting a reasonable nexus between the sliding scale fees and cost of providing the service. The majority concluded that probate charges were a direct tax, and thus within the jurisdiction of the Province.[4]
However, the majority also found that the tax did not originate in the legislature, and thus was not authorized by law as required by the Constitution. If taxing power is delegated, the delegation must be explicit. The impugned legislation only gave the Lieutenant Governor in Council the authority to impose fees, not taxes. The Court declared the fees to be invalid.[4]
The Court suspended their declaration of invalidity for six months to give the Province time to rectify its estate legislation or find alternatives for raising revenue. In Ontario, this was achieved through the Estate Administration Tax Act which retroactively deemed probate fees to be taxes and specifically exempted Mr. Eurig's estate from paying probate fees.[2] Other Provinces quickly followed suit, conducting Eurig reviews of their own estates legislation.[2]
Significance[edit]
This case sets out the test for classifying a levy as either a fee or a tax.
References[edit]
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