Davidson v Chirnside [1908] HCA 65;

Davidson v Chirnside [1908] HCA 65; - HCA 1908 case summary — Zoe

[33]

Apart from the authorities which have been cited, this case seems to be simple. At the execution of the deed of 3rd April 1907 the legacy of £40,000, the subject thereof, was paid to the Union Trustee Co. and Mr. Mackiehan, its manager; and it was by the deed agreed and declared that these trustees should hold the legacy upon the trusts in the will declared concerning the same. The deed, therefore, incorporates the trusts declared in the will, so far as they relate to the legacy when severed from the rest of the testator's estate; and the result is the same as if the trusts were all set out, word for word, in the deed. That is to say, the income is to be paid to Mrs. Calvert, a daughter of the testator, for life, or until alienation, and after alienation, upon such trusts for the benefit of the daughter and her issue during her life as the trustees should appoint, or as if she were dead; and then in trust for all or any of her children as she should by deed or will appoint; and in default of such appointment, for her children in equal shares; with power for the daughter to appoint part of the income to a surviving husband. Apart from the Stamps Act 1892, such a deed, the creature of bounty, and containing elaborate provisions for successive interests in the fund, would clearly be called a "settlement," or "deed of settlement," but for one fact - the fact that it is executed under a power in the will. It might have been doubted, but for sec 28 of the Act, whether Schedule VIII. to the Act could refer to subsidiary instruments, such as appointments under a power, and in particular a special power - whether it does not refer only to principal instruments such as create the power. But sec. 28 puts an end to any such doubt; for it specially excepts instruments of appointment made under a special power in a previous settlement or will on which duty has been paid; thereby showing that, but for sec. 28, the instrument would have been included in the Schedule. The exception proves the rule (see also secs. 24 and 27).

[34]

The fact is that both Acts, the Stamps Act 1890, and the Stamps Act 1892, impose a tax on instruments - not on transactions (Act of 1890, sec. 32; Act of 1892, sec. 4). The more instruments you want, the more stamps you must buy; and "instrument" means and includes every written instrument (sec. 31 of Act of 1890). The Act of 1890 taxed bills of exchange, receipts for £5 and upwards, conveyances or transfers on sale of any real property, annual insurance licences. The Act of 1892 taxed bills of lading, contract notes, customs entry warrants, &c., exchanges of real property, leases, receipts for £2 and upwards, deeds of settlement or gift - put out tentacles for revenue in all directions. "Deed of Settlement or Gift" is defined under two headings. The first heading seems to relate to settlements or deeds of gift which either transfer or accompany a transfer of property; and the second to declarations of trust by an owner - where he declares that property of his "shall" (thereafter) "be held in trust for the person or persons mentioned therein." Now this deed seems to come under the first heading: "Any instrument other than a will ... whereby any property is settled ... in any manner whatsoever ... such instrument not being made before and in consideration of marriage." This fund is "settled," not "given" straight out. To constitute a settlement, the subject thereof need not be transferred by the instrument itself, as Mr. Guest frankly admitted. The two first precedents of settlements in Davidson are cases of settlements which did not transfer the property, but which recited that the stock or funds or shares or mortgage debts had been transferred in the usual way; and the deed of settlement merely declared the trusts on which they were to be held. I take it that the word "settled" here is used in contradistinction to the word "given"; and that an instrument, which declares the trust on which the fund is to be held on a transference thereof to trustees, is an instrument whereby the fund is "settled." It may be difficult in some cases to say what is the precise boundary line between a gift and a settlement. It appears that a succession of interests is not essential: Davidson v. Armytage[29]. A gift to a married woman for her separate use has been held to be "settled": Kane v. Kane[30], followed in In re Berens' Settlement Trusts; Berens v. Benyon[31]. But we are not called on here to formulate an exhaustive definition; for here is a declaration of limitations in succession of property to be held by trustees.

[35]

But it seems that in the Victorian Court a doctrine has obtained currency to the effect that an instrument is not a settlement unless it "create a beneficial interest in some person in whom it did not previously exist." This doctrine was first laid down by Madden C.J. in Wiseman v. Collector of Imposts[32]; and, to judge from the report of the case, there was no argument to the contrary. The document in that case was one of mutual agreement between equitable tenants in common of various pieces of land, partly for division of lands between the parties, and partly for appropriate transfers inter se. It is hard to see how the land could be said to be "settled" by such an instrument. As the learned Chief Justice himself said, in Spensley v. Collector of Imposts[33], Wiseman's Case "relates to a thing which could not be a settlement in any view" The difficulties, and possible disputes, were "settled"; but in no sense could the instrument be treated as a "settlement" of property; so that the actual decision is, no doubt, right. The learned Chief Justice based his dictum on expressions used in the cases of In re Player; Ex parte Harvey[34], and Davey v. Danby[35] - cases decided under the English Bankruptcy Act, and the Victorian Insolvency Act respectively. In the one case it was held that a gift of money outright, and in the other case that a deed of assignment for creditors, was not a "settlement" within the meaning of a bankruptcy section avoiding settlements made within certain times before bankruptcy. Cave J. said[36] that "the transaction must be in the nature of a settlement ... 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." I do not think that these words justify the inference of Madden C.J. that, for the purpose of the Stamps Act 1892, there can be no "settlement" unless it "create a beneficial interest in some person in whom it did not previously exist." The sections of the Bankruptcy Acts referred to deal, of course, with voluntary transactions creating beneficial interests which did not exist before; but the Stamps Acts deal with instruments, and stamps on instruments; and any deed such as the present, which is executed on the transfer of a fund to outsiders, declaring, either expressly or by incorporation, the trusts on which the fund is to be held, would be a settlement within the meaning of the first heading of Schedule VIII. The second heading of Schedule VIII. includes under deeds of settlement or gift on which stamp duty has to be paid even a mere declaration of trust - trust for the future - even where there has been no transfer of the fund or property. In the cases which follow Wiseman v. Collector of Imposts[37], counsel for the Collector do not appear to have disputed the dictum of Madden C.J. in that case.

[37]

Mr. Guest, in his able argument, urged strenuously that this deed is a mere appointment of new trustees; that in every appointment of new trustees of a will there is a declaration that the property shall be held on the trusts of the will; and that this deed could not be a settlement, as it made no change of ownership. But the deed is rather a creation of original trustees under a new instrument. There was no retirement of the trustees of the will. They remained as before; but this fund was taken out of the ring fence of the will, and vested in other trustees. The legal title to the fund was transferred to outsiders. The outsiders hold under what the Chief Justice has aptly termed "a new charter." Then, although the trustees of the deed hold for the beneficiaries referred to in the will, they are not bound by the same trusts in many respects. In order, as I infer, to avoid this very stamp duty, the deed has been drawn without inserting therein any of the usual clauses, powers and provisions which the trustees of the will had power to insert, and the purpose is stated to be "not to create or affect any new or existing beneficial interest therein." No doubt, those who framed the deed thought that they could safely rely on the statutory powers and provisions contained in the various Trust Acts, and on the right of the Union Trustee Company under its Act to charge commission on both corpus and income of the fund, in addition to the commission which they got as trustees of the whole property comprised in the will. But the trustees of this instrument hold the fund freed from the power in the will to apply moneys annually for charity, freed from the power to mortgage for debts or expenses, freed from the provisions that Mr. Whiting should be employed as solicitor and receive full remuneration, freed from the 5 per cent. commission on income which has to be paid to the trustees of the will; and they do not enjoy the powers of investment contained in the will, or the powers of determining what is capital and what is income, and of settling other difficulties. If this were a mere case of appointment of new trustees the "new trustees" (so called) would be subject to all the provisions and enjoy all the powers of the trustees whom they replaced. I am clearly of opinion that this instrument is a deed of settlement within the meaning of Schedule VIII., and that it is therefore primâ facie liable to stamp duty.

At a glance

Court

Decision date

Before

Source

Judgment (61 paragraphs)

Davidson v Chirnside [1908] HCA 65; (1908) 7 CLR 324 (9 October 1908)

Parties

Legislation Cited (1)

Cases Cited (1)