Commissioner of Probate Duties (Vic) v Stocks

[1976] HCA 41

HIGH COURT OF AUSTRALIA

Barwick C.J., Gibbs, Mason, Jacobs and Murphy JJ.

COMMISSIONER OF PROBATE DUTIES (VICT.) v. STOCKS

(1976) 135 CLR 247

12 August 1976

Death Duties (Vict.)

Death Duties (Vict.)—Probate duty—Dutiable estate—Gift inter vivos—Disposition of property—Creation of any trust in property—Life insurance policy effected under s. 94 of Life Insurance Act 1945 (Cth) in favour of daughter—Whether trust created of policy or proceeds—Life Insurance Act 1945 (Cth), s. 94*—Probate Duty Act 1962 (Vict.), ss. 4(1) "Disposition,"** 7(1) (d), 8 (1) (d), (e), (3). * Section 94 of the Life Insurance Act 1945 (Cth) provides: "Subject to the Bankruptcy Act 1966-1973, a policy effected (whether before or after the commencement of the Act) by any man upon his own life, and expressed to be for the benefit of his wife, or of his children, or of his wife and children, or any of them, or by any woman upon her own life, and expressed to be for the benefit of her husband or of her children, or of her husband and children, or any of them shall create a trust in favour of the objects named in the policy, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the person whose life is insured, or be subject to his or her debts." ** Section 4(1) of the Probate Duty Act 1962 (Vict.) defines "Disposition" to include, inter alia, "(d) the creation of any trust or of any estate or interest in property".

Decisions

August 12.
The following written judgments were delivered:-
BARWICK C.J. The deceased, William Henry Stocks, on 5th August 1968, made contemporaneous proposals to an insurance company: (1) for a policy of insurance on his own life in the basic sum of $63,973, with participation in profits at a yearly premium of $6,904; the proposal bore the notation, apparently made by the agent who negotiated the proposal, under the heading "Special Clauses", "Sec. 94 - Elizabeth Rosina Lithgow/ daughter/ben/trust"; it also contained in the body of the proposal, in a space reserved for use by the insurance company, the statement "In conjunction with Immediate Annuity"; (2) for an annuity of $6,904 payable yearly in advance for his life without participation in profits for a single premium of $60,000 payable immediately. (at p250)

2. Policies were issued, that for insurance bearing date 22nd August 1968, with a statement that the risk commenced on 15th August 1968; that for the annuity bearing date 16th August 1968, with a commencing date of 15th August 1968. Although as I think of no materiality, the latter policy did not provide as did the proposal therefor for payment of the annuity in advance. The policy for life insurance bore the indorsement:

"No. 1. Notwithstanding anything to the contrary in the within written Policy, it is hereby declared and understood that this Policy has been effected for the benefit of Elizabeth Rosina Lithgow Daughter of the Life Assured, in accordance with the provisions of Section 94(1) of the Commonwealth Life Insurance Act, 1945-65 and Elizabeth Rosina Lithgow Daughter of the Life Assured has been appointed to be the trustee of the moneys payable under this Policy."

The insurance company in its books of account credited the first payment of the annuity to the payment of the first premium on the policy of life insurance. (at p250)

3. The deceased had had some cardiac disability for the space of some sixteen years before the date of these proposals. But, according to the evidence of his medical consultant, he had no reason at the time of the proposals to fear imminent death. The learned judge who heard this matter at first instance, in his reasons for judgment, said:

"The medical evidence made it clear that the deceased's death was due to his heart condition and had nothing to do with the temporary partial loss of vision, the anti-coagulant treatment or the cessation of that treatment. There is nothing in the evidence which would justify me in finding that at the time of entering into the agreements with the insurance company the deceased thought that his death was imminent. It appears to me that the deceased had lived with a heart condition since 1952 and that he would have been aware that the condition was one that put him at risk of sudden death at any time. Plainly, as he grew older that risk increased but I am not prepared to find that the episode of temporary partial loss of vision which occurred in July together with his medical adviser's opinion as to its probable cause, led the deceased to believe that he had a very short time to live. On the other hand the life expectancy of a man of the age of the deceased, taken from the life-tables was about 8.5 years and I am prepared to believe that if, early in August 1968 the deceased had been asked whether he would be likely to live that long he would have answered that he would be very lucky to do so."

However, the deceased died suddenly on 17th September 1968, of a coronary occlusion. (at p251)

4. The Commissioner of Probate Duties included in the dutiable estate of the deceased an amount of $63,973, being both the amount of and the proceeds of the policy of insurance on the life of the deceased. He did so on the footing that the deceased, in taking out the policy of insurance, made a gift inter vivos to his daughter within the meaning and operation of s. 7(1)(d) of the Probate Duty Act, 1958 (Vict.) ("the Act"), in combination with the definitions of "disposition" and "gift inter vivos" in s. 4 of the Act. (at p251)

5. The executors of the deceased estate objected to the inclusion of this sum in the dutiable estate of the deceased. Their objection was disallowed and was, at their request, treated as an appeal to the Supreme Court of Victoria. That Court (Murray J.) allowed the appeal, holding that s. 8(3) of the Act precluded the Commissioner from so including any part of the proceeds of the policy in the dutiable estate of the deceased. (at p251)

6. The Commissioner appealed from that decision to the Full Court. That Court dismissed that appeal (1976) VR 106 . The Commissioner now appeals to this Court, contending that the amount of the policy moneys is properly included in the dutiable estate by virtue of s. 7(1)(d) and that s. 8(3) does not operate to preclude that course. (at p251)

7. Some propositions in this area are well established. A policy upon the life of a father expressed to be for the benefit of a daughter falls within the purview of s. 94 of the Life Insurance Act 1945 (Cth), as amended ("the Life Insurance Act"). Accordingly, by that section, a trust of the policy and of its proceeds for the daughter is created. (at p251)

8. This Court decided in Commissioner for Probate Duties (Vict.) v. Mitchell (1960) 105 CLR 126 that the trust which arises from such a proposal and policy derives from the statute: that it is not a gift inter vivos made by the proponent by disposal or alienation of any property of the proponent. Fullagar J., with whom Dixon C.J. and McTiernan J. agreed, said that "It may be said that the transaction involved" (emphasis supplied) "a 'creation of a trust' or of an 'interest in property' - expressions which occur in the parenthesis in the definition" (1960) 105 CLR, at p 140 . By this, in my opinion, he meant to convey that, by the proposal for insurance and the issue of the policy, a trust was created by the statute: and implicitly to deny that any trust was created by the proponent, although he was able to dispose of the matter by reference to the terms of the words "disposition of property" appearing in the relevant legislation then in force, namely, the Administration and Probate Act 1958 (Vict.). (at p252)

9. It is also established that by taking out a life insurance in such terms as are to be found in the proposal for and the policy of life insurance in this case, the proponent does not acquire or retain for himself any interest in the policy or the policy moneys. (at p252)

10. In the present case, it is evident that the deceased in making his proposal for insurance intended to resort to the provisions of the section. The indorsement on the proposal and the indorsement on the policy place that matter beyond dispute. Further, the daughter became the trustee of the policy and of its proceeds. (at p252)

11. In Commissioner for Probate Duties (Vict.) v. Mitchell (1960) 105 CLR, at p 142 , Fullagar J. said: "He" (the proponent) "obtained a policy expressed in certain terms. That is all that he did. To the policy so expressed the statute gave a particular effect. The statute did everything that was desired. There was no disposition of property because there was no need for any disposition of property." (at p252)

12. The Commissioner, however, points to an amendment made to the Act subsequent to the decision in Commissioner for Probate Duties (Vict.) v. Mitchell. To the definition of "disposition" in s. 4 of the Act, a par. (d) was added in substitution for a paragraph the obscurity of which had been criticized in that case, namely: "(d) the creation of any trust or of any estate or interest in property." He then argues that the proposal of the insurance resulting in the issue of the policy with the consequences dictated by s. 94 of the Life Insurance Act was relevantly the creation of a trust, namely, of the policy and of its proceeds. It is true that par. (d) of the definition of "disposition" does not in terms require that there should be alienations of property by way of creation of trusts or of interests in property, as do other paragraphs of the definition. But it seems to me that, upon its proper construction in the setting of the definition as a whole, there must be the creation of a trust by a disponor if there is to be a gift inter vivos, though albeit perhaps a rare phenomenon, it need not involve the transfer of property of or by the disponor. In any case, it is not enough, in my opinion, to satisfy the paragraph that a person should bring about a situation in which a statute erects a trust. So to do is not, in my opinion, relevantly to create a trust. Consequently, in my opinion, the Commissioner's submission that the deceased by the proposal for and issue of a policy of insurance created a trust as distinct from merely providing ground for the statute to do so, should not be accepted. (at p253)

13. So to conclude really disposes of the Commissioner's appeal. For, if the policy or its proceeds cannot be brought within the terms of s. 7(1)(d), it certainly cannot be brought within the provisions of s. 8(1)(d): this for two reasons. Firstly, whilst the construction may not be free from doubt, the expression "which does not form part of the estate of the deceased" refers, in my opinion, to the estate of the deceased which is composed by the operation of s. 7. That provision includes in the estate of the deceased both actual and notional estate, without express differentiation. Sections 9 and 10, as well as other sections such as s. 21, provide for deductions to be made for the value of the estate as constituted by s. 7 so as to derive a final balance on the basis of which an assessment of duty payable shall be made: see s. 11(4). See also definition of "final balance" in s. 4. (at p253)

14. But s. 8, speaking with some accuracy, provides for inclusion in the final balance of the estate of amounts which are not themselves part of the deceased estate actual or notional according to the terms of s. 7. Amongst these amounts is the amount for which s. 8(1)(d) provides. It seems to me that this paragraph, amongst other things, requires the addition to or inclusion in the final balance of the estate of the proceeds of a policy for which the deceased had wholly paid or provided the premium. This would be so on the assumption that those proceeds did not form part of the notional estate of the deceased, i.e. that they were not brought into the estate by s. 7. Section 8(1)(d) does not purport to add to the estate of the deceased as specified by s. 7. It merely adds to the amount of the final balance for the computation of duty. (at p253)

15. But s. 8(3) takes out of the operation of s. 8(1)(d) the proceeds of a policy expressed for the benefit of the wife or children of a deceased proponent for a life policy upon his own life. Thus, in my opinion, the proceeds do not form part of the estate of the deceased, there being, in my opinion, no gift inter vivos of the policy or of its proceeds, and s. 8(1)(d) does not require an amount equal to the proceeds to be added to or included in the final balance of the estate because of the express words of s. 8(3). It is for these reasons that I would dismiss the appeal. (at p254)

16. I should add that I do not think that s. 8(3) should be regarded as a special law with respect to the life policies in respect of which it makes provision. In my opinion, s. 8(3) is related to s. 8(1)(d) and (e): it is intended to exclude the policy proceeds of which it speaks from inclusion in the final balance of the estate. Section 8 is not concerned with the inclusion in or exclusion of anything from the estate of the deceased as composed in conformity with s. 7. It is concerned with the augmentation of the final balance of the estate, a quite different concept from the estate of the deceased, actual and notional. The expression of s. 8(3) is quite accurate. It says that no proportion of the amount payable under the policy shall be added to the final balance but the total amount of premiums paid by the deceased within three years prior to his death shall be included in the final balance. The final balance is the result of deductions from the estate of the deceased as described in s. 7. The addition of sums to it is in reality a later step than that of making deductions from the estate, actual and notional, of the deceased. (at p254)

17. Two subsidiary submissions of the Commissioner should be noted. First, it is said that the premium paid on this policy was $60,000 for the reason that the issue of the policy and the grant of the annuity were all one transaction so that the consideration for the issue of the policy was or included the amount paid for the annuity. This submission, in my opinion, is plainly untenable. Granted, as it must be, that the inducement to the insurance company to issue a policy upon the deceased's life, as may be suspected without medical examination, was the proposal for the annuity and the payment of its price, it is none the less quite certain that the premium payable on the policy was the stated sum of $6,904. Both policy and annuity transactions were obviously genuine transactions of the nature they professed to be. That nature in law must be respected. There is no warrant here, as there is not in other fields of taxation, to ignore such transactions and suppose a transaction of a different kind which would produce the economic equivalent of what resulted from such transactions. (at p254)

18. The second of these submissions was that, because the amount charged by the insurance company for the annuity - an amount referable to the expectation of life of a healthy man of the deceased's age - was much in excess of what ought to have been charged for an annuity for the life of the deceased, having regard to his medical history and his actual expectation based upon his current condition and that history, there was a gift to the insurance company of the difference between the two amounts. Quite apart from the paucity of the evidence on which to found any proper calculation of the lesser of these two sums, I am clearly of opinion that there is no substance in the submission. The expectation of life of the deceased was at least uncertain. There was little more reason to think it would be two or three years than that it would be eight or nine years. It cannot, in any case, be said, in my opinion, that the insurance company's promise was not worth the sum agreed to be paid for it. (at p255)

19. The appeal, in my opinion, should be dismissed. (at p255)

GIBBS J. The facts of this case are set out in the judgment of the Chief Justice which I have had the benefit of reading. (at p255)

2. There can be no doubt that when the deceased effected the policy of life assurance for the benefit of his daughter and the policy for the payment to himself of an annuity for life, and arranged that the annuity should be used to meet the premiums payable under the policy of life assurance, he did so with the purpose of providing his daughter with a benefit which would accrue to her on his death and which would not attract probate duty. The fact that he intended to avoid probate duty is, however, not made relevant by the provisions of the Probate Duty Act 1962 (Vict.), as amended ("the Act"). By s. 11(4) duty is to be assessed on the basis of the final balance of the estate, and "final balance" is defined by s. 4(1) to mean

"the final balance, on which duty is to be calculated, that is to say, the total value of all property which forms or is deemed to form part of the estate and all amounts which under sections eight or thirty-nine of this Act are required to be included in the final balance, less the total value of all items which are allowed as deductions."

The question for decision is whether the provisions of the Act require the proceeds of the life policy ($63,973), or the premium payable under the annuity policy ($60,000), or any part of either of those sums, to be included in the final balance of the estate of the deceased. (at p255)

3. The first contention on behalf of the Commissioner is that the proceeds of the policy are deemed to form part of the estate by virtue of the provisions of s. 7(1)(d) of the Act which, so far as material, provides as follows:

"(1) The following classes of property shall for the purposes of this Act be and be deemed to form part of the estate of a deceased person:- ... (d) Any property the subject-matter of any gift inter vivos by the deceased ... if such gift was made - (i) within three years immediately before the death of the donor."

The expression "gift inter vivos" is defined by s. 4(1) to include

"any non-testamentary disposition of or in relation to property made ... either without any consideration given by the disponee to the disponor or upon any consideration other than full consideration given by the disponee to the disponor in money or money's worth based on the value of the property at the date of such disposition and not being a settlement; and where any such disposition is made for a consideration in money or money's worth which is less than the value aforesaid of the property the disposition shall be deemed to be a gift inter vivos of that proportion of the value (to the disponee) of the property at the date of death which the excess of the value of the property (at the date of the disposition) over that consideration bears to the value of the property at the date of the disposition."

"Disposition" is defined, also in s. 4(1), to mean (inter alia): "(d) the creation of any trust or of any estate or interest in property." According to the submission of the Commissioner, when the deceased effected the life policy he created a trust in favour of his daughter and therefore made a disposition as defined in s. 4(1); since no consideration was given by the daughter, there was a gift inter vivos to the daughter of the proceeds of the policy. (at p256)

4. The life policy was a policy effected by a man upon his own life and expressed to be for the benefit of one of his children within s. 94(1) of the Life Insurance Act 1945 (Cth), as amended. By virtue of s. 94(1) it therefore created a trust in favour of the daughter. It is natural to say that it was the statutory provision that created the trust and in Forsyth v. Commissioner of Stamp Duties (1966) 114 CLR 194 Kitto J. (1966) 114 CLR, at p 202 and Taylor J. (1966) 114 CLR, at p 209 spoke of s. 94 as creating the beneficial interests in favour of the persons expressed to be the beneficiaries, and as investing the holding of the policy with the character of a trust. However, it does not seem to me that it therefore follows that the deceased himself did not create a trust. When the law provides that if something is done a trust shall be created, a person who does that thing can be said in the ordinary and natural use of language to create the trust. In Barclay's Trustee v. Inland Revenue Commissioners (1975) 1 WLR 106; (1975) 1 All ER 168 , where the House of Lords had to consider the effect of a particular policy issued under a provision similar to s. 94, it appears that Lord Morris of Borth-y-Gest thought that the trust was created by the person who effected the policy (1975) 1 WLR, at pp 113, 115; (1975) 1 All ER, at pp 173, 175 . I do not think that Fullagar J. in Commissioner for Probate Duties (Vict.) v. Mitchell (1960) 105 CLR 126, at pp 140-142 , was intending to express any different view; he said that there was no disposition of property when the policy in that case was effected, but it is clear that there was no disposition in the ordinary sense of the word and the definition of "disposition" in the statute then in force did not contain the present par. (d). (at p257)

5. However, it does not seem to me necessary to decide whether the deceased made a gift to his daughter when he took out the policy or, if so, what was the value of the subject matter of that gift. The case seems to me to come squarely within the words of s. 8(3) (a) of the Act, which provides as follows:

"Notwithstanding anything in paragraphs (d) or (e) of sub-section (1) of this section - (a) where a policy of insurance has been effected upon the life of the deceased by the deceased ... and expressed to be for the benefit ... of his children ... or any of them and no interest whether vested or contingent was held or retained in such policy by the deceased no proportion of the amount payable under the policy shall be added to the final balance but the total amount of any premiums paid or provided by the deceased in respect of that policy during the three years immediately preceding his death shall be included in the final balance."

By s. 8(1) of the Act it is provided that "There shall be included in the final balance of the estate of a deceased person who at the time of his death was domiciled in Victoria" certain amounts described in the paragraphs which form part of that sub-section. Paragraph (d) provides as follows:

"(d) an amount equal to the amount payable under a policy of insurance effected on the life of the deceased (whether before or after the commencement of this Act) which does not form part of the estate of the deceased - (i) where the deceased at any time within three years before his death had an interest in the policy; or (ii) where the premiums on such policy were wholly paid or provided by the deceased."

Paragraph (e) makes similar provision for the inclusion of a proportion of the amount payable under a policy where part of the premiums were paid or provided by the deceased. It should perhaps be mentioned that the provisions of s. 8(2) have nothing to do with policies of insurance. Section 8(3)(b) provides that where the deceased had not within three years of his death had any interest in a policy of insurance effected on his life then notwithstanding the fact that the premiums on such policy were wholly paid or provided by the deceased no amount shall be included in the final balance of the estate of the deceased in respect of that policy if the total amount payable under it was $2,000 or less, and that if the amount so payable exceeds $2,000 the amount to be included in the final balance shall be that proportion of the amount payable under the policy as the premiums paid or provided by the deceased within three years immediately prior to his death bore to the total premiums. (at p258)

6. It may be assumed that the words "which does not form part of the estate of the deceased" in s. 8(1)(d) and (e) are intended to have the effect that those paragraphs apply only where the amount neither forms nor is deemed to form part of the estate and that those paragraphs do not state exclusively the circumstances in which moneys payable under a policy of life insurance are included in the final balance of the estate. In other words, it may be assumed, without deciding, that the amount payable under the policy will be deemed to form part of the estate by reason of the operation of s. 7(1)(d) unless the provisions of s. 8(3)(a) lead to a different result. The question on that assumption is whether s. 8(3)(a) is of general application or whether its provisions operate only as a qualification of pars (d) and (e) of s. 8(1). The words "shall be added to the final balance" in s. 8 (3) (a) are inapt. In no circumstances does the Act require property to be added to the final balance. As the definition shows, the final balance is reached in effect by adding the total value of all property which forms or is deemed to form part of the estate and all amounts which under s. 8 or s. 39 are required to be included, and by deducting the value of all items which are allowed as deductions. The words "added to the final balance" in s. 8(3)(a) apparently mean "added to other amounts for the purpose of ascertaining the final balance". Their meaning is the same as the words "included in the final balance" in the introductory part of s. 8(1). However, s. 8(3)(a) does not in terms provide that no proportion of the amount payable under a policy shall be included in the final balance by virtue of s. 8(1). It is not expressed as a proviso or exception to s. 8(1)(d) and (e). Its words are quite general. If they are given their full effect they prevent any part of the proceeds of a policy, in the circumstances mentioned, from being taken into account in determining the final balance; in other words, they qualify s. 7 (assuming that section to have the effect of including the proceeds of a life policy in the estate) as well as s. 8(1). In construing a taxing statute words conferring an exemption from liability will not be given a more limited operation than their ordinary sense warrants unless the statute contains a clear indication that such a limited operation was intended. The introductory words of sub-s. (3) of s. 8 do not indicate that par. (a) should be read down so as to govern only s. 8(1)(d) and (e) - they may well have been inserted out of an abundance of caution and because s. 8(1)(d) and (e) were the provisions under which the proceeds of a policy were most likely to be rendered liable to duty. The fact that the provisions of sub-s. (a) are included in s. 8 is not without significance, but that circumstance is not enough to require that the unambiguous words of s. 8(3)(a) should be read as though they were subject to a limitation which they do not express. The provisions of s. 8(3)(b) support the view that s. 8(3) was intended to be of general application, because it was unlikely to have been intended that the proceeds of a small policy should have been caught by some other provision although exempted by s. 8(3)(b). In my opinion the words of s. 8(3)(a) were intended to prevent the proceeds of any policy therein described from being included in the final balance by reason of the operation of any other provision of the Act. Their purpose, clearly enough, was to exempt from duty, inter alia, all policies to which s. 94 of the Life Insurance Act applies. I conclude, therefore, that no part of the proceeds of the policy should be included in the final balance for duty purposes. (at p259)

7. It follows that "the total amount of any premiums paid or provided by the deceased in respect of that policy during the three years immediately preceding his death shall be included in the final balance". The Commissioner contends that the $60,000, paid under the annuity policy, was part of the premiums paid or provided in respect of the life policy. The word "premium" is defined by the Shorter Oxford English Dictionary to mean "The amount agreed on, in an insurance policy, to be paid at one time or from time to time in consideration of a contract of insurance". Although a premium is ordinarily a sum of money it need not necessarily be so: Lion Mutual Marine Insurance Association Ltd. v. Tucker (1883) 12 QBD 176, at p 187 . The Commissioner's submission is that the transactions concerning the two policies were interconnected and that the consideration for the issue of the life policy comprised not only the payment of the premium of $6,904 specified in that policy, but also the taking up of the annuity and the payment of the $60,000. There is no doubt that the two transactions were connected but it does not follow that the consideration for one policy was also the consideration for the other. The transactions were not the same and the form that they took cannot be disregarded. The taking out of the annuity policy may have been a condition of the issuing of the life policy, and from a practical point of view it certainly induced the insurance company to issue the life policy, but the consideration provided by the deceased for the life policy was no more than the promise to pay the premiums which it fixed, and the $60,000 was paid as the consideration for the annuity policy, and not as part of the consideration of the life policy. It was rightly held in the Supreme Court that the only premium to be included in the final balance was the amount of $6,904. (at p260)

8. The final submission of the Commissioner is that the sum of $60,000, or at least part thereof, was a gift by the deceased to the insurance company. A payment is a disposition of property within par. (a) of the definition contained in s. 4(1). The submission for the Commissioner is that the consideration for the payment of $60,000 was the issue of the annuity policy and that having regard to the age and health of the deceased the value of the annuity was much less than $60,000 and that there was accordingly a gift of a proportion of that sum. (at p260)

9. It would be a most surprising result if it were held that the deceased had made a gift to the insurance company. He entered into a commercial transaction with that company which issued the policy in the ordinary course of its business. Where the transaction in question is purely a commercial one, and is between strangers dealing at arm's length in the ordinary course of business, and there is no suggestion that either intended to make a gift to the other, a presumption of fact arises that there was no gift. In the present case it must be held that the payment of $60,000 was not a gift unless there is evidence that displaces the presumption that the amount paid was no more than the market price for the obligations undertaken by the insurance company. In the present case there was no evidence at all of the value of the annuity at the date when the policy was effected. The learned primary judge in the course of his reasons for judgment said:

"Having regard to the medical evidence that the expectation of life of the deceased was, in 1968, no more than three years, it is however obvious that the value of the annuity would not exceed $20,000 and would probably be substantially less."

He went on to say that if in considering the purchase of the annuity he was to ignore the granting of the life policy it was obvious that the deceased had paid substantially more for the annuity than it was worth. However, he held that "part of the consideration for the payment of $60,000 by the deceased for the annuity was the granting of the life policy" and that there was no gift. (at p261)

10. Brief reference should be made to the evidence on which his Honour's observations were based. Dr. Ballantyne, when asked what was the life expectancy of the deceased prior to an episode that occurred on 26th July 1968, replied:

"He had survived a long time with angina and obviously his life expectancy had to be less than that of an average man of those years. I would have thought perhaps three years. This would have been merely an approximation. I couldn't say with any accuracy."

When asked what the life expectancy was after that episode, he replied: "I could only guess. I really would not know exactly. I would have thought perhaps two years." This evidence was very much a matter of guess-work, but the probable life expectancy of the deceased himself was really immaterial. Mr. Crouch, an officer of the insurance company concerned, was asked what was the basis on which the company calculated the amount payable for an annuity in August 1968. He replied: "It would be on the normal expectancy of life." He appears to have meant that it was the expectation of life of a normal person, and not that of the particular individual, that mattered. Mr. Crouch said that he did not know what life expectancy was in fact used in the present case, but agreed that if one worked it out, and allowed the deceased to have the benefit of some interest, he would have expected that the period that was taken into account was something over nine years. There was no evidence what was the normal life expectancy of a man of the deceased's age, but a reference to life tables shows that a man of seventy-one (the age of the deceased when the policies were effected) has an expectation of a further 9.11 years of life. Of course the company did not necessarily work on the tables that showed that figure. However, such evidence as there is, so far from showing that the amount paid for the annuity policy was excessive, supports the conclusion that no more was paid than the ordinary market price. Even if the evidence was inconclusive, it did not rebut the presumption of fact to which I have referred. It is hardly necessary to add that the consideration for the payment of $60,000 had to be valued at the date of the payment, and although subsequent events may often cast light on what has gone before, the fact that the deceased happened to die soon after the annuity policy was effected is not relevant in deciding whether $60,000 exceeded the market price for a policy of that kind. On the evidence it should be held that the insurance company gave full consideration in money's worth for the payment of $60,000 and this is sufficient to dispose of the contention that some part of that payment was a gift. (at p262)

11. For these reasons I am of the opinion that the conclusion reached in the Supreme Court was correct and that the appeal should be dismissed. (at p262)

MASON J. I have read the reasons for judgment prepared by the Chief Justice with which I agree. In addition I agree with what Jacobs J. has had to say in rejecting the Commissioner's contention that as there was insufficient consideration paid by the insurance company for the purchase of the annuity there was a gift inter vivos of the amount of the excess. (at p262)

2. For these reasons I would dismiss the appeal. (at p262)

JACOBS J. The deceased William Henry Stocks, shortly before his death on 17th September 1968 and when he was approaching the age of seventy-two, desired to make provision for his daughter the third respondent and desired so to do in a way which would diminish the amount of probate duty payable on his death. On 5th August 1968 he signed two proposal forms addressed to Underwriting and Insurance Ltd. First he applied for a policy of life insurance on his life expressed to be for the benefit of his daughter the third respondent. The sum assured was $63,973 and the annual premium payable was $6,904. The second proposal was for the payment to him of an annuity of $6,904. The first payment of annuity was to be upon the acceptance of the proposal by the company. The cost of the annuity was to be a single sum of $60,000. This single premium on the annuity policy was paid. The company did accept both proposals and the insurance and the annuity commenced on 15th August 1968. The company thus agreed to pay the first annual sum under the annuity policy on that date and on the same day it became entitled to receive the first premium of $6,904 on the policy of life insurance. The first payment of the annuity was credited in the books of the company to the account of the deceased as the payment of the first premium due under the policy. (at p263)

2. The Commissioner of Probate Duties included in the final balance of the estate of the deceased the whole of the sum assured under the insurance policy, namely, $63,973, as a gift to the third respondent falling within s. 7(1)(d) of the Probate Duty Act 1962. The executors gave notice of objection against the assessment on 12th March 1971 and on 3rd July 1973 the objection was disallowed upon three main grounds: first, that the policy was a gift inter vivos by the deceased made within three years immediately before death within the meaning and operation of s. 7(1)(d); secondly and alternatively, that the sum of $60,000 was such a gift; and thirdly, that the sum of $60,000 was the total amount of premiums paid or provided by the deceased in respect of the policy of insurance during the three years immediately preceding his death. (at p263)

3. The respondents appealed to the Supreme Court where Murray J. allowed the appeal, finding that the only sum to be included in the final balance of the deceased's estate was the amount of the first premium, namely, $6,904. The Full Court dismissed an appeal by the Commissioner from this finding (1976) VR 106 and it is from that dismissal that the Commissioner now appeals to this Court. (at p263)

4. The primary claim of the Commissioner is that the policy of life insurance taken out by the deceased for the benefit of his daughter was the subject matter of a gift inter vivos to his daughter, made within three years immediately before his death and therefore was or was deemed to form part of his dutiable estate. "Gift" is defined in s. 4(1) to include a disposition of or in relation to property made without consideration given by the disponee to the disponor. "Disposition" means, inter alia, the creation of any trust or of any estate or interest in property. The trust, says the Commissioner, is that which is created by s. 94 of the Life Insurance Act 1945-1965 (Cth) and it is conceded that a trust was not otherwise created. The first question is whether the provision in s. 94 that a trust of the proceeds of the policy is created operates to bring property to duty under the law of Victoria which would not otherwise be dutiable under that law. At the same time as s. 94 operates to create a trust it provides that the policy shall not form part of the estate of the person whose life is insured. It has been held that the latter provision does not affect the right of a State to include the policy in the dutiable estate of a deceased person: Forsyth v. Commissioner of Stamp Duties (1966) 114 CLR 194 . There is no intention disclosed by s. 94 of legislating upon the subject matter of what property may not be brought to duty in the estate of a deceased person under the law of a State. If there had been such an intention then Forsyth's Case would have been otherwise decided. But was there any intention of legislating upon the subject matter of State probate or death duty at all? I do not think so. The basis of Forsyth's Case is that the only purpose disclosed by s. 94 is a purpose of ensuring that the proceeds of a policy of life insurance falling within the section should go to the beneficiary, being a spouse or child, named therein by the assured rather than into his estate administrable by his personal representatives on his death. It has no purpose or effect related to or impinging on the liablity of property to death duty under the law of a State. The trust is created not for all purposes but only for the purpose which I have related. It is created sub modo. Just as s. 94 does not provide that the policy and its proceeds will not form part of the estate of the insured for purposes of State probate or death duty so also it does not create an interest which can be seized on to attract duty under State law. Section 94 is exhaustive of the purpose and effect of the trust created thereunder. If it were otherwise the question would arise under s. 109 of the Constitution whether s. 94 did not cover the whole field of the consequences of its provisions, a question which was held in Forsyth's Case not to arise because of the limited purpose and effect of s. 94. (at p264)

5. There is therefore no creation of a trust in a relevant sense, no disposition within the definition in s. 4(1) and consequently no gift inter vivos. The policy is therefore not part of the estate of the deceased under s. 7 of the Act. That being so, s. 8(1)(d) is applicable. I have no doubt that the words in s. 8(1)(d) "which does not form part of the estate of the deceased" refer to the estate ascertained in accordance with the provisions of s. 7(1) and include both actual and notional estate, so called. Section 8 deals with amounts which, though they are not property or a beneficial interest therein which may be included in his estate as though they were property of the deceased, must nevertheless be included in the final balance of his estate. Section 8(1)(d) would suffice to bring to duty, not the proceeds of the policy, but an amount equal thereto. However, s. 8(3) limits the amount to be included in the final balance of the estate in the circumstances of this case to the amount of premiums paid or provided by the deceased during the three years immediately preceding death. (at p265)

6. But then the Commissioner argues that the amount of premiums so paid or provided by the deceased was not the amount of $6,904 but that the price paid for the annuity, $60,000, was a premium for the life insurance policy and that this amount should be included in the final balance of the estate. This argument depends upon considering the purchase of the annuity and the taking out of the life insurance as one transaction whereby the $60,000 could be regarded as payments in advance of the premiums due from year to year on the life insurance policy. This submission was rejected by Murray J. and by the Full Court and, in my opinion, it was rightly rejected. There were distinctly two transactions even though they may have been associated and even though the one would not have been entered into if it were not for the other. The $60,000 was therefore what it purported to be, namely, a capital sum paid for purchase of the annuity. (at p265)

7. The last contention of the Commissioner has been that there was not sufficient consideration paid by the insurance company for the purchase price of the annuity and that therefore there was a gift inter vivos to the company of the amount of the excess pursuant to s. 7(1)(d) and to the definition of gift inter vivos in s. 4(1). There was actuarial evidence that $60,000 was a proper sum for a life annuity in respect of a man aged seventy-two but that it was an excessive sum in respect of a person in the state of health of the deceased. The actual expectancy of life of the deceased was about three years but the insurance company did not know this and took no steps to have the deceased medically examined. There was no evidence that an insurance company will agree to an annuity for a premium less than one based upon the normal life expectancy of a person of the age of the life in question. There was no evidence of the value of a life annuity if the projected life was only two or three years. Murray J. found that if he were to ignore the granting of the insurance policy the deceased paid substantially more for the annuity than it was worth. However, he took the view that he should not look at the purchase of the annuity in isolation but should have regard also to the concurrent transaction respecting life insurance. When he did so, he found that there was full consideration to the application of this within s. 7(1) in the definition of "gift inter vivos" and that therefore there was no deficiency of consideration in this sense. The Full Court confirmed this conclusion. I do not dissent from that conclusion but I prefer to base my conclusion that the Commissioner fails in this alternative claim upon the ground that even if the annuity purchase is looked at alone there is no evidence that under ordinary practice an annuity of $6,904 could have been purchased by the deceased for a premium less than that which was paid. It may be that neither the deceased nor any other person would in such circumstances purchase such an annuity but that does not alter the fact that before an element of gift could be found, it would be necessary to establish that more was paid in this case than was properly payable in an ordinary course of business for such an annuity. On all grounds therefore I am of opinion that the appeal fails and should be dismissed. (at p266)

MURPHY J. My conclusion is that the policy moneys were not dutiable under the Probate Duties Act 1958 (Vict.). (at p266)

2. The trust of the policy was not created by the deceased (within the meaning of s. 7(1)(d) of the Probate Duty Act) but by s. 94 of the Life Insurance Act 1945 (Cth) which states that the policy itself creates a trust (Commissioner for Probate Duties (Vict.) v. Mitchell (1960) 105 CLR 126 ). (at p266)

3. Section 8(1)(d) of the Probate Duty Act (which is consistent with s. 94 of the Life Insurance Act) does not purport to bring the policy into the estate, but would (except for s. 8(3)) include the policy moneys in the final balance of the estate (that is, not the estate but the amount calculated for duty purposes). However, s. 8(3) precludes such an exclusion by specific exemption. (at p266)

4. There is no evidence to support the Commissioner's contention that there was a gift to the insurance company. (at p267)

5. The appeal should be dismissed. (at p267)

Orders

Appeal dismissed with costs.