Commissioner of State Taxation (W.A.) v. West Australian Trustee Executor and Agency Company Limited

Judges:
Lavan SPJ
Wallace J
Brinsden J

Court:
Supreme Court of Western Australian (Full Court)

Judgment date: Judgment handed down 16 June 1980.

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Lavan S.P.J.

By his last will and testament dated 11 November 1969 and a codicil thereto, Herbert Walford King appointed The West Australian Trustee Executor and Agency Company Limited (``the trustee'') and his wife, Annie Frances King, to be the executors and trustees thereof, and after making provision for a number of pecuniary bequests including bequests to his daughter Elizabeth Marian Twine and his sister Leura Marian Carter, gave, devised and bequeathed the rest and residue of his estate unto his trustees:

``Upon trust to allow the use, enjoyment and net income of my estate to my said wife free of probate and estate duties during her lifetime and on the death of my said wife for my said daughter absolutely or should she have predeceased me or my wife then for such of the children of my said daughter as shall be living at the death of my wife and have attained or lived to attain the age of 21 years and if more than one in equal shares and failing any such children then for my sister the said Leura Marian Carter absolutely.''

The testator died on 20 May 1978 survived by his widow and daughter and in due course Probate of his said will was granted to the trustee. In submitting a statement of assets and liabilities as required by sec. 13(1) of the Death Duty Assessment Act, 1973-1977 the trustee disclosed a final balance for duty of $74,284.00. In arriving at this balance the trustee included as an asset of the estate the actuarial value of the widow's life interest and excluded the value of the interest in the remainder of the daughter of the testator.

On 20 February 1979 the Commissioner of State Taxation (``The Commissioner'') gave notice of an assessment calculated on a balance for duty of $263,548.00 which included the value of the residuary estate. After making an allowance of $50,000 as required by sec. 22 of the Act and some further minor adjustments in accordance with sec. 24, duty was assessed on a final balance of $212,048.00 in the sum of $41,227.25.

On 3 April 1979 the trustee objected to the assessment on the ground that the whole of the residue of the estate passed to the widow and that therefore by virtue of sec. 22(a) and 5(3) of the Death Duty Assessment Act no duty was payable in respect thereof.

On 6 April 1979 the Commissioner disallowed the objection and on 27 April issued an adjusted assessment of $41,260.75 calculated on a balance for duty of $263,748.00 reduced by statutory allowances to $212,248.00. Against this amended assessment the trustee appealed to the Supreme Court contending that no duty should have been assessed on the residue of the estate or upon its value.

The Death Duty Assessment Act, 1973 as originally enacted reflected an established legislative policy of making concessions in favour of the widow of a deceased person by enacting, in sec. 22, that:

``Where property comprised in the estate of a deceased person... passes to the widow of a deceased person, the Commissioner shall -

• (a) deduct an amount of $20,000 from the value of that property for the purpose of and before, assessing the duty payable in respect of that property; and
• (b) deduct an amount of $20,000 from the final balance of the estate for the purpose of and before assessing the duty payable in respect of any property comprised in the estate that passes to (the widow or children of the deceased person).''

The amounts so required to be deducted were by virtue of sec. 6 of the Death Duty Assessment Act Amendment Act 1976 increased to $50,000.

The legislative policy was preserved in the Death Duty Assessment Act Amendment Act

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1977, but was achieved by repealing sec. 22 and re-enacting that section by providing in sec. 5:

``Where property comprised in the estate of a deceased person... passes to the widow of the deceased person -

• (a) no duty shall be assessable or payable in respect of that property; and
• (b) the Commissioner shall deduct an amount of $50,000 from the final balance of the estate for the purpose of, and before, assessing the duty payable in respect of any property comprised in the estate that passes to (the widow or the children) of the testator.''

This was the state of the legislation at the time of the death of the testator. It will be observed that from the inception of the legislation a distinction is preserved between the property which ``passes'' to the widow of the testator and the final balance for duty.

Section 5(3) of the Act provides that:

``Without limiting the generality of the term `passes', where used in this Act in relation to property that forms part of the estate of a deceased person for the purposes of this Act, that term, unless the contrary intention appears, includes the taking of a limited interest in that property under any Will or non-testamentary disposition.''

As defined in sec. 5 ``final balance'', in relation to the estate of a deceased person, means the final balance on which duty is to be assessed, that is to say, the total value of all property comprised in the estate for the purposes of this Act (calculated by reference to the value of that property before the deduction of any amount that may be deductible from the value of that property under sec. 22...) less the total amount of all allowable deductions.

Upholding the trustee's appeal Wickham J. held that upon the death of the trustee the whole of the real and personal estate of the testator passed to the trustee and a limited interest therein created in favour of the widow followed by successive interests in remainder. He considered that on the true construction of sec. 5(3) because in terms of the will a limited interest in that property had been taken by the widow it followed that the property passed to her within the meaning of sec. 5(3) and 22(a). His Honour ordered that the amended assessment be further amended by excluding from the amount on which duty had been held by the Commissioner to be assessable, the sum of $212,248 and reducing the duty payable accordingly.

This is an appeal against that judgment. It is brought on the grounds:

• (i) that his Honour was wrong in law in his construction of the words ``property comprised in the estate'' which occur in sec. 22 of the Act and the words ``property that forms part of the estate'' which occur in sec. 5(3) of the Act, in their application to the facts;
• (ii) that his Honour was wrong in law in his construction of the term ``passes'' which occurs in sec. 5(3) and in sec. 22 of the Act... in its application to the facts;
• (iii) that his Honour was wrong in law in his construction of the words ``the taking of a limited interest in that property'' in sec. 5(3) of the Act in their application to the facts; and
• (iv) that his Honour was wrong in law and in fact in his construction and application of sec. 5(3) in failing to attribute any value to what he described as ``the successive interests to follow''.

Although it is possible by the strict application of sec. 5(3) and sec. 22 to arrive at the same conclusion as that reached by Wickham J. to do so requires that the term ``property'' as it appears in sec. 22 should be given a different meaning from that in which it is used in the context of other sections of the Act. It is a rule of construction that when there is an ambiguity in the meaning of a word appearing in a section of an Act other sections may be adverted to in order to ascertain the sense in which the word is there used:
Spencer v. Metropolitan Board of Works (1882) 22 Ch. 142 per Jessell M.R. at p. 163. It appears to me that if that is done it becomes evident that sec. 5(3) and 22 cannot be invoked to exempt the residue of the estate from the incidence of duty.

In terms of sec. 10 the estate of a deceased person comprises - inter alia - his real and personal property in this State. The liability for duty arises under sec. 8 and is assessed

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``on and in relation to the final balance of the estate''; that ``final balance'' by definition means the total value of all property comprised in the estate calculated by reference to the value of that property before the deduction of any amounts that may be deductible from the value of that property - inter alia - under sec. 22.

Although every administrator is required by virtue of sec. 9(1) to pay duty assessed pursuant to sec. 8 on the final balance of the estate, sec. 35(4) imposes upon him the qualified responsibility of deducting from each and every devise, bequest or legacy coming to any person under a will the amount of the duty assessed in respect thereof, while sec. 39 requires that he shall in carrying out the adjustment of the incidence of duty payable or paid by him:

``(a) charge upon and pay out of the corpus of any property in which any limited interest is taken under any Will... all duty paid or payable in respect of that limited interest... or the reversion expectant thereon...''

The conclusion therefore appears to me to be unavoidable that on the proper construction of the Act duty was required to be assessed on the final balance of the estate and that the ``property'' which passed to the widow was the value of her life interest in the property which was the subject thereof.

In my opinion the appeal should be allowed.