Davidson v Armytage [1906] HCA 63; (1906) 4 CLR 205 (15 October 1906)

The question for determination in this case arises under the Stamps Act 1892. Under the Schedule to that Act an ad valorem stamp duty is payable upon settlements and deeds of gift. The 8th clause is in these words:—"Settlement or Gift, Deed of—(1) Any instrument other than a will or codicil whether voluntary or upon any good or valuable consideration other than a bonâ fide adequate pecuniary consideration whereby any property is settled or agreed to be settled in any manner whatsoever, or is given or agreed to be given in any manner whatsoever, such instrument not being made before and in consideration of marriage." The Act imposes an ad valorem duty in accordance with "the value of the property,"—whatever that may mean. The present appeal relates to two instruments, dated respectively 24th January 1905, and 7th June 1904, both of which were made in execution of a power of appointment contained in a settlement made on 1st March 1886, before the passing of the Act by which the lands now in question were conveyed to trustees, subject to the life estates of Frederick William Armytage and Mary Susan Armytage, upon trust for Harry Armytage, Frank Armytage, and Bertram Armytage, or such one or more of them for such estates or interest and in such manner as Frederick William Armytage should by deed or will appoint, and, in default of appointment, for the three objects of the power as tenants in common in fee. By the two deeds now in question Frederick William Armytage exercised the power of appointment in favour of Bertram Armytage and Frank Armytage respectively, by appointing to them in fee after the expiration of the life estates. The question is whether these are settlements within the meaning of the Act. The learned Judges of the Supreme Court, who were of opinion that the instruments were not settlements, relied to a great extent upon the decision of the Full Court in Castlemaine Brewery Co. Ltd. v. Collector of Imposts[1]. The document under consideration in that case was in no sense a settlement, but the Judges made use of some general observations that are, in turn, applicable to the present case. They cannot, however, be taken as a complete definition of what is a settlement.

It was contended by Mr. Weigall for the respondent that these instruments are not settlements, and in support of that contention he used various arguments. He maintained, amongst other things, that the term "settlement" necessarily connotes either restriction of power of disposition or a succession of interests. Restrictions alone cannot be the test, for a deed conveying land to trustees for uses for various persons in succession, might be a settlement, although there might be no restriction on the power of disposition of the beneficiaries. The case of Kane v. Kane[2] is a case showing that there may be a settlement without any succession of interests.

In the case of Moffat v. Collector of Imposts[3] the Court held, and in my opinion correctly, that an instrument was a settlement although it was an appointment of a sum of money to the appointee absolutely for his own use. So that this cannot be the test.

In the case of Wiseman v. Collector of Imposts[4], Madden C.J., speaking of the term "settlement," said:—"It must create a beneficial interest in some person in whom it did not previously exist." That is, of course, not an exhaustive definition, but that condition is fulfilled in the present case, because, although in default of these deeds of appointment the same persons would have taken a share of the property as tenants in common in fee, it is settled by Sweetapple v. Horlock[5], the authority of which has not been disputed, that the interests taken under the deeds are new interests.

In Moffat v. Collector of Imposts[6] an executrix had under the will power to revoke the trusts declared in the will as to a sum of £5,000, with the consent of the person for whose benefit that sum had been given, and to make a new appointment. She did exercise that power with the consent of that person, and appointed the same to him absolutely. The Full Court, reversing the judgment of Williams J., held that that was a settlement. The learned Judges in the present case thought that there might be a distinction between that and the present case, because in that case the power of appointment was general. It was general in one sense, but it could only be exercised with the consent of the person in whose favour it was ultimately exercised. But whether it was a general or a special power cannot make any difference in the nature or character of the instrument by which the power is executed. In other words, the question whether the appointment is a settlement or not cannot depend upon whether the power is special or general. We are unable to distinguish the case of Moffat v. Collector of Imposts[7] from the present case, and, for reasons which I will give directly, we think that case was rightly decided.

The construction of similar words was considered by the Privy Council in the case of Commissioner of Stamp Duties v. Stephen[8]. In that case the question was whether a particular instrument was a settlement or not. The instrument was made in execution of a special power of appointment. The judgment of the Judicial Committee was given by Lord Lindley. The material words of the Act in question are set out in the judgment and are as follows:—"Duties to be levied, collected, and paid according to the duties mentioned in the said third schedule shall also be charged and chargeable upon and in respect of:—(a) All estate, whether real or personal—(a) Which any person, dying after the twenty-second day of May, one thousand eight hundred and ninety-four, has disposed of, whether before or after that date, by will or by settlement containing any trust in respect of that estate to take effect after his death, under any authority enabling that person to dispose of the same by will or deed, as the case may be." The 3rd schedule contained these words:—"Third Schedule.—Duties on the Estates of Deceased Persons.—Part I.—On the probate or letters of administration to be granted in respect of any estate real and personal of deceased persons. Where the value of such estate is under," &c. "Part II.—(2) Settlement of property taking effect after death of settlor—same duties as under Part I." After reading this enactment, Lord Lindley said:—"Their Lordships are of opinion that the foregoing language would be wide enough to cover property over which a deceased person had only a special power of appointment if there was any indication of an intention to include such property; for such a power is to some extent and in some sense a power of disposition, although within narrow limits. But the language itself is much more appropriate to general powers of disposition than to special powers of selection or distribution amongst a particular class, and the words cannot, in their Lordships' opinion, be extended so as to include the latter class of powers without some plainer indication of intention to include them." Then he proceeded to inquire whether there was anything in the context to show an intention to include special powers, and came to the conclusion that the context showed that it was not intended to include them. The rule there laid down is a rule which we think we are bound to follow. The learned Judges of the Supreme Court were of opinion that the words now in question are not capable of bearing the construction sought to be placed on them by the Crown. We are of opinion that they are capable of bearing it, and should be so read if there is anything in the context to show that that was the intention of the legislature. In the present case the legislature has shown in the plainest language in sec. 28 what it meant. On the assumption that a special power of appointment is included, that section proceeds to deal with the specific case. It provides that:—"Where any person is specially named or described as the object of a power of appointment in a settlement or gift on which ad valorem duty has been paid, or in a will in respect of property on which duty under any Act imposing duties on the estates of deceased persons has been paid, an instrument of appointment in favour of such person in respect of such property is not liable to duty." So that the precise case is dealt with. If settlement duty has once been paid on a settlement of the whole estate, no further duty is payable on the exercise of the special power of appointment. Upon the construction of the words and upon the authorities we think we are bound to hold that both these instruments were liable to stamp duty.

The next question is—How much duty? For the Crown it is contended that duty is payable upon the whole value of the estate that is, of the land which is the subject matter of the settlement. The words of the schedule are: "Where the value of the property does not exceed £1,000.—10/ - per cent.," &c. The test therefore is the value of the property. What, then, is the meaning of the term "the property" in that context? Reliance is placed for the Crown upon the case of Onslow v. Commissioners of Inland Revenue[9], in which very similar words received interpretation. By the Stamp Act 1870 (33 & 34 Vict. c. 97) ad valorem duty is imposed upon "any instrument ... whereby any definite and certain principal sum of money ... or any definite and certain amount of stock, or any security, is settled or agreed to be settled in any manner whatsoever." In that case there had been a settlement of contingent reversionary interests in certain specified amounts of stock which were vested in trustees with power to vary the securities, and it was held by the Court of Appeal that duty was chargeable upon the amount of the stock quite irrespective of the fact that the interests referred to in the settlement were only reversionary and only contingent. If that case were not distinguishable from the present it would be binding upon us. But upon consideration we are of opinion that it is not an authority governing this case. The real basis of the decision is to be found in a few observations of Bowen L.J. and Fry L.J.[10]. Bowen L.J. pointed out that: "Definite and certain in the clause which we are considering are terms applied, not to the interest or the nature of the interest, but to the amount of the stock, and that the amount of the stock does not become uncertain because the chance of getting the stock may be uncertain." Fry L.J. said:—"Now it is obvious at once that the words I have read (any definite and certain amount of stock is settled) contain no definition or reference to the interest of the settlor in that definite and certain amount. They simply refer to the stock. Two possible readings of those words seem to me to occur to the mind: the one would be to say, there was no settlement of that sum unless the settlor had an absolute and indefeasible interest; the other is to say that it applies to every case in which the settlor had any interest in that sum, whether that interest be vested or liable to be divested, or contingent, provided it is an interest." He thought the section related to the second class of interest, and that the only test was whether the sum itself was definite and certain. That is not the case here. The words used are "the value of the property." What is the property the subject of the settlement? Suppose the subject of the settlement were a term of years. It could not be contended that the value of the land was the subject of the settlement. If that is obviously so in the case of a term of years, why is it not so in the case of a freehold interest after an estate for life? What difference can it make if a partial interest is the subject matter of the settlement, whether that partial interest is present or future? We do not think that we are bound by the authority of that case to hold that duty is payable on anything more than the value of the property dealt with by the settlement, that is, the reversion expectant upon the deaths of the tenants for life.

The conclusion at which we have arrived, that the actual interest dealt with in the settlement is the only thing intended to be taxed, is confirmed, I think, by sec. 28 of the Act to which I have already referred. That section assumes that, when duty has once been paid upon the whole value of any land under a settlement, duty will not be payable on any subsequent dealing with that land under the settlement. It seems to follow that, when land has once been made the subject of a settlement and no duty has been paid, if subsequently a smaller interest is carved out under the settlement, duty should be charged on that interest only.

I should have mentioned that a similar view of the meaning of the term "settlement" had been expressed by Phillimore J. in Russell v. Inland Revenue Commissioners[11]. That however was only a dictum. Upon the authority of the Privy Council we are bound to hold that this is a settlement within the meaning of the Schedule.

Mr. Hayes contended that the intention of the legislature was by that definition to include practically every conveyance not being a conveyance upon sale. It is unnecessary to say that these two descriptions include all possible conveyances, but it is hard to point out one that is not included.

We are of opinion, therefore, that the appeal should be allowed to this extent, by declaring that the instruments in question are chargeable with ad valorem duty to be computed in respect of the value of the expectant estates in remainder dealt with by the respective instruments. The respondents should pay the costs of the appeal.

[1] 22 V.L.R., 4; 17 A.L.T., 282.

[2] 16 Ch. D., 207.

[3] 22 V.L.R., 164; 18 A.L.T., 144.

[4] 21 V.L.R., 743, at p. 748; 17 A.L.T., 251.

[5] 11 Ch. D., 745.

[6] 22 V.L.R., 164; 18 A.L.T., 144.

[7] 22 V.L.R., 164; 18 A.L.T., 144.

[8] (1904) A.C., 137.

[9] (1891) 1 Q.B., 239.

[10] (1891) 1 Q.B., 239, at p. 244.

[11] (1901) 2 K.B., 342, at p. 348.

High Court of Australia

Davidson v Armytage [1906] HCA 63; (1906) 4 CLR 205 (15 October 1906)

HIGH COURT OF AUSTRALIA