Commissioner of Stamp Duties (NSW) v Sprague [1960] HCA 13; (1960) 101 CLR 184 (1 March 1960)

HIGH COURT OF AUSTRALIA

COMMISSIONER OF STAMP DUTIES (N.S.W.) v. SPRAGUE [1960] HCA 13; (1960) 101 CLR 184

Death Duties (N.S.W.)

High Court of Australia
Dixon C.J.(1), Fullagar(2), Kitto(3), Menzies(4) and Windeyer(5) JJ.

CATCHWORDS

Death Duties (N.S.W.) - Settlement - Property settled upon trust for such children of settlor as he should by deed or will appoint - In default of appointment property to be held upon trust for all children of settlor who being sons attain twenty-one years or being daughters attain that age or marry as tenants in common - All children of settlor attaining age in his lifetime - Power to appoint not exercised - Death of settlor - Dutiable estate - "Property disposed of . . . by a settlement containing any trust in respect of that property to take effect after his death" Whether trust for children takes effect after death - Stamp Duties Act 1920-1940 (N.S.W.), s. 102 (2) (a)*.

HEARING

Sydney, 1959, December 16, 17;
Melbourne, 1960, March 1. 1:3:1960
APPEAL from the Supreme Court of New South Wales.

DECISION

1960, March 1.
The following written judgments were delivered:-
DIXON C.J. This is an appeal from an order of the Supreme Court of New South Stamp Duties Act 1920-1940 (N.S.W.). By the order the questions submitted were determined against the commissioner who now appeals to this Court. The questions arise under s. 102 (2) (a) of the Act. That paragraph includes in the estate of a deceased person all property which the deceased has disposed of . . . by will or by a settlement containing any trust in respect of that property to take effect after his death, including a will of settlement made in the exercise of any general power of appointment, whether exercisable by the deceased alone or jointly with another person: provided that the property deemed to be included in the estate of the deceased shall be the property which at the time of his death is subject to such trust. (at p192)

2. I have failed to understand what in the context is meant by the words "by will". The words "including a will made in the exercise of any general power of appointment" seem to suggest that there are other forms of property which might pass by will which are not caught by s. 102 (1) - the provision dealing with the testator's own property. However, my difficulty may be passed by because it is not directly material to the present case. (at p192)

3. The words upon which the present case depends are "property which the deceased has disposed of by settlement containing any trust in respect of that property to take effect after his death". The deceased with whom we are concerned, whose name was Leslie Sprague, made a settlement dated 28th June 1924 which contained the following trust of the "settled property": "Upon trust for all or such one or more exclusively of the other or others of the children or remoter issue of the said Leslie Sprague such remoter issue to be born and take vested interests within twentyone years of the death of the said Leslie Sprague for such estate or estates interest or interests and if more than one in such shares and with and subject to such powers provisions and limitations over for the benefit of any one or more of such children or remoter issue and in such manner as the said Leslie Sprague shall by any Deed or Deeds revocable or irrevocable or by Will appoint and in default of and subject to any appointment under the power hereinbefore contained In Trust for all or any the children or child of the said Leslie Sprague who being sons or a son attain the age of twentyone years or being daughters or a daughter attain that age or marry if more than one in equal shares as tenants in common". The power of appointment conferred by this trust was not exercised. The trust which took effect is the trust for all or any of the children of Leslie Sprague. The deceased in fact left six children and they all had attained the age of twenty-one during his lifetime. The question is whether in these circumstances the settlement contained a trust in respect of the settled property to take effect after his death. (at p193)

4. The argument on the part of the appellant the Commissioner of Stamp Duties commenced with the proposition that although the interest given by the trust in default of and subject to any appointment was a vested interest it was defeasible by the exercise of the power of appointment, and that accordingly, when the settlor or testator died without exercising the power of appointment, what had hitherto been a defeasible interest became absolute. The argument then proceeded that the interest became absolute by virtue of the trusts of the settlement. Accordingly, so it was said, there was a trust in respect of the property to take effect after his death. This, in my opinion, is a view that cannot be sustained. The trust of the interest in default of appointment took immediate effect in the settlor's lifetime. The fact that it was defeasible was, if the expression may be used, a quality of the interest. It was defeasible by an event which did not happen. The fact that the event did not occur did not mean that the interest took effect anew in any respect. The possibility of defeasance or divesting had passed but nothing affecting the vesting of the interest or the taking effect of the interest occurred. (at p193)

5. This view seems clear enough in principle but in an attempt to meet it passages from certain decisions were relied upon as having a contrary tendency. Perhaps it is a sufficient answer to these citations to repeat from the opinion of Lord Buckmaster in one of them this sentence - "It certainly is not desirable to rely on extracts from judgments delivered in other conditions as a rule or test to be applied in all cases". Adamson v. Attorney-General (1933) AC 257, at p 267 . That case related to the passing of property on death, an expression denoting a change of title or possession taking place on death; something quite different from "taking effect". Moreover, the limitations were entirely different. This is true also of Attorney-General v. Lloyds Bank Ltd. (1935) AC 382 . Neither of these cases really affects the application of the provision under which this case must be decided nor does D'Avigdor-Goldsmid v. Inland Revenue Commissioners (1953) AC 347 but their tendency is anything but against our conclusion in the present case. That conclusion is supported by Commissioner of Succession Duties (S.A.) v. Isbister [1941] HCA 2; (1941) 64 CLR 375 and Commissioner of Stamp Duties (N.S.W.) v. Bradhurst (1950) 81 CLR 199 . It is unnecessary to discuss these cases. It is enough to say that in the present case plainly the trust in favour of the children took effect as a vested interest before the death of the settlor and the fact that the possibility of defeating or divesting the interest ceased with his death does not mean that any new interest took effect or that the vested interest took effect anew. (at p194)

6. It was not suggested that the mere fact that the deed contained a special power of appointment by will was enough to make it a settlement containing a trust to take effect after the settlor's death. The power of appointment by will cannot in itself be considered a trust to take effect after death independently of its exercise. An exercise of the power no doubt would be read back into the power in accordance with ordinary principles and that would or might create a trust to take effect after the death of the testator. But the power was not exercised by will or at all. (at p194)

7. Nor was it argued that there was any other ground for bringing the deed within any of the paragraphs of sub-s. (2) of s. 102. The settlement does contain a power of revocation but it is not a power of revocation falling within par. (c) (iii) of sub-s. (2) of s. 102. That paragraph is on its terms limited to a power reserving to the settlor the right to restore to himself or to reclaim the property or the proceeds of the sale thereof. The power of revocation in the deed under consideration is a power to revoke and resettle in a way which excludes benefit to the settlor. The power is inseverable and expressly excludes the settlor Leslie Sprague from the benefit of any resettlement made thereunder. (at p194)

8. For these reasons the appeal should be dismissed. (at p194)

FULLAGAR J. I agree with the judgment of the Chief Justice in this case, and I have nothing to add. (at p194)

KITTO J. I have had the opportunity of reading the judgment of the Chief Justice. I agree in it and have nothing to add. (at p194)

MENZIES J. The only question argued before us was whether a settlement of property made by the deceased during his lifetime was one "containing any trust in respect of that property to take effect after his death", so as to bring half the settled property into the deceased's dutiable estate pursuant to s. 102 (2) (a) of the Stamp Duties Act 1920-1940 (N.S.W.). (at p194)

2. The settlement in question was one whereby the deceased conveyed certain lands to trustees upon trust as to one moiety for such of his issue taking vested interests within twenty-one years after his death as he should by deed or will appoint, and in default of and subject to any appointment "In Trust for all or any the children or child of the said Leslie Sprague who being sons or a son attain the age of twentyone years or being daughters or a daughter attain that age or marry if more than one in equal shares as tenants in common". Such a settlement vests the property subject to the power in the persons entitled in default of appointment until such time as the power is exercised, so that the exercise of the power divests the estates limited in default either wholly or in part and creates new estates according to the terms of the appointment. In this case there was no appointment so that those entitled in default of appointment took vested estates upon the coming into operation of the settlement and the consequence of the death of the settlor was that those estates could no longer be defeated by an exercise of the settlor's power. (at p195)

3. The commissioner contended that because what was defeasible became indefeasible on the death of the deceased the settlement contained a trust which took effect on his death. Accepting the conclusion that what had been defeasible became indefeasible, I regard the inference therefrom that the commissioner's counsel sought to draw as entirely untenable. No trust in the settlement took effect upon the settlor's death; when the settlor died the trust in the settlement which took effect upon its execution could no longer be defeated because the settlor's power to appoint elsewhere died with the settlor. (at p195)

4. In my opinion this case is covered by the principle upon which Commissioner of Succession Duties (S.A.) v. Isbister [1941] HCA 2; (1941) 64 CLR 375 was decided and I regard the language used there by Rich A.C.J. as applicable here word for word. His Honour said: - "It is said that, as the trusts in the instruments were defeasible whilst the power existed and became indefeasible on the death of the settlor, a change took place on his death which constitued the taking effect of a trust or disposition. This confuses a revocation or condition subsequent or defeasance with a trust or disposition. The former are powers to destroy. The cesser or failure of the power to destroy may give greater value to the estate or interest open to destruction but it is not the creation of a new estate or interest nor is it the taking effect of a trust or disposition" (1941) 64 CLR, at p 379 . Adamson v. Attorney-General (1933) AC 257 which was concerned with the question whether there was a "beneficial interest accruing or arising by survivorship or otherwise on the death of the deceased" and not the different question arising here, viz. whether a trust took effect after the death of the deceased, has no bearing upon the determination of the latter question. There are, moreover, the reasons for distinguishing Adamson's Case (1933) AC 257 that were adopted by this Court in Commissioner of Stamp Duties (N.S.W.) v. Bradhurst [1950] HCA 17; (1950) 81 CLR 199 . (at p196)

5. We were pressed with the decision in Rosenthal v. Rosenthal [1910] HCA 47; (1910) 11 CLR 87 that it was sufficient to attract the section that a trust contained in a settlement took effect in part upon the death of the settlor. Accepting that decision the answer to the contention is that the trust in default of appointment in the settlement here under consideration took full effect when the settlement was executed, and the only consequence of the death of the settlor was to preclude that trust being defeated either wholly or in part. (at p196)

6. The question which has given me most concern is whether because the settlor had power by will to control the destination of the trust property subject to the power of appointment, the settlement should thereby be regarded as containing another trust to take effect after the death of the settlor notwithstanding that the power was not exercised. I have however reached the conclusion that a trust in a settlement brings property subject thereto within the operation of the sub-section, only when there, in fact, is a trust taking effect after the settlor's death and it is not sufficient that a new trust would have taken effect if the settlor had chosen to exercise by his will a power given to him by the settlement. "To take effect" is not the equivalent of "which could take effect". The construction of the provision which I have adopted is, I think, supported by the proviso which indicates that it is only property which is subject to a trust which takes effect after the death that is to be included as part of the estate of the deceased. For the reasons I have given there was no property so subject here. (at p196)

7. I find it possible to deal thus shortly with this case because I am fully in agreement with the judgment of the Full Court against which this appeal has been brought. (at p196)

WINDEYER J. I agree that this appeal should be dismissed. The settlement contained no trust limited to take effect after death. The trust took effect when the settlement was executed. The settlor's death only made impossible the exercise of the power of appointment which he had not exercised in his lifetime. (at p196)

ORDER

Appeal dismissed with costs.