27 Counsel submitted that given the word "solely" did not appear in the present case, it was sufficient to gain the benefit of the exemption if the retirement or appointment of a trustee was a cause of the transfers. It did not have to be the sole cause. Even if the purpose of the retirement and appointment of trustees and the subsequent transfers was to effect a change in the beneficial ownership of the properties, that did not change the fact that the transfers were because of the retirement and appointment of trustees.
28 Counsel also responded to an argument raised in the Commissioner's written submission, namely that s 33(2) did not apply because the transactions created new trusts. He submitted that although the unit holders had changed - which was in any event permitted by the terms of the trust deeds - the trusts themselves had not changed. Even if new trusts had been created, there was nothing in the terms of s 33(2) to prevent it from applying to the new trusts.
Commissioner
29 Counsel for the Commissioner characterised the issue for determination as being whether the transfers were made because a new trustee was appointed. This, he said, was a robust question of fact which the appellant had answered by indulging in a degree of semantics in order to divert attention from that very simple question. Counsel acknowledged that, although in his written submission the Commissioner regarded the transactions as being in essence a sale, that was not the issue. Rather, the Court had to stand back and ask whether, on an objective consideration of the materials before the Commissioner, the transfers were made because of the appointment of a new trustee.
30 Counsel referred to the Unit Subscription and Redemption Agreement for the Gemfield Unit Trust[19] which he characterised as being an agreement whereby "all of the people who hold units in the trust agree to redeem them in return for which they receive quite a lot of money. The trustee agrees to issue new units and the new unit holders agree to pay for those units, and the money which they pay for their new units is what gives the trustee the money to redeem the units of the outgoing unit holders" (emphasis added)[20].
31 Counsel pointed out that in this deed, dated 30 May 2001, the outgoing unit holders were described as "vendors". In contrast the (later) Counsel House appointment deed did not refer to "vendors" but instead used the term "unit holders". Counsel submitted that the use of the term "vendors" in the earlier agreement betrayed the reality of the transactions, namely the sale of commercial premises.
32 To support this argument, counsel referred to numerous provisions of the Gemfield deed. The trust property was defined as 461 Bourke Street[21]. "Vendors' works" was defined as various scheduled repairs to be undertaken by and at the cost of the vendors. Clause 4.5(b), entitled "Obligations of delivery on the Trustee and Vendors", provided that on the "Completion Date", the Trustee must deliver and the Vendors must ensure the Trustee delivers to the New Trustee a copy of all trust deeds, all trust records, books of account, Certificate of Title for the property, the originals of tenancy agreements and duly signed notices addressed to each of the tenants advising them of the sale[22]. By clause 5, entitled "Completion Accounts and Final Accounts", the vendors warranted that the completion accounts would show a true and fair view of the financial position and assets and liabilities of the trust. It was specifically provided that "the [Bourke Street] Property will be included at $30,800,000 in such Completion Accounts". Counsel referred to the actual completion account itself, annexed to the agreement, which showed net assets of $30,800,000 being the value of the building, plant and equipment. Counsel then referred to a rent guarantee in clause 7.1 and property warranties in Schedule 13. The warranties included that the property be free of encumbrances, there be no incomplete tenancy agreements, no maintenance agreements of a specified nature, and no leases, licences or other rights other than the tenancy agreements specified in the agreement.
33 Counsel then referred to one of the definitions of the word "sell" given by the shorter Oxford Dictionary, namely "to hand over for money". Here, he said, the property had been handed over for money, namely the $30,800,000 paid by the incoming unit holders to acquire the new units which was used to redeem the existing units. In short, the reality of the transactions was that they effected sales of the commercial buildings.
34 Counsel reiterated that the transfers were not made because of the retirement of a trustee or the appointment of a new trustee but rather because the beneficial interest in the properties had been sold and the transfer of title to the appellant was the step taken to complete that sale. Although the transfer was effected because the trustee retired, to say that the transfers took place because of the change in trustee was to fasten sole and exclusive attention on the last step in the transactions. That approach ignored the fact that it was the change of beneficial ownership which led to the retirement and appointment of trustees and the transfer of trust property to the new trustees. That was the real explanation of the transfer of the property.
35 The point was illustrated by the following example. Assume that all the shares in X Co. Ltd are purchased by a takeover consortium which then elects a new board of directors. It is true that power is passed from the old board to the new board because the new board are the incoming directors, but they are so because they have been put there by the new owners of the company. It is true, but superficial and inadequate, to say that they are there because the old board has been voted out and they have been voted in[23].
36 In response to a question by me, counsel said that he did not submit that the expression "because of" required the identification of a single cause. However, the cause relied on by the taxpayer must be "a complete explanation". If it is not you must look for the complete agenda which leads to the transfer taking place. When you do that you look beyond the mere exiting of a trustee and a new trustee coming in and realise that the beneficial ownership was changing as part of the process. In that circumstance, it cannot be said that the transfer is simply because one trustee has gone and another trustee has come in[24].
37 Counsel then relied on the written submission which contained several arguments as to the correct approach to interpreting an exemption provision in tax legislation; relevantly, that exemptions are "intrinsically unfair" and will only be granted "where there is some good reason for this". He referred to the fact that s 33 is entitled "Change in trustees", and that the definition of "new trustee" refers to a trustee appointed in substitution of or in addition to existing trustees, and suggested that the section was intended to apply where a trustee retired, or was released but not where the underlying beneficial ownership of property changed. As soon as one went further than simply moving one of the title holders, and not just because the trustee has to go, but because there are underlying transactions, you fail to comply with s 33(2).
38 Counsel then submitted that the parliamentary intention behind s 33(2) was that the exemption was available only when there is a "mere change in trustees" and the change in beneficial interest in the present case meant that the transfers were "because of other matters as well as the mere replacement or addition of a trustee".
Decision
39 Regardless of the ways in which the issue was argued, the starting point is the language of the exemption provision itself, as it stood at the time of the transfers: "No duty is chargeable ... in respect of a transfer of dutiable property to a special trustee because of the retirement of a trustee or the appointment of a new trustee (emphasis added)".
40 The critical question is the meaning and application of the expression "because of" as it appears in the exemption. The Concise Oxford Dictionary defines "because of" as meaning "by reason of". So defined, the expression "because of" is reduced to its bare bones, so to speak. To seek to clarify the expression by language of my own would involve the risk of placing a judicial gloss or qualification on the expression. Further, to go beyond this definition with further definition would be to go around in circles or at least, hopefully, in a circle that would return one to the beginning, but also with the risk I have mentioned. I merely observe that "because of" is an expression of causation; if event Y occurred "because of" event X, it follows that event X caused event Y.
41 In submitting that the transfers were "because of the retirement of a trustee", counsel for the appellant focused on the form of the transactions. I do not say this by way of criticism but rather to recognise that he focused on the formal way in which the transfers followed on from the deeds of appointment and the vesting clause, such that the transfers could be said to be "because of" the retirement and appointment of trustees.
42 In stark contrast, counsel for the Commissioner focused on what he said was the substance of the transactions, namely that they were sales effecting a change in beneficial ownership of the properties. This focus on substance was apparent in his reliance on the outgoing unit holders being described in the deed as "vendors", the nature of the obligations in the deed, and the submission that the properties had been "handed over for money". And although he agreed that there had been no sale in the technical sense, he stated that the retiring trustee had obtained from the incoming unit holders the money used to redeem the outgoing unit holders' units.
43 The difficulty for the Commissioner is that while counsel correctly acknowledged that the issue was not whether there had been sales, he nevertheless conducted his case as though the fact of sales was an end in itself. But given the common ground that sales had not occurred in the technical sense, although the transactions had brought about a change in the beneficial ownership in the properties, the characterisation of the transactions as sales did not answer the question. The real question was whether the appellant was correct in contending that the exemption in s 33(2) could still apply to a transfer arising from transactions by which the beneficial ownership of property had changed.
44 As to this, I accept the appellant's submission, relying on Perpetual, that even if the underlying purpose of the transactions was to effect a change in the beneficial ownership of the properties, absent the word "solely" in s 33(2), it did not matter that the transfers were "because of" other factors, provided that the transfers were also "because of" the retirement or appointment of a trustee, in the sense that the retirement or appointment of trustees was a cause of the transfers. In Perpetual, the exemption was available if the transfer was "solely in consequence of the appointment or retirement of any trustee or other change in trustees...". On the facts in that case, the exemption was not made out, as the transfer was made in consequence of other factors in addition to the change of trustee[25]. As I observed there however, without the word "solely", it would have been enough that the transfer was in consequence of the change in trustees even if it was a consequence of another or other factors as well. I do not consider that to be a statement of principle but rather a statement of commonsense flowing from the language of the relevant exemption provision.
45 Similarly, in the present case it is plain on the face of s 33(2) that the exemption applies if the transfers were "because of" the retirement of a trustee or the appointment of a new trustee, even though the transfers were also "because of" other factors. To read the exemption in s 33(2) as though it contained the word "solely" is unnecessary, productive of ambiguity and would deprive the subsequent amendment of effect.
46 That still leaves the question of whether the exemption in s 33(2) was satisfied on the agreed facts. In submitting that it was not, the Commissioner attempted to distinguish between the literal fact that the transfers were effected because of the retirement of the trustee, and the "real explanation" of the transfers, namely the change of beneficial ownership. Thus, the Commissioner accepted that the transfers were "because of" the retirement and appointment of trustees, yet he submitted that s 33(2) required more than this, namely that the factor relied on by the taxpayer as being the cause of the transfers be "real" and a "complete explanation". If the reasons for the transfer went beyond a "mere change in trustees" the exemption did not apply.
47 I reject the Commissioner's argument. Despite his statements to the contrary, I consider that counsel's interpretation of s 33(2) has the effect of reading the exemption as though it contained the word "solely". I am strengthened in that conclusion by the fact that counsel could not explain the operation of s 33(2) as he sought it to be applied, without ultimately falling back on reference to the exemption being available only where a "mere change of trustees" had occurred. I accept that the words 'because of' imply causation and are limiting. However, on the agreed facts, I consider that the transfers were made because of the retirement and appointment of trustees.
48 For these reasons, in each case the appeal will be allowed and the relevant assessment set aside. I will hear counsel on the terms of the orders and as to costs.
49 In these circumstances it is unnecessary to deal with the appellant's alternative submission that the dutiable value of the property transferred, being the "bare legal estate", was nominal. The Commissioner accepts that the value of the "bare legal estate" is nominal but submits that the estate transferred was the fee simple interest. The appellant's submission relies on the decision in Challenger, the correctness of which will be passed on in the pending judgment on appeal. In the circumstances it is not merely unnecessary to deal with the appellant's alternative submission, it is preferable not to do so.