In the fall of 1998, the Supreme Court of Canada ruled that Ontario's court fees for estate administration were invalid. The Supreme Court then suspended its decision for six months and invited the Province of Ontario to clean up its act. 

A few months later, the Province obliged. It passed an act which retroactively validated the fees as a new tax. 

These court fees were previously called probate or administration fees. When an application was filed with the court to prove the last will and testament of a deceased person, the court collected a fee, supposedly for this service.  If there was no will, the closest next-of-kin or their nominee would apply to be appointed administrator of the estate. The same fee was charged.

For a long time, the fee was ½ of 1% (0.5%) of the estate value. For a $200,000 estate, the fee was $1,000. For a $2 million estate, it was $10,000. 

In 1992, the Ontario government changed the fee structure.  It continued charging $5 per $1,000 of estate value, but only for the first $50,000 of estate value. For the remaining estate value above $50,000, it tripled the fee from $5 to $15 per $1,000 of estate value.  Now the fee for a $200,000 estate was $2,500 instead of $1,000. For the $2 million estate, it became $29,500 instead of $10,000.

This made some people took a closer look at what they were getting for their money.  The probate process involved no court hearing and no serious deliberation. It looked as though court officials merely processed some papers prepared by the applicant’s lawyer. How much more intensive was the processing for a $29,500 fee compared to a $2,500 fee? Not one whit.  Zero.  Nada.

People soon could be heard to grumble that this was not a fee at all. THIS WAS A TAX. 

Marie Sarah Eurig lost her husband either in October, 1993 (according to Justice Morrison who heard the initial application) or in October, 1992 (according to Justice Morden who wrote the decision of the Ontario Court of Appeal panel of 3 judges). In any event, Mrs. Eurig was surprised to learn that to deal with her husband’s estate of $414,000, she would have to "prove" his last will. After all, she was his widow and lawful next-of-kin. To add insult to injury, the fee under the new schedule would be $5,710 for a simple, straightforward application.

Mrs. Eurig thought this sounded like a tax. Her lawyers agreed. She brought a special application seeking not only Letters Probate, but also an order permitting her to get them without having to pay the illegal tax, or invalid fee.

In October, 1994, Justice Morrison considered various arguments. Mrs. Eurig heard that a tax had to be compulsory. She heard that she didn’t have to apply for probate. With one or more financial institutions or other asset holders insisting that she deliver a copy of these Letters Probate before they released any assets, the need for these letters seemed pretty compulsory, at least from Mrs. Eurig’s point of view. The court upheld the fee.

Mrs. Eurig was upset. She wanted to appeal and she did. Remember that this was not about a $149,500 fee on a ten million dollar estate. A trip to the court of appeal is expensive.

In the midst of preparing for her appeal, Mrs. Eurig found that the government was doing some tinkering. They started changing the names of statutes and all sorts of things. They threw out obscure, technical terms and substituted descriptive language. An executor named in a will had previously received Letters Probate from the court. The "fee" would now be payable for a Certificate of Appointment of Estate Trustee with a Will. Where there was no will, the next-of-kin or their nominee would now receive a Certificate of Appointment of Estate Trustee without a Will instead of Letters of Administration. But other than substituting this new wording, the regulation setting the "fee" stayed the same. Mrs. Eurig continued.

In January, 1997, the Ontario Court of Appeal agreed with Mrs. Eurig that her application was compulsory. She had no choice. It was the right thing and the only thing to do. BUT ? the court held that the fee was properly authorized. It was not a tax. It had not been passed under the revenue-generating, taxing powers of the province. It was not for a general public purpose. It was part of a regulatory scheme for the administration of justice and the operation of the courts in the Province of Ontario.

Mrs. Eurig was still upset. She wanted to appeal again and she did. Remember that this was not about a $749,500 fee on a fifty million dollar estate. A trip to the Supreme Court of Canada is also expensive.

On October 22, 1998, all 9 judges of the highest court agreed with Mrs. Eurig and the public grumblings. The work of the court staff was substantially the same from one estate to the next. The difference between a fee of $2,500 and a fee of $749,500 bore no relation to the service. A percentage fee looked like a tax; it quacked like a tax; IT WAS A TAX.

Two of the 9 judges made Mrs. Eurig nervous. They decided that even though the fee was actually a tax, it had been properly authorized and was valid. The other 7 judges stuck to their guns. The legislation had delegated to the Lieutenant Governor the authority to make a regulation requiring the payment of a fee for a court application. Having already decided that the fee was a tax, these 7 judges determined that the Lieutenant Governor had acted improperly by imposing a tax instead of a fee.

The court decided that Mrs. Eurig should get back the "fee" of $5,710 which she had been forced to pay under protest. It also ordered that she should recover her costs of her journey through the different courts.

The other thing that made Mrs. Eurig, and everyone else, nervous was the decision by the court that its decision would be meaningless for 6 months. This would give the province an opportunity to remedy this technicality, this oversight.

After the court’s decision, people starting looking for refunds of these "illegal fees" --almost 50 years’ worth. Even though the province had done significant cutting and slashing, it was still running a few billion dollars short each year. It could not afford a few billion more dollars in refunds.

Give Premier Mike credit. He didn’t take 6 months. He took less than 2. In his plainspeak tradition, he also called it what it was. Just before Christmas, 1998, the government of Ontario passed Bill 81.

The Estates Act was amended by deleting certain sections which previously made reference to the "fees."  Instead, the Estates Act now refers to payment of an amount "required by the Estate Administration Tax Act, 1998." 

The new Estate Administration Tax Act, 1998 is deemed to have come into force on May 15, 1950.  The new tax applies to all applications to the court since 1950. The new tax is payable upon the issuance of an estate certificate (formerly Letters Probate) by the court at any time since 1950.

The act sets forth a dated list of tax rates since 1950.  The list coincidentally corresponds to those probate fees which were in existence at the time of the application to the court. Any probate fees which have been paid since 1950 are now credited against the tax which is now payable in each individual estate application.

What about Mrs. Eurig’s tax? Premier Mike did the fair thing. Mrs. Eurig had been through enough. Subsection 7(2) of the new Estate Administration Tax Act, 1998 specifically states:
 

James F. O’Brien is a partner in the Belleville law firm of Reynolds O’Brien LLP. He is a councillor of the Canadian Bar Association, councillor and Executive Committee member of the Ontario branch of the Canadian Bar Association, director and past-president of the Hastings Law Association and director of the Quinte Estate Planning Council. Mr. O’Brien is also a member and former director of the Belleville and District Chamber of Commerce. 
 
 
 

Lawyer James F. O’Brien would be happy to meet with you to discuss other questions you might have regarding wills or estate planning.