New South Wales Institution for the Deaf, Dumb & the Blind v Shelley [1917] HCA 46; (1917) 23 CLR 351 (7 September 1917)

HIGH COURT OF AUSTRALIA

The New South Wales Institution for the Deaf, Dumb and the Blind and Another Defendants, Appellants; and Shelley and Others Defendants and Plaintiffs, Respondents.

H C of A

On appeal from the Supreme Court of New South Wales.

7 September 1917

Barton, Isaacs and Rich JJ.

E. Milner Stephen (with him Nicholas), for the appellants.

Knox K.C. (with him Maughan), for the respondents.

E. Milner Stephen, in reply,

The judgment of the Court, which was read by Isaac J., was as follows:—

Sept. 7

Barton, Isaacs and Rich JJ.

The question is whether the Commonwealth estate duty under the Act No. 22 of 1914 is by the testator's will directed to be paid out of the residuary estate. Harvey J. decided that it is so directed, and the appellants contend that it is not and that the duty should be apportioned as provided by sec. 35 of the Act. The relevant clause in the will is in these terms: "And as to the proceeds to arise from the sale conversion and getting in of my residuary estate I direct my trustee thereout in the first place except where herein otherwise directed to pay or retain all the expenses incident to the execution of the preceding trusts and my debts funeral and testamentary expenses." The respondent relies on two phrases in that direction, namely, (1) "the expenses incident to the execution of the preceding trusts" and (2) "testamentary expenses," as amounting to a "different disposition" within the meaning of sec. 35. The learned Judge from whom this appeal comes was of opinion that the duty answered both descriptions.

It is, we think, the better construction of the clause in question that each provision is exclusive of the other. The testator in adding the latter phrase was providing for something he had left undealt with by the first.

As to "expenses incident to the execution of the preceding trusts" they seem to refer to the expenses attendant on actually carrying out the prior directions of the will, after the trustee was clothed with the necessary authority. The "preceding trusts" are in contradistinction to the remaining trusts, and therefore the phrase cannot refer to a general expense which covers both preceding and subsequent provisions of the will. The clause includes the words "except where herein otherwise directed." The exception helps to strengthen the view which we take of the affirmative provision. It is otherwise directed as to the rates and taxes, insurance premiums, external repairs and other outgoings in connection with the cottage and land known as "Glenara" and as to the Henley property.

The second branch was much more strongly relied on than the first, the view presented being that sec. 34 of the Act enacts that the duty is to be a first charge upon the estate in priority over all other encumbrances whatever, and that no disposition of the estate or any part of it is permitted until the duty is paid. From this it was said that the "administrator," as he is termed in the Act, was bound to pay as a condition of getting the probate or letters of administration not merely the State probate duty, but also the Commonwealth estate duty, and therefore that the latter equally with the first was "a testamentary expense." But an examination of the Act shows that this view cannot be sustained.

Sec. 34 does not say simply that the duty is to be a first charge. What it says is that "the duty assessed under this Act" shall be a first charge. The latter part of the section goes on, however, to say that there shall not be any disposition of the estate or any part of it until the "duty" thereon has been paid or secured. But as to the charge, there must first be an "assessment."

Reference to the definition of in sec. 3, to the provisions in sec. 10 as to his furnishing returns, to secs. 13 and 14 referring to the State assessments which are assumed to have been already made and probably paid, and to sec. 16 as to the result of default in making returns will show that the assessment does not—at all events necessarily—take place before the issue of probate or letters of administration. This is confirmed by the provisions of secs. 24 to 28, because it is impossible to think that the right to pay the State probate duty and get the probate or letters of administration must necessarily wait all that time, or whatever shorter time the Commissioner may under sec. 25 choose to make it by proceeding in adversum on the assessment as it stands.

Sec. 29 says that "duty assessed" shall be due and payable within thirty days after service by post of a notice of assessment, but that time may be extended by the Commissioner up to two years, and by sec. 32 it is made a debt only as "duty assessed" and as from the time it is due and payable. Then, when sec. 34 says the "duty assessed" is to be a first charge, it seems an irresistible conclusion from the whole Act that payment of the duty cannot be regarded as a condition precedent to obtaining probate, or stand on the same footing as the State probate duty. The provision in sec. 34 forbidding disposition until payment or security is by way of security only for a favoured debt, and from what has been said does not impart to the duty the character of a testamentary expense. Secs. 38 and 43 are wholly inconsistent with the idea that the payment of the estate duty is a condition precedent to the complete investiture of title of the administrator.

We do not find it necessary to define the limits of the term "testamentary expenses," because we think the Commonwealth estate duty is clearly outside any reasonable interpretation of the expression. The Commonwealth Act does not concern itself with granting title in any way, or charging a price for it, or with prescribing the administrator's duties under the will; it accepts the position as it finds it, for its own purposes it defines "the estate" to be taxed, and then it imposes a tax on "the estate" measured by a rate on its assessed value, and makes the tax payable when "assessed," and by the person recognized by the State law as the person entitled to represent the deceased or to administer his estate. By virtue of its overriding legislative power, it takes for the assessed duty certain priority of what it calls "other encumbrances" and forbids any "disposition" of the estate except its tax is paid or provided for. It is unnecessary to decide what, if anything, is further implied in the requirement of payment or security.

For these reasons we are of opinion that the decision goes beyond any heretofore recognized conception of testamentary expenses, and therefore the provision in the will that has been referred to is not a different disposition within the meaning of sec. 35.

The appeal will be allowed and the judgment varied by substituting for the word "amounts" in the relevant declaration the words "does not amount."

Appeal allowed. Order appealed from varied by substituting for the word "amounts" in the relevant declaration the words "does not amount." Suit remitted to the Supreme Court in Equity for further proceeding in accordance with this judgment. Costs of this appeal to be costs of the suit.

Solicitors for the appellants, Stephen, Jaques & Stephen.

Solicitors for the respondents, Allen, Allen & Hemsley; Norton, Smith & Co.