Buzza v Comptroller of Stamps (Victoria)

83 CLR 286
1951 - 0427A - HCA

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(Judgment by: McTiernan J)

Between: Buzza
And: Comptroller of Stamps (Victoria)

Court:

Judges: Latham CJ
Dixon J

McTiernan JWilliams J
Webb J
Fullagar J

Subject References:
Taxation and revenue
Stamp duties
Deed of settlement
Agreement varying trusts of will
Extent of property settled

Legislative References:
Stamps Act 1946 (Vic) No 5204 - s 17; Third Schedule

Hearing date: Melbourne 14 March 1951; 15 March 1951
Judgment date: 27 April 1951

Sydney

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Judgment by:
McTiernan J

The indenture as to which the question of liability for stamp duty arises deals with the administration of the trusts of the testator's residuary estate.  He created, by his will, trusts of his residuary estate in favour of his widow and children.  His widow was entitled to one-third of the income of the whole residuary estate until her death or remarriage: the children were entitled, subject to the trust in favour of the widow, to the income and capital of the residuary estate.  Thus their enjoyment of any part of this estate, whether capital or income, was apparently postponed until the death or remarriage of the widow, although she was entitled to nothing more than one-third of the income.  She and the children were the only persons with any interest in the residuary estate.  Being sui juris, after the testator's death, the widow and children and the trustee agreed by the aforementioned indenture to change the manner of administering the residuary estate provided by the will.  They agreed that it was to be administered by the trustee "as if without otherwise affecting the provisions of the said will it had therein been provided that the trustee should hold such residuary estate upon and subject to" the trusts contained in the indenture.

The trustee joined in the indenture in consideration of the release and indemnity which the wife and children gave in respect of the departure, which the indenture involves, from the trusts of the will.  The instrument is entitled "Indenture of Agreement and Release".  The parties to it thereby agree to set aside a specific part of the residuary estate which is described in the Schedule.  According to the arrangements to which they agreed, the trustee, instead of holding the residuary estate upon the trusts in the will, undertook by the indenture to make a present distribution equally among the children of the other part of the residuary estate: each child taking an absolute share.  In regard to the widow the trustee undertook to hold the part of the residuary estate set aside by the indenture upon trust for the widow until her death or remarriage, with remainder to the children, but their interest is made subject to a condition which guarantees the widow a minimum annual income of PD340, so that, if the income which she derives from such part of the residuary estate is less in any year than that amount, it could be mortgaged to raise the money necessary to provide her with that annual sum.  

It was decided that this indenture is a settlement within the meaning of Part IX. of the Third Schedule of the Stamps Acts 1946-1949 (Vict.) and accordingly liable to duty and liable in an amount calculated upon the value of the whole residuary estate.  

The first condition of this indenture being a settlement is that property is "settled" or "agreed to be settled" by it.  The word "settled" is not defined by the Act.  The word "settlement" in its ordinary sense means a disposition of property for the benefit of some person or persons, usually through the medium of trustees.  There cannot be a settlement without a disposition of property, but a mere disposition of property is not a settlement.  The creation of a trust of property may not be sufficient to settle the property on the beneficiary.  It is necessary for the instrument to "settle" the property.  In Hubbard (Otherwise Rogers) v  Hubbard ^[F14] the property was assigned to the trustee upon trust to assign it to the assignor's wife absolutely and the trustee did so.  The Court of Appeal held that the property was not settled.  The Court based its decision upon the ground that the deed assigning the property was "not a settlement in any sense".  The trustee is bound by the present indenture to hold the residuary estate, other than the part included in the schedule, upon trust to distribute it immediately among the children, each of them taking the share absolutely.  

In Vaizey on Settlements (1887-1888), vol. 1, pp. 1 & 2, it is said that "the homely word 'settlement' has been put to various technical uses in the language of our law"; and that the author used the word to mean "a legal act designed to regulate during a specified period the enjoyment of property, and to provide during the same period for the safe custody and prudent management of the subject-matter".  The author contradistinguishes a settled estate, whether in legal or popular language, from an estate in fee simple.  He said that the former is understood to be one "in which the powers of alienation, of devising, and of transmission according to the ordinary rules of descent, are restrained by the limitations of the settlement".  He quotes the passage in Micklethwait v  Micklethwait, ^[F15] in which it is said that "it would be a perversion of language to apply the term 'settled' to an estate taken out of settlement and brought back to the condition of an estate in fee-simple".  It is added that "this passage must not be understood to mean that during the continuance of the settlement the settled land cannot be sold.  It can always be sold, and the money produced will become instead subject to the settlement.  It is the perpetual interest in this variable subject-matter which cannot be alienated".  The learned author refers to Kelland v  Fulford, ^[F16] which says that in s. 69 of the Land Clauses Consolidation Act 1845 (Imp.) (8 Vict. c. 18) "settled" simply means "standing limited".

In Bythewood & Jarman's Conveyancing, 4th ed., 1884-90, vol. VI., p. 127, this exposition of the meaning of "settlement" is adopted: and the authors add:

"Settlements thus essentially involve some modification of absolute proprietary right over property, and they usually, though not necessarily, create successive estates or interests therein".

In the Encyclopaedia of Forms and Precedents, 2nd ed., vol. 16, p. 4, it is said that the forms given for the creation of settlements "determine from their dates, first, how during the subsistence of the settlement the benefit yielded from time to time by the settled property shall be apportioned among the objects of the settlor's care; secondly, upon whom at the close of the settlement the settled property shall devolve; and thirdly, the means whereby, while the settlement subsists, the property settled may be managed and possibly changed in a husbandlike manner".  In the same work, at p. 9, it is said:

"The foundation of a settlement of personalty is the vesting of the whole legal interest in and power of disposition over the property to be settled in competent and trustworthy persons, whose duty it will be to guard and administer that property for the benefit, according to the settlement of the several persons in existence, and to come into existence, in whose interest the settlement is made.  In a realty settlement the same duty is imposed on the tenant for life as estate owner, subject, as regards capital moneys, to the security afforded by the trustees".

In the case of Williams v  Lloyd, ^[F17] at p. 375 which was a case under s. 94 of the Bankruptcy Act 1924-1932 (Cth.), Dixon J. cited the definition of a settlement given by Cave J. in the case of In re Player; Ex parte Harvey, ^[F18] at p. 687.  That case was under s. 47 of the Bankruptcy Act 1883 (Imp.) (46 & 47 Vict. c. 52), from which s. 94 is derived.  There it is said:

"The end and purpose of the thing must be a settlement, that is, a disposition of property to be held for the enjoyment of some other person. ... But where the gift of money is to be expended at once, the transaction is not, in my opinion, within s. 47 of the Act of 1883".

The meaning of "settlement" under the Stamp Act 1891 (Imp.) (54 & 55 Vict. c.39) is discussed in Massereene v  Commissioners of Inland Revenue, ^[F19] at p. 317.  There the question was whether a deed was an instrument whereby property was "settled or agreed to be settled in any manner whatsoever".  These are the same words as those upon which the instant case turns.  Palles C.B. said:

"This description comprises such instruments only as, by their own force, either by actual transfer or by agreement therein contained, impose, or agree to impose, trusts upon property which previously was free from the same".

He said:

"It is essential to such an instrument that there shall be-

1,

such free property, by which I mean property which is then not, according to our jurisprudence, subject to the trusts in question;

2,

a settlor, who either is, or appears on the face of this instrument to be, competent to subject that free property to trusts which, until the execution of the instrument, did not bind it; and

3,

an imposition by the instrument of such trusts upon such property".

In that case there had been a marriage settlement and the husband and wife executed a deed appointing a new trustee.  The operative part of the deed, besides doing that, declared that all the estate and interest of the surviving trustee, as such, should vest in him and the new trustee jointly upon the trusts applicable thereto "by the settlement or otherwise"; also that they should hold various investments mentioned in the schedule to the deed upon the trusts and subject to the powers and provisions applicable thereto "by virtue of the settlement or otherwise".  When this deed came into force it would seem that it became the "charter" of the beneficiaries' rights and interests.  But the Court held that it was not an instrument whereby property was settled or agreed to be settled.  Palles C.B. could not find that any of the three elements which, in his opinion, are needed to make a settlement was present.  He said that at the date of the deed there was no "free property" in this sense in which he used the word; secondly, "there was no settlor" because the husband and wife were the only persons who had any beneficial interests in the property and "they had no more than limited interests" as appeared by the marriage settlement: and, thirdly, "the instrument does not purport to impose new trusts upon the property".  In relation to the third matter the Chief Baron said:

"No doubt it (the instrument) contains a declaration that the property shall be held, by the continuing and new trustee, upon the trusts of the settlement; but the prior part of the instrument shows that the reason of that declaration is not the bringing into the settlement additional property not theretofore subject to the trusts, but the introduction of a new trustee, who thereby admits the identity of the stocks with those purchased with the trust funds".

In the instant case, the indenture does not apply to any property other than the residuary estate.  The operative part of the indenture is that whereby the trustee agrees with the widow and children to administer the residuary estate as if the will contained the trusts set forth in the indenture.  The recitals in the indenture are not disputed.  They declare in brief that the widow and children agreed to this new manner of administering the residuary estate to facilitate the desire of the children to have a present distribution on account of their respective presumptive interests without delay or litigation involving the construction of the will.  In order to determine whether the indenture is chargeable with stamp duty and if it is, with what amount, it is necessary to ascertain "its real and true meaning" (Limmer Asphalt Paving Co  v  Inland Revenue Commissioners). ^[F20]   If the indenture is chargeable as a settlement, it is immaterial that its object could have been realized by other means; that consideration would not relieve it of duty.

The residuary property was already subject to the settlement made by the will.  The indenture is not strictly a resettlement because the testator of course is not a party to it.  As regards the indenture the testator is not the settlor.  If it is a settlement, the question is: Who is the settlor?  In Massereene v  Commissioners of Inland Revenue, ^[F21] Madden J. said:

"Mr. Price suggested the true test when he asked who was the settlor in the instrument which we are asked to treat as a settlement.  Certainly not the tenant for life; and as certainly not the trustees, from whom the declaration proceeds, but who have no beneficial interest in the property.  The moneys which represented the settled land were as truly and effectually settled property before the execution of the appointment as they are at the present moment".

The trustee of the will is not the settlor.  The trustee could not be a settlor because it had no beneficial interest in the residuary property or any power other than as trustee of this will.  The widow and children both had limited interests in the testator's residuary estate.  The widow's interest did not enable her to "settle" or agree to "settle" the properties mentioned in the indenture upon herself for an estate for life with the power to mortgage and upon the children in remainder.  The children's interest was also limited and it did not enable them to "settle", or agree to "settle" the residuary estate.  The indenture really took out of the settlement made by the will the part of the residuary estate not included in the schedule in the indenture: it did not "resettle" that part of the residue, but authorized the trustee to distribute it among the children.  The properties to which the indenture refers remained "settled" but subject to the change in the manner of administration to which the widow, children and trustee agreed by the indenture.  That instrument did not resettle those properties.  The indenture may be called a fresh charter of the rights of these beneficiaries.  A charter is not as such chargeable with duty.  It is not chargeable as a settlement unless it fulfils the primary condition of being an instrument whereby property is settled or agreed to be settled in any manner whatsoever.  In my opinion this indenture does not satisfy this condition.

I should therefore allow this appeal on the ground that the indenture is not an instrument by which property is "settled" or agreed to be "settled".