Buzza v Comptroller of Stamps (Victoria)

83 CLR 286
1951 - 0427A - HCA

(Judgment by: Williams J)

Between: Buzza
And: Comptroller of Stamps (Victoria)

Court:
High Court of Australia

Judges: Latham CJ
Dixon J
McTiernan J

Williams J
Webb J
Fullagar J

Subject References:
Taxation and revenue
Stamp duties
Deed of settlement
Agreement varying trusts of will
Extent of property settled

Legislative References:
Stamps Act 1946 (Vic) No 5204 - s 17; Third Schedule

Hearing date: Melbourne 14 March 1951; 15 March 1951
Judgment date: 27 April 1951

Sydney


Judgment by:
Williams J

This is an appeal from an order of the Supreme Court of Victoria (Sholl J.) made in a case stated by the comptroller pursuant to s. 33 of the Stamps Acts 1946-1949 (Vict.).  The case stated contains two questions for the opinion of the Court, the first whether the indenture of 3rd June 1949 referred to in the case is chargeable with duty, and the second with what amount of duty is it chargeable.  His Honour answered the first question that the indenture is chargeable with duty and the second question that it is chargeable with PD887 17s. 0d. duty.  The appellants are Rose Ann Buzza, the widow of Thomas Henry Buzza, Emily Genevieve Ryan, Sybil Monica Connellan, Eileen Lever and Thomas Joseph Buzza, the three children and adopted daughter of Thomas Henry Buzza, and they have appealed against both these answers.  The respondent is the Comptroller of Stamps.  

The material facts are in a small compass:Thomas Henry Buzza died on 26th April 1930.  By his will dated 9th January 1924 he appointed the National Trustees Executors and Agency Co  of Australasia Ltd , his executor and trustee.  After bequeathing certain specific and pecuniary legacies and an annuity, he devised and bequeathed his residuary real and personal estate to his trustee upon trust so far as it did not consist of authorized investments to sell, call in and convert the same into money, with power to postpone conversion, and after payment thereout of his debts etc to stand possessed of his residuary estate upon trust to pay one-third of the income thereof to his wife during her widowhood, and subject thereto upon trust as to both the capital and income for all and every his children and his adopted daughter  Eileen Buzza who being sons attained twenty-one or daughters attained that age or married and if more than one in equal shares as tenants in common.  The testator empowered his trustee in its absolute discretion to invest any part of the trust moneys forming part of his residuary estate in the purchase or lease of a dwelling house for the use of his widow during her widowhood, she permitting such of his children including his adopted daughter as should for the time being be unmarried and under the age of twenty-one years to reside therein with her, all rates, taxes and outgoings in respect of such property to be paid out of his estate with full power to his trustee to sell and dispose of any such dwelling house at any time it thought fit.  

By an indenture made on 3rd June 1949 between the testator's widow Rose Ann Buzza of the one part, the children and adopted daughter of the testator of the second part, and the trustee company of the third part, after reciting the trusts of residue and that the children were desirous of having a present distribution of their respective presumptive interests in the residuary estate of the testator, and that doubts had arisen whether on the true construction of the will such distribution could lawfully be presently made, and that the widow and children were all of age and had agreed that the residuary estate should be administered in manner thereinafter appearing, it was witnessed that the trustee agreed to administer the residuary estate as if, without otherwise affecting the provisions of the will, it had therein been provided that the trustee should hold such estate, upon trust as to the freehold properties and effects set out in the schedule thereto to hold the same to the use of the widow during her life or widowhood with remainder to the children in equal shares as tenants in common, provided, however, that should the net income to be derived from such properties during such term be less  than the sum of PD340 in any year the amount of such deficiency should be raised for the benefit of the widow and charged upon the freehold properties in the said schedule, and that subject thereto the remainder of the residuary estate and the income thereof should be appropriated and distributed forthwith among the children in equal shares as tenants in common.  The schedule to the indenture comprised real estate Nos. 129 and 131 Nicholson Street, Footscray, 3 Dane Street, Footscray, and 72 Monash Avenue, Ascot Vale, together with the furniture, household effects and piano therein contained.  

It will be seen that under the will during the widowhood of the testator's wife the children could not, without her consent, require the trustee to distribute any part of the corpus of residue amongst them because she was entitled to  one-third of the income of the whole residuary estate and this income could fluctuate from time to time, and also because of the provision authorizing the trustee in its discretion at any time during the widowhood to invest any part of the residue in the purchase of a dwelling house.  The purpose of the indenture was, therefore, as the recitals stated, to allow the children to have a present distribution of part of the corpus of residue.  Accordingly, by agreement between the widow and children, including the adopted daughter, they being all sui juris and the only persons entitled to residue, the trusts of the indenture were substituted for the trusts of the will and the trustee agreed to administer the residue upon the trusts of the indenture in place of the trusts of the will.

These trusts differed materially from the trusts of the will because under the indenture the widow was confined to the income of the real estate included in the schedule with the right to resort to the corpus if the net income in any year was less than PD340, and the trustee no longer had a discretion to invest part of the corpus of residue in the purchase of a dwelling house for the widow.  The children became entitled to an immediate distribution of the residue other than the real and personal property in the schedule.  They became entitled to the property in the schedule as tenants in common in equal shares in remainder upon the death or remarriage of the widow.  The trust for conversion contained in the will was eliminated and the children became entitled to equal shares in the existing property in specie.  The most usual form of settlement is an instrument which settles the enjoyment of property on persons in succession but an instrument can be a settlement, although the proprietary interests which it creates are not interests in succession (Kane v  Kane: [F22] Lloyd v  Prichard; [F23] Re Berens' Settlement Trusts; Berens v  Benyon; [F24] Davidson v  Armytage, [F25] at pp. 210, 211; Davidson v  Chirnside, [F26] at pp. 339, 348).  

The Comptroller of Stamps claims that the indenture is dutiable under Part IX. (1) of the Third Schedule to the Stamps Acts, which provides, so far as material, that duty shall be payable upon an instrument other than a will or codicil, whether voluntary or upon any good or valuable consideration other than a bona-fide adequate pecuniary consideration and whether revocable or not whereby any property is settled or agreed to be settled in any manner whatsoever, such instrument not being made before and in consideration of marriage.  This Part provides for duty on the value of the property at so much per cent on an ascending scale.  The value of the whole of the assets comprised in the residue on 3rd June 1949 was PD29,594 and the sum of PD887 17s. Od. is the amount of duty payable under the Part on this value.  

The indenture of 3rd June 1949 is, my opinion, an instrument whereby property is settled in a certain manner within the meaning of the Part.  The settlors are all the parties to the indenture other than the trustee.  Under the will these parties each had an equitable interest in the residuary estate of the testator.  The legal estate was in the trustee which had active duties to perform during the widowhood of the widow and on her remarriage or death.  But it lay within the power of the widow and children collectively to determine these trusts and require the trustee to dispose of the residue in any manner they thought fit.  They could have required the trustee to make an immediate distribution of the property amongst themselves.  But they did not do so.  They exercised their collective power in the manner set out in the indenture.  Under this instrument the legal estate remained in the trustee.  The trustee still had active duties to perform.  But they were different duties to those required by the will and the beneficial interests of the widow and children in the residue were different to those they enjoyed under the will.  Thenceforth the duties of the trustee and the beneficial interests of the widow and children in the residue were entirely governed by the trusts and powers of the indenture and these trusts and powers were altogether independent of the trusts and powers contained in the will.  

It would be unwise to attempt to define what instruments are settlements and what are not.  But at least it can be said that when a person or persons who own property at law or in equity solely or collectively dispose of that property by vesting in a trustee on beneficial trusts for the benefit of themselves and others, such persons settle that property.  And it is immaterial that the property is already vested in the trustee when the trusts are created (as in the present case) or that the trusts are created before the property is vested in the trustee and await the vesting for their operation.  In Commissioner of Stamp Duties (Q.) v  Hopkins, [F27] at p.378 Dixon J. said:

"An instrument is a settlement because it creates trusts and contains limitations which restrict or affect alienation and transmission, according to the course provided by law for estates in fee simple or a full ownership."

In Masserene v  Commissioners of Inland Revenue, [F28] at p. 146 Palles C.B. said, in a passage which exactly fits the present case:

"It is essential to such an instrument that there shall be-

1,
such free property, by which I mean property which then is not, according to our jurisprudence, subject to the trusts in question;
2,
a settlor, who either is, or appears on the face of this instrument to be, competent to subject that free property to trusts which, until the execution of the instrument, did not bind it; and
3,
an imposition by the instrument of such trusts upon such property."

The present case is in essence indistinguishable from Commissioner of Stamp Duties (Q.) v  Chaille. [F29]   It is a stronger case than Davidson v  Chirnside, [F30] for there the trusts of the indenture corresponded with the trusts of the will, whereas in the present case they are different.  

The consideration moving from each of the parties to the indenture of the first and second parts was that they gave up their existing equitable interests in the residue and the consideration moving to each of them was that they acquired new equitable interests in the same property.  Accordingly, each gave consideration for what they received which could be described as bona fide and adequate, but to take a settlement out of Part IX. (1), it is necessary that the consideration shall be pecuniary.  The consideration under discussion could not, in my opinion, be said to be a pecuniary consideration.  Such a consideration must be payment in money and not a bringing into a pool of an interest in property.  "The term 'pecuniary consideration' must relate to those things which pass as money in the ordinary intercourse of life" (per Littledale J. in Cumberland v  Kelley: [F31] Stroud's Judicial Dictionary under title Pecuniary Consideration, 2nd ed. (1903)).  It was urged that the widow at least gave pecuniary consideration, for she gave up the income of one-third of the residue under the will in exchange for the rents from the real estate in the schedule to the indenture.  But her interest in one-third of the residue under the will could not be said to be a pecuniary interest although it produced periodical sums of money any more than an investment which produced interest or rents or dividends could be said to be the equivalent of money.  It was a proprietary equitable interest in the assets comprised in the residue and in no sense a sum of money.  It follows that, in my opinion, the indenture of 3rd June 1949, while it is an instrument whereby property is settled, is not an instrument whereby property is settled for a bona-fide adequate pecuniary consideration.  

The further question arises whether duty is payable on the whole of the property subject to the indenture or only upon the property settled upon the widow during her widowhood and after her remarriage or death upon the children or, in other words, upon the value of the real estate comprised in the schedule.  No doubt there could be an indenture which included property which was settled or agreed to be settled and property which was not settled or agreed to be settled, but the present indenture is not such an indenture.  It is not merely a settlement of the property comprised in the schedule upon the widow during her widowhood and the children after her death.  It is a settlement of the whole corpus of residue because, as I have said, it creates different equitable interests in the residue as a whole to those which existed under the will (Attorney-General v  Seccombe, [F32] at p. 699; Quigley's Case (Commissioner of Stamp Duties (N.S.W.) v  Perpetual Trustee Co  Ltd); [F33] Carmichael's Case. [F34]  

In my opinion his Honour's answers to the questions were right and the appeal should be dismissed with costs.