Elder's Trustee & Executor Co Ltd v Federal Commissioner of Taxation [1953] HCA 42; (1953) 88 CLR 200 (30 July 1953)

HIGH COURT OF AUSTRALIA

ELDER'S TRUSTEE AND EXECUTOR CO. LTD. v. FEDERAL COMMISSIONER OF TAXATION [1953] HCA 42; (1953) 88 CLR 200

Estate Duty (Cth.)

High Court of Australia
Fullagar J.(1)

CATCHWORDS

Estate Duty (Cth.) - Gifts within three years of death - Gifts of money to donees applied in payment of debt of donees - Estate Duty Assessment Act 1914-1950 (No. 22 of 1914 - No. 80 of 1950), s. 8 (4) (a).

HEARING

Adelaide, 1953, May 19.
Melbourne, 1953, July 30. 30:7:1953
APPEAL under Estate Duty Assessment Act.

DECISION

July 30.
FULLAGAR J. delivered the following written judgment:-
Elder's Trustee & Executor Co. Ltd. is the executor of the will of the late the assessment of estate duty on her estate under the Estate Duty Assessment Act 1914-1950 (Cth.). The relevant provision of the Act is contained in s. 8 (4), which provides, so far as material, that property which passed from the deceased person by any gift inter vivos made within three years before his decease shall for the purposes of the Act be deemed to be part of the estate of that deceased person. Under s. 8 (1) estate duty is to be levied and paid upon the value, as assessed under the Act, of the estates of persons dying after the commencement of the Act. The case is concerned with two sums of 5,000 pounds, each of which was paid by the deceased to her three sons within three years of her death. (at p202)

2. The case came before me on an agreed statement of facts, which I will summarize. For many years before her death three sons of the late Mrs. Higgins, whom I will call the Higgins Brothers, were carrying on in partnership a pastoral business on certain freehold and leasehold lands in New South Wales. In the course of this business they dealt in a manner which is usual in Australia with a company named Elder Smith & Co. Ltd., which carried on (inter alia) the business of wool-selling brokers, and which I will call "the company". The course of dealing involved the maintenance in the books of the company of a current account, which was to all intents and purposes a banking account. To that account were credited (inter alia) the proceeds of sales of wool and stock sold by the partnership, and on that account drawings were made for payment of a great variety of outgoings of the partnership and also for payment of outgoings of the individual partners, such as income tax, children's school fees, & c. At the time of each of the payments now in question this account was in debit, that is to say, it showed a balance owing by the Higgins Brothers to the company. The indebtedness from time to time of the Higgins Brothers to the company was secured by mortgages of the freehold and leasehold lands on which the pastoral business was carried on, and also by a registered stock mortgage. The late Mrs. Higgins herself also had a similar current account with the company. (at p202)

3. On 1st December 1949 the debit balance in the current account of the Higgins Brothers with the company was 16,597 pounds 0s. 4d. On that date the late Mrs. Higgins drew a cheque for 5,000 pounds on her own current account with the company, and this cheque was paid to the credit of the current account of the Higgins Brothers with the company. The effect of this was to reduce the indebtedness of the Higgins Brothers to the company to 11,597 pounds 0s. 4d. On 7th June 1951 the debit balance in the current account of the Higgins Brothers with the company was 6,334 pounds 3s. 3d. On that date the late Mrs. Higgins drew a further cheque for 5,000 pounds on her own current account with the company, and this cheque was paid to the credit of the current account of the Higgins Brothers with the company. The effect of this was to reduce the indebtedness of the Higgins Brothers to the company to 1,334 pounds 3s. 3d. The account of the Higgins Brothers with the company was at all times in debit between the dates of the two payments of 5,000 pounds, and continued in debit for a short time after the second payment. On 10th July 1951, however, a large sum representing the proceeds of sales of wool was paid in, and the account then showed a credit balance of 7,278 pounds 10s. 4d. By 9th September 1951 (the date of Mrs. Higgins' death) the credit balance had been reduced to 5,677 pounds 5s. 4d. I mention these two latter facts since they appear from a copy of the current account which was before me, but, as will be seen, I do not regard them as material. (at p203)

4. It is to the two abovementioned sums of 5,000 pounds that the question in this appeal relates. It will be convenient, I think, and in no way misleading, if I refer throughout to the two transactions as involving payments of money. All that was actually done in each case was that a series of book entries were made. But the effect in each case was the same as if Mrs. Higgins had handed 5,000 pounds in notes to the partners and the partners had then handed those notes to the company by way of partial discharge of their indebtedness at the time to the company. It is not disputed that each of the payments in question was made without consideration and, at the time when it was made, constituted a "gift" within the ordinary meaning of that term - and, of course, a gift inter vivos. And each gift was made within three years before the death of Mrs. Higgins. It is said, however, that, even though a gift be made within three years before the death of the donor, duty will not be payable under s. 8 (4) (a) unless the subject-matter of the gift is in existence in the hands of the donee at the death of the donor either in its original form or in some identifiable form into which it has been converted. It is not suggested that money is not "property" within the meaning of s. 8 (4) (a), but it is said that, in the present case, the money given lost its identity and in effect disappeared when it was paid into the account of the Higgins Brothers with the company. The argument may be illustrated by an example. Suppose that A gives to B 10,000 pounds. If B buys a house with that money, and the house is in existence and owned by B at A's death within three years, duty will be payable. But, if the money is stolen from B and never recovered, or if B loses it before A's death through unwise investment on the stock exchange or the racecourse, or if he uses it to pay a debt which he owes to C, duty will not be payable. I understood it to be conceded that, if a gift of money be simply paid by the donee into his current account at a bank, the rule in Clayton's Case (1816) 1 Mer 572 (35 ER 781) could be applied at the death of the donor and might enable the identification of part of a credit balance as representing pro tanto the subject matter of the gift. But clearly no such application of Clayton's Case (1816) 1 Mer 572 (35 ER 781) could be made where, as here, the account was, at all material times up to the death of the donor, overdrawn. The argument requires the consideration of several decided cases, but I think it desirable to begin with one or two general observations. (at p204)

5. Statutes imposing estate duties or probate duties commonly take as the primary subject of charge the property owned by a deceased person at his death. But such statutes never stop there, because there is a variety of voluntary acts inter vivos by which a person may diminish his estate before he dies or even ensure that he will leave no estate at all: see Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (Watt's Case), per Isaacs J. [1926] HCA 14; (1926) 38 CLR 12, at p 32 , and cf. what is said by Rich J. in Trustees Executors & Agency Co. Ltd. v. Federal Commissioner of Taxation (Teare's Case) [1941] HCA 36; (1941) 65 CLR 134, at p 140 . In particular, a person may shortly before his death, and perhaps because he anticipates death in the near future, make a gift or a voluntary settlement of a large part of his property. Such statutes, therefore, commonly make provision for bringing into charge, as "notionally" part of the estate, property which has been the subject of a gift or of certain classes of settlement. In the case of gifts, of course, to charge all gifts made at any time by the deceased would be to take the impost beyond the character of a death duty, and it is usual to fix an arbitrary period before death and charge property given during that period. Because one of the purposes of the inclusion of such property is to prevent "evasion", and because it is thought that what is included may fairly be regarded as the subject of a death duty, the inclusion of such property in the Commonwealth Act does not mean that the Act is dealing with more than one subject of taxation so as to infringe s. 55 of the Constitution: see National Trustees, Executors & Agency Co. of Australasia Ltd. v. Federal Commissioner of Taxation [1916] HCA 62; (1916) 22 CLR 367 . These general considerations may be thought to suggest in the absence of any express provision on the point that, if there can be shown to be any difference between the value of what is given at the time when it is given and its value at death, it is the latter value that should be adopted for the purpose of assessing duty. But they would not seem to me to suggest that the question whether the gift is dutiable at all should depend on what the donee does with it. There is, however, a substantial body of authority which - up to a point at any rate - supports the appellant's argument in this case, and I gathered that Mr. Phillips and Mr. Alderman were agreed that my problem in this case was largely one of interpretation of that authority. (at p205)

6. Before approaching the cases there are, I think, two other observations to be made. The first is that, although the problem is in the last resort one of the construction of a particular state, it would be wrong to draw nice distinctions based on differences in the machinery of assessment and collection. The courts have in fact declined to draw such distinctions. The second observation to be made is that there can be no question of a "valuation" of money. An expression in terms of monetary units is, for all purposes now relevant, at once a description of a thing and a final statement of its value. As Lord Sands said in Lord Strathcona v. Inland Revenue Commissioners (1929) SC 800 , "No doubt money in a banking or exchange sense may have a price, but in legislation and in law the value of money is a constant. No question of value can therefore arise when the donation is one of money" (1929) SC, at p 808 . If the gift were of 1,000 pounds in notes, and the notes were found in the donee's safe after the death of the donor, it would be idle to suggest that the gift was to be valued at 800 pounds because the purchasing power of money had declined by 20 per cent since the date of the gift. (at p205)

7. The first case to be considered is that which is generally referred to as Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 . A minor question in that case related to a sum of 200 pounds, which had been handed by the deceased to one Jamieson with certain instructions. In accordance with those instructions Jamieson expended 109 pounds in the purchase of a steamer ticket to America, and handed the ticket and the balance of 91 pounds to a friend of the deceased. The friend went to America and there expended the whole of that balance. The sum was held by the Full Court of New South Wales not to be dutiable under s. 102 (2) (b) of the Stamp Duties Act 1920 (N.S.W.), which provided that the dutiable estate should include "any property comprised in any gift made by the deceased within three years before his death". Ferguson J., in whose judgment James J. concurred, said: - "If the Act had said that duty should be payable upon the value of all gifts made by the deceased within three years of his death, then no doubt it would be payable in respect of this gift, but the Act does not say that. The section merely enumerates classes of property which are or are deemed to be included in the estate of the deceased. You must find the property, and find it in New South Wales" (1925) 25 SR (NSW), at p 492; 42 WN 191 . Campbell J. found in the scheme of the Act the "idea of making the property concerned the specific object of the impost", and an implication "that the property concerned is concerned as property still tangibly in existence at the death of the deceased" (1925) 25 SR (NSW), at pp 501-502; 42 WN 191 He said: - "I have come to the conclusion that it is an indispensable condition of the operation of (2) (b) upon any gift that the subject of the gift should exist at the date of the death in some concrete identifiable form" (1925) 25 SR (NSW), at p 502; 42 WN 191 . This decision was upheld in this Court, Higgins J. dissenting. Knox C.J., Gavan Duffy J. and Rich J. merely said that they agreed with the Supreme Court. Starke J. agreed specifically with Ferguson J. Isaacs J., in the course of dealing generally with the questions arising in the case, expressed the view that the Act taxed only property in New South Wales at death. His Honour said: "Therefore the property, the subject of sub-sec. 2 of sec. 102 (except merely appointed property), is in every case property which was originally property of the deceased and ceased to belong to him by reason of his disposition referred to; and therefore, also, property not in existence in New South Wales at the time of the death - and which for that reason, if still retained by the deceased, would not form part of his estate - is not intended by the Act to be made part of his 'dutiable estate' merely because he had parted with it. If the Act did so intend, then, in my opinion, having regard to the persons described in sec. 101, it would be an invalid intention" (1926) 38 CLR, at p 32 . With regard to the particular sum of 200 pounds, his Honour said: - "The real gift to the donee was, as I regard the matter, a passage ticket to America and 91 pounds. Recipient, ticket and money, all left Australia, and have not, so far as appears, ever returned. For reasons already fully stated, this transaction does not fall within sub-sec. 2 (b) of sec. 102" (1926) 38 CLR, at p 36 . (at p206)

8. Since Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 may be said to be the leading case, two comments upon it may be made at this stage. In the first place, the case appears to decide that, under an Act framed as was the Stamp Duties Act 1920 (N.S.W.), property given by a deceased person in his lifetime will not be subject to charge unless it, or something into which it has been converted, can be found in existence at the death of the deceased. The further requirement that it must be found within the territory in which the Act operates does not matter for the purposes of the present case. On the other hand, no judicial statement of a rule can be regarded without reference to the facts of the case in which it is made, and it is very important to note that in Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 money was expended in such a way that there was nothing left to show for it. To use Mr. Alderman's word, it was "dissipated". (at p207)

9. Two Victorian cases may next be mentioned. In Ballarat Trustees Executors & Agency Co. Ltd. v. The King (1927) VLR 415 , what was given was land. The land was still owned by the donee at the date of the donor's death, but it had risen sharply in value. All that was decided was that the value for duty was the value at date of death. Curiously enough, Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 was not cited. In In re Grice (1937) VLR 356 , the Full Court of Victoria had to consider three gifts made within the statutory period before death. The court held all three gifts not dutiable under the Administration and Probate Act 1928 (Vict.). As to two of these gifts the correctness of the decision is, to say the least, very doubtful, but the third gift, which was a gift of money to a daughter for the purposes of a voyage to England and back, would seem clearly enough to have fallen within Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 on the assumption that no distinction could be drawn between the statutes of Victoria and New South Wales. The case is mainly interesting for an observation by Macfarlan J. His Honour said: - "In at least one case I feel fairly clear that the Act does not apply and that is where the money is earmarked by the donor for a specific purpose which he initiates, and which necessitates and results in the money being consumed in carrying out the purpose of the gift. There the gift is in its essence an expenditure by the donor" (1937) VLR, at p 363 . This appears to be fundamentally a different view from that taken in Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 . The passage suggests what might possibly be regarded as the true scope of Watt's Case (1), but I am disposed to think that such a view would be too narrow. Mann C.J. and Gavan Duffy J. regarded the case as covered by Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 . (at p207)

10. There are three other cases in this Court. The first is Trustees Executors & Agency Co. Ltd. v. Federal Commissioner of Taxation (Teare's Case) [1941] HCA 36; (1941) 65 CLR 134 . This case arose under the statute now in question, the Estate Duty Assessment Act (Cth.). The deceased had formed a company to take over a business carried on by him, and had provided the purchase money for certain shares which were issued to sons and to trustees of a family settlement. Between the date of this transaction and the date of death the shares had declined in value from 20s. to 18s. Whereas the New South Wales Act "included" in the dutiable estate "property comprised in any gift", the Commonwealth Act provided that property which "passed from the deceased by any gift" should be deemed to be part of the estate. The commissioner maintained that what had passed from the deceased was money and nothing but money, and that money could not change its value. This argument was rejected. The Court held that the subject matter of the gift was represented at the death of the donor by shares, and that duty was payable on the value of the shares at death. Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; (1926) 38 CLR 12 was thus, in effect, held applicable to a case arising under the Estate Duty Assessment Act (Cth.). Starke J. said: - "Now the property which passed from the deceased in the present case does not exist in the form in which it was given or settled: it has been transmuted into shares. It can, however, be traced, followed, and identified in those shares, or in other words, the subject matter of the gifts and settlements is found in its transmuted and actually existing form, namely, shares: cf. In re Payne's Declaration (1939) Ch, at pp 874-876; (1940) Ch 576 . The value of the property which passed from the deceased as it actually existed at the date of his death is, therefore, the value of the shares at the date of the death of the deceased" (1941) 65 CLR, at p 143 . Williams J. said: - "Since the administrator is bound to make a full and complete return of all the estate in Australia of the deceased person setting forth the description and values of the items comprising the estate, and the commissioner is given a charge over the whole estate both actual and notional and can distribute this charge between the separate assets, the Act would appear to contemplate that the assets which are to be returned as comprised in the estate must be identifiable at the date of death so that they can be described and valued and be subjected to the charge or an apportioned part thereof. Money can in many instances be traced into a particular bank account or asset. In the present case the moneys were used to buy shares, which were still in the hands of the sons or the trustee of the settlements at the date of death" (1941) 65 CLR, at p 148 . (at p208)

11. The next case was Vicars v. Commissioner of Stamp Duties (N.S.W.) [1945] HCA 24; (1945) 71 CLR 309 . This case, like Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 itself, arose under the Stamp Duties Act (N.S.W.), which had, however, been substantially amended since Watt's Case [1926] HCA 14; (1926) 38 CLR 12 was decided in 1926. The deceased in this case had paid at Canberra a sum of 40,000 pounds to a company which had previously executed as trustee a settlement in favour of the wife and children of the deceased. Shortly afterwards the company purchased from the deceased 40,000 shares in another company in which he was largely interested and which had its share register in New South Wales. The company paid for these shares at Canberra with the 40,000 pounds which had previously been paid to it. The company was under no legal obligation to purchase the shares, but it was understood and intended that it should do so. The deceased died within three years of this transaction, and it was argued that the only gift was the gift of 40,000 pounds, a gift of money which had never been in New South Wales and was not in New South Wales at the death. This argument was accepted by Latham C.J., but was rejected by the four other members of the Court. The matter was regarded by their Honours, notwithstanding the amendments to the Act, as covered by Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 and Teare's Case [1941] HCA 36; (1941) 65 CLR 134 , and it was held that duty was payable on the value of the shares at death. Starke J. succinctly stated the position by saying: "The subject matter of the gift was the trust funds which no longer exist in the form in which they were given, but in the form of shares in existence in New South Wales at the death of Sir William Vicars" (1945) 71 CLR, at p 337 . The shares were, of course, situate in New South Wales because the share register was in New South Wales. It should be mentioned that Dixon J. (1945) 71 CLR, at p 343 would have been prepared to hold that the relevant "gift" was a gift of the shares. (at p209)

12. One or two observations made in Vicars's Case [1945] HCA 24; (1945) 71 CLR 309 tend, I think, to throw some light on the present case. Latham C.J. said: - "This provision relates to property, that is, to something which exists as property. It cannot be applied where property which has been given has disappeared by destruction" (1945) 71 CLR, at p 323 . I think that that passage would have commanded general acceptance, though the learned Chief Justice thought, as the other justices did not, that in the particular case "The money existed only as a bank credit, and the credit has long ago disappeared" (1945) 71 CLR, at p 323 . Dixon J. said: - "If the subject of the gift is consumed or destroyed before the death of the donor, it cannot, at his death, be situate in New South Wales" (1945) 71 CLR, at p 339 . Williams J. said: - "It is in each case a question of establishing an underlying identity in a practical sense" (1945) 71 CLR, at p 349 . The decision itself shows that a disposal of the gift does not necessarily carry the same consequences as its "consumption" or "destruction", and the passages quoted suggest that it may be possible to state the result of Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; (1926) 38 CLR 12 correctly in terms which confine its application to cases of total or partial consumption or destruction. (at p210)

13. The last case is Moss v. Federal Commissioner of Taxation [1947] HCA 63; (1947) 77 CLR 184 . In this case, which was heard by Williams J., the deceased had within three years of her death given to her son certain sums of money amounting in all to 6,899 pounds and to her daughter sums amounting in all to 3,603 pounds. The case arose under the Commonwealth Act. As to these sums Williams J. applied a general principle, which his Honour stated in these terms: - "A gift of property consisting of money must, like any other kind of property, be capable of being identified in its original or some derivative form at the date of death before it can be included in the notional estate, and must be valued in the form in which it exists at that date" (1947) 77 CLR, at p 188 . The appellants called certain evidence, which they were given leave to supplement if possible, as to what had become of the moneys given. It was shown that the son was carrying on a pastoral business in New South Wales. Some of the lands on which this business was carried on were conditional purchase lands, and the whole of the lands were subject to mortgages to secure a principal sum of 10,000 pounds and interest thereon. The son had insured his life for a sum of 5,000 pounds, payable on attaining the age of ninety years or previous death, premiums being payable quarterly. Part of the sums given to the son had been used to purchase a motor truck for 400 pounds, to build a shed on the station costing 80 pounds, to purchase cattle for 150 pounds, war savings certificates worth 125 pounds and Commonwealth bonds of the face value of 200 pounds. These assets were still retained by him at the death of his mother. He had also used some of the money to pay interest on the mortgages, instalments of the conditional purchase moneys (which would include principal and interest) and premiums on his life policy. It was also shown, by the application of the rule in Clayton's Case (1816) 1 Mer 572 (35 ER 781) that about 50 pounds of the moneys given still remained in a bank account. (at p210)

14. It was conceded (subject to an overriding argument which failed) that the value of the truck, shed, cattle, war savings certificates and Commonwealth bonds at the date of death, the instalments of conditional purchase moneys so far as they represented capital, and the sum of about 50 pounds, should be included in the dutiable value of the estate. His Honour held that the dutiable estate also comprised sums paid as interest on the mortgages, conditional purchase instalments so far as they represented interest, and the premiums on the life policy. He said: - "The payments of interest are therefore reflected in the value of the equity of redemption at the date of death. In the same way the payment of interest on the conditional purchases is reflected in their value at the date of death . . . In order to trace gifts of money into identifiable assets it is only necessary to establish an underlying identity in a practical sense, and in this sense it can, I think, be said that the equity of redemption of the station lands, the conditionally purchased lands, and the policy of life assurance, had an increased value at the date of death at least to the extent of these payments" (1947) 77 CLR, at p 187 . (at p211)

15. The only other case to which I think I need refer is the English case of Re Payne; Poplett v. Attorney-General (1939) Ch 865; (1940) Ch 576 . Like Teare's Case [1941] HCA 36; (1941) 65 CLR 134 and Vicars's Case [1945] HCA 24; (1945) 71 CLR 309 it was a case of a voluntary settlement and not of an outright gift. The decision of Simonds J. (as he then was) and of the court of appeal (although, as Latham C.J. pointed out in Vicars's Case (1945) 71 CLR, at pp 329, 330 differing opinions emerged as to the correct analysis of the position) may be said to be in line with the decisions in Teare's Case [1941] HCA 36; (1941) 65 CLR 134 and Vicars's Case [1945] HCA 24; (1945) 71 CLR 309 . (at p211)

16. I have felt it necessary to examine in some detail the Australian cases to which I have referred, in order to ascertain as precisely as possible what has really been decided. Actually, I think that the present case is covered in principle by what was conceded by counsel and what was decided by Williams J. in Moss's Case [1947] HCA 63; (1947) 77 CLR 184 . It is clear that Williams J. must have approved of the concessions made by counsel, for otherwise his Honour could not have decided the disputed questions as he did. In other words, the correctness of the concessions follows a fortiori from the decision. I should probably have felt that I ought to follow the decision of Williams J., whatever my own view. I have, however, been very sensible of the difficulties of this case, and it has seemed to me that Moss's Case [1947] HCA 63; (1947) 77 CLR 184 really broke new ground. For those reasons I have considered the matter for myself, and will state my reasons for thinking that the two sums of 5,000 pounds are part of the dutiable estate in this case. I think that my view is substantially in accord with that of Williams J. (at p212)

17. The cases do indeed lay down two propositions - (1) that you must value the subject matter of a gift as at the death of the donor, and (2) that the subject matter of the gift cannot be treated as part of the dutiable estate unless you can find it, or something representing it, in the hands of the donee at the death of the donor. But with regard to the second proposition, I think, and I would gather that Williams J. thought, that it should not be taken too literally. It has never yet been applied to relieve from duty except in a case in which there is at the date of death nothing left in the hands of the donee which can be said to have any value expressible in terms of money. With regard to the first proposition, I would think, as I gather that Williams J. thought, that there may be cases in which a gift of money has been so applied by the donee for his own enduring benefit that, although the money has "lost its identity", the donee ought to be regarded as still having it, so that the "value" of the gift can only be expressed as the amount of money given. (at p212)

18. The substance of the position in the present case is that two sums of money were given, each of which was immediately paid by the donees to a creditor in reduction of their indebtedness to that creditor. The indebtedness was secured by mortgage, but I am not disposed to regard that fact as material. The discharge of that indebtedness pro tanto had an effect which was both immediate and final. It took place automatically on the payment to the creditor, and nothing that took place thereafter could undo it or affect it in any way. A permanent benefit of a tangible character, bearing a value equal to the amount received and paid, accrued to the donee. It seems to me that the effect of the transaction should, for duty purposes, be regarded as equivalent to the acquisition by the donee of a permanent asset of fixed value, purchased with the money given, and enduring in the hands of the donee up to the death of the donor. On the one hand, it is not susceptible of conversion or transmutation into another form, or into an asset of another kind. On the other hand, its value cannot change. You can "find" what was given, in a real and practical sense, at the death of the donor, and its valuation presents no difficulties. It would, in my opinion, be a misapplication of what was laid down in Watt's Case (1926) 38 CLR 12 and in Teare's Case [1941] HCA 36; (1941) 65 CLR 134 to say that what was given had disappeared or could not be valued. (at p213)

19. I have not overlooked the fact that the above view has one disadvantage which has been thought to provide a subsidiary reason for the adoption of the principle of Watt's Case (1925) 25 SR (NSW) 467; 42 WN 191; [1926] HCA 14; (1926) 38 CLR 12 . A donee is, or can be made, responsible for payment of the duty imposed in respect of a gift made to him by a deceased person: see in this connection In the Will of Harper; Harper v. Harper (1922) VLR 512 . It might happen that a donee, who has used the gift in order to pay a debt owing by him, finds himself at the death of the donor without actual assets out of which to pay the duty, or even in an insolvent condition. One answer to a criticism based on such a possibility is that a donee, who is at death in actual possession of the specific property given, may be in a hopelessly insolvent condition. Perhaps, however, the best answer is to be found in the words of Lord Hanworth M.R. in Attorney-General for Ontario v. National Trust Co. Ltd. (1931) AC 818 . His Lordship, speaking for the Judicial Committee, said: - "A number of illustrations are suggested which it is claimed are such that the interpretation contended for by the appellant cannot have been intended by the legislature. But it must be remembered that it would not be difficult to suggest analogous illustrations from an opposite point of view" (1931) AC, at p 823 . So, here, it may be remembered that, if my view be not correct, it is the easiest thing in the world to make a gift which cannot attract duty after death. A is willing to make a gift of 10,000 pounds to B. B thereupon borrows 10,000 pounds from C. The gift is then made and at a later date is used by B in repaying to C the amount borrowed from him. There would not be the slightest difficulty in keeping the sums unmistakeably earmarked and separate. It may be said in further criticism of my view that - unless the debt discharged was secured by mortgage, in which case the equity of redemption might be available - there will be nothing representing the money given on which the charge given by s. 34 (1) of the Act can operate. Assuming In the Will of Harper (1922) VLR 512 to have been rightly decided, the charge is a general charge on the whole of the estate, and it would be a curious result if the fact that one possible subject of the charge might not be available to the Crown were held to take a large class of what are indubitably in their nature gifts inter vivos outside the Act. (at p214)

20. In my opinion, this appeal should be dismissed. (at p214)

ORDER

Appeal dismissed with costs.