Hill and Another v. Federal Commissioner of Taxation.

Members: Barwick CJ
McTiernan J

Kitto J
Menzies J
Windeyer J

Tribunal:
High Court (Full Court)

Decision date: Judgment handed down 28 February 1969.

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Kitto J.: This is a case stated under sec. 28 of the Estate Duty Assessment Act 1914-1966 (Fed.) in an appeal against an assessment of estate duty. The objection to the assessment related to an amount of $23,856 which the Commissioner had treated as included in the estate for duty purposes in reliance upon sec. 8(4)(f) of the Act. The provision is that for the purposes of the Act the estate of a deceased person comprises ( inter alia ) property being money payable to, or to any person in trust for, the widow of the deceased under a policy of assurance on the life of the deceased where the whole of the premiums has been paid by the deceased. The amount in question had become payable to the widow of the deceased under a policy on his life in respect of which the whole of the premiums had been paid by him. The terms of sec. 8(4)(f), literally construed, were thus exactly satisfied; but the administrators of the estate, relying upon Thurn v. Commissioner of Taxation (1965) 112 C.L.R. 432, contended that the amount had become payable to the widow not as such, but as purchaser of the policy from the deceased, and that circumstance took the amount out of the application of sec. 8(4)(f).

The facts of the case, which differ from those of Thurn's case, need to be carefully observed and their legal significance determined. The policy in question, which was effected by the deceased in 1956, was so expressed as to take advantage of the provisions of sec. 94 of the Life Insurance Act 1945 (Fed.). By the policy the assurance company bound itself, in consideration of the premiums and subject to certain conditions, to pay £ 10,001 on the death of the deceased ``to the Trustee or Trustees for the time being of the moneys payable under this Policy or if none then to the Executors, Administrators or Assigns of the Assured''. Amongst the conditions was one, numbered 6, in these terms: ``This Policy has been effected by the Assured in pursuance of Section 94 of the Life Insurance Act 1945 for the benefit of his Wife, Shirley Hilda Hill should she be living at the date when the sum assured becomes due and the Assured has appointed Shirley Hilda Hill of Traralgon Trustee/Trustees of the moneys payable under this Policy.''

Then in 1964 the deceased, in consideration of an amount of £ 525 paid to him by his wife, executed (by his wife as his attorney under power) a deed by which he purported to release and renounce in favour of his wife all his right, title, benefit and interest in and to the policy and the moneys payable thereunder, to the intent that thenceforth the policy should be read and construed as if the words ``should she be living at the date when the sum assured becomes due'' had been deleted therefrom.

If the effect of the deed had been precisely as the statement of intent suggested, the appellants' contention that the policy moneys became payable to the widow in a character other than that of widow could not possibly have been maintained; for to claim by virtue of the supposedly-varied terms of the policy, as creating

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a trust by force of sec. 94 would necessarily have been to claim as the deceased's former wife. But the deed could not have operated as a variation of the terms of the policy for the only power to vary the policy was that which sub-sec. (6) of sec. 94 confers upon the trustee alone in a case where there is one. Whether such a variation would have been within the authority of that provision may be open to doubt, but the question does not arise in this case since the execution of the deed was the act of the husband (by his attorney) and not of the trustee.

The basis of the appellants' contention is an assumption that the beneficial interest of the wife under the statutory trust was contingent upon her surviving the husband, and that therefore the husband had a vested interest under a resulting trust subject to be divested upon the happening of the contingency. It would follow, no doubt, that by assigning the latter interest to the wife the deceased ensured that in the event of his dying first she would take the policy moneys not as a widow claiming under sec. 94 but as purchaser of the beneficial interest which had resulted to him under the ordinary law of trusts. The assumption, however, is incorrect. The judgment of Fullagar J. in
Commissioner for Probate Duties (Vict.) v. Mitchell (1960) 105 C.L.R. 126 , concurred in by Dixon C.J. and McTiernan and Windeyer JJ., establishes that a policy expressed to be for the benefit of the assured's wife not simpliciter but only if she survives him is, notwithstanding the condition, a policy expressed to be for her benefit within the meaning of sec. 94 of the Life Insurance Act; and in the course of doing so it explains at pp. 137-139 how the section operates in such a case. The section provides that the policy ``shall create a trust in favour of the objects named in the policy'', that is to say an immediate trust; and accordingly where a policy is expressed to be for the benefit of the assured's wife conditionally upon her surviving him the condition cannot operate as a condition precedent: it makes the trust which arises immediately in her favour defeasible upon her predeceasing him. ``The beneficial interest of the wife will be destroyed if she dies before her husband. But, unless and until that event happens, the beneficial interest in the policy belongs to her. The substance of the matter is that she is to be deemed to have an interest which is vested, though liable to be divested'': (1960) 105 C.L.R. at p. 139. As a necessary consequence the beneficial interest of the husband under the resulting trust is not vested but contingent; and if, as is the fact in the present case, he releases that interest to the wife the result is that her vested interest under the statutory trust remains and is still defeasible by the event of her predeceasing him, but she acquires his contingent interest under the resulting trust which will come into existence if she predeceases him. That event did not happen in this case. The trust for the wife under sec. 94 did not suffer defeasance. She became at the death of the deceased beneficially entitled to the proceeds of the policy by virtue of that trust. The deed formed no part of her title. The moneys were therefore payable to her as the former wife of the deceased and in that character alone. Her character of assignee by purchase was irrelevant, for it related to an interest which the death of the deceased in her lifetime had prevented from ever taking effect in possession.

But it was further contended for the appellants that even so the case is outside sec. 8(4)(f) because policy moneys are not caught by that provision as being payable to the widow of a deceased person unless the right with respect to them which the widow had during the deceased person's lifetime was conditional upon her becoming his widow, that is to say upon her surviving him and upon the marriage continuing until his death. Reference was made to expressions in my judgment in Thurn's case which lend some support to the proposition. In so far as they do, they go, I think, too far. The point to be made in that case was that sec. 8(4)(f), as I read it, does not apply to policy moneys which become payable to the widow of the deceased if she is entitled to them only in some character other than that of former wife of the deceased, e.g. in the character of purchaser of the policy. There cannot be such a case where the policy moneys become payable to a widow by virtue of a trust created by sec. 94 of the Life Insurance Act; for even where she is individually named in the policy as the person for whose benefit it is effected, the statutory trust in her favour must have depended for its creation upon the fact of her being the wife of the assured. Her title to receive the proceeds on his death is therefore referable to her being the former wife of the deceased; if the marriage has continued,

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it is referable to her being his widow.

In my opinion the appellants' contentions should be rejected and the question in the stated case answered: Yes, the whole.