Kent v Commissioner of Stamp Duties (NSW) [1961] HCA 52; (1961) 106 CLR 366 (18 August 1961)

HIGH COURT OF AUSTRALIA

KENT v. COMMISSIONER OF STAMP DUTIES (N.S.W.) [1961] HCA 52; (1961) 106 CLR 366

Death Duties (N.S.W.)

High Court of Australia
Dixon C.J.(1), Kitto(1), Taylor(1), Menzies and Windeyer(1) JJ.
(THE HONOURABLE MR. JUSTICE MENZIES did not deliver a judgment in this appeal)

CATCHWORDS

Death Duties (N.S.W.) - Settlement - Trust deed - Death of settlor - Trusts on the happening of certain contingencies to take effect on death of settlor - Construction of deed - Whether trusts in the events &which had happened still take effect - Trusts redundant by general law - Remote possibility of trusts taking effect - Stamp Duties Act, 1920-1952 (N.S.W.) s. 102 (2) (a)* - Conveyancing Act, 1919-1954 (N.S.W.) s. 36B**.

HEARING

Sydney, 1961, April 12, 13; August 18. 18:8:1961
APPEAL from the Supreme Court of New South Wales.

DECISION

August 18.
The following written judgment was delivered:-
DIXON C.J., KITTO, TAYLOR and WINDEYER JJ. In this appeal, which is against concerned with the meaning and the application in particular circumstances of a part of a provision made by s. 102(2)(a) of the Stamp Duties Act, 1920-1952 (N.S.W.). Section 102 deals with the composition of the estate of a deceased person for the purposes of the assessment and payment of death duty. It contains four paragraphs. The first three describe classes of property which, for the purposes mentioned, the estate is to be deemed to include. Paragraph (1) describes two classes of property of the deceased to which any person becomes entitled under the deceased's will or upon his intestacy. Paragraph (2) describes, in fourteen sub-paragraphs, classes of property which is to be treated for duty purposes as if it had belonged to the deceased at his death because of some connexion with it which he had in his lifetime. Paragraph (2A) describes personal property of a deceased dying domiciled in New South Wales, which was outside the State at the death of the deceased and would have fallen within par. (2) if it had then been within the State. To the provision which appears, in disregard of grammar, as par. (3), there is no need to refer. The problem in the case arises, as we have said, upon sub-par. (a) of par. (2). (at p372)

2. It is a somewhat curious piece of draftsmanship. Introduced by the general words "the estate . . . shall be deemed to include and consist of the following classes of property", it is in terms which, omitting such as have no bearing on the problem in this case, are as follows: "All property which the deceased has disposed of . . . by a settlement containing any trust in respect of that property to take effect after his death . . .: 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 p372)

3. The deceased in this case is one Harold Frederick Kent, who died in 1953. In his lifetime, namely, on 24th November 1948, being the holder of and beneficially entitled to 1,000 shares in a certain company, he executed, without receiving any consideration for so doing, a deed poll by which, after reciting that he was desirous of settling the shares in the manner thereinafter appearing, he declared that he held the shares upon the trusts terms and conditions set out. By the trusts which he declared, he created in favour of persons other than himself a succession of beneficial interests in the income and corpus of the property. The respondent to this appeal, the Commissioner of Stamp Duties, assessed the death duty payable on the deceased's estate upon the footing that the settlement answered the description in sub-par. (a). The appellants, the executors, disputed the correctness of the assessment in this respect, and appealed by case stated to the Supreme Court. By a majority that Court ruled against them, and they now appeal to this Court. They concede that by executing the deed the deceased made a "settlement" of the 1,000 shares. The concession is rightly made, since by s. 100 "settlement" is defined to include, inter alia, any disposition of property, without consideration, whereby any property is settled. The property which was subject to the trusts of the settlement at the death of the deceased consisted of 3,000 shares in the same company. By virtue of the proviso to sub-par. (a), even if not independently of it, the 3,000 shares are the property with respect to which the question must be considered whether the sub-paragraph applies to the facts of the case. (at p373)

4. The deed made three persons the principal beneficiaries. They were one Mavis Christina Kent, a son of the deceased named David, and a daughter named Rosemary. The actual terms in which the trusts of corpus and income were expressed need not be recited: it will make for clarity if the trusts are described shortly and in re-arranged order. As regards corpus no trust was made to depend in any way on the death of the deceased. If Rosemary should live to attain twenty-five years, she was to take the corpus absolutely. If she should not, the corpus was to go, after the trusts of income ceased, to any issue whom she should leave surviving her; or, if none, then to David absolutely. The trusts as to income fell into three parts. Pending Rosemary's attainment of twenty-five years, the income was to go to Mavis until Rosemary should attain twenty-one years or marry, and then as to one half to Rosemary and as to the other half to Mavis. If Rosemary should die under twenty-five years leaving issue surviving, one half of the income was to go to Mavis for her life, and the other half, during Mavis' life was to go to Rosemary's issue. On the other hand, if Rosemary, dying under twenty-five, should die without issue surviving, the income during the life of Mavis was to be paid to her during the life of the settlor, the deceased, and after his death was to be paid as to one half to Mavis and as to the other half to David. (at p373)

5. It is upon the lastmentioned provision that the Commissioner bases his contention that the settlement falls within the description in sub-par. (a) of s. 102(2). He says, and the majority of the learned judges who considered the case below have agreed, that there is in this provision a trust which by its very terms is to take effect, if ever it does, after the death of the deceased. It was, of course, subject from the beginning to two contingencies: that Rosemary should die under twenty-five, and that she should die leaving no issue surviving. None the less, says the Commissioner, it was a trust created by reference to the death of the deceased and so that it could not take effect until after his death, and that is enough. Such a trust, he contends, is not taken out of the description in the sub-paragraph by the fact that its taking effect is made contingent upon the happening of another event. (at p373)

6. The first submission on the part of the appellants is that while this may be so where a possibility that the further contingency may happen still exists at the death of the settlor, it is not so where the the situation at the death is such that the contingency cannot thereafter occur; and they say that in the present case the possibility of the contingency's happening had ceased when the settlor died. The submission is based upon a reading of the material limitations in the deed as subjecting the trust of income in the event of Rosemary's dying under twenty-five without issue surviving to a third contingency, namely that Rosemary should predecease the settlor. If the trust had been subject to that contingency, the situation at the settlor's death would have been that the trust could never take effect, for Rosemary did not predecease the settlor, and for that reason it would no doubt have been right to decide the appeal against the Commissioner, either on the ground that the proviso excludes the trust property from the dutiable estate in such a case: see In the Estate of W.O. Watt (dec'd) (1925) 25 SR (NSW) 467, at p 490 affirmed sub nom. Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (1926) 38 CLR 12 , or on the ground that the expression "containing any trust to take effect after his death" postulates a trust which at the death is still capable of taking effect. But it is impossible to hold on the construction of the deed that the trust as to the income of the settled fund in the event of Rosemary's dying under twenty-five without issue is conditional upon Rosemary's predeceasing the settlor. The relevant portion of the deed is in par. (e) of cl. 2, and its precise terms should be observed. It reads: "(e) If the said Rosemary Deacon Kent shall die before attaining the age of twenty-five (25) years without issue surviving to hold the trust fund during the life of the said Mavis Christina Kent upon trust (i) During my life to pay the income arising therefrom to the said Mavis Christina Kent (ii) After my death to pay one half of the income arising therefrom to the said Mavis Christina Kent and the remaining one half to my son David Kent and (iii) After the death of the said Mavis Christina Kent to hold the Trust Fund for my said son David absolutely -". The sense of the paragraph would perhaps be more readily apparent if (A) were inserted before "during the life of the said Mavis", and (iii) were changed to (B), (i) and (ii) being left as the only sub-divisions of (A). The appellants contend that the whole paragraph is framed on the assumption that if Rosemary should die under twenty-five without issue the settlor will still be living; and from this they draw an inference that only in the assumed situation is it intended that any of the trusts shall be capable of taking effect. The answer is that there is no sufficient ground for the inference. The trust of income in (i), to pay the income to Mavis during the joint lives of Mavis and the settlor, is of course dependent upon Rosemary's predeceasing both Mavis and the settlor; but the trust in (ii), though dependent upon Rosemary's predeceasing Mavis, is postponed to the settlor's death whenever it may occur. The situation therefore is that in the event which has happened, that the settlor has predeceased both Rosemary and Mavis, although the trust in (i) can have no operation, the trust in (ii) is accelerated, in the sense that by the very event of the settlor's death it has been enabled to take effect if and when Rosemary dies in the lifetime of Mavis, under twenty-five and without issue surviving. (at p375)

7. The appellants then fall back upon a second contention, which may be expressed as follows. First, as regards the trusts for Mavis: pars. (i) and (ii) should be read together; so read, they have the effect of giving Mavis one-half of the income for her life and the other half for the joint lives of the settlor and herself, so that there is no trust in her favour to take effect after the settlor's death in relation to either half. Then as regards the trusts for David: the effect of par. (iii) is to give David an interest in corpus; that interest is vested, though subject to be divested under cl. 2(c) or cl. 2(d), and therefore carries the intermediate income of the fund, subject only to the gifts of income to Mavis; even if the interest be considered contingent, it carries the intermediate income, by force of s. 36B (2) of the Conveyancing Act, 1919-1954 (N.S.W.), subject, again, to the gifts of income to Mavis; the gift of one-half of the income to David in par. (ii) is therefore redundant, and for that reason is not a trust to take effect after the settlor's death. This argument, interesting for its ingenuity, has the fatal defect of deserting the deed. Mavis does not take the whole of the income for life subject to reduction to one-half of it on the settlor's death: her right to the whole income wholly ceases on the settlor's death, and a new trust, as to one-half only of the income, arises in her favour immediately thereafter. And David does not take one-half of the income during Mavis' life, by virtue either of the general rule as to intermediate income in cases where the corpus is vested or of the rule applying under s. 36B (2) of the Conveyancing Act, 1919 (N.S.W.) in cases of contingent interests. Those rules apply only in respect of intermediate income which has not been expressly disposed of by the relevant instrument. Here, if Rosemary dies under twenty-five years without issue surviving, the interest which David will take in income until the death of Mavis will come to him by force of the express trust in cl. 2(e) (ii); and it is nothing to the point that the practical effect is (if, indeed, it is) the same as might have been achieved by different draftsmanship. (at p376)

8. The appellants' next contention is that even if cl. 2(e) (ii) does contain a trust to take effect after the settlor's death the trust is, by reason of the contingencies to which it is subject, so very unlikely ever to take effect that it does not satisfy the notion expressed by the words "to take effect after his death". The contention attributes to the words a shade of meaning which connotes, in the case of a contingent trust, that there is a preponderance of probabilities, or at least a substantial probability, that in the event the trust will take effect. This is to find in the words more than is really there. They do not indicate anything about the probabilities of the matter. Their concern is only with the nature of the trust. They furnish a description which is satisfied by any trust so expressed that it cannot operate to give immediate enjoyment until the specific event of the settlor's death has occurred. The argument therefore cannot be accepted. (at p376)

9. Finally, the appellants made a submission based on the words in the proviso to s. 102(2) (a), "the property which at the time of his death is subject to such trust". They say that the only trust in the deed which (their other arguments failing) was a trust to take effect after the settlor's death was the trust in cl. 2(e) (ii) in favour of Mavis, and as that was a trust as to one-half only of the income of the settled fund one-half only of the settled property is caught by s. 102(2) (a). It is essential to this argument that what appears in cl. 2(e) (ii) as a direction to pay one-half of the income to David after the settlor's death is not a trust to take effect after the settlor's death, because it gives David no more than he would take without it, by force of s. 36B of the Conveyancing Act if not by force of the general law. For the reason which has already been given, this view of cl. 2(e) (ii) is untenable. (at p376)

10. In the result it must be held that the property which was subject to the trusts of the settlement at the settlor's death forms part of his dutiable estate. The appeal should be dismissed. (at p376)

ORDER

Appeal dismissed with costs.