University of Western Australia v West Australian Trustee Executor & Agency Co Ltd [1961] HCA 13

High Court of Australia Dixon C.J. Fullagar, Kitto, Menzies and Windeyer JJ. University of Western Australia v West Australian Trustee Executor & Agency Co Ltd [1961] HCA 13

ORDER Appeal allowed. Discharge order of Supreme Court of Western Australia except as to costs. In lieu thereof declare that the residuary estate of William Sim McGillivray deceased available for distribution should be divided between the University of Western Australia and the University of Aberdeen in such manner that the duties paid on the said estate under the Administration Act, 1903-1956 of the State of Western Australia and under the Estate Duty Assessment Act 1914-1957 of the Commonwealth be borne wholly by the University of Aberdeen. Order that costs of all parties in the appeal be paid out of the estate, the costs of the plaintiff being taxed as between solicitor and client.

Cur. adv. vult.

The following written judgments were delivered:—

1961, Mar. 17 Dixon C.J.

The late William Sim McGillivray who died on 17th February 1959 appears to have resided in Perth at the time of his death and to have been domiciled in Western Australia. The final balance of his estate situated in that State was assessed by the Commissioner of Stamps at £85,506 and the value of his estate situated there and elsewhere in Australia was fixed by the Federal Deputy Commissioner of Taxation at £89,859. Death duties assessed as payable under the State Death Duties (Taxing Act), 1934-1956 amounted to £6089 and estate duty assessed as payable under the Federal Estate Duty Act 1914-1957 amounted to £4936. The assessments were accepted by the executor of the will, the respondent company, but a question immediately arose as to the incidence of the duties as between the only beneficiaries named in the will. These were the University of Western Australia and the University of Aberdeen. Apart from an important direction for conversion and the payment from the proceeds of debts, funeral and testamentary expenses and probate and estate duties and the expenditure of not more than £50 upon a headstone for his grave, the testator's testamentary disposition consisted only of a distribution of the residue of his estate in equal parts or shares between these two Universities. The difficulty arises from the fact that under the Federal and under the State enactments alike the bequest to the University of Western Australia enjoys an exemption from duty and the bequest to the University of Aberdeen does not. The Commissioners in assessing duty took the simple view that they first should ascertain the residue without reference to duties and then halve it. As to one half they neither calculated nor imposed any duty; as to the other half they treated it as bearing duty at what they considered the appropriate rates and on that basis they assessed the respective liabilities of the executors, that is to say the liabilities in the amounts stated above. This of course accords completely with the view of the matter upon which the University of Western Australia relies, namely, that the equal shares or parts must first be ascertained and then the duty must be calculated on the share of the University of Aberdeen which must bear it, the share of the University of Western Australia being handed over free of duty. It is not easy, however, to see how it can accord with the view put for the University of Aberdeen. For the claim for that University is that the duty, once ascertained, is to be considered a payment out of the estate antecedent to the definition or ascertainment of residue, which is then divided between the two universities equally, a claim which means that the benefit of the immunity of the share of the University of Western Australia is to be enjoyed equally between them. It would seem that such a view of the matter must mean that before you can ascertain the residue to be divided into two equal shares you must ascertain the duty to be deducted calculated on one of them and you could not do that until you first ascertained the amount of the share on which it is calculated, that is to say the share of the Aberdeen University. The same point may be put conversely: you must, on the hypothesis stated, know the amount of the share of the University of Western Australia which is exempt from tax before you know the amount of the exemption and you cannot know the amount of the exemption till you know the share of the University of Western Australia. The result is a circulus inextricabilis or at all events it means an ever diminishing figure for the exemption or deduction. The ironical thing about the present case is that as the respective Commissioners of Stamps and Taxation adopted the direct method of treating the amount of tax as not entering into the measure of the residue, half of which was exempt, it becomes easy in calculating the legacy each University receives to ignore the difficulty and distribute the benefit of the exemption equally between the two Universities, notwithstanding that that is done by deducting the tax paid before and in the course of ascertaining the residue upon which the deduction is calculated. In the case of each set of statutory provisions respectively governing the duties an attempt was made in support of the view favouring the University of Aberdeen to assign an interpretation to them which would avoid the apparent inconsistency and one which would enable the University of Aberdeen, as a result of the construction of the will and its operation with respect to the duty, to obtain a half share of the benefit of the exemption from duty of the bequest to the University of Western Australia. In the Supreme Court upon an originating summons heard by Mr. Commissioner Boylson Q.C. it was declared that the balance of the estate remaining after the payment of debts, funeral and testamentary expenses and probate and estate duties and not more than £50 for a headstone, should be divided equally between the residuary legatees, i.e. the two Universities, and that no adjustment should be made between them in respect of such duties. The University of Western Australia appeals from the declaration.