Sullivan v Commissioner of Probate Duties (Vic)

[1976] HCA 43

HIGH COURT OF AUSTRALIA

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

SULLIVAN v. COMMISSIONER OF PROBATE DUTIES (VICT.)

(1976) 135 CLR 237

17 August 1976

Death Duties (Vict.)

Death Duties (Vict.)—Probate duty—Dutiable estate—Final balance—Deduction of debts from estate—Life insurance policies included in estate—Proceeds of policies protected from availability for payment of debts by Life Insurance Act (Cth)—Debts exceeding value of property of estate available for payment of creditors—Whether excess of amount of debts over available property deductible in calculating final balance for duty—Probate Duty Act 1962 (Vict.), s. 10(1) (a) (i).

Decisions

August 17.
The following written judgments were delivered:-
BARWICK C.J. The executors of Alan Fergus Sullivan, deceased, (the appellants) objected to the assessment of probate duty made by the respondent Commissioner in respect of the final balance of the deceased estate. The respondent disallowed the objection except in what is now an immaterial particular. The appellants required that their objection be treated as an appeal. The Supreme Court of Victoria (Starke J.) dismissed the appeal and confirmed the assessment except to the extent to which the appellants' objection had been allowed by the Commissioner. (at p240)

2. The appellants now appeal to this Court by its special leave from the decision of the Supreme Court. (at p240)

3. There was real estate valued at $10,000, money at bank $147.02, shares to the value of $1,581.50 and the proceeds of life policies $27,595.75 in the estate of the deceased. The deceased at his death owed $28,515.35 and, in addition, there were claims not admitted by the appellants but apparently not abandoned by the claimants totalling $47,000. The amount of the debts, $28,515.35, thus exceeded the estate of the deceased other than the proceeds of the life policies. (at p240)

4. The estate of the deceased, being insolvent, was administered in bankruptcy. The trustee in bankruptcy had disowned the life policies. Section 92(2) of the Life Insurance Act 1945 (as amended) (Cth), prevented the proceeds of the policies being liable to be applied or made available in payment of the debts of the deceased "by any judgment, order or process of any court, or by retainer by an executor or administrator, or in any other manner whatsoever ..." (at p240)

5. The learned judge who heard the appeal at first instance followed the decision of the Supreme Court of Victoria (Adam J.) in Sheezel v. Commissioner of Probate Duties (1973) VR 435 , and confirmed the assessment of duty on the basis of a final balance in the estate of $26,180. The final balance had been arrived at by the Commissioner as the "net proceeds of policies of insurance after payment of secured creditors totalling $1,254.16" and an allowance of $160 for funeral expenses, in addition an allowance of $556.50 in respect of premiums paid on a policy and returned ex gratia which amount was included in the proceeds of the life policies. In other words, the other amounts of the deceased's indebtedness were not allowed as deductions because the proceeds of the policies were not available to the creditors of the deceased. (at p241)

6. The relevant provisions of the Probate Duty Act 1962 (Vict.) ("the Act") are:-

"6. Subject to this Act there shall be paid to the Commissioner, to be by him paid into the Consolidated Revenue, by every administrator or other person required by this Act to file a statement, duty calculated on and in relation to the final balance of the estate in accordance with the provisions of the First Schedule to this Act."

The 1st Schedule contains various rates of duty calculated according to the identity of the persons to whom "the final balance passes" and the assessment of that balance.

"7.(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:-"

There follows by description a number of items of property actual and notional to be so included.

"4.(1) 'Final Balance' means 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."

"10.(1) Subject to this section in computing the final balance for the purposes of this Act there shall be allowed as deductions from the estate of a deceased person - (a) if he was domiciled in Victoria at the time of his death - (i) all debts at the time of his death due and owing by him except debts charged on real property situate outside Victoria; ... (4) No allowance as a deduction shall be made for l 154930 154990 (a) any debt the amount of which is incapable of being ascertained;
(b) any debt where there is a right of reimbursement except to the extent that the Commissioner is satisfied that the exercise of the right would not result in the recovery of the full amount of the debt; (c) any debt incurred or created by the deceased to the extent that such debt was not incurred or created bona fide for an adequate consideration in money or money's worth paid or given to the deceased; (d) any debt which is irrecoverable by action through the lapse of time except where such debt is proved to have been paid in due course of administration; or (e) any debt charged on any estate or interest in any property of the deceased to the extent that the value of such estate or interest is allowed as a deduction under this section." "11.(1) Every administrator shall file in the office of the Commissioner a statement in the prescribed form specifying particulars of - ... (e) any debts due and owing by the deceased at the time of his death and any other amounts which are allowed as deductions by this Act; ... (4) From the information contained in the statement and

from such other information as he may possess the Commissioner shall cause the final balance to be determined and an assessment of the duty payable on the basis of the final balance to be made and notice of the assessment to be served upon the administrator or other person liable to pay the duty." (at p242)

7. The Supreme Court of Victoria decided in Sheezel v. Commissioner of Probate Duties (1973) VR 435 that "in computing the final balance of an estate, the allowance to be made under s. 10(1) (a) (i) for debts of the deceased cannot exceed the value of the assets out of which those debts are to be met". This conclusion was founded upon the proposition that "the broad scheme of the legislation" (the Probate Duty Act 1962) "is to ensure that real debts, but only real debts affecting the value of the dutiable estate passing to the personal representative are taken into account as deductions" (1973) VR, at p 437 . Reliance was placed on In re Barnes (1938) 2 KB 684 and Edilson v. Commissioner of Stamp Duties (1942) NZLR 536 . It was thus decided in substance that the terms of s. 10(1) (a) (i) of the Act must be read as limited to those debts to the payment of which the estate of the deceased would necessarily be applied, or, in other words, to confine the estate from which debts should be deducted to the actual estate of the deceased. Notional estate not being available for payment of debts would fall within the decision of Sheezel v. Commissioner of Probate Duties (1973) VR 435 . (at p242)

8. In 1973 the Supreme Court of New South Wales, Court of Appeal Division, decided in Jelfs v. Commissioner of Stamp Duties (1973) 1 NSWLR 372 that "the whole of the amount of the debts actually due and payable by the deceased at the time of his death shall be set off against his dutiable estate in order to arrive at the final balance of the estate upon which duty is to be assessed" and "that no implication to the contrary is to be read into" s. 107(1) of the Stamp Duties Act, 1920 (N.S.W.) "on the basis that the literal construction would lead to absurd results". (at p243)

9. Hope J.A., who wrote the leading judgment in that case, described the relevant sections of the Stamp Duties Act (1973) 1 NSWLR, at pp 374-376 . These provisions are, in my opinion, indistinguishable in structure and effect from the sections of the Act which I have set out. (at p243)

10. His Honour then said (1973) 1 NSWLR, at p 376 :

"Duty is payable on the 'final balance of the estate', a figure which is to be computed in the way directed in the sections I have described. In arriving at this figure, there is to be placed on one side of the ledger the value of various assets, some of which will vest in the legal personal representatives of the deceased and some of which will not, but all of which are to be deemed to be part of his estate for the purposes of the assessment and payment of duty. Having arrived at that figure, certain allowances are authorized. It is conceded for the Commissioner, and in my opinion rightly conceded, that the word 'allowance' means 'deduction', and indeed these words are used interchangeably in various provisions of the Act. The Act then points to the value from which any deduction is to be made: that value is the 'total value of his dutiable estate' which s. 104 expressly provides shall comprise the assets described in ss. 102 and 103 of the Act. There is no express provision of Act that the allowance or deduction in respect of debts is to be made only in respect of the deceased's actual estate, as opposed to the whole of his dutiable estate, including his notional estate. Indeed, s. 108(1) (a), in dealing with what might be called foreign debts where there are no foreign assets, expressly provides that all unsecured debts may be deducted from the dutiable estate of the deceased. All these provisions are directed to the computation which s. 105 requires to be made in order to ascertain the final balance of the estate of a deceased person. The language of the sections is quite clear, and unless the Court is constrained by authority, or some implication is to be read into the relevant provisions, because their literal construction would lead to absurd or quite unreasonable results, or for some similar reason, that construction, which is the one contended for by the appellants, should, in my opinion, be given to them." (at p243)

11. The Supreme Court of New South Wales expressly rejected the submission that, by implication, a deduction "can only be made in respect of debts which the legal personal representative, in the ordinary course of administration, would be able to pay out of the assets which vested in him". (at p244)

12. That Court thought, as I do, that the statutory provisions upon which In re Barnes (1938) 2 KB 684 was founded were significantly different from the Stamp Duties Act. I would add that they are also significantly different from those of the Act to which I have called attention: it was not a matter of "slight variation in language". In my opinion, too little heed was paid to this difference by the Supreme Court of Victoria in deciding Sheezel v. Commissioner of Probate Duties (1973) VR 435 . (at p244)

13. The Supreme Court of New South Wales acknowledged the similarity of the legislation dealt with in Edilson v. Commissioner of Stamp Duties (1942) NZLR 536 with the Stamp Duties Act (N.S.W.). But the Supreme Court of New Zealand failed, in my opinion, adequately to observe and give effect to the differences between the Finance Act, 1894 (U.K.) and the Death Duties Act, 1921 (N.Z.). Consequently, in my opinion, the judgment of the Supreme Court of New Zealand (Smith J.) should not be followed in the construction of s. 10(1) (a) (i). (at p244)

14. The structure of the Act is that, by the operation of s. 7, an estate is constructed which includes indifferently both actual and notional estate. That is the equivalent of the dutiable estate described in Jelfs v. Commissioner of Stamp Duties (1973) 1 NSWLR 372 . Additions are made by virtue of s. 8. From the total value of that estate, deductions are allowed as provided by ss. 9, 10 and 21. The result is the final balance of the estate: see definition, s. 4(1). It is, to my mind, quite clear that the allowable deductions are to be made from the whole of the estate, that is to say, from the total value of the items both actual and notional brought into the estate by s. 7. There is no warrant whatsoever, in my opinion, to limit the deductions to those items of actual estate which are included in the estate of the deceased for the purposes of the Act by s. 7. It is from the total value of the whole estate, actual and notional, that all debts at the time of the death of the deceased due and owing by him, with only the exception for which s. 10(1) (a) (i) and s. 10(3) and (4) provide, should be deducted. (at p244)

15. No reduction by implication of the extent of the expression "all debts" in s. 10(1) (a) (i) is, in my opinion, possible. The language is both plain and intractable: it should be given effect as the intention of the legislature. It cannot, in my opinion, be qualified by any supposed policy or scheme of the Act or "broad principles of death duty legislation", which is not only not apparent in, but which, in my opinion, is contradictory of, the express language of the statute. (at p245)

16. I am in accord with the views and reasoning of Hope J.A. expressed in Jelfs v. Commissioner of Stamp Duties: I am unable to agree with the reasoning and conclusion of Adam J. in Sheezel v. Commissioner of Probate Duties (1973) VR 435 . (at p245)

17. Counsel for the respondent, in supporting the conclusion of the Supreme Court of Victoria, has pressed upon us considerations derived from the history of legislation in Victoria imposing probate duty. But however much the legislative antecedents of a statute may aid the construction of ambiguous or uncertain language of a statute, it cannot avail to displace or qualify such unambiguous and intractable language as is employed in the relevant parts of the Act. (at p245)

18. Counsel also placed considerable reliance on the words of Dixon J. in Commissioner of Stamp Duties (N.S.W.) v. Brasch. Dixon J. said (1937) 57 CLR 69, at p 82 :

"Now, whatever else may be said about s. 107, I think it clearly must be taken as implying that the debts with which it is dealing are those for which the estate is liable. Its object is to deduct from the aggregate property devolving on death the charges properly payable thereout. In the practical affairs of life, liabilities are rarely if ever incurred which do not bind the obligor's personal representatives."

The decision of the Court in that case was that "the liability under the onerous lease to pay future rent was a contingent debt within s. 107(2) (d) of the Stamp Duties Act, 1920-1933 (N.S.W.) and was not a debt 'due and owing' within s. 107(1)". It was to that matter that Dixon J. was directing his mind when writing the passage quoted. He was not concerned with the problem posed in this case and, in my opinion, his words ought not to be taken as lending support to the respondent's submissions. I agree with the views expressed in Edilson v. Commissioner of Stamp Duties (1942) NZLR, at p 541 and in Jelfs v. Commissioner of Stamp Duties (1973) 1 NSWLR, at p 378 , as to the relevance to the problems dealt with in those cases of the words of Dixon J. which I have quoted. (at p245)

19. In my opinion, the plain and unambiguous language of the Act requires that the appeal and the appellants' objection be allowed. (at p246)

GIBBS J. I would allow this appeal for the reasons given by the Chief Justice with which I am in agreement. (at p246)

STEPHEN J. I have had the advantage of reading and agree with the reasons for judgment prepared by the Chief Justice. I would allow this appeal. (at p246)

MASON J. I am in agreement with the reasons for judgment which have been prepared by the Chief Justice and, accordingly, I would allow the appeal and the appellant's objection. (at p246)

JACOBS J. I agree with the conclusion of the Chief Justice and with his reasons and consequently with the reasoning of Hope J.A. in Jelfs v. Commissioner of Stamp Duties (1973) 1 NSWLR 372 . I do not wish to add anything. (at p246)

Orders

Appeal allowed with costs.

Order of the Supreme Court of Victoria set aside and in lieu thereof order that the appeal be allowed with costs.

Assessment reduced in accordance with the reasons for judgment.

Order that repayment of the amount of duty overpaid be made to the appellants.