MacCormick v Federal Commissioner of Taxation [1945] HCA 10

MacCormick v Federal Commissioner of Taxation [1945] HCA 10 - HCA 1945 case summary — Zoe

[45]

On 19th April 1944 the solicitors forwarded to the Deputy Commissioner an objection against the assessment in the words and figures following : - ''I hereby lodge objection against the above- mentioned assessment in respect of deed of marriage settlement mage by me on the 21st June 1943. 1. The duty assessed is unrea- sonable and excessive and not warranted by law. 2. The gift effected by the said deed was made for and towards the maintenance of my intended wife, Ella May Millar, one of the donees thereunder, and for and towards the maintenance, education or apprenticeship of Micaele Vivian Millar, the other donee mentioned therein, and was not excessive in amount having regard to my legal and moral obligations to afford the said maintenance, education and apprenticeship respec- tively. 3. Even if the Commissioner were justified in considering that the whole gift was excessive in amount for the purposes men- tioned in the last preceding ground of objection, he would be justified in considering that at least a very substantial portion of the gift was not so excessive, having regard to the station in life of myself and my wife and children, and to my legal and moral obligations to three children of my own, and to my financial circumstances. 4. That no facts or circumstances exist or have existed which would warrant the Commissioner in forming the opinion that the said gift was not made for the purposes mentioned in par. 2 hereof or was excessive in amount having regard to my legal and moral obligations to afford such benefits. 5. That there was no evidence or material before the Commissioner upon which he could rationally and in accordance with law form.the opinion mentioned in par. 4 hereof. 6. That if, as T am informed and believe, the Commissioner has disallowed my said claim on the ground that the provisions I have made under the deed for the benefit of the said donees are not limited to income to be paid or applied as mentioned in par. 2 hereof but include dis- positions under which they may respectively become entitled to capital of the fund the subject of the deed, or on the ground that s. 14 (i) (ii) of the Gift Duty Assessment Act 1941-1942 does not apply to a gift which involves a settlement, of capital, then the disallowance is manifestly erroneous in principle and contrary to law."

[76]

the opinion formed by the respondent was clearly right. The fact of his satisfaction is the condition precedent to exemption. The Court will not interfere if the respondent says he is not satisfied unless it finds that his dissatisfaction is such as no reasonable man could reach, unless he were guilty of caprice, or has arisen from some irrational consideration, or some misdirection of himself in law, in which case the Court will remit the matter to him for reconsideration. "' Satis- fied" was considered in R. v. Connell; Ex parte Hetton Bellbird Collieries Ltd. (1), Commissioner of Taxes (Q.) v. Ford Motor Co. of Australia Pty. Ltd. (2), and Australasian Scale Co. Ltd. v. Commis- sioner of Taaes (Q.) (3). There is only one gift in this case. That gift was not, and was not expressed to be, for or towards the maintenance, education-or apprenticeship of any person as required by s. 14 (7) (ii) in order to be exempt from duty. The provision in the instrument relating to the daughter merely empowers the trustees and does not impose an obligation upon them. The benefit so conferred extends far beyond what is comprised in maintenance (Lowther v. Bentinck (4); In re Peel ; Tattersall v. Peel (5)). "Benefit" has a meaning wider than maintenance. The statutory power to apply money for benefit does not authorize payment for maintenance (Re Patterson ; Perpetual Eaxecutors and Trustees Association of Australia Ltd. v. Patterson (6)). There is not anything in the deed which would prevent the trustees from making a payment of the whole or part of the corpus for the benefit of the daughter, or of the wife, and such payment would be outside the particular purposes mentioned in s. 14 (i) (ii). Income is payable to the daughter for many years during which, ordinarily, she should be able to maintain herself. Upon an examination of the limitations of the deed it is impossible to character- ize the gift as a gift that is for maintenance, education or apprentice- ship of any person whatsoever. The gift was a substantial gift of capital. The gift of capital in addition to the gift of income for maintenance makes the total gift excessive for the purposes for which the section provides. The instruction by the respondent that a gift of a substantial amount of capital cannot be within the exemption in s. 14 (7) (ii) is a proper and reasonable instruction. That instruction does not prevent the respondent or his officers from considering the circumstances of every case. The gift was an entire gift (Commis- sioner for Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (7) ). 'An illustration of a settlement creating different interests is shown in In re Payne ; Poplett v. Attorney-General (8). In this case, however, (5) (1936) Ch. 161, at pp. 164, 165.

[93]

It was further argued that the Commissioner was wrong in treating the marriage settlement as a single gift, and that, in determining whether he was satisfied that the conditions of s. 14 (7) (ii) were fulfilled, he should have treated the settlement as containing at least two gifts - one to the intended wife and the other to the adopted daughter, who were the persons in whose favour the settle- ment immediately operated upon its execution. It was argued that where there were several donees under a settlement there must of necessity be several gifts. This contention, however, is not sup- ported by the terms of the Act. It is sufficient to refer to s. 25 (4), which provides as follows : - '* Where there is more than one donee under the same gift, each of them shall be liable only for the same proportion of the gift duty as the value of his interest bears tothe total value of the gift." This provision shows that there may be several donees under the same gift. In the present case over 20,000 shares in a number of companies were settled. It would be unreal to regard the transaction as consisting of separate gifts of the shares in each company, or as consisting of separate gifts of each share. It is a single gift of the property which, by the settlement, is vested in the trustees. Similarly, although the beneficiaries under the settlement include several persons, namely the wife, her adopted daughter, and possibly the children of the marriage, or other persons who might become entitled under the general power of appointment contained in the settlement, it would be equally unreal to hold that there are separate gifts to each of those persons. But though it would, in my opinion, be wrong to treat the settlement as containing as many gifts as there are (or may be) donees, the settlement does deal quite separately with two-thirds of the fund and the other one-third of the fund. The provisions relating to the parts into which the fund is divided are quite separate and they operate quite independently. In this case, therefore, I think that the settlement should be regarded as making two gifts, in respect of which the provision for exemption should be separately considered.

[111]

Ricu J. Section 14 of the Gift Duty Assessment Act 1941-1942 provides that, notwithstanding anything contained in the Act, gift duty shall not be payable in respect of " (i) any gift concerning which the Commissioner is satisfied - __. . . (ii) that the gift is made for or towards the maintenance, education or apprenticeship of any person, and is not excessive in amount, having regard to the legal and moral obligations of the donor to afford the maintenance, educa- tion or apprenticeship." The criterion of exemption from duty is the satisfaction of the Commissioner (or other authorized officer) of the matters specified. It is for the officer to decide whether he is satisfied that the purpose of the gift is maintenance, education or apprentice- ship, and that the gift is not excessive in amount for the purpose ; and in so deciding he must have regard to the legal and moral obliga- tions of the donor to afford the maintenance, education or apprentice- ship. When a question is raised as to whether a particular gift is the subject of exemption under the sub-clause, it is the legal duty of the Commissioner or other officer to address his mind to the question and come to a decision whether or not he is satisfied of the relevant matters. If he takes irrelevant considerations into account in arriv- ing at a purported decision, this is tantamount to having failed to give a decision at all. The fact that this has occurred may appear from direct evidence on the point, or may be inferred from the circumstances. Thus, a purported decision under this sub-clause allowing exemption of a gift of, say, a million pounds alleged to be made for the education of an individual would, at any rate in the absence of evidence of very extraordinary circumstances, justify the inference that irrelevant matters had been taken into consideration. So would a refusal to grant exemption to a gift of, say, a hundred pounds by a father to a son to apprentice him to a trade, if there were unquestioned evidence that this was the usual premium, and nothing to suggest that the gift was not in fact made for the purpose stated. But an express or constructive failure of the officer to give a decision would not justify a court in assuming to take the matter out of his hands and make the decision for him. The differences in language between the provisions of pars. (f) (ii) and (iii) and (7) and the rest of the section sufficiently indicate that the fact of the Com- missioner's satisfaction is intended to be an essential ingredient in the existence of a legal right to exemption. Hence, the most that a court could do would be to treat the matter as still undecided, and require him to proceed to decide it according to law.

[114]

Applying these considerations to the facts before the Court, I have arrived at the following conclusions. Having regard to the fact that the amount settled, though considerable, is not enormous in relation to the donor's wealth and social position, that his obligation as husband and head of the family is to support and maintain his wife and family, in which latter term is included the child of his wife by a former marriage (Hill v. Hull (1) ; Eversley on Domestic Relations, 3rd ed. (1906), pp. 260, 261), and that on the evidence led in the: appeal before me I found that in making the assessment and disallowing the objection the Deputy Commissioner of Taxation acted upon the rule or instruction of the Commissioner which he interpreted as binding him to refuse an exemption to gifts, and particularly settlements by way of gift where the subject of the gift was a substantial amount of capital unless special reasons appeared from the nature or circum- stances of the gift why the allowance should be specially considered by the Commissioner, when he would refer the matter to him, a course in the circumstances of the present case he saw no reason for adopting, I am of opinion that the officer has taken irrelevant considerations into account in arriving at his decision, and that the duty cast upon him by the sub-clause has not been performed according to law. The second question should therefore be answered in the affirmative. I am of opinion, however, that no gift here in question constitutes one of those extreme cases in which a court could be justified in holding that, on the material before the officer and his stated or possible conclusions as to its authenticity, only one decision is open to him. In the present case, the whole matter lies in a field which is his and his alone. It follows that, upon the facts of the case, the first arm of question 3 should be answered in the affirmative and the second in the negative, and question 4 should be answered in the negative.

[122]

The Act lends no support to the Commissioner's principle of assessment. It refers to any gift made for or towards maintenance, education or apprenticeship and does not exclude gifts of capital for that purpose. And it is now, I think, settled, in this Court, that the Commissioner cannot base his dissatisfaction upon a mistaken con- struction of the section or upon grounds that have no relevance to the matter he has to consider. In short he must act according to reason and justice and not arbitrarily or capriciously : See Stenhouse y. Coleman (1). Prima facie, therefore, the assessment is bad and in the ordinary course would, I presume, be remitted to the Commis- sioner for further consideration. But the Commissioner before this Court took wider ground and contended that none of the provisions or dispositions of the marriage settlement exempt the property described therein or any part of it from gift duty. As I understood the argument the gift exempted by s. 14 (7) (ii) is the whole property comprised in the marriage settlement or at least the two-thirds of the fund settled in favour of the wife and the one-third of the fund settled in favour of the daughter. But I am unable to agree with this contention. The Act itself contemplates gifts of any interest in real or personal property whether at law or in equity, the creation of trusts and the liability of donors, donees and trustees to the extent mentioned in s. 25 (7) to gift duty. It also provides for the distri- bution proportionally of gift duty if there be more than one donee under the same gift. And if the interest of a donee is a future interest then that he should not be personally liable until it becomes an interest in possession : See Act s. 4 (definition) and s. 25 (5). Disposition of property by way of gift may therefore be created by trusts giving tise, as in this case, to various beneficial interests. And I see no reason why those various interests may not, in themselves, be gifts within the meaning of the Act and within the scope of s. 14 (7) (ii).

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