Federal Commissioner of Taxation v Westgarth
(1950) 81 CLR 39624 ALJ 129
[1950] ALR 439
(Judgment by: McTiernan J)
Between: Federal Commissioner of Taxation
And: Westgarth
Judges:
McTiernan JLatham CJ
Williams J
Webb J
Fullagar J
Subject References:
Estate Duty (Cth)
Judgment date: 23 December 1949
Judgment by:
McTiernan J
McTIERNAN J. delivered the following written judgment in which the facts are sufficiently set forth:
This appeal is made under s. 26 (9) of the Federal Estate Duty Assessment Act 1914-1942 against a decision of a Board of Review given upon a reference for which ss. 24 (4) (a) (ii) and 26 (1) of the Act provide. The decision of the Board involves a question of law. The question is whether an amendment of an assessment increasing the liability of this estate for duty is a valid exercise of power under s. 20 of the Estate Duty Assessment Act 1914-1942. (at p397)
The only two questions which have been raised are whether the second sub-section of s. 20 applies to the case, and, if not, whether the third sub-section applies. (at p397)
The commissioner alleges that the respondents had not made to him a full and true disclosure of all the material facts necessary for the making of an assessment. The respondents deny this allegation. If this allegation is not sustained, s. 20 (2) does not apply. (at p397)
The only fact within the class of facts defined in the sub-section which the commissioner alleges that the respondents did not fully and truly disclose was the value of a cottage, No. 26 Kent Street, Rose Bay, which was part of the estate left by the testatrix. (at p397)
In the return of the estate made under s. 10 of the Act, and verified on 22nd November 1945 in compliance with s. 12, the respondents stated that the value of this cottage was 2,750 pounds. This statement refers to the value of the cottage at the date of the death of the testatrix. The date was 15th October 1945. (at p397)
The respondents annexed to their return a certificate of valuation given by the Valuer-General of New South Wales under the State's Valuation of Land Act, 1916. The Valuer-General thereby certified that the improved value of the property, that is the cottage and land, on 15th October 1945 was 2,750 pounds. (at p398)
The notice of the original assessment is dated 28th May 1946. The original assessment does not show the amount at which No. 26 Kent Street was assessed for duty. The notice of the amended assessment is dated 30th September 1946. The amended assessment shows that the value for duty of the cottage was originally assessed at 2,750 pounds. (at p398)
The material part of the amended assessment is as follows: -
"Amended on account of increased value of 26 Kent St., Rose Bay, to agree with consent price of delegate of the Treasurer for sale thereof. Prev. Ass'd. 2,750 pounds. Now Ass'd. 3,200 pounds. Add: 450 pounds." (at p398)
The value for duty of the estate was originally assessed at 15,807 pounds and the duty payable thereon was previously assessed at 749 pounds 5s. 0d. The amended assessment added 450 pounds to the value for duty and increased the duty payable by 40 pounds 16s. 10d. (at p398)
The respondents paid the duty previously assessed before they received the notice of the amended assessment but this circumstance is not of any importance: see s. 20 (1). (at p398)
The sale to which the commissioner refers in the amended assessment was a sale of the cottage to the tenant at the price of 3,200 pounds. The date of the contract was 29th July 1946. (at p398)
The date of the respondents' return in which they stated that the value of the cottage on 15th October 1945 was 2,750 pounds was 22nd November 1945, and the date of the Valuer-General's certificate, annexed to the return, was 30th October 1945. (at p398)
The National Security (Economic Organization) Regulations applied to the sale. The Delegate to the Treasurer consented to the sale to the purchaser at the contract price, 3,200 pounds. That official acted it seems, upon a certificate of valuation which shows that the valuer, who gave it estimated that the "10/2/42 market value of the existing property", (No. 26 Kent Street) was 3,200 pounds. (at p398)
In the present proceedings the commissioner called two expert witnesses who gave opinion evidence of the value of the cottage on 15th October 1945. Their opinions coincided. Each said in evidence that the value of the cottage on 15th October 1945 was 3,200 pounds. (at p398)
The commissioner contends that the value of the cottage on 15th October 1945 was a fact and that this fact was not fully and truly disclosed by the statement in the return that the value of the cottage was 2,750 pounds. (at p398)
It may be conceded that value is a fact. The full and true disclosure of all the material facts to which s. 20 (2) refers may involve the full and true disclosure of value. (at p399)
In order to decide whether the respondents had not made a full and true disclosure of the value of the cottage on 15th October 1945 it is necessary to inquire what that fact was. The value was not a fact existing independently of the mind. It was not a fact like the cottage itself. The inquiry is about the sufficiency of the disclosure of a fact of which the apprehension was subjective. The realty of the value of the cottage was the value it was thought to have. It was a thing determined by the mind of the valuer. (at p399)
The respondents stated that the value was 2,750 pounds. That was a disclosure of a fact if it represented what they thought was the value. The fullness and truth of that disclosure cannot be checked except by ascertaining the value which was actually determined by their minds. There is no proof whatever that the amount of 2,750 pounds did not represent their genuine opinion. The respondents also furnished the certificate of valuation given by the Valuer-General. That also was the disclosure of a fact if it represented what he thought was the value. There is no suggestion that it did not do so. (at p399)
The only question here is one of the true and full disclosure of the money's worth of the cottage on 15th October 1945. The matter of the disclosure could only consist of valuations of the cottage as at an appropriate date made before the original assessment. (at p399)
Regarded as a fact, the value of 3,200 pounds had no actual existence until the cottage was valued at that amount. Then that fact came into existence in the mind of the valuer. It is not suggested that before the original assessment anybody valued the cottage at 15th October 1945 at 3,200 pounds. If there were any proof that the cottage had been valued before assessment at more than 2,750 pounds the respondents' knowledge of that valuation might be involved in the issue whether they had not made the full and true disclosure of value. (at p399)
Section 20 (3) refers to material facts necessary for the making of an assessment. These facts obviously do not include a fact which had no actual existence before the assessment. It does not include a value, which before that time, nobody had estimated. There is no proof that there was in existence before the assessment a valuation of the cottage on 15th October 1945 at 3,200 pounds. (at p399)
The result is, in my opinion, that the state of facts necessary for the application of s. 20 (2) is not shown to have existed. (at p399)
There is the alternative contention that s. 20 (3) applies to this case. This contention implies a denial of the allegation made to sustain the amendment under s. 20 (2). (at p400)
The amendment increases the liability of the estate. The power under s. 20 (3) upon which the commissioner relies is limited to the correction of an error in calculation or a mistake of fact. In reply to the respondents' objection to the amendment, the commissioner advised them that it was made to correct a mistake of fact and was justified by s. 20 (3). It was contended again in these proceedings that the amendment was made to correct a mistake of fact. (at p400)
The alleged correction made by this amendment of "a mistake of fact" is the alteration of the value of the cottage from 2,750 pounds to 3,200 pounds. (at p400)
The amendment made a fresh assessment of the value of the cottage: it set aside the previous assessment. The words of the amendment are "Previously assessed 2,750 pounds now assessed 3,200 pounds." (at p400)
The amended assessment declares that the reason for amending the assessment is to make the value for duty, as assessed, agree with the price at which the Treasurer consented to the sale. The commissioner contends that this procedure is the correction of a mistake of fact. I do not agree. (at p400)
Both the assessment and the amendment show clearly that the commissioner did originally assess the value of the cottage at death at 2,750 pounds. Regarding value as a fact, the fact as determined by the mind of the commissioner was 2,750 pounds. If it appeared that the commissioner assessed the value at 3,200 pounds but wrote 2,750 pounds, the latter figure would be a mistake of fact. But that is not this case. In the present case the commissioner has not altered the value in the original assessment to make it agree with the value at which he originally assessed it. He has made a fresh assessment of the value of the cottage. The power under s. 20 (3) is limited to the correction of an error in calculation or a mistake of fact. The assessment of the value of the cottage as at 15th October 1945 at 2,750 pounds may have been a mistake in the sense that 3,200 pounds was a sounder or more reasonable valuation than 2,750 pounds. The power under s. 20 (3) is not a power to correct any mistake. It is a power to correct only a mistake of fact. The terms of the amendment show that the commissioner considered in the light of subsequent events that he made an error of judgment in assessing the value of the cottage at 2,750 pounds. A mistake of fact in the context of s. 20 (3) does not include an error of judgment. (at p400)
The conclusions at which I have arrived are as follows: - (at p400)
I am satisfied upon the evidence that it is not the fact that the respondents did not make to the commissioner a full and true disclosure of all material facts necessary for assessing the value for duty of the cottage in Kent Street. (at p401)
I cannot doubt that upon the true construction of sub-ss. (2) and (3) of s. 20, the return and the schedules relating to this property and its value constituted a full and true disclosure of all the material facts necessary for assessing the value for duty of that property. (at p401)
The fullness and truth of the disclosure made in the return and these schedules is not prejudicially affected to the smallest degree by the valuation subsequently made for the purposes of the National Security (Economic Organization) Regulations, or the official consent to a sale at that price, or the sale by the respondents at that price, or the evidence given at this hearing of the value of the property at the death of the testatrix. (at p401)
I find also that the commissioner did not make the original assessment under any mistake of fact. Taking the amendment itself and considering it with all the circumstances of the case, its effect is not to correct any error of calculation or mistake of fact. The conclusion which I reach is that the amendment was made in order to correct an error of judgment which the commissioner believed he made, after he received information that the Delegate to the Treasurer had consented to the sale at a price in excess of the figure at which the Valuer-General of New South Wales valued the property. There was much argument on the question whether value is a matter of fact or of opinion. The initial question is whether the subject matter of the correction made by the amendment is either an error in calculation or a mistake of fact. In my opinion it is neither of these things. (at p401)
I dismiss the appeal with costs. (at p401)
From that decision the commissioner appealed to the Full Court of the High Court. (at p401)
The relevant statutory provisions are set forth in the judgments hereunder. (at p401)
F. W. Kitto K.C. (with him J. P. Hannan), for the appellant. There was not a full and true disclosure of all material facts necessary for making the assessment, therefore under s. 20 (2) (b) of the Estate Duty Assessment Act 1914-1942 the commissioner had power to amend within three years. If sub-s. (2) of s. 20 does not apply then the matter comes within sub-s. (3) as being a case where although full and true disclosure was made the amendment was the correction of an error in calculation or a mistake of fact. The matter with which the commissioner was concerned was the value of the assets at the death of the deceased. The value of the property at the date of death was a material fact which was not fully and truly disclosed. For this purpose, although not for the purpose of any liability for penalty, a person is affected by the non-disclosure of a fact which he did not know. If the commissioner can satisfy the appropriate tribunal that the true value was in fact more than the administrator had stated it to be then sub-s. (2) of s. 20 applies and he can, within the period of three years, collect the duty which really was payable under the Act. If an administrator mis-states, however honestly, the value of an asset sub-s. (2) of s. 20 applies. By virtue of s. 26 (9) it was not open to the respondents on this appeal to question the value of the property at 3,200 pounds; that could have been, but was not, challenged under ss. 24, 25. There cannot be here any challenge to value from the decision of the Board of Review, but there might have been from a decision of the Valuation Board. The High Court upon an appeal from the Board of Review, as distinct from an appeal from a decision by a Valuation Board, was not asked or allowed to deal with the question of value. If the question of value is to be made the subject-matter of an objection it can be pursued in two ways, one is direct to the Court when a question of law is involved under s. 24 (4) (b), then everything is open.
The alternative courses are on value to a Valuation Board under s. 24 (4) (a) (i), on other questions to a Board of Review. The Valuation Board does but the Board of Review does not deal with value. In either case if a question of law be involved there may be an appeal to the High Court. This Court is not seized of any other matter than the one which was before the Board of Review: s. 26 (9). It was proved before McTiernan J. that at the date of the deceased's death the value of the subject property was 3,200 pounds. A State Valuer-General's certificate of valuation is not evidence for purposes of land tax (Federal Commissioner of Land Tax v. Duncan (1915) 19 CLR 551 )) This is a case where there was only one question of fact, namely: What was the value of the property at the date of death? The commissioner and the administrators wrongly supposed that the value was 2,750 pounds (see Federal Commissioner of Taxation v. Hayden (1944) 7 ATD 440 , at p 442)) Value is an objective thing however difficult it may be to ascertain. McTiernan J. confused the process of valuation with the value, which was an objective act, not to be looked for in a mind or minds which postulate particular individuals because if so there would be as many facts with regard to the value of land as there were people to consider. (at p403)
(WILLIAMS J. referred to Bisset v. Wilkinson [1927] A.C. 177 ).) (at p403)
The Act requires the duty to be assessed on the real value of property. Value is an ascertainable fact: see ss. 8-10, 15, 16A and 19. An erroneous statement of value is a mistake of fact. As shown by s. 48 there is a difference between non-disclosures which enable an amendment of the assessment to be made and those which result in criminal liability. Value is a question of fact (Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 , at pp 380, 388, 397, 398, 400; Trustees Executors and Agency Co. Ltd. v. Commissioner of Taxes (Vict.) (1941) 65 CLR 33 , at pp 36, 37, 40; McCathie v. Federal Commissioner of Taxation (1944) 69 CLR 1 , at pp 10, 11; Commissioner of Succession Duties (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd. (1947) 74 CLR 358 , at pp 361 370 The judge was in error in looking at this matter as if the value equalled valuation and was a subjective fact - a state of mind. The case falls within s. 20 (2). "Disclosure of all material facts" has the same meaning as "statement of all material facts." Knowledge of the value is immaterial, the only question is: Was the real value stated, that is, disclosed? The object of s. 20 is to get the correct amount of duty. The decision in Noud v. Federal Commissioner of Taxation (1949) 66 WN (NSW) 186 runs counter to the cases referred to above and to the true construction of the Act. (at p403)
K. W. Asprey, for the respondents. There was a full and true disclosure within the meaning of s. 20 (2) of the Act. At the relevant time the real value was not capable of being known because the mere expression of opinion by anybody that the subject land was worth any particular amount was itself not a fact. In order to determine what was meant by the word "disclosure" in s. 20 (2) regard should be had to the Act to ascertain what it contemplated as the criterion of disclosure. That word cannot be so construed as to cast an obligation upon administrators to disclose something which at the time was not capable of being known. Value is not in itself a fact. It does not become so until a court translates it, by virtue of judicial process, into a final determination. Facts are matters upon which the court decides particular questions posed before it, and it is an exception to the general rule that the court does act in this and other kindred matters on opinion evidence. The court acts on the opinions of experts as to the value of particular land. In the original assessment the commissioner chose to accept the opinion of the Valuer-General of New South Wales, and when he purported to amend that assessment he accepted the opinion of the delegate to the Treasurer, but he did not make the mistake as to a fact. The value had not increased since the original assessment. (at p404)
(LATHAM C.J. referred to The Moreton Club v. The Commonwealth (1948) 77 CLR 253 .) (at p404)
The commissioner showed that he was not mistaken in the first place as to fact and that all he did was to change his mind as to which opinion he preferred to adopt. The mistake, if any, must have been made prior to the date of the original assessment and there is not any such evidence. The opinion as to increased valuation was not given until a considerable time after that date. The respondents did all that they were able to do, that is, they disclosed their honest opinion. Price is not necessarily value. To prefer one opinion to another is not a mistake as to a fact. There was not any evidence before or finding by the judge appealed from of any value of 3,200 pounds: there was not any such evidence called before the Board of Review. The commissioner did not have any jurisdiction to issue the "amended" assessment. "Value" is a word which is not capable of easy definition. It determines nothing for any valuer to express to the commissioner what the value is of any particular land. Apart from whether it was a mistake of fact, there was not any evidence that there was any mistake. The onus of proof was upon the commissioner. He may have considered all these matters up to the date of the original assessment. Section 8 (1) casts upon the commissioner the duty of himself arriving at a value of the various items disclosed in an estate duty return. It is an opinion or estimate which the commissioner is required to give. Sections 14 and 16 show that in assessing, the commissioner assesses the value of the particular property and then calculates the duty payable upon the entire dutiable estate. He, himself, merely estimates the value of the property, or he may adopt the value of somebody else. This type of statutory provision was adverted to in Denver Chemical Manufacturing Co. v. Commissioner of Taxation (N.S.W.) (1949) 79 CLR 296 . (at p404)
F. W. Kitto K.C., in reply.
Cur. adv. vult. (at p404)