Tooheys Ltd v Commissioner of Stamp Duties (NSW)

105 CLR 602

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(Judgment by: DIXON CJ)

Between: TOOHEYS LTD
And: COMMISSIONER OF STAMP DUTIES (NSW)

Court:

Judges:
Dixon CJKitto J
Taylor J
Menzies J
Windeyer J

Subject References:
Taxation and revenue
Stamp duty
Exemptions
Deed between company and trustees establishing pension scheme for employees
Meaning of 'declaration of Trust'

Legislative References:
Stamp Duties Act 1920 (NSW) - Second Schedule

Hearing date: 23 November 1960; 24 November 1960; 25 November 1960; 28 November 1960; 1961 November 1960; 13 June 1960
Judgment date: 13 June 1961

SYDNEY

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Judgment by:
DIXON CJ

The question in this appeal is whether a deed is liable to any and what stamp duty under the Stamp Duties Act, 1920-1956 (N.S.W.). The general character of the deed is described by the recital with which the instrument begins. It recites that Tooheys Limited had decided to establish a pension fund (to be called Tooheys Pension Fund) for the purpose of making provision for and securing individual personal benefits pensions or retiring allowances for, or for dependants of, such of the present and future employees of Tooheys Limited and associated companies and others as under the rules of the fund shall be eligible to benefit. In the Supreme Court it was decided by Owen, Clancy and Walsh JJ. that the deed was liable to stamp duty as a declaration of trust within the meaning of that term in the second schedule of the Act. It was further decided that the duty should be assessed under the sixth schedule at 151/2% upon the moneys the subject of the trust as if the instrument was a conveyance of the property comprised therein falling under s. 66 (3) (ii) as a conveyance without consideration in money or money's worth: Tooheys Ltd v Commissioner of Stamp Duties. ^[F1] The reasons of the Court were given by Walsh J. The Commissioner of Stamp Duties had relied not only on the category of "declaration of trust" but also, as an alternative, upon the category of a "conveyance" on the ground that the deed contained a covenant to pay money not made for a full consideration in money or money's worth and therefore fell within the artificial definition of the word "conveyance" to be found in s. 65. The appellants on their side said that even if the Commissioner succeeded in bringing the deed under either heading in the second schedule, viz. declaration of trust or conveyance, he was faced with the general exemptions from stamp duty under Pt III of the Act given at the end of the second schedule. What was the fourth but is now the fifth of these exemptions is expressed to exempt "all instruments relating to the services of apprentices, clerks, and servants".

The deed is a lengthy document. It consists of twenty clauses and a schedule of forty-nine rules of the fund. It was executed on 29th October 1958 and is expressed to be made between Tooheys Limited of the one part and six persons of the other part who are described as the directors and the general manager of that company. The company and these gentlemen are the appellants. The effect of the chief clauses of the deed is to "constitute" the pension fund, to provide that Tooheys Limited may admit subsidiary companies as associates for the purpose of the fund which will then become bound as original parties, to require that the fund shall be administered in accordance with the rules and to provide of what moneys the fund shall consist. It is to consist of an initial contribution of PD50,000 by Tooheys Limited "at the date hereof" for the purpose of establishing the fund, of all moneys thereafter paid to the fund by Tooheys Limited and the associated companies, of all other moneys or property paid or transferred to the fund, and of all investments and profits and income therefrom. A not unimportant clause provides that Tooheys Limited and every associated company admitted shall make such contributions as shall be determined in accordance with the rules. There is a proviso enabling Tooheys Limited to terminate or suspend the making of contributions and enabling associated companies to withdraw. When the clause speaks of determining the contributions in accordance with the rules, it refers to a rule which says that Tooheys Limited and each associated company, in such proportions as they shall determine, shall pay to the trustees such amount as shall be necessary to provide on an actuarial basis for the "anticipated entitlements of members or their dependants having regard to the respective years of service of members and such further amounts as shall be certified by the actuary from time to time as necessary for the proper maintenance of the fund." Another clause provides for the payment of the amounts by instalments and speaks of two initial instalments of PD50,000 each. The statement of facts before us tells nothing of the actual payments made but according to what was said at the Bar there was an interval of time after the execution of the deed before the first PD50,000 was in fact paid to the trustees.

Power is given by a clause of the deed to Tooheys Limited to alter repeal or add to the rules but the alteration must not adversely affect the benefits to members as at the date thereof unless all members consent in writing. Who are members? The term "member" is defined by the rules to mean an employee of Tooheys Limited (or an associated company) duly admitted as a member of the fund in accordance with the rules. An "employee" means every person employed as a member of the permanent staff of Tooheys Limited or of an associated company including a managing or other executive director. An employee becomes a member of the fund upon admission by the trustees but the trustees must receive his nomination in writing by the board of Tooheys Limited and an application in a form prescribed by the rules by which he undertakes to be bound by the trust deed and the rules. He must be of full age and have completed two years' continuous service with his employer, requirements which the board has a discretion to waive.

No member of the fund is to be under any obligation to contribute thereto. That is a provision of the deed itself. The benefits in pensions and retiring allowances are provided for by the rules. The member must have completed ten years' service with Tooheys Limited or an associated company and he must have retired from the service on reaching the retiring age, sixty-five for men or sixty for women, ages which may be extended in special circumstances but not to a greater age than seventy years. In default of such retirement the member must have died or his services must have been terminated for physical or mental incapacity or ill health. A proviso gives Tooheys Limited a special power to elect to treat an employee as in the same category as one retiring for ill health although he does not actually fall within it. The benefit payable to a member is first a pension during his life-time at an annual rate that is specified and is calculated by reference to his years of service and his salary at the date of retirement; next a pension to his widow during widowhood at half that rate. There are certain qualifications as to separation and so on. Then in the third place there are certain discretionary payments to dependants. There are provisions as to the effect of breaks in the continuity of the service by reason of military service, illness and the like, and there are provisions for reduction or cancellation of the pension in certain events, including sentence for crime, disappearance, presumption of death and immoral or prejudicial conduct. The directors and general manager of Tooheys Limited from time to time are to be the trustees and the deed specifies their duties, and their powers, which are very wide. A clause in the deed provides that the trustees shall hold the fund upon the trusts of and with and subject to such powers and provisions as are contained in or are necessary ancillary or incidental to these presents and the said rules.

The first question which must be answered is whether the foregoing instrument is a declaration of trust within the meaning of that expression in the second schedule. Section 4 of the Act among other things charges upon the several instruments described or mentioned in that schedule the several duties, and at the several rates, specified in the Act and schedules. The material part of the description of instrument under the heading of declaration of trust is par. (2) which is as follows: "Any instrument declaring that any property vested or to be vested in the person executing the same is or shall be held in trust for the person or persons or purpose or purposes mentioned therein notwithstanding that the beneficial owner or person entitled to appoint such property may not have joined therein or assented thereto." A very important phrase in the foregoing is "vested or to be vested". For it might well be said that when the "declaration" expressed in the deed now in question was made no property was vested. But the Commissioner replies that, be that as it may, the money intended to form the fund was "to be vested" within the meaning of the paragraph.

This reply the appellants contest as insufficient to cover the present case. It must be borne in mind that the only beneficiaries of the trusts declared are the members of the fund when and if they are admitted. At the time when the deed was executed and presented for the consideration of the Commissioner of Stamp Duties no property or money had been vested in the trustees, no members had been admitted and the trust deed, so it is argued, had nothing to operate upon and had in truth no force. If property had been vested in the trustees, there might, until members were admitted to the fund, have been a resulting trust in favour of the company. But as it was at the critical point of time there was neither beneficiary nor trust property and therefore no trust then operating. It was said for the appellants that the schedule, in defining the instrument called a declaration of trust, introduced the words "or to be vested" to cover cases where a presently operative declaration of trust applies to some property or rights existing in the trustees but nevertheless property remains to be vested in them. A further point was made that there were no "persons mentioned" in the deed as beneficiaries of the trust within the meaning of the paragraph. But that is better considered as an independent argument: what matters for the purposes of the argument now in hand is that when the instrument was presented for the determination of the Commissioner there were no members of the fund. In my opinion the argument unduly restricts the meaning and application of the paragraph. The words "any property vested or to be vested" seem to me to be directed simply to the two cases, namely the case of the declaration of a trust of property then vested in the person who declares the trust and the second case of a declaration of trust in advance of the vesting in the person who declares it of property which it is intended to make the subject of the trust. Here the first payment to be made is stated and quantified: no objection is possible on the ground that there is no property that can be identified or ascertained. The exclusion by s. 346 of the Companies Act, 1936-1957 (N.S.W.) of an instrument such as the present from the operation of the rule against perpetuities may perhaps be responsible for the possibility of a situation existing in which the argument may be used. But the argument does not appear to me to rest on a proper interpretation of the paragraph. The independent point also seems to me to fail. The point is put as a necessary consequence of the words "the person or persons or purpose or purposes mentioned therein". It is said, and no doubt correctly, that we may disregard the reference to "purpose or purposes" in the present case: the use of those words is to cover trusts for charitable purposes and the anomalous other cases where trusts have been upheld although they create no beneficial interest for human objects, born or unborn. The argument is that as there are no persons ascertained or ascertainable under the terms of the deed whether by name or description no person or persons are "mentioned" in the instrument as persons in whose favour the trusts are declared. This argument appears to me to limit too narrowly the meaning of the phrase in which the word "mentioned" occurs. It may be conceded that the word "mentioned", when applied to persons or objects, usually imports or implies some reference which identifies them by name or designation. It may further be conceded that in the present case there is simply a definition of a class of present and future persons any of whom may become members on the nomination of the company. But it is apparent from the subject matter of the paragraph with which we are concerned in the second schedule that there is no point in the manner of identifying describing or defining the objects of the trust declared and that the word "mentioned" is used in a sense as wide as "referred to" or "described".

For the foregoing reasons I think that the deed falls within the category in the second schedule of instruments called "Declaration of Trust". This view makes it unnecessary to consider the question whether, with the aid of s. 65 it could be brought within the category "conveyance".

It appears to me to follow that unless the instrument falls under a general exemption it is dutiable as a declaration of trust. I may dismiss at once s. 71 from consideration: for it seems to me to have no real bearing on any of the problems of the case. The decisive question is whether the deed falls within the description of the fifth exemption of the second schedule viz, whether it is an instrument relating to the services of apprentices, clerks, and servants. In support of the appellants' contention that the trust instrument is excluded by this exemption from liability to duty it is said that the purpose of establishing the fund is to make the service of the company including the service of subsidiary companies more beneficial to its employees and so make the service more attractive, to induce men to enter the service of the companies and to continue in the service, that by the terms of the instrument membership of the fund is open only to those who serve the companies or one of them, the benefits are calculated by reference to periods of service, the circumstances of the retirement determine or affect the quantum of benefit and the benefits of the widow or dependants are referable to the like considerations growing out of the service of the deceased member. Accordingly the instrument "relates" to the services of the clerks and servants of the companies. It is I think correct that the persons who may become members of the fund fall under the legal description of clerk or of servant. But the question is whether the declaration of trust really is an instrument relating to the services of such men, being clerks or servants. The question is within a small compass and may be said perhaps to be verbal. But in truth it depends on the substantial intention of the exemption. No one denies that the fund or, if you like, the declaration of trust touches the fact of employment as one which governs its effect and operation upon the individual or that an important part of the motive of the company in setting up the fund was to make service with the company more attractive, nor that in joining, and remaining in, the company's service men will be affected by the prospective benefits the fund holds out to them. But does that mean that the instrument is one "relating to the service of (the) clerks or servants"? The subject matter with which the deed actually deals is the pensions and benefits which will be enjoyed by the clerk or servant when his service is over, when he is superannuated, and by his widow and dependants when he dies. That is what all its clauses are directed to. They do not regulate his service or services (if there be a difference in the plural word) or any incident of his service or services.

That he serves or has served is a prior assumption of the deed and that he does so or has done so, and for what period, form conditions upon which certain clauses depend. But the period of time with which the instrument is concerned is that which follows his retirement or death. It is concerned with the benefits which ensue and with the proprietary or quasi proprietary rights that accrue and with their administration and regulation. When the exemption clause speaks of an instrument relating to the services of apprentices, clerks, and servants, I understand it as meaning primarily an instrument dealing with the relationship of master and apprentice, master and clerk or master and servant. It may affect one term or all the terms of the relationship. It may govern or regulate the relationship or it may affect it less directly perhaps and still relate to it. But it is that with which it must deal. A trust deed devoted to the establishment and administration of a fund and to rights in relation to the fund of the man who is superannuated and operating when his services have ceased seems to me another thing, whatever motives may have led to its establishment and whatever motives the existence of the fund and the prospect of its benefits may inspire in those who give their services. The question is one of the manner in which the words, and so the purpose, of the exemption is understood. An exemption is not of course to be construed more widely than a fair reading of its words appears to require, and perhaps that cautionary principle may have its weight. The history of the provision, of the sources whence its chief terms have been collected and the varying purposes to which they have been put from time to time appear to me to tell one little of what they came to mean in the exemption as it was placed in the Stamp Duties Act, 1898 (N.S.W.) and finally in the Act of 1920-1956. Little or no assistance can be obtained from this history. It seems to me to give no complexion to the meaning of the provision as it stands, but as it stands I think that it is the subject with which the contents of the instrument actually deal, the legal operation which the instrument has, that will determine its character for the purpose of the exemption, not the motives or policy upon which the deed rests nor the connexions, by way of condition or contingency or dependence, with the employment which clauses may exhibit. In my opinion the deed is not exempt.

There remains the question of the rate at which duty is chargeable. The second schedule contains three columns: under the first the nature of the instrument is described, under the second the amount of duty is presented and under the third the persons primarily liable for the duty are defined. Opposite "Declaration of Trust" (second paragraph) in the first column, the second column states "The same duty as if the instrument was a conveyance of the property comprised therein." This necessarily carries one back to what the second column of the schedule says under the head "Conveyance". The amount of duty under that head differs widely when, for example, the conveyance is a conveyance on sale for a consideration not less than the unencumbered value of the property conveyed and when the conveyance is without consideration. The same rate is applied by s. 66 (3B) of the Act to a conveyance for full consideration although not a conveyance on sale. When the conveyance is without consideration the duty is calculated at the rate in the sixth schedule. It is charged (in effect and so far as material) on the value of the property conveyed. There are other categories, but in the Supreme Court it was decided that "conveyance without consideration" afforded the appropriate method, and the Commissioner had rightly adopted it. The question is whether this view is correct. It is evident enough that in applying the rates appropriate to a conveyance to a declaration of trust, you are required to treat the person declaring the trust as imparting property to the objects or purposes of the trust and to consider whether in that capacity treating it as analogous to conveying property the party declaring the trust obtained full consideration. This statement is subject to a qualification. The third column in the second schedule states the person declaring the trust or the person directing such declaration. The inference from this may be and probably is that the person directing the declaration of trust may as an alternative be a person who may obtain the full consideration. Accordingly it seems right to qualify the statement that the person declaring the trust is the person by whom the consideration for the trust declared is to be obtained by including as an alternative the person directing the declaration. The appellants' argument is that the trustees obtained the sum of PD50,000 as full consideration for the trusts they declared of that sum. It is clear enough that what the material clauses in the second schedule contemplate is the use of a declaration of trust to impart an equitable interest instead of a conveyance of a corresponding legal interest or for that matter of a corresponding equitable interest. A consideration in money or money's worth must be furnished, perhaps it does not matter whence or by whom, but it must be furnished for the declaration of trust in the sense of the creation of the trust which gives the equitable interest. If it is a trust for purposes-charitable purposes-it would not of course be right to speak of the equitable interest being taken by the charitable purpose. But the parallel is there and consideration must come from some source for the creation of this trust if the transaction, if not otherwise exempted, is to escape the rate given by the sixth schedule. Once it is seen that the question is whether any consideration in money or money's worth was obtained for the creation of the trust of the PD50,000, it seems to me that the question almost answers itself. The company as the party directing the creation of the trust and the trustees as the parties creating the trust by the declaration of the trust obtained no consideration in money or money's worth. The placing of the trust fund in the trustees' hands was no consideration for the present or future equitable interests created.

In my opinion the appeal should be dismissed.