Gale v Federal Commissioner of Taxation
(1960) 102 CLR 133 ALJR 564
[1960] ALR 274
(Judgment by: Kitto J)
Between: Gale
And: Federal Commissioner of Taxation
Judges:
Dixon CJ
McTiernan J
Fullagar J
Kitto JMenzies J
Subject References:
Estate Duty (Cth)
Judgment date: 5 April 1960
Judgment by:
Kitto J
We have here to apply a familiar provision contained in s. 8(4)(a) of the Estate Duty Assessment Act 1914-1947 (Cth), by which property which has passed from a deceased person by any gift inter vivos within three years before his death is deemed to be part of his estate for the purposes of the Act. The description of the property to which the provision intends to refer is unambiguous. It is the property of which the deceased divested himself by the transaction of gift, and not, if it is different, the property which became vested in the donee. In Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96 , a case under s. 102(2)(b) of the Stamp Duties Act 1920-1949 (N.S.W.), the Court had before it some of the facts concerning the transaction which is in question now, and on those facts it affirmed a decision of the Supreme Court of New South Wales which proceeded on the footing that the property of which the deceased divested himself by that transaction was 2,250 pounds. That was the sum which he paid to Myrtle Gale as the price of the interest in "Bibaringa" which she then transferred to Peggy Martin. The facts before the Court in the present case include some which did not appear in the previous litigation and the respondent contends for a conclusion on the material now available that before the transaction in question the deceased was entitled to an interest in "Bibaringa" under a contract of purchase and sale subsisting between himself and Myrtle Gale, and that it was that interest, and not the 2,250 pounds, which the deceased alienated by his gift to Peggy Martin. The additional facts, however, do not enable a different conclusion to be reached from that which was come to in regard to State death duty. In particular, it still does not appear that the agreement between the deceased and Myrtle Gale for the purchase and sale of the interest in "Bibaringa" was enforceable in equity.
There was no writing, and in the circumstances of the case the conduct of the deceased which has been relied upon by the Commissioner as constituting part performance was not by any means solely referable to some such contract as that in question. The reasons which the Chief Justice and Menzies J. gave in the earlier case for the conclusion that the 2,250 pounds was the property alienated from the deceased by the gift are fully applicable to the facts as we know them now. (at p19)
The Commissioner nevertheless contends that the property which is to be valued as at the death of the testator for the purpose of assessing the duty payable is the interest in "Bibaringa" which Peggy Martin received under the transaction. The contention is based upon a doctrine developed in Teare's Case (Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation) (1941) 65 CLR 134 , which rests largely on the supposed need for a reconciliation between the requirement of the Act that the property which passed from the deceased by the gift shall be included in the estate and the requirement (which the Act must be understood as making) that the estate shall be valued as at the death of the deceased. The doctrine of Teare's Case (1941) 65 CLR 134 is that there is such "an underlying identity" between property which passed by a gift and any property in the hands of the donee at the death of the deceased in which the former can be "traced, followed and identified" (1941) 65 CLR, at p 143, that it is in accordance with the true meaning of s. 8(4)(a) to treat the latter property as that which is caught by the provision. Property, for example, which the donee has purchased out of the money given (if the deceased divested himself of money by the gift), or which the donee has purchased out of the proceeds of realization of the property given (if the deceased divested himself of property other than money), is to be valued at the death on the footing that it "represents" the property which passed from the deceased by the gift. Though it is not that property in the form in which it passed from him, yet in its "transmuted and actually existing form" (1941) 65 CLR, at p 148, its "actual state of preservation" (1941) 65 CLR, at p 148, it is to be recognized as "in a practical sense" that property. (at p19)
In Vicars v. Commissioner of Stamp Duties (N.S.W.) (1945) 71 CLR 309 , the doctrine was applied by Rich, Starke and Williams JJ. to s. 102(2)(b) of the Stamp Duties Act (N.S.W.); but it was not adopted by Latham C.J. or by Dixon J. An application of it by Williams J. is to be found in Moss v. Federal Commissioner of Taxation (1947) 77 CLR 184 (at p19)
In the present case we have to consider whether the doctrine will survive examination in the light of the speeches delivered in the House of Lords in Sneddon v. Lord Advocate [1954] AC 257 That case arose on provisions of the estate duty legislation in force in the United Kingdom. The duty was imposed on property passing on the death of a deceased, and property passing on the death of a deceased was deemed to include any property taken under a voluntary disposition purporting to operate as an immediate gift inter vivos, whether by way of transfer, delivery, declaration of trust or otherwise, which should not have been bona fide made five years before the death of the deceased. There was in that legislation, as there is by implication in the Estate Duty Assessment Act, and as there is by express provision in the New South Wales Stamp Duties Act, a requirement that the value of property shall be estimated as at the death of the deceased. The expression "property taken" under a voluntary disposition might have been thought not as clear as the expression "property which has passed from the deceased person" by a gift, but their Lordships were unanimous in thinking that it meant the property which the deceased parted with by the gift. They held that that property, and no other, was the property to which the deeming provision applied, and that, as a consequence, it was that property, and no other, which had to be valued as at the death. Their Lordships were not unmindful of the difficulties that would inevitably arise in practice through events and circumstances occurring in the interval between gift and death; but they denied that on that account the deeming provision ought to be read in any qualified fashion. Lord Reid dealt with the point specifically by saying: "... the Act appears to me to set two quite distinct problems, the first of which must be solved before one reaches the second.
The first is to determine what was the property taken, and, once that problem has been solved, the next is how to value that property" [1954] AC, at p 277 It may be that in a case where a court of construction would regard property A as identical with property B when deciding a question of ademption (see Halsbury, Laws of England, 2nd ed., vol 34, par. 164, p. 128, and cases there cited) their Lordships would not refuse to see identity for the purposes of the estate duty legislation. But it is clear from their judgments that the words of the deeming provision which describe the property to be caught are to be applied as at the time of the gift, and that it is the property so ascertained which alone is to be valued as at the death. Their Lordships did not adopt the view which once had been put forward in Scotland, that the valuation is to be of that property considered as in a hypothetical state of preservation. They preferred the view which Lord Sands had stated in Lord Strathcona v. Inland Revenue (1929) SC 800, at pp 807, 809, and the Privy Council had endorsed in Attorney-General for Ontario v. National Trust Co. Ltd. [1931] AC 818 , at p 823, namely that the property donated is to be treated just as if it had remained the property of the deceased until his death and had then passed as part of his estate. The duty, it was held, is imposed not upon the value of the gift, but upon the value of the property brought into charge, assessed with reference to the actual condition of the property at the death. But the House was unanimous in rejecting the notion that that consideration authorized the valuing of any other property than the actual subject-matter of the disposition. (at p21)
5. With Sneddon's Case [1954] AC 257 before us, we would not, I think, be justified in adhering to the doctrine of Teare's Case (1941) 65 CLR 134 , even if, without Sneddon's Case [1954] AC 257 we would have felt constrained to accept it. The language of s. 8 (4)(a) of the Commonwealth Act is even clearer than that of the United Kingdom provision, and the reasoning of Sneddon's Case [1954] AC 257 applies to it a fortiori . In my opinion we cannot but hold that on the true construction of s. 8 (4)(a) the property to be deemed part of the estate of the deceased in the present case is the sum of 2,250 pounds, and that that sum, and not the property which "represented" it in the donee's hands at the death of the deceased, is to be valued as at the death. (at p21)
As to valuation there is a question to be considered, but it is not, I think, difficult. If the property given had been a horse, and the horse had died in the lifetime of the deceased, it is clear from Sneddon's Case [1954] AC 257 that what would be deemed part of the estate would be a dead horse, and the value accordingly would be nil. Again, if the gift had been of 2,250 pounds in coin of the realm, and the coin had been destroyed by fire in the deceased's lifetime, the value for duty purposes would (presumably) be nil. Here, the 2,250 pounds which passed from the deceased was, apparently, in the form of a right to money, namely a credit in a bank account. The passing of the property from the deceased consisted in the satisfaction of the right, and of course thereafter the right did not exist. Is the value for duty purposes, then, to be considered as nil? The answer of Sneddon's Case [1954] AC 257 is "No". See also Potter v. Inland Revenue (1958) SLT 198 The deeming provision requires that the right to the money shall be treated as if it had not passed from the deceased in his lifetime. If he had in fact kept it, it would have been worth 2,250 pounds at his death. Accordingly that is the value which must be assigned to it. Williams J. remarked in Teare's Case (1941) 65 CLR 134 that dicta to the effect that the value of money was constant were somewhat optimistic under modern conditions (1941) 65 CLR, at p 146; but, if I may say so with respect, the answer would seem to be that the valuation which the Act requires consists in assessing the equivalent of the estate in terms of money. The money equivalent of 2,250 pounds cannot be anything but 2,250 pounds, however much the equivalent of it in terms of goods and services may vary from time to time. See per Fullagar J. in Elder's Trustee and Executor Co. Ltd. v. Federal Commissioner of Taxation (1953) 88 CLR, at p 205 (at p22)
I have not accepted the principle of Sneddon's Case [1954] AC 257 without considering what it may involve for cases like Vicars v. Commissioner of Stamp Duties (1945) 71 CLR 309 , both under s. 8 (4)(a) of the Estate Duty Assessment Act and under State provisions such as s. 102(2)(b) of the Stamp Duties Act (N.S.W.). It involves, I think, rejecting the view that in the case where a gift has been made by the creation of a trust the test for identifying the property to be treated as dutiable is different from that which applies in other cases. The argument in support of that view commences by pointing to the specific recognition by the statutes of the creation of a trust as a means of making a gift, and it finds in that recognition a sufficient warrant for interpreting the description of the subject-matter of a gift made by the creation of a trust in the light of a conception established in the law of trusts, namely that the trust fund is to be regarded as having an identity separate from that of the investments which compose it for the time being. In Sneddon's Case [1954] AC 257 the Court of Session in Scotland applied this equitable conception to the provisions of the Finance Act 1894, but the House of Lords declined to accept it. The decision was that in the case of a gift by the creation of a trust, no less than in the case of any other gift, the statute was concerned with the property which passed from the deceased, whatever might have been the property that passed to the donees; and as a consequence of that proposition (as I read the majority judgments) their Lordships denied that in such a case the property which was caught by the provision and had to be valued as at the death was something the deceased never had, namely a fund to which the equitable doctrine of continuing identity applied.
If Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96 is right, as I respectfully think that it is, in holding that par. (b) of s. 102(2) of the New South Wales Act is to be construed as Sneddon's Case [1954] AC 257 decided that the United Kingdom section was to be construed, the consequence seems to be that no distinction can be drawn for the relevant purposes of that paragraph between a gift by the creation of a trust and any other gift. It may be added that there is no occasion in the present case to decide what this involves in regard to par. (d) of s. 102(2), which brings into an estate "any property comprised in any gift made by the deceased at any time, of which bona fide possession and enjoyment has not been assumed by the donee immediately upon the gift and thenceforth retained" etc. The words there used to describe the property are identical with those used for the same purpose in par. (b), and the description can hardly have one meaning in par. (b) and a different meaning in par. (d). Yet there may be difficulty in applying Sneddon's Case [1954] AC 257 and at the same time giving effect to the principle of Hall's Case (Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd) [1943] A.C. 425 ; (1943) 67 C.L.R. 234 . It seems hardly satisfactory to say, with the learned editors of Dymond's Death Duties, 12th ed. (1955), p. 148, that in such a case the principle of Sneddon's Case [1954] AC 257 "breaks down" It may be in point to recall that the judgment of the Privy Council in Hall's Case [1943] AC 425 treats par. (d) as applying to the property which the deceased vested in the trustees, interpreting "bona fide possession and enjoyment" as meaning such beneficial possession and enjoyment of that property as, having regard to the nature of the gift and the circumstances, the objects of the deceased's bounty could have assumed and retained through the medium of the trustees [1943] AC, at p 440 But this is a question for another day. (at p23)
I agree that the appeal should be allowed. (at p23)