Purcell v Deputy Federal Commissioner of Taxation

The case of *Purcell v. Deputy Federal Commissioner of Taxation* concerned Thomas Purcell, a grazier who executed a declaration of trust over his grazing business and associated assets. Purcell was assessed for income tax on the profits of this business, but he claimed that the income was received as trustee for himself, his wife, and his daughter in equal shares, and therefore each should be assessed on one-third of the income. The Deputy Federal Commissioner of Taxation contended that the declaration of trust was void for non-registration under the *Bills of Sale Act 1891* (Qld) and also that it could be disregarded for income tax purposes. The matter was brought before the High Court of Australia.

The central legal issue before the Full Court was whether the declaration of trust, which had not been registered under the *Bills of Sale Act 1891* (Qld), was a valid and binding declaration with respect to the chattels comprised within it, or if it was of no effect. This question arose because sections 3 and 4 of the Act stipulated that unregistered bills of sale, including declarations of trust of chattels without transfer where the holder or grantee has power to seize or take possession, would have no effect.

The High Court, comprising Knox C.J., Duffy, Rich, and Isaacs JJ., held that the declaration of trust was valid and binding on the settlor. Knox C.J. and Duffy and Rich JJ. reasoned that the declaration of trust did not fall within the scope of the *Bills of Sale Act* because neither the wife nor the daughter, as beneficiaries, possessed the power to seize or take possession of the chattels. They found that the beneficiaries' interests were subject to the settlor's retained rights of management and disposition, and that the deed did not confer a right to take possession upon them. Isaacs J., while acknowledging the deed's potential to be a bill of sale, concluded that its true effect was not a transfer of property in the chattels themselves, but rather a gift of shares of the settlor's profits arising from the business. He found that the extensive powers reserved by the settlor rendered the purported gift of property ineffective as a transfer of ownership, meaning the deed did not require registration under the Act.

Consequently, the High Court answered the question submitted by the Chief Justice in favour of the appellant, finding the declaration of trust to be valid and binding.