//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[1960] HCA 18
High Court of Australia
1960-04-06
Menzies JJ, Fullagar J, McTiernan J, Walsh J
Original judgment source is linked above.
High Court of Australia Dixon C.J. McTiernan, Fullagar, Kitto and Menzies JJ. Gale v Commissioner of Taxation (Cth) [1960] HCA 18
ORDER Appeal allowed with costs. Order of the Supreme Court set aside. In lieu thereof order that the appeal to the Supreme Court from the assessment of the Commissioner of Taxation be allowed with costs. Declare that for the purposes of the assessment of estate duty the gift by the deceased to Peggy Mary Martin should not have been included at an amount or value in excess of £2,250. Remit the assessment to the Commissioner for reassessment consistently with the foregoing declaration.
In my opinion this appeal should be allowed. I concur in the reasons given by Fullagar J.
In my opinion the appeal should be dismissed. I have reached the same conclusion as the primary judge (Walsh J.). I agree with his reasons and I wish to adopt them. I cannot usefully add anything to them.
This is an appeal from a judgment of the Supreme Court of New South Wales (Walsh J.). The appellant, Raymond Arthur Gale, is the executor of the will of his brother, Leslie Ross Gale, who died on 29th July 1950. He appealed to the Supreme Court against an assessment of estate duty under the Estate Duty Assessment Act 1914-1947 Cth, and the Commissioner's assessment was upheld by Walsh J. The point in dispute is as to a gift made by the deceased within three years of his death to a lady whom he afterwards married and who survived him. Section 8 (3) of the Estate Duty Assessment Act provides that, for the purposes of the Act the estate of a deceased person comprises (a) his real property in Australia, (b) his personal property, wherever situate, if he was at the time of his death domiciled in Australia, and (c) his personal property in Australia, if he had at the time of his death a foreign domicile. Section 8 (4), so far as material, provides that "Property (a) which has passed from the deceased person by any gift inter vivos or by a settlement made within three years before his decease shall for the purposes of this Act be deemed to be part of the estate of the person so deceased". The executor maintains that in the present case what is to be treated as part of the estate under s. 8 (4) (a) is a sum of money (£2,250). The Commissioner maintains that what is to be brought into charge under s. 8 (4) (a) is an undivided one-half interest in a station property known as "Bibaringa". The value of a one-half interest in that property (which was subject to a mortgage) was at the date of death £28,271 17s. 6d. A similar question to that which now arises came before this Court in Commissioner of Stamp Duties v. Gale [1] . It was there held, affirming the decision of the Supreme Court of New South Wales, that the amount to be brought into account for the purposes of s. 102 (2) (b) of the Stamp Duties Act 1920-1949 N.S.W. was £2,250, and not the value of a one-half interest in "Bibaringa".
Before 1947 the appellant and his deceased brother were carrying on a pastoral business in partnership on "Bibaringa". The station property was owned by Mary Gale, the wife of the deceased, and Myrtle Gale, the wife of the appellant, as tenants in common in equal shares, and was leased by them to the partners. The terms of the lease were never reduced to writing, and no rent was paid, but mortgage interest, rates, taxes and insurance premiums were paid by the partners. The marriage of the deceased and Mary Gale was dissolved on 19th December 1947, and some six months later he married a lady named Peggy Martin.
About the middle of 1947 it was agreed between the deceased and Myrtle Gale, the wife of the appellant, that she should sell to the deceased her one-half interest in the station property for £2,250. At the same time it was agreed between the deceased and the appellant that their partnership should be dissolved. The former agreement appears to have been merely oral. Nor was any written instrument of dissolution of partnership executed. The terms agreed upon, however, were recorded in a memorandum by a solicitor who was acting for the parties. This memorandum includes the following: - "Mrs. M. C. R. to sell equity in land and buildings and household furniture for £2,250. No adjustment to be made in respect of interest on mortgages or rates and taxes. If property sold within 7 years and sale price of equity plant and machinery, motor vehicles and household furniture exceeds £23,500, net profit on sale to be divided equally between L. R. and R. A. All other necessary adjustments to be made on the basis that L.R. takes over the property on 1/7/47". In this extract "M.C.R." is Myrtle Gale, the wife of the appellant, "L.R." is L. R. Gale, the deceased, and "R.A." is R. A. Gale, the appellant. The word "equity" is, of course, incorrect. As Dixon C.J. said in the earlier case [1] , "It is evident enough that the sum of £2,250 is half the difference between the amount of the mortgage (£19,000) and the amount mentioned of £23,500."
On 5th December 1947 two written contracts were executed. By the one Mary Gale agreed to sell to the deceased her one-half interest in "Bibaringa" for £2,250. By the other Myrtle Gale (who, it will be remembered, had some six months earlier agreed orally to sell her interest to the deceased) at the request of the deceased agreed to sell her one-half interest in "Bibaringa" to Peggy Martin for £2,250. The consent of the Treasurer to these contracts under the National Security (Land Sales Control) Regulations then in force was obtained, and transfers of the two one-half interests to the deceased and to Peggy Martin (who in the previous July had become Peggy Gale) respectively were executed and registered on or about 30th September 1948. In the meantime the partnership was wound up in accordance with the agreement for dissolution. The total sum payable under the terms of dissolution to the appellant and his wife, Myrtle Gale, was £5,570. This sum was paid by the deceased to the appellant in four instalments between December 1947 and March 1948. There was no appropriation, so far as appears, of any of these instalments, but the total must be taken to have included the £2,250 payable by Peggy Martin to Myrtle Gale under the contract of 5th December 1947, and the appellant accounted for that sum to Myrtle Gale, his wife. From 1st July 1947 the deceased resided on "Bibaringa" and carried on the business formerly carried on by himself and his brother in partnership. The only other fact that need be mentioned is that about two months after the death of the deceased (government control of land sales having in the meantime ceased) "Bibaringa" was sold for £86,882.
I have found it desirable to state for myself the facts as I understand them, because I consider the material before the Court unsatisfactory and in at least one respect ambiguous. It seems obvious that the contracts of 5th December 1947 ought to have been annexed to the statement of agreed facts. However, the Commissioner appears to have been satisfied with that statement, and it is on those "agreed facts" that the case must be decided.
The decision in the present case does not, I think, necessarily follow from the decision of this Court in the case under the New South Wales Act, because the relevant provisions of the Commonwealth Act and of the New South Wales Act are different in terms. The immediately operative words of the New South Wales Act are: - "The estate of a deceased person shall be deemed to include any property comprised in any gift made by the deceased within three years before his death". Those of the Commonwealth Act are: - "Property which has passed from the deceased person by any gift inter vivos within three years before his decease shall be deemed to be part of the estate of the person so deceased". So far the difference in language between the two enactments might well be thought not to produce a different result. But the New South Wales Act contains a provision (introduced by amendment in 1939 and referred to in argument as a "proviso") that "where the property comprised in any such gift consists of money, or money is paid as aforesaid in pursuance of any such covenant or agreement the property to be included in the estate pursuant to this subparagraph shall be the actual amount of the money given or paid". No such provision occurs in the Commonwealth Act, and I agree with Walsh J. in thinking that the decision of the majority of the Court in the earlier case must be regarded as based on that provision. It is clear, I think, that the third member of the Court, Menzies J. would have reached the same conclusion in the absence of the "proviso" in the New South Wales Act, but Dixon C.J. (with whom McTiernan J. agreed) said that "a good deal turned on it", and he also said: - " it seems clear enough that the actual operation of the proviso is to clothe a gift of money with a special characteristic, namely that of fixity, so that nothing is to be considered except the period that elapsed before the death of the donor took place. If it is less than three years from the gift, then the amount of money comprised in the gift forms part of the estate for duty, however the money may have been applied or misapplied" [1] . Having regard to these passages I do not think that we can dispose of this case by saying simply that it is covered by the earlier decision. At the same time that earlier decision is important for present purposes, in that the members of the Court held that the gift actually made was a gift of money and not a gift of an interest in land. We are, I think, bound - or at any rate ought - to deal with the present case on that footing.
Walsh J., in a closely reasoned judgment, considered the case on the alternative footings that the gift was a gift of money and that it was a gift of an interest in land. If it were a gift of an interest in land, the Commissioner, of course, succeeded. But, even if it were a gift of money, his Honour considered that he was bound by certain decisions of this Court to hold that duty was payable on the value of the one-half interest in Bibaringa. He was aware that the authority of those decisions might be radically affected by the recent case in the House of Lords of Sneddon v. Lord Advocate [2] but he thought that, until this Court had considered the effect of Sneddon's Case [2] he should follow and apply those decisions. I agree with Walsh J. that, if those decisions are accepted, the Commissioner is entitled to succeed in the present case. It is, therefore, necessary for us to consider whether Sneddon's Case [2] is inconsistent with those decisions, and, if it is, whether we should depart from those decisions.
Statutes which impose estate or probate duties have commonly provided (subject to varying conditions and time limits) for the inclusion in the dutiable estate of property given or settled by the deceased person in his lifetime. One such statute, the Administration and Probate Act 1890 Vict. provided that property given with intent to evade death duties should be "deemed to form part of the estate" of the deceased. Dealing with that provision in Payne v. The Queen [3] , Holroyd and a'Beckett JJ. (two very eminent judges) said: - "These words do not mean that the Crown has to follow the gift into its different transformations. For instance, if money were given and used by the donee in the purchase of land, and this land were vested in him at the death of the donor, the amount on which duty would be chargeable would be that of the money given, not the value of the land, which might be greater or less than the price paid for it; or if the gift were of debentures, and the debentures were stolen from the donee, or of property which the donee wasted, that on which duty would be charged would be the value of what had been given away, unaffected by any considerations as to what afterwards became of it. The later provisions of the section, giving a right against the property the subject of the gift, might be resorted to where it remained in specie; but the amount of duty would be fixed by the value of that which was abstracted from the estate with intent to evade duty" [1]
I should have thought myself that, in the absence of some reasonably clear indication of a different intention, the view stated in the passage quoted was right, and that nice distinctions ought not be drawn between different forms of words in statutes in pari materia. For one thing, that view attributes a natural and fair intention to the legislature, and, for another thing, it avoids formidable complexities which must arise on any other view. It is not affected by the decision of the Privy Council on appeal [2] . A similar view to that of Holroyd and a'Beckett JJ. was taken by a Full Court consisting of Irvine C.J., Cussen and Mann JJ. in Ferguson v. The King [3] : this case was, I think, misunderstood by Mann C.J. in Re Grice [4] , a case which, as to the gift of £638, seems to have been wrongly decided on any view.
It is perhaps unfortunate that Payne v. The Queen [5] was not cited either to this Court in Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (Watt's Case) [6] , or to the Supreme Court of Victoria in Ballarat Trustees Executors and Agency Co. Ltd. v. The King [7] . In the former case this Court (Higgins J. dissenting) approved of the judgments delivered by the Supreme Court of New South Wales. In the latter case there was no appeal to this Court. The effect of the two decisions was that property given or settled must be valued as at the date of the death of the donor or settlor, and that such property was not dutiable unless it could be found within the territorial jurisdiction at the death. The latter of these two propositions was developed in three later cases in this Court - Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation (Teare's Case) [8] , Vicars v. Commissioner of Stamp Duties (N.S.W.) [9] and Moss v. Federal Commissioner of Taxation [10] . The first and third of these cases arose under the Commonwealth Act, and the second under the New South Wales Act. All were cases in which the subject matter of the disposition was - or was treated by a majority of the Court as being - a sum or sums of money. I had occasion to attempt to state their effect in Elder's Trustee and Executor Co. Ltd. v. Federal Commissioner of Taxation (Higgins's Case) [1] . Before referring again to them, it will be convenient to state in general terms the position which appears to have been established by the series of cases in this Court. What we have is really, of course, a rule or rules of construction to be applied in the absence of any clear indication of a contrary intention.
We begin with the proposition that the value of the subject matter of a disposition must be ascertained as at the death of the disponer. Subject to this, the position is as follows. The subject matter of a disposition will not be dutiable unless at the date of death we can find it in the hands of the disponee and within the territorial jurisdiction. If at that date we can find the very thing disposed of in the hands of the disponee, no difficulty arises. Its value at that date must be determined, and duty must be paid on that value. But, if we cannot find that very thing in the hands of the disponee, that is not the end of the matter. We must then see if we can "trace" it into something else which is in his hands. The position is essentially the same whether the thing disposed of by the deceased in his lifetime was money or some other kind of property. If it was money, and the money has been given away or spent ("dissipated"), so that nothing tangible has taken its place, the disposition is not dutiable. But, if the money or some of it still remains in the hands of the disponee, what is there is dutiable. It may be in his pocket or in his safe, or we may, by the application of the rule in Clayton's Case [2] , be able to find it, or some of it, in his bank. If he has none of the money left, but has in his hands something identifiable into which it has been converted, such as land or shares or a television set, the land or the shares or the television set must be valued as at death, and duty paid on that value. If the subject matter of the disposition is something other than money, and it is found in the hands of the disponee at the death of the disponer, again no difficulty arises. If not, again we must see if we can "trace" it into something which is in existence in his hands. He may have sold it and lost the proceeds on the racecourse or by unwise investment. If so, no duty is payable. So if it is destroyed by fire, and he has either omitted to insure it or has collected and "dissipated" the insurance moneys. Or he may have sold it and bought shares with the proceeds. If so, the shares, if still held by him, must be valued as at death, and duty paid on that value. Or he may have sold it, paid the proceeds into his bank account, and operated on that bank account only for ordinary household expenditure. If so, we apply the rule in Clayton's Case [1] , to see if there is anything left.
Three comments may be made at this stage on the position as stated above. The first is that the statement treats straight-out gifts and settlements as standing on the same footing. It might well be thought that different considerations ought to apply to a settlement from those which apply to a straight-out gift: see e.g. In re Payne's Declaration [2] . But the relevant provision of the Commonwealth Act, like the relevant provision of the New South Wales Act, applies equally to gifts and to settlements, and I think that they must be treated as standing on the same footing, though it is obvious that some of the examples which I have taken in the above statement cannot arise, or at least are unlikely to arise, where the disponee is a trustee who takes subject to trusts.
The second comment is this. In Higgins's Case [3] , I regarded myself as bound by earlier decisions, whether or not I correctly applied them. But, now that the whole matter is to some extent opened up by Sneddon's Case [4] , I must say that the position, as I have stated it, appears to me to be very unsatisfactory from the points of view of the revenue and of the taxpayer alike, and to be very unlikely to represent what the legislatures intended. The complexities - not to say absurdities - which can arise from it are well illustrated by Moss's Case [5] . Another example which occurs to one as by no means far-fetched is the case of a daughter who receives from her father a gift of £1,000, which she expends in having her house painted inside and outside and some new plumbing installed. Must we institute an inquiry, as at her father's death, into the extent to which (if at all) the value of her house has been increased by her expenditure? Or has she dissipated her gift, so that no duty is payable in respect of it?
The third comment is this. The rules as to "tracing" are sometimes spoken of as if they followed as a corollary on the rule that the valuation of the subject matter of a disposition must be made as at the date of the death of the disponer: see e.g. Re Grice [6] . But this is clearly, in my opinion, not so, although I do think that the requirement of valuation as at death has been the root of all the trouble. I would myself agree entirely with the view of Holroyd and a'Beckett JJ. in Payne v. The Queen [7] , but it must be taken to be established here that the valuation must be made as at date of death, and in England the relevant statute expressly requires it to be made as at date of death: Finance Act 1894, s. 7 (5): and see Sneddon's Case [1] (per Lord Morton of Henryton). There is, however, no inherent difficulty in valuing as at date of death an asset which is no longer in the hands of the disponee, or even an asset which has been destroyed. And the real question which arose in Teare's Case [2] and Sneddon's Case [3] , and which arises in the present case, is not: "As at what date must the valuation be made?" but: "What is it that must be valued?"
Now, Teare's Case [2] involved both straight-out gifts and settlements. Two sons of the deceased applied for shares in a company which he had caused to be incorporated, and the deceased paid to the company in full the amount payable for the shares which were allotted to each son. A little later he executed three settlements for the benefit of his wife and two daughters. The settlements were of three sums of £18,000, £12,000 and £12,000 respectively. The trustee of the settlements very shortly afterwards invested the whole of the three sums in shares of the company. At the date of the death of the deceased the sons and the trustee still held the shares acquired by them respectively, but at that date the shares, for which £1 each had been paid, were worth only 18s. Rich J., with whom McTiernan J. agreed, thought that the gifts to the sons were gifts of shares. The settlements were clearly settlements of sums of money, but his Honour thought that the dutiable subject matter was "the shares into which the money had been transmogrified" [4] . Starke and Williams JJ. thought that gifts and settlements alike were of sums of money, but that in both cases it was on value at death of the shares, into which the money could be "traced, followed and identified" [5] , that duty was payable. Vicars's Case [6] , involved a settlement only, the question being whether that settlement fell within s. 102 (2) (b) of the Stamp Duties Act of New South Wales. For the effect of that case I refer to my summary of it in Higgins's Case [7] , but my statement that the matter was regarded by the four members of the Court other than Latham C.J., who dissented, as covered by Watt's Case [8] and Teare's Case [2] is not completely accurate. It should have been added that Dixon J. (as he then was) found alternative grounds for his decision in specific provisions of the New South Wales Act which are not found in the Commonwealth Act. So far as the decision is based on these grounds, it is not inconsistent with the decision of the House of Lords in Sneddon's Case [1] . The words of s. 102 (2) (b) of the New South Wales Act which were material in Vicars's Case [2] were "any property comprised in any gift". By s. 100 the word "gift" was defined as meaning "any disposition of property" made otherwise than for full consideration. And the term "disposition of property" was defined so as to include, inter alia, "(b) the creation of any trust" and "(e) any transaction entered into by any person with intent thereby to diminish the value of his own estate and to increase the value of the estate of any other person". Dixon J. was of opinion, looking at par. (b) of this definition, that "property comprised" in a "trust created" should be regarded as meaning the property subject from time to time to the trust. His Honour was also of opinion, after some hesitation, that the Vicars settlement fell within par. (e) of the definition as a settlement of shares, there being in reality one entire transaction not completed, for the purposes of that paragraph, until the shares were vested in the trustees. So far as Moss's Case [3] is concerned, I need do no more than refer to what I said in Higgins's Case [4] .
The facts in Sneddon's Case [1] , were exactly parallel, for all material purposes, with those in Teare's Case [5] . It will suffice to take them from the headnote, which reads: - "A voluntary trust deed, which operated as an immediate gift inter vivos, was granted in 1946 by a truster, the sum of £5,000 being put in trust and the trustees being directed to hold and apply it "or investments representing the same" for the benefit of certain limited interests. Shortly after the execution of the deed the trustees invested the sum in the purchase of certain shares which on the trustee's death in 1948 were worth £9,250". It was held by the House of Lords (Lord Morton, Lord MacDermott and Lord Reid, Lord Keith dissenting) that the property deemed to pass on the death of the deceased was the sum of £5,000, and not the trust fund in its state of investment at death, viz. the shares, and that the assessment of estate duty should have been on that sum.
The United Kingdom statute which was under consideration in Sneddon's Case [1] imposed duty on "property passing on the death of the deceased", and provided that that expression should be deemed to include property which would be required to be included in an account under s. 38 of the Customs and Inland Revenue Act 1881 Imp.. This section required the inclusion in such an account of "property taken under" a settlement made within five years before the death of the disponer. The immediately relevant words of the United Kingdom statute and of the Commonwealth statute are thus not identical. In the former case the words are "property taken under" certain classes of disposition. In the latter case the words are "property passing from the deceased" by certain classes of disposition. But no distinction can be drawn on this basis between Sneddon's Case [1] and the Australian cases. If a gift or settlement is made, there must be property taken under it and property passing by it, and what passes by it must be identical with what is taken under it. Both expressions look to the immediate effect of the disposition. I can see no escape from the view that Sneddon's Case [1] is inconsistent with Teare's Case [2] and Vicars's Case [3] . And, in the present case, if we follow Teare's Case [2] and Vicars's Case [3] , we must say that the property dutiable is the one-half interest in "Bibaringa" into which the sum of £2,250 given by the deceased can be traced, whereas, if we follow Sneddon's Case [1] , we must say that the property dutiable is the sum of £2,250.
Which course, then, should we follow? In my opinion we should apply Sneddon's Case [1] . Against that course are the facts that the relevant statutes do differ in terms (although they are, in my opinion, identical in effect), that Watt's Case [4] was decided so long ago as 1926, and that, whereas the Parliament of New South Wales has seen fit to amend its legislation so as partially to overcome the Australian decisions, the Parliament of the Commonwealth has taken no step to amend the Estate Duty Assessment Act in any material respect. But I think there are two matters which outweigh these considerations. I find a very strong reason for applying Sneddon's Case [1] in the fact that (with the greatest respect) I think that it is right, and that it gives us opportunity for correction. The second reason is that, if this case, or any case raising the same question, were to go on appeal to the Privy Council, there is a high degree of probability that it would be decided in accordance with Sneddon's Case [1] .
I think I should add that I have not omitted to take into account what is said by Dr. H. A. J. Ford at the end of his recent article Federal Estate Duty - Gifts Inter Vivos - Transmutation of Property Given (1956) 30 A.L.J. 15, at pp. 23, 24. Probably the only really satisfactory solution of difficulties which ought not to exist would be found in a legislative provision that the valuation should be made as at the date of the disposition. One would suppose the date for valuation to be a matter of indifference to the revenue: what it would lose in some cases it would gain in others, as is shown by a comparison of Teare's Case [1] (where the shares had declined in value) with Sneddon's Case [2] (where the shares had increased in value). And the advantages in simplicity and equity of a clear legislative adoption of what was said in Payne v. The Queen [3] would be very great.
We have here to apply a familiar provision contained in s. 8 (4) (a) of the Estate Duty Assessment Act 1914-1947 Cth, by which property which has passed from a deceased person by any gift inter vivos within three years before his death is deemed to be part of his estate for the purposes of the Act. The description of the property to which the provision intends to refer is unambiguous. It is the property of which the deceased divested himself by the transaction of gift, and not, if it is different, the property which became vested in the donee. In Commissioner of Stamp Duties v. Gale [4] , a case under s. 102 (2) (b) of the Stamp Duties Act 1920-1949 N.S.W., the Court had before it some of the facts concerning the transaction which is in question now, and on those facts it affirmed a decision of the Supreme Court of New South Wales which proceeded on the footing that the property of which the deceased divested himself by that transaction was £2,250. That was the sum which he paid to Myrtle Gale as the price of the interest in "Bibaringa" which she then transferred to Peggy Martin. The facts before the Court in the present case include some which did not appear in the previous litigation and the respondent contends for a conclusion on the material now available that before the transaction in question the deceased was entitled to an interest in "Bibaringa" under a contract of purchase and sale subsisting between himself and Myrtle Gale, and that it was that interest, and not the £2,250, which the deceased alienated by his gift to Peggy Martin. The additional facts, however, do not enable a different conclusion to be reached from that which was come to in regard to State death duty. In particular, it still does not appear that the agreement between the deceased and Myrtle Gale for the purchase and sale of the interest in "Bibaringa" was enforceable in equity. There was no writing, and in the circumstances of the case the conduct of the deceased which has been relied upon by the Commissioner as constituting part performance was not by any means solely referable to some such contract as that in question. The reasons which the Chief Justice and Menzies J. gave in the earlier case for the conclusion that the £2,250 was the property alienated from the deceased by the gift are fully applicable to the facts as we know them now.
The Commissioner nevertheless contends that the property which is to be valued as at the death of the testator for the purpose of assessing the duty payable is the interest in "Bibaringa" which Peggy Martin received under the transaction. The contention is based upon a doctrine developed in Teare's Case (Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation) [1] , which rests largely on the supposed need for a reconciliation between the requirement of the Act that the property which passed from the deceased by the gift shall be included in the estate and the requirement (which the Act must be understood as making) that the estate shall be valued as at the death of the deceased. The doctrine of Teare's Case [1] is that there is such "an underlying identity" between property which passed by a gift and any property in the hands of the donee at the death of the deceased in which the former can be "traced, followed and identified" [2] , that it is in accordance with the true meaning of s. 8 (4) (a) to treat the latter property as that which is caught by the provision. Property, for example, which the donee has purchased out of the money given (if the deceased divested himself of money by the gift), or which the donee has purchased out of the proceeds of realization of the property given (if the deceased divested himself of property other than money), is to be valued at the death on the footing that it "represents" the property which passed from the deceased by the gift. Though it is not that property in the form in which it passed from him, yet in its "transmuted and actually existing form" [3] , its "actual state of preservation" [3] , it is to be recognized as "in a practical sense" that property.
In Vicars v. Commissioner of Stamp Duties (N.S.W.) [4] , the doctrine was applied by Rich, Starke and Williams JJ. to s. 102 (2) (b) of the Stamp Duties Act N.S.W.; but it was not adopted by Latham C.J. or by Dixon J. An application of it by Williams J. is to be found in Moss v. Federal Commissioner of Taxation [5] .
In the present case we have to consider whether the doctrine will survive examination in the light of the speeches delivered in the House of Lords in Sneddon v. Lord Advocate [6] . That case arose on provisions of the estate duty legislation in force in the United Kingdom. The duty was imposed on property passing on the death of a deceased, and property passing on the death of a deceased was deemed to include any property taken under a voluntary disposition purporting to operate as an immediate gift inter vivos, whether by way of transfer, delivery, declaration of trust or otherwise, which should not have been bona fide made five years before the death of the deceased. There was in that legislation, as there is by implication in the Estate Duty Assessment Act, and as there is by express provision in the New South Wales Stamp Duties Act, a requirement that the value of property shall be estimated as at the death of the deceased. The expression "property taken" under a voluntary disposition might have been thought not as clear as the expression "property which has passed from the deceased person" by a gift, but their Lordships were unanimous in thinking that it meant the property which the deceased parted with by the gift. They held that that property, and no other, was the property to which the deeming provision applied, and that, as a consequence, it was that property, and no other, which had to be valued as at the death. Their Lordships were not unmindful of the difficulties that would inevitably arise in practice through events and circumstances occurring in the interval between gift and death; but they denied that on that account the deeming provision ought to be read in any qualified fashion. Lord Reid dealt with the point specifically by saying: " the Act appears to me to set two quite distinct problems, the first of which must be solved before one reaches the second. The first is to determine what was the property taken, and, once that problem has been solved, the next is how to value that property" [1] . It may be that in a case where a court of construction would regard property A as identical with property B when deciding a question of ademption (see Halsbury, Laws of England, 2nd ed., vol 34, par. 164, p. 128, and cases there cited) their Lordships would not refuse to see identity for the purposes of the estate duty legislation. But it is clear from their judgments that the words of the deeming provision which describe the property to be caught are to be applied as at the time of the gift, and that it is the property so ascertained which alone is to be valued as at the death. Their Lordships did not adopt the view which once had been put forward in Scotland, that the valuation is to be of that property considered as in a hypothetical state of preservation. They preferred the view which Lord Sands had stated in Lord Strathcona v. Inland Revenue [1] , and the Privy Council had endorsed in Attorney-General for Ontario v. National Trust Co. Ltd. [2] , namely that the property donated is to be treated just as if it had remained the property of the deceased until his death and had then passed as part of his estate. The duty, it was held, is imposed not upon the value of the gift, but upon the value of the property brought into charge, assessed with reference to the actual condition of the property at the death. But the House was unanimous in rejecting the notion that that consideration authorized the valuing of any other property than the actual subject-matter of the disposition.
With Sneddon's Case [3] before us, we would not, I think, be justified in adhering to the doctrine of Teare's Case [4] , even if, without Sneddon's Case [3] we would have felt constrained to accept it. The language of s. 8 (4) (a) of the Commonwealth Act is even clearer than that of the United Kingdom provision, and the reasoning of Sneddon's Case [3] applies to it a fortiori. In my opinion we cannot but hold that on the true construction of s. 8 (4) (a) the property to be deemed part of the estate of the deceased in the present case is the sum of £2,250, and that that sum, and not the property which "represented" it in the donee's hands at the death of the deceased, is to be valued as at the death.
As to valuation there is a question to be considered, but it is not, I think, difficult. If the property given had been a horse, and the horse had died in the lifetime of the deceased, it is clear from Sneddon's Case [3] that what would be deemed part of the estate would be a dead horse, and the value accordingly would be nil. Again, if the gift had been of £2,250 in coin of the realm, and the coin had been destroyed by fire in the deceased's lifetime, the value for duty purposes would (presumably) be nil. Here, the £2,250 which passed from the deceased was, apparently, in the form of a right to money, namely a credit in a bank account. The passing of the property from the deceased consisted in the satisfaction of the right, and of course thereafter the right did not exist. Is the value for duty purposes, then, to be considered as nil? The answer of Sneddon's Case [3] is "No". See also Potter v. Inland Revenue [5] . The deeming provision requires that the right to the money shall be treated as if it had not passed from the deceased in his lifetime. If he had in fact kept it, it would have been worth £2,250 at his death. Accordingly that is the value which must be assigned to it. Williams J. remarked in Teare's Case [1] that dicta to the effect that the value of money was constant were somewhat optimistic under modern conditions [2] ; but, if I may say so with respect, the answer would seem to be that the valuation which the Act requires consists in assessing the equivalent of the estate in terms of money. The money equivalent of £2,250 cannot be anything but £2,250, however much the equivalent of it in terms of goods and services may vary from time to time. See per Fullagar J. in Elder's Trustee and Executor Co. Ltd. v. Federal Commissioner of Taxation [3] .
I have not accepted the principle of Sneddon's Case [4] without considering what it may involve for cases like Vicars v. Commissioner of Stamp Duties [5] , both under s. 8 (4) (a) of the Estate Duty Assessment Act and under State provisions such as s. 102 (2) (b) of the Stamp Duties Act N.S.W.. It involves, I think, rejecting the view that in the case where a gift has been made by the creation of a trust the test for identifying the property to be treated as dutiable is different from that which applies in other cases. The argument in support of that view commences by pointing to the specific recognition by the statutes of the creation of a trust as a means of making a gift, and it finds in that recognition a sufficient warrant for interpreting the description of the subject-matter of a gift made by the creation of a trust in the light of a conception established in the law of trusts, namely that the trust fund is to be regarded as having an identity separate from that of the investments which compose it for the time being. In Sneddon's Case [4] the Court of Session in Scotland applied this equitable conception to the provisions of the Finance Act 1894, but the House of Lords declined to accept it. The decision was that in the case of a gift by the creation of a trust, no less than in the case of any other gift, the statute was concerned with the property which passed from the deceased, whatever might have been the property that passed to the donees; and as a consequence of that proposition (as I read the majority judgments) their Lordships denied that in such a case the property which was caught by the provision and had to be valued as at the death was something the deceased never had, namely a fund to which the equitable doctrine of continuing identity applied. If Commissioner of Stamp Duties v. Gale [6] is right, as I respectfully think that it is, in holding that par. (b) of s. 102 (2) of the New South Wales Act is to be construed as Sneddon's Case [4] decided that the United Kingdom section was to be construed, the consequence seems to be that no distinction can be drawn for the relevant purposes of that paragraph between a gift by the creation of a trust and any other gift. It may be added that there is no occasion in the present case to decide what this involves in regard to par. (d) of s. 102 (2), which brings into an estate "any property comprised in any gift made by the deceased at any time, of which bona fide possession and enjoyment has not been assumed by the donee immediately upon the gift and thenceforth retained" etc. The words there used to describe the property are identical with those used for the same purpose in par. (b), and the description can hardly have one meaning in par. (b) and a different meaning in par. (d). Yet there may be difficulty in applying Sneddon's Case [1] and at the same time giving effect to the principle of Hall's Case (Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd) [2] . It seems hardly satisfactory to say, with the learned editors of Dymond's Death Duties, 12th ed. (1955), p. 148, that in such a case the principle of Sneddon's Case [1] "breaks down". It may be in point to recall that the judgment of the Privy Council in Hall's Case [3] treats par. (d) as applying to the property which the deceased vested in the trustees, interpreting " bona fide possession and enjoyment" as meaning such beneficial possession and enjoyment of that property as, having regard to the nature of the gift and the circumstances, the objects of the deceased's bounty could have assumed and retained through the medium of the trustees [4] . But this is a question for another day.
The estate of L. R. Gale, deceased, was assessed to estate duty on the footing that a gift which the deceased had made to Peggy Martin within three years of his death, was not a gift of £2,250, as the appellant as executor of the will of L. R. Gale, deceased, contends, but was a gift of a one-half interest as tenant in common in a grazing property, "Bibaringa", valued, after allowing for a mortgage, at about £28,270, as Walsh J. decided by the judgment now under appeal.
The gift has already been the subject of litigation - Commissioner of Stamp Duties v. Gale [5] - and in the judgments in that case the facts are set out in some detail. All that it is necessary to say here is that what actually occurred was the payment of £2,250 by the deceased to M. C. R. Gale in satisfaction of the purchase price payable under a contract made on 5th December 1947 between Peggy Martin and M. C. R. Gale at the instance of the deceased for the purchase and sale of a one-half interest in "Bibaringa". It was argued for the Commissioner here that the statement of facts agreed upon by the parties for the purposes of the hearing before Walsh J. differ materially from the facts upon which the earlier case was decided, particularly in that there it was common ground that a parol contract between M. C. R. Gale and the deceased for the purchase of her "equity in land and buildings and house-hold furniture for £2,250" made prior to the contract already referred to was unenforceable and the deceased obtained no proprietary interest in "Bibaringa" thereby, whereas the agreed facts, so it is contended, give rise to an inference that the contract, although parol, was enforceable because it had been partly performed. The acts relied upon for part performance do not seem to me to point unequivocally to the existence of such a parol contract and, in any event, specific performance of the contract could not have been obtained unless and until the consent of the delegate of the Treasurer under the National Security (Land Sales Control) Regulations then in force had been obtained. Furthermore, whether the contract between the deceased and M. C. R. Gale was enforceable or not, it is clear that its subject matter was not altogether the same as the contract between M. C. R. Gale and Peggy Martin, and it must, moreover, have been determined before the making of that contract. There was not simply a novation. Upon the whole, I agree with Walsh J. that there is no material difference between the facts upon which this case is to be decided and those upon which the earlier case was decided.
Walsh J. appears to have distinguished Commissioner of Stamp Duties v. Gale [1] on the footing that the decision there depended upon the proviso to s. 102 (2) (b) of the Stamp Duties Act N.S.W. to the effect that where there has been a gift of money, what is to be included in the estate is the actual money given or paid. There is no doubt that this proviso was relied upon, but I do not think it was treated as in itself decisive; rather it was regarded as a significant part of a provision which, as a whole, required that what was to be included in the estate of a deceased person was what passed from him by gift. In deciding in that case that it was money and not an undivided interest in "Bibaringa", the Chief Justice, after discussing the statute and earlier cases, said "In the end one may say that for present purposes it comes down to the question what did the deceased alienate" [1] and then, having stated the facts he continued: - "On the foregoing facts it is not difficult to understand why a contest should have arisen as to whether the subject matter of the gift by the deceased to Peggy Mary Martin, his future wife, should be regarded as a gift of money or of an undivided half share in the land" [2] , and concluded: - "But once the view of s. 102 (2) (b) stated in this judgment is adopted the facts show clearly enough that if the deceased had no right title or interest legally or equitably in the undivided half share in question the gift must be considered to be one of money. For on that footing it was of money that he divested himself" [2] . My judgment was to the same effect.
I think, therefore, that this case is concluded by the earlier decision. What s. 8 (4) (a) of the Estate Duty Assessment Act requires for present purposes is, to keep closely to the language of the statute itself, the inclusion as part of the estate of a deceased person of the property which has passed from him by a gift inter vivos within three years of his death. If the property that so passed from him was money, it is money that has to be included as part of his estate. Our earlier decision was, as I have shown, that it was money and not an interest in land, and that decision is decisive here.
In Commissioner of Stamp Duties v. Gale [3] some reference was made to the decision of the House of Lords in Sneddon v. Lord Advocate [4] , where it was held that what passed as a gift inter vivos by way of a declaration of trust of £5,000 to be invested by the trustees in shares which, at the date of the death of the truster, were worth £9,250, was the £5,000 and not the trust fund and that under legislation which requires the inclusion in the estate of a deceased person of any gift inter vivos by way of declaration of trust made within five years before his death, the assessment should have been upon the money and not upon the trust fund in the state of investment at the death of the truster. In reaching this conclusion, the House of Lords expressed disapproval of the decision in In re Payne's Declaration [5] where the Court of Appeal affirmed a decision of Simonds J. that upon the death of a settlor within a year of executing a settlement of an option and £10,000 to purchase shares the subject of an option, estate duty was payable on the settled fund in its condition and at its value on the settlor's death. The decision so disapproved seems to have exerted an important influence upon this Court in deciding Teare's Case (Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation) [1] and Vicars v. Commissioner of Stamp Duties (N.S.W.) [2] . The effect of the House of Lords decision upon these earlier cases was not discussed in Commissioner of Stamp Duties v. Gale [3] , but as it is clear that Walsh J., in distinguishing that decision, was greatly influenced by the earlier decisions of this Court, it becomes necessary to consider how they stand in the light of Sneddon's Case [4] .
The case nearest in point is Teare's Case [1] where, although the gift made by the deceased had been money which was used to buy shares, it was the value of the shares that was included as part of his estate on the basis that the subject matter of the gift of money was found in the shares into which it had been "transmogrified" (Rich J.) [5] , "transmuted" (Starke J.) [6] or which represented its "actual state of preservation" (Williams J.) [7] . It had been argued for the Commissioner that "the statute requires the assumption that the disposition was not made by the donor, but that the thing which passed from him remained part of his property. Any disposition by the donee is really immaterial" [8] . This argument, which was rejected by the Court, is right in line with what has now been decided by the House of Lords. I think that Teare's Case [1] should be reconsidered in the light of Sneddon's Case [4] and so far as it treated an acknowledged gift of money inter vivos either as a gift of the shares it was used to purchase or as something to be valued at the donor's death by reference to those shares, it ought to be overruled. The view of Rich J., with whom McTiernan J. concurred, that one of the gifts there in question was not a gift of money but was a gift of shares [9] , is a different matter, and as to that I do no more than refer to the statement of Lord Reid in Sneddon's Case [10] and my observations thereon in Commissioner of Stamp Duties v. Gale [11] . In Moss v. Federal Commissioner of Taxation [12] , Williams J. gave effect to the decision in Teare's Case [1] and held that gift moneys applied by the donees in making certain payments were to be included as part of the estate and valued as at the date of the death of the donor. His Honour said: - "In my opinion, a gift of property consisting of money must, like any other kind of property, be capable of being identified in its original or some derivative form at the date of death before it can be included in the notional estate, and must be valued in the form in which it exists at that date" [1] . The decision that the gift of money must be valued in the form in which it existed at the date of the death of the donor must fall with Teare's Case [2] . Vicars v. Commissioner of Stamp Duties (N.S.W.) [3] is another case upon which Walsh J. relied; there the Court decided that where trustees used money provided by the deceased for the purchase of shares that it was the value of shares - constituting as they did the settled fund at the testator's death - that formed part of his estate. In so far as the decision rested upon the view that what had to be valued was the property subject to the settlement at the date of the settlor's death and not the property that was settled, I do not think that what was decided can be reconciled with Sneddon's Case [4] . Vicars's Case [3] is a case like In re Payne's Declaration [5] and in saying that the latter was wrongly decided, Lord Morton of Henryton said: - "I can see no logical distinction, for the present purpose, between any of the following cases: (1) A.B. gives cash or transfers shares to C.D. for his own benefit; (2) A.B. declares that he will henceforth hold a sum of cash or a block of shares in trust for C.D. for life with remainder to other beneficiaries; (3) A.B. gives cash or transfers shares to C.D. and E.F. upon trust for G.H. for life with remainder to other beneficiaries. In each case the property taken is the cash or shares which the donor gives or transfers or whereof he declares trusts" [6] and added: - "It is noteworthy that in Payne's Case [7] Simonds J. (as he then was) appears to have felt some doubt whether the words of the statute entitled him to "isolate gifts by way of settlement from other forms of gift". I think that this doubt was well founded, and I cannot find any words in the statute which justify such isolation" [6] . These words would seem to me to apply with even greater force to an Act which requires the inclusion in the estate of a deceased person of property which passed from him by gift of the sort described.
To decide this appeal, I do not regard it as necessary or desirable to consider either Watt's Case (Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co Ltd.) [8] and the question whether that decision is applicable to the Commonwealth Estate Duty Assessment Act, or the general problem of the valuation at death of property given away by a deceased person during his life and later included as part of his estate by virtue of s. 8 (4) (a) of that Act.
Gale
Commissioner of Taxation