Buzza v Comptroller of Stamps

Buzza v Comptroller of Stamps - [1951] HCA 16 - HCA 1951 case summary — Zoe

[30]

It is now necessary to turn to the will before stating the manner in which the operative part of the indenture affected the testamentary dispositions made by the testator. In the events which happened the residuary estate was devised and bequeathed upon the following trusts: as to one-third of the income to pay it to the testator's widow during widowhood; subject thereto as to both capital and income for the children in equal shares as tenants in common. The will conferred power upon the trustee to invest any part of the trust moneys of the residuary estate in the purchase of a dwelling house for the use of the widow during widowhood and this power was exercised. The clause directed that the rates, taxes and outgoings of the dwelling should be paid out of the estate but empowered the trustee to sell it at any time the trustee thought fit. At the time of the making of the indenture the value of the assets forming the residuary estate appears to have been about £29,600, producing an annual income averaging over the prior three years about £1,034. Of this one-third, or about £345, would be payable to the widow. Of the capital about £16,720 was invested in forms of personalty readily convertible into money. The remaining value of the residue was represented by realty, including the dwelling purchased for the widow. In this situation the operative part of the indenture provided that in pursuance of the agreement between the widow and children and of the premises, the trustee undertook and agreed to administer the residuary estate as if, without affecting the other provisions, it had provided that the trustee should hold the residuary estate on the trusts which it proceeded to set out. Those trusts are as to the realty to the use of the widow for life during widowhood and after her death to the children in equal shares as tenants in common, with a proviso that if in any year the amount of the net income from the realty should be less than £340 the deficiency should be raised for the widow's benefit and charged on certain of the realty. Subject to this trust the remainder of the residuary estate (that is the personalty) and the income thereof "should be appropriated and distributed forthwith among the children in equal shares as tenants in common". There follows a release of the trustee from the trusts created by the will and an indemnification. It will be seen that this rearrangement accomplished more than one object. Because the widow's share of income under the will was one-third of the whole income of the estate it was difficult to appropriate to the children any specific part of the estate as representing their shares. The rearrangement removed this difficulty. In the next place the widow is given a full life estate during widowhood in the whole of the realty, including the purchased residence. None of the realty is subject to a trust for conversion and the residence is no longer subject to the power of the trustee to sell it, a power which would have meant that the proceeds fell back into residue. In the third place the widow is assured of a net income of £340 per annum by a charge upon the land. In the fourth place the future interest or remainder to the children is restricted to the realty and the personalty is released from the widow's life estate. In the fifth place it is to be held upon a trust in their favour as tenants in common in equal shares for immediate appropriation and distribution among them. I am unable to see any escape from the conclusion that the instrument, effecting as it does this rearrangement of trusts is a settlement. It may be called a resettlement, but it is not because of that description any less a settlement. It takes trust property and, leaving the property vested in the trustee, it limits equitable estates in succession. It is true that the remaindermen under the old trusts held substantially the same interests. But the life tenant did not and these are fresh limitations. The personalty, which was subject to successive interests under the old trusts, is released from them, but it is made subject to a trust and an active trust. It may be that if the personalty had been free and had for the first time been subjected to a trust for distribution among the four beneficiaries and that had been done by an instrument confined to the purpose, it would not have been a settlement. But the case is quite otherwise when the instrument deals as a whole with assets held by a trustee and defines the trusts with respect to different descriptions or parts of the assets. Here the instrument deals with the whole trusts and expresses an indivisible transaction as part of which the trust of personalty is made a trust for distribution. The creation of new trusts, the inclusion of trusts to persons in succession and the restriction involved in all the trusts upon the enjoyment which would arise from full ownership mark the instrument out as a settlement. Even the trust to appropriate and distribute involves a departure from the rights of enjoyment which full and immediate ownership would give the children. It is notoriously difficult to define a settlement, but that does not mean that it is difficult to recognize one. This instrument appears to me to be well within the conception, even if the limitation of interests in succession were an indispensable attribute, which it is not.

[35]

The indenture as to which the question of liability for stamp duty arises deals with the administration of the trusts of the testator's residuary estate. He created, by his will, trusts of his residuary estate in favour of his widow and children. His widow was entitled to one-third of the income of the whole residuary estate until her death or remarriage: the children were entitled, subject to the trust in favour of the widow, to the income and capital of the residuary estate. Thus their enjoyment of any part of this estate, whether capital or income, was apparently postponed until the death or remarriage of the widow, although she was entitled to nothing more than one-third of the income. She and the children were the only persons with any interest in the residuary estate. Being sui juris, after the testator's death, the widow and children and the trustee agreed by the aforementioned indenture to change the manner of administering the residuary estate provided by the will. They agreed that it was to be administered by the trustee "as if without otherwise affecting the provisions of the said will it had therein been provided that the trustee should hold such residuary estate upon and subject to" the trusts contained in the indenture. The trustee joined in the indenture in consideration of the release and indemnity which the wife and children gave in respect of the departure, which the indenture involves, from the trusts of the will. The instrument is entitled "Indenture of Agreement and Release". The parties to it thereby agree to set aside a specific part of the residuary estate which is described in the Schedule. According to the arrangements to which they agreed, the trustee, instead of holding the residuary estate upon the trusts in the will, undertook by the indenture to make a present distribution equally among the children of the other part of the residuary estate: each child taking an absolute share. In regard to the widow the trustee undertook to hold the part of the residuary estate set aside by the indenture upon trust for the widow until her death or remarriage, with remainder to the children, but their interest is made subject to a condition which guarantees the widow a minimum annual income of £340, so that, if the income which she derives from such part of the residuary estate is less in any year than that amount, it could be mortgaged to raise the money necessary to provide her with that annual sum.

[38]

In Vaizey on Settlements (1887-1888), vol. 1, pp. 1 & 2, it is said that "the homely word "settlement" has been put to various technical uses in the language of our law"; and that the author used the word to mean "a legal act designed to regulate during a specified period the enjoyment of property, and to provide during the same period for the safe custody and prudent management of the subject-matter". The author contradistinguishes a settled estate, whether in legal or popular language, from an estate in fee simple. He said that the former is understood to be one "in which the powers of alienation, of devising, and of transmission according to the ordinary rules of descent, are restrained by the limitations of the settlement". He quotes the passage in Micklethwait v. Micklethwait [1] , in which it is said that "it would be a perversion of language to apply the term "settled" to an estate taken out of settlement and brought back to the condition of an estate in fee-simple". It is added that "this passage must not be understood to mean that during the continuance of the settlement the settled land cannot be sold. It can always be sold, and the money produced will become instead subject to the settlement. It is the perpetual interest in this variable subject-matter which cannot be alienated". The learned author refers to Kelland v. Fulford [2] , which says that in s. 69 of the Land Clauses Consolidation Act 1845 Imp. (8 Vict. c. 18) "settled" simply means "standing limited". In Bythewood & Jarman's Conveyancing, 4th ed., 1884-90, vol. VI., p. 127, this exposition of the meaning of "settlement" is adopted: and the authors add: - "Settlements thus essentially involve some modification of absolute proprietary right over property, and they usually, though not necessarily, create successive estates or interests therein". In the Encyclopaedia of Forms and Precedents, 2nd ed., vol. 16, p. 4, it is said that the forms given for the creation of settlements "determine from their dates, first, how during the subsistence of the settlement the benefit yielded from time to time by the settled property shall be apportioned among the objects of the settlor's care; secondly, upon whom at the close of the settlement the settled property shall devolve; and thirdly, the means whereby, while the settlement subsists, the property settled may be managed and possibly changed in a husbandlike manner". In the same work, at p. 9, it is said: "The foundation of a settlement of personalty is the vesting of the whole legal interest in and power of disposition over the property to be settled in competent and trustworthy persons, whose duty it will be to guard and administer that property for the benefit, according to the settlement of the several persons in existence, and to come into existence, in whose interest the settlement is made. In a realty settlement the same duty is imposed on the tenant for life as estate owner, subject, as regards capital moneys, to the security afforded by the trustees". In the case of Williams v. Lloyd [1] , which was a case under s. 94 of the Bankruptcy Act 1924-1932 Cth., Dixon J. cited the definition of a settlement given by Cave J. in the case of In re Player; Ex parte Harvey [2] . That case was under s. 47 of the Bankruptcy Act 1883 Imp. (46 & 47 Vict. c. 52), from which s. 94 is derived. There it is said: "The end and purpose of the thing must be a settlement, that is, a disposition of property to be held for the enjoyment of some other person. But where the gift of money is to be expended at once, the transaction is not, in my opinion, within sec. 47 of the Act of 1883".

[40]

The meaning of "settlement" under the Stamp Act 1891 Imp. (54 & 55 Vict. c. 39) is discussed in Massereene v. Commissioners of Inland Revenue [3] . There the question was whether a deed was an instrument whereby property was "settled or agreed to be settled in any manner whatsoever". These are the same words as those upon which the instant case turns. Palles C.B. said: "This description comprises such instruments only as, by their own force, either by actual transfer or by agreement therein contained, impose, or agree to impose, trusts upon property which previously was free from the same". He said: "It is essential to such an instrument that there shall be - 1, such free property, by which I mean property which is then not, according to our jurisprudence, subject to the trusts in question; 2, a settlor, who either is, or appears on the face of this instrument to be, competent to subject that free property to trusts which, until the execution of the instrument, did not bind it; and 3, an imposition by the instrument of such trusts upon such property". In that case there had been a marriage settlement and the husband and wife executed a deed appointing a new trustee. The operative part of the deed, besides doing that, declared that all the estate and interest of the surviving trustee, as such, should vest in him and the new trustee jointly upon the trusts applicable thereto "by the settlement or otherwise"; also that they should hold various investments mentioned in the schedule to the deed upon the trusts and subject to the powers and provisions applicable thereto "by virtue of the settlement or otherwise". When this deed came into force it would seem that it became the "charter" of the beneficiaries' rights and interests. But the Court held that it was not an instrument whereby property was settled or agreed to be settled. Palles C.B. could not find that any of the three elements which, in his opinion, are needed to make a settlement was present. He said that at the date of the deed there was no "free property" in the sense in which he used the word; secondly, "there was no settlor" because the husband and wife were the only persons who had any beneficial interests in the property and "they had no more than limited interests" as appeared by the marriage settlement; and, thirdly, "the instrument does not purport to impose new trusts upon the property". In relation to the third matter the Chief Baron said: "No doubt it (the instrument) contains a declaration that the property shall be held, by the continuing and new trustee, upon the trusts of the settlement; but the prior part of the instrument shows that the reason of that declaration is not the bringing into the settlement additional property not theretofore subject to the trusts, but the introduction of a new trustee, who thereby admits the identity of the stocks with those purchased with the trust funds".

[42]

The residuary property was already subject to the settlement made by the will. The indenture is not strictly a resettlement because the testator of course is not a party to it. As regards the indenture the testator is not the settlor. If it is a settlement, the question is: Who is the settlor? In Massereene v. Commissioners of Inland Revenue [1] , Madden J. said: "Mr. Price suggested the true test when he asked who was the settlor in the instrument which we are asked to treat as a settlement. Certainly not the tenant for life; and as certainly not the trustees, from whom the declaration proceeds, but who have no beneficial interest in the property. The moneys which represented the settled land were as truly and effectually settled property before the execution of the appointment as they are at the present moment". The trustee of the will is not the settlor. The trustee could not be a settlor because it had no beneficial interest in the residuary property or any power other than as trustee of this will. The widow and children both had limited interests in the testator's residuary estate. The widow's interest did not enable her to "settle" or agree to "settle" the properties mentioned in the indenture upon herself for an estate for life with the power to mortgage and upon the children in remainder. The children's interest was also limited and it did not enable them to "settle", or agree to "settle", the residuary estate. The indenture really took out of the settlement made by the will the part of the residuary estate not included in the schedule in the indenture: it did not "resettle" that part of the residue, but authorized the trustee to distribute it among the children. The properties to which the indenture refers remained "settled" but subject to the change in the manner of administration to which the widow, children and trustee agreed by the indenture. That instrument did not resettle those properties. The indenture may be called a fresh charter of the rights of these beneficiaries. A charter is not as such chargeable with duty. It is not chargeable as a settlement unless it fulfils the primary condition of being an instrument whereby property is settled or agreed to be settled in any manner whatsoever. In my opinion this indenture does not satisfy this condition.

[47]

It will be seen that under the will during the widowhood of the testator's wife the children could not, without her consent, require the trustee to distribute any part of the corpus of residue amongst them because she was entitled to one-third of the income of the whole residuary estate and this income could fluctuate from time to time, and also because of the provision authorizing the trustee in its discretion at any time during the widowhood to invest any part of the residue in the purchase of a dwelling house. The purpose of the indenture was, therefore, as the recitals stated, to allow the children to have a present distribution of part of the corpus of residue. Accordingly, by agreement between the widow and children, including the adopted daughter, they being all sui juris and the only persons entitled to residue, the trusts of the indenture were substituted for the trusts of the will and the trustee agreed to administer the residue upon the trusts of the indenture in place of the trusts of the will. These trusts differed materially from the trusts of the will because under the indenture the widow was confined to the income of the real estate included in the schedule with the right to resort to the corpus if the net income in any year was less than £340, and the trustee no longer had a discretion to invest part of the corpus of residue in the purchase of a dwelling house for the widow. The children became entitled to an immediate distribution of the residue other than the real and personal property in the schedule. They became entitled to the property in the schedule as tenants in common in equal shares in remainder upon the death or remarriage of the widow. The trust for conversion contained in the will was eliminated and the children became entitled to equal shares in the existing property in specie. The most usual form of settlement is an instrument which settles the enjoyment of property on persons in succession but an instrument can be a settlement, although the proprietary interests which it creates are not interests in succession (Kane v. Kane [1] ; Lloyd v. Prichard [2] ; Re Berens' Settlement Trusts; Berens v. Benyon [3] ; Davidson v. Armytage [4] ; Davidson v. Chirnside [5] ).

At a glance

Court

Decision date

Before

Source

Judgment (63 paragraphs)

Parties