Queensland Trustees Ltd v Commissioner of Stamp Duties
[1952] HCA 52
•13 October 1952
54
HIGH COURT
[1952.
[HIGH COURT OF AUSTRALIA.]
QUEENSLAND TRUSTEES LIMITED A N D \
O T H E R S ..................................................... J
A ppell a n t s ;
AND
COMMISSIONER OF STAMP DUTIES .
R e s p o n d e n t .
ON APPEAL FROM THE SUPREME COURT
OP QUEENSLAND.
H. C. OF A.
Succession Duty {Q.)—•“ Succession ”—Settlement—Trust during lifetime of settlor
1952. to apply income at trustees' discretion in favour of any of specified persons—■
After death of settlor imperative trust to apply income in favour of any of specified Br is b a n e , persons—Payments of income made after settlor's death—Liability to duty—
June 17 ;
The Succession and Probate Duties Acts, 1892 to 1948 (Q.) (56 Viet. No. 13—
Melb o u r n e ,
12 Oeo. 6 No. 23), ss. 4, 12, 20, 37.
Oci. 13.Section 4 of The Succession and Probate Duties Acts 1892 to 1948 (Q.)
Dixon C.J.,
provides : “ Every . . . disposition of property, by reason of which any
McTiernan,
Webb and person . . . shall become beneficially entitled to any property or the income
Eitto JJ.thereof upon the death of any person . . . either immediately or after any
interval, either certainly or contingently, and either originally or by way of substitutive hmitation . . . shall be deemed . . . to confer on the person entitled by reason of such disposition . . . a ‘ succession ’ ; and the term ‘ successor ’ shall denote the person so entitled ”.
By a deed of settlement, a settlor appointed trustees to hold certain securities with a power from time to time if and when and at such times and in such manner as they in their absolute discretion thought fit but not otherwise, to pay or apply the income of the fund as they might for the time being think advisable in or towards the maintenance or support of her niece, any husband whom she might marry, any child or children of her marriage, any issue of any such child living at her death, or any of her next of kin as if she had died intestate and unmarried and provided that “ from and after the death of the settlor the trustees shall pay or apply the whole of the income in manner aforesaid half-yearly at least in each year.” It was then declared that the trustees should hold the trust fund for the maximum period allowed by the law, or until the death of the niece, whichever event should first be reached or happen, to invest the surplus income and accumulate and apply
88 C.L.R.]
OF AUSTRALIA.
the same in accordance with the trust. The settlor then provided that in
H. C. OF A.
case the trustees during the life of the niece but prior to the death of the 1952.
settlor should Tiot have deemed it expedient in their discretion to apply
the income of the trust fund, then the unapplied income and any accumulated
Q u een sla n d
T r u stees
income should fall into and become part of the trust fund and if for any reason
L t d .
the trustees should be unable lawfully to comply with the settlor’s directions
V.
Com m is
as to income and accumulated income the trustees should apply the income
sio n e r OP
or capital to certain charities. It was further provided that upon the death
Stamp
of the niece the trustees were to exercise their discretionary powers in favour
D u t ie s .
of her issue, but so that after the death of the settlor the whole of the income should be paid or apphed in each year as already provided. At the death of the settlor the niece was unmarried, her brother being her next of kin, she married later but had no issue. After the settlor’s death, the trustees pur suant to the settlement made payments of income to the niece and these payments were assessed to succession duty under The Succession and Probate Duties Acts 1892 to 1948 (Q.).
Held, that the settlement conferred a succession within the meaning of s. 4 of The Succession and Probate Duties Acts 1892 to 1948 (Q.). A new power was brought into existence by the settlor’s death the exercise of which was to be read into the settlement so that the income to which the exercise of the power related passed as if the settlement had actually provided that after the settlor’s death the income should be paid or applied to or for the benefit of the chosen beneficiary ; and accordingly, the recipient’s beneficial title to income arose “ by reason of ” the settlement and “ upon the death ” of the settlor after an interval contingently and by way of substitutive limi tation.
Decision of the Supreme Court of Queensland (Full Court), Be Martin
(1953) Q.S.R. 37, affirmed.
A p p e a l from the Supreme Court of Queensland.
On 27th September 1932 Margaret Hart Martin made a settle ment in favour of her niece Margaret Hart Martin the younger (now Mowder), whereby she created certain trusts appointed trustees and transferred securities to be held by the trustees upon the following trusts—“ 2. (a) Subject to the proviso to this clause from time to time if and when and at such times and in such manner as the trustees shall in their absolute discretion think fit but not otherwdse to pay or apply the income of the trust fund from time to time or any part or parts of such income as they may for the time being think advisable in or towards the maintenance or support of the said Margaret Hart Martin (the Younger) or of any husband with whom the said Margaret Hart Martin (The Younger) may intermarry or any children or child of any marriage or issue of any such child living at her death made by the said Margaret Hart Martin (The Younger) to the exclusion of the other or others
56 HIGH COURT
[1952.
if. 0. OF A. o f fiietn or to any of her next of kin a.s if she had died intestate
and unmarried durin^r the lifetime of the said Margaret Hart QmoisNSLAND Younger) or at the like absolute discretion to pay the
'I'KUMTiiiss
nmt or other ex|)enses of a home or residence for her him or them
l/i'i).
V.or any of them and or otherwise ap[)ly the said or any part of the
( ' O M M i a - said income for the maintenance and personal support or benefit
SIONIOH
O F
Stampof all or a.ny one or more to the exclusion of the other or others of
D u t m o .s .the said persons whether minors or adults Provided however that
from and alter the death of the settlor the trustees shall pay or apply the whole of the income in manner aforesaid half-yearly at least in each year.
(b) -For the maximum period allowed by law in that connection or until the death of the said Margaret Hart Martin (The Younger) (whichever event shall first be reached or happen) to invest the surplus (if any) of the said income and to accumulate the same at compound interest with power to the trustees to apply such accumulations or any part thereof under the trust lastly herein before declared as if the same were income for the current year and at their discretion to use and deal with such accumulations or any part thereof in manner provided by such last preceding trust. (c) Provided always that in case the trustees at any time during the life of the said Margaret Hart Martin (The Younger) but prior to the death of the settlor shall not deem it expedient to apply the income of the trust fund in pursuance of the said discretionary power then and in such case the unapplied income and the accumu lated income (if any such) shall from time to time fall into and become part of the trust fund without prejudice to the future discretionary application of income of the trust fund during such lifetime If for any reason the Trustees shall be unable lawfully to comply with this or any other direction in this deed contained concerning any income or accumulated income or if any of the trusts (other than the trust in favoiir of the University of Queensland with respect to the failure of which special provision is hereinafter made) in this deed contained concerning any capital or income or accumulated income are contrary to law then the settlor directs but to the extent of such inability or illegality only that the trustees shall apply such income or accumulated income or capital upon the trusts hereinafter mentioned in favour of the University of Queensland.
(d) After the death of the said Margaret Hart Martin (the Younger) in respect of the income of the trust fund and all un applied or accumulated parts thereof to exercise a similar discre tionary trust during the minority of or other issue any child of
88 C.L.R.] OR AUSTRALIA.
57
the said Margaret H art Martin (the Younger) in favour of all or any such or such other issue children but so that after the death of the settlor the whole of the income shall be paid or applied Queensland
in each year as aforesaid ” .
T r u stees
L t d .
On 24th April 1944 another settlement was made by the settlor in favour of her second cousin Josephine Margaret Martin (now
V.
Com m is
sio n er OF
Callaghan) in identical terms except that no provision was made Stamp
therein for any husband she might marry.
D u t ie s .
At the death of the settlor on 12th October 1948, the niece was unmarried, her brother being her next of kin. She married later but had no issue. The second cousin was married at the time of the settlor’s death and had issue one child, another child was
born later.
.
After the settlor’s death the trustees in the exercise of their discretionary powers made payments of income to Margaret Hart Martin (the younger) and Josephine Margaret Martin and these payments were assessed to succession duty under The Succession and Probate Duties Acts 1892 to 1948 (Q.).
The trustees lodged two appeals, one in respect of each settlement, by petition to the Supreme Court of Queensland. On 9th November 1951, Douglas J. by consent ordered that the petitions be con solidated and that the points arising thereon be argued before the Full Court. The Full Court upheld the assessments and dismissed both petitions : Re Martin (1).
From this decision the trustees appealed to the High Court by special leave.
IF. J . V . Windeyer Q.C. (with him B. F. Fahey), for the appellants. The question which arises is whether the proviso to cl. (a), namely that from and after the death of the settlor the trustees shall pay or apply the income half-yearly at least, accomplishes a succession. The key to The Succession and Probate Duties Acts 1892 to 1948 (Q.) is found in s. 4, which corresponds with s. 2 of the Succession Duty Act 1853 (16 & 17 Viet. c. 51) (Imp.) : Duke of Northumberland v. Attorney-General (2). The reasoning of Philp J. in Re M unro ; Commissioner of Stamp Duties v. Queensland Trustees (3) is erroneous. I t is based on the objects of the power having a right jointly to demand a distribution, as if they were the only persons to benefit. All they had was a
right to require the trustees to carry out the trust.
They had not
acquired any property by reason of the settlor’s death.
The words
(1) (1953) Q.S.R. 37.(3) (1949) Q.S.R. 217, at p. 224.
(2) (1905) A.C. 406, at p. 410.
68 HIGH COURT
[1952.
H.- C. OF A.
“ upon the death ” in s. 4 of the Acts refer to a period and not to
1952.a condition. Death is tlie event marking a point of time and not
Queenslanda cause or an occasion : Commdssioner of Stamp Duties {Q.) v.
T ru stees
Donaldson (1). Before the settlor’s death the right of an object
L t d .
V.of the power to receive income arose from the exercise of the
Commistrustees’ discretion. After the settlor’s death the right to receive
sio n er
OF
Stamp income depended upon the exercise of the trustees’ discretion. D u t ie s .Therefore, after the settlor’s death the situation remained exactly
as it was before and no person became beneficially entitled to any property or income upon the death of the settlor. The words of s. 4 of the statute are “ beneficially entitled ” and not “ come into possession ” . A person is not beneficially entitled unless he can sue for and recover the property. An object of the power had before the settlor’s death a chance of the trustees’ discretion being exercised in his or her favour. After the settlor’s death all he or she had was a greater chance of the discretion being exercised in his or her favour. The objects of the power had not acquired any vested or contingent interest in property which they could sell or assign. [He referred to In re Coleman ; Henry v. Strong (2); In re Beckett’s Settlement; Eden v. Von Stutterheim (3); In re Miller’s Agreement; Vniacke v. Attorney-General (4); Attorney- General V. Heywood (5) ; Attorney-General v. Farrell (6) ; Craig V. Federal Commissioner of Taxation (7) ; Commissioner of Stamp Duties [N.S.W.) V. Bradhurst (8) ; Ex parte Coote (9); Adamson
V. Attorney-General (10).]
H. I. Gibbs, for the respondent. There was a succession. Upon the death of the settlor the objects of the power became beneficially entitled to the income. [He referred to Duke of Nooihumberland V. Attorney-General (11) ; Commissioner of Stamp Duties [Q.) v . Donaldson (12).] Before the settlor’s death, the highest right any member of the group had was to compel the trustees to exercise their discretion. Even in their discretion the trustees were not bound to distribute the income. After the settlor’s death, the members of the group could conjointly demand and enforce payment from the trustees of the half year’s income. This right was not merely to compel the trustees to exercise their discretion, but also
(1) (1927) 39 C.L.R. 639, at p. 545.(8) (1950) 81 C.L.R. 199, at p. 221.
(2) (1888) 39 Ch. D. 443.
(9) (1948) 49 S.R. (N.S.W.) 179, at
(3) (1940) Ch. 279.
p. 182 ; 66 W.N. 28, at p. 29.
(4) (1947) Ch. 615.(10) (1932) 2 K.B. 159; A.C. 257.
(5) (1887) 19 Q.B.D. 326.(11) (1905) A.C. 406, at p. 410.
(6) (1931) 1 K.B. 81.
(12) (1927) 39 C.L.R. 539, at pp.
(7) (1945) 70 C.L.R. 441, at pp. 446,545, 646.
■
454, 457.
88 C.L.R.] OF AUSTRALIA.
59
to compel them to make a distribution. [He referred to In re
H. C. OF A.
Sm ith ; Public Trustee v. Aspinall (1) ; In re Nelson; Norris
1952.
V. Nelson (2); Attorney-General v. Heywood (3) ; In re Beckett’s
Qu een sla n d
Settlement (4).] Before the death of the settlor each member of
T r u stees
L t d .
the group had a chance of becoming a recipient in a distribution
V.
of income. Such member was not entitled to become a recipient Com m is
| sio n e r OF |
and would not become so entitled. After the death each member
Stamp
had a right to join with the others to compel a distribution to all.
D u t ie s .
This was a new and a valuable interest, so that on the death of the settlor each member became beneficially entitled to property. If a discretionary trust came into being at the settlor’s death, then the property passed and they became beneficially entitled to an interest in the property : Burrell v. Attorney-General (5). Property passes on death, where there is a discretionary trust in favour of one group followed by a discretionary trust in favour of another group. Similarly, property passes where there is a discretionary trust under which the trustees are not bound to dis tribute any property, followed by one in which they are bound to make a distribution {Attorney-General v. Wade (6); Way v. Commissioner of Stamp Duties (A./S.IF.) (7) ).
W. J. V. Windeyer Q.C., in reply. There was no collection or group of persons who on the death of the settlor became entitled to property : In re Goggs (8). He distinguished Attorney-General v. Gell (9) on the ground that in that case there was no trust, but only a power to accumulate.
Cur. adv. vuU.
T h e Co u r t delivered the following written judgm ent:—
Oct. 13.
These appeals are brought by special leave from judgments of the Full Court of the Supreme Court of Queensland. By the judgments appealed from, the Supreme Court dismissed appeals which had been made to it against two assessments of succession duty under The Succession and Probate Duties Acts 1892 to 1948 (Q.). The assessments were made upon the footing that successions were conferred, within the meaning of the Acts, by two settlements made by one Margaret Hart Martin on 27th September 1932 and 24th April 1944 respectively. In each case, duty was assessed
(1) (1928) 1 Ch. 915.(6) (1910) 1 K.B. 703.
(2) (1928) 1 Ch. 920 (n.).(7) (1949) 79 C.L.R. 477.
(3) (1887) 19 Q.B.D. 326.(8) (1909) Q.S.R. 27.
(4) (1940) 1 Ch. 279.
(9) (1865) 3 H. & C. 615 [159 E.R.
(5) (1937) A.C. 286, at pp. 297, 299,
673].
301, 302.
()0 HIGH COUET
[1952.
H.0. OF A.upon a series of payments of income made to a beneficiary since
| 1952.Pitli Oi'tober 1948, which was the date on which the settlor died ; |
QinOEN.SLANl)and a note w'a,s added intimating that further succession duty would
'I’k u s t i o e s
bec.ome jiayable on income from the settled fund when it should be
I .Tl).
V.paid to the beneficiary.
CoiMMIS- The first of the settlements was made in favour of the settlor’s
.SIONIOH OF
S 'l’AMTniece, one Margaret Hart Martin the younger, and others. Its
D u t i e s .beneficial limitations commenced with a provision conferring upon
the trustees a power, from time to time if and when and at such
Dixon
t ' . J .
MoTicnuin
Webb .1.
times and in such manner as they should in their absolute discretion
Kitto
J .
think tit but not otherwise, to pay or apply the income as they might from time to time think advisable in or towards the main tenance or support of the niece, any husband whom she might marry, any children or child of hers, any issue of any such child living at her death, or any of her next of kin as if she had died intestate and unmarried. The discretion extended to paying the rent or other expenses of a home or residence for the niece or other persons or any of them or otherwise applying the income for the maintenance and personal support or benefit of all or any one or more to the exclusion of the other or others or make any other like application of such income. This discretionary power, wTich was restricted to the lifetime of the niece, was made subject to a proviso that from and after the death of the settlor the trustees should pay or apply the whole of the income in manner aforesaid half-yearly at least in every year. There was a trust for accumulation of surplus income for the maximum period allowed by law or until the death of the niece, whichever event should first be reached or happen. The income not applied in pursuance of the discretionary power during the life of the niece and prior to the death of the settlor was directed to fall into the trust fund, and a charitable destination was prescribed for the application of such income in the event of the trustees being unable lawfully to comply with this direction. After the death of the niece a discretionary power was created, during the minority of any child or the other issue of the niece living at her death, in favour of all or any such children or such other issue, but so that after the death of the settlor the whole of the income should be paid or applied in each year as aforesaid. Upon the death of the niece, the fund and all accumu lations were given over.
At the death of the settlor, the niece -was still unmarried and her next-of-kin wns her brother. She married on 5th September
| 1950, but has had no issue. Her brother died on 8th June 1951. |
88 C.L.R.] OF AUSTRALIA.
61
H. C . OF A.
The second settlement was made in favour of a second cousin of the settlor, one Josephine Margaret Martin (now Callaghan)
1952.
and others. Its terms, so far as material, were identical with Qu een sla n d
those of the niece’s settlement except that no provision was made
T b u stees
L t d .
for any husband the second cousin might marry. She in fact
V.
married on 4th January 1945, and has had issue two children, a Com m is
sio n er OF
son horn on 25th February 1946 and a daughter born on 4th Stamp
January 1949.
D u t ie s .
The controversy raised by the appeals depends upon the true construction and application of certain sections of The Succession
Dixon C.J. McTiernan J.
Webb ,T.
and Probate Duties Acts 1892 to 1948 (Q.), which was based upon,
Kitto J.
but is not in all respects identical with. The Succession Duty Act 1853 (16 & 17 Viet. c. 51) (Imp.). The Queensland Act (by s. 12) imposes a duty at specthed rates in respect of every succession ; and (by s. 20) it makes the duty payable when the successor, or any person in his right or on his behalf, becomes entitled in possession to his succession or to the receipt of the income and profits thereof, subject to certain exceptions not relevant to these appeals. This section “ only defers the time for payment, in cases where the successor is not entitled to immediate possession, until the right to possession matures, and the duty is none the less imposed and charged at the moment when the succession is conferred ” : Lord Advocate v. Macalister (1). Special provision is made by s. 37 for the case where a successor has not obtained the whole of his succession at the time of the duty becoming payable. In that case the successor is chargeable only with duty on the value of the property or benefit from time to time obtained by him.
Section 4 of the Act supplies the test for ascertaining whether a succession has been conferred. So far as material it provides : “ Every . . . disposition of property, by reason of which any person . . . shall become beneficially entitled to any property or the income thereof upon the death of any person . . . either im mediately or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation . . . shall be deemed . . . to confer on the person entitled by reason of such disposition . . . a ‘ succession ’ ; and the term ‘ successor ’ shall denote the person so entitled . . . ”
Each of the settlements with which we are concerned was, of course, a disposition of property, and under its provisions the death of the settlor unquestionably made a difference in regard to the income of the settled property. The trust as to income which operated until that event was a trust for accumulation
(1) (1924) A.C. 586, at p. 591.
62 HIGH COURT
[1952.
H.C. OF A.subject to a discretionary power to apply income for the benefit
| 1952. | of any of the specified persons ; but the trust taking effect upon |
Qu een sla ndthe settlor’s death was a trust which imperatively required the
T r u stees
payment or application of the whole income at least half-yearly
L t d .
V.for the benefit of one or more of the specified persons, with a
Commisdiscretionary power limited to making a selection amongst them
sio n er
OP
Stamp from time to time and deciding the manner in which the selected D u t ie s .person or persons should be benefited. If the latter power had
Dixon C.J.
not been conferred it is clear that s. 4 would have been satisfied, and
McTiornan J.
M'ebb J. there would have been a succession conferred, for the specified persons
Kitto J.would have become beneficially entitled to the income of property
upon the death of a person (the settlor), immediately and certainly. This would have been true whether the specified persons had been in existence and ascertained at the.date of the settlements or had become so after that date but before the death of the settlor; for “ a succession under a disposition is not conferred until some person who can be named or identified becomes beneficially entitled to the property upon the death of some other person, whether he becomes so entitled immediately or subject to some intervening
estate or interest
Lord Advocate v. Macalister (1).
I t was argued for the appellants that, although it is true that the death of the settlor put an end to the discretionary power as to income which had subsisted until then, and brought into operation the imperative trust as to income and the new power to decide the manner of distribution, it is nevertheless not true that upon that death any person or persons became beneficially entitled to the income either immediately or after an interval, either certainly or contingently, either originally or by way of substitutive limitation. They contend that in one respect, and that the vital one, the situa tion remained after the settlor’s death exactly as it was before : no person had any right to receive any income except by an exercise of the discretionary power of the trustees in his or her favour. Therefore, they say, no person became beneficially entitled to any property or the income thereof upon the death of the settlor ; and, that being so there was here no “ successor ” and no “ succes sion
The proposition that no person had any right to receive any income except by an exercise of the power confided to the trustees, though true in relation to the period before the settlor’s death, is not accurate in relation to the period thereafter. Before the death, none of the specified persons coidd be described as beneficially entitled to the income or any part of it, except as and when an
(1) (1924) A.C. 586, at p. 593.
88 C.L.R.] OF AUSTRALIA.
63
exercise of the trustees’ discretionary power might give it to him
H . C. OF A.
or her : Re Eddowes (1); In re Baron Vestey’s Settleynent; Lloyds
1952.
Bank Ltd. v. O’Meara (2). Upon the death, the persons amongst
Qu een sla n d
whom for the time being the income was required to be distributed
T r u stees
L t d .
in the manner determined by the trustees became beneficially
V.
entitled in equal shares to the income accruing during the lifetime Com m is
sio n er OF
of the niece in the one case and of the second cousin in the other Stamp
case : Broivn v, Higgs (3) ; Burrough v. Philcox (4) ; In re Weekes’
D u t ie s .
Settlement (5) ; Lambert v. Thwaites (6) ; In re Arnold ; Waimvright
Dixon C.J. McTiernan J.
V. Howlett (7) ; In re Scarisbrick ; Cockshott v. Public Trustee (8) ;
Webb J.
the interest of each of them being a vested interest, though liable
Kitto J.
to be divested wholly or in part by an exercise of the trustees’ power to select one or more of them to the exclusion of the other or others : In re Hughes ; Hughes v. Footner (9); In re Clarke; Bracey v. Royal National Lifeboat Institution (10). Consequently each of the persons in whose favour a trust to apply income during the lifetime of the principal beneficiary arose upon the death of the settlor, that is to say the niece and her brother in the one case, and the second cousin and her son in the other case, became beneficially entitled to that income upon that death, immediately, certainly and originally. The settlements therefore conferred successions upon those persons, and as they become entitled immediately in possession to their successions, they became liable to pay succession duty by reason of s. 20 of the Act, subject to the provisions of s. 37. By reason of the latter section they were chargeable only with duty on the value of any benefit they might from time to time obtain. During the period under consideration, they did not obtain any benefit, for their interests in each amount of income which became distributable in that period were defeated (and, as will be mentioned in a moment, were defeated in toto), by the exercise of the discretionary power of the trustees. Accord ingly it was right not to make assessments against them.
The assessments which have been made treat each of the persons to whom payments of income have been made by the trustees since the settlor’s death as having become, on the date of each payment, entitled in possession to a succession consisting of the beneficial right to the amount paid on that date, and the commissioner has
(1) (1861) 1 Drew. & Sm. 395 [62
(5) (1897) 1 Ch. 289.
E.R. 430].
(6) (1866) L.R. 2 Eq. 151, at p. 155.
(2) (1951) Ch. 209, at p. 224.(7) (1947) Ch. 131.
(3) (1799) 4 Ves. 708 [31 E.R. 366];
(8) (1951) Ch. 622, at p. 635.
(1800) 5 Ves. 495 [31 E.R. 700];(9) (1921) 2 Ch. 208, at p. 214.
(1801) 8 Ves. 561 [32 E.R. 473].
(10) (1923) 2 Ch. 407, at p. 419.
(4) (1840) 5 My. & Cr. 72 [41 E.R.
299].
64 HIGH COURT
[1952.
H.C. oii' A.intimated that further duty will be payable on future income when
| 1952. | paid. Upon the question whether the right to each amount of |
Q ueenslandincome jiaid in exercise of the power of the trustees to select a T rusteesLtd.recipient from amongst the specified group is a succession, it must
V.be borne in mind that the effect of each exercise of that power was
Commisto divest conqiletely the interests which, by reason of the imperative
sio n er
OE
Stamp trust for distribution, existed antecedently in the relevant amount D u t ie s .of income, and to confer a new title to that amount upon the person
Di.xon C.J;
in whose favour the power was exercised : Jackson v. Commissioner
MeTienmii J.
Webb J. of Stamps (1); In re Dickinson’s SeUle?nents; Bickersteth v. Dickinson
| Kitto J. | (2); and other cases cited in Halsbury, Laws of England (2nd ed.), vol. 25, p. 5G4, par. 1006, note (k). For this reason, the appellants are able to take the first step in their argument by saying that it is no less true of income paid out by the trustees after the settlor’s death than it was of income paid out before the settlor’s death that the recipient’s right to receive it arose upon the exercise of the trustees’ power to decide the manner .of distribution, and arose then as a new right. |
But it is essential not to lose sight of the fact that the power exercisable after the settlor’s death is not the same power as was exercisable before the death. They are quite different powers, though it is true that the settlements confer them upon the same trustees in favour of the same category of persons and in respect of the income of the same property. The difference is that the power exercisable before the death was a power to defeat a trust for accumulation ; the power exercisable after the death is a power to defeat a trust for the persons who are the objects of the power. They are therefore powers which not only arise at different periods but are exercisable upon different considerations. The power which arose upon the settlor’s death must accordingly be considered, not as if it were a mere prolongation of the previously existing power, but as a new power brought into existence by the death. This brings us to the two crucial questions in the case, which are whether in the case of each settlement, each amount of income received by a beneficiary under an exercise of that power of the trustees which arose upon the settlor’s death was property to which the recipient became beneficially entitled “ by reason o f” the settlement; and, if so, whether the recipient became beneficially entitled to that income “ upon the death ” of the settlor within the meaning of s. 4. Of course there were three links in the recipient’s chain of title to each amount, the settlement, the death of the settlor and the decision of the trustees, and the amount
(1) (1903) A.C. 360, at p. 354.
(2) (1939) Ch. 27. at p. 30.
88 C.L.R.] OF AUSTRALIA.
65
H. C. OF A.
passed to the recipient by their conjoint effect.
But, as has often
been held with respect to special powers of appointment, when
1952.
property passes under an exercise of such a power, it is the creation Qu een sla n d
of the power, and not the exercise of it, by reason of which the
T r u stees
L t d .
property is taken : Muir or Williams v. Muir (1) ; In re Bowie’s
V.
Will Trusts ; Barlas v. Pennefather (2); In re Batty ; Public
Commis
sio n er OF
Trustee v. Bell (3) ; and accordingly it is the instrument conferring Stamp
the power which is properly to be called the disposition : cf. In re
D u t ie s .
H off; Carnley v. Hoff (4).
In the present cases, each exercise of the
Dixon C.J. McTiernan J.
trustees’ power to apply income after the settlor’s death takes effect,
Webb J.
to adapt Lord Homer’s language (5), as if the settlor had left a blank
Kitto J.
in the settlement which the trustees fill up for her ; and the result of their filling it up in relation to a particular amount of income is the divesting of the antecedently existing interests in that amount and the substitution of an absolute interest therein in favour of the selected recipient. The important point is that the exercise of the trustees’ power is, so to speak, to be read into the settlement, so that the income to which the exercise relates must be considered to pass as if the settlement had actually provided that after the settlor’s death that sum of income should be paid or applied to or for the benefit of the chosen beneficiary. So considered, the recipient’s beneficial title to that income arises “ by reason o f” the settlement, and arises upon the death of the settlor, not immediately but after an interval, not certainly but contingently, not originally but by way of substitutive limitation ; and the recipient is the “ successor ” , being the person entitled to the succession at the date when it becomes an interest in possession : Dube of Northumberland v. Attorney-General (6).
A useful contrast is provided by the case of Attorney-General V. Eyres (7). A settlement provided an annuity for each of the trustees for the time being, and it gave the settlor a power to appoint new trustees. One trustee having died and the settlor having made an appointment to fill the vacancy, the Crown claimed succession duty, contending that the new trustee became entitled to his annuity by reason of the settlement and upon the death of the former trustee. The argument for the Crown sought to read the appointment into the settlement as if the new trustee had been named therein in substitution for the original trustee, and by this means to show that the new trustee’s annuity arose upon the death
(1) (1943) A.C. 468, at pp. 483, 486.(5) (1943) A.C., at p. 483.
(2) (1949) Ch. 547, at pp. 553-554.(6) (1905) A.C. 406, at p. 419.
(3) (1952) Ch. 280, at p. 283.(7) (1909) 1 K.B. 723.
(4) (1942) Ch. 298.
VOL. LXXXVIII.—5
66 HIGH COURT
[1952.
H. C. OF A.
“ by way of substitutive limitation ” . Channell J. decided against
1052.the Crown. He held that a “ substitutive limitation ” means a
Qukknslandlimitation substituted by virtue of the settlement for that originally
T rustees
created, and that, while it might have been otherwise if the
Lt d .
V.settlement had provided that upon the death of the original trustee
Com m isthe individual apyiointed as new trustee should take the vacant
sio n er
OF
Stamp place, there was no such substitutive limitation where the annuity Du t ie s .arose liy reason of a vacancy (wliich might have resulted from causes
Dixon C..T.
other than death) and the appointment to fill it, coupled with the
McTiernan J.
| annuity provision in the settlement. “ The death had really only |
Webb J.
Kitto J.
a remote and accidental connection with the matter.”
In the present case, there is no difficulty in treating each exercise of the trustees’ power as taking effect by reason of that provision of the settlement which declares the trusts to take effect upon the settlor’s death. To do so accords with well-established principle. I t follows that with respect to each amount of income distributed the conditions are fulfilled upon which a succession consisting of the absolute interest in that amount must be deemed by virtue of s. 4 of the Act to have been conferred. To this succession the selected beneficiary becomes entitled in possession upon the trustees deciding to make the paym ent; and the duty becomes payable at that time by virtue of s. 20.
The assessments were right and the appeals should be dismissed.
Appeals dismissed 'with costs.
Solicitors for the appellants, MacDonnell Harris
Bell, Cairns
by Kinsey Bennett & Gill.
Solicitor for the respondent, H. T. O’Driscoll, Crown Solicitor for Queensland.
B. J. J.
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