Mack v Commissioner of Stamp Duties

Mack v Commissioner of Stamp Duties - [1920] HCA 76 - HCA 1920 case summary — Zoe

[11]

By virtue of sec. 49 the estate assessable to duty includes not only the real and personal property belonging to the testator at the date of his death, which is dealt with by sub-sec. 1, but also certain other real and personal estate specified in sub-sec. 2 which did not belong to him at that time. But it is important to observe that with the exception of property over which the deceased person had a power of appointment all the property brought into the "estate" by sub-sec. 2 is property which at some time belonged to the deceased person but has ceased to belong to him at the date of his death by reason of some disposition made by him. The general object of these provisions plainly is to render liable to taxation on the death of a person property which, but for some disposition made by him during his lifetime, would have passed from him on his death. In the present case it is clear that the assets of the testator at the date of his death were unaffected by the execution of the indentures in question. The property real and personal which he had before executing the indentures was not in any way disposed of or affected by their execution. No property which had belonged to him passed to any other person by means of the indentures, nor did they create any charge on any specific property. There was no gift of anything tangible, or of anything at all except an obligation enforceable against the testator. What the testator did was to create a liability, not to dispose of assets. The answer to the contention of the respondent may be found in the fact that while sec. 53 deals wholly with the "liabilities" side of the account, sec. 49 deals wholly with the "assets" side. The provisions of these sections are wholly independent, and the fact that a given obligation is within the scope of the deductions authorized by sec. 53 is irrelevant in considering whether a given transaction does or does not come within the provisions of sec. 49. The two sides of the account must be compiled independently of each other.

[17]

Ultimately the contention of the Commissioner that they were not such "debts" rested on the circumstance that by the terms of the deeds the moneys were covenanted to be paid "on demand." It was said that as no "demand" had been made in the testator's lifetime there was no "debt" at his death. It is perfectly clear that, if that be a sound argument, a great number of ordinary business obligations and ordinary covenants upon valuable consideration to pay moneys "on demand" would be outside the ambit of sec. 53. There is no doubt the obligation is to pay a sum certain, not contingently, but absolutely. It is a liability for that sum not dependent in any way upon the non-performance of some other obligation, but presently existing, and fixed, and independent of any other stipulation. But a "demand" is stipulated for, not in order to create a pecuniary obligation, or even to make it certain in amount, but simply to fix the time of performance so that no litigation for breach is possible until the demand is made. The debt existed. It was, at the date of the testator's death, a debt "actually due and owing," that is, truly and really due and owing; for "due" here only means "debitum," and "owing" only means that which is "owed." "Due" is sometimes used in the sense of "payable"; that, however, is where the context requires it. But, as Mellish L.J. said with reference to the phrase "debts due," in Ex parte Kemp; In re Fastnedge[5], "primâ facie, and if there be nothing in the context to give them a different construction, they would include all sums certain which any person is legally liable to pay, whether such sums had become actually payable or not." Story J., in United States v. State Bank of North Carolina[6], says, with reference to the word "due" being synonymous with "owing": "In the settlement of the estates of deceased persons, no distinction is ever taken between debts which are payable before or after their decease. The assets are equally bound for the payment of all debts." Here the context helps the primâ facie meaning, because it would be curious to read "due and owing" as "payable and owing."

[19]

The only other question is whether the amounts of these debts, though deductible under sec. 53, still fall within sub-sec. 2 (B) of sec. 49, so as to be taxable as "personal estate taken under any gift," &c. A careful examination of sec. 49 will demonstrate the impossibility of such a result. Sec. 49 establishes a field of taxation by way of "Duties on estates of deceased persons." But that field is marked out into two distinct portions, the dividing line being unmistakable. Sub-sec. 1 embraces "all estate whether real or personal" which "belonged" to the deceased. That is every particle of property he had at his death, and it means the gross amount of that property. Sub-sec. 2 establishes an entirely separate class, consisting of various elements, which, though distinguishable from each other, possess one common characteristic, namely, they did not belong to the deceased at the time of his death. It follows that the class of property embraced in sub-sec. 1 and that embraced in sub-sec. 2 as a whole are mutually exclusive. Now, sec. 53 provides that the "debts actually due and owing by him" shall be deducted from "his estate." That is, his debts shall be deducted from his estate. After gathering and valuing up in gross the whole of the property belonging to him at the time of his death, you deduct part of that gross value, namely, the amount of his debts, so as to get the net amount of his own property. "Deduction" means taking away part of the thing from which the deduction is made. Since the debts are treated as part of the first class and since the two classes are mutually exclusive, it necessarily follows that the debts are not part of the second class, and consequently do not fall within the expression "personal estate" as used in sub-sec. 2 (B) of sec. 49. It is easy to see how unjustly and irrationally the contrary view would operate. A debt that falls within the third sub-section of sec. 53 - as, for instance, a gift such as the present, if the testator had died within three months after the deed was executed - would not only not have been deductible under sec. 53, but would have actually been added to swell the taxable estate under sec. 49 (2) (B), making his estate notionally £18,000 more than he ever had or could have had, and simply because he created an obligation against himself. That is absurd, but it is also contrary to the obvious meaning of the section.

At a glance

Court

Decision date

Before

Source

Judgment (30 paragraphs)

Mack v Commissioner of Stamp Duties (NSW) [1920] HCA 76; (1920) 28 CLR 373 (27 November 1920)

Parties

Legislation Cited (1)

Cases Cited (1)