Equity Trustee Executors & Agency Co Ltd v Commissioner of Probate Duties (Vic) [1976] HCA 34; (1976) 135 CLR 268 (25 June 1976)

HIGH COURT OF AUSTRALIA

EQUITY TRUSTEE EXECUTORS AND AGENCY CO. LTD. v. COMMISSIONER OF PROBATE DUTIES (VICT.) [1976] HCA 34; (1976) 135 CLR 268

Death Duties (Vict.)

High Court of Australia
Gibbs(1), Stephen(2), Mason(3), Jacobs(4) and Murphy(5) JJ.

CATCHWORDS

Death Duties (Vict.) - Probate duty - Dutiable estate - Notional estate - Property over or in respect of &which deceased had power of appointment at time of death - Property of &which deceased competent to dispose immediately prior to death - Deceased given right under late husband's will to request trustee of his estate to raise and pay to her sum or sums out of capital of estate - Probate Duty Act 1962 (Vict.), s. 7(1) (f), (j).

HEARING

Melbourne, 1975, October 16.
Sydney, 1976, June 25. 25:6:1976
APPEAL from the Supreme Court of Victoria.

DECISION

1976, June 25.
The following written judgments were delivered:-
GIBBS J. I have had the advantage of reading the reasons for judgment

2. The crucial question is whether the deceased was, by reason of the provisions of cl. 6A(a) of the will, competent to dispose of the portion of the estate in question. Many authorities have recognized that the word "dispose" has a very wide meaning, and in its context in s. 7(1) (j) of the Probate Duty Act 1962 (Vict.) it includes any mode by which the property could, as the result of an act of the deceased, pass immediately before her death. I agree with the view expressed by Lord Greene M.R. in In re Parsons; Parsons v. Attorney-General (1943) Ch 12, at p 15 , that a person is competent to dispose of property which he can make his own. Since the deceased could by her act have made the property pass to herself immediately before her death, she was competent to dispose of it. I would only add that the statutory provisions considered in the New Zealand cases to which Mason J. has referred contained the words "at the time of his death", or similar words, and in that respect are distinguishable from s. 7(1) (j). (at p272)

3. On the other questions arising in the case I am content to adopt the reasons of both Stephen J. and Mason J. (at p272)

4. I would dismiss the appeal. (at p272)

STEPHEN J. The terms of the will of the late Hyman Silk and a recital of the relevant circumstances of this appeal appear in other judgments. The question is whether cl. 6A(a) of that will has the effect of imposing upon the estate of his widow a particular liability to Victorian probate duty. The Commissioner contends that it does so by conferring upon her either a power which is a general power of appointment at the time of her death in respect of property being part of his estate - s. 7(1) (f) - or, alternatively, a competency immediately prior to her death to dispose of such property - s. 7(1) (j). (at p272)

2. Section 7(1) (f) has, I think, no application to the present case and may be disposed of quite shortly. Critical to its application is the possession of a general power of appointment by the widow "at the time of" her death and these words must be given their precise and literal meaning. The language of a number of the paragraphs of s. 7(1) discloses the drawing of a nice but quite deliberate distinction between two temporal concepts, one of which is invoked by the phrase "immediately prior to his death" and the other by the phrase which is used in par. (f), "at the time of his death". (at p272)

3. Where the latter phrase is used that which is spoken of, being in the case of par. (f) the general power, must exist at the moment of death. However the widow's power under cl. 6A(a) came to an end on her death, death was its terminating event; accordingly whatever power was conferred upon her was not a power exercisable "at the time of" her death. It follows that s. 7(1) (f) is inapplicable, it cannot operate to render liable to duty any property over which power was conferred upon her by cl. 6A(a). (at p272)

4. Quite different considerations apply to s. 7(1) (j). Paragraph (j) reads:

"(j) Any property of which immediately prior to his death
the deceased was (whether with the concurrence of some
other person or not) competent to dispose, otherwise than
in a purely fiduciary capacity;..."

That the property to which it refers may be the property of a third party is clear; the express words of the paragraph in no way restrict its scope to property of the deceased nor does its general tenor or its context require that its operation should be so restricted. Indeed quite the contrary; the relevant context is one concerned with instances of notional, rather than actual, property. Moreover to so limit the operation of the paragraph would have curious consequences. In the case of personalty the paragraph would be no more than an unnecessary repetition of pars (b) and (c) of s. 7(1). It would be equally unnecessary in the case of realty situate in Victoria - see par. (a) - but would catch ex-Victorian realty, presumably limited to the case of Victorian domiciliaries, a result which par. (a) studiously avoids; such an effect upon realty might give rise to questions of the legislative competence of the State (Thompson v. Commissioner of Stamp Duties (1969) 1 AC 320 ; In the Will of Cookes, deceased (1960) VR 219 ; New Zealand Insurance Co. Ltd. v. Commissioner of Probate Duties (1973) VR 659 ). (at p273)

5. If, then, "property" in par. (j) includes the property of others, there remain two phrases requiring interpretation. The first is "competent to dispose". The competency spoken of must, I think, be legal competency to dispose and does not involve questions of the possession at the relevant time of a practical ability then and there to make an effective disposition. Physical remoteness of the deceased from the property, the lack of postal facilities, of legal advice or of whatever else may be necessary actually to effect a disposition, all such considerations will be irrelevant to the question of possession of the relevant competency. The words in parentheses in par. (j) are consistent with this view. The last two words of the phrase, "to dispose", are to be understood in the context in which they appear, that of a paragraph concerned predominantly, if not exclusively, with powers to deal with property not that of the deceased. Thus "to dispose" includes the effecting of a change in the ownership of property, not by its owner but by the deceased pursuant to some competency conferred by the owner. In any disposal of ownership one person loses title and another gains it; since the original owner has conferred upon another a competency to dispose it will be that original owner who will be the one to lose title by the exercise of that competency. Accordingly par. (j) must contemplate a disposal which does not involve any loss of title by the deceased but rather by the original owner. (at p273)

6. In the present case the widow possessed a competency to deprive of their rights of ownership those possessing interests in the estate of the original owner, whether legal or equitable. The fact that she could only pass those rights to herself is, I think, irrelevant. The description of the power contained in par. (j) is one which looks at the passing of ownership from the viewpoint of the original owner and from that viewpoint the material thing is the loss of ownership. So long as a deceased had the ability to bring about a loss of the ownership of property which had theretofore been enjoyed by another, that is enough; the destination of the ownership thus divested is, I think, irrelevant. In giving this meaning to "dispose" I do not adopt the reasoning of Luxmoore J. in In re Penrose (1933) Ch 793, at p 807 , but the view I take is consistent with, if not identical to, that of the Master of the Rolls in In re Parsons (1943) Ch 12, at p 15 . (at p274)

7. The other phrase in par. (j) requiring some examination is "immediately prior to his death". It identifies the time at which a deceased must possess the relevant competency if the paragraph is to apply. If, as I have concluded, that competency is no more than the possession of legal competency its existence may be tested at any moment of time; the paragraph has selected as the appropriate moment that occurring immediately before death and it follows that the temporal requirement of the section will be satisfied whenever a deceased possessed, at the moment before his death, the legal competency to dispose. (at p274)

8. Accordingly I regard par. (j) as extending to a case in which a deceased possesses, at the moment before death, the legal competency to acquire for himself the property of another. (at p274)

9. Taking this view of the operation of par. (j), it remains only to examine the will of the late Hyman Silk and to learn what precise competency cl. 6A(a) conferred upon his widow, the present deceased. (at p274)

10. One important question concerning cl. 6A(a) is whether, if the widow, immediately before her death, had made a request to the trustees that a sum be raised out of the capital, that would then and there have resulted in a disposal within s. 7(1) (j) by depriving of their ownership those previously entitled. If not, par. (j) will be inapplicable to the present case; the necessary competency as at the moment before death will be absent. On this point the appellant's first proposition is that a relevant disposition under cl. 6A(a) takes place only when, having raised a sum out of capital, the trustees come to pay it. Its second proposition is that the raising and payment of money is to be effected only for the personal benefit of the widow while living, as a supplement to her rights to income, her survival until time of payment being a condition of her entitlement to payment. The power which she possessed immediately before her death to make a request under cl. 6A(a) could not have resulted in any disposal, the trustees could not have given effect to that request because payment to her estate rather than to her was not within the contemplation of the clause. Accordingly, it is said, the widow possessed immediately before her death no competency to dispose. (at p275)

11. As to the first of these two propositions three members of the New Zealand Court of Appeal in Commissioner of Stamp Duties v. Pratt (1929) NZLR 163 took a contrary view. That case concerned a provision very like cl. 6A(a) and in the joint judgment of Ostler and Blair JJ. they said of a person in the position of the present widow (1929) NZLR, at p 173 :

"Once it is conceded that he had the right given him by
the will to obtain the property upon his request, then the
moment he made the request the property would become his
in law and in equity. It would become a debt due to him,
and, as such, a part of his estate.".

Smith J. was of the like view, saying (1929) NZLR, at p 175 :

"Furthermore, the person making the request would, in my
opinion, acquire a vested interest to the extent of the amount
thereby required to be raised. Equity regards that as done
which ought to be done: I see no reason why that principle
should not apply in this case. It follows, therefore, that the
death of a beneficiary after making a request and before payment
to him or her would not affect the vesting of the
property.".

This accords with my own view. When this matter was before the Full Court Lush J. said that "as soon as a request was made the deceased had an absolute right to receive the sum requested. The direction for payment to her is not inconsistent with, and to my mind does not suggest the exclusion of, payment to her personal representatives" (1976) VR, at p 70 . I would, with respect, adopt these views as my own. (at p275)

12. As to the appellant's second proposition it too is largely disposed of by the passages quoted above. Despite the cogent argument to the contrary, which relied upon a number of provisions of the will said to point to a contrary conclusion, I have in the end concluded that the true effect of cl. 6A(a) is to confer upon the widow an absolute right to receive the sum requested once the request is made by her to the trustees and that her death following the making of the request would not alter this position; the moneys when available in the hands of the trustees would require to be paid by them to the estate of the widow. It follows that this principal submission made on behalf of the appellant as to the interpretation of cl. 6A(a) must fail. (at p276)

13. The appellant also relies upon the quite distinct contention that the consequence of a request made by the widow under cl. 6A(a) can only be the raising of a sum of money by the trustees out of the capital of one half of the residuary estate and that that act gives rise to no disposal of then existing property. Money so raised is not to be equated to the corpus out of which it is raised. The two are quite distinct. It follows, so it is said, that a request made by the widow could not effect the disposal of any property existing at the time of the request. The sum of money to be paid to the widow would come into existence only some time after her request and hence after her death. There could accordingly have been no "disposal" of the sum by the widow immediately before her death nor would any disposal of the corpus itself have been effected by the request. (at p276)

14. This submission makes too much of the distinction which is sought to be drawn between the half share of residue with which cl. 6A(a) deals and the sums of money which the widow may require to have paid to her. The whole of the residuary estate is, by the opening words of cl. 6 and subject to powers of postponement and retention, to be converted into money, the proceeds of which, after payment of debts, expenses, legacies and duties, are to be divided into two parts comprised of those net proceeds and of all unconverted assets, one part being then held upon the trusts of cl. 6A(a). In those circumstances, and giving full recognition to the power of postponement and retention which is conferred, it is difficult to draw any valid distinction between the quality of that which is in the trustees' hands and the sums of money which they must, at the widow's request, pay to her. When cl. 6A(a) refers to the raising of a sum "out of the capital of such half part of my residuary estate" this does not, I think, contemplate more then the taking of a sufficient part of that half part, in whatever form it may be in, and, if not already in the form of money, converting it and paying it to the widow, any conversion being only so as to enable payment to be made. Such interests in that half part of residue as are created by cl. 6A(a) and (b) are wholly unaffected by its mode of investment or by the extent to which the power of retention in unconverted form has been exercised. (at p277)

15. The effect of a request by the widow under cl. 6A(a) will be to deprive of their legal or equitable interests in a half part of residue those who previously possessed those interests to the extent to which that half part is thereby depleted by payment to the widow. To that extent there will be a "disposal" by the widow to which s. 7(1) (j) is applicable. It is upon that footing that the Commissioner has proceeded in his assessment and I consider that in doing so he has acted in accordance with the terms of the statute. (at p277)

16. Counsel for the appellant drew to the attention of the Court certain consequences which may be thought to flow from the adoption of that interpretation of s. 7(1) (j) which I have accepted and which appear anomalous. As Lush J. observed in response to a similar submission made before the Full Court, such problems as this situation may involve must be left for decision when, and in the form in which, they do arise. Their possible existence has not persuaded me that any different construction of par. (j) is open, although it may be that they make it appropriate that at the legislative level there be some reconsideration of its provisions. (at p277)

18. I would dismiss this appeal. (at p277)

MASON J. Section 7(1) of the Probate Duty Act 1962 (Vict.) ("the Act") provides that the following classes of property

"Shall...be deemed to form part of the estate of a deceased
person:-
...
(f) Any property over or in respect of which the deceased
had at the time of his death a general power of appointment;
...
(j) Any property of which immediately prior to his death
the deceased was (whether with the concurrence of some
other person or not) competent to dispose, otherwise
than in a purely fiduciary capacity;
..." (at p277)

2. The appellant, the executor of the will of Jessica Myrtle Silk, deceased ("the deceased"), lodged a return of her estate for duty purposes disclosing assets to the value of $155,066.01. The respondent Commissioner assessed the estate to duty on a value of $312,524.31 by including in the assets for duty purposes the value (ascertained at $157,458.30) of a one-half part of the residuary estate of Hyman Silk, the deceased's husband, she having survived him. This interest which was not included by the appellant in its return for duty purposes, so the Commissioner asserts, falls within s. 7(1) (f) and (j) of the Act. (at p278)

3. Pape J. allowed the appellant's appeal from the Commissioner's disallowance of its objection (1975) VR 229 . This decision was reversed by the Full Court of the Supreme Court which held that the interest in question fell within s. 7(1) (j) (1976) VR 60 . (at p278)

4. The deceased's interest in her husband's estate arose under a disposition of one-half of his residuary estate contained in cl. 6A (a) of his will dated 17th November 1952 which was confirmed in relevant respects by a codicil dated 28th October 1957. By this provision he gave the deceased the net income of a one-half part of his residuary estate and authorized and directed his trustees, notwithstanding the trusts otherwise declared by the will, after the expiration of the period of five years from the date of his death,

"at any time or times on the request in writing of my wife
to raise any sum or sums out of the capital of such half part
of my residuary estate and pay the same to my wife for her
use and benefit in addition to the income of the share of my
residuary estate to which she is entitled..." (at p278)

5. Although the deceased did not call on the trustees to raise the whole of the capital of such half part of the residuary estate in accordance with cl. 6A(a), the existence of the power thereby conferred is said to bring the wife's interest within the two paragraphs of s. 7(1) of the Act. (at p278)

6. There is an initial question of construction: Did cl. 6A(a) confer on the deceased a right to payment of a sum once the request in writing was made, or was the right to payment conditional upon the deceased's survival until payment was made? There was a division of opinion between the judge at first instance and Lush and Crockett JJ. in the Full Court. I prefer the view taken in the Full Court. I do not regard the direction to "pay the sum to my wife for her use and benefit" as indicating that payment was to be made to the deceased personally, to the exclusion of her legal personal representatives. Nor is it correct to say that money paid to her representatives will be paid otherwise than for her use and benefit. It would be wrong to make the destination of that part of the capital represented by the sum demanded depend on the speed with which the trustees performed their obligation. In truth, as Lush J. said: "The making of the request placed the trustees under a duty, devoid of any element of discretion, to raise the money and to pay it" (1976) VR, at p 70 . (at p279)

7. The expression "general power of appointment" is defined in s. 4 of the Act so as to include

"any power or authority which enables the donee or other
holder thereof or would enable him if he was of full capacity
to appoint or dispose of any property or to charge any
sum of money upon any property as he thinks fit for his own
benefit whether exercisable by instrument inter vivos or by
will but does not include any power exercisable in a fiduciary
capacity under a dispositon not made by himself or exercisable
as mortgagee." (at p279)

8. This definition provides little assistance in applying s. 7(1) (f) to the facts of this case. The frailty of the Commissioner's argument in so far as it is based on this paragraph stems not so much from the elements in the statutory definition as from the terms of the paragraph itself. It requires that the power of appointment over or in respect of the property should subsist at the time of the deceased's death. (at p279)

9. Although I am reluctant to draw a distinction based on the difference between the expressions "immediately prior to his death" and "at the time of his death", the distinction is one which the Act itself insists upon making. The first of the two expressions, or its equivalent "immediately before his death", is to be found on no less than four occasions in s. 7(1) - see pars (d), (e), (i) and (j). The second expression appears twice in the same sub-section - see pars (c) and (f). The difference cannot be ignored. Indeed, the history of the section requires that it be recognized. The ancestor of s. 7(1) (j), which appeared in s. 104(1) of the Administration and Probate Act 1958, contained the expression "at the time of his death". It was altered in the 1962 Act to "immediately prior to his death". (at p279)

10. To give effect to the change in language it is necessary that the provision now be read as requiring that the power should exist not immediately prior to the deceased's death, but at the time of her death. As death is the event which terminates her power to make a request in writing it cannot be said with accuracy that the power existed at that time. For this reason I agree with the Full Court in thinking that the case stands outside s. 7(1) (f). (at p279)

11. The application of s. 7(1) (j) is a more complex matter. In essence it is a question of deciding whether the words "any property of which...the deceased was...competent to dispose" signify property, whether owned by him or not, of which he can dispose, or whether they are more limited in meaning, applying only to property owned by the deceased. (at p280)

12. Of the two interpretations I prefer the former. The language of the paragraph is apt to apply to anything which the deceased could alienate, either because he was the owner of it or because he had a capacity to dispose of it stemming from some authority or power, not being fiduciary in character. There is no persuasive consideration, textual or contextual, for restricting the "property" to which the paragraph refers to property owned by the deceased; the expression "any property" provides a contrary indication. The presence of s. 7(1) (f) dealing with property not owned by the deceased, is an insufficient reason in itself for concluding that par. (j) is necessarily confined to the deceased's own property. (at p280)

13. A similar view has been taken of the provisions of s. 5(2) of the Finance Act, 1894 (U.K.) which imposes estate duty on property of a testator of which he is "competent to dispose" at the time of his death. Although s. 22(2) (a) of the Finance Act provides that a person is competent to dispose of property if he has any power or authority enabling him to dispose of it as he thinks fit, where the power is exercisable by instrument inter vivos or by will, the definition is inclusive, not exclusive. Consequently it did not exclude the ordinary meaning of the words. (at p280)

14. In re Penrose (1933) Ch 793 decided that s. 5(2) applied to property over which the deceased held a power to appoint to a definite class of which he was a member. Luxmoore J. rejected the argument that if the deceased appointed to himself he acquired the property, but did not dispose of it, saying (1933) Ch, at p 807 :

"A donee of a power who can freely appoint the whole of
the fund to himself and so acquire the right to dispose of
the fund in accordance with his own volition, is, in my
judgment, competent to dispose of that fund as he thinks fit,
and it can make no difference that this can only be done by
two steps instead of by one - namely, by an appointment to
himself, followed by a subsequent gift or disposition, instead
of by a direct appointment to the object or objects of his
bounty."

In In re Parsons (1943) Ch 12 , the Court of Appeal held that the deceased was competent to dispose of a legacy given to him by his wife's will, even though he subsequently disclaimed the legacy. Lord Greene M.R. said (1943) Ch, at p 15 :

"The phrase 'competent to dispose' is not a phrase of art,
and, taken by itself and quite apart from the definition
clause in the Act, it conveys to my mind the ability to dispose,
including, of course, the ability to make a thing your
own....During the period between the death of the testatrix
and the disclaimer he was unquestionably 'competent
to dispose' within the meaning of those words in the subsection,
which, I think, are wide and, in a sense, popular in
meaning."

His Lordship went on to express the view that the facts fell within the extended definition contained in s. 22(2) (a) of the Act. (at p281)

15. The same approach was taken to a similar statutory provision by the Supreme Court of Canada in Montreal Trust Co. v. Minister of National Revenue (1956) 4 DLR (2d) 449 , in which In re Penrose (1933) Ch 793 was followed and the observations of Luxmoore J. were applied. However, the two English decisions have attracted criticism, notably in Tawse's Trustees v. Lord Advocate 1943 SC 124. . (at p281)

16. Earlier, in Commissioner of Stamp Duties v. Pratt (1929) NZLR 163 , the New Zealand Court of Appeal held that a power given by will to the testator's son enabling him to call for capital gave him power to obtain capital but not to dispose of it. For this reason it was decided that he did not have a general power of appointment, notwithstanding the presence of an extended definition of "general power of appointment". Subsequently, in In re Going (1951) NZLR 144 and Re Manson (1964) NZLR 257 , the New Zealand Court of Appeal affirmed that Pratt's Case (1929) NZLR 163 was binding. It should be pointed out that in its latest reconsideration of Pratt's Case the Court of Appeal in Manson's Case (1964) NZLR 257 arrived at its decision, stating that the Court should not merely substitute for its earlier decision an opposite conclusion which it thinks preferable. Manson's Case is therefore not to be taken as a reaffirmation of Pratt's Case (1929) NZLR 163 on the footing that the view there expressed was unquestionably correct, for the reaffirmation was expressly based on stare decisis. (at p281)

17. With respect to those who have favoured a contrary view, it is my opinion that In re Penrose (1933) Ch 793 and In re Parsons (1943) Ch 12 were correctly decided and that the criticisms made of the observations of Luxmoore J. and Lord Greene M.R. are misconceived. For my part I would merely add that I prefer Lord Greene's exposition of s. 5(2) to that of Luxmoore J. The appointment of property by a donee of a power to himself is correctly described as a disposition and an acquisition. The fact that it is an acquisition by the appointor does not deny its other character as a disposition by him. So long as he possesses the power to appoint he is competent to dispose of the property which is the subject of the power. (at p282)

18. Accordingly, I consider that the case falls within s. 7(1) (j) and that the appeal should be dismissed. (at p282)

JACOBS J. Section 7(1) of the Probate Duty Act 1962 (Vict.) brings to duty by pars (f) and (j):

"(f) Any property over or in respect of which the deceased
had at the time of his death a general power of appointment;
...
(j) Any property of which immediately prior to his death
the deceased was (whether with the concurrence of
some other person or not) competent to dispose, otherwise
than in a purely fiduciary capacity;".

"General power of appointment" is defined in s. 4 to include "any power or authority which enables the donee or other holder thereof or would enable him if he was of full capacity to appoint or dispose of any property or to charge any sum of money upon any property as he thinks fit for his own benefit whether exercisable by instrument inter vivos or by will". (at p282)

2. Clause 6A(a) of the will of Hyman Silk provided that the trustees should hold one-half of the residuary estate upon trust during the lifetime of his wife Jessica Silk to pay to her the net income thereof. The trustees were then authorized and directed, so far as is now relevant, "at any time or times on the request in writing of my wife to raise any sum or sums out of the capital of such half part of my residuary estate and pay the same to my wife for her use and benefit in addition to the income of the share of my residuary estate to which she is entitled". On the death of Jessica Silk the trustees were to hold the said one-half of the residuary estate as to capital and income upon trust for the person or persons entitled to the income and capital of the other half of the residuary estate. Jessica Silk during her lifetime duly requested the trustees to raise a certain sum and to pay it to her, and this was done. She died without having made any further request. The Commissioner of Probate Duties claimed that the remaining balance of this one-half of the residuary estate was brought to duty under pars (f) and (j) of s. 7(1). At first instance the Victorian Supreme Court (Pape J.) found against the Commissioner (1975) VR 229 but on appeal to the Full Court the property was held to be dutiable under s. 7(1) (j) but not under s. 7(1) (f) (1976) VR 60 . The executor has appealed and on the appeal it has been argued on behalf of the Commissioner that both par. (f) and par. (j) embraced the property in question. (at p283)

3. Whether or not the balance of the one-half of the residuary estate in which Jessica Silk had a life interest is brought to duty under either of these paragraphs depends upon whether on the true construction of cl. 6A(a) Jessica Silk either had the power at the time of her death (par. (f)), or immediately prior to her death was competent (par. (j)), to dispose of the corpus of the share in the residuary estate as she thought fit. Paragraph (f) brings to duty property over or in respect of which a deceased had at the time of his death a general power of appointment which includes any power or authority which enables the donee or other holder thereof to appoint or dispose of any property as he thinks fit for his own benefit. The words "competent to dispose" in par. (j) embrace that same concept. Each imports the idea that the property was not in the ownership of the deceased so that thereby he could freely deal with it but nevertheless was property with which he could freely deal as he thought fit as though it were his own property. The question is whether Jessica Silk had that power. (at p283)

4. For the appellant it has been submitted that the only power of Jessica Silk was to call upon the trustees to raise and to pay her sums out of corpus during her lifetime and that she could not direct the trustees how the corpus should go in remainder after her death. For the respondent Commissioner it is submitted that she could have exercised the power in the will and at the same time have directed the trustees to pay the corpus to such person or persons as she thought fit. Thus, it is said, she was competent to dispose of the property. (at p283)

5. A power or competency to acquire is not of itself a power to dispose but by a doctrine of equity the exercise of a power to acquire by a purported disposition may in certain circumstances be made good. The argument for the Commissioner is not that the will in terms gave such a power or competency to Jessica Silk to dispose of the property but that the application to the power contained in the will of the equitable doctrine which aids the defective execution of a power results in her having had a complete power of disposal. The terms of the will were quite specific and did not in terms give a power to dispose. Jessica Silk could make a request in writing to the trustees, who thereupon had power, to raise any sum or sums out of the capital of the one-half part of the residuary estate and to pay the same to her for her use and benefit in addition to the income to which she was entitled. The words "for her use and benefit" do not in my opinion limit the occasions of exercise by her of the power to require payment to those occasions when she had personal need of the sums raised out of capital: In re Richards (1902) 1 Ch 76 ; In re Ryder (1914) 1 Ch 865 ; Re Shuker's Estate; Bromley v. Reed (1937) 3 All ER 25 . Contrast Re Pedrotti's Will [1859] EngR 1045; (1859) 27 Beav 583 (54 ER 231) . There was no intention to confer any discretion on the trustees. She was to be the judge of her own "benefit". If she had given notice while her entitlement to income was continuing but had not received payment at the time of her death the sum or sums would be payable to her personal representatives. She had an equitable right to receive the moneys requested once she had given the requisite notice and she could dispose of the moneys accordingly. If she had given notice she would have had a power to dispose of the sum requested. She could not elect to take any of the actual property comprised in the residuary estate, although no doubt the trustees could, if they wished and with her consent, appropriate specific property in satisfaction of the sums which they had been requested by her to raise. (at p284)

6. Leaving aside for the present the moment of time immediately prior to her death, but considering her lifetime up to that moment, if during that time Jessica Silk had, instead of making a request in writing to the trustees to raise a sum of money and pay it to her, requested them to pay that sum to a person or persons nominated by her, that direction, though it would have been a defective execution of the power, would, I think, have been regarded as good in equity. On the true construction of the will, she was to be the judge of her own benefit and the receipt did not need to be a personal receipt by her of the moneys. She could therefore do in one step - a direction to the trustees to pay a third person - what she could have done in two steps - a direction to raise and pay to her and an assignment by her of the moneys so payable. This principle is expressed in Farwell on Powers, 3rd ed. (1916), p. 366, as follows:

"Appointments made in substantial accordance with the
expressed purpose of the power, although not strictly in
accordance therewith modo et forma, are good appointments
in equity."

This was the principle which was applied by Luxmoore J. in In re Penrose (1933) Ch 793 . There, the testatrix by her will devised and bequeathed all her residuary real and personal estate to trustees upon trust to pay the income to her husband for life and after his death upon trust for, inter alia, "such of the following persons ...as my said husband shall by any deed or deeds with or without power of revocation and new appointment or by will or codicil appoint". Included among the persons was the husband himself. He could thus exercise the power in order to determine that after his death the remainder should go to himself. This being the testatrix's intention, it was held that the unlimited power to acquire the remainder enabled the donee to dispose of the property to others as he thought fit. In this context Luxmoore J. (1933) Ch, at pp 807-808 used the words so strongly relied on by the Commissioner.

"It is argued that the power in the present case is a limited
power and does not authorize the donee to appoint or dispose
of the property subject to it as he thinks fit. It is said
that if he appoints to himself he only acquires the property
but does not dispose of it, and that his power to dispose of
it as he thinks fit does not arise under the power but after
he has exercised it in his own favour. In my judgment this is
too narrow a construction to place on the words of the
definition. A donee of a power who can freely appoint the
whole of the fund to himself and so acquire the right to dispose
of the fund in accordance with his own volition, is, in
my judgment, competent to dispose of that fund as he thinks
fit, and it can make no difference that this can only be done
by two steps instead of by one - namely, by an appointment
to himself, followed by a subsequent gift or disposition, instead
of by a direct appointment to the object or objects of
his bounty. If under a power the donee can make the whole
of the property subject to it his own, he can by exercising
the power in his own favour place himself in the position to
dispose of it as he thinks fit. The power to dispose is a necessary
incident of the power to acquire the property in
question." (at p285)

7. It is clear however that the testator in the present case never intended that Jessica Silk should have power simply to appropriate the property or its proceeds after her death to her estate or to persons of her own choosing or to dispose of it by will. The remainder expectant on her death was vested in objects selected by the testator. Their interests were not contingent on default by Jessica Silk in the exercise of her power. Their vested interests were subject to being wholly or partially divested if during her lifetime Jessica Silk saw fit to give notice requiring payment to herself "in addition to the income" of a sum or sums raised out of the corpus. But their vested interests could not otherwise be divested. The intention of the testator was that his dispositions in remainder should, except in one event, be effective. Compare the remarks of James L.J., albeit in the context of a different will, in In re Thomson's Estate (1880) 14 Ch D 263, at p 264 : "If there is one thing clearer than another in the case, it is that the testator intended his own will, and not that of his wife, to be that by which the destination of his property was to be determined." (at p286)

8. In my opinion it was not the intention of the testator that Jessica Silk should be able to exercise her power in such a way that the exercise of the power did no more than change the persons taking the corpus after her death. It is true that she could call for the proceeds of sale of corpus and could thereby extinguish the remainders but she could not simply redirect the disposition of the remainders. (at p286)

9. Let it be assumed that Jessica Silk had given a direction to the trustees, "I now direct you to hold the property on trust to pay the income to me for life and after my death for A, B and C". Would such a direction be within the power given to Jessica Silk? I do not think so. It would be contrary to the intention of the testator disclosed in his will. In terms of the will Jessica Silk could only make a request of a kind which could result in a payment to her of a sum raised out of capital "in addition to the income". If the request was capable of having that result it would not matter if in form the request was to pay the sum not to her but at her direction. Such a request would fall within the intention of the testator, but a direction of the kind which I have envisaged would effectively be nothing other than a disposition of the capital after the death of the life tenant and would be contrary to the testator's intention. This exercise of the power, defective as it obviously would be, would not be made good under the equitable doctrines relating to the defective execution of powers because so to do would directly defeat the testator's intention. It is not to the point that she might have achieved the same purpose by an effective exercise of the power and a subsequent disposition to herself for life and to objects of her own choice in remainder. (at p286)

10. However, the question remains whether Jessica Silk could immediately before her death have exercised her power so as to require the trustees to hold the one-half share of the residuary estate or a sum raised out of that one-half share in trust for persons of her choosing. I have already expressed my opinion that earlier during her enjoyment of income, she could effectively have done so. It does not follow that she could have done so immediately prior to her death. It must be recalled once again that the assumed exercise of the power would be defective, so that the question is whether the defective exercise would be made good in equity as a substantive effectuation of the testator's intention. If the defective exercise would not be made good in equity then there was no moment of time left in which, having exercised her power to acquire, she might then exercise her power to dispose of the property. In my opinion a disposition of the property immediately before her death would not be an effectuation of the testator's intention. He makes clear by his use of the words "in addition to the income" that he envisaged a request for a sum raised out of capital being made at a time when the right to receive the income could merge with the right by election to receive the sum raised out of capital. He did not envisage a disposition of the capital at a time when the income had wholly accrued. Let it be assumed that Jessica Silk prospectively directed the trustees as follows, "I direct you immediately prior to my death to raise a sum of $X and to pay it to the following persons..." The purpose of the testator would be defeated as surely as it would if there was a re-disposition of the remainder at an earlier point of time. If instead of the prospective request and direction to the trustees, it be envisaged that the request and direction were made immediately prior to death, then the only consequence of the request would be a re-direction of the interests in remainder and it was not the intention of the testator that Jessica Silk should have that power of re-direction except as an incident of her power to call for a sum to be raised out of the capital and paid to her in addition to the income. An exercise of that power immediately prior to death, a theoretical possibility only, would be no different from a direction to the trustees of the kind which I have earlier postulated. A power in a life tenant immediately prior to death to dispose of the capital is indistinguishable from a power by instrument inter vivos to appoint the remainder expectant on the determination of the life tenancy. That power Jessica Silk did not have. The theoretical possibility that she might at the moment immediately prior to death make the request and therefore acquire the capital sum does not make her competent to dispose of that sum until she should have acquired an indefeasible right to be paid that sum. Whereas during the remainder of her life the difference in time between acquisition and disposition would hardly matter, it becomes crucial when the only relevant time for competency to dispose is the moment immediately prior to death. There was a moment for acquisition but without the aid of the doctrine making good a defective execution of a power there was no moment for disposition. Section 7(1) (j) was not intended to cover such a case as the present one. It was intended to cover cases where it could in all respects be said that the deceased was competent to dispose of the property in question as he or she thought fit. Whereas in the case of a disposition such as that in In re Penrose (1933) Ch 793 there could be said to be such a power, the same cannot be said in the present case. (at p288)

11. I would therefore allow the appeal and restore the orders made by Pape J. (at p288)

MURPHY J. The case arises under the Probate Duty Act 1962 (Vict.) which was a consolidating and amending measure. (at p288)

2. The legislative intention was unquestionably to overcome various devices for avoiding or minimizing death duty by reducing the value of the estate at death. The Act includes as notional estate property which would not form part of the actual estate although control of it could be retained up until death. (at p288)

3. The case does not come within s. 7(1) (f) of the Act. Assuming that the relevant provisions of the deceased husband's will constituted (within the meaning of the Act) a general power of appointment to the deceased wife, this was to be exercised in her lifetime. It did not exist at the time of her death. (at p288)

4. The case does come within s. 7(1) (j). Immediately before her death, the deceased was competent to dispose of the relevant property. Section 7(1) (j) extends to property not owned by the deceased and comprehends a disposition to or in favour of the deceased. It is not concerned only with a power to dispose other than to the deceased. The Act imposes duties on the actual or notional estate of a deceased, and the inclusion of property which the deceased could dispose of in favour of herself in consistent with the general legislative intention. This is obviously the purpose of s. 7(1) (j), which includes property which was available to the deceased right up to the time of her death upon a mere request in writing. In a sense, it was like "money in the bank" for the deceased during her lifetime, but not upon her death. Contrary to the argument put, it would be difficult to attribute to the legislature an intention to include within the estate property belonging to someone else which the deceased could dispose of only to another during her lifetime. If no advantage could flow to the deceased during her lifetime from such a disposition and it was not disposable by her will, the inclusion of the property in her estate would not fit into the general intention disclosed by the Act. (at p289)

5. In my view, the fact that the money could not be paid instantaneously upon her request does not detract from the operation of the provision. This aspect was dealt with well by Lush J. in the Supreme Court. (at p289)

6. The appeal should be dismissed. (at p289)

ORDER

Appeal dismissed with costs.

(HIGH COURT OF AUSTRALIA.)

EQUITY TRUSTEES EXECUTORS AND

AGENCY CO. LTD..................APPELLANT;
APPELLANT,
AND

THE COMMISSIONER OF PROBATE DUTIES

(VICTORIA)......................RESPONDENT.
RESPONDENT,
ON APPEAL FROM THE SUPREME COURT OF
VICTORIA.