Manning v Federal Commissioner of Taxation [1928] HCA 9; (1928) 40 CLR 506 (23 April 1928)

HIGH COURT OF AUSTRALIA

Manning Appellant; and Federal Commissioner of Taxation Respondent.

H C of A

23 April 1928

Knox C.J.

Harper (with him Amsberg), for the appellant.

McDonald, for the respondent.

Knox C.J delivered the following written judgment:—

April 23

Knox C.J.

The only question submitted for decision is whether the appellant is, as she claims to be, a trustee within the meaning of the Income Tax Assessment Act 1922-1925 of the money received by her as income of the estate of Richard Manning deceased.

The will of the testator, so far as relevant, is in the words following:—"I give devise and bequeath unto my wife Hattie Rose Manning in trust for my three children Richard John Manning Neville Lincoln Manning and Joy Lincoln Manning the whole of my real and personal estate wheresoever situate comprising land dwelling-houses and buildings shares in companies moneys in banks or lent at interest household furniture personal effects life insurances and any and all other property goods chattels or effects which I stand possessed of at time of my decease. The said Hattie Rose Manning during her lifetime to receive the net income rents profits and interest accruing and arising from the whole of the herein mentioned real and personal estate for the support and maintenance of herself and my children. As soon after the decease of my wife Hattie Rose Manning as may be conveniently possible the whole of the estate real and personal to be converted into cash and net proceeds of such sale to be equally divided between my sons Richard John Manning Neville Lincoln Manning and my daughter Joy Lincoln Manning provided the said Joy Lincoln Manning shall have attained the age of twenty-one years." Testator subsequently made a codicil in the words following: "The whole of my properties assets &c. I leave in trust to my wife Hattie Rose Manning for my three children Richard John Manning Neville Lincoln Manning and Joy Lincoln Manning to be divided equally when Joy Lincoln Manning reaches the age of twenty-two years."

In proceedings instituted in the Supreme Court of New South Wales for the purpose of deciding certain questions arising on the construction of the said will and codicil a decretal order was made containing the following (among other) declarations:—"This Court doth declare that the codicil to the will of the above-named testator did not operate as a revocation of the whole of the devises and bequests contained in the said will And this Court doth further declare that the said codicil did not operate as a revocation of the direction contained in the said will that the defendant Hattie Rose Manning was during her lifetime to receive the net income rents profits and interest accruing and arising from the whole of the real and personal estate of the said testator for the support and maintenance of herself and the children of the said testator And this Court doth further declare that the plaintiff should after payment of the debts funeral and testamentary expenses of the said testator and the legacies bequeathed by his said will hand over and transfer to the defendant Hattie Rose Manning as sole trustee of the said will and codicil the whole of the real and personal estate of the said testator to be held by her upon the trusts declared by the said will and codicil."

No declaration was made as to the effect of the direction contained in the will that the appellant was to receive the income of the estate during her life, and it seems to me that, although the Supreme Court of New South Wales is the proper forum in which to ascertain as between the persons interested in the estate what is the true meaning and effect of this direction, it is necessary for this Court, notwithstanding the absence of some of the persons interested, to determine in these proceedings whether the appellant is beneficially entitled to the income in question or holds such income when received upon some trust, express or implied, for the benefit of herself and the children of the testator. A decision on this question in these proceedings will, of course, not be binding on the children in their absence; but, notwithstanding the inconvenience which may result from this position, I see no justification for abstaining from expressing my opinion on the question at issue. The question whether the recipient of income under provisions more or less closely resembling the direction contained in this will has been raised and decided in a great number of reported cases, the decisions in which are not easily reconcilable and afford little assistance in construing this will except so far as they proceed on some principle or rule of construction. Upon a consideration of the authorities referred to in argument and other decisions I think this case falls within the rule—if it be a rule—expressed in Browne v. Paull[1], as follows: "Where the interest of the children's legacies is given, to a parent, to be applied for or towards their maintenance and education, there, in the absence of anything indicating a contrary intention, the parent takes the interest subject to no account, provided only that he discharges the duty imposed on him of maintaining and educating the children." (See Jarman on Wills, 6th ed., p. 893.) In this view it seems to me that the appellant is entitled to receive the income of the estate subject to no liability to account for its application, provided she discharges the duty of supporting and maintaining testator's children.

The definition of trustee contained in sec. 4 of the Income Tax Assessment Act is in the words following: "Trustee in addition to every person appointed or constituted trustee by act of parties, by order, or declaration of a Court, or by operation of law, includes (a) an executor or administrator, guardian, committee, receiver or liquidator, and (b) every person having or taking upon himself the administration or control of income affected by any express or implied trust, or acting in any fiduciary capacity, or having the possession, control or management of the income of a person under any legal or other disability." Wide as this definition is, it requires at least as an essential ingredient in the position of "trustee" under the Act the existence of a fiduciary obligation towards some other person. The existence of a fiduciary obligation to another person must, I think, always involve a liability to account at the instance of that other person, and if I am right in thinking that the gift of income to the appellant involves no such liability it seems to me to follow that she is not a trustee of the income within the meaning of the Act.

The parties agree that no order is necessary other than a declaration on the question whether the appellant is within the meaning of the Income Tax Assessment Act a trustee of the income received by her from the estate of the testator.

In my opinion the question submitted should be answered in the negative, and there should be a declaration to that effect. The appellant is to pay the costs of this appeal.

Declaration that the appellant was not, within the meaning of the Income Tax Assessment Act 1922-1925, a trustee of the income in question. Appellant to pay costs of appeal.

Solicitor for the appellant, William Arnott.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.

[1] [1850] EngR 928; (1850) 1 Sim. (N.S.) 92, at pp. 103-104.