West v Federal Commissioner of Taxation

(1949) 79 CLR 319
23 ALJ 670

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(Judgment by: Latham CJ)

Between: West
And: Federal Commissioner of Taxation

Court:

Judges:
Latham CJRich J
Dixon J

Subject References:
Estate Duty (Cth)

Judgment date: 16 November 1949

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Judgment by:
Latham CJ

The question submitted by this case stated is whether the Commissioner of Taxation was correct in including in his assessment of the dutiable estate of Helen Amelia Weston deceased for the purposes of the Estate Duty Assessment Act 1914-1928 the value as at the date of her death of the corpus of "the daughter's share" settled by an indenture of settlement dated 29th November 1911. "The daughter's share" was the share of Mrs. Helen Amelia Weston under the will of her father the late Albert Terry. The testator, after making certain provisions for his widow and one of his sons, directed that his trustees should stand and be possessed of the whole of his estate as to five equal thirteenth parts thereof for three of his sons and as to eight equal thirteenth parts thereof for another son and three daughters in equal shares. Under this provision the daughter's share of Mrs. Weston was an interest in two-thirteenths of the residuary estate left by her father. The will contained a direction that the share of a daughter should not vest until she should attain the age of forty years or marry under that age and that if a daughter died under the age of forty years without being married her share should accrue to others of the testator's children. These provisions taken by themselves would have given Mrs. Weston a contingent interest in the corpus of two-thirteenths of the residuary estate which interest would have become vested when she attained the age of forty years or married under that age. But what would otherwise have been the result of these provisions is altered in material respects by the following provision:

"AND I ALSO WILL AND DECLARE that the share or provision for each of my said daughters under the trusts of this my Will shall respectively be enjoyed by her as a personal provision and free whensoever she shall be covert from the control and engagements of her husband and so that her receipts alone notwithstanding any coverture shall be sufficient discharges to my Trustees AND it is my Will and desire that the share in my trust estate of every daughter of mine under any of the trusts or provisions of this my Will who shall be married at the time of my decease or shall be about to be married under the age of forty years shall be by deed settled and assured upon her and her children and so as to be free from the debts or control of any husband and in such way and manner as my Trustees shall in the discretion of my Trustees appoint or think best but so nevertheless as not to deprive any such daughter of the annual income arising from her share during her life." (at p324)

This latter provision is in my opinion clearly an imperative direction by the testator to his trustees. The words "it is my will" cannot be construed as merely permissive, as only creating a power which may or may not be exercised at the will of the trustees. These words impose upon the trustees a duty to settle the daughter's share in the manner stated in the will; that is, upon her and her children free from control by her husband in such way and manner as the trustees should in their discretion think best but so as to give the daughter the right to the annual income during her life. The will contains provisions whereby the value of a daughter's share may be increased; e.g. if a son had died under forty years of age without issue or a daughter had died under forty years of age unmarried or a daughter had married under the age of forty years but without the consent of the trustees. The words in the last quoted provision of the will "the share in my trust estate of every daughter of mine under any of the trusts or provisions of this my will" show that the direction to settle is to apply to any interest of a daughter whether original or accrued. The words "her children" in the phrase "settled and assured upon her and her children" are obviously wide enough to cover the children of any marriage contracted by the daughter. (at p324)

Thus the position is that the will contained an executory trust in favour of the testator's daughter Helen Amelia and her children. Her interest was a life interest only - an interest in income during her life. She had no interest in the corpus of her share as distinct from the income. (at p325)

In 1911 Helen Amelia, being twenty-five years of age, proposed to marry Philip Stanley Weston. The trustees consented to the marriage, which took place on 3rd January 1912. On 29th November 1911 an indenture of settlement was executed by the trustees of the will, Messrs. A. A. Terry and Robert Fulton, by Helen Amelia Terry spinster, and Philip Stanley Weston, her intended husband. The indenture recited the relevant provisions of the will and the intended marriage with the consent of the trustees. The indenture also contained a recital stating that the trustees were "desirous of complying with the direction and declaration in the said Will contained that the share in the trust estate of every daughter of the Testator under any of the trusts or provisions of the said Will who should be about to be married under the age of forty years should be by deed settled and assured in accordance with such declaration and direction and in pursuance of such their desire have caused to be prepared such settlement or assurance in such form and to such effect as hereinafter in these presents expressed or contained." (at p325)

The operative words of the deed are -

"they the said Albert Augustus Terry and the said Robert Fulton as the present trustees of the said Will declare that as from the solemnization of the said intended marriage between the said Helen Amelia Terry and the said Philip Stanley Weston they the said Albert Augustus Terry and the said Robert Fulton or other the Trustees or Trustee for the time being of the said Will shall stand possessed of the said share upon trust to pay the income arising therefrom to the said Helen Amelia Terry during her life for her separate use without power of anticipation." (at p325)

There follows a proviso relating to any insolvency of the daughter, and the provision as to the trust continues -

"from and after the death of the said Helen Amelia Terry the said Trustees or Trustee for the time being shall stand possessed of the capital and income of the said share in trust for all or such one or more of the children of the said Helen Amelia Terry whether of the said intended marriage or of any subsequent marriage in such manner and form in every respect as she by deed with or without power of revocation and new appointment or by Will or Codicil may appoint,"

with provisions in default of appointment in favour of the children, and a further provision that if no child qualifies to take the property is to be held upon trust for such person for such purposes as the daughter shall during coverture by will or codicil and when not under coverture by deed or by will appoint and in default of appointment upon trust for the daughter. (at p326)

Helen Amelia Weston died on 29th December 1937. The commissioner claimed that the property to which the settlement related formed part of her estate for the purpose of the Estate Duty Assessment Act 1914-1928. Section 8 (4) (c) of the Act provides that property -

"comprised in a settlement made by the deceased person under which he had any interest of any kind for his life whether or not that interest was surrendered by him at any time before his decease"

shall for the purposes of the Act be deemed to be part of the estate of the deceased person. It is contended on behalf of the commissioner that the indenture is a settlement made by Mrs. Weston because she was a party to it, that the property comprised in the settlement was property in which she had an interest for life, and that therefore the property falls within the description contained in s. 8 (4) (c). (at p326)

Mrs. Weston placed on record her concurrence in the terms of the settlement by executing it, and her intended husband did the same thing. But in my opinion neither of these persons settled any property by the settlement in which property Mrs. Weston had a life interest. The property settled was property the title to which was in the trustees. They settled the property in accordance with a direction contained in the will of the testator. The interest of Mrs. Weston under the will was an interest in income to be defined by the settlement to be made in pursuance of the duty imposed by the will upon the trustees. That interest was an interest in income for her life. She did not have any interest in any property of which she made a disposition by means of the settlement. She did not make a settlement of any property. In my opinion, therefore, the question submitted should be answered - No. (at p326)