University of Western Australia v West Australian Trustee Executor & Agency Co Ltd [1961] HCA 13; (1961) 105 CLR 71 (17 March 1961)

HIGH COURT OF AUSTRALIA

THE UNIVERSITY OF WESTERN AUSTRALIA v. THE WEST AUSTRALIAN TRUSTEE EXECUTOR AND AGENCY CO. LTD. [1961] HCA 13; (1961) 105 CLR 71

Estate Duty (Cth)

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

CATCHWORDS

Estate Duty (Cth) - Probate Duty (W.A.) - Incidence and apportionment as between beneficiaries - Will - Trust for conversion with direction to pay probate and estate duties - One only of two bequests each of half share of residuary estate exempt from estate duty and probate duty - Application of statutory rules not avoided - Estate Duty Assessment Act 1914-1957 (Cth), ss. 8 (5)*, 35* - Administration Act, 1903-1956 (W.A.), ss. 95, 96, 134 (1)*

HEARING

Perth, 1960, September 7, 8;
Melbourne, 1961, March 17. 17:3:1961
APPEAL from the Supreme Court of Western Australia.

DECISION

1961, March 17.
The following written judgments were delivered: -
DIXON C.J. The late William Sim McGillivray who died on 17th February 1959 domiciled in Western Australia. The final balance of his estate situated in that State was assessed by the Commissioner of Stamps at 85,506 pounds and the value of his estate situated there and elsewhere in Australia was fixed by the Federal Deputy Commissioner of Taxation at 89,859 pounds. Death duties assessed as payable under the State Death Duties (Taxing Act), 1934-1956 amounted to 6089 pounds and estate duty assessed as payable under the Federal Estate Duty Act 1914-1957 amounted to 4936 pounds. The assessments were accepted by the executor of the will, the respondent company, but a question immediately arose as to the incidence of the duties as between the only beneficiaries named in the will. These were the University of Western Australia and the University of Aberdeen. Apart from an important direction for conversion and the payment from the proceeds of debts, funeral and testamentary expenses and probate and estate duties and the expenditure of not more than 50 pounds upon a headstone for his grave, the testator's testamentary disposition consisted only of a distribution of the residue of his estate in equal parts or shares between these two Universities. The difficulty arises from the fact that under the Federal and under the State enactments alike the bequest to the University of Western Australia enjoys an exemption from duty and the bequest to the University of Aberdeen does not. The Commissioners in assessing duty took the simple view that they first should ascertain the residue without reference to duties and then halve it. As to one half they neither calculated nor imposed any duty; as to the other half they treated it as bearing duty at what they considered the appropriate rates and on that basis they assessed the respective liabilities of the executors, that is to say the liabilities in the amounts stated above. This of course accords completely with the view of the matter upon which the University of Western Australia relies, namely, that the equal shares or parts must first be ascertained and then the duty must be calculated on the share of the University of Aberdeen which must bear it, the share of the University of Western Australia being handed over free of duty. It is not easy, however, to see how it can accord with the view put for the University of Aberdeen. For the claim for that University is that the duty, once ascertained, is to be considered a payment out of the estate antecedent to the definition or ascertainment of residue, which is then divided between the two universities equally, a claim which means that the benefit of the immunity of the share of the University of Western Australia is to be enjoyed equally between them. It would seem, that such a view of the matter must mean that before you can ascertain the residue to be divided into two equal shares you must ascertain the duty to be deducted calculated on one of them and you could not do that until you first ascertained the amount of the share on which it is calculated, that is to say the share of the Aberdeen University. The same point may be put conversely: you must, on the hypothesis stated, know the amount of the share of the University of Western Australia which is exempt from tax before you know the amount of the exemption and you cannot know the amount of the exemption till you know the share of the University of Western Australia. The result is a circulus inextricabilis or at all events it means an ever diminishing figure for the exemption or deduction. The ironical thing about the present case is that as the respective Commissioners of Stamps and Taxation adopted the direct method of treating the amount of tax as not entering into the measure of the residue, half of which was exempt, it becomes easy in calculating the legacy each University receives to ignore the difficulty and distribute the benefit of the exemption equally between the two Universities, notwithstanding that that is done by deducting the tax paid before and in the course of ascertaining the residue upon which the deduction is calculated. In the case of each set of statutory provisions respectively governing the duties an attempt was made in support of the view favouring the University of Aberdeen to assign an interpretation to them which would avoid the apparent inconsistency and one which would enable the University of Aberdeen, as a result of the construction of the will and its operation with respect to the duty, to obtain a half share of the benefit of the exemption from duty of the bequest to the University of Western Australia. In the Supreme Court upon an originating summons heard by Mr. Commissioner Boylson Q.C. it was declared that the balance of the estate remaining after the payment of debts, funeral and testamentary expenses and probate and estate duties and not more than 50 pounds for a headstone, should be divided equally between the residuary legatees, i.e. the two Universities, and that no adjustment should be made between them in respect of such duties. The University of Western Australia appeals from the declaration. (at p77)

2. The learned Commissioner who made the declaration delivered a very clearly expressed judgment in which he construed the will as directing that the amount of probate and estate duty assessed on the testator's estate and payable to the State and the Commonwealth was to be paid by his trustee out of the proceeds of the trust for conversion which the testator constituted as a fund for this primary purpose. The reasons of the learned Commissioner are clearly to be seen from the following passage from his judgment: "The words used by the testator in their context negative the idea of any adjustment or apportionment of duty between the beneficiaries. The beneficiaries have no specific interest in any of the property comprising the residue until the residue has been ascertained in due course of administration. No residue properly so called can be ascertained until the execution of the trust to pay the duties and make the other payments directed by the will, and it is only after such an ascertainment that the trust in respect of the ultimate residue becomes operative: see Hill v. Hill [1933] HCA 45; (1933) 49 CLR 411, at p 427 . The ultimate residue for division between the beneficiaries is reduced pro tanto by the sums paid in execution of the earlier trusts, and that is the end of the matter." It will of course be seen that if the calculation of the duty had not been first fixed and the amount thus established it would not have been possible to give the provisions such a simple and straightforward application. And yet it would seem that on such an application of the provisions of the will the duty should have been fixed at a higher figure, that is to say, the exemption was less; for the exemption could only have been of the actual or unadjusted amount receivable by the University of Western Australia. However enough has been said to make it plain that the problem must be solved by the terms of the respective statutes and the meaning and operation of the provisions of the will in relation thereto. This involves in fact a recognition of the dual nature of the case. For the Federal and the State statutes are by no means in the same form. It is therefore necessary to deal with each separately and independently of the other. It seems better to deal with the Federal enactments first. (at p78)

3. The Estate Duty Assessment Act 1914-1957 of the Commonwealth declares that, subject to the Act, estate duty shall be levied and paid upon the value, as assessed under the Act, of the estates of persons dying after its commencement: s. 8 (1). In the distinctions that are made among the descriptions of duties which become payable in respect of property on death Commonwealth estate duty has been said to be truly an estate duty as distinguished from a succession duty: it looks to property and not to persons and takes part of a man's property for the Treasury on his death and is not taxing the persons who succeed: cp. Jackson v. Federal Commissioner of Taxation [1920] HCA 27; (1920) 27 CLR 503, at p 508 and the qualifying observation of Long Innes J. in Re Jordan; Pidcock v. Cooper (1932) 32 SR (NSW) 591, at pp 594, 595 . But such a distinction cannot be maintained in all its consequences with complete logical precision. What the Treasury takes it takes from people or institutions who otherwise would succeed to it and if by reason of their nature or their needs the property ought not to be taken from them or prevented from reaching them, the Act must deal with the situation on the basis of persons and give some answer to the question whether or not the duty should fall on the person. (at p78)

4. In sub-s. (5) of s. 8 the Commonwealth Act provides that duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement - (a) for religious, scientific or public educational purposes in Australia. There follow under par. (b) a list of institutions and under par. (c) a list of funds exempted, but it is under par. (a) that the gift to the University of Western Australia qualifies for exemption. The gift to the University of Aberdeen does not so qualify because of the limitation expressed in par. (a) by the words "in Australia". Section 10 requires the executor or administrator to prepare and furnish a full and complete return of all the estate in Australia of the deceased and of his debts and other charges upon his estate. By s. 15 the Commissioner is directed from the returns and from any information in his possession to cause an assessment to be made for the purpose of ascertaining the amount upon which duty shall be levied in accordance with the Act. Section 17 prescribes the debts and State and Federal income taxes and land taxes that shall be deducted. Section 35, as amended, provides that, subject to any different disposition made by a testator in his will, the duty payable in respect of an estate, exclusive of so much of the estate as is exempt from estate duty by sub-s. (5) of s. 8 of the Act, shall be apportioned by the executor or administrator among the persons beneficially entitled to the estate in the manner which is then stated in the section. The material part of the apportionment prescribed says that the duty shall in the first instance be apportioned among all the beneficiaries in proportion to the value of their interests. It will be seen that s. 35 adds after the words "payable in respect of an estate" the parenthesis "exclusive of so much of the estate as is exempt from estate duty by sub-s. (5) of s. 8 of this Act". As this parenthesis is placed it has no logical effect, because ex hypothesi no estate duty is payable in respect of what is exempt. But what is obviously meant is that property answering the gift exempt is excluded from any distribution of duty under the provision. Probably the meaning is that which would have been conveyed if the parenthesis had followed the word "estate" where it occurs three lines later. The provision would then have read "the duty payable in respect of an estate shall be apportioned by the administrator among the persons beneficially entitled to the estate exclusive of so much of the estate as is exempt from estate duty by sub-s. (5) of s. 8". When you turn to the taxing Act (the Estate Duty Act 1914-1941) you find that the rate of duty is graduated by reference to "the value for duty of the estate", an expression which in the end comes to "the amount upon which duty shall be levied in accordance with this Act" the ascertainment of which is, according to s. 15, the purpose of an assessment made in pursuance of that section. (See s. 17: s. 18A.) It is not the practice to include assets the subject of exempt gifts in the value of the estate for the purpose of determining the rate of duty and that doubtless is in accordance with law. For to calculate the rate by reference to the exempt or excluded property would be to impose a tax with respect to it perhaps not as directly as if the rate when calculated was applied to it but nevertheless as certainly. Cf. The Commonwealth v. State of Queensland [1920] HCA 79; (1920) 29 CLR 1 . The result seems to be that for all purposes of the calculation, imposition or assessment of duty s. 8 (5) operates to exclude from the estate of the testator the whole subject of gifts which it exempts. In strictness, s. 35 has no application to such property. When s. 35 says "subject to any different disposition made by a testator in his will, the duty payable in respect of an estate" shall be apportioned among the persons beneficially entitled to the estate in the manner it proceeds to specify, it is not dealing with property which is covered by sub-s. (5) of s. 8. It is, of course, competent for a testator to deal specifically with the property excluded by sub-s. (5) of s. 8 but if he does so he is in truth making a distinct testamentary disposition and one which may defeat the initial application of s. 8 (5) to work the exclusion. The question in the present case is whether the provisions of the will amount to such a disposition. The will itself is very brief but what has already been said about it is hardly sufficient. The material part begins by a devise of all the real estate and a bequest of all the personal estate in those terms to the trustee upon trust to sell call in and convert into money the same or any part or parts thereof not consisting of money with power to postpone the sale calling in and conversion of the testator's real and personal estate or any parts thereof for so long as it shall think fit. Then the will proceeds with grammatical incongruity: "and shall with and out of the moneys produced by such sale calling in and conversion and with and out of my estate as shall consist of money pay my just debts funeral and testamentary expenses and probate and estate duties and to stand possessed of my estate". There follows under the letter (a) a direction to expend a sum not exceeding 50 pounds in providing for a suitably inscribed headstone and kerbing or railing for the testator's grave. That is followed under the letter (b) by the bequest to the Universities. It is in the following terms: "to divide the residue of my estate into two equal parts or shares and to pay and transfer one of such parts or shares to the University of Western Australia to be used in such manner as the Senate of the said University shall determine and to pay the other of such parts or shares to the University of Aberdeen Scotland to be used in such manner as the governing body of the said University shall determine". It will be noticed that the direction to "stand possessed of my estate" is in general terms and is not in words expressed as a trust of the residuary estate. The question which must arise from the nature and application of the exemption may be stated in various ways and perhaps not alittle may depend on the form in which it is cast. For the form may tend to conceal or to expose the true point. But however it is stated the question is involved whether the provisions of the will are to be construed as intending to dispose in favour of the University of Aberdeen of any part of the moneys excluded from estate duty by sub-s. (5) of s. 8 as having been bequeathed for educational purposes in Australia, namely, to the University of Western Australia. This may seem at first sight a tendentious way of stating the question but reflection upon the situation will show that basically it is in fact the question to be answered. We are not here concerned with the incidence of the duty. The Act places so much of the estate as is bequeathed to the University of Western Australia outside the duty. If the matter is stated as a question of placing upon the University of Western Australia half the duty paid to the Crown, that is only a statement that what is bequeathed to the University of Western Australia in terms is diverted to the University of Aberdeen by the general provisions of the will. Once the nature of the duty and of the exemption is appreciated it seems much more difficult to find in the terms of the will any real or actual intention to cast any part of the burden of the duty upon the share which otherwise would pass to the University of Western Australia. For to do so amounts in truth to taking what is not subject to duty and is in terms bequeathed to the University of Western Australia and devoting it to the University of Aberdeen. Scrutiny of the terms of the will indeed rather suggests that a direction of an ordinary admininstrative kind was included to pay what the executors were bound by law to pay before coming to the trusts of the will and that the direction was given with no thought of exonerating any disposition in part or adding to or detracting from the amount which would otherwise be taken by either University. The words in par. (b) "to divide the residue of my estate into two equal parts" seem to follow naturally after providing for the expenditure on the headstone. They do not necessarily disclose an intention on the part of the testator to divide into equal parts whatever was left after paying probate and estate duties irrespective of the source where according to law the probate and estate duties should be found or fall. In the provisions of the legislation that are quoted it seems impossible to find any intention to relieve the estate considered as an entirety or as a fund of the duty as distinguished from giving an exemption in favour of the beneficiary or religious, scientific or public educational purpose. The structure of the Act is to place whatever is within the exemption outside the scope of duty altogether. If the contrary view to that which is expressed in this judgment be right, it would necessarily follow that in order to define what is excepted from the duty it would be necessary, whether algebraically or otherwise, to pursue the ever diminishing amount of the exempted bequest until the figure left undistributed became so small that it might be neglected. (at p82)

5. The question where the burden of Western Australian death duties lies, that is apart from some express testamentary disposition, depends on somewhat different legislative provisions. They give rise in some respects to the same considerations in relation to the operation upon them of the will but at the cost of a repetition of a line of reasoning, it is better to deal with it in full as an independent problem. The duties are imposed by the Death Duties (Taxing) Act, 1934-1956 but that is to be read as one with what is now Pt. V, formerly Pt. VI, of the Administration Act, 1903-1956 (W.A.). (See s. 2 of No. 29 of 1934, s. 39 of No. 28 of 1934.) Part V of the Administration Act extends from s. 65 to s. 137. By s. 66 (1) an executor to whom probate is granted must file in the office of the Commissioner a statement. The statement must specify among other things the property of the testator in Western Australia, property he has made the subject of donationes mortis causa and any gifts inter vivos by him, transfers of property into his name jointly with others, property the subject of a general power of appointment exercisable by him and so on. It must specify the debts and liabilities of the testator and certain other matters. The Commissioner is to certify his approval of the statement with such additions alterations or variations (if any) as may be made (s. 66 (4) and (5)). By s. 69 the executor is required, subject to s. 134 among other provisions, to pay to the Commissioner the duty calculated and levied on the final balance of the real and personal estate of the testator as assessed under the Act. Section 95 (1) provides that "Subject to any special provision by a testator for the payment of the duty imposed by this Act, every executor and every administrator with the will annexed shall deduct from each and every devise, bequest, or legacy coming to any person under the will, an amount equal to the duty upon such devise, bequest, or legacy calculated at the same rate as is payable under the estate of the deceased." Section 96 (1) provides that "Subject to any specific direction appearing in any will or settlement to the contrary, every executor, administrator, or trustee, or person required to pay duty under this Act, shall adjust such duty and the incidence of any duty paid or payable by him, so as to throw the burden thereof upon the respective properties on which the same are ultimately chargeable." Sub-section (1) of s. 134 provides, so far as directly material, that no duty shall be payable under the Act in respect of "any gift, devise, bequest, legacy, or settlement made or given to or in trust for - . . . (c) any public educational institution in the State which is wholly or in part dependent on any State grant, aid or subsidy". Sub-section (2) was added for the purpose apparently of making sure that gifts, bequests, legacies etc. exempted by sub-s. (1) should not be considered as included in the final balance of the estate either for the purpose of imposing the liability for duty or of calculating the rate of duty under the Death Duties (Taxing) Act, the rate being graduated. Sub-section (2) provides that "From the amount which would otherwise be the final balance of the estate of a person who dies after the coming into operation of the Administration Act Amendment Act, 1956 there shall be deducted the amount of any gift, devise, bequest, legacy or settlement mentioned in sub-s. (1) of this section and on the final balance as so reduced duty shall be payable at the appropriate rate declared by Parliament in the Death Duties (Taxing) Act, 1934-1956". In the foregoing provisions the exemption of a bequest to a public educational institution in the State dependent (whether wholly or in part) upon a State grant, aid or subsidy covers the University of Western Australia but not the Aberdeen University. There seems to be every reason for reading the statute as treating exempt dispositions of property as altogether outside the incidence of duty. If the contrary were true, it would perhaps be correct that the words "special" and "specific" occurring respectively in s. 95 (1) and s. 96 (1) demanded something more than can be found in the testator's will before the incidence of the duty could be varied. There is in other words nothing in the will satisfying the expressions "specific direction" or "special provision". But the true view seems rather to be that s. 95 and s. 96 have nothing to do with the question on which the decision of this case turns. Section 134 places the subject of the gift to the University of Western Australia outside the duty; it is free and the question upon which the case depends seems really to be whether part of what otherwise, or prima facie, is the subject of the gift has been given by the will to the Aberdeen University. The formulation of the question in this manner may seem to involve a self contradiction. But that is because the very hypothesis that what otherwise is or would be the subject of the gift is diminished by any burden of duty thrown upon it by the will simply means that the will has pro tanto given the amount to the University of Aberdeen and not to the University of Western Australia. An obstacle to reversing the order of thought and treating the will as first disposing of the burden of duty by deducting before ascertaining the gift is that the statute is not framed to enable that to be done. That is to say, s. 134 operates only on the ultimate gift made by the will to the University of Western Australia and excludes it from dutiability. Of course a testator can make any provision he likes to dispose of the property but he cannot secure immunity from duty of anything more than what in the end is taken under the gift exempt under s. 134 by the object of that gift, in this case the University of Western Australia. It is in this situation that the will must be interpreted and applied. But ought the will to be understood as directed or addressed to any such situation? Can there be seen in its language or arrangement any advertence to the fact, or the consequences of the fact, that a gift to one University once defined is exempt and the gift to the other once defined bears duty? Can any intention be detected of affecting such a position or its consequence? Can there be seen any intention on the part of the testator of giving to the University of Aberdeen anything more than half the residue under his disposition considered independently of the liability of gifts to one University to duty and the immunity or exemption from duty of gifts to the other University? The exemption from duty conferred on the gift to the University of Western Australia must mean that the will either leaves the advantage to be enjoyed by that University or else takes it away to bestow it on the other University, in whole or in part. Is there any intention to do such a thing disclosed? Is it sufficiently expressed? The answer to these questions should be found by looking for a real intention covering the situation, and therefore the problem, rather than by a mechanical application of the order in which directions are expressed, directions of a general description dealing on the face of them more with administration than the definition of rights and certainly exhibiting no intention of affecting the result of the exemption of the gift in favour of one of the donees. (at p84)

6. The result of the foregoing is that the appeal should be allowed and an order should be made answering the question in the originating summons substantially as sought by the notice of appeal. (at p84)

FULLAGAR J. This is an appeal from a decision of Mr. Commissioner Boylson Q.C. exercising jurisdiction in chambers as a Judge of the Supreme Court of Western Australia. It raises a difficult question with regard to the incidence of death duties in relation to the estate of William Sim McGillivray, who died on 17th February, 1959. (at p84)

2. The testator left a very short, and on its face very simple, will. He appointed the respondent company to be his executor and trustee, and he devised and bequeathed to it all his real and personal estate upon trust for conversion. He then directed his trustee out of the proceeds of conversion to "pay my just debts funeral and testamentary expenses and probate and estate duties and to stand possessed of my estate: (a) to expend a sum of not exceeding Fifty pounds (50 pounds) in providing for a suitably inscribed headstone and kerbing or railing on my grave (b) to divide the residue of my estate into two equal parts or shares and to pay and transfer one of such parts or shares to the University of Western Australia . . . and to pay the other of such parts or shares to the University of Aberdeen Scotland". (at p85)

3. The contest in the case is between the University of Western Australia and the University of Aberdeen, and it arises because under two statutes, which impose death duties, gifts by will to the former institution are, whereas gifts by will to the latter institution are not, exempted from duty. The two statutes are the Administration Act, 1903-1956 (W.A.) and the Estate Duty Assessment Act 1914-1957 (Cth). (at p85)

4. Part V of the State Act (s. 66) requires every executor to file in the office of the Commissioner of Stamps a statement setting out (inter alia) the assets and liabilities of the estate of a deceased person. When the Commissioner is satisfied with the correctness of the statement filed, he certifies his approval of it, and duty is payable on the "final balance" shown by it. Section 95 (1) provides: "Subject to any special provision by a testator for the payment of the duty imposed by this Act, every executor . . . shall deduct from each and every devise, bequest, or legacy coming to any person under the will, an amount equal to the duty upon such devise, bequest, or legacy calculated at the same rate as is payable upon the estate of the deceased". Section 95 (2) contains a corresponding provision for cases of intestacy. Section 96 (1) provides: "Subject to any specific direction appearing in any will . . . to the contrary, every executor . . . shall adjust such duty and the incidence of any duty paid or payable by him, so as to throw the burden thereof upon the respective properties on which the same are ultimately chargeable." Section 134, so far as material, pro vides: "(1) No duty shall be payable under this Act in respect of any gift, devise, bequest, legacy, or settlement made or given to or in trust for - . . . (c) any public educational institution in the State which is wholly or in part dependent on any State grant, aid, or subsidy; . . . (2) From the amount which would otherwise be the final balance of the estate of a person who dies after the coming into operation of the Administration Act Amendment Act, 1956 there shall be deducted the amount of any gift, devise, bequest, legacy or settlement mentioned in subsection (1) of this section and on the final balance as so reduced duty shall be payable". It is not in dispute that the University of Western Australia is an institution of the character described in par. (c) of sub-s. (1) of this section, and it is equally clear that the University of Aberdeen is not. (at p86)

5. Section 8 (1) of the Commonwealth Act provides that estate duty shall be levied and paid upon the value, as assessed under the Act, of the estates of persons dying after the commencement of the Act. Sub-sections (3) and (4) of s. 8 provide for the inclusion in the dutiable estate of a number of specified classes of property. Section 8 (5), so far as material, provides: "Duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement - (a) for religious, scientific or public educational purposes in Australia". Again, of course, it is clear that the one University is within the terms of the exemption, and that the other is not. Section 15 requires the Commissioner of Taxation to make an assessment of the amount upon which duty is to be levied. Section 35 provides that "Subject to any different disposition made by a testator in his will, the duty payable in respect of an estate, exclusive of so much of the estate as is exempt from estate duty by sub-s. (5) of section eight of this Act, shall be apportioned by the administrator among the persons beneficially entitled to the estate in the following manner:". The "manner" prescribed is not material to the present case. (at p86)

6. It is to be noted that both statutes contain a direction as to the manner in which effect is to be given to the exemption granted. By s. 134(2) of the State Act and by s. 35 of the Commonwealth Act the value of the exempted gift is to be excluded in the assessment of the dutiable value of the estate. In fact, in making their respective assessments, the Commissioner of Stamps and the Commissioner of Taxation appear to have followed these directions and excluded the value of the gift to the University of Western Australia from the calculation of the "final balance". (at p86)

7. The question in controversy between the two Universities is whether the burden of the State and Commonwealth duties is to be borne wholly by the University of Aberdeen or is to be shared equally between that University and the University of Western Australia. The learned Commissioner of the Supreme Court considered - rightly, I think - that the answer to this question depended on whether the will contains "special provision" or "specific direction" (the expressions do not, I think, differ in meaning) within the meaning of ss. 95 and 96 of the State Act or a "different disposition" (which also, I think, amounts to the same thing) within the meaning of s. 35 of the Commonwealth Act. He held that the will does contain such a provision, and he answered the question in the case in favour of the University of Aberdeen. (at p87)

8. It is helpful, I think, to begin by considering just how the position must be practically worked out in a case where the residue of an estate is directed to be divided equally between A and B, and the gift to A is exempted from duty by the statute while the gift to B is not. It is important to bear in mind at the outset that the assessment and payment of duty are essentially matters between the executor and the Commissioner, whereas the incidence of the duties - the question on whose shoulders they ultimately fall - is a matter between the executor and his beneficiaries. The former is governed wholly by the relevant statute, and cannot be affected by anything in the will. The latter also is governed prima facie by the statute, but the will may place the burden on other shoulders than those designated by the statute to bear it. (at p87)

9. In the case which we are supposing the Commissioner must begin by ascertaining the amount of the final balance of the estate, scil. assets (which may or may not include notional estate) less liabilities. He must then subtract from this the value of the gift to A. If the gift to A were a specific or pecuniary legacy, this would present no difficulty, but, where (as in the supposed case) it is a gift of a share of residue, difficulty may arise, because at the stage when duty must be assessed residue will generally not have been ascertained. The Commissioner must, one supposes, make an estimate, and he may, of course, be able to make a fairly accurate estimate. The estimate will be subject to appeal, and subject to subsquent amendment. (at p87)

10. Let us suppose that the Commissioner assesses the final balance less the value of the exempt gift at 50,000 pounds, and the duty at 10,000 pounds. The executor must pay this sum, and he may pay it out of any available assets in his hands: he may borrow the money, if necessary. He then proceeds to administer the estate until the day comes when he has in his hands an ascertained and distributable "residue". Suppose it amounts to 60,000 pounds. He must now decide how the burden of the duty which he has paid is to be borne as between A and B. If there is no provision in the will on the matter, he must give effect to the statutory exemption of the gift to A, and make the distribution in such a way that the gift to B will bear the whole of the duty. This he will do by what is really a hotchpot calculation, and A will receive 35,000 pounds and B 25,000 pounds. (at p87)

11. But the executor may find in the will a specific provision on the subject. He may find a provision that the burden of the duty is to be borne equally by A and B. If he does find such a provision, he must give effect to it, and effect will be given to it by distributing 30,000 pounds to A and 30,000 pounds to B. But it would be contrary to all principle to hold that A can be deprived of the benefit of the express statutory exemption from duty of the gift to him otherwise than by clear and direct words. (at p88)

12. Most of the cases which have been cited to us were cases in which the question was whether the duty payable under the statute on particular gifts was to be borne by residue. In such cases a direction to pay duties out of residue as distinct from particular parts of the estate will generally suffice to cast the burden of duties on residue in exoneration of the particular gifts. It may be that Nicholls C.J., referring to such cases in Re Bond's Will (1935) Tas LR 117 stated the general position a little too strictly when he said: " . . . to free a dutiable gift from payment of duty the relevant part of the will must disclose that the testator has directed his attention to the point and, either by express language or by clear implication, has given a definite direction that the duty shall be paid out of the residue" (1935) Tas LR, at p 129 . But I think that his Honour was clearly right in saying, as he said a little later, "I think it important that, as I have said, the effect of a 'different' provision, if it is to have an effect, must be to countermand the statutory direction for the ultimate 'apportionment' or 'adjustment'. A direction in general words to pay duties out of the estate, says no more than the Acts say; and carries with it, if not clearly modified by a later clause, the implied acceptance by the testator of the law as to the final adjustment" (1935) Tas LR, at pp 129, 130 . Cf. Re Goetze (dec'd) (per Clark J.) (1949) Tas SR 131, esp at p 155 . A mere direction to pay duties out of the estate, or out of the proceeds of conversion of the estate, will not, I think, of itself suffice to shift to residue the burden which the statute places on particular gifts. (at p88)

13. But in the present case it is not a question of relieving particular gifts at the expense of residue. It is a question of imposing the burden of duty on a gift which under the statute is exempt from duty. The case is, in a sense, the converse of Hill v. Hill [1933] HCA 45; (1933) 49 CLR 411 . In such cases very clear and specific words must, in my opinion, be found in a will before it can properly be held that duty is chargeable as between beneficiaries on a gift which, as between the estate and the Crown, is not chargeable with duty at all. (at p88)

14. The relevant words in Mr. McGillivray's will follow more or less a common form. I find it impossible to suppose that any question of the ultimate incidence of duties as between beneficiaries was present to the mind of the testator or to the mind of his draftsman. I cannot think that they intended to do anything more than direct the due discharge of all the liabilities of the estate with a view to the creation of a fund for ultimate distribution. It may be said that on this view the direction to pay duties was unnecessary. But so was the direction to pay funeral and testamentary expenses and debts, and the direction to pay these could not on any view affect the interests of the beneficiaries as between themselves. The truth is, I think, that it is no more possible to attach an ulterior significance to the direction to pay duties than to the direction to pay debts and funeral and testamentary expenses. As Clark J. said in Re Goetze (dec'd) (1949) Tas SR 131 , "If it is said that unless the provision in question displaces the substantive provision in s. 21, it only does what the law would have done without it, I would ask do not most testators put into their wills provisions as to which the same thing could be said?" (1949) Tas SR, at p 154 . It has been put that effect cannot be given to the directions in the will without producing the indirect result that the University of Western Australia bears one half of the duties on the estate. The only gifts, it is said, are gifts out of a fund depleted by payment of (inter alia) duties, and to make an adjustment for duties is to give to the University of Western Australia more, and to the University of Aberdeen less, than the one half of that fund which is given by the will. But I think, with respect, that this view misunderstands the nature of the real question in the case. The testator has, it is true, directed the division of a fund in equal shares, but prima facie the statutes modify this direction and require an adjustment to be made, the result of which will be that one legatee will in fact receive a larger sum than the other. The question which arises is whether the will contains a sufficient indication of an intention to displace the statutory requirements. I do not think it does. I think that the direction to pay duties was inserted alio intuitu altogether, and has nothing to do with the incidence, as distinct from the payment, of duties. (at p89)

15. This appeal should, in my opinion, be allowed. (at p89)

KITTO J. The Estate Duty Assessment Act 1914-1957 (Cth) and the Administration Act, 1903-1956 (W.A.), the former providing for estate duty and the latter for probate duty, contain exempting provisions in respect of gifts to certain favoured objects. The exempting provisions apply in the present case to a bequest which is made to the University of Western Australia. The only other beneficiary in the estate is the University of Aberdeen, and gifts to that body are not within the exemptions. The will devises and bequeaths the whole estate to a trustee on trust to convert it into money, to pay the debts, funeral and testamentary expenses, and probate and estate duties, and to stand possessed of the estate (a) to expend a sum not exceeding 50 pounds on a headstone and kerbing and railing for the testator's grave, and (b) to divide the residue of the estate into two equal parts and pay one part to each of the two Universities. The decision now under appeal means that, because of the form which the dispositions take, the benefit flowing from the exemptions accrues in equal shares to both Universities, notwithstanding that it arises by reason of the character of the gift to one of them. In order to decide whether this is correct it is necessary first to consider the relevant statutory provisions, and then to consider, in the light of those provisions, how the will takes effect. (at p90)

2. The exempting provision in the Estate Duty Assessment Act is in s. 8 (5). The sub-section contains a list of objects including public educational purposes in Australia, and it provides that "Duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement" to objects in the list. Because the words "assessed" and "payable" refer, at least primarily, to the ascertainment and discharge of the estate's liability to the Crown, the tendency is to regard the sub-section as concerned only with the extent of that liability, and consequently as having no direct bearing upon the ultimate incidence of duties as between persons beneficially interested in the estate. It is important, however, to observe three points. One is that the provision is enacted as an integral part of s. 8, and that it takes effect, through the introductory words of sub-s. (1), as a qualification upon that, the leading provision of the section. "Subject to this Act", sub-s. (1) says, "estate duty shall be levied and paid upon the value, as assessed under this Act, of the estates of persons dying . . . ". The next two sub-sections describe the items of property which are to be comprised in an "estate" or deemed to be part of it for the purposes of the Act. Sub-section (5) then excludes what passes to specified objects from everything which sub-s. (1) commands. That is to say, it excludes it from that which the Act sets out to diminish by the imposition of duty. The second point to observe is that the general nature of the dispositions to which sub-s. (5) affords this favoured position is such as itself to make inherently probable an intention to obviate the diminution by duty of the benefit of those dispositions. And finally there is to be observed the reach of the word "upon" both in sub-s. (1) and sub-s. (5) It goes much further than such expressions as "by reference to"; the notion of ultimate burden is inherent in it. Bearing in mind these three points, I think the conclusion is required that sub-s. (5) exhibits the intention of saving the property it describes from all impact of estate duty, and not merely the intention of offering an incentive to a testator, in the form of a remission of duty on his estate as a whole, to make approved benefactions. (at p91)

3. What, then, is the subject of the exemption? It is described as so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement to any of the institutions, funds or purposes in the list. That means, as I understand it, so much as is devised or bequeathed or passes assuming estate duty not to be payable. For the purpose of deciding how the Act applies in a particular case, as distinguished from what the will may require in the way of adjusting the incidence of duty, it is this construction alone, I think, which makes the provision precisely applicable in the not unusual event of the subject-matter of a gift being restricted to the balance of a fund remaining after the payment of estate duty thereout. It seems necessary to imply the words above emphasized in order to give the fullest effect to the evident policy of the exemption, lest there should be excluded from the benefit of it a class of dispositions falling as certainly within its policy as any other. As will appear, I do not regard the present case as of this class, for notwithstanding the use of the word "residue" I think that the provision for division between the Universities is a gift of the estate generally, and is indistinguishable for present purposes from a gift of equal shares of the estate without mention of duties. But I refer to the point in order to make it clear that on either way of looking at the will the Commissioner, in my opinion, was right in the method of assessment that he followed, which was, first, to ascertain how much would pass to the Universities if no duty were payable, and then, having put on one side one-half of that amount as being what passes to the University of Western Australia, to treat the remaining half as the whole of the dutiable estate. (at p91)

4. The views I have expressed concerning s. 8 (5) may be thought to extract a good deal from a few words. But undue terseness is one of the notorious faults of the Act. As Cussen J. said of the same Act long ago, it "requires a good deal of judicial or administrative padding to fill it out": In the Will of Davidson (1917) VLR 748, at p 759 . And the padding required in order to make effectual the manifest intention of s. 8 (5) seems to me to be certain enough. So much of the estate constituted under ss. 8 (3) and (4) as would pass to non-exempt objects if there were no estate duty imposed is taxed as if it were the whole estate; and as between it and the exempt portion of the estate the duty lies where it falls, that is to say "upon" the former and not at all "upon" the latter. That is so far as the Act is concerned. The testator may, of course, require the recipients of exempt property to relieve the recipients of non-exempt property from some or all of the burden of duty resting upon the non-exempt estate; but that must be by his own doing. (at p92)

5. Now it is necessary to turn to s. 35. I do not think that on its true construction that section applies to the present case, but it provides strong confirmation of the conclusions I have expressed in regard to s. 8 (5). It provides how, if there be no different disposition in the will, the burden of the duty payable in respect of an estate, "exclusive of so much of the estate as is exempt from estate duty by sub-s. (5) of section eight of this Act", is ultimately to fall as between "the persons beneficially entitled to the estate". In the first instance the administrator is to apportion it among "all the beneficiaries" in proportion to the value of "their interests". The duty which would be "payable" under this apportionment in respect of the interests of beneficiaries taking specific bequests or devises of a value not exceeding 200 pounds is to be apportioned amongst "all the beneficiaries" in proportion to the value of "their interests". And, since in the assessment of duty deductions from the value of the estate are allowed (by s. 18A) where the whole or part of the estate passes to certain members of the deceased's family, a proviso is added to ensure that in makingthe apportionment of duty under s. 35 the value of the interest of any such member of the family is reduced correspondingly. (at p92)

6. Difficulties of construction arise here, as elsewhere in the Act, through the use of the word "estate" in varying senses and the consequential uncertainty in the references to beneficiaries and their interests; but the words "exclusive of so much of the estate as is exempt from estate duty by sub-s. (5) of section eight of this Act" perform the function, as I read the section, of confining the operation of the provision to the non-exempt estate and the interests of beneficiaries therein. What s. 8 (5) protects from liability to duty is excluded from the apportionment of duty. It is an opportionment amongst those who participate in the dutiable part of the estate. That is why I regard s. 35 as not directly in point in a case like the present, where the question of incidence is between a beneficiary taking a duitable portion of the estate and one taking an exempt portion. On this view, the problem here is not whether there is a "different disposition" displacing the provisions of s. 35, but whether the testator has shown an intention to deprive the exempt beneficiary of part of the fruits of the exemption, and bestow that part upon the non-exempt beneficiary. The importance of s. 35 in such a case lies in its implication that so much of the estate as falls within s. 8 (5) is, by force of that sub-section itself, out of the picture (so to speak), and neither needs nor is subject to any statutory provision for apportionment. (at p93)

7. In the simple case where the will, without mentioning estate duty, directs that the estate be divided equally between two beneficiaries, and one beneficiary is within s. 8 (5) and one is not, the effect of the Act as I have construed it is that what is available for distribution after payment of estate duty and the other charges, though it is to be divided into equal shares, is intercepted before distribution and adjusted so that none of the duty on the non-exempt share remains finally a burden on the exempt share. In effect, the duty is added back, the exempt beneficiary receives out of the distributable estate one-half of the total thus produced, and the non-exempt beneficiary receives what is left. To this extent and in this way the Act makes its own subtraction from the quantum of the non-exempt gift, while leaving the quantum of the exempt gift untouched. Accordingly, if the testator wishes each beneficiary to bear one-half of the estate duty notwithstanding what the Act provides as to exemption, he must do more than simply direct an equal division of his estate. He must direct, in some form of words, that when the estate has been divided into equal parts and the Act has operated to diminish one part by the imposition of duty upon it, a counteracting adjustment shall be made so as to recoup to that part one-half of the duty paid upon it, by means of a transfer of the requisite amount from the exempt part. The words by which this is accomplished may vary infinitely, of course; but they must go further than providing for an equal division of the estate. Whether they do go further, and show an intention to govern the incidence of duties in a manner different from that of the Act, is a question of getting at the truth of the document. (at p93)

8. Now the will in the present case, artificially but not skilfully drafted as it is, consists (apart from clauses revoking former wills and appointing an executor) of two sets of provisions, and they are of sharply contrasting natures. The first is purely administrative; it requires the executor to take the step, which he would have to take in any case, of meeting out of the proceeds of conversion the liabilities including probate and estate duties. The second part is dispositive. It is expressed to apply to "my estate", and it disposes of the money required for the grave and then "the residue of my estate". The argument for the University of Aberdeen must take its stand, in the end, on the use of the word "residue" to describe the subject-matter of the division. There are two reasons, in my opinion, for concluding that it does not suffice to differentiate this case from that which I have called above the simple case. (at p94)

9. The first reason is that "residue" appears to me to refer only to so much of the general estate as remains after the expenditure on the grave has been made. If the testator had intended the content of his dispositions to the Universities to be so governed by the provision for payment of debts etc., as to conclude the question of incidence, he would hardly have expressed his dispositions as dispositions of his "estate" generally. The more natural construction of the dispositive part of the will, it seems to me, is that which treats the trust in par. (b) to divide "the residue of my estate" as a trust with respect to that which remains after the expenditure provided for in par. (a). So read, the will is indistinguishable in any relevant respect from a simple gift of the whole (less the expenditure on the grave) to the Universities in equal shares: the trust to convert the estate into money and pay the debts, funeral and testamentary expenses and duties adds nothing which can fairly be taken as more than an expression to the executor of steps which he must take before he can give effect to the dispositive provisions. (at p94)

10. The second reason is that, even if "the residue of my estate" means so much as remains after payment of the debts, funeral and testamentary expenses and duties and the expenditure on the grave, the trust with respect to it still amounts, in substance, to a general disposition of the estate, embodying an acknowledgement that the payments already provided for will deplete what is divisible between the Universities, but too much a matter of stereotyped form to be accepted as showing a real intention to deal with the incidence of duties to the exclusion of any statutory result. On cognate problems the courts have always felt a need to be wary lest words directed to the payment of outgoings by executors be too readily taken as intended to affect ultimate beneficial interests inter se. An example may be seen in a passage in the judgment of Romer L.J. in In re Tong; Hilton v. Bradbury (1931) 1 Ch 202, at p 212 , a passage which was later endorsed by the Court of Appeal in In re Worthington; Nichols v. Hart (1933) Ch 771 . See also Roman Catholic Archbishop of Melbourne v. Lawlor [1934] HCA 14; (1934) 51 CLR 1, at pp 43, 44 . I think it may be said in general that where there is a statutory provision regulating the ultimate adjustment of the burden of duty as between the beneficiaries, such words as "remainder" or "residue" in a general gift which is preceded only by a direction for the administrative discharge of the liability of the estate for duty, "throw no light" as Romer L.J. put it "on how as between the persons having beneficial interests in the remainder the liability . . . is to be apportioned" (1931) 1 Ch, at p 212 . A case like the present is quite different, I think, from that which exists where specific or pecuniary legacies are followed by a direction for payment of duties and then by a residuary gift, and the question of incidence of duties arises between the specific and pecuniary legatees on the one hand and the residuary legatees on the other. In such a case the direction as to duties serves to define the content of the residuary bequest and relieve the other gifts at the expense of residue: cf. Hill v. Hill [1933] HCA 45; (1933) 49 CLR 411, at p 418 and see the review of the cases by Gibson J. in In re Hall (1955) Tas SR 118, at pp 128-133 . Where, however, the provision for payment of duty is not directed to the relation between dispositions of separated parts of the estate, but is preliminary to the disposition of the whole estate, or the whole of a fund, to several beneficiaries in shares, it is difficult to see a substantial difference from the case which I have described earlier as the simple case. A difference in language exists, but surely not in substance. There is still not enough to satisfy the reader that the testator really meant to go beyond the question of payment to the question of ultimate incidence as between those who are to take the subject-matter beneficially. (at p95)

11. I turn to the Administration Act, 1903-1956 (W.A.), which provides by Pt. V for duty on deceased persons' estates. The duty is calculated and levied "on" the final balance of the estate as assessed under the Act: s. 69. Subject to any special provision by a testator for the payment of duty, there is to be deducted from each devise, bequest, or legacy under the will an amount equal to the duty "upon" such devise, bequest, or legacy: s. 95 (1). Subject to any specific direction there is to be an adjustment of duty and the incidence thereof, so as to throw the burden upon the respective properties "on which the same are ultimately chargeable": s. 96 (1). The lastmentioned provision seems to refer to property notionally brought into the estate by provisions such as ss. 73-78. Neither s. 95 (1) nor s. 96 (1) authorizes any adjustment which would throw upon exempt property any of the burden of duty payable on non-exempt property. Exemption is conferred by s. 134. Sub-section (1) provides that no duty shall be payable under the Act in respect of any gift, devise, bequest, legacy or settlement made or given to or in trust for any of a number of stated objects. Sub-section (2) provides how the exemption is to receive effect: from the amount which would otherwise be the final balance of the estate there shall be deducted the amount of any gift etc. mentioned in sub-s. (1), and "on" the final balance as reduced duty shall be payable at the appropriate rate. The appropriate rate seems clearly to mean the rate appropriate to the reduced amount. Thus sub-s. (2) requires a procedure similar to that which I have described in dealing with estate duty, and here as under the Estate Duty Assessment Act I would understand "the amount of any gift" etc. mentioned in sub-s. (1) to mean the amount of the gift etc. as it would have been, assuming no probate duty at all to be payable. In view of these provisions so construed, the problem in relation to probate duty appears to me to be similar to that which I have discussed in relation to estate duty. For the reasons given in that connexion I conclude that the gift to the University of Aberdeen must bear the whole of the probate duty assessed in respect of the gift. (at p96)

12. I agree that the appeal should be allowed. (at p96)

MENZIES J. The Administration Act, 1903-1956 (W.A.) and the Estate Duty Assessment Act 1914-1957 (Cth) impose probate and estate duty respectively to be levied and paid upon the value (assessed in the manner provided) of the estates of persons dying. The question with which we are concerned here relates to the burden of these duties in the estate of William Sim McGillivray, deceased. By his will, the testator directed his executor to divide the residue of his estate into two equal parts, and to pay and transfer one of such parts to the University of Western Australia and the other such part to the University of Aberdeen. Neither probate nor estate duty is assessable or payable upon the share of the estate given to the University of Western Australia, and the contest is whether or not the whole of the duties that are payable upon the estate are to be borne by the University of Aberdeen. In accordance with the terms of the question asked, the Commissioner decided that the balance of the estate of the said deceased remaining after payment of his debts, funeral and testamentary expenses and probate and estate duties, and not more than 50 pounds for a headstone, should be divided equally between the residuary legatees, and that no adjustment should be made between them in respect of such duties. It is from that decision that this appeal has ben brought. For the University of Western Australia, it is contended that the "residue" to be divided and paid as aforesaid is to be ascertained before the deduction of duties and that both duties must be borne by the share payable to the University of Aberdeen; for the University of Aberdeen, it is contended that the "residue" is to be ascertained after the deduction of duties, so that each University will receive its half of the residue without deduction. Before considering these contentions further, it is desirable to refer shortly to the two Acts. (at p97)

2. Each Act imposes duty upon the estate which is chargeable upon the whole of the estate and is payable by the executor. Neither is a succession duty and each Act takes part of the estate before there is anything for the beneficiaries. Each Act also excludes from the calculation of the dutiable balance of the estate gifts that are exempt from duty (s. 134 of the Administration Act and s. 8 of the Estate Duty Assessment Act), but I cannot find in either of the sections the implication that the recipient of a gift of exempt duty should not bear any of the burden of the duty imposed upon the estate and if any such implication were to be found it would not, so far as I can see, be accompanied in the sections by the qualification that the testator may nevertheless make a contrary provision. Each Act also contains provisions for the adjustment of duty among the beneficiaries. They are ss. 95 and 96 of the Administration Act, and s. 35 of the Estate Duty Assessment Act. These provisions are not plain and unambiguous but they do seem to be directed to the apportionment of duty ratably among those beneficially entitled to dutiable estate in the absence of provision to the contrary by the testator. Whereas, however, s. 35 of the Estate Duty Assessment Act does make it reasonably clear that, in the absence of a different disposition by the testator, no estate duty should be borne by the recipient of an exempt gift, s. 95 of the Administration Act leaves it uncertain whether a special direction is not necessary to free the recipient of an exempt gift from a share of the burden of probate duty. I do not find it necessary to decide this doubtful point, because this at least is clear in the case of each Act, namely, that the statutory provision is subject to the will and that the recipient of an exempt gift must bear the burden of duty to the extent to which the will so provides. If there is such a direction or disposition to be found in the will, then probate or estate duty is to be borne by the University of Western Australia. The question is therefore essentially one of construction, upon which I do not find the cases cited of any material assistance beyond showing that the direction or disposition must not leave the matter in doubt. (at p98)

3. This brings me back to the will itself, which I think clearly provides that the residue that is to be divided amongst and paid to the two Universities is to be ascertained by deducting from the amount realized by the conversion of the estate everything that is payable out of the estate, including probate and estate duty, so that what is to be divided between and paid to the two Universities is a residue from which no further deduction is to be made. Two different constructions were suggested - the first that the residue is to be ascertained merely by deducting 50 pounds for a gravestone from the gross value of the estate; the second that the residue is to be ascertained by deducting everything but the probate and estate duty and 50 pounds. I do not regard either of these constructions as consistent with the order of administration directed by the will, i.e., conversion, payment of debts, funeral and testamentary expenses, payment of probate and estate duties, the provision of 50 pounds for a gravestone, and then the division and payment of the residue. The first alternative construction would, moreover, mean that neither University would receive one half of the residue; it would receive one half of the residue less one half of the debts, funeral and testamentary expenses. This plainly is not in accordance with the will. The second alternative would result in the University of Western Australia receiving one half of the residue so ascertained, but it would result in the University of Aberdeen receiving one half of the residue less duties. The will, on the contrary, provides expressly for the payment to the University of Aberdeen of one half of the residue ascertained in the manner provided. Neither alternative construction, therefore, accords with the will and both must be rejected, leaving the residue to be ascertained after the deduction of duties, so that each University will be paid one half of the residue, no more and no less. I have found no reason for treating the will as meaning less than it says. (at p98)

4. It is only necessary to add that my view of the will leaves no room for the application of the provisions of either Act for the adjustment of the burden of duties because the calculation of what each University is entitled to receive depends upon the prior ascertainment and deduction of duties. The problem is to ascertain what the testator has given to the University of Western Australia rather than to determine whether what has been given should be reduced by one half of the duties payable. It is true that the ascertainment of duties in advance of the determination of the amount of the gift to the University of Western Australia presents the Commissioner with an arithmetical problem in that the calculation of duty depends upon the amount of the gift to the University of Western Australia. The same difficulty would, however, arise in a case where the testator, by unmistakable language, made it plain that the University of Western Australia should bear a proportionate part of the duty assessed and payable on the estate. Moreover, if such unmistakable language were to have been used I cannot think that the method adopted by the Commissioner to calculate duty could be correct. He would then perforce have had to assess duty on so much of the estate as was not given to the University of Western Australia, which would have been one half of the net estate less duty and not one half of the net estate disregarding duty. The difficulties of the Commissioner in calculating duty cannot, of course, control the construction of the will. (at p99)

5. In my opinion, the judgment appealed from was correct and the appeal should be dismissed. (at p99)

WINDEYER J. I need not repeat the facts, nor set out again the relevant statutory provisions which exempt from duty property given to the University of Western Australia. In my opinion this statutory exemption does not operate for the benefit of all those beneficially interested in a testator's estate by simply reducing the dutiable value of the whole estate: rather it operates for the benefit of the donee of the exempted gift. This view of the effect of the Commonwealth Act has been, I think, generally and rightly accepted since the decision of Harvey J. in Perpetual Trustee Co. v. Mackenzie (1917) 17 SR (NSW) 660 , which on this aspect was not affected by the appeal to this Court in Wyndham v. Mackenzie [1918] HCA 46; (1918) 25 CLR 172 . And the State legislation has, I think, a similar effect. In other words both Acts provide that, as between the beneficiaries, no tribute is to be levied in respect of property given by a testator to a donee of the favoured class. The testator may, if he chooses, displace this and by the terms of his will provide that the donee of the exempt property shall not take it free of duty. To do so he must show clearly that he intends to impose upon a donee to whom he has given such property an obligation to contribute to the duty that the law would otherwise cast upon those who take the property that makes up the dutiable estate. The testator here gave his residuary estate to the two Universities in equal shares. But they can only profit equally by his bounty if his will is to be read as specifically directing that the University of Western Australia is to be deprived of part of the advantage that the law gives it in order to relieve the University of Aberdeen of a part of the toll that the law imposes upon the gift to it. (at p100)

2. Does the will say this? I think not. It seems to me that that would be to read too much into an introductory provision in a fairly common form. The directions for conversion and for the payment of debts, funeral and testamentary expenses and duties out of the proceeds of conversion mean that there could be no disposable estate until these charges had been paid. And, that was the position as between the estate and the Commissioners charged with the assessment and collection of duty. But, as I read the will, it really says nothing as to the next stage, the one with which we are concerned, namely the ultimate adjustment of the burden between the beneficiaries (cf. Hill v. Hill [1933] HCA 45; (1933) 49 CLR 411 ; Permanent Trustee Co. Ltd. v. Culpan (1933) 50 WN (NSW) 110 ). If, on the other hand, the will should be read on the assumption that it does speak of the incidence of duty as between beneficiaries and the consequential adjustments that must be made by the executor - then it seems to me that its terms are at least as consistent with the prevalence of the statutory exemption as with its displacement. The gifts to the two Universities take the form of a tust to divide residue into equal shares and to transfer one to each University. According to the literal terms of the will consecutively read, the residue to be equally divided was not ascertainable until after duties had been paid: and I appreciate the force of the argument that, therefore, the Universities should get equal sums freed of all liability for duty. This view depends upon the proposition that the value of the shares given to the Universities cannot be ascertained until after duty has been paid. But it is equally correct to say that the duty to be paid cannot be determined until the value of the share given to the University of Aberdeen has been ascertained, because, for the assessment and payment of duty, the value of the gift to the University of Western Australia is to be disregarded entirely (s. 8 (5) of the Commonwealth Act, s. 134 of the State Act). It seems to me, therefore, that the scheme of the will cannot be taken as deciding the question we have to decide or as displacing the advantages that the statute law confers upon gifts to the University of Western Australia. The testator treated the Universities as the equal objects of his bounty; but the tax-gatherer treats his gifts differently. (at p100)

3. I would add that I am not to be taken as saying that a will containing trusts in similar terms to the present one could not amount to "a different disposition" within the meaning of s. 35 of the Commonwealth Act or of the Stamp Duties Act, 1898 (N.S.W.), s. 56 (3), repealed in 1920, or to a "special provision" or "specific direction" under ss. 95 and 96 of the Western Australian Act. Those provisions deal with the adjustment of duty as between beneficiaries who take items of property in respect of which duty has been assessed. That is not this case. Here the problem arises because one beneficiary takes property in respect of which duty is not payable, property excluded in determining the value of the dutiable estate. Its value was, in effect, disregarded in the assessment of the duty. Neither is it necessary to express any opinion on whether or not the terms of a will such as this cast upon the testamentary estate the burden of duty attributable to any notional estate. I think that little assistance is to be got for the solution of the present question from decisions on those more familiar topics. (at p101)

4. The duties have in fact been paid by the executor. The balance of the estate should, in my opinion, now be distributed so that the burden of them falls upon the University of Aberdeen. I would allow the appeal. (at p101)

ORDER

Appeal allowed. Discharge order of Supreme Court of Western Australia except as to costs. In lieu thereof declare that the residuary estate of William Sim McGillivray deceased available for distribution should be divided between the University of Western Australia and the University of Aberdeen in such manner that the duties paid on the said estate under the Administration Act, 1903-1956 of the State of Western Australia and under the Estate Duty Assessment Act 1914-1957 of the Commonwealth be borne wholly by the University of Aberdeen.

Order that costs of all parties in the appeal be paid out of the estate, the costs of the plaintiff being taxed as between solicitor and client.