Perpetual Trustee Co Ltd v Commissioner of Stamp Duties - [1941] HCA 15 - HCA 1941 case summary — Zoe

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Perpetual Trustee Co Ltd v Commissioner of Stamp Duties

[1941] HCA 15

High Court of Australia|1941-05-01|Before: McTiernan JJ

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Source facts

Court

High Court of Australia

Decision date

1941-05-01

Before

McTiernan JJ

Source

Original judgment source is linked above.

Judgment (48 paragraphs)

[1]

This matter in the first instance came before the Supreme Court of New South Wales on a case stated under sec. 124 of the Stamp Duties Act 1920 (N.S.W.).

[2]

The first question asked in the case involves the construction of that part of sec. 102 (2) (d) of the Act which provides that, for the purposes of the assessment and payment of death duty, the estate of a deceased person shall be deemed to include and consist of "any property comprised in any gift made by the deceased at any time, whether before or after the passing of this Act, of which bona-fide possession and enjoyment has not been assumed by the donee immediately upon the gift and thenceforth retained to the entire exclusion of the deceased, or of any benefit to him of whatsoever kind or in any way whatsoever whether enforceable at law or in equity or not and whenever the deceased died." And the question emerges from the trusts of a gift and disposition of eight hundred and fifty shares in a limited company registered in the name of J. R. Hall, since deceased, and settled by him by means of an indenture of settlement and transfer of the shares to trustees, of whom he was one. The material clauses of the indenture are clauses 1, 3 and 10, which constitute trusts during the minority of the settlor's son to pay the whole or any part of the income, accumulations of income or the corpus of the shares as the trustees should think fit for the maintenance, advancement and education of the son, and upon the son attaining the age of twenty-one to transfer to him as his absolute property all the property and assets whatsoever, including the accumulations and all investments held by the trustees under the trusts of the indenture. The gift in this case was a gift to the son by the creation of a trust of the beneficial interest in the shares. That is one of the methods of disposition recognized by sec. 100 of the Act, and was necessarily adopted in this case so that the settlor's son, being an infant, might immediately obtain complete "possession and enjoyment" of that character of which the subject matter of the gift was capable. The phrase "possession and enjoyment" is a composite one, and means in this case beneficial possession and enjoyment: Cf. [], per C.B. But it was contended that the settlor was not entirely excluded from possession by reason of his being one of the trustees under the settlement. And the Supreme Court answered in the affirmative the question submitted, holding that the settlor was not, after the date of the gift, excluded from possession of the property, inasmuch as, being a trustee, he joined with his co-trustees in receiving and applying for his son's benefit the dividends which were paid in respect of the shares. Another reason given in the judgment under appeal is that the settlor was not, after the date of the gift, entirely excluded from the enjoyment of the property given and from any benefit of whatsoever kind whether enforceable at law or in equity, because in the event of the son dying under twenty-one there would arise a resulting trust in favour of the settlor. With great respect I am unable to agree with either of these reasons. I am of opinion, notwithstanding the decision in the Canadian case, [], may be to the contrary, that the transfer of the legal interest in the shares to the settlor as one of the trustees of the settlement does not come within the scope of the section. His possession then was merely incidental and was attached to him in his capacity as trustee and not as beneficial owner: Cf. []. The phrase in sec. 102 (2) (d) is "any property comprised in any gift." It is, therefore, the possession and enjoyment of the proprietary interest given which the donee must immediately assume and thenceforth retain to the entire exclusion of the donor. Any interest in property, absolute or limited, legal or equitable, may be given. If such an interest is equitable, the donor may remain a trustee of the legal estate so long as he is completely excluded from the beneficial interest. If the interest is legal, the donee must go into possession and enjoyment of the legal estate and exclude the donor from the possession and enjoyment thereof.

[5]

The alternative construction is that the property means the whole asset out of which the gift is carved. This construction would mean that a donor could not give a limited interest in property without infringing the sub-section. It would be necessary for him completely to exclude every possibility of a resulting trust, however remote. Every settlement would have to contain an ultimate trust of an indefeasibly vested interest in favour of a beneficiary other than himself. But the other sub-sections dealing with the notional estate show that the limited interests which are struck at are those which arise by reference to the death of the deceased person and are therefore substitutes for wills. The present sub-section does not strike at limited interests which do not arise by reference to the death of the settlor, but at transactions which could be collusive. There is no reason why a gift during the life of the donee or of a term of years, or of an annuity charged on property of the donor, which gift the donee immediately possessed and enjoyed to the exclusion of the donor, should infringe the sub-section. The settlor did not, therefore, in my opinion, retain any benefit or reserve for himself any interest in the gift inconsistent with the full enjoyment of the subject of the gift by the son as beneficiary. Three cases decided under the Mortmain Act (9 Geo. II., c. 36, sec. 1), which contains somewhat similar words to those in the sub-section under consideration, support this view. In Attorney-General v. Munby[5] it was held by Sir William Grant M.R. that a grant of premises in trust for the rectors of a parish was not invalidated by the fact that at the date of the grant the grantor was himself rector. The object of the Statute of Mortmain was to prevent a reservation under colour of a charitable use of some substantial benefit to the donor himself (Doe d. Thompson v. Pitcher[6]). That statute required, as does sec. 102 (2) (d), an "out and out" gift over which the settlor retained no power of disposition (Girdlestone v. Creed[7]). After the execution of the documents in this case the complete beneficial interest in the shares thereby created vested in the son. "A gift is a gift whether it be given directly or given through the medium of a trust. What the donor keeps back is no gift" (Wheeler v. Humphreys[8]). The settlor in this case kept back nothing. "In order to ascertain what is the gift, we must see what is given. Does the donor give what he does not part with? I think he does not give what he reserves or retains; and, if it was not included in the gift he made, then there was an entire exclusion of the donor from the property taken under the gift, and what was given was exclusively possessed and enjoyed by the donee" (In re Cochrane[9]). It is true that in the event of the death of the son before attaining twenty-one there remained a mere contingency, which did not happen, in which a resulting trust might arise. But nothing was reserved out of the interest given. The possibility of a benefit accruing to the donor does not affect or impair in any way "the gift" to the son and does not fall within the scope of the Act. Accordingly, I consider that possession of the legal interest in the property comprised in the gift by the settlor as one of the trustees and not in his capacity as beneficial owner was not the possession aimed at by the sub-section and that, the settlor having made a gift complete in itself without any reservation or power of disposition over what was the subject of the gift, he was entirely excluded from the enjoyment of the property given and from any benefit of whatsoever kind whether enforceable at law or in equity.

[12]

But it was said that the donor was not entirely excluded from the possession and enjoyment of the property or of any benefit to him, because the shares in law were vested in him jointly with the other trustees, and that he received and applied jointly with them the income from the trust property for the benefit of the son. The possession, enjoyment and benefit referred to in the section looks, in my opinion, to something tangible and real, not to mere technicalities of the law of possession. Thus, in Commissioner of Stamp Duties (N.S.W.) v. Thomson[13] Higgins J., referring to the question there in question, said: "I take it, therefore, that the benefit referred to means a tangible benefit from the property, a commercial benefit - not necessarily vendible, perhaps, but not a mere sentimental benefit such as may be incident to the honour of being a trustee, or a person who has to be consulted in the administration of property for the benefit of others" - See also Attorney-General v. Seccombe[14]. O'Connor v. Commissioner of Succession Duties (S.A.)[15] illustrates the matter. There the donor transferred securities to his son, who thus had the possession in law of the securities, but he allowed the donor to receive the income from the securities and to deal with it as his own. And so does the Canadian case, Attorney-General of Alberta v. Cowan[16]. The donor in that case declared a trust of negotiable securities, but he remained in possession of those securities, the title to which passed on delivery, just as did the currency of the country. "In point of law," said Duff J., as he then was, "Thomson's possession was the possession of the cestuis que trustent; but the real question is whether this possession of theirs, which was only theirs by virtue of the declaration of trust, was possession of the character contemplated by the Succession Duties Act, R.S.A. 1922, c. 28, sec. 6." And it was held that possession was in substance the possession of the donor and should not be attributed to the beneficiaries in point of law, solely by force of the instrument under which the title of the beneficiaries was created.

Perpetual Trustee Co Ltd v Commissioner of Stamp Duties

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Court

Decision date

Before

Source

Judgment (48 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (2)

Perpetual Trustee Co Ltd v Commissioner of Stamp Duties (NSW) [1941] HCA 15; (1941) 64 CLR 492 (1 May 1941)