[Home] [Databases] [WorldLII] [Search] [Feedback] High Court of Australia

Hill v Federal Commissioner of Taxation [1969] HCA 2; (1969) 119 CLR 72 (28 February 1969)

CATCHWORDS

HEARING

DECISION

2. The policy by cl. 6 was declared to have been effected by the deceased in pursuance of s. 94 of the Life Insurance Act, 1945-1961 (Cth) (the Life Insurance Act) for "the benefit of his wife, Shirley Hilda Hill, should she be living at the date when the sum assured becomes due"; and the deceased thereby appointed Shirley Hilda Hill trustee of the moneys payable under the policy. The deceased paid all premiums due and payable in respect of the policy until and including 30th July 1964. On that date the deceased executed a deed whereby in consideration of the sum of 525 pounds he released and renounced in favour of his wife

"all that the right title benefit and interest to the Life
Assured in to and under the said policy and in and to the
monies payable thereunder to the intent that henceforth the
said Policy shall be read and construed as if the words 'should
he/she be living at the date when the sum assured shall become
due' or any other words in or to the like effect in the said
Policy had been deleted therefrom".

"By deed dated 30th July 1964 the Life Assured released
and renounced all his right title benefit and interest in this
policy and in the monies payable thereunder in favour of the
beneficiary named therein to the intent that thenceforth the
policy should be read and construed as if the words 'should
he/she be living at the date when the sum assured shall become
due' or any other words to the like effect had been deleted
therefrom".

3. No question arises as to the ownership of the proceeds of the policy. By its terms they belong beneficially to the appellant, Shirley Hilda Hill, and s. 94 of the Life Insurance Act ensures that the policy moneys themselves are not available for the payment of any debt of the deceased or, in my opinion, of his estate. But the appellants claim that an amount equal to those proceeds ought not to be included in the notional estate of the deceased because they do not fall within the provisions of s. 8 (4) (f) of the Act properly construed. The appellants' argument is that the proceeds of a policy or the ratable proportion of them according to the terms of s. 8 (4) (f) of the Act only come within the sub-section if those moneys were by the terms of the policy payable to the recipient in her character of widow. This position would only result, according to the appellants' counsel, if in the policy itself the moneys were expressed to be paid to her as the widow or if the moneys were only payable to her on the condition that she, remaining his wife, should survive her husband and thus become his widow. If that proposition be accepted, the appellants say that the appellant Shirley Hilda Hill was specifically named in the policy, there described as the wife and not the widow of the assured and that by the terms of the policy she need not survive the life assured as his widow to be entitled to the proceeds and that after the execution of the deed of 30th July 1964 she need not survive him at all. (at p75)

4. On the other hand, the Commissioner claims that upon its true construction the sub-section authorizes the inclusion in the notional estate of a deceased of an amount equal to the policy moneys or the appropriate proportion thereof in any case where upon his death the proceeds of a policy on his life of which the deceased has paid the premiums in whole or in part are payable to a person who in fact at that time satisfies the description of "widow", etc. The Commissioner thus relies upon a literal application of the subsection and by so doing challenges the decision of the Court in Thurn v. Federal Commissioner of Taxation [1965] HCA 31; (1965) 112 CLR 432, at p 437, in so far as it would otherwise interpret and apply s. 8 (4) (f). (at p75)

5. I do not think there is any validity in the proposition that the person for whose benefit the proceeds of the policy are to be held must be described in the policy, as widow, child, grandchild, etc. if s. 8 (4) (f) is to apply. It is only in the case of the widow or widower that a new description of the person becomes available on the death of the life assured. In relation to all the other classes of relations the question raised by the appellants' somewhat narrow submission can scarce arise. In my opinion, there is no substance in the submission that because the appellant Shirley Hilda Hill is not described in the policy as widow, the sub-section does not apply. Indeed, it would be odd to describe that beneficiary in the policy as the "widow", both the life assured and the beneficiary being then alive and married. On the other hand, it would not be inaccurate to describe the beneficiary as at the moment of death which is the time at which the policy matures, as the wife of the life assured. Where a policy is expressed to be issued pursuant to the provisions of s. 94 of the Life Insurance Act, as was done in this case, it could scarce matter that a beneficiary named in the policy who in fact was related to the life assured as wife or husband or in one of the classes of other relations mentioned in that section, was not described as wife, widow, or other relation as the case may be. Section 94 itself requires that the beneficiary be chosen because of the existence of one of the specified relationships. It may be different in the case of a policy not so issued if it cannot be otherwise derived from the terms or the circumstances of the policy and its issue that the named beneficiary has been so chosen, for as will appear from what follows, in my opinion, the relevant relationship actual or perhaps projected of the beneficiary of the proceeds must have been and appear to have been the reason for his or her selection by the life assured for the role of beneficiary and he must receive the proceeds at maturity as such a relation of the deceased. In this case, the policy was not only expressed to be issued in pursuance of s. 94 of the Life Insurance Act but the beneficiary was described as the wife of the assured for whose benefit it was issued. It seems to me that nothing turns in this case on that section of the Life Insurance Act. (at p76)

6. It may be thought strange that the inducement to make secure provision for close relatives by means of life policies which the Life Insurance Act in s. 94 offers should be so substantially whittled down by the provisions of s. 8 (4) (f) of the Act, but the two provisions are not inconsistent. The latter provision is based, in my opinion, upon the policy of bringing into the computation of a deceased estate amounts disbursed in his lifetime by way of gift. Premiums paid on a policy of which the proceeds will not come into the deceased's actual estate constitute in substance a gift at least of the amount of the premiums paid. But as well the premiums paid are in the nature of an investment. Thus the sub-section seeks to bring to account in computing estate duty the benefit of that investment; hence the provision for the whole or a proportion of the proceeds of the policy to be included in the notional estate, the proportion being determined upon the basis that each unit of premium paid produces the same proportion of the proceeds as it bears to the total premiums paid. (at p76)

7. The real question and the difficulty in the case, it seems to me, if one is not prepared to accept a literal application of s. 8 (4) (f), as I am not, is to decide and to express what precisely are the limitations which ought to be made upon a literal application of the section. I should say that, to my mind, an application of the section in its literal terms would clearly embrace situations which the legislature could not possibly have intended to make the occasion for the imposition of estate duty. A number of illustrations were given during the argument of the appeal which indicated the lengths to which such an application would logically extend. But it seems to me that the facts of Thurn's Case [1965] HCA 31; [1965] HCA 31; (1965) 112 CLR 432 suffice in this connexion. There the policy was not issued in pursuance of s. 94 of the Life Insurance Act or for the benefit of the wife of the life assured. It was a policy of which the proceeds were payable to the executors of the life assured. Had there been no change, those proceeds would not have been caught by s. 8 (4) (f) but have been included in the actual estate of the deceased policy holder by virtue of earlier parts of that section. But the policy was assigned for its full value to the wife of the life assured who became the policy holder and thereafter paid the premiums thereon. The proceeds on maturity were paid to her as policy holder, though in fact she was at that time the widow of the life assured. I can find no reason connected with estate duty and its assessment why the amount of these proceeds, none of which was derived in any sense from the deceased, should affect the amount of duty which his estate should pay. But, literally, the proceeds of the policy on the life of the deceased were in fact paid to the widow. The illustration to my mind and with respect to those who may hold a contrary view negatives the possibility of applying s. 8 (4) (f) literally and indicates that some qualifications related to the policy clearly lying behind such provisions in an estate duty act as s. 8 (4) (f) must be found and expressed. (at p77)

8. It seems to me the execution of the deed of 30th July 1964 has no real bearing upon the resolution of the problem which the appeal presents. It was not an assignment of the policy and did not substitute the wife for the husband as the contracting party. It did not effect any change in the terms of the policy as between the deceased and the society. What it did was to transfer to the wife the contingent interest which the husband had in the policy in the event that she should predecease him. Certainly after the execution of the deed, the representatives of Shirley Hilda Hill would have been entitled to the proceeds of the policy had she predeceased him. Apart from the deed and by reason of the precise terms of the policy in order to be entitled to those proceeds she did not need to survive the life assured as his widow. (at p77)

9. My brother Kitto in Thurn's Case [1965] HCA 31; (1965) 112 CLR 432 , in relation to the circumstances of and for the purpose of resolving the particular problem of that case, expressed the limitation upon a literal application of s. 8 (4) (f) as follows:

". . . the force of the whole expression 'money payable to,
or to any person in trust for, the widow . . . of the deceased
under a policy of assurance on the life of the deceased' requires,
as it seems to me, that the widow's beneficial title to the
money shall accrue to her in virtue of her status as the widow
of the deceased."

10. It seems to me that in order that the sub-section should apply the recipient or intended recipient of the proceeds of the policy must stand at the date of the death of the life assured in the stated relationship to the deceased, e.g., in this case, in that of wife, becoming at that time, widow and that that relationship was the basis upon which the policy moneys were by its terms or by its evident circumstances made payable to the recipient. That is to say, in my opinion, the section is not to be applied literally so as to embrace every case where the proceeds of a policy on the life of the deceased are for any reason payable to a person who at the date of death stands in one of the stated relationships to him but its application is limited to those cases where such moneys are by the policy made payable to or for the benefit of such a person because as appears from the terms or circumstances of the policy, that relationship, e.g., that of wife, exists at the date of the policy or, perhaps, will before maturity exist. (at p79)

11. Here, it is quite true that after the execution of the deed, and solely because of it, had the appellant Shirley Hilda Hill predeceased her husband, her executors would have received the whole of the proceeds of the policy and the husband none of them, but that event did not happen. That appellant remained the wife of the deceased till his death and at that moment became his widow. It is abundantly clear from the terms of the policy that it was her position as his wife which was the reason for making the proceeds of the policy payable for her benefit. That to become entitled she need not have survived the life assured and that had she not survived him, he would not have received any part of the proceeds of the policy are facts equally irrelevant, in my opinion, to the factual situation which existed at the date of the death of the deceased and to the applicability of the section to that situation. (at p79)

12. In my opinion, an amount equal to the proceeds of the policy was rightly included in the notional estate of the deceased by virtue of s. 8 (4) (f) of the Act. The appeal should be dismissed. (at p79)

McTIERNAN J. I am of the same opinion as the Chief Justice and I agree with his Honour's reasons. (at p79)

KITTO J. This is a case stated under s. 28 of the Estate Duty Assessment Act 1914-1966 (Cth) in an appeal against an assessment of estate duty. The objection to the assessment related to an amount of $23,856 which the Commissioner had treated as included in the estate for duty purposes in reliance upon s. 8 (4) (f) of the Act. The provision is that for the purposes of the Act the estate of a deceased person comprises (inter alia) property being money payable to, or to any person in trust for, the widow of the deceased under a policy of assurance on the life of the deceased where the had been paid by him. The terms of s. 8 (4) (f), literally construed, were thus exactly satisfied; but the administrators of the estate, relying upon Thurn v. Commissioner of Taxation [1965] HCA 31; [1965] HCA 31; (1965) 112 CLR 432 contended that the amount had become payable to the widow not as such, but as purchaser of the policy from the deceased, and that that circumstance took the amount out of the application of s. 8 (4) (f). (at p80)

2. The facts of the case, which differ from those of Thurn's Case, need to be carefully observed and their legal significance determined. The policy in question, which was effected by the deceased in 1956, was so expressed as to take advantage of the provisions of s. 94 of the Life Insurance Act 1945-1961 (Cth). By the policy the assurance company bound itself, in consideration of the premiums and subject to certain conditions, to pay 10,001 pounds on the death of the deceased "to the Trustee or Trustees for the time being of the moneys payable under this Policy or if none then to the Executors, Administrators or Assigns of the Assured". Amongst the conditions was one, numbered 6, in these terms:

"This Policy has been effected by the Assured in pursuance
of Section 94 of the Life Insurance Act 1945 for the benefit
of his Wife, Shirley Hilda Hill should she be living at the date
when the sum assured becomes due and the Assured has
appointed Shirley Hilda Hill of Traralgon Trustee/Trustees
of the moneys payable under this Policy."

3. If the effect of the deed had been precisely as the statement of intent suggested, the appellants' contention that the policy moneys became payable to the widow in a character other than that of widow could not possibly have been maintained; for to claim by virtue of the supposedly-varied terms of the policy as creating a trust by force of s. 94 would necessarily have been to claim as the deceased's former wife. But the deed could not have operated as a variation of the terms of the policy, for the only power to vary the policy was that which sub-s. (6) of s. 94 confers upon the trustee alone in a case where there is one. Whether such a variation would have been within the authority of that provision may be open to doubt, but the question does not arise in this case since the execution of the deed was the act of the husband (by his attorney) and not of the trustee. (at p80)

4. The basis of the appellants' contention is an assumption that the beneficial interest of the wife under the statutory trust was contingent upon her surviving the husband, and that therefore the husband had a vested interest under a resulting trust subject to be divested upon the happening of the contingency. It would follow, no doubt, that by assigning the latter interest to the wife the deceased ensured that in the event of his dying first she would take the policy moneys not as a widow claiming under s. 94 but as purchaser of the beneficial interest which had resulted to him under the ordinary law of trusts. The assumption, however, is incorrect. The judgment of Fullagar J. in Commissioner for Probate Duties (Vic.) v. Mitchell [1960] HCA 54; [1960] HCA 54; (1960) 105 CLR 126 , concurred in by Dixon C.J. and McTiernan and Windeyer JJ., establishes that a policy expressed to be for the benefit of the assured's wife not simpliciter but only if she survives him is, notwithstanding the condition, a policy expressed to be for her benefit within the meaning of s. 94 of the Life Insurance Act; and in the course of doing so it explains at pp. 137-139 how the section operates in such a case. The section provides that the policy "shall create a trust in favour of the objects named in the policy", that is to say an immediate trust; and accordingly where a policy is expressed to be for the benefit of the assured's wife conditionally upon her surviving him the condition cannot operate as a condition precedent: it makes the trust which arises immediately in her favour defeasible upon her predeceasing him.

"The beneficial interest of the wife will be destroyed
if she dies before her husband. But, unless and until that
event happens, the beneficial interest in the policy belongs
to her. The substance of the matter is that she is to be deemed
to have an interest which is vested, though liable to be
divested" (1960) 105 CLR, at p 139

5. But it was further contended for the appellants that even so the case is outside s. 8 (4) (f) because policy moneys are not caught by that provision as being payable to the widow of a deceased person unless the right with respect to them which the widow had during the deceased person's lifetime was conditional upon her becoming his widow, that is to say upon her surviving him and upon the marriage continuing until his death. Reference was made to expressions in my judgment in Thurn's Case [1965] HCA 31; (1965) 112 CLR 432 which lend some support to the proposition. In so far as they do, they go, I think, too far. The point to be made in that case was that s. 8 (4) (f), as I read it, does not apply to policy moneys which become payable to the widow of the deceased if she is entitled to them only in some character other than that of former wife of the deceased, e.g., in the character of purchaser of the policy. There cannot be such a case where the policy moneys become payable to a widow by virtue of a trust created by s. 94 of the Life Insurance Act; for even where she is individually named in the policy as the person for whose benefit it is effected, the statutory trust in her favour must have depended for its creation upon the fact of her being the wife of the assured. Her title to receive the proceeds on his death is therefore referable to her being the former wife of the deceased; if the marriage has continued, it is referable to her being his widow. (at p82)

6. In my opinion the appellants' contentions should be rejected and the question in the stated case answered: Yes, the whole. (at p82)

MENZIES J. The facts which have been stated for the opinion of the Full Court have already been summarized and it is not necessary for me to repeat them. (at p82)

2. Those facts show that upon the death of the deceased, Douglas Roland Hill, the sum of $23,856 became payable to his widow, Shirley Hilda Hill, under a policy with the Australian Mutual Provident Society upon the life of the deceased in respect of which the whole of the premiums had been paid by the deceased. These facts bring the case precisely into s. 8 (4) (f) of the Estate Duty Assessment Act 1914-1966 (Cth). Furthermore, the said sum was payable to the widow by virtue of the trust arising from the issue of the policy as created by s. 94 of the Life Insurance Act 1945-1961 (Cth) without more. Section 8 (4) (f) applies, therefore, even if its application be limited to cases where insurance moneys are payable to a person of the description therein, simply by virtue of the policy as issued without regard to subsequent transactions such as assignments. (at p83)

3. In these circumstances the said sum was correctly included in the estate of the deceased for duty purposes and the question in the case stated should be answered "Yes, the whole". (at p83)

WINDEYER J. I agree that, by virtue of s. 8 (4) (f) of the Estate Duty Assessment Act 1914-1966 (Cth), the proceeds of the policy on the life of the late Douglas Roland Hill form part of his estate for the purposes of that Act. I do not wish to add anything to what has been said in other judgments in support of that conclusion. (at p83)

ORDER

Question:
"On the facts set out in this case stated should any
(and if so what) part of the sum of $23,856.00 payable
by the Australian Mutual Provident Society to
Shirley Hilda Hill pursuant to the terms of policy
No. VO 173441 as affected by the aforementioned
deed dated 30th July 1964 be included as part of the
estate of Douglas Roland Hill for the purpose of
the Estate Duty Assessment Act 1914-1963".

Answer:
"Yes, the whole".