Between: National Trustees Executors and Agency Co of Australasia Ltd
And: Federal Commissioner of Taxation

Judges: Dixon CJ
McTiernan J and Taylor J
Fullagar J

Kitto J

Subject References:
Succession
Estate duty
Assessment
Right to share of profit
Valuation at death

Legislative References: - Estate Duty Assessment Act 1914 (No 22); Wool Realization (Distribution of Profits) Act 1948 (No 87)

SYDNEY

Judgment by:
Kitto J

KITTO J. The Court has before it a case stated in an appeal by the executor of one Walter Cobbold Curphey Cain deceased (who will be referred to as the testator) against an amended assessment of the estate duty payable in respect of the testator's estate under the provisions of the Estate Duty Assessment Act 1914-1947.

The testator who carried on the business of a pastoralist and a wool-grower, died on 30th April 1949, domiciled, apparently, in Australia. In his lifetime he had submitted for appraisement, in accordance with the National Security (Wool) Regulations, certain wool which he had shorn in the seven wool seasons of the war period. The submission for appraisement operated as a compulsory acquisition of the wool by the Commonwealth. All the testator's wool was listed as participating wool in the appraisement catalogues used by the appraisers for the purposes of the appraisements made  under the regulations. The testator had received in his lifetime the full appraised prices of his wool and certain further payments known as flat rate adjustments, and thus had received the full amount of the compensation payable in respect of the acquisition of his wool.

On 21st December 1948, approximately four months before the testator died, the Wool Realization (Distribution of Profits) Act 1948 came into operation.  By reason of the manner in which the testator's wool had been listed in the appraisement catalogues it was "participating wool" within the meaning of that Act (s. 4). After his death, a distribution under the Act was made, and the executor's share in that distribution amounted to PD2,830 18s. 10d. This sum was received by the brokers through whom the testator had submitted his wool for appraisement, and the balance remaining after deducting broker's commission was paid by the brokers to the executor on 5th December 1949.

By an amended assessment the commissioner claimed estate duty on the footing that the estate of the testator chargeable to estate duty included the full amount of the executor's share in the distribution. For this he relied upon par. (b) of s. 8 (3) of the Estate Duty Assessment Act, which provides that for the purposes of the Act the estate of a deceased person comprises, inter alia, "his personal property, wherever situate (including personal property over which he had a general power of appointment, exercised by his will), if the deceased was, at the time of his death, domiciled in Australia." The executor appealed against the amended assessment, and on the hearing of the appeal Fullagar J. stated this case for the opinion of a Full Court upon three questions. The first two questions require the Court to consider whether the testator, by virtue of having supplied participating wool for appraisement, had at his death personal property consisting of a right in respect of distributions to be made under the Wool Realization (Distribution of Profits) Act.

That Act has been considered on previous occasions both in this Court and in the Privy Council and only its leading provisions need be mentioned here. It provides for the distribution by the Australian Wool Realization Commission, by means of both interim and final distributions, of amounts equal in the aggregate to a sum called "the wool disposals profit." This expression is defined in s. 4 to mean the credit balance, if any, found to have accrued to the Commonwealth upon the taking of an account of (a) the Commonwealth's share in the ultimate balance of profit (or loss) arising from the transactions of the Joint Organization, and (b) the moneys received by the Commonwealth from the Government of the United Kingdom in pursuance of the arrangement between them for the sharing of profits arising from the disposal of sheepskins acquired under the National Security (Sheepskins) Regulations. Section 24 provides for the establishment of the fund in the hands of the commission. Sub-section (1) of that section refers to an amount which, before the commencement of the Act, the Commonwealth had paid to the Australian Wool Realization Commission, representing the sheepskin profits specified in par. (b) of the definition, and it provides that this amount shall be applied by the commission for the purposes of and in accordance with the Act. Sub-section (2) provides that, when the Commonwealth has received the moneys representing the share of profit (if any) specified in par. (a) of the definition, an amount equal to those moneys shall be payable to the commission by the Commonwealth, out of moneys lawfully made available by the Parliament, for the purposes of the Act. Section 25 authorizes arrangements to be made with the Commonwealth Bank by the Minister with the approval of the Treasurer, for advances to the commission for the purposes of the Act; and s. 24 (2) makes the repayment of such advances (including interest) purposes of the Act.

The distribution in which the testator's executor received the above-mentioned sum of PD2,830 18s. 10d. was one of the interim distributions under the Act. The authority for such distributions is sub-s. (1) of s. 7 as it operates in conjunction with sub-ss. (1) and (2) of s. 6. The commission is required by s. 7 (1) to distribute an amount equal to each "declared amount of profit", an expression which s. 4 defines to mean an amount specified in a notice published in the Gazette in pursuance of s. 6. Sub-section (3) of s. 6 deals with the publication in the Gazette of a notice declaring available for distribution a final amount equal to what may be described as the portion not already distributed of the net profit remaining after deducting certain expenses and charges from the wool disposals profit. Sub-sections (1) and (2) of that section, read together, however, provide for the publication in the Gazette, at any time before the wool disposals profit has been ascertained, of notices declaring amounts available for distribution out of the net profit which it is expected will remain after deducting certain expenses and charges from the Commonwealth's share in the ultimate balance of profit arising from the transactions of the Joint Organization, i.e. ignoring any sheepskin profits.

The persons to whom shares in distributions are to be payable are defined in Pt. III of the Act, which commences with s. 7. Sub-section (2) of that section provides that there shall be payable by the commission, out of each amount to be distributed under the Act, in relation to any participating wool, an amount which bears to the amount to be distributed the same proportion as the appraised value of the wool bears to the total of the appraised values of all participating wool. The amount of each share in a distribution being thus fixed, and a duty to pay it being thus imposed upon the commission, sub-s. (3) makes the general provision that, subject to the Act, an amount payable under the Act in relation to any participating wool shall be payable to the person who supplied the wool for appraisement. Then follow provisions directing that the payment be made to other persons in certain cases where circumstances have changed since the wool was submitted for appraisement. The case where the person who submitted the wool has died before the making of the distribution is governed by s. 11 which (so far as material) makes two provisions: (a) that any amount which would otherwise be payable to the deceased person shall be payable to the personal representatives of that person; and (b) that the rights, duties and liabilities of the personal representatives in respect of the amount shall be the same as if it were part of the proceeds of a sale of the wool by the deceased person made at the time of the supply of the wool for appraisement.

It will be seen that by force of these provisions and by reason of the fact that the testator with whose estate we are now concerned had supplied participating wool for appraisement, the commission in the testator's lifetime came under a statutory duty to pay to the testator if he should be living, and to his personal representatives if he should be dead, a fixed proportion of each amount to be distributed under the Act. Any moneys paid to him by the commission in his lifetime in performance of this duty would be income in his hands: Federal Commissioner of Taxation v Squatting Investment Co Ltd ^[F32] . Amounts paid to his executor after his death, however, could not be income of his estate. This is made clear by the case of Commissioner of Taxation (N.S.W.) v Lawford ^[F33] in which it was held, under an Act which did not contain any such provision as s. 101A of the Income Tax and Social Services Contribution Assessment Act 1936-1953, that professional costs earned by a solicitor in his lifetime and received by his executrix after his death were not assessable income of the executrix. In that case Dixon J. (as he then was) ^[F34] pointed out that the debt owing to the deceased at his death formed part of the assets which devolved upon the executrix; and  clearly enough the position would be similar in the present case if the Wool Realization (Distribution of Profits) Act had had the effect of creating a debt, in the ordinary sense of the word, owed by the commission to the testator. It could not matter that the debt was contingent by reason of the fact that before any amount could become presently payable in respect of it a number of events prescribed by the Act would have to occur, including the provision of funds by means of an appropriation Act or an advance from the Commonwealth Bank under an arrangement made by the Treasurer; for the fact that a right is contingent, though it may affect the value of the right, does not prevent it from being a right of property so as to be included as a dutiable asset of an estate: see In the Estate of McClure ^[F35] , at p. 20.

No doubt the position would be different if the operation of s. 7 (3) and s. 11 in relation to the testator's wool were correctly described, as counsel for the executor sought to describe it, by saying that upon the passing of the Act the commissioner came under a duty to pay to the testator personally a share in such distributions as should be made in his lifetime, and under an independent duty to pay to the testator's legal personal representatives, by virtue of an original title given by the Act to them as personae designatae, a share in such distributions as should be made after his death. If that were the situation, the right arising upon the testator's death in favour of the executor could not be regarded, upon any view of its character, as forming part of the testator's estate chargeable to estate duty.  The executor would be bound to apply any moneys received in a distribution as if they had been part of the estate: Long v Watkinson ^[F36] ; In re Cousen's Will Trusts; Wright v Killick ^[F37] ; but the right to receive such money would not in fact be part of the estate: Lord Advocate v Bogie ^[F38] ; Attorney-General v Loyd ^[F39] , even though the testator might be said to have had a general power of appointment consisting of the power to determine by his will who should have the money when it came in: Re Estate of Isles ^[F40] , at p. 198. But although s. 7 (3) is by express provision subject to the Act and is therefore subject to s. 11, the former is the principal provision, embodying what may be described as the general principle of the Act, while the operation of the latter is only to prescribe the manner in which the broad principle shall be given effect to where death has made literal compliance with s. 7 (3) impossible. As was said by the Court in Ritchie v Trustees Executors & Agency Co Ltd ^[F41] : "The Act provides for devolutions, transmissions and the like, but subject thereto it is the person who supplied the wool who is to be paid" ^[F42] . If the making of distributions had been prescribed in terms of the rights of participants, instead of being prescribed in terms of the duties of the commission, a provision vesting in a person who supplied wool for appraisement a right to receive a defined share in each distribution would have sufficed without more to entitle his legal personal representatives to be paid his share in each distribution made after his death. But the course adopted is to state in the Act the duties of the commission, leaving the correlative rights to be implied; and accordingly the general direction to pay a share in every distribution to each person who supplied wool for appraisement is supplemented by a subsidiary direction that if such a person is no longer alive when the time for making a distribution arrives the payment shall be made to his personal representatives.

The operation of s. 11, therefore, is to entitle the executor, as such, to receive in the testator's place money which he would have  been entitled to receive himself if he had not died.  This is exactly the operation of the general law in respect of every debt. Why, then, is not the right to receive, in respect of the testator's wool, a share in each distribution under the Act to be counted amongst the assets which answer the description "his personal estate", in a statute which taxes the estates of deceased persons according to value?

The broad answer which is offered by the executor is, in effect, that although in a sense it is correct to say that the Act gives a "right" to every person to whom it requires the commission to pay a share in each distribution-for indeed the Act itself speaks of such a person, particularly in ss. 16, 17, 18 and 19, as "entitled" to a share in a distribution-yet there is in truth no more than an expectancy; there is no right which falls within the conception of "property" as that word is to be understood in the Estate Duty Assessment Act. The expectancy is not different in kind, the argument asserts, from that which existed in relation to the testator's wool before the Act was passed. Since the Act there is, of course, more solid reason to expect that distributions will be made, for a positive duty to make them in stated circumstances is now laid upon the commission, and there is a precise ascertainment, which was formerly lacking, of the persons who are to participate and the proportions they are to receive. But the Act itself which has this effect makes the duty of the commission dependent upon both executive and legislative action which may in fact never be taken; it denies to the intended participants in distributions all power of alienation of their shares; and it precludes all resort to the courts to enforce the duty of the commission to make statutory payments, even after the events have happened which make that duty absolute. A "right" so hedged about, it is said, cannot be placed on a higher level than that of a bare expectation.

In one aspect the argument sought to bring the case within the authority of Perpetual Executors & Trustees Association of Australia Ltd  v Federal Commissioner of Taxation (Thomson's Case) ^[F43] and the earlier case of Commissioner of Stamp Duties (N.S.W.) v Perpetual Trustee Co Ltd (Watt's Case) ^[F44] which establish that an expectation of a future payment, if it be unaccompanied by a right grounded in the law, is not property upon which estate duty is chargeable, however strong may be the practical or moral considerations which support it. In Thomson's Case ^[F45] a sum of money was received by an executor from the Commonwealth by way of an ex gratia refund of an amount of income tax which had been paid by the deceased in his lifetime. The tax had been validly assessed, but powerful reasons affecting the public credit of the country led the Commonwealth to decide to repay it. The deceased had requested the refund in her lifetime, and at her death there was a probability amounting to a practical certainty that the request would be granted; but the Court held that the expectation of receiving the refund was not property of the deceased in respect of which estate duty could be charged. Watt's Case ^[F46] was similar in principle, though its facts more closely resembled those of the present case. It related to distributions by the British Australian Wool Realization Association Ltd in respect of profits made on the sale of wool which had been acquired from growers under regulations in force during the war of 1914-1919. There, however,  the distributions in question were made in the exercise of an administrative discretion and not in performance of a statutory duty. In both the cases cited there was at the death an expectation which in every practical sense was assured of fulfilment; but, because it fell short of a "right cognizable at law or in equity", being "devoid of legal title" ^[F47] it could not be charged to duty as property of the deceased.

That was exactly the situation which existed before the Wool Realization (Distribution of Profits) Act came into force, in respect of profits from the sale of wool supplied for appraisement under the regulations in force in the war of 1939-1945. But as the Court said in Ritchie v Trustees Executors & Agency Co Ltd ^[F48] , at p. 577 in a passage quoted by the Privy Council in Federal Commissioner of Taxation v Squatting Investment Co Ltd ^[F49] , at p. 424 that Act "removed the whole matter of the disposal of profits from the province of administrative discretion and placed the distribution upon a defined statutory basis". If, therefore, it is to be held that the persons to whom the Act directs payments to be made are not invested with any right possessing the character of property, the ground cannot be that there is nothing but an expectation devoid of foundation in the law. As to whether the events will happen which are conditions precedent to the commission's duty to make a distribution, there is, of course,   only an expectation, with a high degree of probability. But nevertheless the position differs in a crucial respect from that which existed before the Act, when no legal duty lay upon anyone to make a distribution in any circumstances amongst those who supplied wool for appraisement; for now there is a statutory duty on the part of the commission to make payments, and a correlative statutory right in the designated recipients to have payments made. Such a right, because it is conferred by the law, is not to be excluded from the category of property by anything that was said in Watt's Case ^[F50] or Thomson's Case ^[F51] .

Some reliance was placed for the executor upon a passage in the judgment of the Court in Poulton v The Commonwealth ^[F52] , at p. 600 in which the expression "the possibility of a share", as used in s. 29 of the Act, was treated as meaning the chance which the Act gives that an amount will become payable to a person in a distribution, and the observation was added that in point of law it is no more than a chance, however great the probability attaching to it. But the distinction was not being drawn between a possibility lacking in legal foundation and a right properly to be regarded as property. What was being pointed out was that the right which the Act gives to receive a share in a distribution, being subject to conditions which, theoretically at least, may not be fulfilled, is a chance which is not inaptly described as "the possibility of such a share" in a section which observes a distinction between such a possibility and the actual share which is to become payable if and when the conditions are fulfilled. There is nothing in Poulton's Case ^[F53] which has any bearing upon the present problem.

The executor, however, falls back upon a contention that the inherent characteristics which the right has by reason of the provisions of the Act upon which it rests,  that is to say the impossibility either of alienating it (s. 29) or of enforcing it by means of judicial process (s. 28), prevent it from being recognized as a form of property. Only the unenforceability of the right, however, requires much consideration. It may be said categorically that alienability is not an indispensible attribute of a right of property according to the general sense which the word "property" bears in the law. Rights may be incapable of assignment, either because assignment is considered incompatible with their nature, as was the case originally with debts (subject to an exception in favour of the King) or because  a statute so provides or considerations of public policy so require, as is the case with some salaries and pensions; yet they are all within the conception of "property" as the word is normally understood: Ex parte Huggins; In re Huggins ^[F54] , at p. 91; Hollinshead v Hazleton ^[F55] , at p. 447. Indeed, there was a tendency at one time to regard the non-assignability of a right as qualifying it to be classified as a  chose in action: Holdsworth, History of English Law, 2nd ed. (1937), vol. vii, pp. 529, 531. "The law started with the idea that a chose in action is a personal non-assignable right": op. cit., p. 541. In the context of the Estate Duty Assessment Act there is nothing to justify the adoption of a definition of "property" which would exclude a statutory right to receive a payment of money on the ground that the statute, by a provision against alienation, prevents persons other than those within the immediate contemplation of the legislature from obtaining the fruits of the right.

The executor finally relies upon s. 28 in the endeavour to establish that the right which the testator had under the Act formed part of his personal property. That section provides that no action or proceedings shall lie against the commission or the Commonwealth for the recovery of any moneys claimed to be payable to any person under the Act, or for damages arising out of anything done or omitted to be done by the commission in good faith in the performance of its functions under the Act. This provision of course does not detract in the least from the imperative nature of the duty imposed upon the commission. Its effect is simply that controversies as to what is proper to be done in order to carry the provisions of the Act into execution are to be resolved by administrative and not by judicial action, and that the remedy for non-performance of a duty which becomes absolute is to be found, not in the application of force under the authority of a court, but in action by the executive government and, if necessary, by the Parliament itself. It is therefore inaccurate to speak of a right to a share in distributions as unenforceable. The most that can properly be said is that the method of enforcement which the law provides for the enforcement of most money demands is made unavailable. If this were equivalent to saying that the right is not one which is recognized by the law, no doubt the logical consequence would be that the right cannot be fitted into the concept of property, since that is a concept of the law. But the statements are obviously not equivalent, and it would be impossible to maintain that the law does not recognize a right which the law itself has created. To assert that the prohibition of actions and proceedings for recovery of moneys under the Act prevents the courts from recognizing the right as a legal right is to assert that, because the usual occasions for judicial recognition of the right cannot arise, the right is incapable of judicial recognition as property belonging to the person for whose benefit it exists. The non sequitur is obvious.

The argument for the executor on this part of the case seems to involve and depend upon two propositions: first, that all personal property known to the law must consist either of choses in possession or of choses in action, and, secondly, that choses in action comprise only rights enforceable by action in the courts. But the term chose in action "furnishes an instance of the subject-matter of property having outgrown its nomenclature": Goodeve, Personal Property, 9th ed. (1949.), p. 195; and the second proposition needs to be recast in more flexible terms if the first is to be accepted. The expression now comprises a heterogeneous group of rights which, as Goodeve observes, (loc. cit.) have only one common characteristic, viz. that they do not confer the present possession of a tangible object. Sir William Holdsworth considered the history of the subject in his History of English Law, 2nd ed. (1937), vol. vii, pp. 515 and following, and showed that although "the original meaning of a chose in action-a right to be asserted by an action-has never been wholly lost sight of" (p. 517), the meaning of the term has become progressively extended to accommodate many forms of personal property which were not within the original conception. The topic has been developed by Sir Howard Elphinstone, Mr. Cyprian Williams and Mr. Charles Sweet in learned articles in the Law Quarterly Review, vol. 9, p. 311; vol. 10, pp. 143, 303; vol. 11, pp. 223, 238.

It must have been from early times that liquidated money demands were recognized, even if unenforceable in the courts, as choses in action, and therefore as personal property. It is difficult to suppose that a debt could ever have been considered to lose the character of property whenever it became, and so long as it remained, statute barred. Holdsworth, op. cit., p. 529 mentions, as having ultimately prevailed, an argument of Catesby in a case in 1482, that "though the grantee of an annuity had no tangible thing, but only a right, that right, whether enforceable by action or not (the italics are mine), was, like the right to a rent, a thing which could be assigned." But more closely akin to the right we are now considering are such undoubted forms of property as stock in the public funds, government bonds, and government debts generally. Until a right of action against the Crown was allowed by statute-and that did not occur in England until the Crown Proceedings Act, 1947 came into operation-no debt of the central government could be sued for in the courts. In appropriate cases the courts could entertain a petition of right, but the consent of the Crown in the form of the Attorney-General's fiat was required before the petition could be filed, and the judgment could not do more than declare what the suppliant was found entitled to: Petitions of Right Act, 1860, 23 & 24 Vic. c. 34, s. 9. No enforceable judgment could be given, and it was not unknown for a petition of right to produce no benefit: Macbeath v Haldimand ^[F56] , at pp. 1038-1039] cited by Evatt J. in New South Wales v The Commonwealth [No. 1] ^[F57] , at p. 199. Where the judgment established a right to a sum of money, the Petitions of Right Act required the Commissioners of Treasury to pay the amount "out of any monies in their hands for the time being legally applicable thereto, or which may be hereafter voted by parliament for that purpose" ibid, s. 14. Thus the creditor of the government was in a position which differed in only one respect from the position of a person to whom a share in a distribution becomes payable under the Wool Realization (Distribution of Profits) Act: the former could have the validity of his claim declared by a court, while the latter must have it passed upon by the Australian Wool Realization Commission. Substantially the same may be said concerning a claim against the Commonwealth or a State which is litigated under the Judiciary Act 1903-1950. The appropriate judgment consists only of a declaration of right. Neither execution nor attachment can be issued (s. 65); and there is no way of obtaining payment of the debt which the judgment declares, except by procuring the Treasurer of the Commonwealth or the State as the case may be to perform the duty, which s. 66 imposes upon him, of satisfying the judgment out of moneys legally available: New South Wales v Bardolph ^[F58] ; Grace Bros. Pty Ltd v The Commonwealth ^[F59] , pp. 283, 294, 303. Yet no one could doubt that a debt owed by a government is personal property. Government bonds and stock are, indeed among the commonest forms of such property. The relevant Act may specifically provide that they shall be personal property, as does the Commonwealth Inscribed Stock Act 1911-1946, s. 13, but even if, like the Funded Stock Act of 1892, 56 Vic. No. 1 (N.S.W.), it contains no such provision, bonds and stock held under it are forms of property, and are classed as choses in action in the enlarged sense of the term: R. v Capper ^[F60] . They are "a species of property, grown up, since all these distinctions were settled in our law", as Sir William Grant M.R. observed during the argument in Wildman v Wildman ^[F61] , at p. 569]. "The interest in stock", he said in giving judgment, "is properly nothing but a right to receive a perpetual annuity, subject to redemption: a mere right therefore: the circumstance, that government is the debtor, makes no difference" ^[F62] . So, too, Lord Cairns in Ex parte The Bank of England; In re Price ^[F63] , at p. 667 described bank stock as property of the holders, whom he called the owners and proprietors thereof; and Lord Blackburn in Colonial Bank v Whinney ^[F64] , at p. 439 referring to "new kinds of property like stock in the funds", quoted Lord Thurlow as thinking choses in action "an apt expression to use with respect to such things". Sir George Jessel in Ex parte Huggins; In re Huggins ^[F65] said:

"There are many cases in which property arises from a contract, quite independently of the fact that no judicial tribunal can enforce it...If a man died possessing nothing but French or Italian bonds no one would say that he had died without any property. Such bonds are not choses in action in the ordinary sense, and that cannot be the definition of property. The mere fact that you cannot sue for the thing does not make it not `property'. I am not going to attempt to define `property', that would be too dangerous. But there can be no doubt that these foreign bonds, both in common language and in the language of lawyers, are `property'. Nor can I doubt that if a man had a bond for PD10,000 of the British Government it would be `property'. The annuities which were granted by the kings of England in former days, charged on the tonnage and poundage dues, were always dealt with as property, and they formed the subject of numerous decisions of the Courts. But you could not sue the Crown for them, and they could not even be made the subject of a petition of right, because they were granted out of the voluntary bounty of the Crown. But still they were property..." ^[F66] .

The contention of the executor that the estate of the testator did not include at his death any right in respect of future distributions under the Wool Realization (Distribution of Profits) Act should for these reasons be rejected. It follows from this conclusion that in the making of the original assessment it would have been correct to include the value of that right, estimated as at the testator's death, as an ingredient in the value of the estate. What in fact was done must now be examined.

The estate duty return was submitted by the executor on 16th August 1949, but it contained no reference to any rights in respect of wool submitted for appraisement. The first distribution made under the Act was a distribution of an amount equal to six and one-quarter per cent of the appraised value of all participating wool catalogued between 28th September 1939 and 30th January 1946, and was made out of a sum of PD25,000,000 declared by the Minister under s. 6 (1) on 24th November 1949 to be available for distribution. The testator's participating wool catalogued in that period was of the appraised value of PD45,295 2s. 2d., of which sum six and one-quarter per cent is PD2,830 18s. 10d. The latter amount was paid on 5th December 1949, as to PD2,816 15s. 9d. to the executors through the testator's wool brokers, and as to the remaining PD14 3s. 1d. to the brokers as their commission under s. 21. On 3rd November 1950, the solicitors for the executor sent to the Commissioner of Taxation, who had not yet assessed the estate duty, a letter referring to the subject of estate duty on the testator's estate and stating: "We have been instructed to advise you of the following additional asset-Appraised value of participating wool held by Australian Wool Realization Commission PD45,295 2s. 2d.-6½% of which is equivalent to PD2,830 18s. 10d."

The commissioner assessed the duty on 9th March 1951, and in doing so he included PD2,830 18s. 10d. as an asset which he described, in an alteration sheet accompanying the notice of assessment, as "Wool payments as advised 3/11/50 - PD2,831". The assessment was not objected to, and the assessed amount of duty was paid. Then a second distribution, equal in amount, was made pursuant to a declaration made by the Minister under s. 6 (1) on 27th March 1952. The executor received the estate's share in this distribution on the next day but did not inform the commissioner of it. He learned of it from an inspection of the records in the Victorian Probate Duty Office on 20th May 1952, and ten days later he issued a notice of amended assessment increasing the amount of the duty by adding to the net value of the estate the sum of PD2,831, describing the addition as "on a/c: Second Wool Distribution PD2,831".

The method by which the commissioner dealt with the amounts received from the two distributions was conceded by his counsel to be incorrect. The proper method was to value as at the death the entire right to share in distributions under the Act in relation to the testator's wool; and amounts in fact paid out by the commission in relation to that wool could not be brought into the calculation as if they were themselves assets of the estate. No doubt the fact that the right which had to be valued did in the event produce those amounts might be treated as material in making the valuation, but only if the broker's commission (which was remuneration for acting in the distribution as agents of the commission and not of the executor) were deducted and the balance were discounted back to the date of death. Accordingly it is necessary to give the answer No to the first of the questions in the stated case, which is, in effect, whether the PD2,831 received in the second distribution should be included in the estate of the testator for the purposes of the Estate Duty Assessment Act. The next question is whether any sum in respect of the second distribution should be included in the testator's estate, and, if so, what sum should be so included and how should it be calculated. For the reasons which have been given, the first portion of the question should be answered: by saying that if the commissioner had power to make an amended assessment at all, he should have included the value, as at the death, of the share which vested in the executor.

The third question is whether the commissioner had power under the Estate Duty Assessment Act to issue the amended assessment. The argument on this question dealt with the application of sub-ss. (2) and (3) of s. 20 of the Estate Duty Assessment Act, each of which qualifies the general provision in sub-s. (1) of that section that the commissioner may at any time amend any assessment by making such alterations therein or additions thereto as he thinks necessary. The terms of sub-ss. (2) and (3) need not be set out. It will suffice for the present to say that if the proper view of the facts of the case is that before the original assessment was made the executor made to the commissioner a full and true disclosure of all the material facts necessary for the making of such an assessment as would deal correctly with the right to share in distributions under the Wool Realization (Distribution of Profits) Act in relation to the testator's wool, the amendment of the assessment was forbidden by sub-s. (3) unless it was made to correct a mistake of fact.

The question whether there was the requisite full and true disclosure must be answered by considering the terms of the letter of 3rd November 1950, for only in that letter was any relevant disclosure made. It must be considered, however, in the light of the construction which the court has placed upon the relevant words in s. 20, the result of which is that the executor was not obliged to direct the commissioner's attention to facts of which he was already aware, or to facts which the executor did not know or believe or (perhaps) possess the means of knowing: see the review of the authorities by Fullagar J. in Australasian Jam Co Pty Ltd v Federal Commissioner of Taxation ^[F67] , at p. 33.

It appears from the stated case that before the original assessment was made, both the executor and the commissioner were aware of the provisions of the Wool Realization (Distribution of Profits) Act 1948, as well as of the Wool Realization Act 1945 under which the operations of the Australian Wool Realization Commission, as the Australian subsidiary of the Joint Organization, were conducted. Though the commissioner had received information which, if correct, showed that large profits had resulted from the transactions of the Joint Organization, and he believed, as did the executor, that a further distribution would be made under the 1948 Act, as to when such a distribution would be made and how much would be distributed neither of them had any knowledge, information or belief. It is against this background that the sufficiency of the letter of 3rd November 1950 as a disclosure must be considered. Its proclaimed purpose was to bring to the commissioner's notice an additional asset of the estate of the testator. Its phraseology was imperfect, but to anyone acquainted, as the commissioner was, with the relevant Acts and with the general character of the operations of the Joint Organization, the letter could not fail to convey these five facts: first, that the testator in his lifetime supplied participating wool for appraisement; secondly, that the appraised value of the wool was PD45,295 2s. 2d.; thirdly, that the executor as such was entitled to participate in distributions under the 1948 Act to an extent commensurate with that value; fourthly, that the executor's right so to participate had been recognized by the Australian Wool Realization Commission by its placing on the distribution list the executor's name, with the appraised value of the testator's wool as the amount by reference to which the executor's share in distributions was to be ascertained (see s. 19); and fifthly, that an amount calculated at the rate of six and one-quarter per cent on the appraised value, and amounting to PD2,830 18s. 10d. had become payable, if it had not actually been paid, to the executor. All these things were true. What further fact relevant to the making of a correct assessment and not already known to the commissioner could the executor have disclosed?

It was suggested by counsel for the commissioner that there was no disclosure of the precise asset by means of a correct description of it, and there was no disclosure of the value placed upon the asset by the executor. As regards value, it is obvious that the executor did not know, and had no means of learning, any facts relevant to valuation except those which the commissioner either knew already or was told in the letter. The executor is not shown to have had any opinion of its own or to have obtained any opinion from anyone else on the question of value. There simply was no disclosure of any fact bearing in any way upon that question which the executor could have made and failed to make. It is true, on the other hand, that the letter did not define the asset, by any form of words, as the right which passed at the death from the testator to the executor to receive a share in each distribution to be made under the 1948 Act. But that was in truth the only dutiable asset which the information in the letter showed to exist. The suggestion which the letter was calculated to convey was, no doubt, that the amount of PD2,830 18s. 10d. which had been received in the first distribution was itself a dutiable asset of the estate; and it may be inferred that the mistake which occurred in the commissioner's office when the assessment came to be made was that this suggestion was accepted and acted upon. It was, of course, an erroneous suggestion, but the error consisted in failing to appreciate that a capital sum which comes in as part of an estate after the death of the deceased does not itself constitute property which the Estate Duty Assessment Act requires to be included in the estate for duty purposes, and that what the Act makes dutiable is the asset which existed at the death and which the moneys subsequently received represent wholly or in part. There was, therefore, no failure to make true and full disclosure and no mistake of fact; there was only a mistake of law. Neither party misapprehended any fact. They were both well aware that the PD2,830 18s. 10d. was the first fruits, and probably not the last, of a right under the 1948 Act which had devolved upon the executor, but they treated as dutiable in law the proceeds of that asset instead of the asset itself. Then when the receipt by the executor of an amount in the second distribution was discovered by the commissioner's officers, the same mistake was made again in amending the assessment. But we are not concerned with the incorrectness of the amended assessment; the question is whether there was any power to make it at all. And the answer to that question must be that, as the original assessment was made after a full and true disclosure to the commissioner of all the material facts not already known to him which the executor was in a position to disclose, and as there was no mistake of fact to be corrected, s. 20 (3) precluded the making of any amended assessment.

Accordingly the third question in the stated case should be answered, No.