Deputy Commissioner of Taxation (Cth) v Purcell

29 CLR 464
[1921] HCA 59
(1921) 27 ALR 362

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(Judgment by: Rich J)

Between: Deputy Commissioner of Taxation (Cth) - Appellant
And: Thomas Purcell - Respondent

Court:

Judges: Duffy J
Starke J

Rich J

Hearing date: 24-26 June 1921
Judgment date: 12 August 1921

SYDNEY

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Judgment by:
Rich J

This case originally came before Knox C.J. The learned Chief Justice decided certain questions, of fact and law, but referred to the Full Court the question "whether the declaration of trust dated 20th May 1916 executed by the appellant, not having been registered in the manner prescribed by the Bills of Sale Act of 1891, is a valid declaration of trust binding on the appellant, or is of no effect with respect to the chattels comprised therein." The majority of the Court held that the declaration of trust was valid and binding on the settlor, notwithstanding the nature of its terms and notwithstanding the provisions of the Bills of Sale Act of 1891 (Purcell v. Deputy Federal Commissioner of Taxation ). ^[F4] The Court had not to decide whether the declaration of trust was a sham - i.e ., an unreal or colourable transaction intended to throw dust in the eyes of the Commissioner of Taxation, and not intended to confer benefits on the settlor's wife and daughter. Nor had the Court to decide whether the declaration of trust was obnoxious to sec. 53 of the Income Tax Assessment Act 1915-1916.

The case now comes before the Court by way of appeal from Knox C.J. on the questions decided by him. The first is a question of fact. The essential point is whether the settlor did actually give his wife and daughter certain beneficial interests in the business and property as he purports by the declaration of trust to do. His motives for giving those interests are immaterial. "The question whether an apparent transfer is also a real one is a question which occurs not very rarely, and on which the evidence of actual dealings by the parties can usually be brought to bear. But if we are to dive into the motives of a person acting by himself, and to find out whether a desire to avoid a tax, which probably everybody thinks desirable per se, was, when he gave away property, a dominant motive with him, or a substantial motive, or a minor motive, or any motive at all, that is an inquiry of a vague and indefinite kind" (Simms v. Registrar of Probates ). ^[F5] The Chief Justice has expressly accepted the evidence of Mr. Smith without qualification, treating him as a truthful, accurate and intelligent witness. He also accepts the evidence of Purcell and MacGregor, and sums up his finding thus:-

"I am satisfied on a careful consideration of the whole of the evidence that the proper inference to be drawn from the facts proved is that the appellant really did intend at the time of executing the declaration of trust that his wife and daughter should become the beneficial owners of two thirds of the property comprised in it. I have no doubt that in forming this intention he was influenced to some extent by a desire to lessen the burden of taxation, but the existence of this motive, assuming the existence concurrently of the intention to part with the beneficial ownership of the property transferred, in no way vitiates the transaction."

In view of the evidence given by Smith and MacGregor, and the acceptance by the Chief Justice of that evidence as true, I think that the proper inferences have been drawn from it that the declaration of trust was not a sham, but was genuinely intended to confer beneficial interests on the settlor's wife and daughter.

The next question is as to the true construction of sec. 53 of the Income Tax Assessment Act 1915-1916, It is difficult to say what is its precise scope and effect but, whatever its meaning, it would be unreasonable to construe it so as to include a genuine gift which had the incidental effect of diminishing the donor's assets and income. In my judgment the document in question is not within the section.

In the opinion I have expressed it becomes unnecessary to deal with the question of onus decided by the Chief Justice. I am not, however, to be taken to concur with his decision on that point.

Having regard to the Chief Justice's finding of facts, I think that the trustee is entitled to the deduction of the three sums of £ 100 each as being payments made under the obligation of the deed rather than as voluntary payments in respect of pin-money. The trustee is also entitled under the agreement of the parties to the deduction of the sum of £ 12,510 15s.

For these reasons I think that the order of the Chief Justice should be affirmed, and the appeal dismissed with costs.