Thurn v Federal Commissioner of Taxation

(1965) 112 CLR 432
39 ALJR 100

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(Decision by: Kitto J.)

THURN
v FEDERAL COMMISSIONER OF TAXATION

Court:

Judges:
KittoTaylor
Menzies JJ.

Judgment date: 30 June 1965

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Decision by:
Kitto J.

This is a case stated by Taylor J. under s. 28 of the Estate Duty Assessment Act 1914-1957 (Cth) for the opinion of the Full Court upon a question of law arising in an appeal against an assessment of estate duty under that Act. The question is whether the estate of one Francis Martin Thurn deceased comprises for the purposes of the Act any and if so what portion of a sum of 11,928 pounds which on the death of the deceased was paid to his widow as the moneys due at the maturity of a policy of assurance on his life.

It is a question depending upon the construction of par. (f) of s. 8 (4) of the Act, containing one of the provisions by which the Act includes in an estate, for duty purposes, property which forms no part of the estate in fact. The paragraph comprises "money payable to, or to any person in trust for, the widow (or relatives of certain classes) of the deceased under a policy of assurance on the life of the deceased where the whole of the premiums has been paid by or on behalf of the deceased, or, where part only of the premiums has been paid by or on behalf of the deceased, such portion of any money so payable as bears to the whole of that money the same proportion as the part of the premiums paid by or on behalf of the deceased bears to the total premiums paid".

The policy provided for payment of the sum assured, on the death of the deceased, to his executors, administrators or assigns. During the subsistence of the policy seven annual premiums only were paid upon it. Of these, the deceased paid the first four. Before the fifth fell due he assigned the policy to his wife Olive May Thurn, who on his death became his widow. The assignment was made in consideration of a payment equal to the total of the four premiums, and by means of a memorandum of transfer endorsed upon the policy and duly registered in accordance with s. 87 of the Life Insurance Act 1945-1958 (Cth). The result of the assignment was, by force of s. 87 (3) of the latter Act, that thenceforth the assignee had all the powers and was subject to all the liabilities of the deceased under the policy, and was entitled on his death to sue on the policy in her own name. She paid the three premiums which thereafter fell due.

Taking the view that the policy money became payable to her "under" the policy notwithstanding that her title to it depended upon the assignment as well as the policy, the Commissioner treated it as included in the estate for duty purposes by force of s. 8 (4) (f). A contention submitted in support of the appeal is that the expression "under a policy", in this provision, directs attention to the terms of the policy alone, so that the paragraph applies only where the widow (or relative) is specifically pointed out by the policy as the person to whom or in trust for whom payment of the policy money is to be made. It is not easy to see why the word "under" in this context should be given the narrow meaning thus suggested, for it is a word commonly used to describe the relation between a right and the root of title from which the right is derived even if derived through intervening dispositions. The general sense of the provision favours an interpretation which would extend to a case when policy money becomes payable to a widow or relative (within the designated classes) by the combined operation of the policy and an assignment.

But even if this wider interpretation be accepted, the force of the whole expression "money payable to, or to any person in trust for, the widow . . . of the deceased under a policy of assurance on the life of the deceased" requires, as it seems to me, that the widow's beneficial title to the money shall accrue to her in virtue of her status as the widow of the deceased. Similarly as to the widower and the designated classes of relatives. The operation of the paragraph is to impose duty in respect of life assurance moneys where the policy serves the same purpose as a will, but only in the limited class of cases where the benefit is provided for certain relatives of the deceased: see per Latham C.J. in Williams v. Federal Commissioner of Taxation (1950) 81 CLR 359 , at p 375 The relationship (as at the death of the deceased) of the persons for whom the benefit is provided is of the essence of that similarity, between the policy and a particular kind of will, which the Legislature has thought fit to make the ground for levying estate duty. This no doubt explains why the paragraph is expressed to apply, not to money payable to or in trust for the widow, the widower, or any child, grandchild, etc., but to money payable to or in trust for the widow, the widower, or any of the classes consisting of relatives of the specified degrees. Thus the description of the persons is treated as the relevant consideration. The relationship at the death of the deceased is central to the nature of the payability upon which the application of the paragraph is expressed to depend. If the money is payable to or in trust for a person outside the specified relationships the resemblance between the policy moneys and a provision made by will is not treated by the paragraph as sufficient to attract a liability for duty.

The reason doubtless is that the degree of resemblance that is thought sufficient exists only where the qualification for taking the benefit of the policy is the fulfilling, at the death of the deceased, of a description which as a rule carries with it the notion of a moral or sentimental claim to bounty. It would be inconsistent with this to impose liability for duty where, for example, a policy is vested in a trustee for the wife as persona designata, so that even if she (and her representatives if she dies) should retain the benefit of the policy until it matures the efficacy of the trust for her is not dependent upon her surviving the deceased or upon the continuance of the marriage. In such a case the benefit which arises from the payment of premiums by the deceased is in the nature of an immediate provision made at the time of each payment and made not for the widow but for a person who may or may not become the widow.

The present case is even more clearly outside the purpose which par. (f) discloses on its face. On the death of the deceased the policy money became payable - under the policy, one may concede - to a person who in fact was the widow of the deceased; but the instruments by the operation of which it became so payable did not make it payable to that person as the widow. She would have been entitled to receive it even if her marriage to the deceased had been dissolved in his lifetime. The legal nature of the money which became payable upon the death of the deceased is fully stated by saying that it was money payable under the policy to the assignee of the policy. The fact that the assignee happens to be the widow is, in my view, irrelevant to the purpose and operation of par. (f); for that paragraph concerns itself with relationships in so far only as they are germane to the legal or equitable right to receive payment of the policy money.

For these reasons I am of opinion that the question in the case stated should be answered: Not any part.