Commissioner of Stamps (Qld) v Counsell [1937] HCA 40; (1937) 57 CLR 248 (13 August 1937)

This matter comes before the court by way of appeal and cross-appeal from a judgment of the Full Court of the Supreme Court of Queensland of 8th May 1936. The appeal raises the question whether a certain gift of Commonwealth stock is taxable under the Gift Duty Act of 1926 of Queensland. The Supreme Court decided that sec. 52A of the Commonwealth Inscribed Stock Act 1911-1918 prevented the imposition of gift duty in respect of the stock.

The gift was made by an indenture dated 13th July 1926. By this indenture Charles Frederick Counsell declared, in consideration of his natural love and affection for the donees, that until transfers should have been duly made of (inter alia) certain Commonwealth inscribed stock he should stand possessed of the said stock upon trust for the donees as tenants in common in equal shares.

Sec. 2 of the Gift Duty Act defines "disposition of property" to include the creation of a trust of property. "Gift" is defined to mean and include any disposition of property which is made otherwise than by will (with or without an instrument in writing) without fully adequate consideration in money or money's worth passing from the disponee to the disponor.

There is no doubt that a gift was made to the donees by the indenture in question. It is also clear that the indenture did not convey the legal interest in the stock to the donees. The legal interest was still vested in the donor who held it in trust for the donees.

At the time when the gift was made, sec. 52A of the Commonwealth Inscribed Stock Act was in the following form:—"Stock certificates, stock certificates to bearer, scrip certificates to bearer, Treasury bonds and coupons, and transfers of stock or Treasury bonds shall not be liable to stamp duty or other tax under any law of the Commonwealth or a State unless they are declared to be so liable by the prospectus relating to the loan in respect of which they are issued" (Commonwealth Inscribed Stock Act 1911, as amended by sec. 5 of the Commonwealth Inscribed Stock Act 1915 and sec. 5 of the Commonwealth Inscribed Stock Act 1918).

The validity of the section has not been challenged: see The Commonwealth v. Queensland[1] for a decision upholding the validity of a similar provision. The prospectus of the loan in respect of which the stock was issued did not declare that any of the documents mentioned in the section were liable to stamp duty. The Gift Duty Act of 1926 is plainly an Act imposing stamp duty (see sec. 25).

The Supreme Court applied the principle of the decision in The Commonwealth v. Queensland[2] and further held that the indenture constituted a transfer within the meaning of sec. 52A so that it was not liable to stamp duty under the State law. The reasons for the decision were given on 23rd November 1928, the delay in the drawing up of the judgment and the institution of this appeal being due to causes to which it is unnecessary to refer. In 1935 this court decided the case of Fairbairn v. Comptroller of Stamps (Vict.)[3]. The appellant commissioner relies upon the decision in that case for the purpose of showing that the judgment of the Supreme Court on this point is erroneous. When Fairbairn's Case was decided, sec. 52A had been amended by Act No. 2 of 1927, sec. 4. "Documents relating to the purchase or sale of stock or Treasury Bonds" were added to the category of documents which were not to be liable to stamp duty. Act No. 25 of 1932 made a further addition by including debentures and other prescribed securities and "documents relating to the ... transfer or transmission" of any stock, &c. An attempt was made to distinguish Fairbairn's Case from the present case by reference to the words added in the two Acts mentioned. In my opinion, however, there is no room for any such distinction. Fairbairn's Case was based upon the view of the court that a document which transferred only an equitable interest in stock was not within the meaning of sec. 52A either a transfer of stock or a document relating to the transfer of stock. The only words upon which the respondent can rely for the purpose of procuring exemption under the section as it appeared in the 1911-1918 Act are the words "transfer of stock." Fairbairn's Case is decisive against the contention. In my opinion, therefore, the appeal should succeed.

It is now necessary to consider the cross-appeal. The deed of gift included not only Commonwealth inscribed stock but also: (a) South Australian Government bonds on the Adelaide register; (b) shares in companies incorporated outside Queensland and on registers outside Queensland; (c) debts secured on South Australian freeholds by mortgages under the Real Property Acts of that State and a debt agreed to be so secured by agreement made in that State, the debtors in all cases being resident out of Queensland; (d) a policy of life assurance on the Queensland register of the Australian Mutual Provident Society.

It is not disputed that the policy of life insurance, being property situated in Queensland, is taxable under the Act. It is, however, contended that the other property covered by the indenture—(a), (b) and (c)—as well as the Commonwealth inscribed stock, is not situated in Queensland and that the Act is not valid in its application to such property.

In order to deal with this contention it is necessary to consider the provisions of sec. 3 of the Act which, so far as relevant, are as follows:—"(1) Subject to this Act there shall be levied and paid to His Majesty a duty (in this Act referred to as gift duty) in respect of every gift which is made after the commencement of this Act. (2) Gift duty shall be payable in respect of all property situated in Queensland at the time when the gift is made, although the donor may not have his domicil in Queensland. (3) For the purposes of gift duty the local situation of property shall be determined in manner following:—(a) If the donor is domiciled in Queensland at the time when the gift is made or is a body corporate incorporated in Queensland, all personal property comprised in the gift, whether situated inside or outside Queensland, shall be deemed to be situated in Queensland. ..."

The donor in this case was domiciled in Queensland. The effect of sec. 3 (3) (a), therefore, is that all personal property, wherever situated, comprised in the gift is deemed to be situated in Queensland. It has not been contended that the stock and shares and the interests under the life policy are not personal property. The mortgage debts were secured upon land but they also are personal property for the purpose of succession (Thornborough v. Baker[4]; Tabor v. Grover[5]) and a mortgagee's interest in the mortgaged land is treated as personalty for revenue purposes (Attorney-General v. Worrall[6]). See also cases mentioned in McClelland v. Trustees Executors and Agency Co. Ltd.[7], especially In re Ralston; Perpetual Executors and Trustees Association v. Ralston[8]. I therefore deal with the matter upon the basis that all the property included in the gift in this case was personal property. The effect of sec. 3 (2) therefore is that gift duty shall be payable in respect of all the property included in the gift. The question is whether the Parliament of Queensland has power to enact such legislation or whether it is beyond its territorial competence.

Sec. 11 of the Act, which contains a proviso introduced by the words "provided that if the gift is made out of Queensland" shows that the legislature intended to deal with all gifts wherever made.

Sec. 23 provides that gift duty shall be a first charge on all property comprised in the gift and that it shall constitute a debt due to the Crown by the donee (as well as by the donor) on the making of the gift. No question arises in this case as to a gift made outside Queensland or as to the validity of sec. 23. The question is whether the Parliament of Queensland has power to impose taxation upon a domiciled Queenslander in relation to a gift made in Queensland of property which is situated outside Queensland.

In the case of property situated outside Queensland the Act selects as the criterion of taxability the domicil of the donor. In my opinion the case is covered by authority. It is not necessary to discuss the general question of the territorial competence of the legislature of a State. Evatt J. has examined the question in considerable detail in his judgment in Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation[9] and Jordan C.J. has collected and co-ordinated the principal relevant decisions in Attorney-General v. Australian Agricultural Co.[10]. The fundamental rule is that the legislation of a State Parliament is valid if it is for the peace, welfare and good government of the State (Croft v. Dunphy[11]).

It is well settled that in the case of death duties the domicil of a deceased person may be adopted as affording a sufficient connection with a territory to justify taxation by the legislature of that territory with respect to the personal property of the deceased person wherever that property may be situated, including even property which has been disposed of by him by gift inter vivos before his death (Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation[12]—where it was held that it was "clearly not beyond the constitutional power" of the Commonwealth Parliament to impose such taxation). See also Jackson v. Federal Commissioner of Taxation[13] where Isaacs J. (on behalf of Knox C.J., Starke J. and himself) said that "in right of jus gentium exercised by statute" the Commonwealth Parliament could tax all the personal property anywhere of a deceased person if that person was domiciled in Australia. Whether a statute operates to tax such property is purely a question of the construction of the statute. There is no rule that the revenue laws of a country cannot extend to the "foreign possessions" of its "subjects" (Blackwood v. The Queen[14]; Commissioner of Stamps, Straits Settlements v. Oei Tjong Swan[15]) though there may be difficulties in the way of enforcing them (Barcelo v. Electrolytic Zinc. Co. of Australasia Ltd.[16]; Sydney Municipal Council v. Bull[17]; In re Visser; Queen of Holland v. Drukker[18]).

The cases cited all relate to death duties of one kind or another. But the principle that domicil in a territory constitutes sufficient connection with that territory to enable its legislature to tax persons so domiciled is not limited to the case of death duties. The principle as stated in Commissioner of Stamps, Straits Settlements v. Oei Tjong Swan[19] applies to "revenue laws" generally. This case appears to me to answer the doubt as to the validity of taxation by a State parliament of income derived from outside the State indicated in Commissioner of Taxes v. Union Trustee Co. of Australia[20]; and see Australasian Scale Co. Ltd. v. Commissioner of Taxes (Q.)[21].

The relevant principle is expressed by Dixon J. in Broken Hill South Ltd. v. Commissioner of Taxation (N.S.W.)[22] in the following terms:—"The power to make laws for the peace, order and good government of a State does not enable the State Parliament to impose by reference to some act, matter or thing occurring outside the State a liability upon a person unconnected with the State, whether by domicil, residence or otherwise. But it is within the competence of the State legislature to make any fact, circumstance, occurrence or thing in or connected with the territory the occasion of the imposition upon any person concerned therein of a liability to taxation or of any other liability. It is also within the competence of the legislature to base the imposition of liability on no more than the relation of the person to the territory. The relation may consist in presence within the territory, residence, domicil, carrying on business there, or even remoter connections. If a connection exists, it is for the legislature to decide how far it should go in the exercise of its powers." These principles are applicable to taxation of gifts made in Queensland by persons domiciled in Queensland. I do not think it is necessary to decide anything more in order to deal with the cross-appeal.

When, after long delay, the Supreme Court on 22nd April 1936 gave to the appellant liberty to proceed in the appeal to the Full Court (no judgment having then been entered) a condition was imposed that the commissioner should abide by any order as to costs which the Full Court of the Supreme Court might make, and it was ordered that the commissioner should pay the costs of the appeal to that court, although, except as to the one item of Commonwealth stock, he succeeded upon the appeal. In these circumstances I think that this court should make no order as to the costs of this appeal and that the order of the Supreme Court as to costs should not be varied. The respondent's appeal from the assessment should be wholly disallowed.

I have had an opportunity of reading the judgment of the Chief Justice and desire to add only one or two observations with regard to the cross-appeal. We are concerned only with the case of a gift made in Queensland of movables situated outside Queensland by a donor domiciled in Queensland. The operation of sec. 11 (4) and sec. 23 of the Gift Duty Act 1926 Q., may be laid out of consideration. Story in his Conflict of Laws, 8th ed. (1883), c. ix., sec. 384, long ago laid down the proposition that "the general rule is, that a transfer of personal property, good by the law of the owner's domicil, is valid wherever else the property may be situate." In commenting upon this rule Dicey, Conflict of Laws, 3rd ed. (1922), at p. 569, says that the case law mainly refers to general assignments of movables and not to individual assignments as by gift or sale. He goes on to say: "But the validity of such assignments, when made in accordance with the owner's lex domicilii, is so uniformly taken for granted by judges and by writers of eminence, such as Story, that we may assume that a sale or gift by a person domiciled in England will, at any rate if made in England, be held (if it be in accordance with English law) to be valid as regards goods, wherever situate." Now if by the comity of nations the law of Queensland is recognized as a source of a donor's authority to impart to the donee property in the movables, the subject of the gift, it seems to me to be absurd to refuse to concede to the Queensland legislature the power to impose a tax upon the operation of giving.

I agree with the order proposed by the Chief Justice with regard to the appeal and cross-appeal.

I agree with the judgment of the Chief Justice and the order therein proposed with regard to the appeal and the cross-appeal.

Appeal allowed. Cross-appeal dismissed. Judgment of Supreme Court set aside in so far as it orders that the appeal to the Supreme Court be allowed. Judgment of Supreme Court varied by ordering that the said appeal be dismissed and that the assessment of the commissioner be affirmed. No order as to costs of appeal or cross-appeal to this court.

[1] [1920] HCA 79; (1920) 29 C.L.R. 1.

[2] [1920] HCA 79; (1920) 29 C.L.R. 1.

[3] [1935] HCA 57; (1935) 53 C.L.R. 463.

[4] [1674] EngR 97; (1675) 3 Swans., 628; 36 E.R. 1000.

[5] [1699] EngR 37; (1699) 2 Vern. 367; 23 E.R. 831.

[6] (1895) 1 Q.B. 99.

[7] [1936] HCA 45; (1936) 55 C.L.R., 483, at p. 493.

[8] (1906) V.L.R. 689, at p. 694; 28 A.L.T. 45, at p. 46.

[9] (1933) 49 C.L.R., at pp. 232 et seq.

[10] (1934) 34 S.R. (N.S.W.), at pp. 576 et seq.; 51 W.N. (N.S.W.), at pp. 198, 199.

[11] (1933) A.C. 156.

[12] [1933] HCA 32; (1933) 49 C.L.R. 220.

[13] [1920] HCA 27; (1920) 27 C.L.R. 503, at p. 508.

[14] (1882) 8 App. Cas. 82, at p. 96.

[15] (1933) A.C. 378, at p. 386.

[16] (1932) 48 C.L.R., at p. 409.

[17] (1909) 1 K.B. 7.

[18] (1928) Ch. 877.

[19] (1933) A.C. 378.

[20] (1931) A.C. 258, at p. 268.

[21] [1935] HCA 23; (1935) 53 C.L.R. 534, at p. 561.

[22] [1937] HCA 4; (1937) 56 C.L.R. 337, at p. 375.

High Court of Australia

Commissioner of Stamps (Qld) v Counsell [1937] HCA 40; (1937) 57 CLR 248 (13 August 1937)

HIGH COURT OF AUSTRALIA