Parker v Deputy Federal Commissioner of Land Tax, Tasmania [1914] HCA 5; (1914) 17 CLR 438 (19 February 1914)

HIGH COURT OF AUSTRALIA

Parker and Another Appellants; and The Deputy Federal Commissioner of Land Tax, Tasmania Respondent.

H C of A

19 February 1914

Griffith C.J.Barton and Gavan Duffy JJ.

Waterhouse, for the appellants.

L. L. Dobson, for the respondent.

Feb. 19

Griffith C.J.

The assessment in question in this case is of land held by the appellants as trustees under an old settlement made in 1848 by Mr. and Mrs. Cox. By that settlement the beneficial interest in the lands in question was given in equal shares to three daughters of the settlors for their respective lives with remainders to their respective children, and, in default of children, as they might respectively appoint. Two of them, who had no children, appointed their respective shares to relatives of the settlors by blood or marriage. The share of the third daughter passed under the original settlement to her children, who alienated it to a stranger in blood.

On these facts the question arises for determination whether any deduction beyond the statutory deduction of £5,000 can be made from the total unimproved value of the land. There is no doubt that the beneficiaries under the settlement are joint owners within the meaning of the Act. The general scheme of the Act is that joint owners of land are treated as a single owner. That provision is contained in sec. 38 of the Principal Act of 1910, which enacts that:—"The joint owners shall be jointly assessed and liable in respect of the land as if it were owned by a single person." But the same Act allowed an exception to the rule in the case of certain family settlements. That exception was not contained in sec. 38, which dealt with joint owners, but in sec. 33, which dealt with land held by trustees. The third proviso to sec. 33 (1) was as follows:—

Provided further that, in the case of land vested in a trustee, under a settlement made before 1st July 1910, or under the will of a testator who died before that day, upon trust to stand possessed thereof for the benefit of a number of persons who are relatives of the settlor or testator, then, for the purpose of ascertaining the taxable value of the land owned by him as such trustee, there may be deducted from the unimproved value of the land, instead of the sum of £5,000 as provided by paragraph (b) of sub-sec. 2 of sec. 11 of this Act, the aggregate of the following sums, namely:—

In respect of each share into which the land is in the first instance distributed under the settlement or will amongst such beneficiaries, the sum of £5,000, or the unimproved value of the share, whichever is the less.

The Act of 1911, which is the one under which this case falls to be decided, repealed this proviso and substituted, as an addition to sec. 38, another provision which stands as sub-sec. 7 and is as follows:—

Where, under a settlement made before 1st July 1910, or under the will of a testator who died before that day, the beneficial interest in any land or in the income thereof is for the time being shared among a number of persons, all of whom are relatives of the settlor or testator by blood, marriage, or adoption, in such a way that they are taxable as joint owners under this Act, then, for the purpose of their joint assessment as such joint owners, there may be deducted from the unimproved value of the land, instead of the sum of £5,000 as provided by paragraph (b) of sub-sec. 2 of sec. 11 of this Act the aggregate of the following sums, namely:—

In respect of each original share in the land under the settlement or will—

(a)

the sum of £5,000, or

(b)

the sum which bears the same proportion to the unimproved value of the land as the share bears to the whole,

whichever is the less.

Then follows a definition of the term an "original share in the land" which I need not read. On that provision it is to be noted, first, that the condition of the deduction is that "the beneficial interest" in the land or the income therefrom is for the time being shared among a number of persons, "all of whom are relatives of the settlor or testator by blood, marriage, or adoption." The "time being" is, of course, the day as of which the assessment is made. It is next to be noted that this deduction is in lieu of the statutory deduction of £5,000, and is a single aggregate deduction from the assessable value of the land, which enures for the benefit of all the beneficiaries, and entails a consequent reduction of the rate of taxation for the benefit of all the joint owners. This being an exception from the general rule that joint owners are treated as a single person, the party claiming the benefit of it must show that the case falls within the terms of the exception. When a share in the beneficial interest in the estate has passed to a stranger it is primâ facie impossible to say that "the beneficial interest" is shared between a number of persons "all of whom" are relatives of the settlor. It may seem strange, and at first sight it does seem strange, that the act of one beneficiary over whom the others, having perhaps a largely preponderating interest, have no control, should deprive them of the benefit intended to be conferred by the Act. But, on the other hand, there is no reason to suggest that a stranger was intended to have the benefit of the reduced rate of taxation which was introduced for the benefit of beneficiaries under old settlements made before the Act came into operation, and which would accrue to him if the opposite construction were adopted. Nor can it any longer be said with accuracy that the land is held by "relatives" "in such a way that they are taxable as joint owners" under the Act. The truth is that they and a stranger are together taxable as joint owners, against whom a single assessment is made, which is a joint assessment of all of them, so that, as I have already pointed out, when the deduction is made it must accrue for the benefit of all. The case therefore does not fall within the literal words of the new provision, and any non-literal construction would give rise to consequences which are quite inconsistent with the scheme of confining the benefit to relatives of the original settlor or testator. It follows that, as the law stood under the Act of 1911, the deduction could not be made.

In 1912 another amendment of the Act was made which stands as sec. 38A. In another case standing for judgment we shall have to refer at length to its provisions. For the present it is sufficient to say that it only extends the class of relatives to be benefited, and does not in any way affect the construction of the words of sec. 38 (7) to which I have referred, or the rule to be deduced from them, namely, that all the joint owners at the time of the assessment must be relatives of the original settlor or testator.

The question should therefore be answered in the negative.

Barton J.

I agree.

Gavan Duffy J.

I agree.

Question answered in the negative.

Solicitors, for the appellants, Ritchie & Parker, Launceston, by Simmons, Wolfhagen, Simmons & Walch.

Solicitor, for the respondent, Gordon H. Castle, Commonwealth Crown Solicitor, by Dobson, Mitchell & Allport.