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Petitioner: GEORGE JOHNSON AND OTHERS, TRUSTEES OF THE WILL OF FRANK JOHNSON DECEASED VS Respondent: THE COMMISSIONER OF STAMP DUTIES
P L D 1957 Privy Council 205
P L D 1957 Privy Council 205
Present : Viscount Simonds, Lords Oaksey, Reid, Keith of
Avonholm and Somervell of Harrow
GEORGE JOHNSON and others, Trustees of the
Will of Frank Johnson deceased‑Appellant
Versus
THE COMMISSIONER OF STAMP DUTIES -----Respondent
(and 3 other connected appeals)
Privy Council Appeals Nos. 33, 34 and 35 of 1955, decided on 31st January 1956, from the Supreme Court of New South Wales.
(a) Estate Duty‑-------[Law of State of New South Wales (Australia)]‑Deceased's life interest to be included in assessable assets if property situated in New South Wales wherever deceased may be domiciled, but not if property is personal property situate outside New South Wales even if deceased was domiciled in New South Wales‑Charging of property within State's jurisdiction wherever its owner may be not contrary to inter national law‑[Estate Duty Act (X of 1950), S. 20].
Held, that for the purposes of assessment and payment of death duty, the estate of a deceased person should include any property in which the deceased bad an estate or interest limited to cease on the death of the deceased [Section 102 (2) (g), Stamp Duties Act, 1920‑1952 (New South Wales) ] wherever the deceased may have been domiciled.
In such a case, there was sufficient relevant territorial connection with New South Wales to withstand any objection on the score of invalidity of clause (g) referred to above.
Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (Watt's Case) (1926) 38 C R L 12; Vicars v. Commissioner of Stamp Duties N.S.W. (1945) 71 C L R 309; Commissioner of Stamp Duties v. Millar (1932) 48 C L R 618 ; Broken Hill South Ltd. v. Commissioner of Taxation (1937) 56 C L R 337 and Winans v. Attorney‑General '(1910) A C 27 ref:
If property was within the State's jurisdiction taxing it was not against any principle of international law or comity of nations.
Winans v. Attorney‑General (1910) A C 27 ref.
There was, however, no territorial connection with the State of New South Wales if personal property was situate outside New South Wales even if the deceased was domiciled in New South Wales.
If any provision in Stamp Duties Act of New South Wales purported to tax such property it was invalid by reason of section 5 of the Constitution Act, 1902.
Such a provision was wholly bad and no distributive or divisible principle could save its application.
Carter v. Potato Marketing Board (1951) 84 C L R 460 and Newcastle and Hunter River Steamship Co. Ltd. v. Attorney‑General for the Commonwealth (1921) 29 C L R 357 distinguished.
The domicile of the deceased within New South Wales at the date of the death was a quite insufficient ground by itself to make good the lack of any other connection with the State.
Legislation on any subject‑matter which has no relevant territorial connection whatever with New South Wales falls outside the power of the Legislature of New South Wales.
Garfield Barwick Q. C. and R. S. Jacobs for Appellant.
Solicitors : Bell Brodrick and Gray.
Solicitor General for N. S. W. H. A. Snelling Q. C. R. Else Mitchell Q. C. and R. J. Holland for Respondents.
Solicitors :Light and Lultin.
Date of hearing : 22nd November 1955.
JUDGMENT
LORD KEITH OF AVONHOLM.‑----These appeals raise certain questions as to the validity of assessments to death duty made by the Commissioner of Stamp Duties, under the Stamp Duties Act 1920‑1952 of the State of New South Wales. The Supreme Court of New South Wales, on cases stated by the Commissioner, in the first case in part upheld and in part rejected the assessment and in the other two cases upheld the assessments in whole. The judgment of the Court in the first case determined the result in the other two cases.
Appeal by Johnson's Trustees
The material facts can be briefly stated. Frank Johnson (hereinafter called the testator) died on 20th August, 1936), being then domiciled in the State of New South Wales and leaving property within that State. Probate of his will and three codicils thereto was granted on 29th December, 1936, to the appellants, the executors named in the will and codicils and the present trustees thereof. By his will the testator after the bequest of certain pecuniary legacies, gave devised and bequeathed all his real and personal estate upon trust to sell, with power to postpone ; to pay his debts funeral and testamentary expenses, State Probate, Federal Estate and all other duties and the said legacies ; to invest and to stand possessed of the investments and to hold the net income from the residuary estate upon trust to pay one third of the income to his wife Sarah Johnson during her life and to divide the residue of the income (including after the death of his wife the income to which she was entitled) into four equal parts and to hold such income upon trust to pay one of such parts to each of his four children for life with gifts over of the income of a child dying before the distribution of the residuary estate, and upon trust as to the corpus of the residuary estate for such of the issue of the four children of the testator as should be living at the death of such children respectively and should attain the age of twenty‑one years, in equal shares per stripes as tenants in common.
The said Sarah Johnson (hereinafter called the deceased) died on 8th December, 1952, being then domiciled in the State of New South Wales and leaving property within the said State. At the date of the death of the deceased the executorial duties in respect of the estate of the testator had been carried out and the residuary estate vested in the appellants comprised (excluding real estate in Queensland which is not affected by this appeal) real estate in New South Wales, valued at the date of death of the deceased at 15,000 and personal estate consisting of shares in public companies and Commonwealth Inscribed Stock and debts due by a proprietary company to the appellants. The total value of the said property and assets at the date of death of the deceased was 97,639 14s. 9d. It is unnecessary to particularise further the personal estate beyond saying that part of it was located in New South Wales and part in the State of Victoria. At the date of the death of the deceased two of the appellants, namely George Johnson and George Edgerley Johnson, were domiciled and resident in the State of New South Wales. The third appellant. Perpetual Trustee Company (Limited), was incorporated and carried on business in the said State. The children of the testator were all living at the date of the death of the deceased and in consequence of her death are each entitled for their respective lives to one‑fourth of the income of the estate of the testator, having previously been each entitled to one fourth of one‑thirds of the said income. The children are all domiciled and resident in the State of New South Wales.
On the basis of these facts the Commissioner included in the dutiable estate of the deceased the whole of the property and assets of the estate of the testator to the extent to which a benefit accrued or arose by cesser of the interest therein of the deceased limited to cease on her death and valued such benefit at one‑third of the principal value of the said property and assets, namely after a certain immaterial adjustment, 32,297. For the purpose of assessing death duty on the estate of the deceased the Commissioner treated the said property and assets, to the extent to which a benefit accrued or arose by cesser of the interest therein of the deceased, as an estate by itself and separately assessed duty thereon in the sum of 3,633 8s. 3d.
The Commissioner of Stamp Duties stated the following questions for the determination of the Supreme Court :‑
(1) Whether any part of the property included in the estate of the testator in which Sarah Johnson had an interest limited to cease on her death was liable to duty under and by virtue of the provisions of the Stamp Duties Act, 1920 1952 ?
(2) If the answer to question (1) be in the affirmative‑
(a) what part of such property was liable to duty as aforesaid?
(b) what was the value attributable to such part thereof for the purpose of assessing death duty thereon in accordance with the provisions of the said Act?
The Supreme Court answered the questions as follows:
(1) Yes ; (2) (a) Such of the said property as was situate at the date of the death of Sarah Johnson in the State of New South Wales ; and found it unnecessary to answer (2) (b). Against this judgment the trustees of the will of Frank Johnson have appealed and the Commissioner of Stamp Duties has cross‑appealed to their Lordships' Board.
The deceased died on the 8th December, 1952, and the Stamp Duties Act, 1920‑52 is the relevant statute. It will be convenient to set forth some of the most relevant provisions of the Act. These run as follows:--
"101‑D.‑(1) In the case of every person who dies after the commencement of the Stamp Duties (Amendment) Act, 1939, whether in New South Wales or elsewhere, and who was at the date of his death domiciled in New South Wales, duty (hereinafter called death duty) at the rates mentioned in the Seventh Schedule to this Act, shall subject to this section be assessed and paid upon the final balance of the estate of the deceased as determined in accordance with this Act . . . . .
101‑E. In the case of every person who dies after the commencement of the Stamp Duties (Amendment) Act, 1939, whether in New South Wales or elsewhere, and who was at the date of his death domiciled outside New South Wales, duty (hereinafter called death) at the rate or rates mentioned in the Eighth Schedule to this Act shall be assessed and paid upon the final balance of the estate of the deceased as determined in accordance with this Act . . . . .
102. For the purposes of the assessment and payment pf death duty but subject as hereinafter provided, the estate of a deceased person shall be deemed to include and consist of the following classes of property:‑
(1) (a) All property of the deceased which is situate in New South Wales at his death.
And in addition where the deceased was domiciled in New South Wales all personal property of the deceased situate outside New South Wales at his death . . . . to which any person becomes entitled under the will or upon the intestacy of the deceased, except property held by the deceased as trustee for another person under a dis position not made by the deceased.
(2)
(g) (i) Any property in which the deceased or any other person had, at any time either before or after the com mencement of the Stamp Duties (Amendment) Act, 1952, an estate or interest limited to cease on the death of the deceased or at a time determined by reference to the death of the deceased (in this Act referred to as the 'limited interest') to the extent to which a benefit accrues or arises by cesser of the limited interest, whether or not the limited interest has been surrendered, assured, divested or otherwise disposed of, whether for value or not, to or for the benefit of a person entitled to an estate or interest in the property in remainder or reversion expectant upon the determination of the limited interest. Provided that where the limited interest was so surrendered, assured, divested or disposed of not less than three years before the death of the deceased, and bona fide possession and enjoy ment of the property was assumed immediately after the limited interest was so surrendered, assured, divested or disposed of, and thereafter retained to the entire exclusion of the person theretofore entitled to the benefit of the limited interest, and of any benefit to such person, whether enforceable or not, the property shall not be deemed part of the estate.
The value of the benefit accruing or arising from the cesser of the limited interest shall‑
(a) if the limited interest extended to the whole of the income or benefits of the property, be the principal value of that property; and
(b) if the limited interest extended to less than the whole of the income or benefits of the property, be the principal value of an addition to the property equal to the income or benefits to which the limited interest extended.
In the application of this sub‑paragraph to and in respect of a limited interest which is an annuity the property out of which or out of the income or proceeds of which the annuity is payable shall be deemed to be held for an estate or interest in remainder or reversion expectant upon the determination of the annuity.
(2A) All personal property situate outside New South wales at the death of the deceased, when‑
(a) the deceased dies after the commencement of the Stamp Duties (Amendment) Act, 1939; and
(b) the deceased was, at the date of his death, domiciled in New South Wales; and
(c) such personal property would, if it had been situate in New South Wales, be deemed to be included in the estate of the deceased by virtue of the operation of paragraph (2) of this section.
105‑A.‑(1) Any property which is deemed to be included in the estate of any deceased person solely by virtue of the operation of subparagraph (g) of paragraph (2) of section one hundred and two of this Act or of that subparagraph as extended in its application by paragraph 2 (a) of that section (in this Act referred to as `non‑aggregated property') shall not be aggregated with the balance of the estate of the deceased but shall be separately assessed and shall for that purpose be an estate by itself:
Provided that the aggregate of all non‑aggregated pro perty included in the dutiable estate consequent upon the cesser of limited interests which were created by the same person shall be separately assessed and shall for that purpose be an estate by itself.
114‑A.‑(1) Death duty separately assessed in respect of non‑aggregated property shall constitute a debt payable to Her Majesty out of the non‑aggregated property and such duty shall be paid accordingly out of the non‑aggregated property by the person in whom the non‑aggregated property is vested.
(2) For the purpose of paying the duty the person in whom the non‑aggregated property is vested, if a trustee, may raise the amount of the duty by mortgage or sale of the non aggregated property.
(3) The person in whom the non‑aggregated property is vested shall not be liable for any duty in excess of the assets constituting the non‑aggregated property.
115‑A.‑(1) Death duty separately assessed in respect of non‑aggregated property shall become due and payable on the assessment thereof by the Commissioner, or if not duly so assessed within six months from the death of the deceased then on the expiration of that period of six months.
(2) Such duty shall constitute, as from the death of the deceased, a charge upon so much of the non‑aggregated property as is situated in New South Wales, but no such charge shall effect the title of a bona fide purchaser for value (whether before or after the death of the deceased) without notice.
(3) In case the duty is not paid within the prescribed time the Commissioner may apply to the Supreme Court, which may order that a sufficient part of the non‑aggregated property so situated be sold and the proceeds of such sale applied in payment of the duty and of the costs consequent thereon.
(4) Where any property has been sold under any such order the Supreme Court may make an order vesting the property in the purchaser.
120.‑(1) Where any property which is or the value of which is included in the dutiable estate of a deceased person is vested in any person other than the administrator, the duty payable in respect thereof (other than death duty separately assessed in respect of non‑aggregated property) shall be paid by the persons entitled thereto according to the value of their respective interests therein, to the administrator,
(2) Every person who as beneficiary, trustee, or other wise acquires possession or assumes the management of any such property (including non‑aggregated property), shall upon retaining the same for his own use, or distributing or disposing thereof, and in any case within three months after the death of the deceased, deliver to the Commissioner a full and true account verified by oath of such property, together with a valuation thereof by a competent valuer: Provided that the time for delivering the account or valuation may be extended by the Commissioner.
(3) Any person directed by this section to deliver an account of any property shall upon the assessment of the duty payable in respect thereof be liable to pay such duty (inclu ding death duty separately assessed in respect of non aggregated property) and interest thereon at the rate of eight pounds per centum per annum from the date of the expiration of the period of six months after the death of the deceased or if administration has been first granted out of New South Wales, from the date of the expiration of the period of twelve months after the death of the deceased, and if a trustee may raise the same by mortgage or the sale of the property.
(5) In case the account and valuation is not lodged within the time abovementioned, or if the duty is not paid within one month after assessment, the Commissioner or any person interested may apply to the Supreme Court, which may order that a sufficient part of such property be sold, and the proceeds of such sale applied in payment of the duty and of the costs consequent thereon.
(6) Where any property has been sold under any such order the Supreme Court may make an order vesting the property in the purchaser.
Their Lordships would observe that, while section 102 (1) deals with property of the deceased to which any person becomes entitled by will or on intestacy, of the deceased and so is property of which he died possessed, section 102 (2) includes a large number of categories of dutiable estate (not set out above) consisting mainly of property of which the deceased had, disposed, or rights which he had created in third parties, during his life time, or within three years of the death, without full consideration. Most, if not all, of these cases are familiar in corresponding British legislation and have been compendiously referred to in various cases in the Australian Courts as notional property of the deceased. They are cases which differ in origin and nature from the property described in paragraph (g) of section 102 (2) which need have been at no time the property of the deceased and the limited interest in which will normally not have been created by the deceased.
The question at issue on the appeal may now be stated. To quote the words of the Supreme Court: ---
"The Legislature of New South Wales is a subordinate legislature. Its powers are to be found in the Constitution Act, 1902, section 5 of which, so far as material, provides that: --
'The Legislature shall subject to the provisions of the Commonwealth of Australia Constitution Act have power to make laws for the peace, welfare and good government of New South Wales in all cases whatsoever.'
Legislation on any subject‑matter which has no relevant territorial connection whatever with New South Wales falls outside the power of the Legislature of New South Wales see Attorney‑General v. Australian Agricultural Company (34 S R 571), and the Commissioner of Stamp Duties v. Millar (48 C L R 618).
One must examine the Stamp Duties Act, therefore, to see whether there is a relevant nexus between the property, dealt with in paragraph (g) and the State of New South Wales, bearing in mind that under paragraph (g) property is brought into the estate of the deceased whom, for con venience, we will call the life tenant, although, of course, paragraph (g) has a wider application than merely to where the deceased was a life tenant. It is brought to on for the purpose of it thereupon being segregated and treated as a separate estate; it is brought in wherever the life tenant died and wherever he was domiciled (section 101/l01E). It is so brought in wherever the remaindermen, or in the case of equitable estates, the trustee, resides or is domiciled, and without regard to the system of law by reference to which the instrument creating the limited interest or regulating the rights of the remaindermen was executed, or to which it owes its force, or by reference to which it would be administered. On these grounds it is said that no relevant connection with the State of South Wales appears from the legislation."
On the question thus posed the Supreme Court reached the conclusion that section 102 . (2) (g) extended only to property within New South Wales and that so construed it had sufficient relevant territorial connection with New South Wales to withstand the challenge of invalidity. In their Lordships' view the Supreme Court were right. While the Statute in its present form is the result of a period of growth through legislative amendments made on the original Act over a long period of years, the broad statutory scheme of the Act as it now stands seems fairly plain. The Act has regard first of all to persons dying domiciled in New South Wales and to persons dying domiciled outside New South Wales (101‑D and 101‑E supra). By subsection (1) of section 102 the estate of a deceased person is deemed to include and consist of (a) his property situate in New South Wales at his death and in addition (b) his personal property situate outside New South Wales at his death where he died domiciled in New South Wales. The person who is domiciled in New South Wales and the person who is not so domiciled are alike caught under (a) but the person who is not so domiciled escapes under (b). It would a remarkable thing if the statute when it comes to deal with the various very special categories of property brought in for purposes of death duty by subsection (2) of section I02 cast the net wider than was done under subsection (1), by including under subsection (2) property inside and outside New South Wales, irrespective of whether the deceased died domiciled there or not. In their Lordships' view this would be an unreasonable construction to place upon the statute. That it was not so intended would, indeed, seem to follow from the addition of subsection (2‑A) which would be otiose if property under subsection (2) already included property inside and outside New South Wales. But as regards paragraph (g) the matter is, in their Lordshships' judgment, concluded by references in sections 102‑A, 105‑A and 112‑E to sub parapraph (g) "as extended in its application by paragraph (2‑A)". The only extension made by (2‑A) was to bring in property situate outside New South Wales where the deceased died domiciled in hew South Wales. The natural reading is that para graph (g) of itself is confined to property inside New South Wales. This view is in harmony with decisions of the High Court of Australia, when dealing with other paragraphs of subsection (2) of section 102, in Commissioner of Stamp Duties (N. S. W.) v. Perpetual Trustee Co. Ltd. (Watt's Case) ((1926) 38 C R L 12) and Vicars v. Commissioner of Stamp Duties (N. S. W.) ((1945) 71 C L R 309). In reaching their conclusion that the statute should be so read, their Lordships have found no occasion to invoke section 17 of the Interpretation Act of 1897.
It is contended, however, that even if paragraph (g) be limited to property within New South Wales that is not sufficient to create a territorial nexus with New South Wales when regard is had to the subject‑matter of para graph (g). Everything it is said which is contemplated by paragraph (g) may take place outside New South Wales The limited interest may be created outside New South Wales: the person with the limited interest may be a for eigner living outside New South Wales; he may hold the interest pur autre vie that is of the deceased who is also living outside New South Wales : the trust administration and the remainderman may be outside New South Wales; the limited interest may be surrendered or disposed of outside New South Wales; and the only connection may be that the property has subsequently been brought into New South Wales before the death of the deceased. Their Lordships assume, however, that the property in which the limited interest was had can be clearly indentified as being in New South Wales at the death of the deceased. If so there is, in their judgment, a sufficient territorial con nection with New South Wales. It is the benefit derived through the property by the cesser of the life interest that is taxed and if the property is inside the jurisdiction at the date of death it is immaterial what are the circumstances attendant on the creation and enjoyment of the limited interest. The presence of property within a State's juris diction has always been regarded as a cogent reason for recognising the right and power to tax that property. The property enjoys the protection of…
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