Dorsamy v Commissioner of Estate & Gift Duty [1976] FJLawRp 12; [1976] 22 FLR 70 (7 May 1976)

[1976] 22 FLR 70

SUPREME COURT OF FIJI

DORSAMY & ANOTHER

v

COMMISSIONER OF ESTATE & GIFT DUTY

[SUPREME COURT, 1976 (Williams J.), 7th May]

Civil Jurisdiction

Estate and Gift duty - payments to bciaries duringuring lifetime of deceased – whether dispositions made by way of gift or with full adequate consideration iny or ’s worth - Estate & Gift Duty Ordinance (Cap 78) ss. 2, 32- 36, 34( 1),( 1), (2), (2), 41,55.

Contract - consideration - work done in fabusiness bess by family members – whether contractual relationship arises - whether obligation to compensate for services rendered.

Shortly before his death, the testator sold his farm for $16,400 and distributed the proceeds amongst his 7 children in varying shares. After his death, his executors contended that these payments were not gifts but were made in consideration of work done by the sons on the deceased's farm during his lifetime and, therefore not subject to duty.

Held.- 1. It was incumbent then the donees to show not only that the consideration ren to the donor was for full money's worth, but also that any agreement for current services ices between the parties was supported by table evidence. #160;Thereno evedence that that the testator was indebted to the sons on a contract to pay wages, and the facts indicated that they had already been paid during the lifetime for any services rendered.

2. In the circumstances, therefore, the full amounts of the gifts were assessable to duty.

Cases referred to:

Attorney-General v. Sandwich (Earl) [1922]&2 K.B. 50B. 500.
Commissioner of Inland Revenue v. N.Z. Insurance Co. [1958] Gissingssing v. Gissing [1970] 2 W.L.R. 25969]&# All E.R.&#16>1043.
evens v. Stevens [1896] N.Z.L.R. br0.Nixon v. Nix. Nixon [1969] 1 W.L.R. 167; [1969]1969] 3 All E.R. 1133.2

C

Case stated by t by the Commissioner of Estate & Gift Duties the instance of the executors of thate o deceased.

S. Prasad for the appellants.
&#16> for the ndent.

WIWILLIAMS J.: [7th May 1976]

Thia is a case stated by the Commissioner of Estate &. Gift Duties under S.55 of the e &amft Duties Ord. Cad. Cap. 178 at the instance of the executoecutors of the estate of Kuppan (s/o), who are descrdescribed as Dorsamy & Subramani, appellants. They are sons of Kuppan (s/o Mari) who also had a third son Hari Krishna.

Kuppan owned res oe farm at Saweni, near Lautoka, where he lives wies with hith his family. On 10/7/72 he sold it for $16,400 and after paying his debts shared the balance of $13,906 among the three sons above named and four daughters.

Kuppan died in November 1973.

The sons Dorsamy, and Subramani as executors of Kuppan's estate submitted a statement of the deceased's effects to the Commissioner of Gifts and Estate Duties through their solicitor Mr S. Prasad valuing the deceased's estate at $363.19. The questionnaire relating to the deceased's estate, which has to be completed by the executors on such occasions revealed the abovementioned sale of land, and after a certain amount of correspondence the Commissioner elicited from the executors that the $16,400 had been divided among the children prior to his (Kuppan's) death as follows:

҈&<;< < &##10;& &##160; &#or0;Di & ;ټ&##160;#160;;ټ#1660;&##160; ҈ &&160; $360;$3,626.,626.89&#16>   &##10;& &##160; ;�;ټ&660;&##160;;ټHa60;  &##60; &&160;&#160 ҈< &160;  ـʔ 㺀҈&160;& #160;3,62br>&## #160; #160; & ; &160; #1160 #160; #160; & ټ < Parwa60; &&160;;;160;;ټ&##160;#160;ـ҈& ټ <  &&160; #1600126.00
#160; ҈ ـ<ټ&##160;;160;;ټ&##160;; &#1uk ;<&#160 &160;&160; #160; #166;n << &;ټ< < 𧄼&1#1600;&#10.00<1600<160; &&160;;#160;   ҈&<;#160;#160;   ـ bram160;& 㼠;ټ1660; #160;#160; #1160;   
,0;$5,82$5,826.89 ټ&###160;;160;;ټ#1660; &ـ < ;&60;;ټ&##160;҈#160;Ka60;Kartan ـn << &160; ##160&&#160  n&##10;&ټ&##160;#160;; &##160;҈&&160; #160;#160;&#160 200.0&
;  < &160; &; ҈< ـ#160; #160; & Lachmi ;&1600 t   ¦ ; n  㺀҈0 &#160 &#16

he Coioner treate pthe payments as giftsegati $13,n all and aand assessssessed thed the tote total gial gift duft duty thty thereonereon at $ at $914.69, as shown in the assessment Ex. 7 attached to the state>

The executorcutors, ths, through Mr S. Prasad, protested in a letter dated 13.5.75, that the payments made to the sons were not gifts, but were payments made in consideration of work done by the sons on the deceased's farm, and asked the Commissioner to state a case accordingly.

There was no request made by the Commissioner for the executors to give details showing the occupations of the sons, their separate sources of income if any, and the kind and amount of work done by them on the farm including the periods of time during which they allegedly worked on the farm.

The case stated by the Commissioner in Part II thereof claims the payments were gifts within the meaning of the Estate & Gift Duties Ordinance Cap. 178, but it does not set out the section or sections of the ordinance which were relied upon, nor were they referred to by either counsel in the course of submissions or arguments.

Gift Duty is dealt with in Part IV of the Ordinance under S.32 to S.54. Section 32 creates gift duty. Sections 33 to 37 indicate instances when gifts do not attract gift duty but Mr Prasad, for the appellants, made no effort to bring any of the payments within those sections. Under s.4 1, gifts not exceeding £2000 ($4000) do not attract gift duty unless the donor, within 12 months prior to or subsequent to gift, has made other gifts which 12 months prior to or subsequent to gift, has made other gifts which when added together aggregate to more than £2000 ($4000). Of course one of the objects of the ordinance is to ensure that a person shall not a void estate duty by giving away his estate prior to his death in large or small amounts.

Section 2 (of the Ordinance defines “gift” as meaning:-

“any disposition of property which is or without atrument in writ writing, without full adequate consideration money or money's worth:

“Provided that if any sisposition of propertyperty is made for a consideration in money or money's worth which is inadequate the disposition shall deemed to be a gift, to the extent of such inadequacy.”

From that definition it is obvious that the ordinary rules of contract as questions of consideration do not apply to gift duty. Normally, the courts will not inquire into the adequacy of the consideration moving from the parties to contract. However, the definition of gift, above quoted, makes it apparent that a person cannot overpay for alleged services etc. by way of a purported contract in gift duty. In s 34escribes ibes such auch arrangements as “voluntary contracts” and in conjunction with s. 34(2) provides that expaymede under a contract shallact gift gift duty to the extent of the exce excess.

It is clear then that the appellants have to show that the aggregate if the gifts made by Kuppan and amounting to $13,906 was in return for consideration rendered by the donees to the donor which was worth $13,906. Ho, as ointed oued out in&# in Attoreneral v Sandwhich hich (Earl) [1922] 2 K.B. 500the judgment ofnt of Lord Sterndale M.R. at 517, the consideration moving frch paoes nve to b to balancalance exactly. He said- he "The only rnly remaining question is whether this consideration for money’s worth was full consideration..............the way to answer this question is not necessarily to estimate the value of the thing granted and the consideration, and ascertain whether they exactly agree, but to look at the nature of the transaction and consider whether what is given is a fair equivalent of what is received.”

That approach to the meaning of “money’s worth" was followed in Commissioner of Inland Revenue v. NZ Ins. Co. [1958] N.Z.L.R 1077.

It would seem then, in the instant case, that if it is shown that there flowed from each son a fair equivalent in return for the sum of money which was handehim by the father Kuppan than then I would be justified in holding that the payments were not gifts.

There is nothing in the case stated which declares that the sons were employed on a wage earning basis, or that they had worked on the farm as a result of a specific promise that the farm, or its value if sold, would be handed over to them by their father on some future date. Attention has been drawn to income tax returns filed in 1963, 1964, 1965 and 1967, which are exhibited with the case stated, showing earnings from the farm. &The income tax return for for 1963 was signed by Kuppan (donor/father) and the only children he there refers to therein are Parwati, a daughter of 17 years and Dorasami a son of 36, whom he declares are living with him. &#1ere is no other referencerence to any other sons or daughters living with him or dependant upon him. The other incomereturns art in the name of Dorsamy, and signed by him, and each one bears a declaration by n by Kuppan that he has no further interesthe fnd that he has made it over to Dorsami. The latter refers ppaKu ian, ian, in then the income tax returns, describing him as his father and as a dependant who lives with him; the only other dependants claimed for by Dorsami are his wife and his five cen: tis no reference tnce to anyo any brothers i.e. Hari Krishna and Subarmani living with him or in anyway dependant on him from the earning of the farm. Nothing ine documents suggesuggests that Hari Krishna and Subarmani lived or worked upon the farm. Ihowevbvious thas that Dors Dorsami lived and worked on the farm and apparently maintained his wife and children from the farm in

n it be said that the $3,626,89 handed to Dorsami was in consideration of that woat work whrk which he did upon the farm during the years 1964 to 1972 and perhaps during years prior thereto.

In Nixon v Nixon [1969] 1 WLR 167 Lord Denning M.R., red to osition of a wife who helps a husband in his busi business ness and he said she should by her efforts get some interest in it, and heared that if she by her work helped the husband to acquire a business and property then shen she becomes a partner in it. ouse rds in&#160 GiGissing v Gi <160; [1970] 2 W.L.R 255, took the view that when property is acquired in the of oouse then one looks not only at the contributions made by the other to decide if e if that that other is a joint owner, but one also lookshe intention of the partiesrties when the contributions were made, before deciding whether the contributing spouse is entitled to a share. In other words done on the the property or in paying for it, when it is in the name of another is not conclusive evidence of an intention to share it.

Work done in a family business or farm by family members can be done for a variety of reasons, and which do not necessarily point to a contractual relationship. Thus in Vo/i>Vol 15 [1896] N.Z.L.R. 620 a son contended that he had been induced to speney oney and spend several years on a farm be of hthersise te it to him. PrendPrendergasergJ t CJ saCJ said at p.629-

“No doubtdoubt sons often find that after some yearsuch indefinite employment ment their parents are unwilling to recognise an obligation to compensate them for their services and an unpleasant feeling grows up on this account. It is certain howevha, the the sons in such cases have no legal claim against their parents: the services have not been performed under any contract express or implied for remuneration.”

The court ot ho that a son or soor sons cans cannot maintain an action of that nature, but that in order to do so they cannot rely on vague parental promises of gifts of land etc. in return for current services. There has to be a contractethe existence of which is supported by acceptable evidence. &#1us in Turner v Tr v Turner
i0; 25 C.A.R. 1968, 569, the owner’s famlaime right to a share of land in return for work they they clai claimed to have done on it, and alleged that the father had promised they wouleive a share. Th60;The couid at p.570 &#80 –

“That agreement would be an extraordinary one, we know that people who are settlers on the land are in the habit of utilising the labours of members of the families and that the question of payment, for that labour seldom arises............an agreement like that alleged here is a very different thing from any kind of understanding with which we are familiar, and requires clear evidence to support it.”

The statement of Kuppan in the income tax returns that he had made over the farm to Dorsami is certainly not evidence of a contract to pay for work done on the farm by Dorsami. It wouf any, be , be evidenvidence of a gift or of a contract to sell the land to Dorsami. Although tses aqove quoted oted were based on allegations of resulting or implied trusts arising from services rendered to a father owning, theciples are, I feel, very similar.

I cannot in the records of documents exhs exhibiteibited with the case stated see any clear evidence to support the contention that Kuppan was indebted to Dorsami on a contract to pay wages. Likewise Dorsami's conduct in farming the land is not necessarily attributable to any implied contract that his father, Kuppan, would remunerate him at an agreed or ascertainable rate so that the amount due to Dorsami could be reasonably assessed after a period of years. Dorsami's behaviour could be, and probably is, explained by his need to provide a home and income for raising his family. His remuneration for work done on the farm was apparently under one of those loose family arrangements covering his expenses as a husband and father for as long as he remained there. Even if that remuneration were somewhat low level then any attempt to compensate him further by way of a lump sum paid well after the services were rendered could only be regarded as payment for a past consideration, i.e. for no lawful consideration in contractual terms.

Referring again to the declaration of Kuppan in the income tax returns, it would appear that it was quite misleading. Kupan had not given up his interest in the land to his son Dorsami. It was not Dorsami who sold the land for $16,400, it was Kuppan. &#160 it was sold Kuppan dian did not account to Dorsami for the $16,400 but instead he shared it out among all his children. Obviously Kuppan had not conveyed the legal title to the land or the beial interest therein&#16>

In my view the money received by Dorsami was not in return for an equivalent amount of work. He had already been paid for any work he had done upon the farm, but at a rate which is quite indeterminate.

With regard to the other two sons there is no evidence whatsoever that they worked on the farm at any time, and certainly no evidence to suggest that the payments to them were to satisfy a legal obligation to pay for work done.In answer swer to the questions set out in the case stated my opinion is that the Commissioner has not erred in law in assessing the sums shown in ex.7 as liab duty as an aggregate gift amounting to $13,906.00.

>

The appellants will pay the costs hereof which I fix at $80.00.

Commissioner correct in assessing the gifts as liable to duty.