Commissioner of Stamp Duties (NSW) v Perpetual Trustee Company Limited [1926] HCA 14

Commissioner of Stamp Duties (NSW) v Perpetual Trustee Company Limited [1926] HCA 14 - HCA 1926 case summary — Zoe

[44]

(g) By an agreement in writing made Ist April 1921 between the Government of the Commonwealth of Australia (thereinafter called the Commonwealth Government) of the first part and the Company of the other part, after reciting that pursuant to certain telegrams, letters and other documents which have passed between the British Government and the Commonwealth Government, com- mencing in the year 1916, the British Government had purchased from or through the Commonwealth Government a large quantity of Australian wool for the year 1916 and subsequent years up to and including 30th June 1920 And that it was part of the terms arranged between the British Government and the Commonwealth Government that any profits derived by the British Government from the resale of such wool for civilian purposes should be divided in equal shares between the British Government and the Common- wealth Government And that the Department of Raw Materials, Ministry of Munitions, of the British Government had administered the purchase and sale of such wool on behalf of the British Govern- ment And that balance-sheets and statements of accounts of the transaction in question had been prepared and audited by Messrs. Heselton and Butterfield, chartered accountants, Bradford, England, for periods respectively ended the 31st March 1918, 31st March 1919 and 31st March 1920, and these successive statements of accounts had been accepted as correct by the Commonwealth Government, and part of the profits shown thereby had been divided between the British Government and the Commonwealth Government to their mutual satisfaction And that the Company had been incorporated in Victoria, Australia, with the object of taking over from the Commonwealth Government with the consent of the British Government the half share of the Commonwealth Government in the undistributed profits (including half of the unsold wool) held by the said Department of Raw Materials for account of the Commonwealth Government the result of the aforesaid transaction And that the Company had shares in capital £25,000,000 divided

[46]

into 25,000,000 shares of £1 each it was agreed as follows : - (1) The Commonwealth Government with the consent of the British Govern- ment hereby agrees to transfer and make over to the Company all the rights of title, estate and interest of the Commonwealth Government under the said agreement and arrangement with the British Government to the intent that the Company shall be entitled to the half share of the Commonwealth Government arising out of the aforesaid transaction so far as such share has not already been paid to the Commonwealth Government (2) The Company shall ratify, confirm and accept as binding on it all settlements, arrange- ments and accounts already made and agreed to between the Commonwealth Government and the British Government (3) The Commonwealth Government shall formally notify the British ; Government of the transfer hereby agreed to be made and that the Company is now fully empowered and entitled to settle and adjust _ all accounts with the British Government relating to the said half - profits aforesaid and to receive and give a good discharge to the British Government for any part of such profits and assets not already paid to the Commonwealth Government by the British Government (4) The Company shall indemnify and save harmless the Commonwealth Government from and against all liability, claims and demands of and in connection with the said matters and transactions or in any way arising out of same (5) In consideration of the premises the Company shall issue to the Commonwealth Government or to such companies, firms and persons as the Common- wealth of Australia Central Wool Committee for and on behalf of the Commonwealth Government may nominate 12,000,000 ordinary shares of £1 each in the capital of the Company and £10,000,000 priority wool certificates all fully paid up Provided that the said shares and certificates may be reduced in number by payments to any such companies, firms or persons in lieu of such shares and certificates.

[123]

importance in elucidating the questions directly at issue. Sec. 101 taxes the property of " every person who dies after the passing of this Act, whether in New South Wales or elsewhere, and wherever the deceased was domiciled." That is to say, the " persons" to be affected are the population of the whole world, even though utter strangers personally to the State. It is therefore manifest that the duty to be valid must be imposed on property over which the State has territorial jurisdiction (Macleod v. Attorney-General for New South Wales (1) ). Then, as to the subject matter taxed, it is described in sec. 101 as "the final balance of the estate of the deceased" and "all property" to be separately assessed. Unless the remaining sections, explanatory of and referential to sec. 101, are incapable of harmonizing with sec. 101 as constitutionally construed, they must be interpreted as relating to property within or subject to the territorial jurisdiction of New South Wales, either actually or by force of some acknowledged principle of international law. Apart from property to be separately assessed, which is immaterial here, it is to be remembered that it is "the estate of the deceased " which is to be finally balanced and, as sec. 101 says "as determined in accordance with this Act." Secs. 102, 103 and 104 are the relevant sections for ascertaining what the Act calls "the dutiable estate of the deceased," which is the same thing as "the estate of the deceased as determined in accordance with this Act." Secs. 102 and 103 describe the classes of property which statutorily may constitute the dutiable estate of a deceased person : First, and naturally, there is all property of the deceased which is situate in New South Wales at his death (sec. 102, sub-sec. 1 (a) ); next, all property of the deceased which, though not in all respects within the territory, is so connected with the territory as to be in some way controllable by the State. As to the first class, it is manifest - but important to remember - that property removable by the deceased in his lifetime would, on the clear construction of sec. 102 (1) (a), if removed from New South Wales, even a day before he died, entirely escape this taxation. The fact that domicil is made immaterial

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So far, the Legislature has designated only property actually belonging to the deceased. Long experience, however, has disclosed various expedients for escaping taxation of this nature by dispositions which, ex facie real, are sometimes genuine and sometimes colourable, and, where colourable, the property disposed of is still in truth, though secretly, the property of the deceased at the time of his death. To meet these expedients the Legislature has from time to time framed provisions to treat, for taxation purposes only, the property nominally, but not really, disposed of as still the property of the deceased at his death. Difficulties of proof and the necessity of certainty, both for the Treasury and the individual, have led to the adoption of more or less rigid standards as simple and definite and, on the whole, reasonable working tests of genuineness. These are what we find in sub-sec. 2 of sec. 102, except, of course, as to property merely appointed. The one important observation of a general nature is that, since the recognized office of these artificial standards is as a test of genuineness of disposition, the basic notions on which the duty is founded are unchanged. They are: (1) the property in view is only that which formerly belonged to the deceased, and (2) the point of time looked at for determining the true ownership of the property is the time of death. Therefore the property, the subject of sub-sec. 2 of sec. 102 (except merely appointed property), is in every case property which was originally property of the deceased and ceased to belong to him by reason of his disposition referred to; and therefore, also, property not in existence in New South Wales at the time of the death - and which for that reason, if still retained by the deceased, would not form part of his estate - is not intended by the Act to be made part of his "dutiable estate" merely because he had parted with it. If the Act did so intend, then, in my opinion, having regard to the persons described in sec. 101, it would be an invalid intention. If a person be personally a stranger to New South Wales and outside its jurisdie- tion, and if property not his be outside that jurisdiction, the mere fact that at a former time, when the property was his, a transaction, say of gift or sale by him or by his authority, took place within New

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the benefit accruing from this gift to the part. (That it was a gift to the partnership which included the testator appears from pars. 2, 3 and 4 of the case stated, apart from the correspondence.) The words of the New South Wales Partnership Act 1892 are copied from the English Partnership Act 1890; and under sec. 29 " (11.) Every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership, or for any use by him of the partnership property, name, or business connection. (11.) This section applies also to transactions undertaken after a partnership has been dissolved by the death of a partner, and before the affairs thereof have been completely wound up, either by any surviving partner or by the representatives of the deceased partner." Under see. 42 (1.) when any member of a firm dies, and the surviving partners carry on the business of the firm without any final settlement of accounts as between the firm and the deceased or his estate, then, in the absence of any agreement to the contrary, the deceased or his estate is entitled to such a share of the profits made since the dissolution as the Court may find to be attributable to the use of his share of the partnership assets. Under sec. 24 the interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any agreement expressed or implied between the partners, by certain rules; and the first rule is that "all the partners are entitled to share equally in the capital and profits of the business." Under sec. 31 (11.), in case of a dissolution of partnership any assignee of a portion is entitled to receive the share of the partnership assets to which the assignor is entitled as between himself and the other partners, and for the purpose of ascertaining that share, to an account as from the date of dissolution ; and under sec. 33 (r.) (subject to any agreement) any partnership is dissolved as regards all the partners by the death of any partner. Under sec. 43, subject to any agreement between the partners, the amount due from surviving partners to the representatives of a deceased partner in respect of the deceased partner's share, is a debt accruing at the date of the dissolution or death; and under sec. 44 in settling accounts between the partners after a dissolution of partnership the assets are to be applied (after payment of liabilities,

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Court

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Judgment (202 paragraphs)