Glynn v Federal Commissioner of Taxation

[1964] HCA 50

HIGH COURT OF AUSTRALIA

Kitto J.

GLYNN v. FEDERAL COMMISSIONER OF TAXATION

(1964) 111 CLR 169

4 September 1964

Estate Duty (Cth)

Estate Duty (Cth)—Appeal to High Court from Board of Review—Competency—Question of law—Declaration of trust—What constitutes—Failure to communicate trust to beneficiaries—Receipt of income by settlor in lifetime—Whether life interest in trust property reserved—Estate Duty Assessment Act 1914-1953 (Cth), ss. 8 (4) (c), 26 (9).

Decision

September 4.
KITTO J. delivered the following written judgment:-
Harold Marcus Glynn died on 2nd October 1954, being at that date the registered holder of a large parcel of shares in a company called Glynns Pty. Limited. The respondent Commissioner made an assessment of the estate duty payable on the deceased's estate under the Estate Duty Assessment Act 1914-1953 (Cth), and in doing so treated the whole of the shares as having belonged to the deceased beneficially. The administrators objected upon three grounds. The first ground related to 1,424 shares in Glynns Pty. Limited, which the deceased had acquired in 1920 by transfer from his mother Kate Glynn. The second ground related to 176 shares in that company which the deceased had acquired, also in 1920, from his brother Leo Patrick Glynn. As to all these shares, totalling 1,600, it was said that the deceased had received them without consideration and upon trust for other persons, and that he had never had any beneficial interest in them. The third ground related to a sum of 6,090 pounds made up of dividends received by the deceased on the 1,600 shares. The administrators said that the deceased had retained the dividends in breach of trust and that they constituted a debt due and owing by him at his death and were deductible under s. 17 of the Act accordingly. The Commissioner disallowed the objections and the administrators requested him to refer his decision to a Board of Review. The Board confirmed the assessment, giving no reasons beyond the bare statement that the amount of the assessment had not been shown to be excessive. (at p171)

2. The administrators now appeal from that decision under s. 26 (9). The appeal is competent if, in the opinion of the Court, the decision involved a question of law. In my opinion it did involve a question of law, for the ultimate questions which the Board had to decide were whether, on the facts as they found them, the actions of the deceased with respect to the 1,600 shares were such that a court of equity would hold them to be effectual as declarations of trust, and if so what were the beneficial interests under the trusts. There is therefore jurisdiction in the Court to entertain this appeal on all questions, whether of fact or of law, within the scope of the objections. It is a proceeding in the original jurisdiction of the Court, and accordingly I have not to decide whether the Board's decision should be upheld or reversed as a decision on the material which the Board had before it. I have to decide upon the evidence adduced before this Court whether or not the 1,600 shares were subject to the trusts alleged. The distinction is more than ordinarily important in this case, for new evidence has been discovered since the Board gave its decision. It is conceded by the Commissioner that if the alleged trusts are proved it must follow that the deduction claimed in respect of the dividends must be allowed. (at p172)

3. The administrators' case is that the 1,600 shares were held by the deceased as to 800 in trust for a son James Ignatius Glynn absolutely, and as to 800 in trust for another son Thomas Patrick Glynn absolutely. Since the decision of the Board of Review, the transfers of these shares to the deceased have come to light and are now in evidence. They are three in number, all dated 26th April 1920. At that time the two sons were respectively six and four years of age. Two transfers are from the deceased's mother Kate Glynn and the other from his brother Leo Patrick Glynn. One is a transfer by Kate Glynn of 624 shares numbered 5785 to 6408, expressed to be in consideration of 624 pounds paid to her by "Harold Marcus Glynn as Trustee for Jas. I. Glynn". The signature of the transferee is "Harold Marcus Glynn as Trustee for Jas. I. Glynn". Then there is a transfer by Leo P. Glynn of 176 shares numbered 8915 to 9090, expressed to be in consideration of 176 pounds paid to him by "Harold Marcus Glynn as Trustee for Jas. I. Glynn" and signed by the transferee "H. M. Glynn as Trustee for Jas. I. Glynn". Finally there is a transfer by Kate Glynn of 800 shares numbered 6409 to 7208, expressed to be in consideration of 800 pounds paid to her by "Harold Marcus Glynn as Trustee for Thos. P. Glynn" and signed by the transferee "H. M. Glynn as Trustee for Thos. P. Glynn". (at p172)

4. It appears from the minute book of the company that these three transfers were approved by the board of directors of the company at a meeting held on 22nd March 1920 at which the deceased was the chairman. The first and the second transfers are described in the minutes of that meeting as transfers to "J. I. Glynn", and the third transfer as transfer to "T. P. Glynn". The minutes are signed by the deceased himself. (at p173)

5. The share register is in evidence, and on Mrs. Kate Glynn's folio there are entries reflecting the transfers of the 640 shares and the 800 shares and naming as the respective transferees "James I. Glynn" and "P. T. Glynn". On Leo Patrick Glynn's folio the transfer of the 176 shares is shown as a transfer to "J. I. Glynn". There is a folio originally inscribed as for "James Ignatius Glynn". The name has been struck out and replaced by "Harold Marcus Glynn". In pencil someone has written "Held in trust for J. I. Glynn", but who wrote it does not appear and I leave it out of account. The 624 shares and the 176 shares are shown as acquired but no names appear against them. Finally there is a folio originally inscribed as for "Patrick Thomas Glynn". Again the name is struck out and replaced by "Harold Marcus Glynn", and again there is a pencil note, this time reading "Held in Trust for P. T. Glynn". (The initials are reversed as on Mrs. Kate Glynn's folio). I ignore this pencil note as I do the other. (at p173)

6. There are also in evidence four share certificates which are not unimportant. They are all dated 22nd March 1920. One certifies that "James Ignatius Glynn by his Trustee H. M. Glynn" is the registered holder of the 640 shares numbered 5785 to 6408 ; another that "James Ignatious Glynn by his Trustee H. M. Glynn" is the registered holder of the 176 shares numbered 8915 to 9090 ; and a third that "Patrick Thomas Glynn by his Trustee H. M. Glynn" is the registered holder of the 800 shares numbered 6409 to 7208. (It will be noticed that once more the christian names are reversed.) All these certificates are signed by the deceased himself as secretary of the company. (at p173)

7. It seems obvious that in 1920 the deceased and others took the view that in respect of shares held by a trustee for a specific person it was proper to treat the latter as the shareholder for the purposes of the share register and of share certificates, and that at some later time it was realized that at least the share register should be rectified by naming the trustee as the shareholder without any mention of the trust. (at p173)

8. It is relevant to add that in two lists of shareholders, one as at 31st August 1924 and the other as at 31st July 1931, the deceased is shown as holding 3,250 shares in trust for James Ignatius Glynn and 3,250 shares in trust for Patrick Thomas Glynn. The folio of the share register which has the pencil notation "Held in trust for J. I. Glynn" shows the abovementioned 176 shares and 624 shares as included in an ultimate total, reached on 2nd June 1924, of 3,250 ; and the folio bearing the notation "Held in trust for P. T. Glynn" shows the abovementioned 800 shares as included in a similar total, reached on the same day. The two lists of shareholders of 1924 and 1931 are significant because each is included among the documents bound up with the audited accounts for the relevant period, and each set of accounts was received, approved and adopted at an annual general meeting presided over by the deceased, the minutes of which he signed. (at p174)

9. If there were nothing more in the case, the conclusion, in my opinion, would be irresistible that in 1920 the deceased effectually declared as binding and irrevocable the trusts which the administrators assert. He plainly evinced an intention that the trusts should attach to the shares at the moment of his acquiring them. This he did, first by acknowledging in the transfer forms that he had paid the consideration as trustee for the respective sons and was taking the shares in that character, next by presiding at the meeting of directors at which the transfers to him in that character were approved, then by signing the minutes recording that that had been done, and finally by signing the share certificates which unequivocally acknowledged the trusts. (at p174)

10. But the Commissioner relies upon two further facts. One is that, as the evidence establishes, the deceased did not at any time communicate the existence of the trusts to either of the sons. The other is that he did not at any time account to either of the sons for any of the dividends he derived from the shares, or treat any of the dividends otherwise than as belonging to himself beneficially. Upon these facts two submissions are made. (at p174)

11. The first submission is that when all the facts, including these, are regarded as a whole it should be held that there is too much doubt about the intention with which the deceased became the holder of the 1,600 shares for the conclusion to be reached that he intended an immediately binding trust. It is true that proof of a formal statement by the owner of property to the effect that he holds it upon trust for another is not conclusive proof of the trust, for special circumstances may explain the statement as having been due to some other intention than that of creating a trust : Commissioner of Stamp Duties (Q.) v. Jolliffe (1920) 28 CLR 178 ; Teasdale v. Webb (1940) 57 WN (NSW) 151 . But there are no such circumstances here, and I see no reason to doubt that the deceased intended the immediate constitution of the trusts. (at p174)

12. Secondly, it is said that even if the trusts were effectually declared the non-communication of them to the beneficiaries and the appropriation of the dividends by the deceased to his own use up to the time of his death give rise to an inference similar to that which arose in the special circumstances of Kauter v. Hilton (1953) 90 CLR 86 , namely that the intended trust was a trust reserving a life interest to the deceased. If this inference should be drawn, the Commissioner claims that the 1,600 shares are included in the deceased's estate for estate duty purposes by s. 8 (4) (c) of the Act. I am unable, however, to see in the facts of the case any support for this contention. Both the non-communication of the trusts to the beneficiaries and the omission of the deceased to account for any of the dividends are quite consistent with an intention on the part of the deceased to create trusts under which the sons took the whole beneficial interest immediately. They were too young in 1920 to understand matters of business or to handle money. The course of events leaves open a hypothesis at least as probable as any other that although the deceased intended an immediate trust for the sons absolutely he considered that while they were young and he was maintaining them there was no point in telling them about the trusts, and that in a practical sense he was applying the income for their benefit by putting it in the pocket out of which their maintenance was provided. And when they grew up he may well have continued unreflectingly the course which the intervening years had made habitual. I am not making any assumption that this is in fact the explanation. All I say is that the deceased's course of conduct from 1920 onwards does not seem to me to justify an inference that the absolute trusts to which he repeatedly assented in the written documents were in truth subject to an unexpressed qualification reserving a life interest to himself. It is important to remember that although the creation of the trusts was never disclosed to the two beneficiaries there was no secrecy about it. Other people were made aware of it clearly enough, and records of it were made in documents likely to be permanently retained by the company and available for inspection. In the circumstances I do not think that there is any basis for a finding which would attract s. 8 (4) (c). (at p175)

13. In my opinion the appeal should be allowed and the assessment remitted to the Commissioner to be amended by excluding from the estate of the deceased the shares mentioned in the objection and by deducting as consisting of debts due and owing by the deceased at the time of his death the sum of 6,090 pounds therein mentioned. (at p176)

Orders

Appeal allowed with costs. Assessment remitted to the Commissioner in order that it may be amended by excluding from the estate of the deceased the shares mentioned in the objection and by deducting as consisting of debts due and owing by the deceased at the time of his death the sum of 6,090 pounds therein mentioned.