Queensland Trustees Ltd v Commissioner of Stamp Duties

Queensland Trustees Ltd v Commissioner of Stamp Duties - [1956] HCA 75 - HCA 1956 case summary — Zoe

[10]

Now I cannot see how the nomination of trustees, including in that document the schedule of trusts, could constitute a settlement within this definition unless it operated to create the trusts. Otherwise it would not be true that it was a deed whereby property was settled. The definition of "settlement" is not expressed in terms compatible with the notion that the tenor of a document ex facie and not its operation may determine the description under which it is stamped: cf. Commissioner of Stamp Duties (Q.) v. Hopkins [1] . To fall within that definition an instrument must, I think, be one whereby the property is in truth settled or agreed to be settled. The Commissioner of Stamps, when he claimed that the nomination of trustees was liable to stamp duty as a settlement, must therefore be taken to have ascribed to the nomination of trustees comprising the transfer and schedule of trusts an effective operation to create the trusts now in question. And indeed that was the view he in fact espoused. His claim was contested but it was judicially declared by the Supreme Court that the nomination of trustees was chargeable with stamp duty as a settlement. That declaration was affirmed on appeal to this Court. Disregarding altogether the reasons for this decision it appears to me to be, or at all events to involve, a judicial determination between the Crown and the executors that it was the nomination of trustees (including therein the schedule) which created the trusts. In face of that determination the Crown cannot now turn about and claim successfully that it was the will and not that instrument which created the trusts. On that simple ground of issue-estoppel, the claim of the Commissioner of Stamp Duties must fail. But if the reasons for the decision of this Court are looked at, it seems to me that they show that the decision of the Court directly depended upon the very conception stated above. The trusts of the will were put on one side because the testator did not die possessed of the land which therefore did not vest in the executors as trustees except in virtue of the nomination of trustees. The view seems to have been rejected that it was the will which created the trusts which attached to the land as soon as it was acquired in lieu of the shares which in the meantime were held for the cestuis que trust subject to the directions of the will. The Chief Justice said: "The trustees under the will became the trustees of the lands, not by virtue of the will, as the testator did not own lands, but only by reason of the transfer to them by the company. So also the rights of the beneficiaries in relation to the land depend upon the terms of the nominations of trustees and the transfers. It is true that the trusts set forth in the nominations of trusts correspond with those set forth in the will. But those trusts did not come into existence until the lands were vested in the trustees by a transfer from the company. The form of the documents corresponds with the substance of the transaction, namely the transfer of the lands to trustees to be held upon certain specified trusts. These trusts were set forth in the will, but could not operate in relation to the lands by virtue of the will": In re Sharpe [1] . No doubt the view might have been adopted that the trustees took under and subject to the will first the shares and then the land and that nothing else could operate as a limitation of the equitable estates or interests taken by the beneficiaries. But that view was not adopted, as the foregoing passage shows. Its adoption must, however, have spelled a decision against the claim of the commissioner that it was as a settlement that the nomination of trustees must be stamped. The decision that the document was a settlement necessarily precludes the commissioner from now going back for the purposes of succession duty to the view that it was the will and not the nomination of trustees (including the schedule thereto) which created the trusts. It is only necessary to add that the appellants F. V. Sharpe and A. R. Sharpe were privies of the executors in the appeal against the imposition of stamp duty as on a settlement.

[13]

The judgment and reasons of the Full Court, delivered by Mansfield S.P.J., are, in my opinion, right. His Honour stated the question at issue and reasons for answering it adversely to the present appellants in a passage with which I entirely agree, and upon which I could not improve. It is as follows: "The whole question in issue in this case depends upon the terms of s. 4 of The Succession and Probate Duties Act 1892. The word "property" as used in that section covers every form of right or benefit, and the matter therefore depends entirely on (a) the meaning of the words "upon the death of any person", and (b) the substantial effect of the will in relation to circumstances in which it operated (cf. Commissioner of Stamp Duties (Q.) v. Donaldson [1] , per Isaacs J.). To come within s. 4 so as to be conferred as a succession the property must "by reason of" the disposition - that is, by reason of the terms of the will relevant to that property - have passed to another at the given moment, namely, upon the death of the testator (ibid.). The date of the entitlement is the date of death, and if the circumstances of the case reveal that after date of death of the person alleged to be the successor, some other person is by reason of a disposition shown to be entitled to a benefit which can be classed as property within the meaning of the Act, and to which he was not entitled before that death, then a "succession" will take place and it will be liable to succession duty under the section. If the entitlement takes place after an interval or is subject to a contingency the duty is payable on the expiration of that interval or upon the happening of the contingency, as the case may be. In the instant case, the beneficiaries, by reason of the will of the testator and upon his death became beneficially entitled to certain rights. The testator as a shareholder in the company held a controlling interest therein which passed to his trustees upon his death. The trustees were bound to act in accordance with the testator's directions, and because of the control which they then possessed they were able to alter the articles of the company and acquire the lands specified by the testator and hold them on the trusts directed by him. The interest in the lands which the appellants Frank Victor Sharpe and Alfred Roy Sharpe received was the fruit of the testator's interest in the company and the directions contained in his will. The important point is that the exercise of the trustees' power and the performance of their fiduciary obligation must, so to speak, be read into the will, so that the benefit which the beneficiaries obtained must be considered to pass under the will (cf. Queensland Trustees Ltd. v. Commissioner of Stamp Duties [2] ). There is in my opinion no new and independent title which precluded the operation of the provisions of the will, and there was therefore a succession. As the contingency to which the acquiring of an absolute interest was subject, has now happened, the succession duty thereon is payable." It was argued for the appellants that all parties are estopped in relation to the question by way of issue-estoppel. This argument is based upon the judgment in the case of In re Sharpe; Queensland Trustees Ltd. v. Commissioner of Stamp Duties [1] . In that case the Supreme Court of Queensland decided that the "nomination of trustees" and the "schedule of trusts" constituted a settlement within the meaning of s. 2 of The Stamps Acts 1894 to 1940 and as such were liable to ad valorem duty. The majority of the court (Philp and Mansfield JJ.) applied Davidson v. Chirnside [2] . Actually, they decided the case without reference to the will of the testator. "The instrument must be assessed by what appears on its face, and on its face it sufficiently appears to be a settlement of the lands described therein without reference to the will" per Philp J. [3] "By s. 4 a tax is imposed upon instruments - not upon transactions - and, as Higgins J. said in Davidson v. Chirnside [4] , "the more instruments you want, the more stamps you must buy." By s. 2 the term "instrument" means and includes any written or printed document."

[28]

But the Full Court of Queensland in the present proceedings held that "the trustees' power and the performance of their fiduciary obligations must, so to speak, be read into the will, so that the benefits which the beneficiaries obtained must be considered to pass under the will". In other words their Honours held that the proceedings in the winding-up brought about by the trustees as shareholders, including the execution of the nomination of trustees and transfer of the lands by the liquidator, must be read into the will. In support of this view their Honours referred to this Court's judgment in Queensland Trustees Ltd. v. Commissioner of Stamp Duties [1] that " as has often been held with respect to special powers of appointment, when property passes under an exercise of such a power, it is the creation of the power, and not the exercise of it, by reason of which the property is taken The important point is that the exercise of the trustees' power is, so to speak, to be read into the settlement " [2] . Their Honours' view would certainly have prevailed if the High Court had adopted the reasoning of the majority of the Full Court in the earlier proceedings, who had excluded the will from consideration merely for the purposes of The Stamp Acts. However, although Latham C.J. referred to the "full and satisfactory" reasons of the majority, he expressly stated, after taking the will into consideration, that is to say, after taking into account the whole transaction, which the majority had refused to do, that the trustees became trustees of the lands not by the will but by the transfer, and that the rights of the beneficiaries in the lands depended on the nomination of trustees and the transfer. Now is this consistent with the view that the beneficiaries' absolute interest in the land passed under the will? With some hesitation I think it is. It is true that the liquidator of the company was not acting in any legal sense for the testator but for the company, which was not identified with the testator because he was the dominant shareholder. The reading of the nomination of trustees and transfer into the will in those circumstances might appear not to be warranted because an appointment under a special power given by the will would be read into it, as such an appointment would be made directly in pursuance of the will; whereas the nomination of trustees and transfer was executed by the liquidator in pursuance of a resolution of the company, although as a result of the exercise of the voting strength of the trustees of the will as shareholders. But the distinction is too fine, and I think it is not sufficient to prevent the will and the nomination of trustees and transfer from being held to be a disposition creating a succession within s. 4 of The Succession and Probate Duties Acts. The fact is that the will had a legally coercive effect throughout as, by legal action, the trustees of the will could have been compelled to do what they did in the winding-up of the company, and the liquidator of the company could likewise have been compelled to execute the transfer to the trustees who would have held the lands subject to the trusts of the will.

[37]

The testator had no title to or interest in the land at any time; but at the respective dates of his will and death the whole legal and beneficial title were vested in a company called Thos. Heaslop & Co. Pty. Limited, and in that company he had a controlling interest, being the holder of 94,732 out of the 96,667 issued shares. By his will he made a provision concerning the land which, so far as it need here be recited, was as follows: - "I Direct my Trustees without delay after my death to take the necessary steps for the voluntary winding up of Thos. Heaslop & Co. Pty. Limited of which I am the dominant shareholder and in such winding up to provide for the distribution among its members of any portion of its assets in specie or in kind and particularly inter alia of the lands described in the following Deeds namely in Certificate of Title No. 353025 Volume 1877 Folio 15 and in such distribution that such lands be transferred to my Trustees who shall thereupon hold and stand possessed of the said lands upon and subject to the following trusts that is to say Upon Trust to manage and order all the affairs thereof as regards letting occupation repairs alterations insurance against fire rebuilding in case of fire receipt of rents indulgences and allowances to tenants and all other matters for a period of sixteen years from the date of my death or until my elder son shall attain the age of fifty years whichever event shall first happen and to divide the net income arising therefrom equally between my sons Frank Victor Sharpe and Alfred Roy Sharpe and upon the expiration of the said period of sixteen years or the attainment by my elder son of the age of Fifty years (whichever event shall first happen) I Direct my trustees to stand possessed of the said lands and hereditaments Upon Trust for my said sons absolutely in equal shares as tenants in common." Then followed provisions to take effect in case one or both of the sons should die before the happening of either of the events referred to. There was also an express declaration to the effect that the land in question should not vest until one of those events should occur.

[39]

The course prescribed by the will was duly followed by the trustees. The company's articles of association were altered so as to empower a liquidator in a winding-up to divide any of the company's assets amongst the members in specie with the consent of a general meeting. The company went into voluntary winding-up, and the liquidator was authorised by a general meeting to divide the assets as he should think fit amongst the members in specie. The appellant trustees (and another trustee of the will, since deceased) being then the members of the company holding the shares which had belonged to the testator in his lifetime, the liquidator exercised the power thus given him by putting the company's seal to an instrument of transfer with respect to the subject land. The instrument so executed was not the appropriate instrument for the purpose. It was expressed to transfer the land to the three transferees, and its subsequent registration was no doubt effectual to pass the legal title; but it was a "Nomination of Trustees" in the form prescribed by s. 77 of The Real Property Acts 1861 to 1929 Q. for use by a registered proprietor desirous of vesting his land in trustees. The company and the liquidator had no concern with the trustee character of the shareholders to whom the land was to be transferred. It was to them as members, and not as trustees, that the company could properly be described as desirous of transferring the land. The transfer should therefore have been made to them by means of a memorandum of transfer under s. 48 of The Real Property Acts 1861 to 1929 Q.. Such a memorandum, of course, would not have referred to the trusteeship of the transferees: see form D in the schedule. The instrument in fact used, however, not only described the transferees in the body of it as trustees, but (in conformity with form I in the schedule as prescribed by s. 77) it included a "Schedule of Trusts", executed by the company and the trustees, which set out that it was agreed that the land should "be held by the above-named trustees, the trustees of the Will of Frederick Robert Sharpe deceased, upon the trusts following that is to say", and proceeded to paraphrase the relevant provisions of the will.

[43]

It was in fact conceded by counsel for the appellants that if their beneficial interests in the land, which became absolute on 21st January 1954, are now vested in them by force of the testator's will and not by force of the schedule of trusts, and if there is nothing in the case to preclude the respondent from asserting that that is so, it must be held that succession duty was rightly assessed against them. But it was argued that whatever may be the right conclusion on the facts which so far have been stated, the appeal must be decided against the respondent by reason of further facts. When the trustees produced for stamping the nomination of trustees and schedule of trusts, the commissioner assessed duty on the footing that the instrument, considered as a whole, was a "settlement" within the meaning given to that word for the purposes of The Stamp Acts 1894 to 1940 Q. by s. 2 of that Act, namely "any contract, deed, or agreement whereby any property is settled or agreed to be settled in any manner whatsoever". The question whether the instrument was such a settlement was then litigated between the trustees and the commissioner by means of a special case. The Full Court of the Supreme Court answered the question in the affirmative [1] , and its decision was affirmed by this Court on appeal [2] . The argument is that, as a consequence of its success in those proceedings, the Crown, here represented by the commissioner, is now estopped from denying that the operative instrument which gave the sons the interests which fell into possession on 21st January 1954 was the nomination of trustees and schedule of trusts. The principle of law which is relied upon is that for which Hoysted v. Federal Commissioner of Taxation [3] is the leading authority in the Privy Council. If the Crown is so estopped, the assessment of succession duty cannot stand, for the nomination and schedule was an instrument which operated inter vivos, and the trusts which it stated in favour of the sons were expressed without reference to the death of any person.

[45]

The case therefore turns upon a question of issue-estoppel. The crucial inquiry must be whether a decision that that instrument, and not the testator's will, was the disposition of property which gave the sons their interests in the land was necessarily involved in the conclusion that the nomination and schedule constituted a settlement within the meaning of The Stamp Acts. This is an inquiry, not as to the reasons which in fact led the Supreme Court, or this Court, to decide in the commissioner's favour the appeal against the assessment of stamp duty, but as to the matters legally indispensable to the conclusion reached, "the essential foundation or groundwork of the judgment, decree or order": Blair v. Curran [4] . See also Brewer v. Brewer [5] . What had to be held, if the assessment of stamp duty was to be sustained, was that the land was "settled" by the instrument on which the duty was charged. The instrument had, of course, a resemblance to a settlement, for in addition to being a transfer of the legal title in favour of persons which it called trustees, it contained provisions such as might be found in an instrument falling within the ordinary conception of a settlement and expressed in terms appropriate to an operative limitation of equitable interests in the property transferred. But, as appears from the petition before us and the reports which are there referred to (as to which see Jackson v. Goldsmith [6] ), an issue was raised as to whether it was from the instrument that the beneficial interests prescribed by the testator took their rise. The opposing contentions appear clearly enough. The Crown was asserting that the testator at his death had no interest in the land and no power to compel its transfer to his trustees; that immediately before the execution of the nomination and schedule the land belonged to the company free from any trust; and that the nomination and schedule effectually imposed upon the land the trusts therein contained, the company being therefore the settlor. The appellants, on the other hand, were asserting that the only trusts subsisting with respect to the land were imposed upon it by force of the testator's will at the moment of the vesting in the trustees, and that they would have taken effect just the same even if the instrument had made no mention of a trusteeship and had contained no specification of beneficial interests. Here, the appellants were contending, the nomination and schedule had no operative effect to create beneficial interests. The issue clearly emerged: whose instrument was it that bound the land by the subsisting trusts - the testator's or the company's? And a decision of the case in favour of the Crown required the answer: the company's. As has already been said, we have not now to examine the reasoning which in fact led to this answer being given; nor have we to speculate as to whether it would have been given if the case of Commissioner of Stamp Duties (Q.) v. Hopkins [1] had already been decided. The important point is that this answer was essential to the conclusion, in the sense that to deny the correctness of the answer would necessarily be to deny the correctness of the decision itself, not merely by invalidating a step in the reasoning which led to it, but by rejecting the very foundation upon which, as a matter of legal necessity, it rested.

At a glance

Court

Decision date

Before

Source

Judgment (48 paragraphs)

Parties