National Trustees Executors and Agency Co of Australia Ltd v Federal Commissioner of Taxation (Chisholm's Case) (No 1)

(1953) 89 CLR 177
27 ALJ 569
[1954] ALR 85

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(Judgment by: Dixon CJ, Taylor J)

Between: National Trustees Executors and Agency Co of Australia Ltd
And: Federal Commissioner of Taxation

Court:

Judges:
Dixon CJWebb J
Kitto J

Taylor J

Subject References:
Estate Duty (Cth)

Judgment date: 12 December 1953

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Judgment by:
Dixon CJ
Taylor J

The first series of questions raised by the case stated in this matter is concerned with the construction of sub-s. (7) of s. 8 of the Estate Duty Assessment Act 1914-1950. That sub-section is in the following terms:

"When any duty is lawfully paid in any place outside Australia in respect of any part of the estate situate outside Australia there shall be deducted from the total duty to which the estate is liable under this Act the lesser of the following sums -

(a)

the amount of duty so paid in the place outside Australia; or

(b)

the duty which is payable under this Act in respect of that part of the estate". (at p186)

Some of the difficulties involved in the application of this provision were solved by the decision in Perpetual Trustee Co. (Ltd.) v. Federal Commissioner of Taxation (1938) 59 CLR 611 , where it was held that the duty which was payable under the Act in respect of that part of the deceased's estate which was situate outside Australia should be determined by ascertaining the proportion of the total duty which that part of the deceased's estate, less a ratable part of the estate debts, bore to the net value of the whole estate. But in that case the only part of the estate situate outside Australia was a part situate in England and the further difficulties which arise where assets of an estate are situate in different countries outside Australia and where some of such assets attract duty in more than one of such countries do not present themselves. (at p187)

Three possible views of the effect of the sub-section are presented by the first series of questions. Firstly, it may be that the sub-section is not concerned with differentiating between duties paid on different parts of the estate outside Australia. On this view the requirements of the section would be satisfied by aggregating the various amounts of foreign duty and, having compared the resulting sum with the duty payable under the Act in respect of the parts of the estate outside Australia, deducting the lesser amount from the total duty payable under the Act. But this method, for which the appellant contends, is criticised not only on the ground that the words of the sub-section are not appropriate to produce such a result, but also because in some cases its application would, in respect of some of the assets situate abroad, result in an allowance in the aggregate deduction decided upon of a sum in excess of the duty payable under the Act in respect thereof. (at p187)

If the method suggested by this view of the sub-section is wrong then it is necessary to make a series of calculations and comparisons for the purpose of applying the section. But such a course involves difficulties of its own, for competing views are advanced which seize upon, on the one hand, the duty paid in any place outside Australia and, on the other, the duty paid in respect of any part of the estate situate outside Australia, for the purpose of making a comparison with the duty payable under the Act in respect of the appropriate parts of the estate. Each method would, of course, lead to the same result except in cases such as the present where shares which form part of the estate and which, according to Australian law, are situate in Canada have attracted duty not only in that country but also in the United States of America where the relevant share certificates were held at the date of the death of the deceased. The application of the former of these methods is a matter of some difficulty and is calculated to produce anomalous results. In the present case, for instance, the duty paid in Canada was less than the duty payable under the Act in respect of that part of the estate upon which Canadian duty was paid. Accordingly the appropriate deduction on this view was the amount of the duty paid in that place. Likewise the duty payable in the United States of America on these shares was less than the duty payable under the Act in respect thereof. But the aggregate of the Canadian duty and the United States duty was greater than the duty payable under the Act. Assuming that a deduction of the Canadian duty has been made, the question immediately arises whether a full deduction of the United States duty on the shares should be allowed.

Perhaps the question would have arisen in a more acute form if the duty payable under the Act in respect of these shares had been less than the duty paid either in Canada or in the United States, for the question which would then have arisen would have been whether this particula r method, involving, as it does, a series of comparisons between the duty paid in each place and the appropriate proportion of duty payable under the Act, would have been satisfied only by the making of two deductions each of the amount of the latter duty. It may, of course, be said that the deduction which the sub-section authorizes in such a case is the duty payable under the Act in respect of the relevant part of the estate and that this can be deducted only once. But even if this be so, it does not dispose of the difficulties which arise, and which were adverted to in argument, where the duty paid in one place is less, and in another place, greater than the duty payable under the Act in respect of that part of the estate which has attracted the foreign duties. Nor does it dispose of the difficulties which arise where assets situate in one foreign country attract duty not only in that country but also in another country as portion only of that part of the estate of the testator subject to duty in the latter country. This is the case here for the Canadian shares formed portion only of that part of the deceased's estate which attracted duty in the United States. (at p188)

The second of the methods which require a series of calculations to be made avoids these difficulties by selecting as the basis for each calculation the various parts of the estate which have attracted duty outside Australia. In our view, however, this method is not justified by the terms of the sub-section. It was sought to be supported by giving to the expression "any part of the estate" a distributive meaning but we see no reason why a distributive meaning should be given to this expression and yet denied to the controlling words of the section

"Where any duty is lawfully paid in any place outside Australia".

Moreover, the method is, in our opinion, clearly in conflict with the comparison directed by the sub-section between duty paid at the place outside Australia and that payable under the Act in respect of the appropriate part of the estate. The result of the adoption of this method by the commissioner in the present case was to make a comparison between the duty payable under the Act in respect of the Canadian shares and the aggregate of duties paid in respect thereof in Canada and the United States, and thereafter to compare part of the amount of the duty paid in the latter country, i.e. the duty payable on the assets situate in the United States exclusive, of course, of the Canadian shares, and the duty payable under the Act in respect of those assets. In our opinion in neither case was a comparison of the nature specified in the sub-section made. (at p189)

If, in giving effect to the sub-section, it were necessary to choose between the methods which require a series of calculations and comparisons to be made in cases such as the present we would, for the reasons briefly indicated, prefer the former method, but upon consideration of the language of the sub-section and its history, it is unnecessary to make such a choice. In its original form s. 8 (7) read as follows:

"All duties lawfully paid in any place outside Australia, in respect of any part of the estate situate outside Australia may be deducted from the duty to which the estate is liable under this Act". (at p189)

This sub-section was replaced by the existing provision in 1928 (Act No. 47 of 1928, s. 5(c)). Under the earlier provision all foreign duties payable on any part of the estate situate outside Australia were deductible and it was quite immaterial whether any such part of the estate or any assets comprised therein attracted duty in more than one place. Equally, it was quite immaterial whether the aggregate of such duties equalled or exceeded the duty payable under the Act in respect of that part or those parts of the estate situate outside Australia, or indeed in respect of the whole estate. Accordingly, it was possible for deductions on account of foreign duties to absorb entirely the liability for duty under the Act and it was this obviously possible result, we should think, with which the provision introduced in 1928 was intended to deal. It is not without significance that, so far as was possible having regard to the prescription of a maximum limit on the deduction given by the sub-section, the language of the former sub-section was adopted. That sub-section made reference to "all duties paid in any place outside Australia, in respect of any part of the estate situate outside Australia" and the application of the sub-section did not require either the expression "any place" or "any part" to be read distributively; the deduction permitted was of all duties paid, in effect, anywhere out of Australia in respect of any portion of the estate situate outside Australia. In these circumstances we do not see why the form of the present sub-section should be regarded as requiring either expression to be read distributively and thereby ascribe to the legislature an intention that a series of comparisons should, in a case such as the present, be made. The first of the suggested methods which involve a series of comparisons is practically unworkable whilst the second focuses attention on the expression "any part of the estate situate outside Australia" to the entire exclusion of the opening words of the sub-section.

Indeed if the expressions "in any place" and "in the place" are to be ignored the sub-section would quite clearly not require a series of comparisons to be made but would be satisfied by a comparison between the aggregate of the duties paid outside Australia on any part of the estate situate outside Australia and the duty payable under the Act on such parts of the estate. (at p190)

We think the problem in this case is best solved by regarding the present sub-section as an expression in the singular of the basis upon which a deduction therein is permitted and that in its application to a case such as the present it should be read in the plural form. On this basis the section permits a deduction when any duties are lawfully paid in any places outside Australia in respect of any parts of the estate situate outside Australia and the quantum of the deduction should be ascertained by comparing the amount of the duties so paid in the places outside Australia and the duty which is payable under the Act in respect of the appropriate parts of the estate. Having regard to the history of the section we do not think, as was suggested in argument, that it is a valid objection to this construction that, where the aggregate of the foreign duties is less than the duty payable under the Act in respect of the ex-Australian estate, such aggregate may contain an amount of foreign duty payable in a particular place in respect of particular ex-Australian assets which is greater than the duty payable under the Act in respect of such assets. (at p190)

For the reasons given we are of the opinion that question (1) (a) should be answered in the affirmative and questions (1) (b) and (c) in the negative. On this view it is unnecessary to answer question (2) nor, in the circumstances of this case, questions (4) and (5). (at p190)

The final question is concerned with the basis upon which the respondent should ascertain "that part of the estate" situate in England upon which duty was lawfully paid. Included in the English estate were investments to the value of 5,026 pounds 8s. 2d. which, pursuant to s. 47 of the Finance (No. 2) Act 1915 (Imp.) (5 & 6 Geo. 5, c. 89), s. 22 (1) of the Finance (No. 2) Act 1931 (Imp.) (21 & 22 Geo. 5, c. 49), and s. 60 (1) of the Finance Act 1940 (Imp.) (3 & 4 Geo. 6, c. 29), were exempt from duty. The statutory provisions under which the investments were exempt were not merely assessing provisions which affected only the manner in which duty was assessed on the whole of the English estate. On the contrary, the duty was assessed and paid only on the other assets. In these circumstances the appellant claims that the investments formed part of the estate upon which duty was paid and, accordingly, that the total value of the whole of the English assets should be taken into account in making the calculation required by par. (b) of the sub-section. With this view we disagree, for the investments did not constitute any part of the deceased's estate upon which duty was lawfully paid in England. Accordingly their value should be disregarded for the purposes of par. (b) and question (3) should be answered by saying that the commissioner should treat that part of the deceased's estate which is situate in England in respect of which duty was lawfully paid as being of the value of 55,632 pounds 14s. 0d. (at p191)