SUPREME COURT OF NEW SOUTH WALES
GLYNN v COMMISSIONER OF STAMP DUTIES
WADDELL J
19 May 1977 -
Waddell J The plaintiffs claim a determination of the matters stated for decision in a case stated by the defendant Commissioner pursuant to s 124 of the Stamp Duties Act 1920. The case relates to the amount of death duty payable in respect of the estate of Harold Marcus Glynn who died on 2 October 1954. The deceased had at all relevant times been domiciled and resident in the State of New South Wales. At the date of his death he was registered as the holder of 17,223 fully paid up shares of $2 each in the capital of Glynns Pty Ltd, formerly known as Glynns Ltd. Probate of the last will of the deceased was on 8 March 1955 granted to the plaintiffs as executors and executrix named therein. In the stamp affidavit of value made by the plaintiffs and filed with their application for probate all of the shares mentioned were shown as assets and as part of the deceased's dutiable estate. No claim was made for an allowance pursuant to s 107 of the Stamp Duties Act in respect of any dividends on any of the shares received by the deceased. The plaintiffs claim that 12,997 of the shares should be excluded from the dutiable estate of the deceased. They contend that at all material times the deceased held 3250 of the said shares upon trust for his son James Ignatius Glynn ("James"); 3250 upon trust for his son Thomas Patrick Glynn ("Thomas"); 3249 upon trust for his daughter Aileen Mary Glynn ("Aileen"); and 3248 upon trust for his son John Vincent Glynn ("John"). The plaintiffs further claim that in computing the final balance of the dutiable estate of the deceased an allowance should be made for $109,467.09 being the total of the dividends received by the deceased on the 12,997 shares referred to during the period when, as they claim, the said shares were held by the deceased in trust for the persons referred to. The principal questions raised by the stated case are whether the said 12,997 shares should be excluded from the dutiable estate of the deceased and whether the allowance claimed for the dividends received by the deceased should be made.
James was born on 19 June 1914, Thomas on 10 September 1916, Aileen on 2 August 1920, and John on 2 September 1922. Aileen married Richard Parmalee on 19 February 1944.
The facts disclosed by the evidence are as follows. The statutory general meeting of Glynns Ltd was held on 29 November 1917. The minutes show that the deceased was present as chairman of directors. It was resolved that the subscribers to the company's memorandum of association be entered on the register of shareholders, each having one share. It was resolved that the company enter into an agreement with the deceased, Leo Patrick Glynn and John Foy Glynn (apparently for the purchase of the retail business carried on by them) and that the company's solicitors prepare the requisite conveyances for vesting in the company the freehold properties agreed to be sold to it by the agreement. It was further resolved that the share consideration under the agreement of sale be allotted to the vendors' nominees in specified numbers. Those relevant are: the deceased, 300; the deceased's wife, Nina Rose Glynn, 999; James, 993; and Thomas, 992. These allotments were entered in the share register. The share certificates in respect of the shares allotted to James and Thomas, both signed by the secretary and the deceased as a director, are in evidence and show the shares as held by each of them personally.
The minutes of a meeting of directors held on 28 February 1919 show that three applications had been received for shares including one from the deceased for 1698 shares. It was resolved that shares be allotted in terms of the applications to, among others: the deceased, 198 shares; Nina Rose Glynn, 500; James, 500; and Thomas, 500. These allotments were entered in the share allotment journal, the allottees James and Thomas being described as minors. The certificates in respect of the shares allotted to James and Thomas are in evidence, each signed by the deceased as secretary and as a director and show the shares as held by each of them personally.
The minutes of a meeting of the directors of 22 March 1920 indicate that several applications for transfer of shares were received and dealt with. The first which is relevant was that of Mr L P Glynn who sought approval to the transfer of 300 shares to the deceased and 176 shares to James. The next was an application of Kate Glynn in respect of a transfer of 2610 shares of which 624 were to James and 800 to Thomas. The stamped share transfer for each of these transfers is in evidence. Each of them expresses the consideration to have been paid by "Harold Marcus Glynn as trustee for" either James or Thomas. The transfers are respectively signed by the deceased in the following terms: "H M Glynn as trustee for Jas J Glynn"; "Harold Marcus Glynn as trustee for Jas J Glynn"; "H M Glynn as trustee for Thos P Glynn". The minutes also record that an application by the deceased for the allotment of 1955 shares was received and these were allotted, in part, 600 to James and 600 to Patrick. Certificates were issued in respect of each of these parcels of shares, each certificate being signed by the deceased as secretary of the company. On each certificate the holder is shown as Patrick Thomas Glynn by his trustee H M Glynn, or James Ignatius Glynn by his trustee H M Glynn. The list of shareholders and particulars of shares held on 25 April 1922 appearing in the share register shows James, described as a minor, holding 2893 and Patrick, similarly described, as holding 2892. Both these numbers are the total of the various allotments and transfers already mentioned.
The minutes of the half-yearly general meeting of shareholders held on 24 September 1923 record that Mr J F Glynn notified the company that he and Mrs Marie Glynn had disposed of all shares registered in their names and requested approval to a number of transfers of shares to the deceased totalling 7562. Certificates were issued in respect of this total in various parcels, each in the name of the deceased. A photocopy of the butt for each certificate is in evidence. The parcels were as follows: 357 shares, the entry in the butt in the space provided for the address of the holder being "Lismore - James Ignatius Glynn"; 358 shares, the entry in the butt being Patrick Thomas Glynn; 3248 shares, the entry in the butt being "On behalf of John Vincent Glynn"; 3249 shares, the entry in the butt being "On behalf of Aileen Mary Glynn". As a result of this transfer James and Thomas had a total of 3250 shares each.
The list of shareholders for the years 1924 to 1935, some years being omitted, in the share register all show the deceased holding two parcels each of 3250 and parcels of 3249 and 3248 shares as well as a parcel of 976 shares.
The minutes of the annual general meeting of the company held on 17 October 1924 show that the directors submitted various accounts prepared by the company's auditors made up to 31 August 1924, that these were generally discussed, and that the audited statements and balance sheet were approved. These accounts are in evidence. There is annexed to them a list of shareholders as at 31 August 1924. The relevant entries are that the deceased is shown as holding 976 shares. "James Ignatius, held in trust by Harold Marcus Glynn" is shown as holding 3250 and there are similar entries for Patrick, Aileen and John. The minutes of the annual general meeting held on 10 September 1931 show that accounts were adopted. These accounts are in evidence and contain annexed to them a list of shareholders in the terms just mentioned. The deceased was the chairman of both meetings and signed the minutes of them.
The various transfers and allotments which have been mentioned are recorded in the share ledger. In the case of James and Thomas each was originally shown as the holder followed by the notation "held in trust by Mrs Nina Rose Glynn". She was their mother. This notation was altered to read "held in trust by 'Harold Marcus Glynn' " and the whole entry was apparently subsequently crossed out and the name Harold Marcus Glynn substituted. In the case of Aileen and John the original entry was in their respective names with the notation "held in trust by Harold Marcus Glynn" and this entry was apparently subsequently crossed out and the name of "Harold Marcus Glynn" substituted.
The above is the evidence upon which the plaintiffs rely to establish the trusts claimed. The Commissioner relies upon two further aspects of the evidence as establishing that the correct inference to draw from the whole of the evidence is that the deceased did not in fact intend to create a trust of any of the parcels of shares in question or that if he did then it should be inferred either that he intended to reserve to himself a power of revocation and subsequently revoked each of the trusts or that he reserved to himself a right to dispose of any dividends paid on the shares during his lifetime.
The first of these aspects is that the deceased at no time communicated the existence of the trust to any of his four children. Of course, in 1923 when it is claimed that the last of the trusts was constituted, the four children were of tender years, the eldest being nine and the youngest one. However, by about 1944 Aileen, who was the last of the children to remain dependent upon the deceased, married. James had ceased to become dependent about the year 1933. In that year, according to the minute book, he became a director and until 1935 the deceased and he are recorded as the only directors attending directors' meetings. James was then appointed a director and the deceased and he are recorded as attending most meetings until 1940 when he resigned. It is significant no doubt that the deceased maintained his silence during these periods. It is pointed out for the plaintiffs that although the deceased did not inform any of his children of the trusts their existence must have become known to the relatives originally involved in the company and to other persons concerned with the company's affairs and was recorded in records which might be inspected. However, apparently, no one apart from the deceased, for example the children's mother, said anything about the trusts. The persons who knew of or who had access to the documents evidencing the trusts claimed would probably have known that the deceased was appropriating the dividends to his own use.
The second aspect is that the deceased did not at any time account to any of his four children for the dividends which he received on the shares nor did he appropriate the dividends in any way which preserved their separate identity as belonging beneficially to each of them. There is a schedule in evidence which sets out the total amount of dividend paid upon the issued capital of the company from 1918 until 1953. Quite substantial dividends were paid during each of the years 1918 to 1923. It appears from the schedule to an affidavit sworn by James Ignatius Glynn during this period the deceased received, by way of dividends on shares which the plaintiffs claim he then held upon trust for James and Thomas, a sum exceeding $10,000 (the amounts are converted in the affidavit to decimal currency) which it is common ground he applied to his own use. From the end of 1923 the deceased was in the control of the company and no dividends were declared until 1935. It appears from the minute book of the company that during this period substantial annual net profits were made until 1932 and in each year these were appropriated to a bonus paid both to the deceased and his wife, Mrs N R Glynn, who was the only other director of the company. Mrs Glynn died some time before 1 November 1933. The annual general meeting for 1934 records a profit for 1933 and 1934 totalling £2885 and that approval was given to the appropriation of the whole of this profit as a bonus to the deceased. In 1935 and in each year up to and including 1943 dividends were declared. No further dividends were declared until 1951 in which year and the following two years very substantial dividends were declared. It is common ground that the whole of these dividends were received by the deceased and appropriated to his own use.
The whole of the evidence has now been sufficiently stated. The plaintiffs rely upon a decision of Kitto, J in which he had to consider whether trusts had been established in relation to the shares which the deceased acquired from Mr L P Glynn and Kate Glynn in 1920 and directed to be transferred as to parcels of 176 and 624 to James and 800 to Thomas: Glynn v FC of T (1964) 111 CLR 169. That case was an appeal against the decision of a Board of Review upholding an assessment of estate duty payable on the deceased's estate under the Estate Duty Assessment Act . The administrators had objected upon the ground that the deceased held the 800 shares mentioned on trust for other persons and that he had never had any beneficial interest in them, and upon the ground that the dividends received by the deceased on these shares and retained in breach of trust constituted a debt due and owing by him at his death and were deductible. Before Kitto J, as here, it was submitted that the failure of the deceased to communicate the existence of the trusts to either of the sons and to account at any time to either of them for any of the dividends he derived from the shares should be regarded as creating too much doubt about the intention with which the deceased became the holder of the shares for the conclusion to be reached that he intended an immediately binding trust or, alternatively, as requiring an inference that although he intended to create an immediately binding trust he reserved a life interest in the shares to himself. Kitto J said: "It is true that proof of a formal statement by the owner of property to the effect that he holds it upon trust for another is not conclusive proof of the trust, for special circumstances may explain the statement as having been due to some other intention than that of creating a trust: Commissioner of Stamp Duties (Q) v Jolliffe (1920) 28 CLR 178; Teasdale v Webb (1940) 57 WN (NSW) 151. But there are no such circumstances here, and I see no reason to doubt that the deceased intended the immediate constitution of the trusts."
In relation to the second submission he went on to say:
"Secondly, it is said that even if the trusts were effectually declared the non-communication of them to the beneficiaries and the appropriation of the dividends by the deceased to his own use up to the time of his death give rise to an inference similar to that which arose in the special circumstances of Kauter v Hilton (1953) 90 CLR 86, namely that the intended trust was a trust reserving a life interest to the deceased. … All I say is that the deceased's "course of conduct from 1920 onwards does not seem to me to justify an inference that the absolute trusts to which he repeatedly assented in the written documents were in truth subject to an unexpressed qualification reserving a life interest to himself. It is important to remember that although the creation of the trusts was never disclosed to the two beneficiaries there was no secrecy about it. Other people were made aware of it clearly enough, and records of it were made in documents likely to be permanently retained by the company and available for inspection."
The plaintiffs rely upon this decision as a precedent establishing the principles which are applicable to the present case and as an example of the application of those principles in circumstances similar to those of the present case.
In Commissioner of Stamp Duties v Jolliffe, supra, the facts were that the respondent Jolliffe had opened an account in the Queensland Government Savings Bank for his wife in the name of "Mrs Hannah Jolliffe - Edwin Alfred Jolliffe, trustee". In doing so, he made a declaration that he was desirous of becoming a depositor in the bank as the bona fide trustee of Hannah Jolliffe. After her death the question arose as to whether the moneys in the account belonged to her or to the respondent. The trial Judge found as a fact that Jolliffe had had no intention in fact of creating a trust in favour of his wife and concluded that the moneys belonged to him personally. Before the High Court the question was "Whether the effect of the Queensland Government Savings Bank Act of 1916 and the written documents in evidence conclude the respondent from averring that he was not trustee of the money in question" (181). The majority, Knox CJ and Gavan Duffy J, said: "In our opinion the law is accurately stated in Lewin on Trusts, 11th ed, at 85: 'It is obviously essential to the creation of a trust, that there should be the intention of creating a trust, and therefore if upon a consideration of all the circumstances the Court is of opinion that the settlor did not mean to create a trust, the Court will not impute a trust where none in fact was contemplated.' "
They went on to conclude that notwithstanding the statement of the trust in the documents the finding of the trial judge prevented it being held that any trust had been established.
Isaacs J, who was in the minority, in a detailed judgment, expressed the view that "an open declaration of trust is therefore an expression of intention that is final and beyond recall". In Teasdale v Webb (1940) 57 WN (NSW) 151, Miss Webb had opened a bank account for her great-nephew in the name of "Louisa Sarah Webb as trustee for Ronald James Teasdale". Both were killed in an accident, Miss Webb being the survivor. The question was who owned the moneys in the bank account. After surveying the evidence as to the way in which the account had been opened and the moneys in it dealt with Williams J said:
"On the whole of the evidence in the present case I am quite satisfied that Miss Webb never intended to create an immediate trust with respect to the moneys in any of the three trust accounts. The first two accounts are not sued on, so I need say nothing further about them. With respect to account No 48983, I do not think that there is any better evidence of an intention to create a trust of the moneys in this account than there is in the case of the two earlier accounts. No doubt Miss Webb did intend to confer some benefit on Ronald of an unascertained nature at some unascertained time and was saving up money to that end. At the date of his death he was still a lad and all he required for his happiness and prosperity was the maintenance which she was then providing for him. If he had lived to attain his majority he would have required some advancement in life as, for instance, setting him up in business, or providing him with a capital sum upon his marriage. I feel sure that, if and when such a need had arisen, Miss Webb would have made the necessary provision for him; that she was keeping this prospective liability in view and intended to meet it out of the trust account."
Kauter v Hilton, supra, was an appeal from the Supreme Court of New South Wales in Equity, Roper CJ in Eq. In that case a deceased person had before his death opened several bank accounts in the name "Frank Hickey - Trustee for Miss Alfreda Hilton". After his death the question arose who owned the money in these accounts. His Honour had held that an immediate trust had been created in favour of Miss Hilton of the moneys in the accounts but because of the way in which the deceased had dealt with the interest he had some doubt "as to whether the deceased intended that the interest upon the money in the account should go to the plaintiff during his lifetime, or as to whether he intended to reserve to himself the right to the interest on the account for the term of his life" (97) and found that the intention to create a trust in respect of the moneys in question was subject to a reservation of a life interest. In the judgment of the High Court given jointly by Dixon CJ, Williams and Fullagar JJ, his Honour's conclusion as to the existence of the trust at the death of the deceased was approved although there is no express approval of his finding of fact that the deceased had reserved a life interest to himself.
Before turning to the Commissioner's submissions in the present case it is convenient to refer to two decisions to which reference has been made on the question of revocation. The first of these is In re Cozens; Green v Bisley [1913] 2 Ch 478. There the question was whether an irrevocable trust had been created by pencil entries in private accounts, the trust never having been communicated to anyone. Neville J said: "In my opinion the absence of communication raises a strong inference against an intention to make an appropriation irrevocable. In the absence of evidence to the contrary I think the inference is that silence was intended to enable the declarant to adhere to or abandon the declaration as best served his advantage for the time being."
In the second case, Radcliffe v Abbey Road and St Johns Wood Permanent Building Society (1918) 119 LT 512, Eve J commented on the above expression of opinion that in the generality of cases very little evidence is required to rebut the inference from non-disclosure that a trust was intended to be revocable. He declined to draw such an inference in the case before him, there being particular reasons why the creator of the trust would have wished to keep it secret.
The above decisions establish that in the present case the statements of trust in the various documents relied upon by the plaintiffs are not to be treated as conclusive of the existence of a trust, or of the terms of the trust or that any trust created was irrevocable. It is necessary to consider the whole of the evidence to ascertain what were in fact the intentions of the deceased in respect of the various parcels of shares.
What is in issue in the present case is, of course, the intention with which the deceased caused the shares in question to be transferred into the names of his sons Thomas and James or into his own name to be held for Aileen and John. His subsequent failure to communicate the existence of the trusts claimed or to account for the dividends which he received is no more than evidence relevant to his intention at the time it is claimed the trusts were created. I do not find the question of intention at all an easy one. On the one hand there is in respect of each parcel of shares in question an explicit declaration of trust or at least, in the case of the shares transferred in 1923, a statement that each parcel was held for the child named in the butt to the share certificate. On the other hand, from the very beginning, when the deceased caused part of his vendor's entitlement to shares to be transferred to James and Thomas in 1917, he dealt, as is common ground, with the dividends as if he were absolutely entitled to them. There is, thus, during the period when the trusts are claimed to have been created, 1917-1923, evidence of conduct on the part of the deceased inconsistent with an intention that the beneficiaries were to be entitled to the income. There would, I think, be some room for suggesting that during this period it is consistent with the evidence that the deceased may have been using the dividends to repay moneys advanced to him by the company to buy the shares in question, but this suggestion has not been made, and in any event the later conduct of the deceased in appropriating the substantial profits of the company by way of bonus to himself and his wife up to 1933 and thereafter appropriating all dividends to himself provides a consistent line of conduct which is against any initial intention to create absolute trusts in favour of his children. Then there is the question of non-disclosure. Why did the deceased not disclose to James when he became a director in 1933 the existence of the trust? His non-disclosure is, of course, consistent with an earlier intention to create trusts which he subsequently decided he should not persist with. On the other hand, it is also consistent with having put the shares into the names of his children for the purpose of benefiting each of them in such a way as might appear suitable in the light of subsequent progress of the company and other relevant circumstances, and with having subsequently decided to retain the shares for himself.
I do not think that it would be proper for me to be persuaded to reach a conclusion that the testator intended to create absolute trusts as is claimed by the plaintiffs by the decision of Kitto J in Glynn v FC of T, supra. His Honour was there dealing with only two relatively small parcels of shares. The evidence before this court must necessarily be more extensive than that before his Honour. It is, I think, more difficult to regard the failure of the deceased to account for the dividends on nearly 13,000 shares as consistent with an intention to create an absolute trust than it is the income on 1600 shares. The possible explanations of the conduct of the deceased advanced by Kitto J are less convincing in relation to the larger number of shares in question here. The decision of Kitto J is, of course, one which should be followed by this court in relation to the legal principles stated by his Honour but, as is accepted for the plaintiffs, the actual decision is no more than an illustration of the application of such principles to a set of facts which is only part of the facts in the present case.
On the whole of the evidence in the present case there must, I think, be considerable doubt as to the nature of any trusts which the deceased intended to create. In my opinion the inference most favourable to the plaintiffs which the evidence supports is that the deceased intended to create immediate trusts of each of the parcels of shares in question but to reserve to himself the right to apply the dividends in any way which seemed to him appropriate, that is to say, he reserved a life interest in the dividends on the shares.
Accordingly the question in the case should be answered on the basis that the shares in question were held by the deceased upon the trusts claimed but subject in each case to a reservation of a life interest on the part of the deceased. There is no contest that the consequence is that the shares formed part of the dutiable estate of the deceased under s 102(2)(a)or (c) of the Stamp Duties Act.
The questions in the stated case should, therefore, be answered:
(a) No.
(b) No.
(c) No.
(d) No.
(f) By the plaintiffs.
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