Commissioner of State Taxation (W.A.) v. West Australian Trustee Executor and Agency Company Limited

Judges: Lavan SPJ
Wallace J

Brinsden J

Court:
Supreme Court of Western Australian (Full Court)

Judgment date: Judgment handed down 16 June 1980.

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Brinsden J.

This matter is an appeal from the decision of Wickham J. in which he allowed an appeal by the respondent under sec. 58 of the Death Duty Assessment Act, 1973-1977. The background of this case is taken from the judgment of his Honour. Under the will of the deceased his residuary estate is given to the respondent upon trust for the deceased's wife for life and after her death for his daughter absolutely. There is a provision providing for the daughter predeceasing the testator or his wife and in which case there is a gift over to the children of the daughter as should be living at the death of the wife and have attained or should

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attain the age of 21 years and if more than one in equal shares. Failing any such children there is a further gift over to a sister absolutely. The appellant assessed duty on the residuary estate by excluding the actuarial value of the widow's life interest and charging duty on the balance of the value of the residuary estate on the basis that the daughter was the absolute remainderman. The respondent contends that no duty should have been assessed on the residue of the estate or upon its value by reasons of the provisions of sec. 22 of the Assessment Act which, since the amendment to the Act, No. 2 of 1977, read as follows:

``22. Where property comprised in the estate of a deceased person for the purposes of this Act passes to the widow or widower of the deceased person -

• (a) no duty shall be assessable or payable in respect of that property; and
• (b) the Commissioner shall deduct an amount of fifty thousand dollars from the final balance of the estate for the purpose of, and before, assessing the duty payable in respect of any property comprised in the estate that passes to any person to whom Table 1 of the Schedule to the Death Duty Act, 1973, applies.''

The grounds of appeal are four in number and are as follows:

``(i) that his Honour was wrong in law in the construction of the words `property comprised in the estate' which occur in sec. 22 of the Act and the words `property that forms part of the estate' which occur in sec. 5(3) of the Act, in their application to the facts;

(ii) that his Honour was wrong in law in the construction of the term `passes' which occurs in sec. 5(3) and in sec. 22 of the Act and in Table 1 of the Schedule of the Death Duty Act, 1973-1977, in its application to the facts;

(iii) that his Honour was wrong in law in the construction of the words `the taking of a limited interest in that property' in sec. 5(3) of the Act, in their application to the facts; and

(iv) that his Honour was wrong in law and in fact in the construction and application of sec. 5(3) in failing to attribute any value to what he described as `the successive interests to follow'.''

At all material times sec. 5(3) of the Assessment Act has provided as follows:

``Without limiting the generality of the term `passes', where used in this Act in relation to property that forms part of the estate of a deceased person for the purposes of this Act, that term, unless the contrary intention appears, includes the taking of a limited interest in that property under any will or non-testamentary disposition.''

His Honour understood the submissions of the various parties before him in their simplest form as follows. The respondent contended that the word ``property'' in sec. 22 refers to the specific assets, whereas the appellant contended that the word refers to the interest in property (including a limited interest) which passes under the will. His Honour noted that the property passed to the trustees and a limited interest was created for the widow with successive interests to follow although, he thought, a wider meaning to the word ``passes'' would probably be allowed from the context. But, however, by reason of the definition contained in sec. 5(3), the term included the taking of a limited interest in the property which was an asset namely the asset items which will go to make up the residue of the estate, and because the limited interest in that property has been taken under the will by the widow, it followed that the property passed to the widow within the meaning of sec. 5(3) and sec. 22(a).

I am unable to agree with his Honour's conclusions. It is, I think, necessary to make a short examination of the provisions of the 1973 Act as it originally came into force, because for one thing the interpretation placed upon the present sec. 22 would equally apply to the interpretation placed on sec. 22 in its original form. Section 8 provides that there shall be assessed, collected, and paid, on and in relation to the final balance of the estate of every deceased person duty at the rates declared in the Death Duty Act, 1973. The ``final balance'' in relation to the estate of a deceased person is defined to mean by subsec. (5)(i) the final balance on which duty is to be assessed, that is to say, the total value of all property

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ATC 4322

comprised in the estate for the purposes of the Act (calculated by reference to the value of that property before the deduction of any amount which may be deductible from the value of that property under sec. 22 to 25 inclusive) less the total amount of all deductions that are allowed under sec. 11 or 12. Section 9(1) provides that duty shall be paid by every administrator and by every person ordered to file a statement pursuant to sec. 14. By subsec. (2) it is provided that where duty is assessed on and in relation to a final balance determined pursuant to para. (b) of subsec. (1) of sec. 14 and there is no administrator of the estate of the deceased person, the duty shall be payable by the person or persons to whom the property comprised in that estate for the purposes of this Act, passes. Section 35(4) provides that subject to any special provision by the testator for the payment of duty, an administrator shall deduct from each and every devise, bequest, or legacy coming to any person under a will the amount of the duty assessed in respect of the property comprised in that devise, bequest or legacy.

Section 39 also provides that subject to any specific direction to the contrary in the will, an administrator shall, in carrying out the adjustment of the incidence of duty payable or paid by him charge upon and pay out of the corpus of any property in which any limited interest is taken under any will, all duty paid or payable in respect of that limited interest and the remainders or the reversion expected thereof, and the corpus so diminished shall thereafter, as between the respective persons entitled thereto, be deemed to be the property in which those interests are taken. Now these provisions seem to me to contemplate that duty will be assessed on a limited interest, as for example, a life estate. The administrator will pay that duty out of the corpus unless the will otherwise directs, and the corpus so diminished shall then be thereafter the property in which the limited interest is taken. Should there be no administrator, the duty is payable by the person who takes the limited interest. I would reach that latter conclusion by reason of the provisions of sec. 9(2) and the interpretation placed upon the word ``passes'' by sec. 5(3).

Section 22 originally provided as follows:

``Where property comprised in the estate of a deceased person for the purposes of this Act passes to the widow or widower of the deceased person the Commissioner shall -

• (a) deduct an amount of twenty thousand dollars from the value of that property for the purpose of, and before, assessing the duty payable in respect of that property; and
• ...''

In my view, the word ``passes'' in this section, when interpreted in accordance with the definition in sec. 5(3), qualifies the word ``property'' wherever it appears in the section. This means that the section so understood would read as follows:

``Where a limited interest in property comprised in the estate of a deceased person for the purposes of this Act passes to the widow of the deceased person the Commissioner shall:

• (a) deduct an amount of $20,000.00 from the value of the limited interest in that property for the purpose of, and before, assessing the duty payable in respect of that limited interest in the property.''

In respect of the amended sec. 22, in my view it should be interpreted in the same way so as to read:

``Where a limited interest in property comprised in the estate of a deceased person for the purposes of this Act passes to the widow of the deceased person no duty shall be assessable or payable in respect of that limited interest in the property.''

So interpreted, a number of anomalies which the interpretation which found favour with his Honour causes, are avoided.

In my view this appeal should be allowed.