Queensland Trustees Ltd v Deputy Federal Commissioner of Land Tax (Qld) [1919] HCA 44; (1919) 26 CLR 485 (14 August 1919)

HIGH COURT OF AUSTRALIA

Queensland Trustees Limited Appellants; and The Deputy Federal Commissioner of Land Tax (Queensland) Respondent.

H C of A

14 August 1919

Isaacs, Gavan Duffy and Rich JJ.

Stumm K.C. (with him Wassell), for the appellants.

Drake, for the respondent.

Stumm K.C., in reply.

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

Aug. 14

Isaacs, Gavan Duffy and Rich JJ.

This is a case stated by Chubb J. under sec. 46 of the Land Tax Assessment Act for the opinion of this Court. Two questions are stated, but in effect they depend on one, namely, whether under the will of William Perry, deceased, certain Brisbane lands are, within the meaning of sec. 34 of the Land Tax Assessment Act, charged with the annuity given to the testator's daughter Mary Hay Perry, now Mary Hay Kilby.

It was argued for the Deputy Commissioner that Cochrane's Case[1] governed this, because, as it was there held that an annuitant having a rent-charge in respect of lands was not liable to taxation as owner, it followed that the owner was liable notwithstanding the charge. But that consequence does not follow. Cochrane was held not liable because of the express directions of sec. 32. The question here is the independent one—whether the owner is, by the express directions of sec. 34, entitled to the deduction of the value of the annuity. The matter must therefore be determined apart from Cochrane's Case.

The appellants claimed the benefit of the section on two grounds: (1) because the annuity was, on the true construction of the will, charged on the corpus of the land; and (2) because, even if charged only on the income, there was nevertheless a charge on the land within the meaning of the section. If either is decided in the affirmative, it concludes the matter in favour of the appellants.

The first point depends entirely on the construction of the will. There is no doubt—for the testator has expressly so declared—that he has "charged" the annuity. No doubt, it is a charge on the "income"; but is it also a charge on the corpus?

Cases have been cited to aid the Court in discovering what, if any, principle or canon of construction should guide it in determining the case. But, as Lord Brougham said in Baker v. Baker[2], "nothing, generally speaking, can be more unfruitful than a reference to other cases where, instead of the question arising upon a principle of law, or a rule of law, the whole question arose upon the meaning of the words employed in the will; and the least difference between the case at the bar and the case cited, will make all the difference in the world, and render the application of the case cited utterly useless." That passage acknowledges, as of course, the necessity of observing principles of law or rules of law; but, that done, the intention of the testator must be judged of by his own words. In Gee v. Mahood[3] Cotton L.J. states two relevant propositions, viz.: (1) "If there is a direct legacy of an annuity, then primâ facie the annuitant is entitled to have that made good, not only out of the income, but out of the capital, unless there are words sufficient to cut down the claim of the person to the income only"; and (2) "Although there is a gift of an annuity, yet there may be expressions in the will that show that what the testator has provided as a fund for payment of the annuity is to be handed over to those who are to take after the death of the annuitant in the same state as when first set apart." In other words, if the source of the annuity is given to another "intact," it is not charged with the annuity. When that case was in the House of Lords (Carmichael v. Gee[4]) Lord Selborne L.C. proceeded on those lines. Lord Hatherley[5] divided the cases into two classes. One class is where "a general trust fund ... is partitioned between two parties, the one taking a life interest and the other taking an interest in the remainder." In that class of cases, the annuitant's only right is against the income accruing from the fund. The other class is where there is a gift of an annuity to one person, and others are to take subject to that gift, the others must submit to any loss or inconvenience occasioned by satisfying the gift of the annuity. Whether a case falls into the one class or the other may be easily settled if express words are used such as "subject to," or their equivalent. But there is no rule of law requiring any specific words, and if the intention can be gathered from the will as a whole, that is sufficient.

In the present case the first significant fact is that a fund is designated, viz., "the clear annual income derived from the said lands," out of which the annuities are to be paid. True, the testator says "the several annuities hereinafter charged," but, when we look to see on what they are charged, it appears they are charged on nothing but the fund out of which they are payable, because no intimation of a charge on corpus is given, and there is one provision which shows it is not on the corpus of the estate. That provision is this: "It is hereby declared that all the said annuities or annual payments hereby charged or declared to be payable are charged and are to be payable and paid in the order and rotation" &c. So that "charged" and "payable" are used in respect of the one fund out of which the annuities are to be paid, which, as before stated, is the annual income. Then the will proceeds to make provision for what is to happen in case of insufficiency of income to meet all the annuities. They are to be paid in priority; that means, up to that point, that some may have to go unpaid altogether. And nothing is said as to any further recourse to the estate to make good the deficient annuities. Then provision is made for the case of the income being more than sufficient to meet the annuities: the surplus is to go to Mrs. Annie Perry, or, if the trust to her fails, then for her then husband's children's maintenance until the youngest attains twenty-one years. On that event happening a new trust of the land and any accumulated income is created. Altogether it is clear that there is no charge on the corpus. There is what Lord Watson, in Carmichael v. Gee[6], called "an intention on the part of the testator to limit the fund out of which" the annuity "was to be paid to the income."

The next question is: What is the nature of the charge on the income? It is to be noted in this connection that in the case of the three grandchildren annuitants, two of them being other than the beneficiaries under the new trust, the annuities are not to cease until they attain twenty-two. The two beneficiaries referred to, Beryl Ham and Herbert Ham, might not attain that age until after the surviving parent of William Perry's children had died and the new trust had arisen. But the annuities to the Ham grandchildren were to continue until they were twenty-two, notwithstanding the new trusts. The specific term of duration fixed by the will in those two cases makes that clear. This provision is, in Lord Brougham's words above quoted, the difference that, in view of the cases (notably the judgment of Parker J. in Re Boulcott's Settlement; Wood v. Boulcott[7]), makes all the difference in the world, because if, as is plain, those annuities are not to cease till the period mentioned, it is the better construction that Mrs. Kilby's annuity, being unlimited, would naturally be intended to continue (together with, in her case, the charge on the income to secure it) during her life, the period corresponding to the attainment of twenty-two years in the other cases.

Does that bring the case within the words of sec. 34 of the Assessment Act, "land is charged with an annuity." In Payne v. Esdaile[8] Lord Macnaghten says "A charge means something carried, a burthen or an imposition." It is necessary to distinguish between the charge itself, however created, and the remedy to effectuate it. Here the charge is equitable. Applying, accordingly, the reasoning of Lord Macnaghten in the case cited to the present case, we may say that beyond all doubt the liability to apply the income of the land to satisfy the annuity subtracts something from the profitable enjoyment of the land; it must be taken into account on the occasion of a sale, or a mortgage, or a lease with notice. An intending purchaser of the interest of the remainderman would give so much less purchase money; an intending mortgagee of that interest would strike the amount off the rental in calculating the value of his proposed security, and an intending lessee of the beneficial owner's interest would offer so much less rent. According to the ordinary understanding of mankind, that is a charge upon land which cannot be dissociated from the land, and which charges the remainderman when he receives the income of the land and charges similarly anyone who takes his interest with notice. That is, therefore, a charge on the land within the meaning of sec. 34, and entitles the owner to the statutory deduction.

The questions are answered in the affirmative, and the case is remitted to the Supreme Court of Queensland with this opinion. Costs will be costs in the appeal.

Questions answered accordingly. Costs to be costs in the appeal.

Solicitor for the appellants, R. McCowan.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth, by Chambers, McNab & McNab.

[1] [1916] HCA 31; 21 C.L.R., 422.

[2] [1858] EngR 480; 6 H.L.C., 616, at pp. 626-627.

[3] 11 Ch. D., 891, at pp. 897, 899.

[4] 5 App. Cas., 588.

[5] 5 App. Cas., at p. 597.

[6] 5 App. Cas., at p. 598.

[7] 104 L.T., 205.

[8] 13 App. Cas., 613, at p. 626.