Commissioner of Stamp Duties (NSW) v Jones

2 ATR 641
(1971) 125 CLR 511
(1971) 46 ALJR 50
[1971] AEGR 66,086
[1971] HCA 67

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(Judgment by: Menzies J)

Commissioner of Stamp Duties (NSW)
vJones

Court:

Judges: Barwick CJ
McTiernan J

Menzies JWindeyer J
Owen J

Case References:
Carapark Holdings Ltd v Federal Commissioner of Taxation - (1967) 115 CLR 653
Barclays Bank Ltd v Attorney-General - (1944) AC 372
Wayne v Commissioner of Stamp Duties - (1966) 85 WN 301; (1966) 2 NSWR 309
Barclays Bank Ltd v Attorney-General - (1944) AC 372
Lever Bros and Unilever Ltd v Inland Revenue Commissioners - (1945) 1 All ER 145
Commissioner of Stamp Duties (NSW) v Perpetual Trustee co Ltd - (1926) 38 CLR 12
Commissioner of Stamp Duties (NSW) v Gale) - (1958) 101 CLR 96
Wayne v Commissioner of Stamp Duties - (1966) 85 WN 301; (1966) 2 NSWR 309; (1969) 91 WN (NSW) 51
Gould v Curtis - (1913) 3 KB 84
The National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation - (1959) 102 CLR 29
Barclays Bank Ltd v Attorney-General - (1944) AC 372
Wayne v Commissioner of Stamp Duties - (1966) 85 WN 301; (1966) 2 NSWR 309

Hearing date: 27 and 28 October 1971
Judgment date: 9 December 1971

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Judgment by:
Menzies J

The appellant Commissioner assessed the respondents, as executors of the will of David Lloyd Jones deceased, to duty upon the footing that $38,427, one half of the proceeds of a policy upon the life of the deceased in the David Jones Ltd Special Staff Superannuation Plan with the AMP Society, hereinafter called "the Society", was part of the dutiable estate of the deceased. Whether it was so or not depends upon whether or not the policy moneys fall within the scope of s 102(2)(h) of the Stamp Duties Act (NSW), which is in these terms: "For the purposes of the assessment and payment of death duty . . . the estate of a deceased person shall be deemed to include . . . (h) Any money payable to any person under a policy of assurance on the life of the deceased where the whole of the premiums have been paid by the deceased or a part of that money in proportion to the premiums paid by him where part of the premiums have been paid by some other person."

The appellant stated a case to the Court of Appeal of the Supreme Court of New South Wales which, by a majority, decided that the policy moneys did not fall within the scope of this provision (1971) 1 NSWLR 106. The basis for this was that the deceased had not paid any part of the premiums upon the policy which yielded the moneys.

The complications that there are here arise from the circumstance that the deceased himself was not a policy holder in the Society otherwise than as one of a number of employees of David Jones Ltd - which I shall call "the company" - covered by a policy with the Society taken out by the trustees of the David Jones Ltd Special Staff Superannuation Plan. This had been done pursuant to a trust deed whereunder the company and its chosen employees made contributions to the trustees - the employees by way of authorized deductions from their salaries - to be paid into an account "to be opened by the Trustees and shall be applied by the Trustees in payment of the premiums on policies with the Society . . . "

The trustees were required to, and did, keep on foot a policy with the Society on the lives of members, including the deceased, to provide a benefit in respect of each male member at the age of sixty-five of an amount equal to three times his annual salary at the date of his becoming a member.

The deceased signed the following document on 11 November 1955, before the execution of the trust deed:

APPLICATION FOR MEMBERSHIP OF DAVID JONES LIMITED SPECIAL STAFF SUPERANNUATION PLAN

To the Trustees,

DAVID JONES LIMITED Special Staff Superannuation Plan.

I, David Lloyd Jones being eligible hereby apply for membership of the Special Staff Superannuation Plan and in consideration of my admission to membership I agree to be bound by the Trust Deed and Rules governing the Plan. I hereby authorise the Company as my agent to deduct each fortnight from my salary my contribution to the Plan for the purpose of paying premiums on my behalf and all such payments shall be deemed to be payments to me personally. Signed D L Jones.

The word "to" in the last line of this document may be a mistake for the word "by".

The provisions of the deed were carried out and what was called a group endowment insurance policy was issued to the trustees by the Society. Premiums were paid by the trustees. It appears that the premiums paid were appropriated to the lives assured under the policy. The deceased was such a life. One half of the premiums appropriated to his life came from deductions from his salary; the other half came from the company.

I consider that, by virtue of the policy, the deceased became an insured person, and, despite the arguments on behalf of the respondents, I am satisfied that the policy was one on the life of the deceased, along with the lives of other members of the plan.

It was argued for the respondents that the Commissioner failed at the outset because the policy which yielded the money was not "a policy of insurance on the life of the deceased". A number of reasons were advanced for this. The first was that it was not a policy on his life because the death benefit was only payable if the deceased were in the employ of the company at the time of his death. It seems to me that this limitation does not involve the conclusion that the policy was not upon the life of the deceased. Term policies are well recognized policies of insurance on life and many life policies are issued according to which the death benefit ceases after a specified age. An insurance upon the life of an employee, while he is an employee, is a typical instance of "keyman insurance" which is commonly regarded as an insurance upon the life of the employee. See Carapark Holdings Ltd v Federal Commissioner of Taxation (1967) 115 CLR 653, at p 663. I do not know how a policy upon the life of a person while he is in the employ of a company is to be described if it is not to be described as a policy on the life of that person. Next it was argued that, because the policy provided benefits other than death benefits, it was necessary to compare the various benefits and characterize the policy according to the principal benefit that it secured. Doing this here, so it was contended, the policy was a superannuation policy rather than a policy upon the life of the deceased. However, in many cases superannuation policies are life policies, and the distinction which it was sought to apply seems to me quite unreal. What the trustees were obliged to do, and did, was to "effect and keep on foot a policy with the Society upon the lives of members". The policy provided for the appropriation of premiums "in respect of the lives to be thereby assured" (cl 8). For the purpose of the policy an assured person means "an employee of the Company whose life is assured under this policy" (cl 11). Thus the very terms of the policy demonstrate that it was a policy upon the lives of members. Another argument, in support of the contention that the policy was not upon the life of the deceased, was that the policy was one upon the lives of members rather than upon his life. It seems to me, however, that, because the deceased was a member, the policy was inter alia a policy upon his life. Finally, on this point, it was argued that, because the policy contains provisions that are unusual in a policy upon a person's life, it is not such a life policy. Reference was made to cl 17, among others, authorizing the Society to terminate the policy. It may be that the policy contains unusual conditions, but, if it does so, the only consequence is that there is here a policy of insurance upon lives with unusual terms. Thus, all the threshold objections to the assessment fail.

The real problem here, and the one upon which the learned judges of the Court of Appeal were divided, is whether or not half of the premiums had been paid by the deceased.

It is not to be doubted that the deceased's salary was a source of part of the premiums paid by the trustees to the Society. The deceased requested the company to make deductions from his salary to pay to the trustees, to be paid by them to the Society. The deductions were expressed to be for the purpose of paying premiums "on my behalf". When the company paid the contributions of the deceased, together with other contributions, to the trustees pursuant to cl 11 of the deed, the trustees received those payments to be paid into an account and to be applied in the payment of premiums on policies with the Society. The submission of the Solicitor-General for the Commissioner was to the effect that the group endowment insurance policy, which was issued to the trustees to cover the life of the deceased and the lives of other employees, was an aggregation of separate policies, each upon an individual member of the fund. I do not so regard it. Rather, it is one policy effecting insurance on the lives of those named in the schedule thereto in the manner set out therein. Whether the Society received one premium, or as many premiums as there were persons assured, is not so clear. The provisions of cl 5 would suggest the latter and I am disposed to the view that once there was an appropriation pursuant to cl 8, any payment made to the Society by the trustees should be regarded as covering the payment of individual premiums. For convenience I set out cll 5 and 8 of the policy:

The non-payment of the specified premiums or any one of them in respect of any assured person shall not void this policy in respect of the assurance on his life so long as the surrender value in respect thereof as fixed by the Board, after deduction of any loan or charge thereon, is sufficient for the payment of any such premium. The Board may appropriate a sufficient portion of such surrender value towards the payment of any premium due and any sums so appropriated shall bear compound interest at such rate as the Board shall determine in pursuance of By-law 9(c) of the Society's By-laws and shall be a charge upon this policy and may be deducted from any moneys payable under this policy in respect of such assured person."

The Society shall be under no obligation to accept any payment of premiums in respect of this policy unless such payment shall be clearly appropriated in respect of the lives to be thereby assured. If the Society shall accept payment of premiums not clearly appropriated as aforesaid the Society may at any time thereafter appropriate such payment or such part thereof as shall not be clearly appropriated to such of those lives previously assured and such of those believed by the Society to be intended to be assured as the Society shall think fit and in such proportion as the Society shall think fit."

If the ultimate conclusion is that the deceased paid part of the premiums, the conclusion that there was a separate premium for the insurance upon the life of each member would aid a conclusion that the deceased paid half of the premiums for the insurance upon his own life. It does not, however, resolve the question whether the deceased paid any part of the premiums. To determine the answer to this problem does, I think, require reference to authority, particularly Barclays Bank Ltd v Attorney-General (1944) AC 372, and Wayne v Commissioner of Stamp Duties (NSW) (1966) 85 WN (Pt 1) (NSW) 301; (1966) 2 NSWR 309

In the former case, the House of Lords, agreeing with the dissenting judgment of Luxmoore LJ in the Court of Appeal, decided that life policies had not been "wholly kept up" by a settlor who had assigned two policies of insurance, which he had effected on his own life, to trustees for the benefit of his son and others, together with certain investments from the income of which he directed the trustees to pay the premiums on the policies. In these circumstances it was held that the premiums had been paid by the trustees out of the trust fund. The argument which was rejected was that, notwithstanding payment by the trustees, the premiums had been kept up by the settlor by reason of his having, in advance, made provision for their payment. Lord Wright said (1944) AC, at pp 379-380:

In truth, once there was an express trust to provide for payment of the premiums fully constituted in the terms in which it was, the settlor had thenceforth nothing to do with keeping up the policies. That devolved on the trustees. The first Lord Devonport had divested himself of his property in the fund by his voluntary assignment of it to the trustees to hold on the trusts declared in the deeds. These trusts included keeping up the policies by paying the premiums, but the settlor did not himself pay them. That was the duty of the trustees under the trusts subject to which they held the fund. They did not pay the premiums as agents for the settlor, nor did they do so under any covenant or agreement with him, for there is nothing of the sort in the trust documents. The settlor could not revoke the trust or terminate the trustees' powers as he would have been able to do if they had been his agents, nor could he control the way in which they executed the trust or take steps to enforce it. He was not a beneficiary under the trust.

Lord Simonds acknowledged that a person may, in certain circumstances, be said to keep up a policy although another person pays the premium, but said (1944) AC, at p 382:

... where the payment is made by a trustee whose duty and right it is to pay whether the settlor wills it or not, it is not he but the trustee who pays the premiums and keeps up the policy. And this appears to me more emphatically to be the case when, as here, the settlor has not even a right to intervene and require the trustee to perform his trust.

This decision of the House of Lords was applied by the Court of Appeal of the Supreme Court of New South Wales in Wayne's Case (1966) 85 WN (Pt 1) (NSW) 301; (1966) 2 NSWR 309, where a deceased person had been a contributor to a compulsory superannuation scheme under which policies of assurance were effected on the lives of members in the names of the trustees of the scheme. It was held that the premiums were not, in any relevant sense, paid by the deceased and that, accordingly, no part of the policy moneys paid to his widow and child upon his death was brought to duty under s 102(2)(h) of the Stamp Duties Act. Jacobs JA, with the approval of Wallace P and Asprey JA, said (1966) 85 WN (Pt 1) (NSW), at p 310; (1966) 2 NSWR, at pp 316-317:

Moneys were deducted from the salary of the employee and paid into a common fund. Then the trustees paid the premiums. Once the moneys were received by the trustees the employee could not recover them nor could he in his capacity as payer of the money, which is in this connection the relevant capacity, require that the trustees expend it in payment of premiums on his policy or policies nor could he require that the trustees hand the money back to him upon some ground that he had revoked an authority in the trustees to expend it in a particular way. In other words, the employee handed over the moneys not under any revocable mandate to spend it on his behalf, so that when they paid a premium it might be said that he himself was paying it, nor was it a payment by the employee which under some contract which he had made was actually carried out by the trustees. As was stressed in Barclays Bank Ltd v Attorney-General (1944) AC 372, regard must be had to the legal character of a trustee. In the circumstances which existed in that case and, I think, in the circumstances of the present case, the payment was by the trustees only. There was no payment by the deceased of any of the premiums.

Unless these decisions are to be distinguished, they govern this case. The majority of the Court of Appeal applied them, but Jacobs JA distinguished Wayne's Case (1966) 85 WN (Pt 1) (NSW) 301; (1966) 2 NSWR 309 and it becomes of critical importance to consider the basis upon which his Honour did so. It was on the footing that, in Wayne's Case (1966) 85 WN (Pt 1) (NSW) 301; (1966) 2 NSWR 309, the trustees were under no contractual obligation to the contributor to use what had been deducted from his salary to pay premiums, whereas here the deed did constitute such a contract. According to its terms, every employee, upon becoming a member, is to be deemed to have executed the deed as a party to it. Moreover, the deed, by cl 13, requires the trustees to apply the moneys paid to them by the company in the payment of premiums on policies. In Wayne's Case (1966) 85 WN (Pt 1) (NSW) 301; (1966) 2 NSWR 309, however, the contributor was a beneficiary under the fund and the deed constituting the fund required the trustees to take out policies and pay all premiums thereon from the appropriate section of the fund. Once there is a trust, it seems to me that the relationship between trustee and beneficiary goes beyond the scope of contract and that, in appropriate proceedings by beneficiaries, or, indeed, by one beneficiary, the trustees can be compelled to carry out their trust obligations. In this connexion reference may be made to Lever Bros and Unilever Ltd v Inland Revenue Commissioners (1945) 1 All ER 145, at p 152, where Lord Greene MR, in speaking of the Barclays Bank Case (1944) AC 372, said:

It is to be observed that the language of the document in that case was the common language which you find in trust documents, as you find in the documents here: The trustees shall do so-and-so and so-and-so. Those words do not import a contractual obligation at all, but merely lay down the terms of the trust under which the trustees are to be bound to act. The trustees thus express their willingness to hold the trust property on those trusts, and as soon as they have done so they are bound. It is illusory, in my opinion, to say that the settlor in such a case obtains a contractual right enforceable against the trustees.

Accordingly, the fact, that here each member of the fund becomes, as it were, a party to the deed, is not at the root of his right to have the trust performed. It is sufficient that he is a beneficiary. Jacobs JA recognized that the distinction which he drew was a fine one and that "the ultimate result achieved in both cases differed little". In my respectful opinion, such difference as there is does not bear upon the critical question, ie did the contributor pay part of the premium? I agree with the majority of the Court of Appeal that the case is not to be distinguished, and I agree with the whole of the Court of Appeal that Wayne's Case (1966) 85 WN (Pt 1) (NSW) 301; (1966) 2 NSWR 309 correctly applied the decision of the House of Lords in the Barclays Bank Case (1944) AC 372. The Solicitor-General sought to distinguish the Barclays Bank Case (2) on the footing that there the settlor was not a beneficiary and could not enforce the trust which he had established. This is a matter referred to by Lord Simonds (1944) AC, at p 382 in the passage which I have already cited, but only, I think, to give added emphasis to his conclusion. The decision does not turn upon that circumstance.

Did then the deceased pay half of the premiums on the insurance upon his life effected under the policy? To this question I would answer "No". Although I am disposed to think that he did provide for the money to pay such premiums, the authorities support what ordinary usage would suggest, viz that to provide money to go into a trust fund from which premiums are to be paid, is not to pay the premiums or any part of them. To make provision for a payment to be made is not the same as to make a payment.

It is for this reason that I am of the opinion that the appeal should be dismissed.