Gale v Federal Commissioner of Taxation
(1960) 102 CLR 133 ALJR 564
[1960] ALR 274
(Judgment by: Menzies J)
Between: Gale
And: Federal Commissioner of Taxation
Judges:
Dixon CJ
McTiernan J
Fullagar J
Kitto J
Menzies J
Subject References:
Estate Duty (Cth)
Judgment date: 5 April 1960
Judgment by:
Menzies J
The estate of L.R. Gale, deceased, was assessed to estate duty on the footing that a gift which the deceased had made to Peggy Martin within three years of his death, was not a gift of 2,250 pounds, as the appellant as executor of the will of L.R. Gale, deceased, contends, but was a gift of a one-half interest as tenant in common in a grazing property, "Bibaringa", valued, after allowing for a mortgage, at about 28,270 pounds, as Walsh J. decided by the judgment now under appeal. (at p23)
The gift has already been the subject of litigation - Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96 - and in the judgments in that case the facts are set out in some detail. All that it is necessary to say here is that what actually occurred was the payment of 2,250 pounds by the deceased to M.C.R. Gale in satisfaction of the purchase price payable under a contract made on 5th December 1947 between Peggy Martin and M.C.R. Gale at the instance of the deceased for the purchase and sale of a one-half interest in "Bibaringa". It was argued for the Commissioner here that the statement of facts agreed upon by the parties for the purposes of the hearing before Walsh J. differ materially from the facts upon which the earlier case was decided, particularly in that there it was common ground that a parol contract between M.C.R. Gale and the deceased for the purchase of her "equity in land and buildings and household furniture for 2,250 pounds" made prior to the contract already referred to was unenforceable and the deceased obtained no proprietary interest in "Bibaringa" thereby, whereas the agreed facts, so it is contended, give rise to an inference that the contract, although parol, was enforceable because it had been partly performed. The acts relied upon for part performance do not seem to me to point unequivocally to the existence of such a parol contract and, in any event, specific performance of the contract could not have been obtained unless and until the consent of the delegate of the Treasurer under the National Security (Land Sales Control) Regulations then in force had been obtained. Furthermore, whether the contract between the deceased and M.C.R. Gale was enforceable or not, it is clear that its subject matter was not altogether the same as the contract between M.C.R. Gale and Peggy Martin, and it must, moreover, have been determined before the making of that contract. There was not simply a novation.
Upon the whole, I agree with Walsh J. that there is no material difference between the facts upon which this case is to be decided and those upon which the earlier case was decided. (at p24)
Walsh J. appears to have distinguished Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96 on the footing that the decision there depended upon the proviso to s. 102(2)(b) of the Stamp Duties Act (N.S.W.) to the effect that where there has been a gift of money, what is to be included in the estate is the actual money given or paid. There is no doubt that this proviso was relied upon, but I do not think it was treated as in itself decisive; rather it was regarded as a significant part of a provision which, as a whole, required that what was to be included in the estate of a deceased person was what passed from him by gift. In deciding in that case that it was money and not an undivided interest in "Bibaringa", the Chief Justice, after discussing the statute and earlier cases, said "In the end one may say that for present purposes it comes down to the question what did the deceased alienate" (1958) 101 CLR, at p 109 and then, having stated the facts he continued:-
"On the foregoing facts it is not difficult to understand why a contest should have arisen as to whether the subject matter of the gift by the deceased to Peggy Mary Martin, his future wife, should be regarded as a gift of money or of an undivided half share in the land" (1958) 101 CLR, at p 111,
and concluded:-
"But once the view of s. 102 (2)(b) stated in this judgment is adopted the facts show clearly enough that if the deceased had no right title or interest legally or equitably in the undivided half share in question the gift must be considered to be one of money. For on that footing it was of money that he divested himself" (1958) 101 CLR, at p 111.
My judgment was to the same effect (at p25)
I think, therefore, that this case is concluded by the earlier decision. What s. 8 (4)(a) of the Estate Duty Assessment Act requires for present purposes is, to keep closely to the language of the statute itself, the inclusion as part of the estate of a deceased person of the property which has passed from him by a gift inter vivos within three years of his death. If the property that so passed from him was money, it is money that has to be included as part of his estate. Our earlier decision was, as I have shown, that it was money and not an interest in land, and that decision is decisive here. (at p25)
In Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96 some reference was made to the decision of the House of Lords in Sneddon v. Lord Advocate [1954] AC 257 , where it was held that what passed as a gift inter vivos by way of a declaration of trust of 5,000 pounds to be invested by the trustees in shares which, at the date of the death of the truster, were worth 9,250 pounds, was the 5,000 pounds and not the trust fund and that under legislation which requires the inclusion in the estate of a deceased person of any gift inter vivos by way of declaration of trust made within five years before his death, the assessment should have been upon the money and not upon the trust fund in the state of investment at the death of the truster. In reaching this conclusion, the House of Lords expressed disapproval of the decision in In re Payne's Declaration (1939) Ch 865; (1940) Ch 576 where the Court of Appeal affirmed a decision of Simonds J. that upon the death of a settlor within a year of executing a settlement of an option and 10,000 pounds to purchase shares the subject of an option, estate duty was payable on the settled fund in its condition and at its value on the settlor's death. The decision so disapproved seems to have exerted an important influence upon this Court in deciding Teare's Case (Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation (1941) 65 CLR 134 and Vicars v. Commissioner of Stamp Duties (NSW) (1945) 71 CLR 309 The effect of the House of Lords decision upon these earlier cases was not discussed in Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96 , but as it is clear that Walsh J., in distinguishing that decision, was greatly influenced by the earlier decisions of this Court, it becomes necessary to consider how they stand in the light of Sneddon's Case [1954] AC 257 (at p26) t in point is Teare's Case (1941) 65 CLR 134 where, although the gift made by the deceased had been money which was used to buy shares, it was the value of the shares that was included as part of his estate on the basis that the subject matter of the gift of money was found in the shares into which it had been "transmogrified" (Rich J.) (1941) 65 C.L.R., at p. 141, "transmuted" (Starke J.) (1941) 65 CLR, at p 143 or which represented its "actual state of preservation" (Williams J.) (1941) 65 CLR, at p 148 It had been argued for the Commissioner that "the statute requires the assumption that the disposition was not made by the donor, but that the thing which passed from him remained part of his property. Any disposition by the donee is really immaterial" (1941) 65 CLR, at p 138 This argument, which was rejected by the Court, is right in line with what has now been decided by the House of Lords. I think that Teare's Case (1941) 65 CLR 134 should be reconsidered in the light of Sneddon's Case [1954] AC 257 and so far as it treated an acknowledged gift of money inter vivos either as a gift of the shares it was used to purchase or as something to be valued at the donor's death by reference to those shares, it ought to be overruled. The view of Rich J., with whom McTiernan J. concurred, that one of the gifts there in question was not a gift of money but was a gift of shares (1941) 65 CLR, at p 140, is a different matter, and as to that I do no more than refer to the statement of Lord Reid in Sneddon's Case [1954] AC, at p 280 and my observations thereon in Commissioner of Stamp Duties v. Gale (1958) 101 CLR, at p 116 In Moss v. Federal Commissioner of Taxation (1947) 77 CLR 184 , Williams J gave effect to the decision in Teare's Case (1941) 65 CLR 134 and held that gift moneys applied by the donees in making certain payments were to be included as part of the estate and valued as at the date of the death of the donor. His Honour said:
"In my opinion, a gift of property consisting of money must, like any other kind of property, be capable of being identified in its original or some derivative form at the date of death before it can be included in the notional estate, and must be valued in the form in which it exists at that date" (1947) 77 CLR, at p 188.
The decision that the gift of money must be valued in the form in which it existed at the date of the death of the donor must fall with Teare's Case (1941) 65 CLR 134 Vicars v. Commissioner of Stamp Duties (NSW) (1945) 71 CLR 309 is another case upon which Walsh J. relied; there the Court decided that where trustees used money provided by the deceased for the purchase of shares that it was the value of shares - constituting as they did the settled fund at the testator's death - that formed part of his estate. In so far as the decision rested upon the view that what had to be valued was the property subject to the settlement at the date of the settlor's death and not the property that was settled, I do not think that what was decided can be reconciled with Sneddon's Case [1954] AC 257 Vicars's Case (1945) 71 CLR 309 is a case like In re Payne's Declaration (1939) Ch 865; (1940) Ch 576 and in saying that the latter was wrongly decided, Lord Morton of Henryton said:-
"I can see no logical distinction, for the present purpose, between any of the following cases:
- (1)
- A.B. gives cash or transfers shares to C.D. for his own benefit;
- (2)
- A.B. declares that he will henceforth hold a sum of cash or a block of shares in trust for C.D. for life with remainder to other beneficiaries; (1945) 71 CLR 309
- (3)
- A.B. gives cash or transfers shares to C.D. and E.F. upon trust for G.H. for life with remainder to other beneficiaries.
In each case the property taken is the cash or shares which the donor gives or transfers or whereof he declares trusts" [1954] AC, at p 265
and added:-
"It is noteworthy that in Payne's Case (1939) Ch 865, at p 876 Simonds J. (as he then was) appears to have felt some doubt whether the words of the statute entitled him to 'isolate gifts by way of settlement from other forms of gift'. I think that this doubt was well founded, and I cannot find any words in the statute which justify such isolation" ([954] AC, at p 265.
These words would seem to me to apply with even greater force to an Act which requires the inclusion in the estate of a deceased person of property which passed from him by gift of the sort described. (at p27)
To decide this appeal, I do not regard it as necessary or desirable to consider either Watt's Case (Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co Ltd.) (1926) 38 CLR 12 and the question whether that decision is applicable to the Commonwealth Estate Duty Assessment Act, or the general problem of the valuation at death of property given away by a deceased person during his life and later included as part of his estate by virtue of s. 8 (4)(a) of that Act. (at p28)
I think this appeal should be allowed. (at p28)