Superannuation Fund Investment Trust v. Commissioner of Stamps (S.A.)

Judges: Hogarth ACJ

White J
Jacobs J

Court:
Supreme Court of South Australia

Judgment date: Judgment handed down 21 August 1978.

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White J.: I agree with the reasons of Hogarth A.C.J. and of Jacobs J. for declining to answer the second question on this appeal.

As I find myself, in answering the first question, in disagreement with Jacobs J. as to the status of the Trust in relation to ``the Crown'', and with Professor Hogg in his excellent book Liability of the Crown (4th ed.) as to the role of the prejudice test in determining the claim of an independent body like the Trust to immunity from State and other imposts, I have expressed my reasons at some length. (I will refer to the appellant as ``the Trust'' and to the Superannuation Act 1976 (Cth.) as ``the 1976 Act''.)

The Trust's first claim to exemption for its instruments is based upon the exemption from stamp duty of ``conveyances to the Crown'' in para. 13b of the general exemptions in the Second Schedule of the Stamp Duties Act 1923-1976. The Trust's difficulty here is that ``the Crown'' means, in my view, only the Crown in right of the State of South Australia (the legislating State) and the exemption does not extend to the Crown in right of the Commonwealth. The Trust's second claim to exemption from State stamp duty is based upon a claim of Crown immunity as the alter ego of the Crown. Its main difficulty here is that the Trust is an

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ATC 4498

independent body, and as such not entitled to claim Crown immunity from impairments or detriments of an insubstantial or indirect kind as readily as a Crown servant.

Section 5 of the Stamp Duties Act makes all stamp duties ``subject to the exemptions contained in the second schedule'', so it is necessary to decide whether para. 13b was intended to exempt conveyances to the Crown in right of the Commonwealth or any person or body on behalf of the Crown in that right.

The Second Schedule contains two main classes of exemption for instruments: first, the particular exemptions within each class of document; second, the general exemptions from all stamp duty.

Many classes of instrument are set out in the second schedule in alphabetical order, each class listing its particular exemptions. For example, ``affidavits'' bear 20 ¢ duty, but particular exemptions are given where the affidavit is to be used for seven specified purposes; and ``agreements'' attract 20 ¢ duty, but exemptions are given for six purposes. In describing the exempted purposes, the Second Schedule refers to the Government or the Crown in its various rights by name, drawing distinctions between the Crown in right of the various States and Dominions, sometimes even distinguishing between Ministers of the Crown and the Crown itself. At the end of the second schedule, there is a list of 23 exemptions entitled ``General Exemptions from all Stamp Duties''. There is no general exemption in favour of any class of persons ; in particular, there is no general exemption in favour of the Crown in right of this State or of any other State or of the Commonwealth; the general exemptions are given to instruments to which the Crown in some right may be a party; and the exemptions vary with each class of instrument.

I give random examples of exemptions of instruments which refer in some way to the Crown or the government. Receipts exemption 1 is for any payment to a department of the ``government of the Commonwealth or of this State or any other State or to the South Australian Housing Trust''. Receipts exemption 10 is for those relating to stocks, debentures and bonds, notes and bills ``of the government of the United Kingdom or of the Commonwealth, or State of South Australia or any other State of the Commonwealth or any other part of Her Majesty's dominions... or of any public statutory body of the Commonwealth or of the State of South Australia or any other State of Australia'' - (but, presumably, not the stock, bonds, etc. of the public statutory bodies of the United Kingdom or other dominions).

This diversity and sensitivity in the selection of bodies whose instruments are entitled to exemption is both instructive and puzzling; instructive because great care was taken from time to time to distinguish between the Crown in rights of its various ``parts'', puzzling because little care was taken to achieve uniform terminology.

General exemption No. 6 relates to all Commonwealth War Bonds ``issued by the Government of the Commonwealth'', while No. 10 relates to mortgage bonds guaranteed by the ``Government of South Australia''. No. 13b is to be found in the following group of exemptions, all of which refer simply to ``the Crown'':

``12. Leases to the Crown and any person on behalf of the Crown .

13. Power of attorney limited to the power to sign and seal leases from the Crown .

13a. Grant of land from the Crown .

13b. Conveyance... to the Crown or to any person on behalf of the Crown ...''

I have set out above only a few of the many and varied references to the Government and to the Crown in right of various parts of the Commonwealth and Dominions. In my view, ``the Crown'' in No. 13b is intended to refer only to the Crown in right of the State of South Australia for the reason that only the Crown in that right can make the ``land grant'' referred to in No. 13a. Since ``the Crown'' should prima facie have the same meaning in all four paragraphs, the Crown in right of the Commonwealth is not entitled to the exemption in No. 13b. This prima facie construction is in harmony with the limitation of the presumption in favour of the legislating State referred to in more detail below.

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I have not overlocked the possible argument that sec. 5 should be so construed or read down that - quite apart from the exemption provisions - it does not apply to the instruments of the Crown in any right whatsoever. It has often been said that the rule of construction expressio unius est exclusio alterius will not readily be invoked where the Crown expressly exempts itself from a particular provision of an Act, since the express exemption could have been inserted in the Act merely out of an excess of caution; that being so, it is said that the Crown may, in spite of a particular express exemption, nevertheless claim the benefit of the general presumption that the Act was not intended to apply to the Crown generally. This latter presumption has special force when the Act imposes fiscal burdens on the subjects of the legislating State in order to raise revenue. It is self-defeating for the Crown to submit, and to make payments, to its own revenue-raising legislation, depleting one pocket in order to augment the other. Apart from the necessity to avoid this absurd result in the case of fiscal burdens, there is the general ``prejudice rule'' that Acts tending to impair Crown rights or privileges will be construed as not applying to the Crown.

Here, if the obligation to pay the stamp duty prescribed by the Stamp Duties Act - quite apart from the specific exemptions - applied to this State Crown's instruments, the revenue of this State would be simultaneously augmented and depleted. In addition, the application of the prejudice test to the Stamp Duties Act would result in it being read down so as not to apply to State Crown instruments or to those of its servants or controlled agents. But these two considerations do not afford any reason for reading down the Stamp Duties Act for the benefit of the Crown in right of the Commonwealth. The very stamp duty that would here deplete Commonwealth revenue would augment State revenue. There is, therefore, no logical or fiscal reason for extending the presumption in favour of the legislating State, South Australia, to the Commonwealth.

For these reasons I hold that the presumption does not extend beyond the Crown in right of the legislating State to the Crown in right of other States or of the Commonwealth. It has been suggested that the one and indivisible Crown is entitled to the benefit of this presumption. I adopt without repeating my reasons for preferring the contrary view as set out in my decision in Re Mount Gambier Gas Company , Credit Tribunal decision of March 18 1977, following the analysis of the cases by Professor Hogg in his book Liability of the Crown (4th ed.) (pp. 192-195).

I hold that the Trust's instruments are not exempted from stamp duty under No. 13b or under any other exemption in the Second Schedule or under any other provision of the Act, and in particular, that there is no rule of construction which would prevent sec. 5 of the Stamp Duties Act binding the Crown in right of the Commonwealth.

The Trust's arguments then turned from the Stamp Duties Act to the presumed intention of the Commonwealth parliament when it passed the 1976 Act. Counsel for the Trust, Mr. Debelle, contended that the Commonwealth intended, when passing the 1976 Act, that the Trust would enjoy the immunities of the Crown in right of the Commonwealth. He said that one of those immunities was automatic exemption from State stamp duties. He contended that the Trust ``was'' the Crown in right of the Commonwealth, or at least its servant or agent, and for that reason, he said, the Trust was beyond the reach of any State-imposed stamp duties upon its instruments. He relied upon sec. 114 of the Constitution (which prohibits the imposition of a ``tax'' upon the ``property'' of the Commonwealth), and upon the much debated concept that the Federal system itself prevents any impediment by the States upon Commonwealth functions and transactions. He developed the former argument but merely stated the latter.

On the view I have taken, it is not necessary to decide whether stamp duty on the written evidence of the movement of an interest in property is a ``tax'' or, if it is, whether it is a tax ``on property''; nor is it necessary for me to decide the merits of the ``Federal system'' argument. I say this because I have formed the opinion that the Trust is not entitled to any relevant immunity of the Crown in right of the Commonwealth in any event. It is not accurate to refer to the

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Trust as ``the Crown'', or as a Crown servant. As a statutory body, it could only be a Crown agent at most. Sometimes the words ``Crown servant'' or ``agent'' are used as if they are interchangeable but I think that a servant is more intimately related to the Crown than its agent.

I begin by applying the ``control test''. I have been unable to discern in the 1976 Act any intention on the part of the Commonwealth legislature, so to control the Trust's functions and discretions as to constitute the Trust a mere servant or agent of the Crown. The Trust is a statutory corporation enjoying wide and almost entirely unfettered discretions in its management and investment of the Superannuation Fund referred to in the 1976 Act, a Fund constituted out of the compulsory and voluntary contributions of employees not only of the Commonwealth Public Service but of employees of public enterprises sometimes having only a remote connection with that Service.

The Commonwealth itself does not contribute to the Fund at all. The Fund consists partly of the past contributions by such employees (which were transferred from a former fund under the superseded Superannuation Act 1922-1976) and partly of the continuing contributions of such employees since 1976. Huge amounts of money have been poured into the fund by huge numbers of contributories, who have a vested interest in the integrity of the Fund, in my opinion.

Not only were superannuation benefits upgraded by the 1976 Act, but a fundamental change was made in the management and investment of the Fund. Under the superseded Act, the Commissioner was responsible for the administration of the Act; and there was no Trust. Under the 1976 Act, the Commissioner continued to be responsible for the general administration of the Act, but responsibility for the management and investment of the Fund became vested in the Trust, a new statutory corporate body with wide discretions. The change in legislative policy was significant, cf. Walsh J. in
Aborigines Welfare Board v. Saunders 1961 N.S.W.R. 917 . In that case, as here, the scheme was previously administered as an activity of a department of government under the supervision of a servant of the Crown. In that case, as here, a new scheme was introduced under the control of a statutory corporation with wide discretions.

Under the 1976 Act, the management and investment of the Fund has been entrusted to a three member Trust, constituted of persons deliberately chosen for their expertise and experience in the management and investment of money, and enjoined to disclose any private interests, to refrain from engaging in activities adverse to the interests of the Fund and to make certain reports. This must have been done, I think, not only in order to achieve impartiality on the part of the ``trustees'' but also to inspire confidence on the part of the ``beneficiaries''. One member of the Trust is chosen specifically to represent the interests of employees and pensioners. These factors point in a general way towards a legislative intention in the 1976 Act to create a body of trustees at arm's length from both the Commissioner and the Executive Government.

To my mind, there is a tension between the concept of a genuine Trust on the one hand, and the concept of service or agency on the other. If the 1976 Act intended that the Trust should be no more than the servant or agent of its creator, the Crown in right of the Commonwealth, it should have refrained from using the language of trust in relation thereto. I would prefer to hold that the Commonwealth legislature intended the Trust to be at arm's length from the Commonwealth, not its servant or agent, and thus to preserve the recognized jurisprudential distinctions between the trustee's relationship with his beneficiaries and the principal and employer's relationship with agents and employees.

The ``trustee test'' construction is in harmony with the ``control test'', because, whether one applies the ``trustee test'' or the ``control test'' to the 1976 Act, the same result is achieved.

Unless the trappings of trust were attracted to the scheme as a solemn farce, the ``trust test'' leads to the conclusion that the Trust is an independent corporation, albeit performing functions of a public nature.

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Applying the usual criteria under the ``control test'', the independence of the Trust is equally apparent. Significantly, there is no ministerial control of the general or particular discretions of the Trust members. The members of the Trust are constituted a statutory body. And it is the Trust's duty to manage and invest the Fund in a wide range of trustees investments, selected in its own discretion, according to its own good judgment, with the good faith and impartiality expected of all trustees. There are certain procedures for ``vetting'' of appointments, for audit and for reporting to parliament. But none of these procedures fetter the discretions vested in the Trust.

Generally speaking, I respectfully adopt the statement of the relevant test by Jordan C.J. in
Skinner v. Commissioner for Railways (1937) 37 S.R. (N.S.W.) 261 at 269, 270 : -

``The question whether a body represents the Crown for the purpose of being entitled to the benefit of the Crown's prerogative privileges and immunities, including that of not being bound by a statute unless an intention in that behalf appears, depends upon whether it is, on the one hand -

1. (a) a branch or department of the Government - a mere agent of the Government; or

• (b) a body which, though independent of the Government, performs functions which are inalienable governmental functions, e.g. the administration of justice; in which cases it does represent the Crown; or on the other hand -

2. a body independent of the Government with independent powers and discretions of its own in which case it does not represent the Crown.

If the body is really a governmental agency the fact that it can sue and be sued does not alter its status; nor does the fact that it is incorporated; or engages in trading. If the body is really independent of the Crown, it is immaterial that it discharges public functions or that its profits must be devoted to the benefit of the public, or its receipts paid to public revenue. In any event, whether the body is found to represent or not to represent the Crown, the extent of its liabilities or immunities may depend to some extent upon particular provisions contained in the Statute by which its functions are regulated.''

That statement of the law was adopted by Street C.J. in
Electricity Commission of N.S.W. v. Australian United Press (1955) 55 S.R. N.S.W. and by Walsh J. in the Aborigines Welfare Board case (supra) . It is consistent with the control test aspect of the High Court decision of
Goodfellow v. F.C. of T. 77 ATC 4086 at p. 4092; (1977) 51 A.L.J.R. 437 at p. 441 and with the views of the majority of the judges of the High Court in
Wynyard Investments Pty. Ltd. v. Commissioner of Railways (N.S.W.) (1955) 93 C.L.R. 376 . It is also consistent with a number of other decisions conveniently collected in Professor Hogg's book, Liability of the Crown including the cases of
Fox v. Government of Newfoundland (1898) A.C. 667 and
Metropolitan Meat Industry Board (N.S.W.) v. Sheedy (1927) A.C. 899 . The control test also loomed large (with the opposite result) in Bank voor Handel en Scheepvaart
N.V. v. Administrator of Hungarian Property 1954 A.C. 584 (H.L.) .

I said I adopted the above statement from Skinner's case ``generally speaking'', because since that case was decided, the concept of a body ``representing'' the Crown has been questioned and, in some quarters, the ``prejudice to the Crown'' test seems to have been given an unwarranted ascendancy over the control test. If the prejudice test is as potent as has been suggested, applying with equal force to independent bodies and Crown servants, the 1976 Act must have intended the Trust to be exempt, since payment of duty indirectly affects the Commonwealth interest. On the other hand, if the prejudice test applies with far less force in the case of independent bodies, the control test is virtually conclusive in this case.

The discussion in Professor Hogg's book on pp. 173-174 and pp. 206-207 seems to be based largely upon the following statement from the minority judgment of Kitto J. in Wynyard's case (supra) p. 392: -

``It was said that `the Commissioner for Railways is not the Crown and is bound by the Landlord and Tenant

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(Amendment) Act 1948-1952'. It is, of course, quite common, where some immunity or advantage is claimed for an individual or a body by reference to a special position which the law accords to the Crown, to speak of the individual or body as being or not being the Crown. This use of language is open to the objection that not only is it for obvious reasons technically inexact but it tends to obscure the real nature of the problem. The Sovereign alone is the Crown. In this country, where questions concerning the monarch personally can seldom arise, the Crown normally means that Sovereign considered as the central government of the Commonwealth or a State. Ordinarily, therefore, to hold that a given statutory provision binds the Crown is to hold that it operates to destroy or curtail or impair some interest or purpose... of the Sovereign as so considered. Where the immunity is claimed by a subject of the Crown , whether an individual or a corporation, the question to be decided, whatever may be the language in which for convenience it may be expressed, cannot really be whether the subject is within a class of departments, organisations and persons generically (and loosely described as the Crown). It must always be whether the operation of the provision upon the subject would mean some impairment of the existing legal situation of the Sovereign ...

(The Bank voor Handel) decision must depend upon an ascertainment of the effect which the taxing of the income would have upon interests or purposes of the Sovereign . The nature of the relation between the official himself and the Crown - whether he was a servant, or an agent or occupied some other position, was considered''

(in Bank voor Handel ) `` only in the course and for the purpose of determining that crucial matter .'' (emphasis mine)

If Kitto J. meant by the first emphasised words (``a subject of the Crown'') to refer to a Crown servant or agent, I would, with respect, agree. However, if he meant thereby to include independent bodies performing public functions, I cannot. (In that case, the Act itself provided that the Commissioner of Railways ``represented'' the Crown.) In the first part of the above passage, Kitto J. seems to indicate that the prejudice test is the crucial test, virtually the only test. And in the latter part, he points to the crucial part played by the prejudice test in Bank voor Handel's case where the administrator of alien property was a Crown servant and the Crown prejudice was most remote and indirect.

In Bank voor Handel , the custodian was plainly a Crown servant; as such he was entitled to Crown immunity without any diminution, the slightest impairment of a remote or indirect interest of the Crown attracting in his favour the operation of the prejudice test.

Unless Kitto J.'s remarks in Wynyard are strictly confined to Crown servants or agents, I think that the prejudice test tends to assume an importance it does not have. The difference between the prejudice test in its application on the one hand to Crown servants and on the other to independent bodies was mentioned in Bank voor Handel , where Lord Reid indicated that the prejudice test far less readily applied to the latter. He said (p. 618-619): -

``I have already said that there is, in my view, an essential difference between the immunity of the Crown itself and immunity which may be claimed by independent bodies on the ground that they are performing functions of a governmental character. There is every reason for strictly limiting the right of such bodies to claim immunity , but I can see no ground for applying those limits to the Crown itself. If an Act of Parliament does not bind the Crown then the Crown can claim immunity from its provisions whether its interest to obtain immunity in a particular case is large or small or direct or indirect.''

(emphasis mine)

The force of the above distinction made by Lord Reid , strictly limiting immunity in the case of independent bodies, would not have effect if Kitto J., in referring to ``a subject of the Crown'', is understood as having intended to include independent bodies as well as Crown servants and agents. Professor Hogg in his abovementioned discussion of the prejudice test seems to have understood

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Kitto J. as having intended to include independent bodies. For example, he says (p. 174): -

``The same consideration of prejudice to the Crown defines the class of persons (or bodies) who are entitled to share the Crown's immunity from statute. Once it has been determined that a particular statutory provision does not apply to the Crown, then the Crown's immunity is shared by any person (or body) who can show that the application of the statute to him would prejudice the Crown . On the basis of this test, Crown servants, when acting as such, will usually be entitled to the same immunity as the Crown; independent contractors, lessees and licensees will usually not be entitled to immunity. But the mere classification of a person into one of these familiar categories will not suffice to determine whether or not he is entitled to share Crown immunity from statute; the test of prejudice to the Crown must always be applied . The possibility of a Crown servant not being entitled to Crown immunity was adverted to by the House of Lords in the Bank voor Handel case .''

(emphasis mine)

And again at p. 206, he says: -

``But the issue in these cases is not just whether the corporation is a servant of the Crown; it is whether the application of the statute to the corporation would impair some interest or purpose of the Crown.''

It is true that the latter passage is introduced by the statement that ``the result usually hinges on whether or not the (master-servant) relationship is established'' and followed by the statement that ``if the corporation is a Crown servant, it is usually obvious that the application of the statute to it will impair some interest or purpose of the Crown''. It is also true that in other passages he seems to acknowledge the generally conclusive effect of the control test; nevertheless, the acknowledgement is always qualified. For example, on p. 207, he says: -

``When all these qualifications have been made , it is still true that the central question in cases where a public corporation claims Crown attributes is usually whether the corporation is a servant of the Crown. The answer to this question is supplied by the `control test'.''

One of the qualifications he is there referring to is his insistence on p. 206 that the prejudice test is the crucial test. This can be seen not only in the text on p. 206, but in footnote 12, which in turn refers back to p. 174 and Kitto J.'s above statement of the law.

With respect, I think that it is too strong a statement of the prejudice test to say that the prejudice test ``defines'' the class of persons (or bodies) who are entitled to share the Crown's immunity from statute (p. 174). I think that it is first necessary to apply the control test in order to see what kind of prejudice test should be applied, as Lord Reid indicated. It is then that the specific burden imposed by the other statute is looked at - in the case of Crown servants, any minor, remote or indirect impairment will suffice; in the case of independent bodies, some substantial and direct impairment is necessary.

I accept the statement that ``the test of prejudice must always be applied'' although that requirement is often not expressly followed once it becomes obvious under the control test that the body is independent. Cf. Fox, Sheedy (supra) , and more recently
Westeel-Rosco Ltd. v. Board of Governors of South Saskatchewan Hospital Centre (1977) 69 D.L.R. (3d.) 334 (Full Ct. Canadian Supreme Court). Indeed, the fact that the prejudice test is often ignored once the control test establishes the body's independence indicates to me that the Courts are in the habit of strictly limiting the claim of such bodies to immunity in spite of some prejudice to them.

I do not accept the dichotomy (on p. 174) between Crown servants on the one hand and independent contractors, lessees and licensees on the other. In my view, the correct dichotomy is between Crown servants (and strictly controlled agents) and independent statutory bodies exercising independent discretions. Independent contractors, licensees and lessees do not enjoy immunity in their own right, but merely as a reflection of the immunity enjoyed by the Crown servant with whom they have contracted.

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In the case of independent contractors, the Full Court of New Zealand in
Lower Hutt City v. Attorney-General (1965) N.Z.L.R. 65 felt constrained to extend to independent contractors the benefit of the Minister's immunity from municipal regulations, mainly on the authority of an earlier decision which had stood unchallenged for 80 years (
Doyle v. Edwards (1898) 16 N.Z.L.R. 572 ); on the strength of Doyle's case , independent contractors performing work for Crown servants had for long been excused from compliance with municipal regulations. Since the Minister was plainly a Crown servant, the most insubstantial and indirect impairment of his interests attracted immunity under the prejudice test. The plumbing regulations created not only a primary obligation upon the contractor to obtain a municipal permit to commence work, but also a secondary obligation upon the owner of the land to see that he did; insofar as the latter tended to bring the Minister indirectly under municipal control of plumbing standards (when the statute made him the sole arbiter thereof), there was said to be some potential prejudice to the Crown. That was a most indirect thread along which to trace prejudice to a Crown servant, and I can understand the reluctance of the Court in that case to extend the Minister's immunity, so as to benefit independent contractors.

In the case of lessees from Crown servants, the prejudice to the Crown as reversioner is clear enough and supportable on the authority of cases like Bank voor Handel and
Rudler v. Franks (1947) 1 K.B. 530 .

As for licensees from the Crown, the law's solicitude for the Crown did not reflect any immunity in favour of the licensees in Shire of
Hornsby v. Danglade (1928) 29 S.R. (N.S.W.) 118 and
Ex parte O'Neill (1892) N.S.W.R. 280 (F. Ct.) . A difficult case is
Roberts v. Ahern (1904) 1 C.L.R. 406 , which held Inter alia that the Commonwealth's immunity indirectly reflected in favour of its night soil contractors; I do not pause to consider that much criticised authority except to say that the Court there held that Post Office premises of the Crown, so the Court was sensitive to any indirect impairment of Crown privilege.

The above analysis shows, I think, that the prejudice test applies in a different way and with much less emphasis when the control test reveals that the body in question is independent of the Crown. The correct dichotomy is between Crown servants on the one hand and independent bodies on the other, and the control test is first used to divide the one from the other. The position of independent contractors, lessees, and licensees dealing with the Crown in only relevant insofar as interference with them may result in prejudice to the privileges of a Crown servant. I do not understand Professor Hogg's analysis as keeping the above dichotomy steadily in mind, nor as distinguishing between the relative force of the prejudice test in each instance; in the result, the role of the prejudice test appears over-dominant.

The prejudice test becomes crucial only in the case of possible impairment of the interests or privileges of Crown servants and then only after the control test has revealed the servant status (Bank voor Handel) . Otherwise, the prejudice test has a minor role, as in Skinner, Fox, Sheedy, Westeel (supra) and in many other cases.

Since the Trust is an independent body, and since the impairment of Crown interests was both indirect and relatively minor, I do not think that the prejudice test is significant. By way of analogy, I would not think that any liability upon the Trust to place stamps on its receipts or to pay search fees and registration fees at the Lands Titles Office of brokerage on share transfers would be prejudicial in a relevant way. They are mere incidents of the management of the Trust, like liability to pay for telephone calls and for stamps on letters. (I am not aware whether the Trust does or does not habitually pay these small fees.) In like manner, I do not think that the obligation to pay stamp duty on any instruments of transfer of its many investments is significantly prejudicial to the Crown. After all, the Trust is an independent Trust of a Fund of employees contributions. The Trust and the Fund do not pay benefits to employees in the ordinary course. The Trust and the Fund form part of a total scheme under which the Commonwealth itself - not the Fund or the Trust - pays superannuation benefits, and pays them not only to Commonwealth public servants but also to many employees only remotely connected with the Commonwealth

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ATC 4505

public service. It seems to me to be not unreasonable to expect any independent body created by the Crown in right of the other States and of the Commonwealth, wishing to take a transfer of land in South Australia, to do so upon any non-discriminatory terms applying to other persons in this State.

The Commonwealth itself, and sometimes independent bodies created by it, enjoy certain specific exemptions under the Stamp Duties Act , but not this one. The Commonwealth, in its own 1976 Act, chose to exempt its Fund from income tax (sec. 42(5)), but not from State stamp duty. It must have been known to the parliament that the Commonwealth enjoyed certain specific exemptions under the Stamp Duties Act but not others, distinctions which had often stood for years. It is not clear whether the income tax exemption contemplated in sec. 42(5) is from the Commonwealth's own income tax or some possible future State income tax. It was an excellent opportunity, to say the least, to exempt the Fund and the Trust from the payment of State stamp duty. I have already noted that such exemptions are often included in statutes out of an excess of caution, without precluding the possibility that other exemptions may continue to be implied in favour of the legislating Crown. I do not rest my decision upon the express exemption from income tax and the silence about stamp duty. I merely comment how much time and effort would have been saved if some attention had been given to this policy decision when it must have been in contemplation that some Fund investments would involve transfers of land which would attract State stamp duty.

I have said that the prejudice to the Commonwealth Crown is relatively minor and indirect.

My reasons for saying this involve a more detailed examination of the provisions of the 1976 Act, which will show, I think, not only the indirectness of the interest of the Commonwealth in any diminution of the Fund resulting from payment of stamp duty but also the lack of control, to which I have already referred, of the Executive over the Trust.

The Trust and the Fund were both created in Pt. III of the 1976 Act. Division 1 of that Part creates the Trust (sec. 28), while Div. 2 creates the Fund; Div. 2 then gives to the Trust all powers of management and investment of the Fund (sec. 41); all investments are to be trustee investments (sec. 42) and a minor proportion are required to be in government securities.

The constitution of the Trust is significant. It is a body corporate with a common seal (sec. 29); it has three members chosen for their expertise and experience in the management and investment of money (sec. 30); the Chairman has a longer term of office than other members and is employed full time; one part time member represents the interests of the ``consumers'' - the contributories, past or present; members must disclose any personal interest in any investment and refrain from voting (sec. 35); any interest is recorded. All of this is what one would expect from independent and impartial trustees.

The Treasurer is empowered to lend money to the Fund (sec. 43) but the Fund cannot lend money to the Treasurer (sec. 42) - except by way of ordinary public securities. Although the Treasurer, as a Minister of the Crown, has certain audit and other minor interests in the concluded activities of the Trust, he has no power to direct them, either generally or specifically, as to the manner in which they will discharge their functions of management or exercise their discretions as to investment. The Treasurer's interest is confined to ``vetting'' the appointments of members to the Trust so as to ensure their ability, experience, expertise and impartiality, and ``vetting'' their achievements indirectly, by his power of inspection of the Trust's accounts and partial power of audit. The Trustees must report annually to the Treasurer who tables the report in Parliament, but this does not constitute control. There are other examples of audit and report powers with respect to independent bodies. There is nothing to prevent the Trust having its own auditors; and the audit power refers to a small part only of the Fund. In my view, the audit and report obligations do not constitute the kind of control over the Trust's discretions which would reduce the independence of the Trust. Having regard to the huge sums of money involved in the Superannuation Fund, the huge numbers of contributories and their dependants, and the importance of the

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ATC 4506

management and investment of the Fund to them (especially to those who contribute regularly thereto and may have to demand repayments therefrom in the circumstances mentioned later), it is understandable that there should be elaborate audit and reporting procedures. And I do not think that the appointment of members of the Trust by the Governor-General is significant.

I would be prepared to infer from the above provisions without more, an intention on the part of the Commonwealth legislature to create an impartial body, independent of the Executive, to manage and invest the Fund of the contributories. But that is not all. The Fund must be seen against the wider objects of the 1976 Act to create a superannuation scheme (taken over from a previous scheme) and, as part of that scheme, to create an investment fund with independent investment trustees. It will be seen that the 1976 Act confers benefits on the contributories and that they have a more direct and substantial interest than the Commonwealth in the Fund. To begin with, contributories have a direct beneficial pecuniary interest in the Trust, in the nature of the interest of any beneficiaries under any other trust. After all, the Fund consists of their compulsory and voluntary investments over many years including that part of the Fund constituted by their contributions to the former fund and transferred to the new Fund. Those former contributories and their dependants also have an interest in the Fund. Again, whenever any contributory becomes ineligible, he must look to the new Fund for payment out of his accumulated contributions (sec. 111 and 112). Again, if he had certain insurance policies under sec. 74 of the former Act, he can look to the Fund for payment out (sec. 189). One way or another, the money of each contributory has gone into the Fund and, in certain situations, he can look to the Fund to be paid through the Trust. I think that these considerations suffice to make them beneficiaries of the Fund in the Trust's hands, in a real sense.

On the other hand, the Commonwealth normally has no direct interest in the Fund, although it has an indirect and ultimate interest. The Commonwealth does not contribute to the Fund. Further, there seems to have been a deliberate attempt, through the machinery of trust, to prevent any direct Commonwealth meddling with the Fund, by putting the Fund beyond reach of the Executive. The Commonwealth has an indirect interest in the prosperity of the Fund; if it does prosper, the Commonwealth, having paid the pensioners, will be called upon to pay less in the long run, when reimbursements from the Fund are taken into account. As I said, superannuation benefits arising under the 1976 Act are, generally speaking, paid direct to pensioners by the Commonwealth, not by the Fund or the Trust, which pay only in the special cases which I have mentioned.

These considerations are sufficient, I think, to distinguish the 1976 superannuation scheme from the schemes considered in Kirkland and Goodfellow .

The Commonwealth has two kinds of indirect interest in the profitability of the Fund; first, its interest in receiving as much as possible in the long run by way of reimbursement from the Fund, second its ultimate interest in the residue upon the winding-up of the Fund (in the event, no doubt, of there being no substituted new Fund), too remote an interest to be significant here. Either of these interests might have been a sufficient peg upon which to base a claim of immunity in the case of a Crown servant trustee (cf. Bank voor Handel ) but not, in my view, in the case of an independent Trust. Diminution in the Fund caused by payment of stamp duties is, in my view, a relatively minor matter in the ordinary course of events, and it would not be a very significant impairment of Crown rights even if the Trust was the Crown; the insignificance of the suggested prejudice is emphasised by the indirectness of the Commonwealth interest in the Fund being administered by the Trust.

It is not necessary to delve deeply into the law of trusts for the purposes of this discussion. I simply refer to Jacobs on Law of Trusts in Australia (4th ed.) p. 5 et seq ., and to the four elements of trust. There is no difficulty about the first two elements, an existing trustee who holds the legal or equitable estate in the trust property, and property capable of being held in trust. There may be a little more difficulty about the third and fourth elements. The third element is that there must be a cestui que trust or

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ATC 4507

beneficiary. The rights given to contributories under sec. 111, 112, 117 and 189 to look to the Fund for payment seem to indicate a direct and substantial interest on their part in the Fund; and they could presumably enforce those rights if they were denied. Any contributory might at some time become ineligible and need to look to the Fund. In my view, all contributories (and their dependants) are cestuis que trust for this reason alone.

And I doubt whether the Commonwealth itself is a cestui que trust , in spite of its present indirect interest in profitability and its remote interest in the ultimate surplus of the Fund when the last trumpet sounds and the public service winds up. If the Commonwealth is a cestui que trust , this would not prevent the Trust from being a genuine trust, because the creator himself may be one of the beneficiaries although he cannot be the sole beneficiary. An additional factor which points to a direct beneficial interest on the part of the contributories is the fact that, while they must pay some contributions from their salaries, they may elect to pay supplementary contributions to the Fund. They pay all amounts (compulsory and voluntary) to the Commissioner, who pays them to the Trust, which then invests the money (for them and for the purposes of the superannuation scheme).

As to the fourth element, I think that such beneficiaries would have rights against the trustees upon default and be able to trace their contributions and policies (if not paid to them) into the Fund.

In relation to the control test, I think that the elaborate creation of a Trust, with the trappings of trust, trustees and trustees' obligations, would be no more than a solemn farce unless the legislature intended to make the Fund inviolable and the Trust truly independent of control. Otherwise, in a hypothetical situation, the Executive might take it upon itself to direct the Trust to sell all of the Fund's profitable investments and to invest the proceeds in Commonwealth bonds or other securities bearing a low rate of interest. Such interference might threaten the continued profitability of the scheme, if not its existence; it could also possibly affect the future rate of contributions, which might have to be increased to offset the lower income; it might affect the value of voluntary supplementary contributions; and so on.

Mr. Debelle contended forcefully that the Trust was so closely identified with the Crown in its appointments, functions, purpose, and controls that it was indistinguishable from the Crown; indeed, he said that it ``was'' the Crown, or at the very least, a servant or controlled agent of the Crown. He eschewed reliance upon any more distant relationship with the Crown, such as being an ``emanation'' or ``instrumentality'' or ``under the shield'' thereof.

I appreciate the force of the argument that the superannuation scheme must be seen as a whole; this argument sees the Fund and the Trust merely as procedural aspects of the substantive functional scheme. This approach to the problem seems to place some reliance upon the governmental nature of the scheme seen in its totality; it seems to assume that the nature of the functions of the Trust as a public body (being within ``the province of Government'') is relevant in determining whether the Trust is a Crown servant or its controlled agent. For the reasons given by Professor Hogg at pp. 209-210, which I adopt with respect, I am of the opinion that the public or ``governmental'' nature of the functions is irrelevant to this question. See especially
South Australia v. The Commonwealth (1942) 65 C.L.R. 373 at 423 per Latham C.J. Many corporations ``performing public functions which have no commercial counterpart have been held not to be Crown servants''. See Hogg p. 210 and footnote 32 where he lists many such cases. I do not see in the analysis of Aickin J. in Goodfellow's case any resurrection of the ``province of government test''; his analysis, I think, was more an exercise under the control test, although at one point he does say (77 ATC at p. 4093; 51 A.L.J.R. at p. 442 col. 1): -

``The Board performs what is plainly a governmental function in the administration of the Act.''

However, I think that his Honour was there doing no more than pointing to the method of administration as part of the control test, in the same way that Walsh J. referred to the departmental nature of the administration of the Aborigines Welfare Act prior to the

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ATC 4508

creation of an independent board. After the above passage, Aickin J. goes on to apply the control test by comparison with
Repatriation Commission v. Kirkland (1923) 32 C.L.R. 1 and concludes: -

``In my opinion, the absence of an express provision to that effect (`subject to the control of the Minister') does not require a different conclusion in view of the wholly governmental membership of the Board, and the nature of its functions.''

The adjective ``governmental'' does not qualify the phrase ``the nature of its functions'', it merely qualifies the phrase ``membership of the Board'' - and governmental membership of a Board is an aspect of the control test. ``Nature of its functions'' is merely a compendious way of referring to all that had been set out before. I do not think that Aickin J. was intending to appeal to the ``(governmental) nature of its functions'' as supportive of characterisation as a Crown servant.

In
Coomber v. Justices of Berkshire (1883) 9 App. Cas. 61 , Lord Watson said the following functions of government were among its ``inalienable'' functions and in
Grain Elevators Board v. Shire of Dunmunkle (1946) 73 C.L.R. 70, 75 , Latham C.J. said they were ``traditional'' functions - the administration of justice, the maintenance of order and the repression of crime. In his article The Shield of the Crown Revisited (1957-1958 M.U.L.R., Vol. 1, p. 137 at p. 140), Professor Sawer suggested that defence must be added, a suggestion which is consistent with Goodfellow's case .

This special group of bodies in consimili casu with Crown servants has not been extended. The existence of the group was affirmed in Bank voor Handel , but there are indications that the group should not be extended. See Professor Hogg pp. 212-213, where he points out that all cases since 1897 which have referred to the inalienable or traditional ``functions of government'' principle can be explained in terms of the control test; if the control test shows that the person or body is a Crown servant (or controlled agent), there is no need to appeal to the in consimili casu principle; and if the control test shows that the person or body is exercising an independent discretion, the desirability of curbing its claim to immunity becomes evident. (See Lord Reid (supra) in Bank voor Handel .) For these reasons, I am reluctant to add investment and management of the superannuation contributions of public servants to the in consimili casu list, in spite of the sheer necessity of public servants to the functioning of government.

In
Inglis v. Commonwealth Trading Bank of Australia (1969) 119 C.L.R. 334 , the High Court considered whether the Commonwealth Trading Bank could be sued as an emanation of the Crown. Kitto J. said (p. 338): -

``The decisive question is not whether the activities and functions with which the respondent is endowed are traditionally governmental in character, though their profession of a traditional or generally accepted governmental character may well help in the ascertainment of the legislative intention. The question is rather what intention appears from the provisions relating to the respondent in the relevant statute: is it, on the one hand, an intention that the Commonwealth shall operate in a particular field through a corporation created for the purpose; or is it, on the other hand, an intention to put into the field a corporation to perform its functions independently of the Commonwealth, that is to say, otherwise than as a Commonwealth instrument, so that the concept of a Commonwealth activity cannot realistically be applied to that which the corporation does?''

(emphasis mine).

Kitto J. was there one of the majority; and in that passage he seems to assert the correct place of the control test and to deny the ascendancy both of ``governmental function'' and ``prejudice''.

Whatever the position in Goodfellow , the 1976 Act created a Trust which is quite different from the Repatriation Board and it also introduces the tension between the concepts of trust and agency, a tension which is significant, because the concepts are markedly different. It is necessary to say something about such differences, although once more I do not intend to delve deeply into the relevant jurisprudence. It will suffice if I refer to Fridman, The Law of Agency (4th ed.) at p. 15 et seq ., where the learned author discusses the fundamental differences

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ATC 4509

between trustees on the one hand, and servants and agents on the other. After noting various major differences and resemblances, Fridman comments (p. 17): -

``These resemblances should not be allowed to create the impression that agency and trusteeship are the same type of relationship. Sufficient differences abound to negate this.''

A master, likewise, is identified with his servant in a way in which a trustee cannot be identified with the creator of the trust. That is the reason why I say that the ``trust test'' applied to the 1976 Act is in harmony with the view I have taken of the application of the ``control test'' to the Act.

In summary, then, it seems to me to be a contradiction in terms to speak at the same time of this Trust as a genuine Trust and also as a servant or agent of the Crown. As Kitto J. said in Inglis , ``the concept of a Commonwealth activity cannot realistically be applied to that which the corporation does''. ( Inglis was, of course, only concerned with Crown immunity, in the sense of the Commonwealth's right to be sued in the High Court and to enjoy immunity from suit in State Courts.)

Applying initially the control test (and bearing in mind the tension caused by the concept of trust if I hold otherwise), and applying the prejudice test only to the degree applicable to independent bodies, I hold that the Trust is not ``the Commonwealth'' for the purposes of sec. 114 of the Constitution or for any other purpose attracting the Commonwealth's immunity (if any) from State stamp duty upon instruments of transfers of land to the Trust. I have, therefore, not found it necessary to consider the further questions raised.

In my opinion, the instruments of the Trust are not exempt for any of the reasons advanced and I would answer the first question ``Yes''.