Buzza v Comptroller of Stamps (Victoria)
83 CLR 2861951 - 0427A - HCA
(Decision by: Latham CJ)
Between: Buzza
And: Comptroller of Stamps (Victoria)
Judges:
Latham CJDixon J
McTiernan 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
Decision by:
Latham CJ
This is an appeal from an order of the Supreme Court of Victoria (Sholl J.) made upon a case stated under the Stamps Acts 1946-1949 (Vict.). s. 33. The case submitted for the decision of the Court two questions-
- (1)
- whether an indenture dated 3rd June 1949 was chargeable with any duty under the Acts?-and
- (2)
- with what amount of duty was it chargeable?
It was held that the indenture was a settlement within the meaning of the Stamps Acts, Third Schedule, Part IX., which is as follows:
"Settlement or Gift, Deed of-
- (1)
- 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 amount of duty payable is to be ascertained by taking a percentage of "the value of the property". Sholl J. held that the indenture was dutiable and that duty was payable upon the value of the whole of the property to which the indenture related even if it were the case that only part of that property was settled or agreed to be settled.
By his last will and testament Thomas Henry Buzza, who dies on 26th April 1930, appointed the National Trustees Executors and Agency Co of Australasia Limited his executor and trustee and bequeathed certain legacies. He then gave all his real and personal estate to his trustee upon trust to sell and convert, and, after paying debts etc-
- (a)
- upon trust to pay one-third of the income of the estate to his wife so long as she should remain his widow;
- (b)
- subject to the wife's interest upon trust as to capital and income for his children, including his adopted daughter Eileen Buzza, who being sons should attain the age of twenty-one years or being daughters should have attained that age or previously married, as tenants in common.
The will empowered the trustee, if in its absolute discretion it should think necessary, to invest any part of the trust moneys forming part of the testator's residuary estate in the purchase or lease of a dwelling house for the use of his wife so long as she should remain his widow. The trustee was given full power to sell and dispose of any such dwelling house at any time it should think fit.
The estate was duly administered and in 1949 the position was that the only persons who had any claims with respect to the estate were the widow and the four children. They were all sui juris. The trustee had bought a house in which the widow was residing. She was entitled to one-third of the income of the whole estate during widowhood and also had the right to live in the house which, however, the trustee could sell at any time. The children were entitled to the other two-thirds of the income, and to the whole of the estate as tenants in common after the death of the widow.
The residuary estate included real estate, being pieces of land upon which were erected a weatherboard dwelling, two brick shops, and the house in which the widow was living, together with some vacant lots of land. The total value of the real estate was PD12,781. The residuary personal estate consisted of Australian consolidated stock, Commonwealth Government stock and other securities of a value of PD16,813.
The provisions of the will did not allow the children to get any of the capital of the estate during the life of the widow. The widow had a right to live in the house purchased by the trustee, but the trustee could sell the house at any time. She was entitled to one-third of the income of the estate, which one-third, during the three years from 30th June 1946 to 30th June 1949 had averaged PD344. In the circumstances stated it was agreed by all interested that the widow, instead of receiving one-third of the whole income, should be entitled, during her life or widowhood, to the income of the real estate (except the vacant lots). The children agreed that if that income fell below PD340 in any year the deficiency could be charged upon the real estate to the income of which she was to be entitled. Subject to these provisions it was agreed that the remainder of the residuary estate and the income thereof should be distributed forthwith among the children in equal shares as tenants in common. Thus the widow under this agreement became entitled to a sum certain instead of a sum uncertain, and obtained an assured tenure of her home instead of being subject to the risk of the trustee selling the house in which she was living. The children assured the widow of an immediate income of PD340 a year, and obtained the advantage of an immediate distribution of the personalty, with remainder after the death of the widow in the realty.
Having made an agreement to the effect stated, the widow, the children, and the trustee executed the indenture dated 3rd June 1949. The indenture recites the relevant terms of the will of the testator, his death, and the grant of probate. The indenture proceeds as follows:
"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 now this indenture witnesseth as follows:
- 1.
- In pursuance of the agreement between the widow and children and in consideration of the premises the Trustee undertakes and agrees to administer the said residuary estate of the testator as if without otherwise affecting the provisions of the said Will it had therein been provided that the Trustee should hold such residuary estate upon and subject to the following trusts namely:(a) Upon trust as to the freehold properties and effects set out in the Schedule hereto to hold the same to the use of the widow during her life or widowhood with remainder to the children in equal shares as tenants in common provided however that should during such term the net income to be derived from such properties be less than the sum of Three hundred and forty pounds in any year the amount of such deficiency shall be raised for the benefit of the widow and charged upon the freehold property in the said Schedule firstly described and that subject thereto the remainder of the said residuary estate and the income thereof should be appropriated and distributed forthwith among the children in equal shares as tenants in common."
Clause 2 of the indenture provides for a release and indemnity to the trustee. The schedule specifies the real property the income from which is to belong to the widow.
Sholl J. held that the assessment of the comptroller was correct. In the first place he held that the transaction was not a gift. There was no element of benefaction and therefore there was no gift (see Collector of Imposts (Vict.) v Cuming Campbell Investments). [F1] It is plain that the transaction was a business transaction in the ordinary sense and that it cannot properly be described as a gift. His Honour, quite rightly I think, rejected an argument that some element of benefaction was necessary in order to constitute a settlement or an agreement for a settlement within the meaning of the relevant provision of the Third Schedule.
It was argued for the appellants, and this argument was strongly pressed upon the appeal, that in this case a bona-fide adequate pecuniary consideration was present and that therefore the indenture fell within the exception for which Part IX. (1) of the Third Schedule provides. I agree with his Honour in holding that there was no pecuniary consideration in this case. A pecuniary consideration is a consideration in money, not in money's worth. The widow gave up the chance of obtaining a larger income than PD340 and acquired the greater degree of security which has already been mentioned. What she acquired did not amount to a pecuniary consideration. Similarly the children for what they gave up obtained an immediate right to the distribution of the residue of personalty instead of a postponed right. The consideration, however, was not pecuniary in the sense of money moving from a beneficiary under a settlement or an agreement for a settlement to a settlor. Accordingly the indenture is not within the exception as being made for a bona-fide adequate pecuniary consideration.
It was held in the Supreme Court that the indenture created new rights of a proprietary character and was therefore a deed of settlement, even though the right which the children acquired was a right to immediate distribution of the residue of personalty.
It has often been pointed out that the Stamps Acts impose duty upon instruments, and not upon transactions independently of instruments. If a transaction is carried through without the use of any documents, no stamp duty is payable in respect of it. In the present case the comptroller contends that the indenture of 3rd June 1949 is a settlement. The indenture is expressed to be made in pursuance of an agreement which had been made between the parties before the execution of the indenture, by which prior agreement the parties had agreed that the residue of the testator's estate should be disposed of in a particular manner. The terms of that agreement are repeated in the indenture, but the indenture is not itself that agreement. The indenture was made in order to perform and carry out that agreement, which may or may not have been made in writing. Thus no question arises as to liability for duty in respect of the prior agreement. But a further agreement was made by the indenture. The trustee agreed with the widow and children to hold the real estate for the widow for life with remainder to the children. The trustee therefore became a trustee of the real estate for the widow and children upon the terms of the indenture. I agree that there was a settlement of the real estate.
But the position with respect to the personalty is quite different Sholl J. felt bound by authority to hold that if a document settles any property at all, duty is chargeable upon the value of that property and also upon the value of any other property "dealt with" by the document whether by way of settlement or not. On this point his Honour referred to the judgment of Higgins J. in Carmichael v Commissioner of Stamp Duties (Q.), [F2] and to the judgments of the Full Court of Victoria in Spensley v Collector of Imposts [F3] and In re Austin's Settlement. [F4]
The indenture provides that the trustee shall appropriate and distribute the personalty forthwith among the children as tenants in common. The personalty is not to be held upon any trust for any persons. The effect of the transaction was that the personalty should immediately be transferred to the children so that they could each dispose of what they received as full owners. A transfer of property which immediately gives a full right of disposition of the whole interest in the property cannot be described as a settlement. Thus, in my opinion, the personalty was not settled. The trustee could not retain it-he was to transfer it at once. A provision for immediate transfer of the whole interest in property to an existing person absolutely cannot possibly make that property "settled" property. Such property is necessarily and essentially property which is not settled.
Duty is chargeable under the relevant provision only in respect of "the value of the property". It is the fact that property is settled or agreed to be settled, by a document, which makes it liable to duty. The duty is determined by "the value of the property". The only property to which the provision refers, or which has any possible significance, is the property which has been settled or agreed to be settled. The words "the property" in the phrase "the value of the property" cannot mean other property which for some reason or other happens to be dealt with by the same document but which has not been settled or agreed to be settled. The unreason and injustice of the contrary view are evident. The view which I have expressed is, in my opinion, established by Davidson v Armytage [F5] -a decision sometimes misunderstood. Griffith C.J. [F6] gave an example of a settlement of a term of years in land. His Honour said:
"It could not be contended that the value of the land was the subject of the settlement" (my italics).
It was held by the Court that "the actual interest dealt with in the settlement is the only thing intended to be taxed". This decision means that it is the value of the property which is actually settled or agreed to be settled which is to be taken into account in determining the duty which is chargeable. The legislation, at least on this point, seems to me to be so clear that the Court should take this opportunity of overruling the decisions to the contrary in Carmichael's Case; [F7] Spensley v The Collector; [F8] In re Austin's Settlement. [F9]
In my opinion the appeal should be allowed and the questions in the case should be answered by declaring that the indenture is chargeable with duty in respect of the value of the real estate therein mentioned-i.e., PD12,781, less PD100, the value of the vacant lots.