Buzza v Comptroller of Stamps (Victoria)
83 CLR 2861951 - 0427A - HCA
(Judgment by: Dixon J)
Between: Buzza
And: Comptroller of Stamps (Victoria)
Judges:
Latham CJ
Dixon JMcTiernan J
Williams J
Webb J
Fullagar J
Subject References:
Taxation and revenue
Stamp duties
Deed of settlement
Agreement varying trusts of will
Extent of property settled
Legislative References:
Stamps Act 1946 (Vic) No 5204 - s 17; Third Schedule
Judgment date: 27 April 1951
Sydney
Judgment by:
Dixon J
The question for decision upon this appeal is whether an indenture made on 3rd July 1949 between the beneficiaries entitled to the residue of the estate of a testator named T. H. Buzza and the trustee of his will is liable to stamp duty as a settlement under par. IX. of the Third Schedule of the Stamps Acts 1946-1949 (Vict.). The relevant portion of that paragraph, which is headed "Settlement or Gift, Deed of", is sub-par. (1). The instruments which it makes dutiable are described by the sub-paragraph thus:
"Any instrument other than a will or codicil whether voluntary or upon any good or valuable consideration other than a bona fide adequate pecuniary consideration and whether revocable or not whereby any property is settled or agreed to be settled in any manner whatsoever or is given or agreed to be given or directed to be given in any manner whatsoever, such instrument not being made before and in consideration of marriage".
The provision has caused some difficulty because of the apparent self contradiction in the conception of a transaction which is a gift notwithstanding that it is upon a good or valuable consideration. But to an extent a reconciliation has been effected judicially between on the one hand the expressions "gift" and "given or agreed to be given" and on the other hand the expression "upon any good or valuable consideration other than a bona fide adequate pecuniary consideration". It has been done by treating the words "gift" and "given" as the dominant words and as importing benefaction as an element in the transaction and the words relating to consideration as meaning that, so long as it is not bona-fide adequate and pecuniary, the presence of consideration shall not be enough in itself to take the transaction out of the category of a gift.
"The real meaning of the schedule is that a deed of gift shall not escape taxation merely because there is some good or valuable consideration therefor", per Hood J., Atkinson v Collector of Imposts, [F10] at p. 113.
The matter was fully discussed in Collector of Imposts (Vict.) v Cuming Campbell Investments Company. [F11]
The result is that the presence of consideration is not to be treated for the purpose of duty as inconsistent with the transaction embodied in the instrument being a gift. It may be a gift although the instrument is made upon a good or valuable consideration unless it be a consideration which is not only bona fide but is adequate and pecuniary.
"Still, the dominant words of the schedule suggest an instrument whereby some benefaction is intended and conferred".
"It cannot be pretended that this conclusion is satisfactory, for it affords no clear rule and requires the consideration of the facts of each particular case", per Starke J. [F12]
But all this relates to the prima-facie contrariety between the notion of a gift and of a valuable consideration. It has no relation to the word "settlement". There is no logical or legal contradiction between the conception of a settlement and the existence of good or valuable consideration for the transaction. Cf. per Latham C.J. [F13] At a stage in the present case reliance appears to have been placed upon the authorities establishing that some element of benefaction must exist before a transaction can fall within the category of a gift under par. IX. and the instrument embodying it be for that reason liable to stamp duty. But in the Supreme Court Sholl J., before whom the case stated was argued, negatived the idea that some element of benefaction is necessary before an instrument can be a settlement and dutiable as such under par. IX. Of the correctness of this view I think that there can be no doubt.
Another matter depending wholly on the meaning of the provision was raised. It was contended that a consideration might be pecuniary although it was neither expressed nor satisfied in money or the equivalent of money. Such an interpretation of the words "pecuniary consideration" is not admissible. Pecuniary consideration means a consideration consisting of or having relation to money.
The appeal, in my opinion, depends on the question whether the indenture is an instrument whereby property is settled or agreed to be settled and, if that is decided against the appellant, upon the further questions whether duty should be charged on the whole of the property with which the indenture deals or on a given part of it only and how the duty is to be calculated.
The indenture is expressed to be made between the widow of the testator of the first part, his four children of the second part, and the trustee of his will of the third part. It recites the effect of the provisions of the will in favour of the widow and children, the death of the testator on 26th April 1930 and the grant of probate. The recitals then proceed-"And whereas the children are desirous of having a present distribution of their respective presumptive interests in the said residuary estate. And whereas doubts have arisen whether on the true construction of the testator's Will such distribution could lawfully be presently made. And whereas the widow and children are all of age and in order to avoid litigation delay and expense and to facilitate the desire of the children for a present distribution on account of their said interests in the said residuary estate have agreed that such residuary estate should be administered in manner hereinafter appearing to which at their request the Trustee has agreed upon having such release and indemnity as are hereinafter contained".
It is now necessary to turn to the will before stating the manner in which the operative part of the indenture affected the testamentary dispositions made by the testator. In the events which happened the residuary estate was devised and bequeathed upon the following trusts: as to one-third of the income to pay it to the testator's widow during widowhood; subject thereto as to both capital and income for the children in equal shares as tenants in common. The will conferred power upon the trustee to invest any part of the trust moneys of the residuary estate in the purchase of a dwelling house for the use of the widow during widowhood and this power was exercised. The clause directed that the rates, taxes and outgoings of the dwelling should be paid out of the estate but empowered the trustee to sell it at any time the trustee thought fit. At the time of the making of the indenture the value of the assets forming the residuary estate appears to have been about PD29,600, producing an annual income averaging over the prior three years about PD1,034. Of this one-third, or about PD345, would be payable to the widow. Of the capital about PD16,720 was invested in forms of personalty readily convertible into money.
The remaining value of the residue was represented by realty, including the dwelling purchased for the widow. In this situation the operative part of the indenture provided that in pursuance of the agreement between the widow and children and of the premises, the trustee undertook and agreed to administer the residuary estate as if, without affecting the other provisions, it had provided that the trustee should hold the residuary estate on the trusts which it proceeded to set out. Those trusts are as to the realty to the use of the widow for life during widowhood and after her death to the children in equal shares as tenants in common, with a proviso that if in any year the amount of the net income from the realty should be less than PD340 the deficiency should be raised for the widow's benefit and charged on certain of the realty. Subject to this trust the remainder of the residuary estate (that is the personalty) and the income thereof "should be appropriated and distributed forthwith among the children in equal shares as tenants in common". There follows a release of the trustee from the trusts created by the will and an indemnification. It will be seen that this rearrangement accomplished more than one object.
Because the widow's share of income under the will was one-third of the whole income of the estate it was difficult to appropriate to the children any specific part of the estate as representing their shares. The rearrangement removed this difficulty. In the next place the widow is given a full life estate during widowhood in the whole of the realty, including the purchased residence. None of the realty is subject to a trust for conversion and the residence is no longer subject to the power of the trustee to sell it, a power which would have meant that the proceeds fell back into residue. In the third place the widow is assured of a net income of PD340 per annum by a charge upon the land. In the fourth place the future interest or remainder to the children is restricted to the realty and the personalty is released from the widow's life estate. In the fifth place it is to be held upon a trust in their favour as tenants in common in equal shares for immediate appropriation and distribution among them. I am unable to see any escape from the conclusion that the instrument, effecting as it does this rearrangement of trusts is a settlement. It may be called a resettlement, but it is not because of that description any less a settlement. It takes trust property and, leaving the property vested in the trustee, it limits equitable estates in succession. It is true that the remaindermen under the old trusts held substantially the same interests. But the life tenant did not and these are fresh limitations.
The personalty, which was subject to successive interests under the old trusts, is released from them, but it is made subject to a trust and an active trust. It may be that if the personalty had been free and had for the first time been subjected to a trust for distribution among the four beneficiaries and that had been done by an instrument confined to the purpose, it would not have been a settlement. But the case is quite otherwise when the instrument deals as a whole with assets held by a trustee and defines the trusts with respect to different descriptions or parts of the assets. Here the instrument deals with the whole trusts and expresses an indivisible transaction as part of which the trust of personalty is made a trust for distribution. The creation of new trusts, the inclusion of trusts to persons in succession and the restriction involved in all the trusts upon the enjoyment which would arise from full ownership mark the instrument out as a settlement. Even the trust to appropriate and distribute involves a departure from the rights of enjoyment which full and immediate ownership would give the children. It is notoriously difficult to define a settlement, but that does not mean that it is difficult to recognize one. This instrument appears to me to be well within the conception, even if the limitation of interests in succession were an indispensable attribute, which it is not.
The widow and the four children combine to effect the settlement of the full interest in the residuary estate. It is true that the proprietary interest in virtue of which each joins in the collective settlement of the whole is that given to him or her by the will. But it is not that interest which is settled. It is not settled as a distinct proprietary interest: all the beneficiaries join so that there may be a resettlement of the sum of interests in the residuary estate, making up full equitable ownership. It is, I think, impossible to adopt the view for which the appellants contended that the four children really assigned their share in the realty (other than the dwelling) to the widow and that the dutiable value should be calculated on their interests so assigned treating it an a settlement by them, while the widow should be considered similarly as having assigned to them her one-third interest in the income of the remainder of the assets, and the value of the interest she so assigned should be ascertained and duty upon it calculated on the footing that she settled that only.
The instrument contains and effects a transaction which cannot be split up in that way. The instrument cannot be considered a settlement upon a bona-fide adequate consideration because, assuming that the consideration consists in the passing of interests from one beneficiary to another in turn, it is not a pecuniary consideration.
There is no doubt more to be said for the view that the final trust to which the instrument subjects the personalty is a severable part of the instrument and that the trust does not "settle" the personalty which therefore should not be considered part of the dutiable property. But, for reasons which already appear, I am unable to adopt this view. The instrument deals with the whole residuary estate and redefines the trusts as an indivisible legal operation. It is, of course, impossible to treat it as two "instruments", and it was not contended that it should be so treated. But in my opinion it is also impossible to treat the trusts of the personalty as a distinct disposition of property falling outside the settlement. It is part of the process of resettling the residuary estate.
For these reasons I think that the judgment of Sholl J. is correct and that the appeal should be dismissed.