Permanent Trustee Co (Canberra) Ltd v Finlayson

[1968] HCA 85

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Kitto, Menzies, Windeyer and Owen JJ.

PERMANENT TRUSTEE CO. (CANBERRA) LTD. v. FINLAYSON

(1968) 122 CLR 338

23 December 1968

Death Duties—Constitutional Law (Cth)

Death Duties—Stamp Duty (N.S.W.)—State Commissioner—Right to recover duty—Foreign administrator—Foreign property—Extra-territorial application of Act—Proceedings against foreign administrator of property situate abroad—Stamp Duties Act, 1920-1959 (N.S.W.), ss. 114 (1)*, 115, 120 (2)**, (3). Constitutional Law (Cth)—Full faith and credit—Application of State Act in Australian Capital Territory—The Constitution (63 &64 Vict. c. 12), s. 118—State and Territorial Laws and Records Recognition Act 1901-1964 (Cth), s. 18.

Decision

December 23.
THE COURT delivered the following written judgment : -
This appeal is against an order of the Supreme Court of the Australian Capital Territory (Dunphy J.) (1967) 9 FLR 424. made in the course of an administration by the Court of what was described in the order as "the Estate of Fanny Lothian Niesche deceased". It seems that the only formal record of the order is in a recital contained in the order now under appeal. The deceased had died possessed of assets in the Australian Capital Territory and assets in New South Wales. Although the order took the form of a general order for administration, it could only have meant by "the Estate of Fanny Lothian Niesche deceased" the assets which were the subject of the probate granted in the Territory : see the comment on Preston v. Melville (1841)8 Cl &F1(8 ER1);(1845) 15 Sim 35(60 ER 528), in Stirling-Maxwell v. Cartwright(1878) 9 Ch D 173, at p 175, affd. (1879) 11 Ch D 522; Williams on Executors, 14th ed. (1960), p. 927, pars. 1469, 1470. (at p341)

2. The order that the estate be administered by the Court had been made on 28th September 1966, on the application of the Permanent Trustee Co. (Canberra) Ltd. We shall call that company the Territory executor, because it had obtained probate in the Supreme Court of the Territory of a will and codicil of the deceased, the former of which was expressed to be her last will and testament as regards all her property in the Territory and (apart from specific bequests of jewellery, personal clothing and similar effects and furniture) related in its dispositive provisions to property in the Territory only. This will, which may be called the Territory will, was dated 7th May 1962 and contained a revocation provision as to all former wills except a will concerning all property situated outside the Territory which it described as executed contemporaneously. The latter will (we shall call it the New South Wales will) in fact bore date the next day, 8th May 1962. It contained a revocation clause excepting the Territory will, appointed a company incorporated and carrying on business in New South Wales (which we shall call the New South Wales executor) as "Executors and Trustees", and disposed of property outside the Territory only. The codicil, dated 21st May 1962, was expressed to be a codicil to the Territory will only. Its only provisions were one limiting a provision in that will as to testamentary expenses to those owing or incurred in the Territory, and one confirming both wills. (at p341)

3. The New South Wales executor took probate in New South Wales of the New South Wales will but not of the codicil. Probably the codicil should have been admitted to probate as confirming and therefore incorporating the New South Wales will : see Mortimer on Probate Law and Practice, 2nd ed. (1927), pp. 11, 12. The effect of the republication of a will by a codicil has been examined by this Court in Fairweather v. Fairweather (1944) 69 CLR 121 and Hawkins v. Perpetual Trustee Co. Ltd. (1960) 103 CLR 135 . Though some attention was paid to this topic in the course of this appeal we are unable to see that it affects the question we have to consider and we therefore leave it on one side. (at p342)

4. The bulk of the deceased's property, valued at more than $250,000 consisted of jewellery, a credit balance in a bank account, debts secured by deeds made in the Territory which (as we infer) were still there at her death, and stock units on the Canberra registers of two companies. It is conceded that all these were, in law, situate in the Territory. The deceased's assets outside the Territory were in New South Wales at her death and were of a value less than $6,000. (at p342)

5. The Territory executor, after administering the Territory assets to some extent, received from the Commissioner of Stamp Duties of New South Wales a claim for $66,154, being the unpaid balance of death duty which had been assessed against the New South Wales executor under the Stamp Duties Act, 1920-1959 (N.S.W.). Thereupon the Supreme Court of the Territory, on the application of the Territory executor, made the abovementioned order for the administration by that Court of the estate of the deceased in the Territory. In that administration the question arose whether the duty claimed by the Commissioner should be paid out of the Territory assets, and Dunphy J. held that it should. He made an order, which is the order under appeal, declaring that the Commissioner had proved that "the Estate of Fanny Lothian Niesche in the Australian Capital Territory is indebted in accordance with the said Commissioner's assessment" in the sum of $66,154 with interest at eight per cent (a rate derived from s. 121 of the New South Wales Stamp Duties Act), and that the Territory executor "is liable to pay the assessment and interest out of assets of the said estate". (at p342)

6. The Territory executor, however, was neither liable nor entitled to pay out of the Territory assets any claims which were not sustainable against it according to the law of the Territory ; and the fact that it is acting now under the general direction of the Court pursuant to the administration order makes no difference. The principle is plainly laid down in In re Lorillard ; Griffith v. Catforth (1922) 2 Ch 638 and Government of India v. Taylor (1955) AC 491 . It rests upon the undoubted proposition that an administration of assets is to be carried out in accordance with the lex fori. The question before Dunphy J., therefore, was whether the claim of the Commissioner of Stamp Duties was one which the law of the Territory recognized as maintainable there against the Territory executor. (at p343)

7. The claim was not, of course, a claim for a debt of the deceased : she had died owing the Commissioner nothing. It was a claim for a tax which by the law of New South Wales had become payable by reason of and subsequently to the death of the deceased, and which that law provides (by s. 114 of the Act) shall constitute a debt payable to the Commissioner out of the estate of the deceased in the same manner as the debts of the deceased. This, of course, means that in an administration governed by New South Wales law the duty is to be met as if it had been a Crown debt owing by the deceased. The section shows on its face that it is intended to apply only to administrations in which New South Wales law governs the course to be followed ; for after directing payment of the duty "in the same manner" as the debts of the deceased it makes the explanatory provision that such duty shall be paid "accordingly" by "the administrator" - who by the combined effect of the definitions of "administrator" and "administration" in s. 100 must be a person whose representative capacity exists by virtue of New South Wales law - and out of such property forming part of the dutiable estate as is vested in him. Indeed, even if by an explicit and unqualified provision the Act had required that the duty be deemed to be a debt of the deceased, it could not be so deemed, by virtue of that provision, in a court applying Territory law : In re Brewster ; Butler v. Southam (1908) 2 Ch 365 . Moreover the law of the Territory contains nothing to give any provision of the New South Wales Act an operation in the Territory, and it makes no provision of its own as to New South Wales death duty. An endeavour was made in the course of argument to invoke s. 118 of the Constitution and s. 18 of the State and Territorial Laws and Records Recognition Act 1901-1964 (Cth) ; but it is one thing to give faith and credit to the New South Wales Stamp Duties Act as achieving all that it purports to achieve as an alteration of the law of New South Wales, and quite another thing to treat it as producing an extra-territorial result which on its true construction it does not purport to have and could not constitutionally have, namely to alter the law of the Territory as to Territory administrations. (at p343)

8. The duty must be paid before the New South Wales executor can have the probate of the New South Wales will issued from the office of the Registrar of Probates : s. 119, and of course it forms part of that executor's administration expenses : Wyndham v. Mackenzie (1918) 25 CLR 172 . Accordingly, if the New South Wales executor had been also the executor in the Territory the duty might perhaps have been payable out of the general mass of assets, regardless of their local situation at the death of the deceased : see per Jenkins L.J. in In re Goetze ; National Provincial Bank Ltd. v. Mond (1953) Ch 96, at pp 111-113 applied by Danckwerts J. in In re Sebba ; Lloyd's Bank Ltd. v. Hutson (1959) Ch 166 . But it is impossible to hold that the duty forms part of the administration expenses of an executor who is not and never has been concerned with the New South Wales assets. (at p344)

9. So far we have not had occasion to advert to the fact that the deceased at her death was domiciled in New South Wales. This had an important bearing upon the quantum of the New South Wales duty because of provisions of the Stamp Duties Act which in their application to the case may be sufficiently summarized by saying that death duty shall be assessed and paid upon the final balance of the estate as determined in accordance with the Act : s. 101 ; the final balance of the estate shall be computed as being the total value of the dutiable estate after making certain allowances in respect of debts of the deceased : s. 105 ; the dutiable estate is his estate constituted as provided in ss. 102 and 103 : s. 104 ; and the estate of a deceased person who was domiciled in New South Wales shall be deemed, for the purposes of the assessment and payment of death duty, to include and consist of (in addition to certain classes of property not belonging to him at his death) all property of the deceased which at his death is situate in New South Wales and all personal property of his which at his death is situate outside New South Wales : s. 102. Since the property which the deceased left in the Territory was all personalty (and there was no property of the additional classes) the effect of these provisions was, and was only, to require that the New South Wales duty be assessed and paid upon a figure worked out by a particular computation, that is to say by deducting the statutory allowances in respect of debts from the sum of the respective values of the items of property left by the deceased in New South Wales and in the Territory. Thus, unless there is any provision not yet mentioned which affects the matter, the case is simply one of a liability cast upon the New South Wales executor to pay out of the real and personal estate vested in it an amount of money assessed in a particular manner. Nothing is or could validly be provided by the New South Wales Act to place the Territory executor under a corresponding liability to make a payment out of the Territory property, or to affect in any way the law of the Territory as to the course to be followed in the administration of the property there situated. (at p345)

10. The only other provisions of the Act to which reference need be made are, we think, in ss. 115, 120 and 133. By sub-s. (2) of s. 115, so far as it is material, the death duty is made a charge upon so much of the dutiable estate as is situate in New South Wales, with a qualification saving the title of a bona fide purchaser for value without notice. By sub-s. (3) the Supreme Court of New South Wales is empowered, upon application by the Commissioner in case the duty be not paid within a prescribed time, to order that a sufficient part of the property included in the dutiable estate be sold and that the proceeds be applied in payment of the duty and costs. Plainly "the property" referred to in sub-s. (3) is the property over which sub-s. (2) creates a charge. It is impossible to construe these subsections as giving the Commissioner any charge over or remedy against the property of the deceased outside New South Wales. (at p345)

11. The provisions of s. 120 that need to be considered are in sub-ss. (2), (3) and (4). They relate (as we read them) to property which is included in the dutiable estate but is not vested in the "administrator". Their effect is to require every person who, as beneficiary, trustee or otherwise, acquires possession or assumes the management of any such property, upon retaining the same for his own use or distributing or disposing of the same, to deliver to the Commissioner a verified account and valuation, and to pay the duty which the Commissioner assesses as payable in respect of that property, together with interest. Failure to comply with these requirements is made punishable by a fine. The Territory executor in the present case is within the words of description literally construed ; but to read these provisions as applicable to a person outside New South Wales who acquires possession or assumes the management of property outside New South Wales, would be plainly impossible to reconcile with the principle of construction which the Privy Council applied in Macleod v. Attorney-General (N.S.W.) (1891) AC 455 (at p345)

12. For these reasons it seems to us that the Supreme Court of the Territory in administering the Territory assets cannot have regard to the claim for New South Wales death duty, even assuming, as the Commissioner contends, that the long-established doctrine of English law which the House of Lords re-affirmed in Government of India v. Taylor (1955) AC 491, namely that in general the revenue laws of one country are not enforceable in the courts of another, has no application as between States and Territories of the Australian Federation. When the Territory administration is complete, so that what remains of the Territory assets is ready for distribution to beneficiaries, a question will arise whether the Supreme Court should direct the Territory executor to carry out the distribution itself or to remit the assets in its hands to the New South Wales executor for distribution. By the rules of private international law in force in the Territory the distribution, unlike the administration that precedes it, is ordinarily governed by the lex domicilii, which in this case is the law of New South Wales : Abd-Ul-Messih v. Farra (1888) 13 App Cas 431, at p 438 ; In the Estate of Maldonado (1954) P 223, at p 246 , and for that reason it is often the better course to submit assets that are available for distribution to the direct authority of that law. The court of the situs has, however, a discretion in the matter, and there is authority for saying that a remission to the representative in the place of the domicile will not be directed if, as is the case here, the result would be to subject the property to a claim which is not enforceable against it in the administration under the lex fori : In re Lorillard (1922) 2 Ch 638 . But this is not a matter upon which it is opportune to express any opinion. (at p346)

13. We observe that the Territory will contains a provision in cl. 4 charging the real and personal estate in the Territory with "death estate or other duty or tax payable by my Executors in respect of my Australian Capital Territory Estate". At the date of the will there was no death duty in force under Territory law, nor is there any yet. The expression "death duty" in the will could not, therefore, have any application unless to New South Wales death duty. But that duty was payable as we have mentioned, by the New South Wales executor only, not by "my Executors". There are other instances in the will of "Executors" being used where only the executor of the Territory will is intended : see cll. 15, 18 and 26. In view of this, and more importantly in view of the clear intention to keep the administration in the Territory entirely separate from the New South Wales administration, it seems to us that in cl. 4 "Executors" is probably a typographical error for "Executor", i.e., the Territory executor, and that death duty is mentioned either by an unthinking adherence to routine draftsmanship or as a precaution lest death duty should be introduced in the Territory in the interval between the execution of the will and the death of the testatrix. Accordingly, in accordance with the arguments of the parties, we have treated the question in the appeal as unaffected by cl. 4. (at p347)

14. In our opinion the appeal should be allowed and the order of the Supreme Court reversed. (at p347)

Orders

Appeal allowed. Order of the Supreme Court of the Australian Capital Territory of 16th June 1967, set aside. In lieu thereof order as follows : 1. Declare that the respondent the Commissioner of Stamp Duties of the State of New South Wales is not entitled to be paid out of the estate of Fanny Lothian Niesche deceased in the Australian Capital Territory any amount in respect of death duty assessed under the provisions of the Stamp Duties Act, 1920- 1959 (N.S.W.). 2. Order that the said Commissioner of Stamp Duties pay the costs of the plaintiff and the defendants in the said Supreme Court.

Order that the respondent the said Commissioner of Stamp Duties pay the costs of this appeal of the appellant and of the other respondents.