Seymour Brothers v Deputy Federal Commissioner of Land Tax (SA) [1918] HCA 61; (1918) 25 CLR 303 (4 October 1918)

HIGH COURT OF AUSTRALIA

Seymour Brothers Appellants; and The Deputy Federal Commissioner of Land Tax (South Australia) Respondent.

H C of A

4 October 1918

Barton, Isaacs and Gavan Duffy JJ.

Grundy K.C. (with him Cleland K.C. and Davison), for the appellants.

Poole (with him Powers), for the respondent.

Cleland K.C., in reply.

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

Oct. 4

Barton, Isaacs and Gavan Duffy JJ.

Case stated by Buchanan J. under sec. 46 of the Land Tax Assessment Act 1910-1914 for the opinion of this Court. The facts, so far as material, may be shortly stated. Five members of the Seymour family were severally registered proprietors of separate parcels of land in South Australia. By deed dated 10th April 1914, after reciting their several proprietorship of those lands, they entered into partnership as cattle, sheep and horse breeders and sellers of wool and stock producers. The term of the partnership was five years as from 25th March 1913, defeasible by certain notice. The style of the partnership was "Seymour Brothers." Clause 5 of the deed was as follows:—"The assets and capital of the said firm shall consist of the property described in the schedule hereunder written marked A and the other property in the schedule hereunder marked B, but on the expiration or determination of the partnership the real estate shall be and remain the property of each individual in whose name it is shown to be in the certificates of title except property in the name of the said Henry Conway Seymour as trustee, which shall be held on the trusts affecting the same, and the partners shall be interested in the personal estate as follows: the said Henry Conway Seymour, Charles Randolph Seymour and Thomas George Seymour to two-ninths each, and the said Elizabeth Susan Seymour and Mary Ellen Seymour to one-sixth each thereof, subject to the trusts contained in the will of Thomas Drought Seymour deceased." Clause 9 provided for the respective shares of the net profits to which the parties were entitled. Clause 11 was in these terms: "Neither partner shall do or willingly suffer anything whereby or by reason whereof any of the stock in trade, capital or property of the said partnership may be seized or attached or extended or taken in execution."

The Deputy Commissioner assessed "Seymour Brothers" as owner of the lands at 30th June 1913, and again in 1914 and 1915. The unimproved value of the lands was assessed and is admitted to be correctly assessed at £42,878. The Deputy Commissioner allowed one statutory deduction of £5,000, leaving a taxable balance of £37,878. The Deputy Commissioner claimed that the firm were liable to be assessed either (1) as joint owners of the lands for the unimproved value of the fee simple, or alternatively (2) as lessees for life under sec. 42A, and that one deduction only of £5,000 should be allowed. The appellants contest both those claims, and contend that they are liable to be assessed only (1) as several owners of the lands according to their respective registered titles, or (2) as joint lessees of all the lands for five years.

It has been properly conceded on both sides that the matter must be determined by ascertaining the legal position of the parties in relation to the land assessed, in view of the terms of the partnership deed, and then by applying to that position the relevant provisions of the Assessment Acts. The effect of clause 5 is not to make a series of leases of the various parcels of land, but to mutually convert for the purposes of the partnership the separate property in the land of the respective owners thereof into joint property. Each owner surrenders to the partnership his individual right in respect of the land, and acquires in return a corresponding partnership share in respect of the lands of his co-partners, limited similarly by the purposes of the partnership. By the Partnership Act 1891 S.A., sec. 22, land or any interest therein which is made partnership property is as between the partners and in the absence of contrary provision regarded as personal property. This is long established law. (See Davis v. Davis[1], and the older cases there cited.) If no limitation had been placed on the quantum of interest so converted into joint property, it would be competent to the partners on the termination of the partnership to reconvert it into realty, and again to sever their interests as at the cutset (Myers v. Myers[2]). The parties, however, provided for this in advance by clause 5, and this specific provision emphasizes the initial act of making the various parcels of land partnership "assets and capital" for the purposes of the partnership. The rights of creditors are affected by that provision. See, for instance, sec. 23 of the Partnership Act 1891, limiting in such case the rights of an execution creditor of an individual partner.

In law the members of the firm, or as the Act calls them "the firm," were jointly the equitable owners of the aggregated land during the term and for the purposes of the partnership, and were entitled as against the respective registered proprietors of the several parcels to receive, and they did in fact receive, the rents and profits of each and every parcel of those lands. In this respect the case is fundamentally different from Mant v. Deputy Federal Commissioner of Land Tax (Qd.)[3]. It is trite law that the equitable interest which a person has in land is commensurate with the relief which equity would give by way of specific performance (Howard v. Miller[4] and Central Trust and Safe Deposit Co. v. Snider[5]). It is clear also that equity would enforce as against each separate owner the rights created by the deed in favour of the firm to treat the lands as partnership property for the period fixed by the deed, subject to any defeasance arising pursuant to its terms.

Applying to those conclusions the provisions of the Assessment Act, we find that the firm of "Seymour Brothers," that is, all the members of the firm, were at each of the dates mentioned—because it is not disputed that the deed reaches back to the earliest of the dates mentioned—the "joint owners" of all the lands in question, according to sec. 3 (the definition section). Then, by sec. 38, joint tenants are to be assessed jointly, and as if a single owner, without regard to their respective interests therein, or to any deductions to which any of them may be entitled under the Act. The fact that the joint interest so created lasts for five years only is immaterial. It might be for the partners' joint lives, and the interest would still be less than a fee simple.

The material circumstance is that at the respective dates—namely, 30th June—in each year of assessment (see sec. 15) the firm were within the meaning of the Act "joint owners" of the lands assessed, and so the principle applies as stated by the learned Chief Justice in Glenn v. Federal Commissioner of Land Tax[6], in these words: "For the tax is an annual tax, and the owner of the land is the person who is in the present enjoyment of the fruits which presumably afford the fund from which it is to be paid."

The case does not fall within sec. 42A. That section assumes a person or persons to occupy, control or use the land to the exclusion of the owner within the meaning of the Act, without any lease or agreement for a lease but under some arrangement with the owner of an indefinite nature.

The case will be remitted to the Supreme Court of South Australia with the opinion of this Court that the appellants were rightly assessed as joint owners for the unimproved value of the fee simple of the land with one deduction only of £5,000. Costs to be costs in the appeal.

Order accordingly.

Solicitors for the appellant, Davison & Daniel, Mount Gambier, by Rupert Pelly.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] (1894) 1Ch., 393, at pp. 402 et seqq.

[2] 61 L.T., 757.

[3] [1915] HCA 46; 20 C.L.R., 564.

[4] (1915) A.C., 318, at p. 326.

[5] (1916) 1 A.C., 266, at p. 272.

[6] 20 C.L.R., at p. 497.