Ryland v. Federal Commissioner of Taxation.
Judges:Nelson J
Court:
Supreme Court of Victoria
His Honor: The testatrix Jane Rhodes who died on 11 March 1960, left a will dated 23 August 1945, probate of which was granted to the plaintiff. By Cl. 3 of the will the testatrix bequeathed a number of pecuniary legacies to individuals and organisations, included in which was a legacy expressed as, ``To the Totally and Permanently Disabled Soldiers' Association of Victoria the sum of Three thousand pounds.'' At the end of the Clause the textatrix declared ``that the receipt of the Treasurer or other proper officer of the Church or any organisation hereinbefore mentioned shall be a sufficient discharge for my Trustee.'' By Cl. 4 of the will the residue of her estate was devised and bequeathed to her Trustee upon trust for sale and conversion and from the moneys to arise from such sale and conversion, the Trustees were to pay funeral and testamentary expenses, duties and the legacies given by the will, and to invest the residue and stand possessed of the same upon trust to pay the income to the plaintiff during her life. The disposition of the estate after the death of the
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plaintiff was expressed in the following terms ``And from and after her decease my Trustees shall stand possessed of the capital and future income of my residuary trust funds as to one moeity of such capital and future income in trust for the Australian Red Cross Society and as to the remaining moiety thereof in trust for the Totally and Permanently Disabled Soldiers' Association of Victoria of if that last mentioned Association shall not be in existence at the death of the survivor of myself and my said daughter'' (i.e. the plaintiff) ``then in trust for the Returned Sailors' Soldiers' and Airmen's Imperial League of Australia to be applied for the relief, assistance or support of the former officers and members of the Naval, Military or Air Forces of the Commonwealth who are sick wounded disabled or out of employment or for the relief, assistance or support of their dependants or of the dependants of officers and members who have lost their lives directly or indirectly in or in connection with any war in which His Majesty has been or may hereafter be engaged.'' The testatrix left a substantial estate, the assets held in the residuary estate at present exceeding $216,000 in value.The plaintiff took out an originating summons seeking answers to a number of questions arising upon the interpretation of the above clauses in the will. The plaintiff had also as executrix of the estate objected under sec. 24 of the Estate Duty Assessment Act 1914-1967 to an assessment of the Commissioner on the ground that certain of the gifts in the above Clauses were not assessable for duty and had requested the Commissioner to treat the objection as an appeal and to forward it to the Supreme Court. This the Commissioner has done, and as some of the same questions as to interpretation of the gifts in the will arose in each proceeding, it was agreed between the parties that the hearing of both matters should proceed concurrently before me. This procedure had obvious advantages but it also entailed some disadvantages. Counsel representing the defendants joined in the originating summons to represent the various interests concerned showed no disagreement in the answers they suggested to the questions asked. This was understandable in view of the instructions they had no doubt received from their clients, but it meant of course that opposing views which were open were not argued by any of the defendants. Counsel for the plaintiff upon whom the responsibility in such circumstances would normally rest to present the opposing view was inhibited from doing so by the fact that his duty in the appeal was to argue against such an opposing view. I considered whether I should not in the circumstances require other parties to be represented in the originating summons. I eventually concluded however that the argument for the Commissioner upon the appeal presented such of the opposing views as would appear to be arguable on the originating summons, and as two proceedings were by agreement heard together, I had consequently had presented to me all the various points of view which were relevant to the determination of the questions in the summons. It was not in the interest of any of the parties represented in the originating summons to argue that any of the relevant gifts was invalid but again I feel I have material before me to decide that question.
The primary question for determination is the nature of the gifts to the Totally and Permanently Disabled Soldiers' Association of Victoria. The nature of that institution is an important factor in determining the nature of the gifts. It was not disputed that the body so described in the will is the body whose constitution and rules have been exhibited to the plaintiff's affidavit in support of the summons, and which is referred to in the various affidavits and exhibits thereto filed in this matter. Its precise name appears to have varied from time to time and I will hereafter refer to it as ``the Association''. The Association is an unincorporated association with a fluctuating membership. At the the date of the death of the testatrix, eligibility for membership of the Association was limited by the constitution to persons who, during any war, had served with an Australian, British or Dominion Force, whether naval, military or air, and, as a result thereof, were classified under the first paragraph of the Second Schedule of the Australian Soldiers' Repatriation Act as ``Totally and Permanently Incapacitated'' and were in receipt of the maximum amount under such Second Schedule. By Cl. 6 of the constitution, all applications for membership had to be submitted for approval to the Executive Committee who might, on receipt of the prescribed subscription admit the applicant as a member. The relevant paragraph of the Second Schedule of the Repatristion Act provides that a special rate of pension may be granted ``to members who are totally and permanently incapacitated (i.e. incapacitated for life to such an extent as to be precluded from earning other than a negligible percentage of a living wage).'' Some of the members of the Association may be fortunate enough to be independent of their earnings, but it is clear that predominantly it will be comprised of those whose only substantial income will be the pension provided under the Repatriation Act. The continued existence of the Association is possible as long as any persons eligible for membership still survive and as eligibility may result from service during any war, the Association may continue
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indefinitely into the future. At the date of the Testatrix's death its membership was four thousand two hundred and sixty and the membership has since increased.The objects of the Association were set out in the constitution in the following terms -
``2. To raise funds from members by subscriptions, or other means, and apply such funds for safeguarding the interests of, and securing just and equitable treatment for its members.
3. To raise funds by appeals, donations, etc., such funds so raised to be paid into a Trust Fund Bank Account and to be utilised for the purpose of alleviating cases of distress.
4. The Association shall be non-political, non-secretarian, and shall confine itself to the care, maintenance and welfare of its members.''
It was argued by Mr. Storey on behalf of the Commissioner that in Cl. 2, the expression ``or other means'' was alternative not to the word ``subscriptions'' but to the expression ``from members by subscriptions'', so that the funds to be raised under that Clause were not limited to funds from members. Although the punctuation creates some difficulties, I think that grammatically the expression ``other means'' must be governed by the preposition ``by'', and although perusal of the document indicates that it would be unwise to place to much reliance upon the requirements of grammatical purity, I think that the clause is limited to the raising of funds from members. I at first thought that this would be a curious restriction for such an Association to place upon the source of funds to be applied for the purposes set out in the Clauses but it is interesting to observe that when the Constitution was redrafted in 1967 the same restriction was retained in quite clear language.
The Association was to be controlled by an Executive elected from amongst its members (Cl. 22), and the management of its affairs was vested in the Executive (Cl. 46). Provision was made for the opening of a General Account in the name of the Association into which all moneys ``other than moneys allotted for Trust purposes'' should be paid (Cl. 55). Cl. 59 provided ``In the event of this Association becoming possessed of Trust Funds, a Special Trust Account shall be opened with the Commonwealth Bank of Australia or any of the Associated Banks in the name of the Association.'' The Trust Funds were to be controlled by Trustees who were to be elected at an Executive Meeting (Cl. 60(a)). There was no provision in terms for the method by which the constitution could be altered but Cl. 66 provided ``A motion to add or alter the constitution or to rescind any clause thereof must be submitted in writing at least twenty-eight (28) days prior to the Annual General Meeting and such motion to be printed on the Agenda paper.'' As this Clause indicates, the constitution was not a very artistically drawn document and it is I think obvious that Cl. 66 was intended to confer a power to alter the constitution by vote of the Annual General Meeting upon a motion submitted in accordance with the Clause. In fact the constitution has been altered and expanded in a number of respects since 1960. No provision appears in the constitution for the disposition of assets of the Association in the event of its dissolution.
According to an affidavit filed by the firstnamed defendant Mr. R.D. Burton who is the President of the Association, what he describes as the ordinary funds of the Association are derived from subscriptions from members and small donations from individuals and business houses and are applied under Cl. 2 of the constitution as set out above. They are used to defray administrative expenses and the maintenance of clubrooms.
At the time of the testatrix's death, there were two separate funds which Mr. Burton described as being administered by Trustees in consultation with the officers of the Association. The first of these which is commonly referred to as ``the Big Trust'' was established by a Trust Deed made on 14 October 1929 between the then Lord Mayor of Melbourne of the one part and a number of named persons and the President for the time being of the Association of the other part. The Deed recited that at a meeting of the Association it had been resolved that the parties of the second part should be appointed the first Trustees of the fund referred to in the Deed and that it should be applied in the manner and subject to the conditions contained in the Deed. The Deed provided that the parties of the second part and all persons thereafter becoming trustees should hold the fund upon trust to pay and apply the same in accordance with the provisions and directions therein contained, but it also provided in Cl. 13 thereof that the provisions of the Deed might be modified by the trustees from time to time by supplementary deed executed by them with the approval of three-fourths of the Executive Committee of the Association. Provision was made for the appointment of new trustees by the Executive. Cl. 2 of the Deed which set out the purposes for which the Trustees could apply the fund was in fact modified under Cl. 13 and at the time of death of the testatrix provided that the fund should be
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applied for the purpose of alleviating the distress of, providing for the comfort of, assisting to maintain and-or advancing in life certain former members of the Forces and/or their dependants. The former members of the Forces referred to included those who under the constitution of the Association were eligible to become its members, but were not limited to this class. The Deed provided in Cl. 17 that at a certain point in time, if in the opinion of the trustees and the then Lord Mayor of Melbourne the objects for which the trust fund was created should have ceased to exist, the trustees should stand possessed of the trust fund upon trust for other charitable organisations which could be unconnected with the Association or its members. Mr. Burton in his affidavit stated that the Big Trust Fund had at all times been regarded by the Executive of the Association as the Trust Fund referred to in Clauses 3 and 59 (supra) of the constitution. Even if it could be said that the Association had become possessed of the Big Trust Fund, in the terms of Cl. 59, and the method of appointment of its Trustees, as at the date of Testatrix's death, complied with the requirements of Cl. 60(a), I do not think it could be said that the fund was one which raised under Cl. 3. It appears to me that Clauses 3 and 4 must be read together and that the words ``cases of distress'' in Cl. 3 must consequently be limited to cases of distress among the members of the Association. I think also that the funds to be raised under Cl. 3 are to be utilised solely for the purpose of alleviating cases of distress among such members. The persons for whose benefit the Big Trust Fund was established are not limited to members of the Association and the purposes to which it can be applied go beyond the purpose of alleviating cases of distress, however generously that expression may be interpreted. The Association may have gone outside its stated objects in its activities in relation to this fund, but that is not a matter with which I think that I am concerned.However, insofar as the existence of a fund pursuant to Cl. 3 of the constitution may have been a factor in determining the nature of the gifts contained in the testatrix's will, I do not think that the Big Trust Fund can be relied upon as such a fund.
The second Trust fund to which Mr. Burton refers is one which is called the 1914-1918 Trust. This fund is not established by any Trust Deed.
In 1957 the Education Department distributed among various exservicemen bodies a fund which had been built up from small gifts by children for the relief of hardship amongst exservicemen of the First World War. The fund was distributed to the various bodies upon their undertaking to use the money for the relief of such exservicemen. The fund is held separately from the Big Trust and is administered by separate trustees. I do not think that I have sufficient material before me to enable me to determine whether the apparently wide scope of this Trust could be read down so as to fall within the terms of Cl. 3 of the constitution.
It is against this background that I have to consider the nature of the two gifts in the will which are expressed to be for the Association. To determine the nature and effect of gifts which are expressed to be for an unincorporated association is very often far from a simple task. One of the factors to which the Court can look in determining this question is the nature of the association, as disclosed by its written constitution, of which the textatrix may be presumed to have been aware. The constitution of this Association shows that it is one which may continue indefinitely with a fluctuating membership and that its activities are to be confined to the care, maintenance and welfare of its members. (Cl. 4). Eligibility for membership is limited to a class which predominantly will consist of those who may often find themselves in circumstances of severe financial distress. Its objects envisage the raising of funds both from its members and from sources outside its membership. Insofar as the latter source is concerned, its constitution provides that the funds shall be paid into a Trust Fund Bank Account and shall be utilised for the purpose of alleviating cases of distress (Cl. 3). Having regard to the limitation imposed by Cl. 4, and the class of person to whom eligibility for membership is confined, I have no doubt that the cases of distress referred to are cases of financial distress among its members. If it became possessed of trust funds, they were to be controlled by Trustees and made available for the purposes for which they were obtained. (Clauses 59 and 60). Although the prima facie is that a gift to an unincorporated association operates as a gift to the individual members at the time when the gift becomes operative, that conclusion can be precluded by the circumstances. (
Leahy v. Attorney General 1959 A.C. 457,
Bacon v. Pianta 114 C.L.R. 634.)
Dealing firstly with the legacy, it is difficult to believe that the testatrix, with a knowledge of what the constitution provided, could have intended a gift to the members of the association at the date of her death, which gift such members could deal with as they wished. The size of the membership of the association and of the legacy and the small individual benefit which would accrue to each member are, also, I think contra-indications to such an intention. I think that she intended that the gift would be used for the purposes set out in Cl. 3 of the constitution. It could be said that she may have felt free to make a gift to the individual
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members, because she believed that by virtue of the contract between them which was embodied in the constitution, they would be bound to apply it in the manner she intended. But the contract between the members could be varied and could cease to bind them so to apply it. It was only if the gift was impressed with a trust for the purpose she intended that it was bound to be applied to that purpose. Cl. 3 refers to payment into a Trusts Fund Bank Account, and although I appreciate that the use of the words ``Trust Fund'' in connection with a bank account may be ambiguous, I think that Cl. 3 in combination with Clauses 59 and 60 clearly contemplate that funds raised under Cl. 3 would be held in Trust for the purpose set out in that clause. A testatrix giving a gift which she must be presumed to know falls within the terms of that Clause would I think intend that the money should be held in trust for the purpose therein stated, and I so find in the case of this testatrix.Although some of the same considerations apply to the gift of a moiety of the residue, there are additional and to some extent different factors to consider. This is a gift which may take effect at some time long after the death of the testatrix, at which time the constitution may have been altered in many respects. The membership may and probably will differ from that at the date of the testatrix's death. There does not appear to be any clog upon the power of the members to alter the constitution in any way they please, and consequently both the eligibility for membership and the objects of the association may be in a different form at the time when the gift takes effect. The trusts impressed upon any property then held by or on behalf of the association could not of course be varied by a change in the constitution. The fact that the membership may differ both in numbers and qualifications at the future date renders it even more unlikely than in the case of the legacy that the testatrix intended a gift to the individual members as at the date when the gift became due. It would appear to be contrary to the general charitable scheme of her will that she intended to make a beneficial gift to each of an indeterminate number of future members without regard to their particular need, even if their Association was described as a Totally and Permanently Disabled Soldiers' Association. The gift over in the event of the Association not being in existence at the death of the survivor or herself or her daughter indicates her intention that the beneficiaries of the gift should be those who needed relief, assistance and support. The gift moreover contemplated that she may survive her daughter, in which event both the legacy and the residuary gift would take effect at the same time, and it would appear strange indeed if in that event she intended that different results should flow from each. In the case of the residuary gift also I therefore consider that the terms of the gift and the surrounding circumstances indicate that it was not intended to be taken beneficially by the members of the Association at the same time that it should take effect. If however at that time it is to be held in trust, for what purposes is it to be so held? As I have pointed out, at the time that it takes effect, the objects of the Association may not be expressed in the terms in which they are at present framed. They may or may not then be charitable in the legal sense. Unless the purposes of the trust can now be stated with certainty, and those purposes are charitable the gift must fail. I have already pointed out that it was not in the interests of any of the parties represented before me on the originating summons to argue that this result should be found, and I am fully conscious of that disadvantage. It was not however contended and I do not see how it could have been successfully contended that a gift on trust for the purposes declared in Cl. 3 of the constitution as at the death of the deceased would be other than a valid charitable gift. I am moreover satisfied that the testatrix intended that the residuary gift as well as the legacy should be held on trust for these purposes. It would I think be extraordinary to impute to her an intention that so large a sum should be held on trust at some future time for purposes which at the time of her death could not be anticipated and which by the time the gift became effective might vary considerably from those which would have been in her contemplation at the time the provision was made.
The summons asks for the determination of a number of questions other than those to which the above observations are relevant. Insofar as the questions relate to the obligations of the personal representative of the testatrix to dispose of the subject matter of the gifts, the legacy to the Totally and Permanently Disabled Soldiers' Association is the only gift which is immediately payable, and Cl. 3 of the will provides for its disposition.
Other questions related to the gifts to the Australian Red Cross Society and the organisation which is now known as the Returned Services League but the issues raised in the questions were not the subject of controversy, and if any answer is required to any of them at this stage, the answer appears obvious and I do not propose to discuss them. I will hear counsel for the plaintiff as to what questions he desires answered at this stage and the form of such answers. (After discussion, His Honour intimated that counsel should submit to him a draft order, setting out answers, in the light of his decision, to any questions desired to be answered.)
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I pass on to consider the appeal under the Estate Duty Assessment Act, in respect of which it was agreed that the material placed before me on the originating summons should be treated as material properly before me in the appeal. The Commissioner assessed duty on the estate on the basis that neither the legacy to the Totally and Permanently Disabled Soldiers Association of Victoria nor the half share of the residue to be held in trust for that body with the gift over if it should not be in existence at the relevant time was exempt under sec. 8(5) of the Act. The executrix objected against the assessment on the ground that the value for duty of the estate set out therein was excessive in that duty was not assessable or payable upon so much of the estate as passed by these gifts. The executrix contended that in each case the gift was exempt under sec. 8(5)(b) as a gift to or for the benefit of a public benevolent institution in Australia, or alternatively, under sec. 8(5)(c) as a gift for the establishment and maintenance of a fund, or to a fund established and maintained, for either or both of the purposes referred to in that paragraph.
I will deal firstly with the submission that the gifts were exempt from duty under sec. 8(5)(c). It follows from what I have said in dealing with the questions raised in the originating summons that I am not satisfied that either of the two Trust Funds to which reference was made in Mr. Burton's affidavit was a fund for the purposes set out in Cl. 3 of the constitution. Consequently neither of them was a fund for the purposes of which the testatrix's gift was to be held in trust. Whether or not there was at the date of her death such a fund, and whether or not there may be at the time when the residuary gift becomes effective such a fund appears to me however to be immaterial. The gifts themselves can establish such a fund (
Lemm v. F.C. of T. 66 C.L.R. 399), (
Union Trustee Co. of Australia Ltd. v. F.C. of T. 108 C.L.R. 451). The question under para. (c) of sec. 8(5) accordingly is whether the fund so established by the gifts are to be maintained for either of the purposes set out in that paragraph.
I deal first with the legacy. I have already held this to be a gift on trust for the purposes set out in Cl. 3 of the constitution of the association, namely for the purpose of alleviating cases of distress. I have already expressed the view that that means cases of financial distress among the members. Leaving aside the question of whether the association is a public benevolent institution, is the purpose of the fund to provide money for the relief of persons in necessitous circumstances in Australia? In
Ballarat Trustees Executors and Agency Co. Ltd. v. F.C. of T. 80 C.L.R. 350 at p. 353, Kitto J., expressed the opinion that sec. 8(5) must be read as if the word ``exclusively'' or perhaps ``chiefly'' appeared after the words ``established and maintained'', so that the establishment and maintenance of the fund must be at least chiefly for the purpose of providing money for the relief of persons in necessitous circumstances. At p. 355 in dealing with this latter expression he said ``The expression `necessitous circumstances' is not defined by the Act, nor has it been judicially interpreted in its present or a comparable context. It does not admit of definition in terms so precise as to provide a yardstick for the determination of every case which may arise. Yet it is an expression which is familiar in common speech, not as limited to cases of abject penury, but as conveying the notion which the Oxford Dictionary endeavours to express as `having little or nothing to support oneself by; poor, needy; hard up.' None of these words or phrases can be selected as by itself precisely defining the expression. `There are degrees of poverty less acute than abject poverty or destitution, but poverty nevertheless': Lemm v. F.C. of T. per Williams, J; and `necessitous circumstances' refers in my opinion to some degree of poverty - Approaching the matter in that way. I should say that a person is in necessitous circumstances if his financial resources are insufficient to enable him to obtain all that is necessary, not only for a bare existence, but for a modest standard of living in the Australian community. Such an attempted explanation of the expression is perhaps hardly less vague than the expression itself; but it serves to bring out what I think is important in this case, namely, that sec. 8(5) refers to inability to afford what may fairly be regarded as necessities for persons living in Australia, as distinguished from things which are merely desirable advantages.'' In this case the broad class of persons who may become eligible to benefit from the fund is limited to those who are incapacitated for life to such an extent as to be precluded from earning other than a negligible percentage of a living wage, and the benefit is provided not for all who fall within that class but for cases of distress within it. Taylor J. having regard to the class of beneficiaries with whom he was concerned in Union Trustee Co. case(s) found it impossible to resist the conclusion that the object of the gift in that case was the relief of persons in necessitous circumstances, although no such words were found in the terms of the gift. I find myself driven to a similar conclusion in this case. The fact that the eligible class is limited by definition to those who were incapacitated and who would predominantly consist of persons who had no means of livelihood other than governmental assistance, and the fact that the benefit is limited to cases of distress in that unfortunate class, in my
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opinion leave no doubt that the persons intended to be benefit fall within the class described by Kitto, J. It was not contested by the Commissioner that if the gift in the legacy were for the relief of persons in necessitous circumstances, such persons were in Australia. The legacy therefore in my opinion is exempted under sec. 8(5)(c)(ii), and it is consequently unnecessary for me to determine whether the Association is a public benevolent institution for the purposes of paras. (b) or (c)(i) of sec. 8 subsec. (5).For the same reasons the gift of a moiety of the residue, insofar as it is a gift in trust for the Association would in my opinion be exempt. Mr. Storey however contended that, before the gift of the moiety of the residue became exempt, both the original gift in trust for the Association and the gift over in trust for the Returned Services League which was to take effect if the Association should not be in existence at the relevant time must fall within the terms of sec. 8(5) and he contended that the latter gift did not fall within these terms. As to the first leg of this contention I think that it is clearly correct. It is quite clear from the cases that where under the terms of a will a gift may be given to both exempt and non-exempt objects or for both exempt and non-exempt purposes, the gift is not exempt. I can see no logical reason why the same result should not follow if the gift is given in an alternative form, either of which alternative may take effect, and one only of which would attract the exemption under the section. The liability of the estate to duty must be determined at the date of the death of the testatrix, and it is as at that date that it must be shown that some portion of the estate will pass under the bequest in a manner which attracts the operation of sec. 8(5). One cannot wait to see whether at some future date, the disposition which becomes operative is one to which the subsection applies. The executrix therefore in my opinion must be establish that the alternative gift also falls within the terms of the section. It is not necessary for me to determine the interesting question which Mr. Ormiston posed of whether such an interpretation of the section involved the proposition that in the case of any gift to which the section would in terms apply, but which is to take effect in the future and may by that time for one reason or another be liable to fail, the exemption would be defeated. I am here dealing with an express bequest by the testatrix and the question is whether the bequest falls within the terms of the section.
The alternative bequest in trust for the Returned Services League is to be applied for ``the relief assistance or support of the former officers and members of the naval, military or air forces of the Commonwealth who are sick, wounded, disabled or out of employment or for the relief assistance or support of their dependants or of the dependants of officers and members who have lost their lives directly or indirectly in or in connection with any war in which His Majesty has been or may hereafter be engaged.'' It was not contended that this was other than a valid charitable gift. It may however be a valid charitable gift without being for the purpose of providing money for the relief of persons in necessitous circumstances. It appears to me however to be limited to this latter purpose. Both in relation to former officers and members of Commonwealth forces and in relation to the two classes of dependants referred to, the expression ``relief assistance or support'' is used. When the same expression is used twice in the same clause, it should in each case be given the same meaning unless the context otherwise requires. The three classes of beneficiaries are respectively, former officers and members who are sick, wounded, disabled or out of employment, dependants of such sick, wounded, disabled or unemployed officers and members, and dependants of deceased officers and members. It is difficult to conceive of any need common to all three classes which could call for relief assistance or support, other than financial need, and I have no doubt that the intention of the testatrix was to provide for the financial relief assistance or support of those in any of the classes who were in need of such financial relief, assistance or support. Applying the observations of Kitto, J. in Ballarat Trustees Executors & Agency Company v. F.C. of T. (supra) to which I have already adverted, I am satisfied that the gift in the alternative Clause is for the establishment of a fund for the purpose of providing money for the relief of persons in necessitous circumstances.
Under sec. 8(5)(c)(ii) however, the gift must be for the purpose of providing money for the relief of persons in necessitous circumstances in Australia.
The gift is not in terms limited to the relief of persons who are in Australia when the occasion for relief arises, nor do I find anything in its terms which would warrant its being contrued as so limited. It is limited to the relief of former officers and members of Australian forces and their dependants. As to the former officers and members it is further limited to those who are sick, wounded disabled or out of employment. As to dependants it is limited to the dependants of those who are so sick, wounded, disabled or out of employment and of those who have lost their lives directly or indirectly in or in connection with any war. The proportion of such former officers and members, or of such dependants who would not be in Australia when they became eligible for relief
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under the terms of the gift is of course entirely a matter of conjecture, but in the nature of things it would appear to be quite unreal to think that it would be other than a very small proportion.I think however that I am bound by authority to hold that the exemption from duty which is conferred by sec. 8(5)(c)(ii) is limited to cases where the only persons who may be relieved by the provision of money from the fund are persons in Australia. It was argued by Mr. Ormiston that where the purpose of the fund is to provide relief for persons, the great majority of whom would be in Australia, the fact that a small proportion of the persons entitled to benefit under the terms of the gift would or might be outside Australia did not detract from the predominant purpose to benefit persons in Australia, and that the fund complied with the terms of the exemption. This argument is attractive and the expressions used by Starke, J. in
Public Trustee v. F.C. of T. 51 C.L.R. 75 at p.101 and Kitto, J. in Ballarat Trustees executors & Agency Company v. F.C. of T. (1950) 80 C.L.R. 350 at p.353 indicate that while neither of their Honors expressed any opinion upon the matter they both contemplated that a fund established chiefly for an exempt purpose may fall within the terms of the exemption. However in
Downing v. F.C. of T. 1970 71 ATC 4164; V.R. 795, Anderson J. held that a gift under which persons outside Australia could enjoy its benefits was dutiable, and although the terms of the gift in that case admitted the possibility of a far larger proportion of the possible beneficiaries being outside Australia than the terms of the gift in this case, it is clear that His Honour interpreted the exemption as applying only to funds which were established exclusively for the exempt purpose. At the time when this matter was argued before me, an appeal against the decision in Downing's case was awaiting hearing in the High Court, and counsel requested me to delay my decision on this matter until the appeal in the High Court had been heard and determined. Judgment in the appeal was delivered on 1 September 1971, and I have been supplied with a copy of the reasons for judgment of Walsh, J. with whom the other members of the court agreed. It is clear from those reasons that no issue was raised in argument as to whether the exemption under the section applies to a fund which was intended to be applied predominantly but not exclusively to an exempt purpose.
In my opinion, however, the whole tenor of the judgment is inconsistent with any such view of the section and is consistent only with the view that to gain exemption under the relevant provisions, the fund must be established and maintained exclusively for the exempt purpose. The disposition to the Returned Services League under the gift over accordingly in my opinion cannot qualify for exemption from duty under sec. 8(5)(c)(ii). It was not contended, and I do not think it could have been sucessfully contended, that the disposition under the gift over was exempt on any other ground.
The appeal consequently will be allowed insofar as it relates to the legacy of $6,000 to the Totally and Permanently Disabled Soldiers' Association of Victoria but not insofar as it relates to the gift of a moiety of the residue. I order that the assessment be varied by treating such legacy as a bequest of part of the testatrix's estate upon which, pursuant to sec. 8(5) of the Estate Duty Assessment Act, estate duty should not be assessed.
Although the appellant has succeeded only on an issue which in terms of value represented a minor part of the money involved, it was necessary for the appeal to be instituted for that relief to be gained, and I think that she is entitled as against the Commissioner to her costs of instituting and preparing the appeal, but that as to the costs of hearing, the costs should be limited to the costs of the first day and of brief to hear judgment.
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