Atwill v Commissioner of Stamp Duties (NSW)

[1971] HCA 63

HIGH COURT OF AUSTRALIA

Barwick C.J., Menzies, Windeyer, Owen and Walsh JJ.

ATWILL v. COMMISSIONER OF STAMP DUTIES (N.S.W.)

(1971) 125 CLR 203

3 December 1971

Death Duties (N.S.W.)

Death Duties (N.S.W.)—Settlement—Trust to take effect after death—Property subject to trust—Property not disposed of by settlor but subsequently purchased by trustees—Whether part of notional estate of deceased—Stamp Duties Act, 1920-1964 (N.S.W.), s. 102 (2) (a).

Decisions

December 3.
The following written judgments were delivered:-
BARWICK C.J. The Commissioner of Stamp Duties included in the dutiable estate of Milton Spencer Atwill deceased the sum of $276,458.00 being the value at the date of his death of twenty shares in Langton Pty. Ltd. These shares were then held by trustees of a deed of settlement made by the deceased which contained a trust to take effect after his death. The shares did not form part of the actual estate of the deceased at his death nor had they at any time been his property. They had been purchased by the trustees of the settlement with a sum of money which the deceased had by the said settlement settled on trusts to take effect after his death. (at p207)

2. The Commissioner of Stamp Duties claimed that the value of the shares formed part of the notional estate of the deceased by virtue of s. 122(2)(a) of the Stamp Duties Act, 1920-1964 (N.S.W.). At the request of the executors of the deceased the Commissioner of Stamp Duties pursuant to s. 124(2) of the Act stated a case for the opinion of the Supreme Court. The Supreme Court was asked whether the shares in Langton Pty. Ltd. should be included in the dutiable estate of the deceased for the purposes of the assessment and payment of death duty. The Supreme Court, Court of Appeal Division, answered in the affirmative (1970) 92 WN (NSW) 869 . The executors have now appealed to this Court. (at p207)

3. I have had the advantage of reading the reasons for judgment prepared by my brother Owen. He there sets out the statutory provision and the contentions of the parties. I entirely agree with the conclusion to which he comes and with the reasons which he gives for that conclusion. I agree that on the proper construction of the section the property to be deemed to be included in the estate of a deceased is the property of which he has disposed in his lifetime by a settlement containing a trust in respect of that property to take effect after his death. If it were not for the proviso the notional estate of a deceased would include the value of property which had been made the subject of such a settlement but which for one reason or another had ceased to be so subject at the date of the death of the deceased. The proviso ensures that notwithstanding that the opening words purport to bring the value of the property into the notional estate because it was disposed of in his lifetime by a settlement of the described kind it will only be so subject if it or part of it is still subject to those trusts at the date of the death of the deceased. The proviso as one might expect of a proviso was in aid of the estate of the deceased as a relaxation of the full extension of the main provision. It would be unusual to treat it as a substantive provision bringing into the notional estate of a deceased property which was never the property of the deceased, although, by reason of the actions of others than himself, it is subject at his death to the trusts of a settlement which he had made, e.g. accretions due to good husbandry of the trustee of trust property other than that settled by the deceased or accretions due to donations by others than the deceased. (at p207)

4. It was submitted in argument that the correct approach to the construction of the section was first to read the words of the proviso as if they were a substantive provision and then to search for words of limitation elsewhere in the section. On this approach the words of the proviso read as a substantive provision were said to be clear and unambiguous. On their plain meaning it was said the whole of the property subject to the trusts of the settlement at the death of the deceased was to be deemed to be part of the dutiable estate. It was then submitted that there was not to be found in the balance of the section any limitation on this clear and unambiguous meaning of the words in the proviso; and that therefore unqualified effect should be given to them. (at p208)

5. In my opinion, this is an inadmissible method of construction of a statute. The fact that the paragraph is a proviso cannot be ignored and as a proviso it ought not to be read and construed apart from the terms of the section. It must be read with that to which it is a proviso. It is first necessary to read the substantive part of the section and then to read the proviso in the light of the meaning of that part. To first assign a meaning to the words of the proviso, independently of the provision to which it is affixed, is in my opinion to reverse the proper approach to the construction of what is in terms and intendment a proviso. (at p208)

6. The governing words of the whole provision including the proviso are, in my opinion, the opening words which describe the property which is to be deemed to be included in the dutiable estate of a deceased. To use the full description it is "all property which the deceased has disposed of . . . by a settlement containing any trust in respect of that property to take effect after his death". The reference to "the property" in the first line of the proviso is in my opinion a reference to the same property as that described in the opening words of the section; so is the reference to "the property" in the second last line. (at p208)

7. We were referred to the legislative history of the paragraph: but having considered it, I obtain no assistance from it in the construction of the paragraph. Nor do I obtain any such assistance from reported cases on other parts of s. 102(2), or from the cases decided on par. (a) before Sneddon v. Lord Advocate (1954) AC 257 and Gale v. Federal Commissioner of Taxation (1960) 102 CLR 1 in which the point here arising was not discussed. (at p208)

8. Paragraph (a) of s. 102(2) may be thought not to be well expressed. Perhaps its meaning is not beyond argument. But I have come to a firm conclusion that the meaning of the proviso is as I have indicated and that its function is merely to protect the estate of a deceased against an operation of the unqualified words of the opening part of the section. I see little profit in conjuring up instances where it might be thought that some item of property not disposed of by the deceased but subject to the trust of his settlement at his death was so related to the property actually disposed of by the deceased that it would be desirable from the point of view of the revenue that it should be treated as part of the notional estate. Nor is there profit in my opinion in considering how on the construction I would give the provision the citizen might so dispose of his affairs as to minimize the impact of such a provision as s. 102(2) upon the amount of death duty payable by his representative. Whether or not any particular property should form part of the dutiable estate is a matter for the legislature to decide. If it intends to bring to duty property which never formed part of the deceased's estate in his lifetime and did not form part of it at his death it must do so in clear words. In my opinion, much clearer words than those used in the paragraph presently under discussion would be necessary to effect an intention to bring into the dutiable estate all the property which for one reason or another might on the death of the deceased be subject to the trusts of a settlement made by him and satisfying the terms of the paragraph. (at p209)

9. In my opinion the appeal should be allowed. (at p209)

MENZIES J. The result of this appeal, from a judgment of the Court of Appeal of the Supreme Court of New South Wales in favour of the Commissioner for Stamp Duties, turns upon the construction to be given to s. 102(2)(a) of the Stamp Duties Act, 1920-1964 (N.S.W.), which is in these terms:

"102. For the purposes of the assessment and payment of 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:- . . . (2)(a) All property which the deceased has disposed of, whether before or after the passing of this Act, by will or by a settlement containing any trust in respect of that property to take effect after his death, including a will or settlement made in the exercise of any general power of appointment, whether exercisable by the deceased alone or jointly with another person: Provided that the property deemed to be included in the estate of the deceased shall be the property which at the time of his death is subject to such trust." (at p210)

2. The facts of the case are simple enough. M.S. Atwill deceased had, during his lifetime, paid 200 pounds to the trustees of a settlement made by him which contained the following trust of capital:

"UPON TRUST after the death of the survivor of the Settlor the said wife of the Settlor and the said sons of the Settlor to divide and pay the trust funds (including any accumulations of which the Trustees then stand possessed pursuant to sub-clause (iii) hereof) to such of the children of the said sons of the Settlor as shall then be living and attain the age of twenty-one years and if more than one equally between them on their respectively attaining that age." (at p210)

3. It is common ground that there was a trust in respect of the 200 pounds to take effect after the settlor's death. On the day of the settlement the trustees used the 200 pounds to buy from the deceased's wife twenty shares in a family company, Langton Pty. Ltd., which the trustees retained and were, at the time of the death of the deceased, valued at $276,458. (at p210)

4. The problem is whether the foregoing shares are part of the notional estate of the deceased. The Court of Appeal decided that they are. The appellants contend that they are not, on the simple ground that they were not the property disposed of by the deceased by his settlement. He disposed of 200 pounds. (at p210)

5. It is, of course, true that the deceased did not dispose of the shares, and, were it not for that part of s. 102(2)(a) introduced by the words "Provided that", the shares could not possibly be treated as part of the deceased's notional estate. The shares were, however, property which, at the date of the death of the deceased, was subject to the trust to take effect after his death which he had created by his settlement of the 200 pounds. The Commissioner claimed, therefore, that the shares must be "deemed to be included in the estate of the deceased" by virtue of s. 102(2)(a) as a whole, including, of course, the opening words of s. 102. (at p210)

6. In form, the last provision of s. 102(2)(a) is a proviso; whether its operation is merely to limit the operation of the subsection, to property disposed of as provided by the earlier part of the section, which remains subject to the trust at the date of the death of the deceased, is the problem. The subsection does not so provide in terms. Indeed, in terms it provides clearly enough that the property deemed to be included in the estate of the deceased, by virtue of s. 102(2)(a), is "the property which at the time of his death is subject to the trust to be found in the settlement". The shares in question answer this description. Should the provision, however, be read down because the latter part is in form a proviso to an enactment which, without the proviso, would relate only to property which the deceased had disposed of by his settlement? (at p211)

7. The purpose of s. 102(2)(a) is to bring within the dutiable estate of a deceased person certain property which, at his death, did not belong to him. For the most part, but not exclusively, the subsection relates to property of which the deceased had disposed during his life. For property falling outside this description see cll. (fa), (g) (i), (h) and (j). Does that part of cl. (2)(a) prefaced by the words "Provided that" bring into the dutiable estate property which not only did not belong to the deceased when he died but of which he had not disposed during his lifetime, simply because when he died the property was subject to a trust of a particular description which the deceased had himself established? The language in which the provision is expressed would require an affirmative answer unless the provision is subject to an unexpressed limitation. The case for the appellants is simply that such a limitation arises from the fact that the provision is introduced by the words "Provided that". This form of enactment, so it is contended, indicates that what follows does no more than except something from the previous enacting part of the enactment, i.e. it is no more than a limitation upon what precedes it. (at p211)

8. There is no doubt that to except is prima facie the operation of a proviso; the question here is whether that is the operation of the words under consideration. To read the provision as no more than a limitation would, I think, require some reconstruction to restrict the meaning of the words used. Of course, it does not refer back to cl. (2)(a) by itself; it refers back to cl. (2)(a) when read with the opening words of the subsection. The earlier part of s. 102(2)(a) refers to property "of which the deceased has disposed" and disregards property subject to the trust at the date of his death. As to property disposed of by the deceased, the provisions of s. 105(2) of the Act would apply and, by reason thereof, the value of such property at the time of the disposition would be disregarded. The latter part of s. 102(2)(a) speaks of property subject to the trust at a future time, i.e. the time of the death of the deceased, and employs the verb "shall be" in relation to that property without regard to how the property became subject to the trust. Without any aid of s. 105(2) the property would be valued at the date of the death of the deceased. The provision in question would, naturally enough, bring into the dutiable estate property subject to the trust, such as accumulated income upon the trust property which the deceased would himself have received had he not made the disposition. It would also bring into the dutiable estate property transferred by the settlor to the trustees after the original settlement. The circumstance, however, that sets the mind searching for some limitation, is that, without implying some restriction upon its operation, the provision could bring into the dutiable estate of a deceased person property transferred to the trustees of his settlement from sources having nothing to do with him. My search for a limitation, based upon a process of statutory construction, has, however, proved in vain. (at p212)

9. I recall that the language of statutes imposing a duty must receive a strict construction; I recall too that an enactment expressed as a proviso is prima facie a limitation rather than a positive enactment; nevertheless, the more I look at s. 102(2)(a) I find that the language is clear and unambiguous and requires that property which is, at the date of the death of a deceased person, subject to a trust to take effect after his death, contained in the settlement whereby he disposed of property, must be included in his dutiable estate. In these circumstances the rule of construction to be applied is the first rule of statutory construction, viz. "If the words of a statute are clear and unambiguous, they themselves indicate what must be taken to have been the intention of Parliament, and there is no need to look elsewhere to discover their intention or their meaning". See Halsbury's Laws of England, 3rd ed., vol. 36, p. 388. (at p212)

10. I reflect too, that, had it been intended merely to limit the operation of s. 102(2)(a) to property disposed of by the deceased which, at the time of his death, remained subject to the trust contained in his settlement, it is difficult to imagine a choice of words less apt to do this and no more. That the proviso does this as part of its operation, as I think, perhaps explains why it is cast in the form of a proviso. (at p212)

11. Furthermore, it seems to me highly unlikely that it was intended that, if a settlor did dispose of property by a settlement containing a trust in respect of that property, to take effect after his death, any change in the investment of the property subject to the trust would take that property beyond s. 102(2)(a). Thus, if a deceased person were to have settled $100,000, paid to trustees in cash or by cheque, upon a trust to take effect after his death, with power in the trustees to invest the money, s. 102(2)(a) would apply only while the trustees held the cheque or cash and, as soon as they invested it, whatever be the investment, that investment would fall outside the operation of s. 102(2)(a) because the property, then subject to the trust, had not been disposed of by the deceased. Counsel for the appellant, quite properly, I think, conceded that the adoption of their arguments must lead to such a consequence. (at p213)

12. It is for these reasons that I agree with the judges of the Court of Appeal and consider that this appeal should be dismissed. (at p213)

WINDEYER J. I have had an opportunity of reading the judgments that the Chief Justice and Owen J. have written. I agree in their conclusion and generally in their reasons. I would be content to express agreement, except that in this I differ, after much consideration, from the learned and closely reasoned judgments that were delivered in the Supreme Court (1970) 92 WN (NSW) 869 . I shall therefore explain for myself my reasons for concluding that this appeal should be allowed. I do so with all respect for the views of those who think otherwise, and well appreciating that two views are open. I appreciate too that the view that I take can lead to results that one may suppose that the legislature of New South Wales did not contemplate, and which if it had done so it would have guarded against. If that be so, it can now amend the law for the future. But this case must depend upon the operation of par. (a) of s. 102 (2) of the Stamp Duties Act (N.S.W.) as it stands and stood at the date of death of the deceased in 1965. The wording of that paragraph contains some inelegancies and obscurities, arising from the reference to property disposed of by will and to powers of appointment. But these do not bear upon the question in this case. The Act must be construed strictly according to its terms. A concern that this may produce anomalies cannot dictate a different construction. And some odd results of the construction for which the appellants contend can be matched by others that would arise if the respondent's construction were adopted. In this situation I take comfort from the remarks of the Privy Council in Attorney-General (Ontario) v. National Trust Co. Ltd. (1931) AC 818, at p 823 . (at p213)

2. I need not repeat all the facts. It is enough to say that Milton Spencer Atwill, the deceased, settled 200 pounds upon trusts for the benefit of his grandchildren to take effect after his death. The powers of investment in the trust deed were expressed as follows:

"All moneys liable to be or requiring to be invested by the Trustees hereunder may at the absolute discretion of the Trustees be invested in any one or more of the following modes of investment:- (a) Any investment in any State of the Commonwealth for the time being allowed by the law of that State or by Commonwealth legislation for the investment of trust funds.

(b) The purchase of any income producing real estate in New South Wales.

(c) Deposit in any Government Savings Bank within the Commonwealth.

(d) Fixed deposit in any Bank carrying on business within the Commonwealth.

(e) Shares in Langton Pty. Limited and/or any subsidiaries and/or any other company or companies wherein the Settlor or the said wife of the Settlor shall have a controlling interest or shares in any company (other than mining companies) listed on the Sydney and/or Melbourne Stock Exchanges and carrying on business in the Commonwealth of Australia"

and having certain specified characteristics which it is unnecessary to quote. (at p214)

3. The express reference to Langton Pty. Ltd. and some transactions within that company, which all occurred on the day, 27th November 1953, on which the deed of settlement was executed and the twenty shares in Langton were allotted, leave no doubt that the execution of the settlement and the trustees' application of the trust fund in the acquisition of these shares were all pursuant to a concerted plan. It may have been a device to avoid death duty. The only question is, Was it a successful device? That does not depend upon what the persons concerned set out to achieve, but on the results in law of what they did. The deceased, the settlor, himself and his two sons were the trustees of the fund of 200 pounds that he provided. Probably it was contemplated by them from the outset of the arrangements that the money would be used as it was, to acquire the Langton shares. But, as appears from the passage I have set out, the choice of investments open to the trustees was, within the permitted range, at their "absolute discretion". That they used their discretion in a particular way is in law immaterial. (at p214)

4. The case is not like one in which money is given by a settlor to a trustee upon trust to use it in the purchase of some specified property to be held upon trusts he created. In a case of that sort it might be said that the settlor had made a voluntary settlement of the specific property which the trustee must buy. But that cannot be said when the property settled is a fund of money which in law the trustee can invest as he sees fit. Nor is this case like one in which - as in Commissioner of Stamp Duties (N.S.W.) v. Way (Gillespie's Case) (1949) 79 CLR 477; on appeal: (1952) AC 95; (1951) 83 CLR 570 - the settlor retained an overriding power to direct or require the way in which the trust fund should be applied. The trustees here could have lawfully invested the trust fund in any one or more of the various investments authorized by the trust deed. They invested it in the Langton shares. They did not get those shares from the settlor. They got them because in the exercise of their discretion they applied for them and the company allotted them - I here adapt and adopt remarks of Lord Morton of Henryton in his speech in Sneddon v. Lord Advocate (1954) AC 257, at p 264 . (at p215)

5. Whatever would be the position if the words of the enactment were simply "property settled", the critical words are actually: "property which the deceased has disposed of . . . by a settlement containing any trust in respect of that property to take effect after his death." Thus it is that the paragraph has been said to describe settlements that are substitutes for wills, being dispositions by a man in his lifetime, of property that is his, to take effect after his death. The deceased cannot be said to have disposed of the Langton shares, for they were not his to dispose of. It is important to notice here the difference in the words of par. (a), on which this case depends, from the words of par. (b) of s. 102(2), "any property comprised in any gift made by the deceased". A man only disposes of property when, it being his or its disposition being in his control, he parts with it according to its nature. But a man can be colloquially said to have made a gift of a thing that was not his if he gave another man, the "donee", money expressly to enable him to acquire it, and he did so. Dixon C.J. observed in Commissioner of Stamp Duties (N.S.W.) v. Gale (1958) 101 CLR 96, at p 107 :

"To ask what was given may in its application to many sets of fact be to ask a completely ambiguous question. For it may mean 'What did the donor part with?' On the other hand it may mean 'What did the donee acquire in fulfilment of the donor's desire to benefit him?'."

His Honour there held (1958) 101 CLR, at p 109 that the word "gift", being defined in s. 100 of the Act as meaning "any disposition of property made . . . without full consideration . . .", the scope of the phrase "property comprised in any gift made by the deceased" comes down in the end to the question, What did the deceased alienate? That, his Honour pointed out, conformed with what Isaacs J. in Watt's Case (1926) 38 CLR 12, at p 32 had seen as a basic notion on which death duty is founded. I have referred to s. 102(2)(b) only to emphasize that the notion that the words "property comprised in a gift", although in the Act by implication and definition importing a concept of alienation by the donor, differ from the requirement in s. 102(2)(a) expressed by the plain words "property which the deceased has disposed of". I do not think that anything in the definitions in s. 100 of the Act of "disposition of property" or of "settlement" would justify reading s. 102(2)(a) as covering anything other than the property of a deceased that he had disposed of. I therefore consider that the Langton shares, not being property which the deceased disposed of, were not by virtue of s. 102(2)(a) included in his dutiable estate. But two answers to this are proposed. One is that the shares are to be identified with the 200 pounds that the deceased disposed of and which was used to acquire them. The other is that the proviso in s. 102(2)(a) brings the shares to charge. I shall deal with these propositions in turn. (at p216)

6. It is true that the shares held upon the trusts of the settlement at the death of the settlor can in a sense be identified with the 200 pounds by which they were acquired. The trust fund, it can be said, was then represented by the shares. There are cases in which a process of identification of that sort has been relied upon to bring particular property into the notional estate of a deceased. The question posed in such cases has been whether property originally provided by the deceased is to be regarded as being at the date of his death in existence in the form of other property into which it had become converted or transmuted. A process analogous to tracing has been adopted in some cases. Sometimes it has been called transmogrification. We heard that word again in this case. But, with respect for those who first introduced it into this context and for those, including the authors of textbooks, who have adopted it, it seems to me to be a barbarous word, ugly and inapt. Doubtless for some centuries "transmogrify", as a verb, has appeared occasionally in writings. In the Oxford English Dictionary it is said to be now "chiefly jocular"; and Fowler's Modern English Usage, 2nd ed. (1965), puts it among "facetious formations" as "long and ludicrous". What does it mean? According to the dictionary a transmogrification is a strange or grotesque transformation. I must say that I doubt whether a word of laboured jocularity, unknown etymology and indefinite denotation can appropriately be used to express or define a legal concept, especially in a field so far removed from jesting as the New South Wales Stamp Duties Act. However that be, whatever vitality the doctrine that the word was used to describe once had, it has come now to the end of its days. In this Court it has been laid to rest by the decision in Gale v. Federal Commissioner of Taxation (1960) 102 CLR 1 , following Sneddon v. Lord Advocate (1954) AC 257 . I do not suggest that there cannot be a case in which property disposed of by a settlement can continue to exist as the same subject matter notwithstanding an alteration in its form, when the change was always inherent in it. Take, for example, the case that was supposed in the course of the argument - a settlement by a deceased of government stock that was redeemed before his death and the trustees paid the moneys to their bank account, which at the date of the death of the deceased was thus in credit. Mr. Kerrigan said that consistently with his construction of s. 102(2)(a) the bank credit would not be the property that the deceased had settled. But I see no reason for his going so far. It is true that in the case supposed what was settled by the deceased was government stock; and that the proceeds of redemption were represented by a right in the trustees to recover from a bank. Nevertheless I would regard the ripening of any loan, secured or unsecured, into a claim for repayment as not a change in the nature of property so much as a development of it according to its nature. In somewhat the same way it seems to me that if shares be settled and in the course of time the trustees of the settlement, by virtue of their holding the settled shares, receive bonus shares their total holding can be treated as property that the settlor had settled. That is because the additional shares are an accretion to the settled property, its produce as progeny. The case of Kent v. Commissioner of Stamp Duties (N.S.W.) (1961) 106 CLR 366 is an illustration: there was no suggestion there to the contrary. But cases of that kind are essentially different from cases in which a trustee lawfully converts a trust asset into property of a different kind, its produce in a sense, but not its progeny. A trustee may by prudent management or good fortune in dealings with the trust property add new assets to the trust estate. But that does not make what he gains identical with that used to gain it. It is another thing. The servant who in the parable had received five talents "went and traded with the same and made them other five talents". They were a new thing, not the same thing. I reject the argument that the Langton shares can be identified with the money that the deceased disposed of. (at p217)

7. I go next to the proviso to par. (a). To shew this in its proper perspective I set out here verbatim the relevant parts of the Act:

"102. For the purposes of the assessment and payment of 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:- (2) (a) All property which the deceased has disposed of . . . by a settlement containing any trust in respect of that property to take effect after his death . . . Provided that the property deemed to be included in the estate of the deceased shall be the property which at the time of his death was subject to such trust."

The argument is that this brings to charge the value of the shares at the date of death of the deceased, they being then property subject to the trust that was created by him to take effect after his death. The judgments of the learned members of the Supreme Court were founded mainly on this reading of the proviso, which they treated as turning the scale. I have felt the weight of that; but I am not able to give it the result that their Honours did. (at p218)

8. The purpose of the proviso is not to determine that property brought into the dutiable estate by s. 102(2)(a) is to be valued for the assessment of duty at the date of death. That is provided for by s. 105(2). The proviso prescribes what is to be valued, not when it is to be valued. I do not think that the problem it creates is to be answered by asking whether it is to be regarded as having a limiting or an enlarging effect upon the antecedent words. I prefer the statement of Mason J.A. that "its function is that of clarification for it may be said to qualify the operation which might otherwise be given to the principal provision if it stood in isolation". But it is couched as a proviso and should I consider be construed accordingly. Using two homely metaphors: A dog may be tied by its tail. The tail must not be allowed to wag the dog. (at p218)

9. In Watt's Case (1925) 25 SR (NSW) 467, at p 490 , Ferguson J., having quoted the proviso, said:

"The intention of the legislature, in my opinion, was that if there was existing in New South Wales some property which the deceased had disposed of, but which at the time of his death was still subject to a trust to take effect after his death . . . then that property was to be deemed part of his dutiable estate."

When the case came on appeal to this Court, Higgins J. said that as to that he concurred absolutely with Ferguson J. I consider that the passage I have quoted states the whole effect of the proviso. In other words, the proviso subjects to duty the property that the deceased had disposed of by the settlement, or so much of it as was still subject to the trusts when he died. That, I think, gives the words an ample and sufficient meaning. To read them as making dutiable something that the deceased did not dispose of seems to me to be not to clarify the antecedent words so much as to contradict them. I am not able to construe "all property which the deceased has disposed of . . . by a settlement" as meaning property which becomes subject to the trusts of a settlement that he created. That would not be to treat the enactment as designed to catch settlements which are substitutes for wills by which a man disposes of his estate, but to subject his estate to duty arising as a result of transactions by other persons with property that he had disposed of. (at p219)

10. Against this construction, which limits the operation of the proviso to cases in which what was disposed of has before the time of death ceased to exist, as for example shares in a company that is wound up, or been in some way diminished in extent, it is urged that this would make the proviso unnecessary. It is said that it must be given a larger operation, otherwise it would be nugatory. It depends, of course, in what sense one uses the word nugatory; but I would not treat it as meaning merely unnecessary. I am not prepared to say that, because read as I would read it, it makes explicit what was already implicit, another meaning must be found for it. Even if one supposes that Parliament does nothing in vain, it seems to me that to clarify its meaning is not something done in vain. (at p219)

11. For these reasons I would allow the appeal. (at p219)

OWEN J. This appeal raises difficult questions as to the construction and operation of s. 102(2)(a) of the New South Wales Stamp Duties Act. The appellants are the executors of one Milton Spencer Atwill (the deceased) who died in November 1965. In November 1953 the deceased paid 200 pounds to the trustees of a deed of settlement which he had executed and which contained trusts to take effect after his death. The trustees, on receipt of the money and pursuant to powers of investment given to them by the deed, immediately invested the money in the purchase of twenty shares in a company, Langton Pty. Ltd., and at the date of the deceased's death these shares, which were then held by the trustees subject to the trust, were valued at $276,458. The question is whether by virtue of s. 102(2)(a) of the Act, the shares should be treated as part of the dutiable estate of the deceased for the purposes of the assessment and payment of death duty. The matter came before the Court of Appeal by way of case stated and their Honours decided the questions asked in favour of the respondent Commissioner. (at p220)

2. Section 102(2)(a) provides that:

"For the purposes of the assessment and payment of 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: (2)(a) All property which the deceased has disposed of . . . by a settlement containing any trust in respect of that property to take effect after his death . . . Provided that the property deemed to be included in the estate of the deceased shall be the property which at the time of his death is subject to such trust." (at p220)

3. For the appellants it is said that the property which the deceased had disposed of by the settlement was 200 pounds; that at the date of his death the moneys were not subject to the trust since they had been expended in purchasing the shares during the lifetime of the deceased; that at the date of the deceased's death the property which was subject to the trust consisted of the shares but these were not to be treated as being notionally part of his estate because he had not disposed of them by the settlement nor could he have done so; and that in these circumstances neither the shares nor the moneys were, at the date of the deceased's death, deemed to be part of his estate for the purposes of the assessment and payment of death duty. (at p220)

4. For the respondent Commissioner it was contended that while the appellants' contention might well have been correct had the first part of s. 102(2)(a) stood alone, the second part of the provision operated to deem the shares to be part of the deceased's estate for death duty purposes. (at p220)

5. The appellants' argument is that in order to determine whether s. 102(2)(a) is applicable it is necessary to inquire:
1. Did the deceased dispose of property during his lifetime?
2. If so, did he dispose of it by a settlement containing a trust to take effect after his death?
3. Was the property the subject of the disposition or any part of it subject to such trust at the date of his death?
And that it is only if each of these questions is answered in the affirmative that s. 102(2)(a) operates. The respondent's submission is that if the first two questions are answered "Yes", the only remaining question to be considered is whether at the time of the deceased's death, there was any property subject to the trust. If there was, it is immaterial whether that property consists of the property or any part of the property over which the deceased had exercised a power of disposition by the settlement. (at p221)

6. It seems odd to me that what, on its face, appears in the form of a proviso to the substantive enactment contained in the first part of s. 102(2)(a), should be regarded as "in substance a fresh enactment, adding to and not merely qualifying that which goes before" (per Loreburn L.C. in Rhondda Urban District Council v. Taff Vale Railway Co. (1909) AC 253, at p 258 ). If it is itself a substantive enactment then the legislature has, in the form of a proviso, added to s. 102(2) a new category of "notional estate" consisting of property over which the deceased never had any power of disposition. This of course does not conclude the matter but it does, I think, lend support to the construction for which the appellants contend, namely that the second part of par. (a) is a true proviso designed to limit the operation of the first part of that paragraph so that when the paragraph is read as a whole it operates only upon so much of the property disposed of by the deceased as remains subject to the trusts of the settlement at the time of his death. Further support is, I think, lent to that construction by what was said by Ferguson J. in Watt's Case (1925) 25 SR (NSW) 467 although the facts in that case are in no way similar to those in the present case. He said of s. 102(2)(a) that:

"The intention of the legislature, in my opinion, was that if there was existing in New South Wales some property which the deceased had disposed of, but which at the time of his death was still subject to a trust to take effect after his death . . . then that property was to be deemed part of his dutiable estate. I agree with Mr. Maughan's submission that if anything done during the testator's lifetime had the effect of removing the property . . . out of the categories mentioned in the relevant subsections, it thereupon ceased to be part of the estate."

(1925) 25 SR (NSW), at p 490 The question raised is not an easy one to answer but on the whole I think s. 102(2)(a) should be read in the way submitted on behalf of the appellants and that "the property" to which the second part of par. (a) refers should be read as referring back to the property of which the first part of the paragraph speaks - namely, the "property which the deceased has disposed of". To my mind this is undoubtedly a construction which is open on the language used and it is to be borne in mind that we are called upon to construe a taxing Act and that the general notion behind s. 102(2) is to bring to duty property as to which a deceased person has during his lifetime exercised a power of disposition and which, had he not done so, might on his death have formed part of his actual estate. That idea was expressed by Dixon C.J. in Commissioner of Stamp Duties v. Gale (1958) 101 CLR 96, at p 107 when his Honour said:

"Generalizations should not be pressed too far but prima facie one expects the legislation to bring into the notional estate some right interest or property on the ground that the deceased has parted with it, that is, has parted with it in circumstances of a kind which the legislature decides should lead it to refuse recognition to the alienation for purposes of death duty . . ." (at p222)

7. I would allow the appeal and answer the questions in favour of the appellants. (at p222)

WALSH J. I have had the advantage of reading the reasons for judgment prepared by Menzies J. I agree with his conclusion and I am in general agreement with his reasons. I wish to make some further observations upon the problem raised by this appeal, concerning the construction and operation of s. 102(2)(a) of the Stamp Duties Act, 1920 (as amended) (N.S.W.). (at p222)

2. His Honour has stated that unless some limitation can be implied upon the operation of that provision, it would bring into the dutiable estate of a deceased person property transferred to the trustees of a settlement made by him from sources having nothing to do with him. His Honour proceeds to say that he has searched in vain for such a limitation. For my part I do not regard it as necessary to decide in this case whether property so transferred to the trustees would or would not form part of the dutiable estate. The question does not arise upon the facts of this case and it is a question which would rarely arise. If property were so transferred, the transfer might be accompanied by an instrument or by a statement which would demonstrate that the transferor was himself creating a trust, defining its terms by reference to the terms of the settlement to the trustees of which the property was being transferred and, in my opinion, this would have the consequence to which the judgment of Mason J.A. in this case referred, namely, that the property so transferred would not become subject to "such trust", that is, to the trust contained in the settlement made by the deceased. I do not say that this would always be so. I am prepared to assume that there could be an accretion from an outside source to the property which is "subject to such trust". But if the provision would operate upon such an accretion, this would rarely occur and the possibility that to that extent the provision may have an operation probably not foreseen or actually intended does not warrant, in my opinion, the adoption of a construction of the provision different from that which would be put upon its language if that possibility did not exist. (at p223)

3. In considering the meaning and the effect of the whole provision including the proviso, it should be noticed that ever since the principal Act was enacted in 1920 this paragraph of s. 102(2) has remained in the same form, disregarding the amendments not here material by which the words "or special" were omitted and restored and again omitted by amending Acts in 1924, 1931 and 1933. In the 1920 Act and for quite a long period thereafter, par. (b), (c) and (d) of the same subsection were unlike par. (a) in that those other paragraphs contained no special provisions concerning the ascertainment and identification of the property which was brought by them into the dutiable estate. In that part of Watt's Case (In the Estate of W.O. Watt (Deceased) (1925) 25 SR (NSW) 467 ; Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (1926) 38 CLR 12 ) which dealt with a question arising under par. (b) of s. 102(2), the important rule was established that if the "property comprised in any gift" made within three years before the testator's death was no longer in existence when he died or if in existence was not situated in New South Wales, it could not be included in the dutiable estate pursuant to that paragraph. The reasons upon this point given by Ferguson J. in the Supreme Court (1925) 25 SR (NSW), at p 492 which were approved in this Court make it clear, in my opinion, that the rule to which I have referred was not applicable to par. (b) alone and that is a view which was adopted in subsequent cases in which reference was made to Watt's Case (1925) 25 SR (NSW) 467 . I think it is clear that if par. (a) had been enacted without the proviso that same rule would have been regarded as applicable, that is to say, the provision would not have operated if at the date of death there was no property to be found in New South Wales which was subject to the relevant trust contained in the settlement. Personal property situated outside New South Wales at the date of death would have been brought, at a later point of time, into the dutiable estate, in the circumstances described in sub-s. (2A) of s. 102, but that is not material to the point which I am now making. (at p223)

4. I do not doubt that the provision operates in such a way that property which is not at the time of the death subject to the trust is not brought to duty. That conclusion is required by the language of the provision and it is in accordance with what Ferguson J. said in Watt's Case (1925) 25 SR (NSW), at p 490 . The contention on the part of the Commissioner with which his Honour was dealing is there stated. The contention was that once there had been a settlement or disposition of property of the kind mentioned in par. (a) or par. (c), "the position was crystallised, and the property stamped irrevocably with liability to death duty". That contention his Honour rejected and he said that as to par (a) it was answered by the proviso. So it was. But, in my opinion, the contention would have been wrong even if there had been no proviso. That view accords with the rejection by Ferguson J. of the same contention so far as it related to par. (c) which had no such proviso. Ferguson J. went on to say that the intention of the legislature was that if there were existing in New South Wales some property which the deceased had disposed of, but which at the time of his death was still subject to a trust to take effect after his death, then that property was to be deemed part of his dutiable estate. That statement should be read having regard to the question with which his Honour was then dealing. He was not dealing with the question whether property subject to the trust at the time of death had to be, if it were to be included in the estate, part of the property with which the settlor had parted. He was dealing with the question whether the provision could operate upon property which had formerly been subject to a trust to take effect after death but which had ceased before the death of the settlor to be subject to any such trust. (at p224)

5. Questions have arisen in many cases relating to par. (b) as to whether the "property comprised in a gift" should be found to have been money or to have been property purchased with money provided by the donor and vested in the donee or in trustees for the donee and as to whether, particularly in relation to gifts made by way of establishment of a trust, the property given could be identified with or was "represented" by property which existed at the date of death in a different form. Cases in which such questions have been debated include Vicars v. Commissioner of Stamp Duties (N.S.W.) (1945) 71 CLR 309 , and Commissioner of Stamp Duties (N.S.W.) v. Gale (1958) 101 CLR 96 . See also Gale v. Federal Commissioner of Taxation (1960) 102 CLR 1 . There is no need to examine those cases here, nor is it necessary to set out the terms of the legislation which sought to deal with some of those questions, by adding in 1931 a new par. (ba) to s. 102(2) and by enacting in 1939 an addendum to par. (b). Such questions have not been agitated in relation to par. (a). No doubt they would have arisen if that paragraph had not contained the proviso. But it seems clear to me that they have been thought to be answered, in relation to that paragraph, by the express terms of the proviso. (at p225)

6. It is in my opinion a matter of significance that in cases which have been taken to this Court and to the Privy Council relating to par. (a) of s. 102(2), in which the estate would have escaped duty in whole or in part, if the paragraph operates only upon property which has actually been transferred by the settlor to the trustees, it has been assumed that its operation is not so limited. I propose to refer to three such cases. (at p225)

7. In Rabett v. Commissioner of Stamp Duties (1927) 27 SR (NSW) 370 , a sum of 30,000 pounds had been transferred by a settlor to trustees upon certain trusts. When he died the capital value of the property subject to the settlement at that time was a little over 30,000 pounds. The reports of the case do not state what that property was, but is seems plain that it was not simply a sum of money. The Commissioner claimed (1927) 27 SR (NSW), at p 372 that the value of the whole of the property subject to the settlement at the date of death should be included in the dutiable estate. By majority the Supreme Court upheld that claim. An appeal to the Privy Council was dismissed and that decision is reported as Rabett v. Commissioner of Stamp Duties (N.S.W.) (1929) AC 444 . The judgment set out the terms of par. (a) of s. 102(2) and then stated: "It is by virtue of this provision that the duty has been assessed in the present case upon the settled property." (1929) AC, at p 447 (at p225)

8. In In re Gillespie (1949) 49 SR (NSW) 331 , the property which was at the date of the settlor's death subject to the trusts of the settlement was held by a majority in the Supreme Court to have been properly included in the dutiable estate by reason of par. (a) of s. 102(2). It was a case in which there had been substantial changes in the nature of the property held by the trustees, who had used money paid to them by cheque by the settlor to buy shares in companies. In this Court it was held that there was no trust to take effect after death within the meaning of par. (a) and therefore that paragraph did not apply: see Way v. Commissioner of Stamp Duties (N.S.W.) (1949) 79 CLR 477 . It was not argued that par. (a) could apply only to such property, if any, held by the trustees as was part of the actual property which the settlor had transferred to them. An appeal from the decision of this Court to the Privy Council was dismissed: see Commissioner of Stamp Duties (N.S.W.) v. Way (1952) AC 95; (1951) 83 CLR 570 . It was not suggested that even if it were held that there was a trust to take effect after death, par. (a) could not apply to the shares, which the settlor had not disposed by the settlement but which were afterwards purchased by the trustees. (at p226)

9. In Kent v. Commissioner of Stamp Duties (1960) 61 SR (NSW) 440 , a settlor had made a declaration that he held 1,000 shares in a certain company upon terms which included a term that he would hold the said shares and the investments for the time being or from time to time representing the same upon certain trusts as to income and as to corpus. When the settlor died the property the subject of the declaration of trust consisted of 3,000 shares in the company. The Supreme Court held by majority that there was a trust to take effect after his death and that the inclusion in the dutiable estate of the value of the 3,000 shares was correct. That decision was confirmed by this Court in Kent v. Commissioner of Stamp Duties (N.S.W.) (1961) 106 CLR 366 . In a joint judgment of four memebers of this Court, their Honours referred to the decision of the Supreme Court from which the executors had appealed and after saying that the appellants conceded that by executing the deed the deceased made a "settlement" of the 1,000 shares, their Honours said (1961) 106 CLR, at pp 372-373 :

"The concession is rightly made, since by s. 100 'settlement' is defined to include, inter alia, any disposition of property, without consideration, whereby any property is settled. The property which was subject to the trusts of the settlement at the death of the deceased consisted of 3,000 shares in the same company. By virtue of the proviso to sub-par. (a), even if not independently of it, the 3,000 shares are the property with respect to which the question must be considered whether the sub-paragraph applies to the facts of the case".

If the contention of the appellants in the present case is correct the statement in the last sentence in the passage cited is plainly wrong and must be taken to have been made per incuriam. (at p226)

10. The three cases to which I have referred, all of which related to par. (a), illustrate the view that has been taken consistently of the meaning and effect of that paragraph in the long period since it was enacted. In my opinion that was not an erroneous view. In the present case, as Menzies J. has said, the shares held by the trustees of the settlement at the date of the settlor's death answered the description which the provision gives of the property which is deemed to be included in the dutiable estate. They constituted "the property which at the time of his death (was) subject to such trust". (at p227)

11. In my opinion the appeal should be dismissed. (at p227)

Orders

Appeal allowed with costs. Order of the Supreme Court of New South Wales (Court of Appeal Division) set aside and in lieu of the answers given by the Supreme Court to the questions one, two and three asked in the stated case those questions be answered as follows -

Question (1) No. Question (2)(a) No. (b) Yes. (c) Unnecessary to answer.

Question (3) By the Commissioner of Stamp Duties.