Appellant v Respondent

TAXATION - Appeal from Commissioner's determination disallowing appellant's objection against an Assessment for landholder duty under Part 2 of Chapter 3 of the Duties Act 2000 - Where the Commissioner, by leave, advanced new or re-vamped basis to support the Assessment on appeal - Where the Commissioner acknowledged that there were 'inaccuracies' in the Assessment as made but says it nevertheless charged the correct amounts of duty, penalty and interest - Where Commissioner contends any error in the Assessment is immaterial - Whether it is appropriate to remit the Assessment to the Commissioner - Assessment remitted - Taxation Administration Act 1997 (Vic), ss 8, 109, 112.

1 This proceeding is brought by way of an appeal instituted under Part 10 of the Taxation Administration Act 1997 (Vic) (TAA) against a determination made by the respondent, the Commissioner of State Revenue (Commissioner) on 29 August 2023, disallowing the appellant taxpayer's objection. The appellant's objection, which was lodged against an assessment for duty made on 30 September 2020 (numbered 23568485) under the landholder provisions of the Duties Act 2000 (Vic), together with penalty tax and interest under the TAA, is treated as an appeal to this Court pursuant to s 106 of the TAA. On an appeal the taxpayer has the onus of proving the taxpayer's case.[1]

2 The proceeding arises from the purchase by Victory International Pty Ltd (ACN 153 434 809), in its capacity as trustee for the Victory International Hybrid Unit Trust (Victory and Victory Hybrid Unit Trust), of a property located at 484A Blackburn Road, Doncaster East, 3109, Victoria, being the whole of the land comprised in certificate of title volume 11333 folio 198[2] (the Land). The contract for the purchase of the Land was entered into on 21 November 2011 and when settlement took place on 28 February 2013, the Land was transferred to the appellant. On that transfer, the appellant paid transfer duty.[3]

3 However, following an investigation conducted by the Commissioner, it became clear that, prior to settlement in February 2013, by means of a suite of transactions which took place on 10 October 2012 (10 October 2012 Transactions), the two natural persons who had held all of the shares in Victory and all of the units in the Victory Hybrid Unit Trust at the time when the contract was entered into, no longer held those shares and units, and had effectively transferred all of their shares in Victory and all of their units in the Victory Hybrid Unit Trust respectively to three newly-formed trustee companies (the Transferees).

4 Once apprised of the 10 October 2012 Transactions, the Commissioner, on 30 September 2020, made an assessment of duty in respect of each of the three (alleged) relevant acquisitions in the Victory Hybrid Unit Trust - being the 'JYP Acquisition', 'ZJF Acquisition' and 'LBZ Acquisition' (together the 'Relevant Acquisitions') - and issued the assessment to Victory as trustee, alleging that the Victory Hybrid Unit Trust is liable to pay duty chargeable on each such relevant acquisition under the landholder provisions contained in Part 2 of Chapter 3 of the Duties Act.

5 Generally speaking, the purpose of the landholder provisions is to charge duty at the same rate as for a transfer of dutiable property under Chapter 2 of the Duties Act on certain acquisitions of interests in landholders (e.g., in companies or unit trusts, by way of transfers of marketable securities[4]) in circumstances where the acquisition would have been chargeable with transfer duty under Chapter 2[5] had there been a transfer of the land instead.

6 In those circumstances, the question in this proceeding is, put simply, whether as a result of the 10 October 2012 Transactions, each of the Transferees has acquired an interest in a landholder, being the Victory Hybrid Unit Trust, that is or amounts to a 'significant interest' in the Victory Hybrid Unit Trust, and thereby has made a 'relevant acquisition' for the purpose of the landholder provisions of the Duties Act, with the result that the appellant (Victory, as trustee) is liable to pay the duty assessed by the Commissioner, together with the penalties and interest imposed, in respect of each of the three (alleged) relevant acquisitions. (The appellant acknowledges that if the Commissioner is correct, the landholder duty so assessed under Chapter 3 would be payable in addition to the transfer duty imposed under Chapter 2 on the direct transfer of the Land that was settled on in February 2013.[6])

7 The appellant objects to the Commissioner's assessment on the basis that it says no 'interest' was acquired by each of the three Transferees (for the purpose of the landholder provisions in the Duties Act), and that, accordingly, no 'significant interest' was obtained. In essence, the appellant submits that when regard is had to the terms of the trust deed of the Victory Hybrid Unit Trust, and in particular its definition of 'Beneficiaries' (which was not limited to unitholders[7]) and the many discretions, uncertainties and contingencies embodied in the deed, it is clear that no 'interest' was acquired by each of them.[8] The appellant says that it is 'simply not possible to conclude 'that the unitholders had [immediately after acquiring the units, or at any other time] an "entitlement" [as explained in s 79(1)] to a distribution of property on a notional winding [up of the landholder]'.[9] It contends that in the present case, the Commissioner fell into error because he equated an 'acquisition of units with an acquisition of interests'.[10]

8 For the reasons which follow, I am satisfied that the rights each of the Transferees acquired in a landholder, being the Victory Hybrid Unit Trust, pursuant to the 10 October 2012 Transactions entailed a 'relevant acquisition' under s 78 of the Duties Act. That is because on a statutory winding up of the landholder each of them, as holders of units, being 'C Class Units' (which are 'Capital Units') in a 'unit trust scheme' acquired an 'interest' in a landholder under s 79(1). The interest that each of the Transferees acquired was, of itself, and when aggregated with the significant interest of each of its associates, a 'significant interest' in the landholder under s 79(2), and was a 'relevant acquisition' under s 78(1), rendering Victory as trustee of the Victory Hybrid Unit Trust liable under s 85(1)(b) to pay landholder duty on each such relevant acquisition under s 77.

9 Accordingly, I would dismiss the appellant's appeal. However, in circumstances where the Commissioner has, on the appeal, advanced a new or re-vamped basis on which he contends the appellant is liable for the amounts of duty that were claimed in the Assessment, and has acknowledged that the Assessment is inaccurate in a number of ways, it is nevertheless appropriate that the Assessment be remitted to the Commissioner.

10 The factual background set out below is presented in the documents that were tendered by the appellant at the hearing.[11]

The incorporation of Victory and establishment of the Victory Hybrid Unit Trust

11 Victory was incorporated pursuant to the Corporations Act 2001 (Cth) (Corporations Act) on 27 September 2011 and the Victory Hybrid Unit Trust was established by a 'Unit Trust Deed' (Victory Deed) on the same date, with Victory named as the trustee.[12]

12 Upon incorporation, the 100 issued shares in Victory were held by the following shareholders:[13]

• Kathryn Yang (51 shares); and
• Ningjun Liu (49 shares).

13 Upon the establishment of the Victory Hybrid Unit Trust, there were four classes of units (A, B, C and D) with 100 issued units in each class, which were held by the following unitholders:[14]

• Kathryn Yang (51 A class units, 51 B class units, 51 C class units and 51 D class units); and
• Ningjun Liu (49 A class units, 49 B class units, 49 C class units and 49 D class units).

14 The issue price of each unit (referred to in the Schedule to the Victory Deed as the 'sum payment per unit') was 'One dollar ($1.00)'.[15]

The incorporation of ZJF Investments Pty Ltd and establishment of the ZJF Investments Trust

15 Approximately two years prior to the incorporation of Victory and the establishment of the Victory Hybrid Unit Trust, the following events took place:[16]

(a) on 18 August 2009, ZJF Investments Pty Ltd (ACN 138 940 726) was incorporated pursuant to the Corporations Act; and

(b) on 18 August 2009, the ZJF Investments Trust (ABN 21 098 714 986) was established by a Deed of Settlement.

At all relevant times, ZJF Investments Pty Ltd was the trustee for the ZJF Investments Trust and Jiefu Zheng was a beneficiary of the ZJF Investments Trust.

'Memorandum of Project Cooperation' entered into on 29 September 2011

16 Shortly after the incorporation of Victory and the establishment of the Victory Hybrid Unit Trust on 27 September 2011, Kathryn Yang and Ningjun Liu met with Jiefu Zheng and they reached an agreement as to the basis upon which they would jointly finance the acquisition of the Land by Victory. Those terms were recorded in a 'Memorandum of Project Cooperation' dated 29 September 2011 (MPC).[17]

17 The MPC recorded the 'Subject of meeting' as being 'Cooperation to invest in 484A land in Melbourne Australia' (i.e., the Land) and that the participants (named as being Kathryn Yang, Ningjun Liu and Jiefu Zheng) 'agree to jointly finance the acquisition of the above land in Melbourne' on the following basis: [18]

1. Investment and composition of shares

The total investment of the land is approximately A$10 million, of which the land price is $9,277,500. According to the contract of sale, the deposit is A$2 million and settlement is expected to be 16 months after signing of the contract.

1. In order to facilitate operation of the project, all shareholders agree to set up a company whose Chinese name is 'Victory International Holding Pty Ltd' (in Chinese) and English name is Victory International Pty Ltd. 52% [sic[19]] of the shares of the company are to be temporarily held by Kathryn Yang (of which 14% is Jiefu Zheng or of a nominated company) and 49% of the shares are held by Ningjun Liu (of which 12% is Jiefu Zheng or of a nominated company).

After the discussions, it was agreed that 2 months prior to settlement, the shareholders must pay the capital of $10 million in accordance with their shareholding. After providing the capital, the shareholding of the company will be changed to the following proportions:

a) Kathryn Yang or a nominated company - 37%;

b) Jiefu Zheng or a nominated company - 26%; and

c) Ningjun Liu or a nominated company - 37%.

1. In accordance with the agreement, the first and second instalments of A$2 million will be temporarily disbursed by Ningjun Liu and would be a loan to the other shareholders. Of which the loan of $740,000 to Kathryn Kang [sic] or a nominated company and the loan of $520,000 to Jiefu Zheng or a nominated company. The loan period is the date of advance to the actual repayment date but not to be later than 2 months prior to settlement. The interest is levied on the commercial loan interest of the National Bank for that period. If overdue, the loan interest rate is 14% per annum.
2. All expenses, signed by at least 2 shareholders (or its authorised representative) are valid.
3. If the project does not proceed to sales, if a shareholder withdraws halfway, it must assume all taxes and levies. The original shareholders would have the right of first refusal under the same conditions.
4. As the outstanding issues are finalised, the agreement is resolved.
5. This agreement is signed in triplicate and has legal effect and the Australian law applies.

18 It will be noted that the MPC was framed in terms of an 'investment', with each of the participants being 'shareholders' who would be 'providing the capital', and, in particular, the MPC recorded that the respective shareholdings in Victory would be changed after the shareholders provided the capital. Further, the participants' agreement was to the effect that to facilitate the operation of the project, Victory would be 'set up' - however, by this point it had already been incorporated and the Victory Hybrid Unit Trust had also been established.

Purchase of Land by Victory as trustee on 21 November 2011

19 On 21 November 2011, a contract of sale was executed by Kathryn Yang with 'Victory International Pty Ltd ACN 153 434 809 &/or nominee' named as purchaser[20] and 'F. & I. Schwartz (Constructions) Pty Ltd ACN 005 963 744' named as vendor for the purchase of the Land at a purchase price of $9,277,500 (excl GST),[21] with settlement due 'on 28 February 2013 or 12 months after the vendor gives notice to the purchaser of registration of the plan, whichever is the later'.[22]

Transactions on 10 October 2012 effectively transferred all of the issued shares and units to three trustee companies

20 After entry into the contract of sale, but before settlement, several transactions took place concerning the shares in Victory and the units in the Victory Hybrid Unit Trust.

21 By means of the 10 October 2012 Transactions, each of Kathryn Yang and Ningjun Liu effectively transferred all of their shares and all of their units to three trustee companies, being respectively JY Property Pty Ltd[23] as trustee for JY Property & Investments Trust (JYPI Trust),[24] ZJF Investments Pty Ltd[25] as trustee for ZJF Investments Trust,[26] and LBZ Pty Ltd[27] as trustee for LBZ Investment Trust,[28] (together, Transferees) as follows:[29]

(i) on 10 October 2012 Kathryn Yang transferred her 51 shares as follows:

• 37 shares were transferred to JY Property Pty Ltd as trustee for JYPI Trust;[30] and

• 14 shares were transferred to ZJF Investments Pty Ltd as trustee for ZJF Investments Trust;[31]

(ii) on 10 October 2012 Ningjun Liu transferred her 49 shares as follows:

• 37 shares were transferred to LBZ Pty Ltd as trustee for LBZ Investment Trust;[32] and

• 12 shares were transferred to ZJF Investments Pty Ltd as trustee for ZJF Investments Trust.

(b) As to the 400 issued units in the Victory Hybrid Unit Trust−

(i) on 10 October 2012 Kathryn Yang transferred her 51 A Class, B Class, C Class and D Class Units as follows:

• 37 A Class, B Class, C Class and D Class Units were transferred to JY Property Pty Ltd as trustee for JYPI Trust; and

• 14 A Class, B Class, C Class and D Class Units were transferred to ZJF Investments Pty Ltd as trustee for ZJF Investments Trust;

(ii) on 10 October 2012 Ningjun Liu transferred her 49 A Class, B Class, C Class and D Class Units as follows:

• 37 A Class, B Class, C Class and D Class Units were transferred to LBZ Pty Ltd as trustee for LBZ Investment Trust; and
• 12 A Class, B Class, C Class and D Class Units were transferred to ZJF Investments Pty Ltd as trustee for ZJF Investments Trust.

22 At the request of the Court, the parties prepared a set of simplified diagrams illustrating the unitholdings in the Victory Hybrid Unit Trust immediately before and immediately after the 10 October 2012 Transactions, a copy of which is reproduced in the Appendix to these reasons.[33] These diagrams are aids only and are not agreed facts or evidence.

23 Figure 1 in the Appendix shows the unitholdings in the Victory Hybrid Unit Trust immediately before the 10 October 2012 Transactions and Figure 2 shows the unitholdings immediately after those transactions took place.

24 The result of the 10 October 2012 Transactions was that there was a transfer of 100% of the issued units in the Victory Hybrid Unit Trust. The appellant accepts that at this time it was the purchaser under the contract of sale. It is an agreed fact that at the time of those transactions the appellant was deemed by s 74(1) of the Duties Act[34] to hold the Land and the Victory Hybrid Unit Trust was deemed to be a 'landholder'[35] for the purposes of the landholder provisions of the Duties Act.[36]

Settlement of the contract of sale on 28 February 2013 - Land transferred to Victory

25 On 28 February 2013, the contract settled and the Land was transferred to the appellant. On that transfer, the appellant paid transfer duty.[37]

26 On 4 April 2013, Victory became registered as the sole proprietor of the Land.

Investigation conducted by the Commissioner and determination of liability to duty, assessment of duty and imposition of penalty tax and interest on 30 September 2020

27 Following an investigation by the Commissioner into compliance with Part 2 of Chapter 3 of the Duties Act, an SRO 'Revenue Specialist, Landholder Acquisitions' officer notified the solicitor for the appellant by an 'exit letter' dated 30 September 2020 that based on the information provided, the Commissioner had made the following determinations:[38]

Liability to duty under Part 2 of Chapter 3 of the [Duties] Act

The Commissioner has determined that the JYP Acquisition, ZLF Acquisition and LBZ Acquisition each constitute a relevant acquisition in the Trust under section 78(1)(a)(i), for the following reasons:

(a) The Trust constitutes a 'unit trust scheme' as defined in section 3(1) and a landholder under section 71(1)(a);

(b) JYP,[39] ZLF[40] and LBZ[41] each acquired an 'interest' in the Trust within the meaning of section 79(1), commensurate with the percentage of Capital Units so acquired, by virtue of clauses 3.26.5 [sic[42]], 17.4 and 17.5.2 of the Trust Deed. The evaluation of a person's entitlement under section 79(1) is concerned with entitlements as a matter of law and is made on a notional winding up of the Trust immediately after the Acquisitions. That evaluation is not concerned with what a person would receive (if anything) on an actual vesting of the Trust or whether the Voting Unit Holders would then direct the trustee to distribute property to persons other than the holders of Capital Units under clause 17.7 of the Trust Deed.

. . .

Imposition of penalty tax and calculation of interest under Part 5 of the Tax Administration Act 1997 (Vic) (TAA)

The Trust is liable to pay duty chargeable on each Acquisition under Part 2 of Chapter 3 of the Act.[43] Duty was required to be paid by 9 November 2012 (being, 30 days after the date of each Acquisition).[44] As payment was not made by this date, a tax default arose under the TAA and the Trust became liable to pay penalty tax and interest on unpaid tax.[45] Having regard for the information provided, the Commissioner has made the following determinations on penalty tax and interest in accordance with Revenue Ruling TAA.007v4:

(a) the Commissioner has reduced the penalty tax rate from 25% to 20% of the unpaid tax on each Acquisition, pursuant to section 31(2) of the TAA. The sum of penalty tax payable on the Acquisitions is $99,000.

(b) The Commissioner has remitted in full the premium rate of interest.

(c) The Commissioner recognises that he has not provided the Trust with a decision on the duty implications of the Acquisitions in a timely manner. As a consequence, the Commissioner considers it appropriate to remit the market rate of interest for the period from 8 August 2018 to 6 February 2020 (inclusive). However, no exceptional circumstances exist for the remission of the market rate of interest for the following periods:

(i) 9 November 2012 to 8 August 2018; and

(ii) 6 February 2020 to 30 September 2020.

(d) Market interest is imposed as a means of compensating the Victorian Government for being denied funds to which it is entitled. Accordingly, the sum of market interest payable on the Acquisitions is $72,102.44.[46]

Assessment made and issued pursuant to section 8(1) of the TAA

In accordance with the above determinations, please find enclosed Assessment 23568485, displaying the following amounts payable:

28 The assessment for duty that accompanied the exit letter was styled as 'Duties Act 2000 Notice of Assessment 23568485' (Assessment) made on 30 September 2020. The Assessment, which was 'for duty under the Duties Act 2000 and penalty tax and interest under the [TAA]' was issued pursuant to s 8(1) of the TAA to Hailes Lawyers on behalf of Victory as trustee for the Victory Hybrid Unit Trust, 'in respect of three relevant acquisitions made by the following persons in the [Victory Hybrid Unit Trust] on 10 October 2012':[47]

29 The Assessment stated that 'Payment is due by: 30 November 2020'.

30 The parties are agreed that for the purposes of this proceeding the applicable version of s 112 of the TAA (which deals with 'Supreme Court appeals') is authorised version no. 86 (effective as at 1 July 2024).[48] Section 112 provides as follows:

(1) On the hearing of an appeal by the Supreme Court, the Court may make any order it thinks fit and may by order confirm, reduce, increase or vary the assessment or decision.

(2) The costs of the appeal are in the discretion of the Court.

31 As the exit letter records that the Assessment was 'made and issued' pursuant to s 8(1) of the TAA it is also convenient to set out some other provisions of the TAA that may be of relevance to the appeal. In each case the text of the provisions is reproduced from authorised version no. 86.

32 Section 8 of the TAA deals with the Commissioner's 'General power to make assessment'. Section 8(1) provides:

(1) The Commissioner may make an assessment of a tax liability of a taxpayer.

33 The expressions 'assessment', 'tax', 'taxation law', 'tax liability' and 'taxpayer' are defined in s 3(1) of the TAA, relevantly as follows:

3 Definitions

(1) In this Act -

assessment means an assessment made by the Commissioner under Part 3 of the tax liability of a person, and includes a reassessment, a compromise assessment and a deemed assessment;

. . .

tax means a tax, levy, contribution or duty under a taxation law, and includes -

(a) interest and penalty tax under Part 5;

(b) any other amount paid or payable by a taxpayer to the Commissioner under a taxation law (other than section 129A);

taxation law has the meaning given by section 4;

. . .

tax liability means a liability to pay tax;

taxpayer means a person who has been assessed as liable to pay an amount of tax, who has paid an amount as tax or who is liable or may be liable to pay tax;

34 Section 14, which deals with a notice of assessment (or withdrawal of assessment), relevantly provides:

(1) If the Commissioner makes or withdraws an assessment, the Commissioner must serve a notice of assessment or withdrawal on the taxpayer.

(1A) . . .

(2) A notice of assessment must -

(a) be expressed to be an assessment of liability to the tax; and

(b) show the amount of tax assessed.

(2A) ...

(3) An amount of tax assessed in a notice of assessment is payable on or before the day specified by the Commissioner in the notice of assessment.

35 Section 17 provides for the validity of an assessment, as follows:

17 Validity of assessment

The validity of an assessment is not affected because a provision of a taxation law has not been complied with.

36 Section 127 of the TAA, which is a 'conclusive evidence' provision, provides as follows:

127 Evidence of assessment

Production of a notice of assessment, or of a document signed by the Commissioner purporting to be a copy of a notice of assessment, is -

(a) conclusive evidence of the due making of the assessment; and

(b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection, review or appeal proceedings (in which it is proof in the absence of evidence to the contrary).

37 Part 10 of the TAA, which contains ss 96-116, is headed 'Objections, reviews and appeals'.

Relevant provisions of the Duties Act

38 The 'landholder' provisions with which the Court is concerned in this proceeding were introduced in 2012 but have their genesis in the 'land rich' provisions that were first enacted in 1987, effectively as an anti-avoidance measure.

39 The Commissioner agrees with the appellant that, for the purposes of this proceeding, it is necessary to apply the provisions of the Duties Act as it stood at the time of the relevant transactions on 10 October 2012. Accordingly, the parties are agreed that authorised version no. 90 of the Duties Act, incorporating amendments as at 27 September 2012, is the relevant version.[49]

40 In BPG Caulfield Village Pty Ltd v Commissioner of State Revenue,[50] Croft J outlined the background to the introduction of the land rich provisions in 1987 and the landholder provisions that replaced them in 2012, as follows:[51]

As stamp duty was, historically, imposed on instruments transferring land, no duty was payable where a taxpayer purchased the owner of the land, but not the land itself. The obvious way of achieving this was the acquisition of shares or units in a private company or unit trust that itself owned the land. Clearly, the possibility of acquisition of the land owner itself had the potential for significant erosion of the stamp duty revenue base. Consequently, in order to bring such transactions to duty, Victoria enacted land rich duty provisions in 1987.[52] The effect of these provisions was to impose duty on certain acquisitions of interests in a company 80 per cent or more of the value of which consisted of real property. In 2000, the land rich provisions became Div 1 of Pt 2 of Ch 3 of the Duties Act 2000. They were, however, repealed in 2012 when the present landholder provisions, including the economic entitlement provisions, were enacted by the Duties Amendment (Landholder) Act 2012 ('the Amendment Act').

41 His Honour also emphasised 'that the history of the development of these provisions is relevant to an understanding of the present provisions to the extent that there is ambiguity in those provisions and resort might otherwise properly be made to extrinsic material'[53] and that 'to appreciate the extrinsic material insofar as it is relevant, such as Second Reading Speeches and Explanatory Memoranda, some appreciation of the legislative history is important'.[54]

The Court requested assistance from the parties as to the history of the legislative scheme

42 During the hearing of the appeal, it became clear from the rival submissions advanced by the parties, and their consensus that there was an absence of any case law that might assist as to the proper construction of the key provisions, that it was necessary for the Court to have an understanding of the legislative history of both the landholder provisions and the predecessor land rich provisions. Accordingly, during the hearing, the Court requested that the parties provide some assistance as to the legislative history of the landholder provisions, outlining the relevant iterative changes made by Parliament over time with a view to enhancing the effectiveness of those provisions so as to ensure that an appropriate amount of tax is collected on all transactions in property involving land. To that end, following the substantive hearing, each of the parties filed a memorandum concerning the legislative history on the (respective) dates noted on the cover sheet to these reasons.

43 The legislative history outlined below is, for the most part, a synthesis of the legislative history material provided by the parties.

Timeline - overview of the history of the landholder provisions of the Duties Act 2000 (Vic)

The original land rich provisions were introduced in 1987

44 The Taxation Acts (Amendment) Act 1987 introduced the land rich provisions by inserting a new subdivision (7) into Division 3 of Part II of the Stamps Act 1958 (Vic) headed 'Duty on change of control of certain land-owning corporations and unit trusts'. The Explanatory Memorandum to the Taxation Acts Amendment Bill 1987 stated the purpose of the new subdivision (7) as being[55]

to close a significant loophole whereby conveyance duty is avoided through the use of company shares and private unit trusts. It treats the transactions concerned as dutiable transfers of land. There are however certain criteria which must be met before the provisions apply...

45 The new land rich provisions introduced by these amendments took effect on 15 November 1987[56] and applied to acquisitions of shares in private corporations and units in private unit trust schemes.

46 Section 75H charged duty on a statement required to be made where a person, by a 'relevant acquisition', acquired a majority interest or further interest in an unlisted landholder having real property in Victoria with an unencumbered value of not less than $1,000,000 and where the value of its property was 80% of all of its property.[57] As the Commissioner noted in his memorandum:[58]

A relevant acquisition was an acquisition of an interest that alone, or when relevantly aggregated, constituted a majority interest in a corporation. An increase of an existing majority interest was also deemed to be the acquisition of a majority interest.[59]

Interest was defined by s 75K to be a 'shareholding in the corporation that would entitle the person and any related person, if the corporation were to be wound up after the shareholding was acquired, to participate (otherwise than as a creditor or other person to whom the corporation was liable) in a distribution of the property of the corporation.'

An entitlement to participate in the distribution of the property of a corporation on a winding up was defined in s 75(6) to be the greater of (a) the amount calculated as if the winding up were carried out in accordance with the memorandum and articles of association of the corporation and any relevant law, and (b) the amount calculated as if the person had exercised all relevant powers and discretions in such a manner as to maximize that amount.

47 Relevantly, for present purposes, at the time when subdivision (7) was inserted, the Stamps Act 1958 already included a definition of 'unit trust scheme' in s 3, which had been inserted by s 2(c) of the Stamps (Further Amendment) Act 1961 (Vic) as part of the definitions supporting the imposition of 'marketable securities duty'.[60] The definition of 'unit trust scheme' in s 3 was framed as follows:[61]

'Unit trust scheme' means any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits or income arising from the acquisition holding management or disposal of any property whatsoever pursuant to that trust.

48 Amongst the suite of provisions introduced in 1987 by subdivision (7), s 75N dealt with 'Unit trust schemes'. Section 75N(3) provided for subdivision (7) to apply to a private unit trust scheme as if[62]

(a) the private unit trust scheme were a corporation; and

(b) a unit in a private unit trust scheme were a share in a corporation; and

(c) the acquisition of units in a private unit trust scheme were the acquisition of shares in a corporation; and

(d) a reference to the Memorandum and Articles of Association of a corporation were a reference to the constituent documents of a private unit trust scheme; and

(e) a reference to a winding up of a corporation were a reference to a termination of a private unit trust scheme.

49 Section 75N also included bespoke definitions of 'Private unit trust scheme', 'Unit', and 'Unit trustee' for the purposes of s 75N, as follows:

'Private unit trust scheme' means a unit trust scheme if, at the time of the acquisition of a unit, the deed relating to the scheme -

(a) has not been approved for the purposes of Division 6 of Part IV of the Companies (Victoria) Code or the corresponding provisions of the law in force in another State or Territory; or

(b) has been so approved but -

(i) no units have been issued to the public; or

(ii) fewer than 50 persons are beneficially entitled to units under the scheme; or

(iii) 20 or fewer persons are beneficially entitled to 75 per centum or more of the total issued units under the scheme.

'Unit' means any right or interest, whether described as a unit or sub-unit or otherwise, of a beneficiary under a unit trust scheme, and includes an interest in a unit but does not include a unit acquired solely pursuant to an arrangement referred to in section 75O(b).[63]

'Unit trustee' means a trustee of a private unit trust scheme.

50 Further, s 75N(2) provided, '[f]or the purposes of the definition of "private unit trust scheme"', a measure for determining the number of persons beneficially entitled to units, framed as follows:

(2) For the purposes of the definition of 'private unit trust scheme' and determining the number of persons beneficially entitled to units -

(a) units to which -

(i) a corporation; or

(ii) a person who is entitled to more than 50 per centum of the issued share capital of the corporation; or

(iii) a related corporation -

is entitled shall be deemed to be held by one person; and

(b) units to which -

(i) a trustee of a trust (including a unit trust scheme); or

(ii) if the trust is a discretionary trust, a person who has an entitlement on the distribution of that trust; or

(iii) a person whose share or interest in the trust, whether vested or contingent, constitutes more than 50 per centum of the trust property or of the issued units in the trusts

is entitled shall be deemed to be held by one person.

The land rich provisions were re-enacted in the new Duties Act 2000

51 The Stamps Act 1958 (Vic) was replaced by the Duties Act in 2000, with effect from 1 July 2001.

52 Section 5 of the Duties Act states that the Act is to be read together with the TAA, which provides for the administration and enforcement of the Duties Act and other taxation laws.

53 As the Commissioner explained in his memorandum concerning the legislative history, when first enacted, the Duties Act included land rich provisions in Divisions 1-4 of Part 2 of Chapter 3, and '[t]he primary change from the Stamps Act was that duty was charged on the making of a relevant acquisition[64] rather than on a statement required to be given when such an acquisition was made',[65] reflecting the change made by the Duties Act in 2001 from an instrument-based regime to a transaction-based one.

54 The Explanatory Memorandum for the Bill that introduced the Duties Act in 2000 outlined the position, as follows:[66]

General

The object of this Bill is to replace the Stamps Act 1958 with a modern statute expressed in clear language and with a more contemporary conceptual foundation. With this Bill liability to pay duty is shifted from the execution of a paper instrument, to the completion of a transaction which may or may not be reduced to writing. . . .

The Bill is based on provisions that are broadly uniform across Australia; New South Wales and the Australian Capital Territory having passed duties legislation and most other Australian jurisdictions proposing to do so in the near future.

The existing stamp duties are replaced by the following duties-

• duty on transfers and transactions concerning dutiable property (Chapter 2);

• an anti-avoidance provision, charging duty at the rate applicable to transfers of land on the acquisition by a person of an interest consisting of certain shareholdings in a private company, or unitholdings in a unit trust scheme, which has substantial land holdings (Chapter 3);

. . .

The proposed Act will be a 'taxation law' for the purposes of the Taxation Administration Act 1997 and is to be read together with that Act. . . .

CHAPTER I-PRELIMINARY

. . .

Clause 3 provides definitions of words and expressions used in the Bill.

. . .

55 Amongst the suite of definitions that were included in s 3(1) of the Duties Act 2000 was a definition of 'unit trust scheme' and a definition of 'unit' in a unit trust scheme, framed as follows:

unit trust scheme means any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits, income or distribution of assets arising from the acquisition, holding, management or disposal of any property whatever pursuant to the trust;

unit in a unit trust scheme means -

(a) a right or interest (whether described as a unit or a sub-unit or otherwise) of a beneficiary under the scheme; or

(b) a right to any such right or interest;

56 More will be said about these definitions below. For present purposes it is sufficient to note that the definition of 'unit trust scheme' (above) replicated for the most part the definition of 'unit trust scheme' that was inserted in the Stamps Act 1958 by the Stamps (Further Amendment) Act 1961, but now (from 2000) it also included a reference to 'distribution of assets' in the phrase 'any profits, income or distribution of assets arising from the acquisition' whereas formerly it simply referred to 'any profits or income arising from the acquisition ...'.[67]

57 In his memorandum concerning the legislative history, the Commissioner explained that under the land rich provisions that were re-enacted in the new Duties Act 2000:[68]

A relevant acquisition was defined to be the acquisition of an interest in a land-rich private corporation that was in itself, or when relevantly aggregated, a majority interest.[69] Interest was defined by s 76(1):

A person has an interest in a private corporation if the person has an entitlement (otherwise than as a creditor or other person to whom the corporation is liable) to a distribution of property from the corporation on a winding up of the corporation or otherwise.

A majority interest was defined to be an entitlement to more than 50% of the property distributed.[70] Because of the definition of 'entitled' in s 3,[[71]] a person could only acquire a majority interest if they were beneficially entitled to more than 50% of the property distributed. This requirement has since been removed but is important for understanding two of the authorities discussed below.[[72]]

The provisions applied to unit trust schemes because a 'private corporation' was defined to include a 'private unit trust scheme'.[73] The definition of private unit trust scheme was materially the same as under the Stamps Act.

The [Duties Act] as originally enacted did not include a definition of 'winding up',[[74]] however the maximisation of entitlements provision in s 85 required a comparison between two calculations, the first of which was to be made based on a distribution carried out in accordance with the constitution of the private corporation and any law relevant to the distribution. The second calculation was made after the relevant person and any other specified person had exercised all powers and discretions in such a manner as would maximise the value of the entitlement. In other words, s 85 as initially enacted was in very similar terms to the current s 89H.

The land rich provisions were replaced by a new regime in 2004, and minor amendments were made in 2005 and 2007

58 In May 2004, the land rich provisions were replaced by a new regime enacted by the State Taxation Acts (Tax Reform) Act 2004 (Vic). In the second reading speech for the State Taxation Acts (Tax Reform) Bill 2004 (Vic), the (then) Treasurer, Mr Brumby, outlined the amendments to the Duties Act and stated, relevantly:[75]

Further, the rules for calculating the duty on high-value property transactions conducted through private companies and trusts are to be revised in light of current business practices, which have the effect of reducing taxation liabilities. The amendments to the land-rich tests will apply from this day.

The fundamental basis of stamp duty is that changes in beneficial ownership in land, however achieved, are subject to conveyance duty. For reasons of equity and revenue protection, it is essential that duties are applied equitably and effectively.

The amendments to the land-rich tests will ensure that an appropriate amount of tax is collected on all transactions in property involving land.

These changes comprise the best features of comparable provisions applying in other jurisdictions.

59 The Explanatory Memorandum for the State Taxation Acts (Tax Reform) Bill (Vic) stated, in respect of the amendments to the Duties Act, that:[76]

The Bill introduces anti-avoidance provisions intended to deter artificial and contrived schemes aimed at avoiding duty on a transfer or a dutiable transaction involving dutiable property to which Chapter 2 applies. They apply exclusively to Chapter 2. In addition the provisions will inhibit persons from preparing instruments where factors crucial to the assessment of duty are omitted or are misleading and to encourage persons seeking assessment of duty to lodge all necessary material pertinent to that transaction.

The Bill contains extensive amendments relating to the rules for calculating the duty on high value property transactions, conducted through private companies and trusts. These have been revised in light of widespread use of artificial structures to reduce taxation liabilities. The amendments to the land-rich tests will apply from 13 May 2004.

60 Section 1 of the State Taxation Acts (Tax Reform) Act 2004 stated the purposes of that amending Act, relevantly as follows:

The purposes of this Act are -

(a) to amend the Duties Act 2000 -

(ii) to introduce general anti-avoidance provisions;

(iii) to reform the taxation of acquisitions of interests in land-rich entities;

61 In his memorandum the Commissioner observed that while extensive changes were made in 2004, few of them are relevant to the provisions in issue in this proceeding. For present purposes, one important change he identified was the introduction of the concept of a landholder which effectively replaced the notion of a private corporation and the need for private unit trusts to be deemed to be private corporations.

62 The companion concepts of a 'landholder' and a landholder that is 'land rich' were defined in s 71 respectively as follows:[77]

(1) For the purposes of this Part, a "landholder" is any of the following that has land holdings in Victoria -

(a) a private unit trust scheme;

(b) a wholesale unit trust scheme;

(c) a private company.

(2) A landholder is "land rich" if -

(a) it has land holdings in Victoria with an unencumbered value of $1 000 000 or more; and

(b) its land holdings in all places, whether within or outside Australia, comprise 60% or more of the unencumbered value of all its property.

Note: As to what constitutes a land holding, see section 72. As to ownership through linked entities or discretionary trusts, see sections 74 and 75.

63 In BPG Caulfield Village, Croft J conveniently summarised the operation of the new land rich provisions, as follows: [78]

(a) duty was chargeable on a 'relevant acquisition';

(b) a 'relevant acquisition' was the acquisition of a 'significant interest' in a 'land rich' landholder;

(c) a 'significant interest' in a landholder was an entitlement (otherwise than as a creditor or other person to whom the landholder was liable) to a distribution of 50% or more of the property from the landholder on its winding up, except in the case of a landholder that was a private unit trust scheme, in which case an entitlement of 20% or more of the property of the landholder on a winding up constituted a significant interest;

(d) 'landholder' was defined to include private unit trust schemes and private companies; and

(e) a landholder was 'land rich' if it had land in Victoria with an unencumbered value of $1,000,000 or more and its land holdings in all places comprised 60% of the unencumbered value of all its property.

Two cumulative criteria were, broadly, created by these provisions for the imposition of duty. First, the taxpayer had to acquire an interest of at least 50 per cent - or 20 per cent in the case of a private unit trust scheme - in another entity. Secondly, that other entity had to be a land rich entity. Moreover, the purpose of these land rich provisions was clear enough, as observed by the Court of Appeal in Commissioner of State Revenue v Landrow Properties Pty Ltd (2010) 79 ATR 800; 2010 ATC 20-200:[80]

The explanatory memoranda and Second Reading Speeches accompanying each iteration of the legislation make it clear that the 'mischief' to which the land rich provisions are directed is the avoidance of duty on land transfers through the use of shares and units in private unit trusts.

Similarly, as the Minister observed in the Second Reading Speech introducing the [2012] Amendment Act:[81]

The current land-rich model was introduced in 1987 to deal with the avoidance of land transfer duty through the acquisition of shares in entities that owned land. At the time, these provisions were largely seen as anti-avoidance in nature.

65 Another important change that was made by the State Taxation Acts (Tax Reform) Act 2004 was an amendment to the definition of 'unit in a unit trust scheme' that appeared in the Duties Act 2000. As neither of the legislative history memoranda provided by the parties mentioned this change**,** which was made for the purposes of (inter alia) Part 2 of Chapter 3 (being then the land rich provisions), the relevant formulation is set out in the table below:

s 3(1) of the Duties Act 2000 (Vic)

Amendment by s 3(3) of the State Taxation Acts (Tax Reform) Act 2004 (Vic)

(a) a right or interest (whether described as a unit or a sub-unit or otherwise) of a beneficiary under the scheme; or

(b) a right to any such right or interest;

(3) In section 3(1) of the Duties Act 2000, in the definition of "unit" -

(a) in paragraph (b), for "interest;" substitute "interest - ";

(b) after paragraph (b) insert -

'and, for the purposes of the definitions of "listed trust" and "widely held trust" and Part 2 of Chapter 3, means a unit (within the meaning of paragraph (a) or (b)) that entitles the beneficiary to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting;'.

66 Accordingly, following the 2004 amendment, the definition of 'unit in a unit trust scheme' read as follows:

(a) a right or interest (whether described as a unit or a sub-unit or otherwise) of a beneficiary under the scheme; or

(b) a right to any such right or interest -

and, for the purposes of the definitions of listed trust and widely held trust and Part 2 of Chapter 3, means a unit (within the meaning of paragraph (a) or (b)) that entitles the beneficiary to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting;

67 The Explanatory Memorandum for the State Taxation Acts (Tax Reform) Bill 2004 described the amendment as being 'for the purposes of the land-rich provisions', as follows:[82]

PART 2 - DUTIES ACT 2000

Part 2 of the Bill contains those amendments to the Duties Act 2000.

Clause 3 amends current definitions and inserts new definitions in section 3 of the Duties Act. The definitions amended or inserted by this clause are mostly relevant for Part 2 of Chapter 3 (the 'land-rich provisions') as follows -

. . .

The definition of 'unit' is amended for the purposes of the land-rich provisions so that where it is referred to in those provisions it means a unit, the holder of which is entitled to the capital of the unit trust scheme (other types of units are disregarded, such as income units or those having other minor rights).

68 No amendment was made in 2004 to the definition of 'unit trust scheme' that appeared in the Duties Act 2000.

69 Other relevant amendments that were made in 2004 were noted in the Commissioner's memorandum as being:[83]

Section 76 of the new provisions defined interests and significant interests. Three changes were made from the previous definition of interest. First, 'private corporation' was replaced by 'landholder'. Secondly, an interest could be acquired 'directly or through another person'. Thirdly, an interest required a 'beneficial entitlement' - this was already a requirement but was imported into the definition in s 76 rather than through the definition of 'entitled'.

The maximisation of entitlements provision was the new s 86, which was not materially different from the previous provision in s 85.

Winding up was defined in s 76(3) and is in the same terms as the current s 79(3).

70 In 2005 and 2007, minor amendments were made to the land rich provisions. The Commissioner summarised their effect as being as follows:[84]

(a) the Duties and Land Tax Acts (Amendment) Act 2005 (Vic) made several amendments. For present purposes, the only one of any relevance was the deletion of the words 'or otherwise' from the end of the definition of interest in s 76(1); and

(b) the main purpose of the amendments brought about by the State Taxation Acts Amendment Act 2007 (Vic) was to deal with the problem of acquisitions of interests made by trustees. As two decisions discussed below established,[[85]] the requirement of a 'beneficial entitlement' meant that a person who acquired an interest in a landholder in a purely trustee capacity had not made a relevant acquisition. The 2007 amendments therefore deleted 'beneficial' from the definition of interest in s 76(1) and inserted a new s 77(2AA) which provided that a person was taken to obtain an interest beneficially if the person obtained the interest as trustee of a trust.

71 I note that in 2007, the s 3(1) definition of 'entitled' (that appeared in the Duties Act 2000) was repealed by the State Taxation Acts Amendment Act 2007 (Vic).[86]

In 2012 the land rich provisions were replaced by a landholder regime

72 In 2012, with the enactment of the Duties Amendment (Landholder) Act 2012 (Vic),[87] (the 2012 Amending Act), the land rich provisions in Parts 1 and 2 of Chapter 3 of the Duties Act were substituted by a new suite of provisions establishing the landholder regime.

73 The Explanatory Memorandum to the Duties Amendment (Landholder) Bill 2012 (the 2012 EM[88] and the Landholder Bill[89] respectively) outlined the operation of cl 5 of the Landholder Bill, stating:[90]

[Clause 5] substitutes new Parts 1 and 2 into Chapter 3 of the Duties Act 2000.

The main function of this clause is to substitute the 'land rich' provisions in Chapter 3 of the Duties Act 2000, which impose duty on the acquisition of interests in certain land rich companies and unit trusts, with 'landholder' provisions which impose duty on certain acquisitions of interests in land holding private and listed companies and trusts, and wholesale unit trust schemes.

74 When introducing the 2012 Amending Act, the (then) Treasurer, Mr Wells, in his second reading speech, referred to the transition from the land rich provisions to the landholder regime and stated:[91]

However, they [the land rich provisions] have now evolved into a distinct head of duty, so that all acquisitions in land are subject to duty regardless of how the land is acquired.

75 Section 1 of the 2012 Amending Act stated the purposes of the amending Act relevantly, as follows:

1 Purposes

The main purposes of this Act are -

(a) to amend the Duties Act 2000 -

(i) to make further provision for the imposition of duty on the acquisition of interests in certain land holding entities; and

(ii) to make other miscellaneous and consequential amendments; ...

76 The Commissioner observes that 'although the landholder regime introduced certain entirely new concepts (such as the acquisition of an 'economic entitlement' in a landholder) they [the 2012 amendments] did not make any fundamental changes to the regime insofar as it applied to acquisitions of interests in landowning unit trusts'.[92]

77 For present purposes, I note that for the most part, save for some amendments to the definition of 'associated person' and 'related person', the definitions of relevant terms in s 3(1) of earlier iterations of the Duties Act that are referred to above remained unchanged.

78 Following the enactment of the 2012 Amending Act, Chapter 3 of the Duties Act continued to be headed 'Certain Transactions treated as Transfers'. Part 1, which is headed 'Introduction and Overview', introduces and provides an overview of the landholder provisions as follows:

70 Imposition of duty

This Chapter charges duty at the same rate as for a transfer of dutiable property under Chapter 2 on certain acquisitions of interests in landholders.

Note

Duty is chargeable under Part 2 on the acquisition by a person of certain interests in private landholders and public landholders that have land holdings in Victoria with an unencumbered value of $1 million or more.

The duty is chargeable at the general rate for a dutiable transaction under Chapter 2.

Duty was chargeable under Parts 3 and 4 on certain transactions occurring before 1 July 2002.

Duty is charged under Part 5 on the allotment of units or shares that confer a land use entitlement.

79 By the 2012 Amending Act, Part 2 of Chapter 3 was substituted with a new Part 2 which contains the landholder provisions. That is to say, the suite of provisions in Part 2 that are referred to below are 'new' provisions in the sense that they were introduced by the 2012 Amending Act in substitution for the version of the respective provision that appeared in the earlier version of the Duties Act.

80 Part 2 of Chapter 3 is headed 'Acquisition of Interests in Certain Landholders'. Division 1 deals with 'Landholders' and Division 2 deals with 'Charging of duty'.

Division 1 - Landholders - explains the type of landholding structure targeted by the landholder provisions and how to determine if a company or unit trust owns or is entitled to the requisite $1 million land holdings in Victoria.

82 Section 71 addresses the meaning of 'landholder' for the purposes of Part 2 of Chapter 3 and provides:

(1) For the purposes of this Part, a landholder is any of the following that has land holdings in Victoria with a total unencumbered value of $1 000 000 or more -

(a) a private unit trust scheme;

(b) a private company;

(c) a wholesale unit trust scheme;

(d) a listed company;

(e) a public unit trust scheme.

(2) For the purposes of this Part, a landholder may hold land -

(a) in accordance with section 72;

(b) under an uncompleted agreement in accordance with section 74;

(c) through a linked entity in accordance with section 75;

(d) through a discretionary trust in accordance with section 76.

(3) A private landholder is a landholder that is a private unit trust scheme, private company or wholesale unit trust scheme.

(4) A public landholder is a landholder that is a listed company or a public unit trust scheme.

83 The expressions 'private unit trust scheme' and 'unit trust scheme' are defined in s 3 respectively as follows:

private unit trust scheme means a unit trust scheme that is not -

(a) a public unit trust scheme; or

(b) a wholesale unit trust scheme;

...

unit trust scheme means any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits, income or distribution of assets arising from the acquisition, holding, management or disposal of any property whatever pursuant to the trust;

84 Section 72 deals with what are 'land holdings'. Relevantly, s 72 (as it appears in authorised version No. 90) provides as follows:

(1) For the purposes of this Part, a land holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor or a profit à prendre.

(2) An interest in land, however -

(a) is not a land holding of a unit trust scheme unless the interest is held by -

(i) a trustee of the scheme in the capacity of trustee; or

(ii) a custodian or other agent in the capacity as custodian or agent of the trustee of the scheme; and

(b) is not a land holding of a company unless the interest of the company in the land is a beneficial interest.

(3) This section is in aid of, but does not limit, the operation of any provision of this Part providing for constructive ownership of interests in land.

85 Section 73, which is not relevant for present purposes, deals with the issue of what the 'land' includes for the purposes of Part 2.

86 The effect of 'uncompleted agreements' is addressed in s 74. Relevantly, s 74(1) provides as follows:

(1) For the purposes of this Part, the vendor and purchaser under an uncompleted agreement for the sale of land are taken to be separately entitled to the whole of the land.

87 As counsel for the Commissioner noted during oral submissions, in the case of a unit trust, where land is the subject of an 'uncompleted agreement', the effect of s 74 is to make the subject land property of the trust for the purposes of the landholder provisions, such that the respective interest holdings may well total more than 100 per cent. However, he said, double taxation is prevented because the Commissioner has a discretion under ss 89E (headed 'Duty concession - anomalous duty outcome') and 89I (headed 'Agreements for sale, transfer or purchase of land').[94]

88 The suite of provisions set out in Division 2 (ss 77-89C) were introduced by the 2012 Amending Act in substitution for the version of the respective provisions that hitherto appeared in the 2000 Act.

Division 2 - Charging of Duty - explains what are interests and significant interests in landholders, and how an interest may be acquired. It also addresses issues such as when a liability arises, what is a relevant acquisition and how duty is charged on relevant acquisitions in private and public landholders. It also contains provisions dealing with the acquisition of an economic entitlement or control for duty purposes. Division 2 also contains provisions dealing with the conversion of a private company to a listed company, or a private unit trust scheme to a public unit trust scheme.

90 Section 77 provides that a liability for (landholder) duty charged by Part 2 arises 'when a relevant acquisition is made'.

91 Section 78 deals with what is a 'relevant acquisition'. Relevantly for present purposes, s 78(1)(a) provides:

(1) For the purposes of this Part, a person makes a relevant acquisition if -

(a) the person acquires an interest in a landholder -

(i) that is of itself a significant interest in the landholder; or

(ii) that amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by all or any of the following -

(A) the person; or

(B) an associated person; or

(C) any other person in an associated transaction; ...

92 The 2012 EM notes, in respect of s 78, that '[n]ot all interests acquired in a landholder are relevant acquisitions'.[96]

93 Section 79 deals with what are 'interests' in landholders and what is required for a person to hold a 'significant interest' in a landholder. Section 79 provides, in the case of a 'private unit trust scheme,' as follows:

79 What are interests and significant interests in landholders?

(1) A person has an interest in a landholder if the person has an entitlement (otherwise than as a creditor or other person to whom the landholder is liable), whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder.

(2) A person who, by virtue of subsection (1), has an interest in a landholder has a significant interest in the landholder if the person, in the event of a distribution of all the property of the landholder immediately after the interest was acquired, would be entitled to -

(a) in the case of a landholder that is a private unit trust scheme - 20% or more of the property distributed; or

person includes a landholder;

winding up of a landholder that is a unit trust scheme means the vesting of the trust property in the beneficiaries.

Note

Section 89H is relevant to ascertaining a person's entitlements on a distribution of property.

94 Neither the expression 'an entitlement' in s 79(1) nor the companion expression 'entitled to' in s 79(2) are separately defined. What is required for a person to have an 'interest' by virtue of s 79(1) is that the person, whether directly or through another person has an 'entitlement' to a distribution of property from the landholder on a winding up of the landholder. Where a person does have an interest in a landholder by virtue of s 79(1), s 79(2) looks to whether such person, in the event of a distribution of all the property of the landholder (that is a private unit trust scheme) immediately after the interest was acquired, 'would be entitled to' 20% or more of the 'property distributed'. In each case, the 'entitlement' of the person in s 79(1), and what the person 'would be entitled to' in s 79(2), is considered or looked at by reference to a distribution of property on a 'winding up' of the landholder.

95 The definition of 'winding up' in s 79(3) applies where the landholder is a unit trust scheme. In that context, 'winding up' means 'the vesting of the trust property in the beneficiaries'. (The parties were agreed that the winding up is not an actual winding up of the kind that takes place under general law or company law. However, counsel for the appellant described it as a 'notional' winding up of the kind described in some of the cases decided under earlier iterations of the landholder or land rich provisions. Whereas counsel for the Commissioner disagreed, contending in oral submissions that it is 'not a notional winding up' but rather it is 'a statutory concept'.[97])

96 The 'Note' which appears at the foot of s 79 refers to s 89H (which is headed 'Maximisation of entitlements on distribution of land holdings'[98]) as being relevant to 'ascertaining'[99] a person's entitlements on a distribution of property. More will be said about this provision below.

97 Sections 80 to 84 deal with matters such as how may an interest in a landholder be acquired (s 80), what constitutes an acquisition of an 'economic entitlement' (s 81), an 'acquisition of control' (s 82), the requirement to lodge an 'acquisition statement' (s 83) and the time when duty must be paid (s 84).

98 For present purposes it is sufficient to note some features of s 80, as described in the 2012 EM:[100]

New section 80 describes how a person may acquire an interest (as described in section 79).

Subsection (1) states the interest must be acquired beneficially but can be acquired by any means.

Subsection (2) lists some means by which interests may be acquired, but is not exhaustive.

Subsection (3) clarifies that where an interest in a land rich landholder is acquired by a trustee, the trustee (in addition to the beneficiaries) will be taken to have obtained an interest beneficially.

Subsection (4) specifies that a trustee who holds or acquires an interest in a landholder is to be treated as a separate person in respect of each trust of which the trustee is a trustee and the personal capacity of the trustee, if any.

Subsection (5) clarifies that, in addition to subsection (1), a person who holds an interest in a landholder acquires an interest if the capacity in which the person holds the interest changes.

Subsection (6) provides that an acquisition of an interest referred to in subsection (5) is to be treated as a separate acquisition from existing interests held by the acquirer.

Subsection (7) is cautionary in specifying it is not necessary to acquire units or shares by way of transfer to acquire an interest in a landholder.

99 As none of sections 81-84 were expressly relied upon by either party, it is not necessary to say anything further about them.

100 Section 85 provides for liability to pay the duty. Relevantly, s 85 states:

(1) The following are jointly and severally liable to pay duty chargeable under this Part -

(a) the person who makes the relevant acquisition; and

(b) the landholder or, if the landholder is a unit trust scheme, the trustee of the landholder; and

(c) if the relevant acquisition results from an aggregation of the interests of the person referred to in paragraph (a) and other persons - each of those other persons.

(2) A person, other than a person referred to in subsection (1)(c), may recover as a debt from the person who made the relevant acquisition or a person referred to in subsection (1)(c) the amount of any duty chargeable under this Part and any penalty paid by the first person in respect of that duty.

101 (As was noted earlier, in the present case, the Assessment was directed to Victory in its capacity as trustee of the Victory Hybrid Unit Trust, and it was described on the Assessment as the 'Liable Party'.)

102 It is not necessary to outline the balance of the provisions in Division 2 as they were not expressly relied upon by either party.

103 Division 3 deals with 'Exemptions and concessions' and Division 4 deals with 'Valuation and supplementary calculation provisions'. Of these provisions, only s 89E, which deals with the availability of a duty concession where the Commissioner is satisfied that there is an 'anomalous duty outcome' and s 89H, which deals with 'Maximisation of entitlements on distribution of land holdings', were referred to by counsel for the parties.

104 In respect of s 89E, the 2012 EM states:[101]

New section 89E provides a concession from duty in circumstances where the Commissioner is satisfied that there is an anomalous duty outcome arising from the application of Part 2 of Chapter 3 to a particular transaction and, because of that anomaly, the duty payable under Chapter 3 is greater than the duty that would have been payable under Chapter 2 if the subject of the acquisition had been a direct transfer of the land. In these circumstances, the Commissioner has a discretion to reduce the duty payable on the acquisition under Chapter 3 to an amount which is not less than the duty that would have been payable under Chapter 2 had the subject of the acquisition been a direct transfer of the land to the person. If a higher duty outcome is intended from the operation of Chapter 3, then no concession is available.

89E Duty concession - anomalous duty outcome

(1) Subject to subsection (3), this section applies to a relevant acquisition if the Commissioner, having regard to all the facts and circumstances, is satisfied that -

(a) the application of this Part results in an anomalous duty outcome; and

(b) the duty payable under this Part is greater than the duty that would be payable under Chapter 2 had the subject of the relevant acquisition been a transfer of the land of the landholder to the person.

(2) The Commissioner may reduce the duty payable to an amount not less than the duty that would be payable under Chapter 2, had the subject of the acquisition been a transfer of the land of the landholder to the person.

(3) This section does not apply to a relevant acquisition that is the acquisition of an economic entitlement under section 81 or the acquisition of control under section 82.

106 It will be noted that, under s 89E(1), the Commissioner must be satisfied of both elements before the duty payable may be reduced, and there is no definition of the expression 'an anomalous duty outcome' for the purposes of the landholder provisions. Also, sub-s (3) makes clear that s 89E applies only to the first class of 'relevant acquisition' set out in Division 2, being a 'significant interest' in a landholder, and does not apply to the second class, being acquisition of an economic entitlement under s 81 or the third class, acquisition of control under s 82.

107 Section 89H, which appears in Division 4 of Part 2 of Chapter 3 headed 'Valuation and supplementary calculation provisions', deals with the 'Maximisation of entitlements on distribution of land holdings'. While reference to s 89H has already been made above, in the context of the 'Note' to s 79, it is convenient to set out below the commentary on s 89H that appears in the 2012 EM:[102]

New section 89H addresses circumstances where a person who has an interest in a landholder possesses rights that if utilised may increase the person's entitlement to distribution on a winding up. This entitlement is the basis for an interest in a landholder (see section 79).

Such rights may include a power to change the voting rights such that the person's entitlement may be enhanced. For the purposes of determining the entitlement in a landholder for this Part, the maximum entitlement capable of being acquired may be utilised.

Subsection (1) states the application of the section.

Subsections (2) to (4) establish the procedure for determining the extent of the interest a person has in the winding up of a landholder. First, a calculation is made of the entitlement based on the rules of the landholder which apply to the interest held.

Next, another calculation is made after all rights available have been exercised to maximise the entitlement. The results are compared and whichever entitlement is the greater is the one used for the purposes of this Part, unless the Commissioner determines otherwise.

89H Maximisation of entitlements on distribution of land holdings

(1) This section applies to any calculation, for the purposes of this Part, of the entitlement of a person (the interested person) to participate in a distribution of the property of a landholder, whether on a winding up, a vesting of trust property or otherwise.

(2) A calculation is to be made based, firstly, on a distribution carried out in accordance with the constitution of the landholder, and with any law relevant to the distribution, as in force at the time of distribution, and the entitlement of the interested person is to be evaluated accordingly.

(3) Next, a calculation is to be made based on a distribution carried out after the interested person, and any other person whom the interested person has power to direct with respect to such a distribution or who is, in relation to the interested person, an associated person, has exercised all powers and discretions exercisable by them -

(a) to effect or compel an alteration to the constitution of the landholder; and

(b) to vary the rights conferred by units or shares in the landholder; and

(c) to effect or compel the substitution or replacement of units or shares in the landholder with other units or shares in it -

in such a manner as would maximise the value of the entitlement, and the entitlement of the interested person is to be evaluated accordingly.

(4) The results obtained by an evaluation of the interested person's entitlement in accordance with subsections (2) and (3) are then to be compared, and whichever evaluation results in a greater entitlement is the correct evaluation, for the purposes of this Part, of the entitlement, unless the Commissioner, being satisfied that the application of this subsection in the particular case would be inequitable, determines otherwise.

(5) A reference in this section to the constitution of a landholder is a reference, if the landholder is a unit trust scheme, to the trust deed or other document that contains the rules of the trust.

109 For present purposes, it is convenient to note that the expression 'associated person' is defined in s 3 of the Duties Act in very broad terms, to mean 'a person who is associated with another person in accordance with any of the ... provisions' as set out in subparagraphs (a) to (k), which includes, relevantly the following associations:

(a) persons are associated persons if they are related persons;

. . .

(e) a company and a trustee are associated persons if the company or a related body corporate of the company is a beneficiary of the trust (not including a public unit trust scheme) of which the trustee is a trustee;

(j) trustees are associated persons if one of the trustees is a beneficiary of the trust (not including a public unit trust scheme) of which the other trustee is a trustee;

(k) persons are associated persons if one of those persons is an associated person of a person of whom the other of those persons is an associated person (including a person that is an associated person of the other of those persons because of one or more other applications of the paragraphs in this definition);

110 The expression 'related persons' referred to in subparagraph (a) of the definition of 'associated person' above is also defined in s 3 in similarly broad terms.

111 (Here, in essence, the Commissioner submits that by reason of subparagraph (e) of the definition of 'associated person', because each of the 'Acquirer companies' (referred to earlier as the Transferees') is a beneficiary of the Victory Hybrid Unit Trust, each company is an 'associated person' of the trustee and by reason of subparagraph (k), each 'Acquirer' is rendered 'an associated person' of each other Acquirer.[103])

112 On 4 November 2020, the appellant, being Victory in its capacity as trustee of the Victory Hybrid Unit Trust, lodged its Objection to the Assessment, under s 96 of the TAA, in which it raised five grounds against the Assessment, in summary as follows:[104]

Ground 1: That the Assessment was incorrect and excessive, as the Acquirers did not acquire an 'interest' or a 'significant interest' in the Hybrid Trust under section 79 of the Duties Act;

Ground 2: Alternatively, if Ground 1 was not accepted by the Court, then the exemption in section 89E of the Duties Act applies to exempt the Acquisitions from liability to landholder duty, and therefore the Assessment was incorrect and excessive;

Ground 3: Alternatively, if Grounds 1-2 were not accepted by the Court, then the Respondent should exercise his discretion not to assess the Acquisitions for landholder duty under sections 8 and 63 of the TAA 1997, as doing so would not be conducive to the good and proper administration of the Duties Act;

Ground 4: Alternatively, if Grounds 1-3 were not accepted by the Court, then the Respondent should exercise his discretion not to impose any penalties on the Appellant under section 30(3)(a) of the TAA 1997, as the Appellant took reasonable care to comply with its obligations under the Duties Act; and

Ground 5: Alternatively, if Grounds 1-3 were not accepted by the Court, then the Respondent should exercise his discretion not to impose any interest on the Appellant under section 28 of the TAA 1997, as the Appellant has not sought to take advantage of revenues laws to gain any advantage at any stage.

113 In essence, the basis for the appellant's primary ground advanced against the Assessment (being Ground 1) is that under the Victory Deed all distributions of trust property on a winding up were always subject to the discretion of the trustee and no unit holder ever had, at any time, an 'entitlement ... to a distribution of property from the landholder on a winding up of the landholder' within the meaning of s 79(1) of the Duties Act. Accordingly, upon the acquisition of the units by the 'Acquirers' on or around 10 October 2012, none of the 'Acquirers' acquired an 'interest' (as defined in s 79(1)) in the Victory Hybrid Unit Trust, much less a 'significant interest', in the Victory Hybrid Unit Trust as per s 79(2) of the Duties Act.[105] Accordingly, it says it follows that as no 'significant interest' was acquired, no liability could arise under the landholder provisions of the Duties Act, and the Assessment is therefore without any legal foundation and should be set aside.

Notice of Determination on 29 August 2023 disallows the Objection in full

114 On 29 August 2023, the Commissioner by his delegate, an SRO 'Revenue Specialist, Technical Advice and Review' officer, issued a Notice of Determination disallowing the Objection in full.[106]

115 Relevantly, in the Notice of Determination, when addressing the appellant's primary ground, the Commissioner applied s 89H when ascertaining the extent of the entitlements of the Transferees to a distribution of property on a winding up of the landholder, being the Victory Hybrid Unit Trust. In so doing, he found that 'the evaluation [of their entitlements acquired by the Relevant Acquisitions] obtained under sections 89H(2) and (3) of the Act is 100%' and that 'this is to be treated as the correct evaluation and there is no reason for the Commissioner to be satisfied that the application of section 89H(3) of the Act in the particular case would be inequitable'.[107]

116 On 11 October 2023, the appellant, being dissatisfied with the Notice of Determination, requested the Commissioner to treat the Objection as an appeal and to set the matter down for hearing in this Court.

117 On the appeal, the appellant relies only on its primary ground.[108] Accordingly, it identifies the question for determination in this proceeding as being:[109]

... whether each unitholding acquired by each of the three Transferees constituted, first, an 'interest' (as defined in s 79(1) of the Act) in the Victory Hybrid [Unit] Trust and, if it did constitute an 'interest' (which is denied), whether each Transferee acquired a 'significant interest' (as defined in s 79(2) of the Act) in the Victory Hybrid [Unit] Trust (also denied).

118 The appellant's submission that no landholder duty is exigible in the present case takes as its starting point the fact that the Victory Hybrid Unit Trust is a 'hybrid' trust, under which the trustee has discretion(s) as to how, and to whom, to distribute the trust property on a vesting of the trust.

119 Relevantly, in the present case, the appellant accepts that we have a landholder in the form of a private unit trust scheme,[110] being the Victory Hybrid Unit Trust.[111] But it says further that it is also a discretionary trust because the trustee has a discretion as to how property is to be distributed on a winding-up, and it contends that none of the beneficiaries has an entitlement to a distribution of the trust property of that discretionary trust.[112]

120 In essence, the appellant submits that when one has regard to 'the relevant vesting clause, being clause 17 of the Trust Deed', and its clear language and effect, 'it is not credible to suggest, much less accept, that the unitholders acquired an "interest", or a "significant interest", in the Victory Hybrid Unit Trust'.[113] Further, the appellant says '[t]his is not surprising because the landholder provisions were never intended to apply to this type of trust - which is underlined by the fact that the landholder provisions are not, and never have been, expressed to apply to hybrid trusts'.[114] Accordingly, the appellant seeks orders setting aside the Assessment, together with an order for costs and such order or further orders as the Court deems appropriate.[115]

121 The Commissioner, on the other hand, rejects the appellant's case and contends on the appeal that the appellant's analysis of the landholder provisions in the Duties Act 'is flawed because it does not apply s 89H',[116] which section the Commissioner contends 'is critical to understanding the appellant's liability to duty'.[117]

122 In essence, the Commissioner contends that the 'Maximisation of Entitlements Provision' in s 89H is relevant to the ascertainment of a person's entitlements to a distribution of property on a s 79(3) statutory winding up of a landholder that is a unit trust scheme. Accordingly, he submits that, in the present case, it is necessary to apply the procedure set out under s 89H, and perform the calculations and evaluations required under sub-ss (2) and (3), and then to compare the results as required under sub-s (4) and 'whichever evaluation results in a greater entitlement is the correct evaluation, for the purposes of [Part 2], of the entitlement' unless the Commissioner, being satisfied that the application of sub-s (4) in the particular case 'would be inequitable', determines otherwise.

123 In the present case, once the s 89H procedure is applied, the Commissioner contends that the rights each of the Transferees acquired in a landholder, being the Victory Hybrid Unit Trust, pursuant to the 10 October 2012 Transactions entailed a 'relevant acquisition' under s 78. That is because each of them, as holders of C Class Units, being Capital Units, acquired an 'interest' in a landholder under s 79(1), that was a 'significant interest' in the landholder under s 79(2). That, in turn, is a relevant interest under s 78(1)(a)(i) and is charged with duty by s 77.

The appellant says the Commissioner did not rely upon s 89H to support the Assessment

124 The appellant responded, by observing that when assessing the duty that the Commissioner contends is payable, the Commissioner relied on ss 78 and 79 of the landholder provisions, and did not even mention s 89H. The appellant submits that the 'exit letter' dated 30 September 2020, which accompanied the Assessment, demonstrates that the Commissioner did not place any reliance upon s 89H.[118] Indeed, it says, the documentation before the Court shows that 'it was the appellant, in fact, who first raised s 89H - pre-emptively - in its Objection, where it submitted, in a footnote, that "s 89H can have no application in the circumstances of this case".'[119]

125 However, the appellant says, the Commissioner re-formulated his position and changed his approach when responding to the appellant's Objection.

The Commissioner's Determination on the Objection did mention s 89H in support of the Assessment

126 In his 'Reasons for Determination', when responding to the appellant's Objection, the Commissioner's delegate summarised the approach taken: first, in making and issuing the Assessment, and secondly, in disallowing the Objection. In his 'Reasons for Determination', a relevant extract of which is reproduced below for convenience, it will be noted that the Commissioner expressly refers to and relies upon s 89H as being 'relevant to (and cannot be ignored when) ascertaining the extent of a person's entitlements (whether nil or greater) to a distribution of property on a winding up of landholder that is a unit trust scheme'.[120]

127 The Reasons for Determination commenced by identifying the 'relevant acquisition' under the landholder provisions that the Commissioner contends, on an application of the s 89H Maximisation of Entitlements provision, 'results in the Acquirers having an entitlement to a distribution of property on a notional winding up of the Unit Trust that is consistent with their respective entitlements as holders of C Class capital units', as set out below.[121]

Reasons for Determination

Relevant acquisition

The landholder provisions impose duty on a relevant acquisition in a landholder. At the time when the Acquisitions occurred on 10 October 2012 (relevant date), the Landholder Provisions provided relevantly that -

• A landholder includes a private unit trust scheme[122] that has land holdings in Victoria with a total unencumbered value of $1,000,000 or more - section 71(1)(a) of the Act

• A land holding is an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor or a profit à prendre - section 72(1) of the Act

• The vendor and purchaser under an uncompleted agreement for the sale of land are taken to be separately entitled to the whole of the land - section 74(1) of the Act

• A person makes a relevant acquisition if the person acquires an interest in a landholder that is of itself a significant interest in the landholder or that amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by the person - sections78(1)(a)(i) and 78(a)(ii)(A) of the Act

• A person has an interest in a landholder if the person has an entitlement (otherwise than as a creditor or other person to whom the landholder is liable), whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder - section 79(1) of the Act

• In the case of a landholder that is a private unit trust scheme, a person has a significant interest in the landholder if immediately after the interest was acquired the person would be entitled to 20% or more of the property distributed in the event of a distribution of all the property of the landholder upon a winding up of the landholder - section 79(2)(b) of the Act

• In section 79 of the Act, winding up of a landholder that is a unit trust scheme means the vesting of the trust property in the beneficiaries. Section 89H[123] (Maximisation of Entitlements Provision) is relevant to ascertaining a person's entitlements on a distribution of property - section 79(3) of the Act

• An interest is acquired if the person's interest increases in the landholder, regardless of how it is obtained or increased. Without limiting how an interest may be acquired, a person may acquire an interest in a landholder by the purchase, gift, allotment or issue of a unit or share, even though for the avoidance of doubt, an acquisition by way of transfer of units or shares is not necessary to acquire an interest in a landholder - sections 80(1), 80(2)(a), 80(7) of the Act

• If a relevant acquisition is made, either or both the person who made the acquisition and the landholder must prepare an acquisition statement (Acquisition Statement) and lodge it with the Commissioner within 30 days after the date of the relevant acquisition - section 83 of the Act

In this matter, each of the Acquisitions is a relevant acquisition under the Landholder Provisions. This is because the Commissioner correctly determined based on available and further information provided during the Investigation that -

• The Unit Trust is a landholder, being a private unit trust scheme[124] that at the relevant time, was entitled to the Land as purchaser under an uncompleted agreement for sale, i.e. the Contract. Based on the Valuation, the Land had an unencumbered value of at least $9,000,000. On this basis, the Company satisfies the requirement of having land holdings in Victoria with a total unencumbered value of more $1,000,000.

• On the relevant date, the Acquirers acquired an interest in the Unit Trust under section 79 of the Act, being an entitlement directly to a distribution of property on a winding up of the Unit Trust. This is because -

• Under the terms of the Unit Trust deed -

- The holders of C Class units are entitled to a distribution of capitalised earnings from the Unit Trust in direct proportion to the number of capital units held by such unit holders as at the date of distribution (clause 3.26.4(c))

- On and from the termination date of the Unit Trust, the trustee is to hold the trust fund for the holders of capital units subject to any distribution of capitalised earnings to any one or more beneficiaries (clause 17.1)

• The Acquirers acquired a significant interest that is of itself a significant interest in the Unit Trust (being 37 C class units acquired by each of JYPPL atf JYPI Trust and LBZ atf LBZI Trust) and/or that amounts to a significant interest when aggregated (being 26 C class units acquired by ZJFIPL atf ZJFI Trust)

• Immediately after the Acquisitions, each of the Acquirers would be entitled to more than 20% of the Unit Trust's property (including the Land) in the event of a distribution of the Unit Trust's property (including the Land) upon a notional winding up of the Company.

• Despite making a relevant acquisition under the Landholder Provisions, neither the Acquirers nor the Company atf the Unit Trust prepared and lodged an Acquisition Statement with the Commissioner within 30 days after the relevant date.

Pursuant to section 98 of the TAA, on an objection the objector has the onus of proving the objector's case.

Ground 1 of the Objection

The Commissioner has considered but does not accept Ground 1 of the Objection in so far as it is relevant to the issue of whether the Acquisitions resulted an 'interest' being acquired under s 79 of the Act. This is because:

• The Commissioner does not accept that Scenario 1 occurred whereby only A Class units were transferred at the time of the Acquisitions having regard to the following -

• . . .

[Scenario 1 is no longer pressed]

• For the reasons already provided, and on the basis that Scenario 2 occurred whereby all classes of units and in particular C Class units in the Unit Trust were transferred at the time of the Acquisitions, the Commissioner does not accept that due to the trustee's discretion to distribute the entire trust fund to Beneficiaries who are not unit holders and/or holders of C Class capital units, none of the Acquirers had an entitlement (being a fixed entitlement) to a distribution of property on a winding up of the Unit Trust. This is because -

• Under the Landholder Provisions, a winding up of a landholder that is a unit trust scheme means the vesting of trust property in the beneficiaries. Furthermore, a person's entitlement to a distribution of property is to be made on a notional winding up of the landholder. It is not concerned with what a person would actually receive (if anything) on an actual winding up the landholder.

• In this matter, the Unit Trust is a 'unit trust scheme' and all unit holders in the Unit Trust are beneficiaries.[125] On a notional winding up of the Unit Trust (which is defined as the vesting of trust property in the Acquirers as unit holders and therefore beneficiaries) carried out immediately after the Acquisition, the trust fund is deemed to be held for the Acquirers as the holders of C Class capital units in the Unit Trust. As already noted, a notional winding up of the Unit Trust is not concerned with what the Acquirers would actually receive (if anything) even in the event that the trustee's discretion could potentially be exercised to distribute the entire trust fund to beneficiaries who are not unit holders and/or holders of C Class capital units.

• Contrary to your claim that the Maximisation of Entitlements Provision can have no application to the circumstances of this matter, the Note to the definition of 'winding up' in section 79(3) of the Act expressly states that section 89H of the Act is relevant to ascertaining a person's entitlements on a distribution of property on a winding up of a landholder that is a unit trust scheme. On this basis, section 89H of the Act is relevant to (and cannot be ignored when) ascertaining the extent of a person's entitlements (whether nil or greater) to a distribution of property on a winding up of landholder that is a unit trust scheme.

• The Commissioner has determined on the basis of the information provided, that an application of the Maximisation of Entitlements Provision results in the Acquirers having an entitlement to a distribution of property on a notional winding up of the Unit Trust that is consistent with their respective entitlements as holders of C Class capital units having regard to the following -

- In the event of a distribution of the Unit Trust's property carried out in accordance with the constitution (Unit Trust deed), under clause 17.1, the Acquirers as holders of C Class capital units would be beneficially entitled to 100% of the property distributed. The C Class units provide the Acquirers with a title, right or claim within the ordinary meaning of 'entitle' to the capital of the Unit Trust. Whilst that entitlement will be outranked if and to the extent that a distribution is authorised to be made to beneficiaries who are non-unit holders, that possibility does not negate the existence of the entitlement.

- Clause 17.8.2 of the Unit Trust deed gives the Acquirers as Voting Unit Holders (A Class units) the power to exclude all beneficiaries other than the holders of C Class capital units, which if exercised would leave the trustee with no ability to distribute the Unit Trust's property to any person other than the Acquirers as holders of C Class units. As a result, the rights conferred by the C Class units would be varied from defeasible to indefeasible or absolute rights for the purpose of section 89H(3)(b) of the Act. When the power under clause 17.8.2 is exercised by the Acquirers in such a manner as would maximise the value of their entitlements, the evaluation of their entitlements acquired by the Acquisitions is 100%, which is no less than the evaluation obtained under clause 17.1.

- As the evaluation obtained under sections 89H(2) and (3) of the Act is 100%, this is to be treated as the correct evaluation and there is no reason for the Commissioner to be satisfied that the application of section 89H(3) of the Act in the particular case would be inequitable.

Anomalous duty outcome

Under section 89E of the Act, the Commissioner has discretion to reduce the duty payable on a relevant acquisition to an amount not less than the duty that would be payable under Chapter 2 of the Act had the subject of the relevant acquisition been a transfer of the land of the landholder to the person. This concession applies to relevant acquisitions, other than acquisitions of economic entitlements under section 81 of the Act or control under section 82 of the Act, where -

• The Commissioner is satisfied that the application of the Landholder Provisions results in an anomalous duty outcome, and - section 89E(1) of the Act

• The duty payable under the Landholder Provisions is greater than the duty that would be payable under Chapter 2 of the Act had the subject of the relevant acquisition been a transfer of the land of the landholder to the person - section 89E(2) of the Act

Both limbs referred to sections 89E(1) and (2) of the Act must be satisfied before section 89E of the Act can apply to a relevant acquisition.

Section 36 of the Act provides an exemption from duty for a transfer of dutiable property that is subject to a fixed trust to a beneficiary of that trust in certain circumstances and subject to certain requirements being satisfied. Among the requirements is that the Commissioner is satisfied that the transfer is not part of a sale or other arrangement under which there exists any consideration for the transfer - section 36(1)(e) of the Act.

Pursuant to section 36(5) of the Act, a fixed trust means a trust other than a discretionary trust (within the meaning of section 36A) or a trust to which a unit trust scheme relates or a superannuation fund (within the meaning of section 41A).

Section 36A of the Act provides an exemption from duty for a transfer of dutiable property that is subject to a discretionary trust to a beneficiary of that trust in certain circumstances and subject to certain requirements being satisfied. Among the requirements is that the Commissioner is satisfied that the transfer is not part of a sale or other arrangement under which there exists any consideration for the transfer - section 36A(1)(e) of the Act.

A discretionary trust in section 36A does not include a trust to which a unit trust scheme relates.

In this matter, section 89E of the Act does not apply to the relevant acquisitions resulting from Acquisitions. This is because the application of the Landholder Provisions would have resulted in the same duty outcome under Chapter 2 of the Act had the Land been transferred directly to the Acquirers. Furthermore, the Acquisitions are not exempt under Chapter 2 of the Act.

As a result, the Commissioner is not satisfied having regard to all the facts and circumstances, that both limbs of sections 89E(1) and (2) of the Act are satisfied for section 89E to apply to the circumstances of this matter.

On the appeal, the Commissioner seeks to rely upon s 89H to support the Assessment

128 As noted earlier, in the Commissioner's outline of submissions on the appeal, the Commissioner contended that s 89H 'is critical to understanding the Appellant's liability to duty'.[126] When addressing the operation of s 89H the Commissioner commenced by submitting:[127]

The operation of s 89H

Subject to the terms of the trust instrument, a holder of a unit in a unitised trust does not have an interest in particular trust property.[128] This does not, however, mean that such a person does not have an interest in the trust for the purposes of the [Duties Act]. This is because s 89H - the 'maximisation of entitlements' provision - must be considered when determining whether a person has acquired an interest in a landholder. This provision applies to any calculation of the entitlement of a person to participate in the distribution of the property of a landholder, including by way of a vesting of trust property. Since the Acquirers' liability to duty depends on whether they were entitled to participate in the distribution of the property of the Trust, it applies here.

Section 89H operates by requiring a comparison between two entitlements, one calculated under sub-s (2) and the other under sub-s (3). The first is calculated on the basis that there is a distribution carried out in accordance with the constitution or trust deed of the landholder and any law relevant to the distribution. The second is calculated on the basis that the person in question and any other person they have the power to direct, or who is an associated person, has exercised all discretions and powers in such a manner as would maximise the value of the person's entitlement. The greater of these two entitlements is deemed to be the person's entitlement for the purposes of the landholder provisions.

129 As to the first step, being the calculation of the entitlements of each of the Acquirers (or Transferees) under s 89H(2), the Commissioner contends that this 'must be based on a hypothetical distribution carried out "in accordance with the constitution of the landholder", which in the case of a trust means the trust deed'.[129] However, the Commissioner observes that s 89H(2) 'does not appear to contemplate more than one hypothetical distribution of trust property that would be in accordance with the trust deed',[130] adding that '[t]he assumption necessarily embedded within s 89H(2) is that there is only one distribution that qualifies for the purpose of the provision' and that '[t]his distribution must be determined by reference to the terms of the trust deed'.[131]

When this is done, the obvious conclusion is that the distribution must be the one that would occur if no specific decisions were taken or discretions exercised by the trustee. In other words, one asks: what would happen if the trust were wound up immediately without any further action on the part of the trustee?

The answer is that the default provision in cl 17.1 of the Deed would apply: 'the Trustee shall hold the Trust Fund for the holders of Capital Units'.

131 The Commissioner says that the 'only sensible alternative construction of s 89H(2) is that it asks what would in fact happen on the winding up of the trust in question'[133] and he notes, by reference to the evidence of Mr John Yun,[134] the director of the appellant, as to the distributions of trust income that have been made, that on 30 June 2020, the appellant resolved to distribute income of the Trust to the then unitholders in the Trust only.[135]

132 But the Commissioner contends that, whichever of these constructions is adopted, 'the conclusion is that under the hypothetical distribution required by s 89H(2), it is the Acquirers [being JY Property Pty Ltd (as trustee), ZJF Investments Pty Ltd (as trustee) and LBZ Pty Ltd (as trustee)] who receive the hypothetical distributions of 100% of the Trust Fund'.[136]

133 The second step, being the application of s 89H(3) to maximise the value of the interest of each of the Acquirers as an 'interested person', involves the identification of any associated persons of the relevant persons and then to ask what powers and discretions the relevant persons have, and which theoretical exercise of rights would result in the maximising of the value of the interest of the interested person, and then to arrive at the value of that entitlement. In the present case, the Commissioner contends:[137]

The result of the application of s 89H in this case is, therefore, that the entitlement of each one of the Acquirers in the Trust is 100%. Section 89H(1) provides that this calculation applies to the whole of Part 2 of Chapter 3 of the [Duties Act], the landholder provisions. It follows that, for the purposes of s 79(2), each Acquirer acquired a significant interest in the Trust. That in turn is a relevant interest under s 78(1)(a)(i) and is charged with duty by s 77.

The appellant's response to the Commissioner's submissions on s 89H

134 The appellant's response to the Commissioner's submissions on s 89H was to point to what it contended was 'a serious deficiency in the Commissioner's case', being the Commissioner's 'failure ... to identify the "interest" (as defined in s 79(1)) that the Commissioner says was acquired by the Transferees [Acquirers]'.[138] The appellant submits that s 89H is 'predicated on the person already having an entitlement' (under s 79(1)) ('interest')[139] - such that s 89H operates post-acquisition of that entitlement - and the purpose, or function, of s 89H is not to create entitlements but rather to 'maximise' that entitlement (if the circumstances require it) and work out the extent, and the 'value' of that entitlement ('interest').[140]

135 Accordingly, the appellant submits that if 'none of the Transferees acquired an 'interest' as per s 79(1), none of the Transferees will have held any 'entitlement' which could be 'maximised' under s 89H'.[141]

136 Further, the appellant referred to the Commissioner's contention (in his outline of submissions, [47] - reproduced in bold italics in the excerpt above) that the result of the application of s 89H in this case is 'that the entitlement of each of the Acquirers is 100%',[142] and responded as follows:[143]

Whatever types of power might have been contemplated by s 89H, it did not include a wholesale re-writing of the Trust Deed to deem each unitholder to be entitled to 100% of the trust property on a winding-up. Yet, this is what the Commissioner has proposed, in his construction of s 89H(3).

Assuming the above statement at [45] [sic[144]] by the Commissioner does not to [sic] contain a typographical error, the Commissioner is saying (without referring to a specific power in the Trust Deed) that the 'entitlement' of each Transferee on a winding-up is, by force of s 89H(3), a 100% interest - which would produce three relevant acquisitions of 100% (300% in total). Apart from amounting to the extreme imposition of triple taxation, this suggestion by the Commissioner is inconsistent with, not only the Assessment,[145] but also the Commissioner's Notice of Determination.[146] We assume this therefore to be a mistake in the Commissioner's Submissions. That position is, clearly inconsistent with the Commissioner's Assessment - which assessed each unitholder on a 37% / 37% / 26% basis[147] - totalling 100% between them. While the Assessment was issued under ss 78 and 79 of the Act and was not, in any way, relying on s 89H, the liability imposed was still only 100%, and not 300%.

The Commissioner's submission also is inconsistent with the Commissioner's Notice of Determination (by which time the Commissioner was relying on s 89H) which provided: ' ... the power ... is exercised by the Acquirers in such a manner as would maximise the value of their entitlements, the evaluation of their entitlements acquired by the Acquisitions is 100%'[148] (emphasis [in italics] added). As per the Commissioner's Notice of Determination, the value of the entitlements of all three Transferees combined (under s 89H(3)) was 100%. It had never been suggested that s 89H(3) operated to deem the value of the entitlement of each unitholder to 100% of the trust property on a winding- up (and the Assessment does not say this). Yet that is now the Commissioner's position - at least according to [43], [44] and [47] of his Submissions. Once again, it is assumed that this is a mistake and the Commissioner is only alleging that the value of the entitlement is equal to 100% of the property to be distributed on a notional winding-up (as he is seeking that the Assessment be confirmed, not increased (at [55])).

137 During oral submissions, counsel for the appellant referred to the Commissioner's argument that the 'entitlement' of each Transferee on a 'winding-up' is, by force of s 89H(3), a 100% interest - which the appellant says would produce three relevant acquisitions of 100% (amounting to 300% in total), yet the Assessment references a total of only 100% - and observed:[149]

MR GRACE: ... As Your Honour has seen from the assessment, it was 37 per cent, 37 per cent, 26 [percent] was the total, so 100 per cent. So, I'll just assume that's - you know. And what the commissioner is saying really under 89H(3) is that you'd get to 100 per cent, not 300. But even then, we say, well, we don't agree with any of the analysis or the type of amendment of the constitution.

But that - the 100 per cent that the commissioner gets under 89H(3) is the same as what the Commissioner - the same percentage that the commissioner got under 89H(2). There's no difference between a winding-up in accordance with the constitution and the laws applicable and the - a winding-up on this maximization basis. So, that indicates also there's really some misapplication of s89H. Section 89H more truly applied where it results in a different and a higher figure to what we would get on a standard distribution. Having regard only to the interests and not what I've termed before the potential interests upon a potential exercise of certain rights to increase winding-up rights.

138 The following exchange then took place:[150]

HER HONOUR: But that would effectively mean s 89[H] is not really doing anything, because the interest is already calculated in accordance with 79(1).

MR GRACE: Well, that's what we say. We say, if we're wrong on s 79(1) and each of the unit holders acquired an interest, that's 100 per cent. The appellant - - -

HER HONOUR: Together that's 100 per cent.

MR GRACE: Yes.

HER HONOUR: Yes.

MR GRACE: And that's what the assessment said, and there's no reason or basis - well, there's no legal basis, we say, to go to s 89H in a theoretical sense, if - on our argument, because there is no interest. But if we're wrong about that and there was an interest, you get 100 per cent, and there's no need to go to 89H, Your Honour. But where the commissioner is now starting at 89H and bypassing s79(1). Sorry, unless Your Honour - - -

HER HONOUR: No, I think I've got - - -

MR GRACE: - - - that concludes my submissions.

HER HONOUR: For the moment, I think I follow the arguments that you've raised. As you know, I'll ask for those aide-memoires to be prepared that I asked for at the outset.

MR GRACE: Yes, Your Honour.

The Commissioner's oral submissions in response on the 'statutory path' under s 79(1) and the second path involving the application of s 89H

139 It will be recalled that in the Commissioner's Determination on Objection, when dealing with Ground 1, and the application of the Maximisation of Entitlements Provision in s 89H, the Commissioner concluded that those provisions would result in the Acquirers 'having an entitlement to a distribution of property on a notional winding up of the Unit Trust that is consistent with their respective entitlements as holders of C Class capital units'[151] having regard to matters including the following:[152]

As the evaluation obtained under sections 89H(2) and (3) of the Act is 100%, this is to be treated as the correct evaluation and there is no reason for the Commissioner to be satisfied that the application of section 89H(3) of the Act in the particular case would be inequitable.

140 When counsel for the Commissioner addressed this aspect during oral submissions, the Court sought to better understand what the Commissioner contends is the operation and effect of the 'Note' (referring to s 89H) under s 79(3) and the proper application of the Maximisation of Entitlements Provision in s 89H, and in particular what is the resultant 'correct evaluation' for the purposes of Part 2 of Chapter 3 of the Duties Act.

141 In response, counsel for the Commissioner commenced by referring to the concept of the acquisition of an interest as provided for under s 79 - namely 'if the person has an entitlement (. . .), whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder' - and described as being 'the key phrase in this entire dispute'[153]. He said sub-s (2) deals with the acquirers in that landholder and the extent of their (respective) interests with a view to ascertaining whether they have a 'significant interest', and in the case of a landholder that is a private unit trust scheme, that is ascertained under sub-s (2)(a), by looking at whether, in the event of a distribution of all of the property of the landholder, immediately after the interest was acquired, the person would be entitled to '20% or more of the property distributed'.[154]

142 At this point, counsel referred to the 'Note' at the foot of s 79 which states:

Note

Section 89H is relevant to ascertaining a person's entitlements on a distribution of property.

He contended that the Note is part of the Duties Act, relying upon s 36(3A)(b) of the Interpretation of Legislation Act 1984 (Vic).[155]

143 Counsel for the Commissioner referred to the language there used, of 'ascertaining a person's entitlements', which he noted differs from the language used in s 89H of 'maximising' a person's entitlement, which section appears in Division 4 of the Duties Act and is headed 'Valuation and supplementary calculation provisions'. He added that the section heading 'is also a part of this Act'.[156] Counsel observed that the language in each of sub-ss 89H(2) and (3) speaks of the entitlement of the interested person as being something that is to be 'evaluated', and sub-s (4) requires that the results obtained by an evaluation of the interested person's entitlement in accordance with sub-ss (3) and (4) are then to be compared and 'whichever evaluation results in a greater entitlement is the correct evaluation' for the purposes of Part 2 'of the entitlement unless the Commissioner, being satisfied that the application of this subsection in the particular case would be inequitable, determines otherwise'.[157] Counsel submitted:[158]

So the statutory language is about evaluating the entitlement, which we think is closer to what's in the note about ascertaining in the sense of working it out rather than the sense of valuing or maximising. But that's the statutory language that's used there.

144 Returning then to s 79, counsel focussed on sub-s (3) and described it as being '[t]he answer to my friend's case, I hesitate to say entire case, but it's close'.[159] He contended that the winding-up that is referred to in sub-s (3) is a 'statutory concept of a winding-up', and clarified that it is not, as counsel for the appellant had characterised it, 'a notional winding up'. He continued, submitting that if one goes back to s 79(1) and substitutes the definition of 'winding up' in sub-s (3) for the term 'winding up' in the last line, then when one is dealing with a unit trust scheme case, the last two lines of s 79(1) would effectively read an entitlement 'to a distribution of property from the landholder on the vesting of the trust property in the beneficiaries of the landholder'.[160]

145 Counsel emphasised the 'statutory' nature of the winding-up concept that is relevant for the purposes of Part 2 of Chapter 3, submitting:[161]

MR YOUNG: ...But the critical point is it's not a notional winding up, it's a statutory winding up. And, in fact, that's not even the right way of describing it. Winding up here is just a statutory term. It's not anything that otherwise looks like a winding up that we're used to seeing in other statutes or to the extent it exists at general law.

It's a statutory concept. In a unit trust scheme, this only has relevance, of course, or context, meaning, application, if we have a trust deed to work out what this all means. And we do. In this case, we have that trust deed. So we know the vesting here is a statutory vesting. My friend wants to say vesting here means clause 17. We say no. This is the statute saying you're doing the vesting. And it's telling you what is vested, and it's telling you in whom it's vested. It's not telling you anything about clause 17.

It's in effect a substitution for clause 17. That's the vesting that's going on. Now, clause 17, of course, is not, my friend called it a vesting clause, to the extent that's a shorthand description of what it might do in some circumstances. Perhaps that's accurate. But it's really just a trust fund clause that says what it says.

146 Counsel for the Commissioner then submitted that there are two ways of applying the definition of 'winding up' in s 79(3). First, he said, when determining the Objection the Commissioner was of the view that, in sub-s (3), the concept of 'beneficiaries' has to be read 'by reference to the way the same word is used in the definition of unit trust scheme'[162] with the result that in the unit trust scheme here, the Victory Hybrid Unit Trust, the unitholders (only) are relevantly the beneficiaries. Counsel then referred to the Determination, where the Commissioner's delegate explained this position stating (inter alia):[163]

In this matter, the Unit Trust is a 'unit trust scheme' and all unit holders in the Unit Trust are beneficiaries# [see fn 8 reproduced below]. On a notional winding up of the Unit Trust (which is defined as the vesting of trust property in the Acquirers as unit holders and therefore beneficiaries) carried out immediately after the Acquisition, the trust fund is deemed to be held for the Acquirers as the holders of C Class capital units in the Unit Trust. As already noted, a notional winding up of the Unit Trust is not concerned with what the Acquirers would actually receive (if anything) even in the event that the trustee's discretion could potentially be exercised to distribute the entire trust fund to beneficiaries who are not unit holders and/or holders of C Class capital units.

_____________________________________________

#[Footnote 8 stated (emphasis in bold italics added):

Clause 3.4 of Unit Trust deed. Furthermore, based on the statutory definition of 'unit trust scheme' in s 3(1) of the Act, the unit holders in the Unit Trust are the beneficiaries, since they are the persons having funds available for investment in the scheme and who hold units in the scheme, being a right, or a right to a right to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting. The non-unit holder beneficiaries, who have not contributed any funds to the scheme and who do not have proportionate rights on a distribution, are not 'unit' holders or 'beneficiaries' entitled to any 'vesting' within the contemplation of the Act.]

147 Counsel described the path that was taken by the Commissioner in the Determination as being 'the statutory path which treats beneficiaries as having some kind of statutory meaning'.[164]

148 Counsel submitted that the second path that is available, which counsel said 'is the one that we're contending for', is through s 89H, and s 89H(2) in particular.[165] Counsel continued, discussing the second path and submitting:[166]

MR YOUNG: ... But to get to that, I have to go through s89H in some detail, but in particular at s89H(2). So the question that Your Honour asked about the beneficiaries in sub-s3, you answer it in one of those two ways. If you answer it by reference to the statutory path, then my friend is right to say if we succeed on s79, then nothing else needs to be considered by Your Honour. We're not sure that's a hundred per cent right. We actually think that the correct way of analysing this is not via that statutory path, it's via the 89H path, and it's because, as we've tried to say, you can't make assumptions about all the various kinds of things that might be unit trust schemes for the purposes of this Act when you're applying the Act.

So it's obviously capable of applying in many different circumstances, to many different kinds of arrangements. So for that reason, when you apply s79(3), the beneficiaries, to work out who that is, yes, you will need to look at the trust deed. That trust deed here, obviously includes persons other than the unit holders. But that doesn't mean my friend wins, what that means is, for the purposes of s79 of the Act, we know that each of the people who are beneficiaries under this scheme, have an entitlement. What we don't know is the extent of that entitlement.

149 Counsel then proceeded to outline the position the Commissioner contended for on the appeal concerning the second path, and the operation of s 89H, effectively for the first time. In those circumstances, the Court requested that counsel provide a further aide- mémoire setting out the Commissioner's position, to which the appellant could respond.

The Commissioner's aide-mémoire concerning s 89H(3)

150 Following the hearing, on 20 December 2024, the Commissioner filed his foreshadowed aide-mémoire concerning s 89H(3). In that document, by way of a further response to the oral submissions and exchange above, the Commissioner addressed the statement that was made in his outline of submissions[167] to the effect that for each Acquirer (or Transferee), the amount evaluated by s 89H(3) is 100%, and stated:[168]

Section 89H(3) prescribes a calculation to be made based on a distribution carried out after the interested person and any Relevant Persons have exercised any relevant powers or discretions in such a manner as would maximise the value of the entitlement of the interested person. In any case in which s 89H(3) applies, the maximum interest calculated by s 89H(3) would be 100% because no person could have any greater interest in the property of a landholder. However, where more than one person acquires an interest, the aggregate of all of their interests calculated in accordance with s 89H(3) may exceed 100%.

For the reasons set out in the Respondent's Outline of Submissions dated 22 July 2024 at [44]-[45], for each Acquirer, the amount evaluated by s 89H(3) is 100%.

In those circumstances, the Commissioner could have (among other things):

(a) assessed each Acquirer on the basis that it had acquired a 100% interest; or

(b) if he had been satisfied that the application of s 89H(4) would be inequitable in this particular case, determined that the interest of one of more of the Acquirers should be some amount other than 100%.

The Commissioner could also have - separately from assessing the Acquirers - assessed the Appellant as trustee of the landholder, relying on s 85(1)(b). Since each Acquirer acquired a 100% interest, the Appellant was prima facie liable to pay duty on the equivalent of an acquisition of a 300% interest. This would be an inequitable outcome for the Appellant and so the Commissioner would 'determine otherwise' under s 89H(4) and charge duty on the Appellant on the basis of the acquisition of a 100% interest only.

This is what the Commissioner in effect did. However, the Commissioner acknowledges that the Assessment is inaccurate in the following ways:

(a) it describes the interests acquired by each Acquirer as being less than 100%, and the aggregate of interests being 100% rather than 300%; and

(b) it does not record that the Commissioner 'determined otherwise' under s 89H(4) and he accepts that in terms he did not do so.

Notwithstanding these inaccuracies, the Assessment charged the correct amounts of duty, penalty tax and interest on the Appellant. In those circumstances, it would not be appropriate to remit the Assessment to the Commissioner. Any error in the Assessment is immaterial.

The appellant's response to the Commissioner's aide-mémoire concerning s 89H(3)

151 The appellant responded to the Commissioner's aide-mémoire concerning s 89H(3) on 23 December 2024.[169] Therein, the appellant reiterated that it considers s 89H to have no application to the acquisitions of the units in this case, and maintains that, even if the Court considered that s 89H was not precluded from prima facie applying, s 89H(3) could not apply to the facts of this case.[170] In so doing the appellant relied on the reasons set out in its earlier submissions[171] (where it contended that the unit holders in this case had no relevant power or discretion 'to vary the rights conferred by units ... in the landholder') and its reply submissions (where it contended that the Commissioner's application of s 89H(3) would be a dramatic rewriting of cl 17 so as to effectively deem each unit holder to be entitled to 100% of the trust property on a winding up).[172] It also called in aid its recently filed memorandum concerning the history of the landholder provisions, where it made reference to the 2012 EM, and summarised (what it contended was) the effect of s 89H stating:[173]

Section 89H is anti-avoidance in nature and is directed to 'maximising' specific, unexercised winding-up rights that have been conferred in [sic] a shareholder/unitholder, or associated person.[174]

The appellant contended that 'no such rights were granted to any person in this case'.[175]

152 Further in the appellant's s 89H response, it took issue with the 'new basis' advanced for the Commissioner's Assessment.[176] In essence, the appellant pointed to the 'inaccuracies' in the Assessment being first, the fact that it 'reflected an acquisition by each acquirer of 37%, 37% and 26% instead of 100%'[177] in each case, and secondly, that the Assessment does not record that the Commissioner 'determined otherwise' under s 89H(4) and he accepts that in terms he did not do so. On the contrary, as the appellant observes,[178] in the Determination on the Objection, the Commissioner did, in fact, turn his mind to and address the discretion available under s 89H(4), but declined to exercise it, stating:[179]

As the evaluation obtained under sections 89H(2) and (3) of the Act is 100%, this is to be treated as the correct evaluation and there is no reason for the Commissioner to be satisfied that the application of section 89H(3) of the Act in the particular case would be inequitable.

153 Further, the appellant submitted that in addition to the 'procedural fairness' implications attendant upon the Commissioner's 'new basis' approach, it is not open to the Commissioner to change the basis for the defence of his assessment without seeking leave to do so under s 109(b) of the TAA.[180] The appellant submitted:[181]

The Commissioner has now radically changed the basis upon which he would disallow the appellant's objection yet the Commissioner has not sought this leave under s 109. While the appellant considers the Commissioner's case to be hopeless - whichever version of it he chooses to adopt and whether or not leave is granted under s 109(b) - the appellant opposes the Commissioner being allowed to change his defence at this late stage (ie, at a time when judgment in the case has been reserved).

At the mention held on 14 February 2025, the appellant did not oppose the respondent being granted such leave as may be required

154 Following the conclusion of the hearing, matters raised in the documents filed by the respective parties necessitated the matter being called on for mention before the Court on 14 February 2025, in the following circumstances.

155 Following the hearing of the appeal, two documents were filed by the parties on 20 December 2024: first, the Commissioner's aide-mémoire on s 89H; and secondly, the appellant's memorandum concerning the legislative history of the Duties Act. Three days later, the appellant filed its response to the Commissioner's aide-mémoire on s 89H, in which it contended that the Commissioner cannot unilaterally change the basis for the defence of his assessment and without seeking leave to do so under s 109(b) of the TAA.

156 On the morning of 5 February 2025, the solicitor for the Commissioner, by email to the Court and copied to the appellant's solicitor, complained that the appellant's memorandum on the landholder provisions was not the document that the Court had requested at the hearing, as it comprised a 60-page document entitled 'Appellant's memorandum on the landholder provisions' together with its 29 appendices running over 1000 pages, and was effectively 'a lengthy closing written submission filed in circumstances where (a) there was no leave to do so, (b) the Commissioner has not prepared a similar written closing submission (because he did not have leave to do so) and (c) contrary to what her Honour contemplated, the Applicant's documents were not exchanged with the Commissioner prior to being sent to her Honour's chambers'.[182] The appellant's solicitor responded the same day submitting 'that the email sent by the Commissioner was an inappropriate communication and that, in accordance with the established practice of the Court, this communication with the Court by the Commissioner should be disregarded'.[183]

157 Against that background, by email on 7 February 2025, the Court informed the practitioners for the parties that her Honour proposed 'to "short circuit" the ongoing exchange of correspondence between the parties, and call the matter on for mention ... on Friday, 14 February 2025'.[184]

158 At the mention, counsel for the appellant informed the Court that the appellant did not oppose the Commissioner being given leave, stating:[185]

And in relation to the second matter, Your Honour, we just say under s109, it's just a requirement of the Taxation Administration Act that - where the commissioner looks to rely or any other party, but in this case the commissioner look to rely on grounds that are different from the grounds set out in the disallowance of the objection, it is customary or it's an obligation for the commissioner to seek leave, so we just say the commissioner must seek leave to rely on the new grounds as set out in the - his submissions before trial, and his submission at the hearing. That's just a requirement of the act Your Honour.

We don't oppose that leave been given. So it's all we need to say about that Your Honour.

159 Counsel for the Commissioner responded to the effect that they did not think leave was required, but added:[186]

We propose to do on the leave point, we - our initial position - well our threshold position is we don't need, we think it's sufficiently covered in the court book, we can make a paragraph or two submission for Your Honour about that in the document that Your Honour will receive in April. But we will also put it on the alternative basis that if leave is required we will seek it, and I do seek it, but given that it's not opposed I don't think that should be a difficult -

160 Thereafter, the following exchange took place to confirm the position reached:[187]

HER HONOUR: Well I think if you [counsel for the Commissioner] just clarify that in the submission that you filed, that will put an end to the issue, I can consider if I need to whether leave is necessary but it's not opposed so it's - - -

MR YOUNG: Not opposed.

HER HONOUR: At least we - - -

MR YOUNG: I think the short - - -

HER HONOUR: - - - can then strike that off the list of contentious matters.

MR YOUNG: But the short cut through is Your Honour will hear from us once more, it will be on that date in April and it will cover everything, it will cover this point that we've just discussion. ...

We didn't want to make a point of leave as a matter of technicality and formality, it was more whether it was assistance to Your Honour, we've heard it is, we'll respond -

161 In those circumstances, the Orders made at the mention held on 14 February 2025 recorded under 'Other Matters':

(a) ...; and

(b) informed the Court that it did not oppose the respondent being granted such leave as may be required pursuant to s 109(b) of the Taxation Administration Act 1997 (Vic) for his defence of the assessment.

Further, an order was made, by consent, that:

1. The respondent have leave to file and serve a document in response to the appellant's document [concerning the legislative history of the Duties Act] filed on 20 December 2024 by 4.00pm on Friday, 11 April 2025.

162 Accordingly, at the mention, the position was that leave was sought and there was no opposition to the grant of such leave as may be required under s 109(b) for the Commissioner to defend the Assessment on the basis outlined in his aide-mémoire on s 89H.[188]

163 As matters transpired, in the Commissioner's responding document no leave was formally sought.

164 In the Commissioner's submissions filed on 11 April 2025, in response to the appellant's memorandum of 20 December 2024 concerning the legislative history of the Duties Act, the Commissioner submitted, inter alia, in relation to s 89H that:

(a) the maximisation of entitlements provision, currently s 89H, is a 'key provision' for the analysis to be conducted in the present case;[189]

(b) as s 89H(1) provides that s 89H applies to any calculation under the landholder provisions of the entitlement of a person to participate in the distribution of the property of a landholder on a winding up, when determining what entitlement each of the 'Acquirers' in the present case had on a hypothetical winding up, s 89H must therefore be applied;[190]

(c) when the evaluation required by s 89H(2)-(4) is undertaken, the result is that the interest of each Acquirer (or Transferee) was 100% and by reason of s 85(1) the appellant - being the landholder - is jointly and severally liable with the Acquirers for duty (and thus the appellant is liable to duty on an acquisition of a 100% interest of the Property).[191]

165 Further, the Commissioner submitted:[192]

It is trite that the Court's role is to construe the [Duties Act] and apply it to the facts of the present case. It is no answer to the Commissioner's case to say that arguments made in this proceeding have not been made previously or even that they are not consistent with arguments previously made.[193] If the person with responsibility for administering legislation comes to the view that a construction not previously appreciated is the correct one, it is incumbent on that person to apply that construction. Without suggesting that it is what has happened here, the Commissioner observes that it is no part of the function of a decision-maker to persist in a wrong interpretation of legislation. For that matter, it is no part of the function of a court either.

However, that is not what has happened here. None of the cases referred by the Appellant concerned a unit trust with the sorts of discretions found in the Trust. This proceeding therefore raises novel questions about the applicability of the landholder provisions to that class of hybrid trust.

The appellant's response - s 89H is not directed to the creation of 'entitlements' or 'interests' and the 'intended operation' or 'scheme' of the landholder provisions has only ever been directed to targeting acquisitions of interests in companies and in '****fixed' unit trusts and does not apply to hybrid trusts

166 In the appellant's reply to the Commissioner's response submissions concerning the legislative history of the Duties Act, filed on 9 May 2025, the appellant made the following observation:[194]

The Appellant notes that the Commissioner has not sought leave to rely on the new ground, as set out in his Submissions dated 20 December 2024. While the Appellant has said that it does not oppose leave, if the Court accepts the Appellant's submission that the Commissioner's current basis for defending the assessment at trial is different from that given by the Commissioner when disallowing the objection, it is a statutory requirement that leave be granted.[195] In this case, the Commissioner's case as set out in his Submissions dated 20 December 2024 is, it is submitted, significantly different from that set out in his Notice of Determination.[196] Leave is therefore (formally) required under s 109 of the TAA.

167 If, as appears to be the case, the appellant continues to maintain that, notwithstanding what is recorded in paragraph 4(b) of 'Other matters' in the orders made on 14 February 2025, a formal order recording a grant of leave under s 109(b) of the TAA is necessary to be made to formalise and make clear the position so as to permit the Commissioner to rely on his re-vamped s 89H argument, I will hear from the parties following the delivery of these reasons for judgment.

168 Aside from its argument that there was no formal grant of leave, the appellant takes issue with the Commissioner's reliance upon s 89H for several reasons.

169 First, it says, the Assessment was not issued by the Commissioner on the basis of s 89H, but rather in reliance upon s 79(1), and his attempt to now rely upon s 89H to justify the Assessment 'is nothing more than an afterthought by the Commissioner' and 'the Commissioner's sole argument in support of the assessment cannot be reconciled with the assessment'.[197]

170 Secondly, the appellant points out that s 89H is located in Division 4 of Part 2 of Chapter 3 of the Duties Act, which deals with 'Valuation and Supplementary Calculation Provisions', and is not located amongst the 'charging' provisions in Division 2. So understood, the appellant submits it follows that s 89H is not directed to the creation of 'entitlements' or 'interests'. Rather it is a provision which operates to maximise or increase an existing entitlement (or interest) already held by a person.[198]

171 The appellant's position is that, in the present case, 'none of the unitholders, on acquiring their units, acquired an "interest" in the Victory Hybrid Unit Trust (a "landholder") under s 79(1) because none of the unitholders acquired an "entitlement to a distribution of property from the landholder [the Victory Hybrid Unit Trust] on a winding up of the landholder [the Victory Hybrid Unit Trust]'.[199]

172 Accordingly, the appellant contends that:[200]

As none of the unitholders acquired an 'entitlement' (as referred to in ss 89H(1)-(3)), there is no basis for the application of s 89H to maximise that 'entitlement'. Section 89H is anti-avoidance in nature and is directed to 'maximising' specific, unexercised winding-up rights that have been conferred in a shareholder/unitholder, or associated person.[201]

173 In the circumstances, the appellant submits that s 89H can have no application unless a person has first acquired an 'interest' in a landholder under s 79(1) and, in the present case, as none of the Transferees acquired an interest in the Victory Hybrid Unit Trust under s 79(1), s 89H cannot possibly support the Assessment.[202]

174 Further, the appellant contends that:[203]

Not only did s 79, by its clear terms, fail to apply to the acquisitions by the unitholders (Alcan[204]), it is the case that Parliament never intended that s 79, or the landholder provisions generally, apply to acquisitions of units in hybrid trusts (or acquisitions of any rights in discretionary trusts). It was always Parliament's intention, as ss 79(1) and (2) show, that the landholder provisions apply to acquisitions of fixed interests in companies and unit trusts. The assessment must, with respect, be set aside.[205]

175 Central to the appellant's case is its submission that the 'intended operation' or 'scheme' of the landholder provisions has only ever been directed to targeting acquisitions of interests in companies and in 'fixed' unit trusts. It says this conclusion is[206]

based on the consistent requirement under s 79(1) - and all its predecessor provisions - which have consistently defined 'interest' by reference to an 'entitlement' to a distribution of property from the landholder on a winding-up.[207] An 'interest' under s 79(1) must, by its definition, provide a person with a fixed entitlement to a distribution of property of the landholder on a notional winding-up (which fixed entitlement, if it exists, may, in the right circumstances, be maximised under s 89H).

176 The appellant maintains that '[a]n entirely different regime within the landholder provisions exists (and has always existed) to deal with, and to potentially subject to landholder duty, the landholdings of discretionary trusts (including hybrid trusts)'.[208] The appellant contends that from their inception, the landholder provisions and the predecessor land rich provisions have applied only to companies and (fixed) unit trusts and have never contained provisions that imposed duty on acquisitions of interests in 'discretionary trusts' or 'hybrid trusts' (being unit trusts which also have features of a discretionary trust).

177 Counsel for the appellant submitted that 'that was a deliberate decision by parliament in 1986 and nothing has changed since then'[209] but he acknowledged that there was nothing in the second reading speeches or any other ancillary aids to interpretation to that effect. Rather, he said, the submission was based on 'the language of the legislation as well as the scheme of the legislation',[210] and in particular provisions such as s 71 which sets out what a landholder is for the purposes of Part 2 of Chapter 3, and the definition of 'unit trust scheme' in s 3. Further, he explained:[211]

But the unit trust scheme as defined [in s 3(1)], Your Honour, we say, does not include - would not include a discretionary trust or a hybrid trust. And a hybrid trust which has all the features of a discretionary trust would also be a discretionary trust, which I'll come to next, if it pleases Your Honour. So, that submission is simply based on - thus far - the s71 [definition of landholder] and the definition of unit trust scheme.

178 The appellant submits that where units are held in a hybrid trust such as the one under consideration here - which has features of both a 'private unit trust scheme' (as defined) and a 'discretionary trust' (as defined[212]) - it is most unlikely that the acquisition of such units will ever constitute the acquisition of an 'interest' in a landholder under s 79. The appellant says:[213]

This is because, on a vesting of a typical hybrid trust (such as the Victory Hybrid [Unit] Trust), the trustee will typically have a discretion, or series of discretions (as in the Trust Deed for the Victory Hybrid [Unit] Trust), that it may exercise when deciding how, and to whom, the trust property should be distributed (clause 17 being the relevant clause of the Trust Deed for the Victory Hybrid [Unit] Trust).

179 Further, the appellant submits that where, as here, the trust is (also) a discretionary trust, the effect of s 76(2) is 'to deem the beneficiaries of the Victory Hybrid Trust to own or otherwise be entitled to the property held by the Victory Hybrid Trust'.[214] But the appellant confirmed that it 'is not submitting that s 76(2) should be read as deeming the beneficiaries of the Victory Hybrid Trust to be the owners of all the trust property to the exclusion of the trustee of the Victory Hybrid Trust with the result that the Victory Hybrid Trust would not have any "land holdings" (and would not be a "landholder" for that reason: s 71(1) of the current landholder provisions)'.[215]

The Commissioner's reply - the hypothetical statutory winding up contemplated by s 79(3) involves a vesting of the Trust property in the Unit Holders - the Commissioner rejects the appellant's 'discretionary trust' argument

The statutory winding up effected under s 79(3)

180 In the Commissioner's response submissions dated 11 April 2025, counsel for the Commissioner briefly restated the gist of the Commissioner's case, relevantly as follows:[216]

Section 79(1) of the [Duties Act] provides that a person has an interest in a landholder if the person has an entitlement to a distribution of property from the landholder on a winding up of the landholder. Winding up for the purposes of s 79(1) does not have its ordinary meaning but rather has a meaning given to it by s 79(3). In the case of a landholder that is a unit trust scheme, a winding up means 'the vesting of the trust property in the beneficiaries'. Clause 3.4 of the Trust Deed provides that the Unit Holders (ie the Acquirers) are beneficiaries.

It follows that the hypothetical statutory winding up contemplated by s 79(3) involves a vesting of the Trust property in the Acquirers.

This having been established, the next question is what entitlement each of the Acquirers had on a hypothetical winding up. Sub-section (1) provides that s 89H applies to any calculation under the landholder provisions of the entitlement of a person to participate in the distribution of the property of a landholder on a winding up. Section 89H must therefore be applied in this case. When the evaluation required by s 89H(2)-(4) is undertaken, the result is that the interest of each Acquirer was 100%. By reason of s 85(1) the Appellant - being the landholder - is jointly and severally liable with the Acquirers for duty. Accordingly, the Appellant is liable to duty on an acquisition of a 100% interest of the Property.

The Commissioner's response to the appellant's 'discretionary trust' argument

181 In his outline of submissions on the appeal, the Commissioner responded to the appellant's initial submission that the landholder provisions were never intended to apply to discretionary or hybrid trusts. First, he noted that no authority was cited in support. Secondly, he observed that 'the classes of landholder' to which the landholder provisions were intended to apply are those listed in the s 71 definition of 'landholder', being private unit trust schemes, private companies, wholesale unit trust schemes, listed companies and public unit trust schemes.[217] Each of these classes is defined in s 3 as is the broader term 'unit trust scheme'. Importantly, he submitted, a unit trust scheme as defined in s 3 'is not limited to those trusts wherein a beneficiary has a defined, fixed interest in trust property' and so discretionary trusts and hybrid trusts may fall within the definition. Indeed, in the present case, the appellant accepts that the Victory Hybrid Unit Trust is a unit trust scheme.[218]

182 Further the Commissioner submitted:[219]

The Appellant's assertion is also gainsaid by s 89H itself. The purpose of s 89H is to deal with entities that do not have fixed interests in a landholder, but which may have an interest after the exercise of powers and discretions that they possess (together or with others they control). A discretionary trust is a quintessential example of such a situation.

Section 89H should be understood as being anti-avoidance in nature, something acknowledged by the Appellant.[220] It is intended to prevent a person from avoiding duty by acquiring interests in landholders that are not fixed but will or may, as a matter of practice, come about. Discretionary trusts are not the only vehicle by which this may be done, but they are an obvious example.

183 In his response to the appellant's memorandum concerning legislative history', the Commissioner responded in more detail to the further submissions (and legislative materials) concerning discretionary trusts that were filed by the appellant after the hearing.[221]

184 First, the Commissioner observed that the 'Constructive ownership of landholdings - discretionary trusts' provision relied on by the appellant, being s 76(2), is addressed not to acquiring interests but rather to determining whether a person is a landholder and the value of any landholding.[222] In the case of a discretionary trust, the starting point under s 76(2) is that a beneficiary 'is taken to own or to be otherwise entitled to' the land the subject of the trust except as determined otherwise by the Commissioner. Thus, the Commissioner points out, 'a person who is not the registered owner of any fee simple land may nonetheless be a landholder by reason of s 76(2) and transfers of shares or units in that person may be dutiable'.[223]

185 Further, turning to the legislative scheme, as it applies to discretionary trusts, and the legislative purpose of the landholder provisions, the Commissioner submitted that:[224]

It is important to recognise that the landholder provisions do not have a mechanism for charging duty on acquisitions of interests in discretionary trusts. In other words, it is not as if acquisitions of interests in the Trust might have been dutiable under provisions relating to discretionary trusts but for some feature. If the fact that the Trust has discretions means that the provisions applying to unit trusts cannot apply to it, then there is no other way to bring to duty acquisitions of units in it.

Legislative purpose

The purpose of the landholder provisions - and before them of the land rich provisions - was to prevent the avoidance of duty by the use of transfers of shares and units to transfer the value of land. It was always a feature of those provisions that transfers of units in a unitised trust could involve the making of a relevant acquisition and therefore be dutiable.

This was recently confirmed by the Court of Appeal in Oliver Hume Property Funds (Broad Gully Rd) Diamond Creek Pty Ltd v Commissioner of State Revenue, where the Court observed:[225]

a consideration of Chapter 3 as a whole evinces a Parliamentary intention to ensure that, as far as possible, any transfer of an economic interest in land is treated similarly for revenue purposes. Where such a transfer is not effected by a simple direct transfer of land, but is rather effected by the acquisition of a 'significant interest' in a landholder, it should be taxed in a similar way as if there was a direct transfer of the interest in the land.

186 In the context of the present case, where the participants had recorded in the MPC the basis on which they had agreed to invest funds to enable Victory to purchase the Land, the Commissioner submitted that:[226]

... It is apparent from the document that the Trust (which is not in terms contemplated by the MPC) was an investment vehicle for the three Participants. There is no suggestion that the Participants intended to use the Trust as a mechanism for distributing the value of the Property or its income to others. The Participants could have purchased the Property directly but instead did so through the Trust. Had they purchased the Property directly and subsequently transferred their interests to their corporate vehicles, transfer duty would have been charged under Ch 2 of the DA. The intention referred to in the above passage from Oliver Hume would prefer a construction of the landholder provisions that charged equivalent duty on the equivalent transfer of units in the Trust.

If the Appellant's argument is accepted then the application of the landholder provisions to unit trusts could be avoided altogether by the simple contrivance of inserting into the unit trust deed a discretion, such that the rights of unitholders is contingent on that discretion. Such a discretion could be added to every unit trust, no matter how unlikely its exercise. The unitholders and trustee could even enter into a side agreement by which the latter promised the former never to exercise the discretion. On the Appellant's case, the unit holders in this scenario would not be beneficiaries, would not be entitled to the property of the trust on a winding up and units could be transferred entirely free from duty.

At [47] of the Appellant's Memorandum, the Appellant submits that where a notional vesting of the property of a trust occurs, 'what cannot be known is which 'beneficiaries' of the trust will receive what, if anything on a vesting of the trust property'. That submission is of course correct for a wholly discretionary trust. It is not, however, correct where the terms of the trust conditionally vest the trust fund in the unitholders and where that condition is not fulfilled.

187 The Commissioner then referred to cl 17.1 of the Victory Trust deed and reiterated his earlier arguments about the vesting of the trust property in the beneficiaries that takes place under s 79(3) upon a statutory winding up of a landholder that is a unit trust scheme. He submitted that:[227]

... In the present case, the Appellant does not say that, at the moment the Acquirers acquired their interests, any discretion had been exercised by it as Trustee that would have the effect of displacing the conditional vesting brought about by cl 17.1.

The question is: had there been a notional winding up undertaken at the moment the Acquirers acquired their Units, would the property of the Trust have vested in them? The answer is yes because no distribution had been made to any other beneficiaries and so cl 17.1 provides that the Trustee shall hold the Trust Fund for them.

The Appellant's reply submissions concerning the discretionary trust argument

188 In the appellant's reply submissions dated 9 May 2025, the appellant responded to the Commissioner's submissions addressing the discretionary trust argument.

189 The appellant referred to the Commissioner's claim[228] that if the appellant's argument is accepted then landholder duty could be avoided by inserting a discretion on distribution into a trust deed for any unit trust, and observed:[229]

That may or may not be correct, but that possibility cannot control the construction of s 79(1) (and s 79(3)), as a matter of statutory interpretation. Secondly, there is no evidence that the distribution discretion in clause 17 was inserted into this deed for any such purpose.

190 As to the Commissioner's reference to a 'conditional vesting' of the trust under s 79(3),[230] the appellant responded by submitting:[231]

However, s79(3) does not posit a 'conditional vesting' of trust property, nor does it refer to a 'vesting' in isolation. What ss 79(1), 79(2) and 79(3) require is a notional distribution of the property of the landholder on a vesting. Contrary to what the Commissioner has said at [57], there must be, not only a 'vesting' of the trust, but there must also be a 'distribution of property' from the landholder on that vesting. That distribution must, naturally, be one undertaken in accordance with the distribution clause of the relevant trust deed. At [58], the Commissioner said that: 'The notional winding up takes place at the moment of acquisition and does not make assumptions about what might happen in the future'. As submitted above, it is not the winding up that is determinative under ss 79(1) and (2), but it is the distribution of the trust property on the winding up of the landholder that is. Further, it is not the distribution of the trust property 'at the moment of acquisition' that is relevant but, rather, as provided for in s 79(2), it is the (notional) 'distribution of all the property of the landholder' at the time 'immediately after the interest was acquired'. So, the notional vesting and distribution is to be undertaken 'immediately after' the acquisition of the interest (assuming there has been the acquisition of an 'interest'). Furthermore, s 79(2) provides that a person has a 'significant interest' if the person 'in the event of a distribution of all the property' 'would be entitled to' '20% or more of the property distributed'. Section 79(2) refers to the concept of 'distribution' twice, and does not refer to 'winding up', or 'vesting', at all. Sections 79(1) and (2) therefore require, not just a notional winding up of the landholder, but also a notional distribution of all the property of the landholder on that winding up ('immediately after' the acquisition). It follows that, unless any of the unitholders who acquired units in this case 'would [have been] entitled to' (s 79(2)), immediately after their acquisition of units, '20% or more of the property of the landholder distributed' (s 79(2)) (on a notional winding up), they will not have acquired a 'significant interest' in the landholder. More fundamentally, the Appellant submits that none of the unitholders in this case acquired any 'interest' to begin with (under s 79(1)) - because the entitlement to a distribution of the trust property under the trust deed is at the discretion of the trustee, and the trust property could have been, under clause 17, distributed to any of the 'Beneficiaries' (and potentially to the exclusion of the unitholders). There was, therefore, no 'entitlement' to 'a distribution of property of the landholder' acquired by any of the unitholders, as required by s 79(1).

191 Further, the appellant continued, by contending that '[w]hat ss 79(1), 79(2) and 79(3) require is a consideration of what property would be distributed to what persons on a notional winding up of the trust', and observing that in the present case ' it may not be possible to say what property would be (as a matter of notional certainty) distributed to which beneficiaries on a winding up'.[232] The appellant submits that an approach requiring a consideration of what property would be distributed 'is not a question of what would happen "in the future" but, rather, it is a question of what would happen (as a matter of notional certainty) in the event of a notional vesting of the trust property and a notional distribution of that property "immediately after" the acquisition of any "interest"'.[233]

Approach to the application of taxing provisions to transactions governed by trust deeds

192 In CPT Custodian Pty Ltd v Commissioner of State Revenue,[234] a case concerning whether unit holders in unit trusts were liable for land tax assessed under the Land Act 1958 (Vic), the High Court outlined the approach to be taken by a court of first instance when faced with the task of statutory construction of the kind presented here. The Court stated:[235]

Statutory construction and the general law

Something now should be said respecting the task of statutory construction which was presented to Nettle J and then to the Court of Appeal. There were two steps to be taken. They were correctly identified in the submissions by the taxpayers to the Court of Appeal.[236] The first step was to ascertain the terms of the trusts upon which the relevant lands were held. The second was to construe the statutory definition to ascertain whether the rights of the taxpayers under those trusts fell within that definition****.

In taking those steps, a priori assumptions as to the nature of unit trusts under the general law and principles of equity would not assist and would be apt to mislead. All depends, as Tamberlin and Hely JJ put it in Kent v SS 'Maria Luisa' [No 2],[237] upon the terms of the particular trust. The term 'unit trust' is the subject of much exegesis by commentators.[238] However, 'unit trust', like 'discretionary trust',[239] in the absence of an applicable statutory definition, does not have a constant, fixed normative meaning which can dictate the application to particular facts of the definition in s 3(a) of the Act.[240]

The First Step: Ascertaining the terms of the trust upon which the Land was held

193 As noted earlier, the MPC was executed on 29 September 2011, which was two days after Victory was incorporated and the Victory Hybrid Unit Trust was established. The MPC records the subject of the meeting between the participants, Kathryn Yang, Ningjun Liu and Jiefu Zheng, as being 'cooperation to invest in 484A land' and sets out the basis on which they agreed 'to jointly finance the acquisition of the land'.

194 The agreement recorded in the MPC[241] involved a 'total investment' in the purchase of the Land of 'approximately A$10 million, of which the land price is $9,277,500', and it was 'agreed that 2 months prior to settlement, the shareholders must pay the capital of $10 million in accordance with their shareholding' following which their shareholding in the company would be changed to the following proportions:

a) Kathryn Yang or a nominated company - 37%;

b) Jiefu Zheng or a nominated company - 26%; and

c) Ningjun Liu or a nominated company - 37%.

195 It is clear from the MPC that the three participants - Kathryn Yang, Ningjun Liu and Jiefu Zheng - were relevantly the investors who agreed 'to jointly finance the acquisition of the [L]and'. Whilst the agreement recorded in the MPC contemplates that the acquisition of the Land would be effected under a company structure, and makes no mention of the Victory Hybrid Unit Trust, in the final outcome the acquisition was effected by Victory in its capacity as trustee of the Victory Hybrid Unit Trust.

The relevant terms of the Victory Hybrid Unit Trust deed

196 The Victory Deed is governed by the law of Victoria. The Victory Deed was executed by the appellant as trustee and by Kathryn Yang and Ningjun Liu as 'First Unit Holders'.[242]

197 Clause 1 contains the 'Declaration of Trust' which is expressed as follows:[243]

1. Declaration of Trust

In consideration of the premises the Trustee and the First Unit Holders hereby agree that the Trustee shall and the Trustee HEREBY DECLARES that the Trustee will henceforth stand possessed of the Trust Fund and the Net Income thereof for the Unit Holders and the Beneficiaries upon the trusts hereinafter set out and with and subject to the powers and provisions hereinafter expressed concerning the same.

198 Clause 2 provides for '[t]he Trust hereby constituted'[244] to be known by the name set out in the Schedule, being the 'Victory International Hybrid Unit Trust'.[245]

199 Clause 3 of the Deed contains a host of definitions of terms that appear in the Deed and the Schedule which are expressed to have the meanings set out in cl 3 'where the context so requires or admits'.[246] The expression 'Unit Holder' is defined in cl 3.27 of the Deed, as follows:[247]

Unit Holder means the person for the time being and from time to time registered under the provisions of this Deed as the holder of a Unit and includes persons jointly so registered and includes persons (including trustees of trusts or settlements whether arising by will or by reason of a disposition inter vivos) who, from time to time until the Termination Day come within the foregoing descriptions notwithstanding that the trusts or settlements of which they are trustees have not been created or come into existence at the date of this Deed and may not take effect until after the date of this Deed and Unit Holders shall have a corresponding meaning.

200 The companion expression 'Beneficiaries' is defined in cl 3.4 of the Deed, as follows:[248]

Beneficiaries includes all Unit Holders and the following persons whether or not such persons are Unit Holders: -

3.4.1 the shareholders of the Trustee (if a company);

3.4.2 the shareholders of any Unit Holders which are companies;

3.4.3 the employees of the Trust or any entity listed in the Annexure (if any) hereof;

3.4.4 the beneficiaries or unit holders of any trust, the trustee of which is any Unit Holder of this Trust;

3.4.5 Relatives including the Grandparents, Parents, uncles, aunts, brothers, sisters, cousins, Spouses, nephews, nieces, widows, widowers, Associates, Children, Grandchildren and remoter issue of any Unit Holder or of any Beneficiary specified in this Clause 3.4 (collectively referred to as Immediate Family) and the Spouses, widows, widowers, dependent Children, Grandchildren and remoter issue of the Immediate Family;

3.4.6 the trustees or trustee of any trust or settlement (whether arising by will or by reason of a disposition inter vivos) from time to time in existence under which any Unit Holder or any Beneficiary specified in this Clause 3.4 or any Relative has a beneficial interest (whether or not any person or persons not being a Relative also has an interest);

3.4.7 any corporation in which any Unit Holder or any Beneficiary specified in this Clause 3.4 or any Relative is a member or owns beneficially the whole or any part of the issued share capital (whether or not any other person not being a Relative is also a member or owns beneficially one or more shares therein);

3.4.8 a charitable institution, company, association or other entity or the trustee of any charitable trust and of any person, officer or governing body acting as trustee, officer or governor of any society, authority, institution, church or religious group or entity.

and the Beneficiaries shall include persons, corporations and other entities and the trustee or trustees of trusts who or which from time to time until the Termination Date come within the definitions herein contained or within any description in the Schedule hereto notwithstanding that such persons, corporations or other entities, trustee or trustees may not be in existence or have come into the defined categories at the date of this Deed and, in the case of such trustee or trustees notwithstanding that the trust or settlement of which he is trustee or they are trustees have not been formed or come into existence or do not fall within the defined category at the date of this Deed.

201 As the Commissioner observes,[249] under the Deed, all 'Unit Holders' are 'Beneficiaries' and the other classes of Beneficiaries are widely-drawn and include various natural persons, trusts and corporations related to the Unit Holders as well as charities and other entities.

202 The expression 'Unit' is defined in cl 3.26.1 of the Deed, as follows:[250]

Unit means any undivided part or share of the Trust Fund.

203 The four classes of Units (A, B, C and D) and the rights attaching thereto are set out in cl 3.26, as follows.

204 The 'A Class Units', which are the only class that have voting rights, are referred to as 'Voting Units'[251] and defined as follows:[252]

3.26.2 The A Class Units means those Units conferring upon the holder thereof: -

(a) the right to receive notice of and to attend and vote at all meetings of the Unit Holders and on a show of hands to one (1) vote and on every poll to one (1) vote for every A Class Unit held;

(b) no right to receive a distribution of Net Income;

(c) the right to a return of Capital paid on such a Unit;

(d) no right to receive a distribution of Capitalised Earnings.

The 'B Class Units' - confer the right to receive 'Net Income'

205 The 'B Class Units', which are referred to as 'Income Units',[253] have the right to receive Net Income. They are defined in cl 3.26.3 as follows:[254]

3.26.3 The B Class Units means those Units conferring upon the holder thereof: -

(a) no right to attend nor to vote at any meeting of Unit Holders;

(b) the right to receive Net Income distributed by the Trustee in direct proportion to the number of Income Units held by such Unit Holders as at the date of distribution at a rate to be determined by the Trustee;

(c) the right to a return of Capital paid on such a Unit;

(d) no right to receive a distribution of Capitalised Earnings.

The 'C Class Units' - the only units that confer the right to receive a distribution of 'Capitalised Earnings'

206 As will be noted, while the holders of each class of units, whether A, B, C or D (discussed below), have a right to a return of Capital paid on such a unit, the 'C Class Units', which are referred to as 'Capital Units', are the only units that carry the right to receive a distribution of 'Capitalised Earnings'.

207 The term 'C Class Units' is defined in cl 3.26.4, and the related terms 'Capital', 'Capital Units' and 'Capitalised Earnings' are defined in cls 3.6, 3.7 and 3.8 respectively, as follows:[255]

3.26.4 The C Class Units means those Units conferring upon the holder thereof: -

(a) no right to attend nor to vote at any meeting of Unit Holders;

(b) no right to receive a distribution of Net Income;

(c) a return of Capital paid on such a Unit;

(d) a distribution of Capitalised Earnings from the Trust in direct proportion to the number of Capital Units held by such Unit Holders as at the date of distribution.

. . .

3.6 Capital means the monies received by the Trustee from a Unit Holder as consideration for an issue of a Unit of any class.

3.7 Capital Units is a reference to the C Class Units.

3.8 Capitalised Earnings means that portion of the Trust Fund which is neither the Capital of the Trust nor that portion of Net Income which the Trustee intends to distribute as Net Income.

The 'D Class Units' - confer the right to receive 'Net Income' distributed by the Trustee in his sole discretion

208 Among the rights conferred on the holder of 'D Class Units' is the right to receive Net Income but the right is expressed in different terms to the B Class Units and embodies a discretionary element. The definition of 'D Class Units' in cl 3.26.5 provides as follows:[256]

3.26.5 The D Class Units means those Units conferring upon the holder thereof: -

(a) no right to attend nor to vote at any meeting of Unit Holders;

(b) the right to receive Net Income distributed by the Trustee in his sole discretion and in this regard to rank pari passu with the holder or holders of the B Class Units;

(c) a return of Capital paid on such a Unit;

(d) no right to receive a distribution of Capitalised Earnings.

209 The Schedule records the 'Sum payment per unit' as being $1.00, such that there is no subscription price difference between the respective classes of units despite the differential rights conferred. In the case of the 'First Unit Holders', Kathryn Yang was allotted 51 units of each class and Ningjun Liu was allotted 49 units of each class.

The 'Trust Fund' and the exercise of the Trustee's powers

210 The 'Trust Fund' held by the Trustee is defined in cl 3.24, as follows:[257]

3.24 Trust Fund means: -

3.24.1 the amounts received from the First Unit Holders as set out in Recital B;[[258]]

3.24.2 any amounts received on the further allotment of Units;

3.24.3 all moneys investments and property from time to time paid or transferred to and accepted by the Trustee as additions to the Trust Fund all accumulations of Net Income hereinafter empowered and the moneys investments and property from time to time representing the said moneys additions accretions and accumulations or any part thereof or into which the same may be converted.

211 The expressions 'Property', 'Interest in Property' and 'Land' are defined in cls 3.20, 3.14 and 3.15 as follows:[259]

3.20 Property includes real or personal property of any kind or tenure, any debt, any chose in action and any estate, right or interest at law or in equity in or over property.

. . .

3.14 Interest in Property means any estate, interest, right or power, whether at law or in equity, in or over property and includes any future interest whether vested, contingent, in reversion, in remainder, possible or expectant.

. . .

3.15 Land includes tenements and hereditaments, corporeal and incorporeal, and every estate and interest therein, whether vested or contingent, freehold or leasehold and whether at law or in equity in severalty or otherwise and whether in Australia or not and also includes lots in strata plan.

212 Clause 17.1 deals with the Trust Fund and provides that, subject to any distribution of Capitalised Earnings to any one or more Beneficiaries in accordance with the terms of cl 17, on and from the Termination Day, the Trustee shall hold the Trust Fund for the holders of the Capital Units (C Class Units). The 'Termination Day' is defined in cl 3.23 to mean 'the date specified by the Trustee in his absolute discretion, with the consent of the Unit Holders'.[260]

213 Clause 17.2 provides that as soon as practicable after the Termination Day, the Trustee shall, in the absence of a direction from the Voting Unit Holders (being the holders of the A Class Units) to the contrary, sell the Trust Fund. Under cl 17.4, the Trustee must then distribute the net proceeds of sale to the Capital Unit Holders (being the holders of the C Class Units) as provided for in cls 17.5-17.9.

214 The complete text of cl 17 is reproduced below.[261]

17. TRUST FUND

17.1 Subject to any distribution of Capitalised Earnings to any one or more Beneficiaries in accordance with the terms of this Clause, on and from the Termination Day, the Trustee shall hold the Trust Fund for the holders of Capital Units.

17.2 As soon as practicable after the Termination Day, the Trustee shall, in the absence of any direction of the Voting Unit Holders to the contrary and subject to the provisions of this Deed, sell, call in and convert into money or cause to be sold, called in and converted into money, the Trust Fund.

17.3 If the Voting Unit Holders direct the Trustee to sell all or any of the assets and investments as aforesaid by public auction, then each and every asset and investment shall be sold to the highest bidder and any Unit Holder may bid at such public auction.

17.4 As soon as is practicable after the completion of events as expressed in Clauses 17.2 and 17.3, the Trustee shall distribute the proceeds of such sale, calling in and conversion into money less all costs and expenses incurred by the Trustee therefor, amongst the holders of Capital Units living or in existence at the time of the Termination Day as provided for in Clauses 17.5, 17.6, 17.7, 17.8 and 17.9 of this Deed.

17.5 Subject to Clause 17.6 hereof, the Trustee: -

17.5.1. [sic] return the Capital to the holder or holders of Units living or in existence at the time of the Termination Day; and

17.5.2 may distribute the whole or any part of the Capitalised Earnings of Trust Fund to the holder or holders of Capital Units living or in existence at the time of the Termination Day in proportion to the total number of Capital Units held by them at the commencement of the Termination Day.

17.6 The distribution of the Trust Fund as expressed in Clause 17.5 hereof is subject to any distribution of the Trust Fund to any one or more of the Beneficiaries.

17.7 At the direction from time to time and at any time of the Voting Unit Holders, the Trustee may distribute the whole or any part of the Capitalised Earnings of the Trust Fund to all or any of the Beneficiaries living or in existence at the time of the direction to the exclusion of the other Beneficiaries and in such shares and proportions and in such manner as the Voting Unit Holders have directed. If the Voting Unit Holders so resolve, the Trustee may distribute the Capitalised Earnings of the Trust Fund to a Beneficiary preferentially to any other entitlement to Capitalised Earnings by Unit Holders.

17.8 Notwithstanding any of the foregoing provisions of this Clause, the Trustee may, from time to time, at the direction of the Voting Unit Holders, determine that: -

17.8.1 some or all of the Capital may be returned to the holder or holders of Units living or in existence at the date of any such determination; and/or

17.8.2 all or any part of the Capitalised Earnings of the Trust Fund be distributed, transferred or paid to the holder or holders of Capital Units in direct proportion to the number of Capital Units held by them at the date of any such determination.

17.9 Any distribution, transfer or payment of all or any part of the Trust Fund made in accordance with this Clause 17 shall be in full discharge of the Trustee for the moneys or property so distributed, transferred or paid.

17.10 The Trustee may postpone the sale, calling in and conversion of all or any part of the Trust Fund for such period as he shall think fit without being responsible for any loss or depreciation attributable to such postponement.

215 Clause 19 deals with the distribution of assets in specie and confers on the Trustee, with the consent of the Voting Unit Holders, the power to appropriate any part of the Trust Fund in or towards the satisfaction of the whole or any part of any share or entitlement of any of the Unit Holders or Beneficiaries in the Trust Fund. Clause 19 provides:[262]

19. Distribution of Assets In Specie

The Trustee may, at any time with the consent of the Voting Unit Holders, appropriate any part or parts of the Trust Fund in its then actual condition or state of investment in or towards the satisfaction of the whole or any part of any share or entitlement of any one of the Unit Holders or Beneficiaries in the Trust Fund whether vested or contingent and for that purpose may take himself or cause to be made by other persons, whether duly qualified or not, a valuation or valuations of the Trust Fund or any part or parts thereof or of any interest therein and in such manner and as at such date or dates as the Trustee considers just and proper and every such valuation and every such appropriation shall be final and binding on all persons claiming under the Trusts hereof, notwithstanding that any such one of the Unit Holders or Beneficiaries may not be in existence or cannot be found or ascertained or may be under a legal disability at the time of such appropriation.

216 Clause 12 deals with the exercise of the Trustee's powers and provides:[263]

12. Exercise Of The Trustee's Powers

The exercise of any discretion or power conferred or imposed upon the Trustee or the making of any decision or determination by the Trustee: -

12.1 where the Trustee is a company may be exercised or made by resolution of the Board of Directors or the governing body of the Trustee;

12.2 shall be sufficiently evidenced if noted in minutes kept by the Trustee (whether or not the Trustee is a company) if its proceedings as Trustee and signed as a true record by the Trustee or a Director of the Trustee and when so noted and if not expressed to be revocable shall be deemed to be irrevocable and binding upon all Unit Holders.

217 The Deed also contains (what counsel for the Commissioner described as) 'a very wide power of amendment'.[264] Clause 10 provides:[265]

10. Amendment Of The Trust Deed

The Trustee may with the consent of the Voting Unit Holders at any time or from time to time by Deed revoke, add to or vary all or any one of the trusts, terms and conditions contained herein or the trusts, terms and conditions contained in any variation or alteration or addition made hereto from time to time and may, by the same or any other Deed, declare any new or other trusts, terms or conditions concerning the Trust Fund or any part thereof provided that the rule known as the rule against perpetuities (as affected by any statute for the time being in force in the relevant jurisdiction mentioned in the Schedule hereto) is not thereby infringed and provided that such new or other trusts, powers, discretions, alterations or variations: -

10.1 shall not be in favour or for the benefit of the Trustee or any person claiming under or in right of the Trustee;

10.2 shall be made in favour of or for the benefit of the Unit Holders or the Beneficiaries or one or some of them;

10.3 shall not affect the beneficial entitlement to any amount held, applied or set aside for any one of the Unit Holders or Beneficiaries prior to the date of the revocation, addition or variation.

The second step: Construing the statutory definitions in the Duties Act to ascertain whether the rights that each of the Transferees acquired pursuant to the 10 October 2012 Transactions entailed the acquisition of an interest in a landholder that is a significant interest, and thereby made a relevant acquisition, rendering Victory as trustee for the Victory Hybrid Unit Trust liable to pay landholder duty under s 77 of the Duties Act.

218 Following the 10 October 2012 Transactions, there were three unit holders, being the Transferees, and each such unit holder was the corporate trustee of a discretionary trust. The 400 issued units in the Victory Hybrid Unit Trust were held by them respectively as follows:[266]

Number and Class of Units held following the 10 October 2012 Transactions

JY Property Pty Ltd as trustee for the JYPI Trust (it is an agreed fact that Kathryn Yang was at all relevant times a beneficiary of the JYPI Trust)

37 A Class units

37 B Class units

37 C Class units

37 D Class units

LBZ Pty Ltd as trustee for the LBZ Investment Trust (it is an agreed fact that Ningjun Liu was at all relevant times a beneficiary of the LBZ Investment Trust)

37 A Class units

37 B Class units

37 C Class units

37 D Class units

ZJF Investments Pty Ltd as trustee for the ZJF Investments Trust (it is an agreed fact that Jiefu Zheng was at all relevant times a beneficiary of the ZJF Investments Trust)

14 A Class units

14 B Class units

14 C Class units

14 D Class units

12 A Class units

12 B Class units

12 C Class units

12 D Class units

100 A Class units

100 B Class units

100 C Class units

100 D Class units

219 As noted earlier, the appellant accepts that at the time when the 10 October 2012 Transactions took place, it was the purchaser of the Land under the contract of sale. It is an agreed fact[267] that, at the time of those transactions, the appellant was deemed by s 74(1) of the Duties Act[268] to hold the Land, notwithstanding that the transaction had not yet settled, and the Victory Hybrid Unit Trust was deemed to be a 'landholder'[269] for the purposes of the landholder provisions in Part 2 of Chapter 3 of the Duties Act.[270]

220 The appellant also concedes that the Victory Hybrid Unit Trust is a 'private unit trust scheme' which, on 10 October 2012, was deemed to have landholdings[271] and it accepts that, by reason of s 74(1), the Land the subject of the contract was deemed to be trust property of the Victory Hybrid Unit Trust. But, the appellant goes further, and contends that because the Victory Hybrid Unit Trust embodied a host of discretionary features, it was also a 'discretionary trust' for the purposes of the Duties Act, and by reason of s 76(2) the beneficiaries of the Victory Hybrid Unit Trust were deemed to own the Land the subject of the trust.

The legislative regime as it applies to landholders under private unit trust schemes

221 Under the legislative regime established in respect of landholders under Division 2 of Part 2 of Chapter 3 of the Duties Act, a liability for duty arises under s 77 when a 'relevant acquisition' is made. There are three classes of 'relevant acquisition' set out in Division 2, being (1) a significant interest in a landholder; (2) an economic entitlement and (3) control, but only the first is relied on in the present case.

222 What constitutes a 'relevant acquisition' is prescribed in s 78 and, for present purposes, it entails (as per s 78(1)(a)):

(a) the person acquires an interest in a landholder -

(i) that is of itself a significant interest in the landholder; or

(ii) that amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by all or any of the following -

(A) the person; or

(B) an associated person; or

(C) any other person in an associated transaction; . . .

223 The concept of a 'landholder' for the purposes of Division 2 includes a 'private unit trust scheme' that has land holdings in Victoria with a total unencumbered value of $1 million or more (s 71(1)(a)). The appellant accepts that the Victory Hybrid Unit Trust is, relevantly, a landholder.[272]

224 The Assessment for duty that the Commissioner made and issued pursuant to s 8(1) of the TAA to Victory as trustee for the Victory Hybrid Unit Trust, and seeks to uphold on this appeal, was in respect of the 10 October 2012 Transactions. The Commissioner contends that the 10 October 2012 Transactions gave rise to the three 'relevant acquisitions' of an 'interest' in the Victory Hybrid Unit Trust by the respective Transferee unit holders, described as follows:[273]

225 Contemporaneous with the making and issue of the Assessment on 30 September 2020, the Commissioner notified the appellant's solicitor by 'exit letter' that he had made the following determination as to liability to duty under Part 2 of Chapter 3, and had imposed penalty tax and interest under Part 5 of the TAA:[274]

Liability to duty under Part 2 of Chapter 3 of the Act

The Commissioner has determined that the JYP Acquisition, ZLF Acquisition and LBZ Acquisition each constitute a relevant acquisition in the Trust under section 78(1)(a)(i), for the following reasons:

(a) The Trust constitutes a 'unit trust scheme' as defined in section 3(1) and a landholder under section 71(1)(a);

(b) JYP, ZLF and LBZ each acquired an 'interest' in the Trust within the meaning of section 79(1), commensurate with the percentage of Capital Units so acquired, by virtue of clauses 3.26.5 [sic[275]], 17.4 and 17.5.2 of the Trust Deed. The evaluation of a person's entitlement under section 79(1) is concerned with entitlements as a matter of law and is made on a notional winding up of the Trust immediately after the Acquisitions. That evaluation is not concerned with what a person would receive (if anything) on an actual vesting of the Trust or whether the Voting Unit Holders would then direct the trustee to distribute property to persons other than the holders of Capital Units under clause 17.7 of the Trust Deed.

Section 89E does not apply to any of the Acquisitions, given duty payable on each Acquisition under Chapter 3 of the Act is not less [than] that which would be payable under Chapter 2, had the subject of each Acquisition been a transfer of the land of the Trust to the relevant person.

The only land holding of the Trust as at 10 October 2012 was land located at 180-200 Reynolds Road, Doncaster VIC 3109[276] (Property). The Commissioner accepts that a fair and reasonable estimate of the unencumbered value of the Property as at 10 October 2012 was $9,000,000, being the value adopted under the Valuation Report prepared by DTZ Australia (Vic) Pty Ltd dated 18 January 2013. Accordingly, the sum of duty payable on the Acquisitions under Part 2 of Chapter 3 of the Act is $495,000.

The Commissioner's Determination on the Objection

226 In the Commissioner's response to the appellant's Objection, as set out in the Notice of Determination dated 29 August 2023, his Reasons for Determination concerning the (alleged) relevant acquisitions commenced by outlining the relevant statutory provisions. In so doing, the Commissioner made reference to (inter alia) s 79, and also (for the first time) to s 89H (the Maximisation of Entitlements Provision) as being relevant to ascertaining a person's entitlements on a distribution of property. As this was the first occasion on which the Commissioner had mentioned s 89H, the appellant contends that the Commissioner's reference to s 89H was in response to a comment by the appellant in a footnote to its Objection, where it stated:[277]

For completeness, it is noted that s 89H can have no application in the circumstances of this case.

227 When responding to Ground 1 of the Objection, the Commissioner informed the appellant that he 'does not accept that due to the trustee's discretion to distribute the entire trust fund to Beneficiaries who are not unit holders and/or holders of C Class capital units, none of the Acquirers [the Transferee unit holders] had an entitlement (being a fixed entitlement) to a distribution of property on a winding up of the Unit Trust'[278] and the reasons why. In his reasons addressing that point, the Commissioner made reference to the statutory definition of 'unit trust scheme' in s 3(1) and effectively called in aid the meaning of the companion expression 'unit in a unit trust scheme', as defined in s 3(1), and explained that[279]

based on the statutory definition of 'unit trust scheme' in s 3(1) of the Act, the unit holders in the Unit Trust are the beneficiaries, since they are the persons having funds available for investment in the scheme and who hold units in the scheme, being a right, or a right to a right to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting. The non-unit holder beneficiaries, who have not contributed any funds to the scheme and who do not have proportionate rights on a distribution, are not 'unit' holders or 'beneficiaries' entitled to any 'vesting' within the contemplation of the Act.

228 The Commissioner's reasons in respect of Ground 1 of the Objection also relied substantively upon s 89H, the Commissioner having 'determined on the basis of the information provided, that an application of the Maximisation of Entitlements Provision results in the Acquirers [the Transferee unit holders] having an entitlement to a distribution of property on a notional winding up of the Unit Trust that is consistent with their respective entitlements as holders of C Class capital units ...'.[280] Further, the Commissioner stated:[281]

As the evaluation obtained under sections 89H(2) and (3) of the Act is 100%, this is to be treated as the correct evaluation and there is no reason for the Commissioner to be satisfied that the application of section 89H(3) of the Act in the particular case would be inequitable.

229 In the present case, there is no issue that as a result of the 10 October 2012 Transactions each of the Transferee unit holders made an acquisition of units in the Victory Hybrid Unit Trust.[282] Rather, the appellant's case is that none of those Transferee unit holders thereby acquired an 'interest' under s 79(1), in essence because the landholder is a hybrid trust and the presence of the many discretions set out in cl 17 of the Victory Deed meant that none of the unit holders could assert any 'entitlement' to a distribution of trust property from the landholder on a winding up of the landholder. Counsel for the appellant referred to cl 17 of the Victory Deed and submitted:[283]

MR GRACE: So, when one has regard to clause 17 of the trust deed and the many discretions in that, that the trustee has - or the many contingencies - _our simple submission is that it's not possible to conclude that any of the unit holders had immediately after acquiring the units - or any other time - _ but [sic] had an entitlement as explained in s79(1). It was simply not possible to say how the trustee might exercise its discretion or discretions on a notional winding-up.

In fact, the [sic] 17.6 in particular of the trust deed allows the trustee the discretion to distribute the trust fund to persons other than - or beneficiaries other than the unit holders.

230 The appellant submitted that all that the Transferee unit holders would have on a winding up effected under s 79 is 'a right to the due administration of the trust and [for] the trustee to act with integrity, et cetera. But they would have no fixed entitlement to a distribution of the trust property'.[284]

231 Further, the appellant says that as none of the unit holders had an 'interest' by virtue of s 79(1), they could not have acquired a 'significant interest' in a landholder under s 79(2), and thus none of them made a 'relevant acquisition' under s 78, with the result that no liability for duty arose under Part 2 of Chapter 3 of the Duties Act.

The Commissioner's submissions on the hearing of the appeal

232 In his outline of submissions filed in advance of the hearing of the appeal, the Commissioner relied heavily on the operation of s 89H and submitted that s 89H 'is critical to understanding the Appellant's liability to duty'.[285] The Commissioner observed, at the outset, that while under the general law the position is that '[s]ubject to the terms of the trust instrument, a holder of a unit in a unitised trust does not have an interest in particular trust property,'[286] '[t]his does not mean that such a person does not have an interest in the trust for the purposes of the [Duties Act]'.[287]

233 When addressing the operation of s 89H, the Commissioner submitted that because s 89H is a 'maximisation of entitlements' provision, it 'must be considered when determining whether a person has acquired an interest in a landholder',[288] and contended that s 89H 'applies to any calculation of the entitlement of a person to participate in the distribution of the property of a landholder, including by way of a vesting of trust property'.[289]

234 Further, the Commissioner took issue with the appellant's analysis of the landholder provisions in the Duties Act, and contended that it 'is flawed because it does not apply s 89H', and 'this is in part because the Appellant ignores one critical clause within s 89H(3) [and] also misconstrues s 89H(2)'.[290] Section 89H(3) is reproduced below. The critical clause that the appellant elided when it was discussing the operation of the maximisation of entitlements provision in s 89H(3) was the reference to an 'associated person' (underlined in the extract below):

(3) Next, a calculation is to be made based on a distribution carried out after the interested person, and any other person whom the interested person has power to direct with respect to such a distribution or who is, in relation to the interested person, an associated person, has exercised all powers and discretions exercisable by them -

(a) to effect or compel an alteration to the constitution of the landholder; and

(b) to vary the rights conferred by units or shares in the landholder; and

(c) to effect or compel the substitution or replacement of units or shares in the landholder with other units or shares in it -

in such a manner as would maximise the value of the entitlement, and the entitlement of the interested person is to be evaluated accordingly.

235 The appellant's submission on the operation of s 89H(3)(b) was that[291]

... [t]he units, as they existed, carried the rights set out in the definitions of the respective units in clause 3.26 of the Trust Deed for the Victory Hybrid Trust - the rights set out in the definitions for the respective classes of unit are the only relevant rights, as contemplated by s 89H(3)(b) of the Act. In this case, the holders of the A class shares have (and had), for example, the right to vote at a meeting of the unit holders, and the holders of the B class shares have the right to receive 'Net Income'. There is no relevant provision, or power, in the Trust Deed (or any other document) that permits or authorises a unit holder to vary those rights (or to vary those rights so as to produce, for that unit holder, a guaranteed right to a distribution of trust property on a winding up).

236 In response, after referring to the elided words, the Commissioner contended:[292]

... Since each of the Acquirers is a related person of each other Acquirer and of the Appellant, these words are critical to the operation of s 89H(3) in the present case.

237 The Commissioner submitted that the result of the application of s 89H in this case is 'that the entitlement of each one of the Acquirers in the Trust is 100%'.[293] In essence, he contends that is because, when considering the operation of s 89H(3) in the present case, '[i]t is the powers and discretions exercisable by all of the Acquirers and the Appellant acting together that would permit amendments to the Deed to give an Acquirer a fixed 100% interest in the Trust Fund'.[294]

238 In oral submissions at the hearing, counsel for the Commissioner referred to the path that was taken by the Commissioner in the Determination on the Objection, relying upon s 79 as being 'the statutory path which treats beneficiaries as having some kind of statutory meaning'.[295] He then identified a second path as being through s 89H, and s 89H(2) in particular, which he said 'is the one that we're contending for'.[296] Counsel continued, discussing the second path and submitting:[297]

MR YOUNG: ... But to get to that, I have to go through s89H in some detail, but in particular at s 89H(2). So the question that Your Honour asked about the beneficiaries in sub-s 3, you answer it in one of those two ways. If you answer it by reference to the statutory path, then my friend is right to say if we succeed on s 79, then nothing else needs to be considered by Your Honour. We're not sure that's a hundred per cent right. We actually think that the correct way of analysing this is not via that statutory path, it's via the 89H path, and it's because, as we've tried to say, you can't make assumptions about all the various kinds of things that might be unit trust schemes for the purposes of this Act when you're applying the Act.

239 At the conclusion of those submissions, the Court requested counsel for the Commissioner to prepare and file an aide-mémoire concerning s 89H(3), articulating the operation and application of s 89H that the Commissioner now contends for in the present case. On 20 December 2024, the Commissioner filed his aide-mémoire concerning s 89H(3).

Did the Transferee unit holders acquire an 'interest' that was a 'significant interest' in the Victory Hybrid Unit Trust?

240 Against that background, the question in this proceeding is, put simply, whether the Transferees have, as the Commissioner contends, an 'interest', by virtue of s 79(1), that is a 'significant interest' under s 79(2), and if so, whether the appellant (Victory, as trustee) is liable to pay the duty assessed by the Commissioner, together with the penalties and interest imposed, in respect of each of the three (alleged) relevant acquisitions.

241 When considering the operation and application of the landholder provisions in Part 2 of Chapter 3 of the Duties Act it is important, at the outset, to acknowledge, as the (then) Treasurer noted in his Second Reading Speech on of the 2012 Amending Act, that the provisions in the land rich model, which were introduced in 1987 to deal with the avoidance of duty on land transfers through the use of shares and units in private unit trusts, were largely seen as anti-avoidance in nature. But with the introduction of the 2012 Amending Act, this is no longer the case as the landholder provisions 'have now evolved into a distinct head of duty, so that all acquisitions in land are subject to duty regardless of how the land is acquired'.[298]

242 I turn to consider the relevant landholder provisions in the Duties Act (authorised version no. 90).

243 Section 79 deals with what are 'interests' in landholders and what is required for a person to hold a 'significant interest' in a landholder. Section 79(1) addresses the 'interest' criterion and provides that:

(1) A person has an interest in a landholder if the person has an entitlement (otherwise than as a creditor or other person to whom the landholder is liable), whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder.

244 The expression 'interest' is defined in Chapter 1 of the Duties Act as follows:

interest includes an estate or proprietary right;

interest in a landholder has the meaning given by section 79(1).

245 For present purposes, as our enquiry concerns whether there was an acquisition of an 'interest in a landholder' for the purposes of s 79(1), it is the latter definition that expressly applies. Accordingly, the focus of the enquiry under s 79(1) is on whether each of the Transferees 'has an entitlement ..., whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder'. Where, as here, the landholder is a unit trust scheme, s 79(3) defines what is meant by a 'winding up' in s 79:

. . .;

winding up of a landholder that is a unit trust scheme means the vesting of the trust property in the beneficiaries.

246 Accordingly, when sub-ss 79(1) and (3) are read together, in the factual context of the present case, the enquiry becomes one as to whether each person - relevantly, each of the Transferees -

'has an entitlement ..., whether directly or through another person, to a distribution of property from the landholder [being the Victory Hybrid Unit Trust] on a winding up of the landholder' [meaning 'the vesting of the trust property in the beneficiaries'].

247 Section 80 addresses how an 'interest' may be 'acquired'. The expression 'acquired' is not separately defined, but s 80(1) provides relevantly that a person 'acquires an interest in a landholder if the person obtains an interest beneficially ...' and s 80(3) provides that '[w]ithout limiting subsection (1), a person is taken to obtain an interest beneficially if the person obtains the interest as trustee of a trust'.

248 Section 80(2) provides some examples of ways in which a person may acquire an interest in a landholder, namely:

(2) Without limiting subsection (1), a person may acquire an interest in a landholder in the following ways -

(a) the purchase, gift, allotment or issue of a unit or share;

(b) the cancellation, redemption or surrender of a unit or share;

(c) the abrogation or alteration of a right pertaining to a unit or share;

(d) the payment of an amount owing for a unit or share.

249 Accordingly, when sub-ss 80(1) and (3) are read together, a person 'acquires an interest in a landholder' for the purposes of the landholder provisions if (without limitation) the person 'obtains the interest as trustee of a trust'. Notably in the present case, sub-s 80(2)(a) provides that a person may acquire an interest in a landholder by, among other ways, the purchase, gift, allotment or issue of a 'unit' or share.

250 In the present case, by means of the 10 October 2012 Transactions, each of the Transferees acquired units (being the A class, B class, C class and D class units) in a landholder that is a private unit trust scheme, being the Victory Hybrid Unit Trust. In the factual circumstances of this case, the application of the statutory definition of 'unit' (i.e. a unit in a unit trust scheme) is central to ascertaining whether, on a proper construction, each Transferee had 'obtain[ed] an interest beneficially' and thereby 'acquire[d] an interest in a landholder'.

251 The Duties Act defines what the expression 'unit in a unit trust scheme' means for the purposes of the landholder provisions, as follows (emphasis in bold and underlined added):

(a) a right or interest (whether described as a unit or a sub-unit or otherwise) of a beneficiary under the scheme; or

(b) a right to any such right or interest -

and, for the purposes of the definitions of listed trust and widely held trust and Part 2 of Chapter 3, [[299]] means a unit (within the meaning of paragraph (a) or (b)) that entitles the beneficiary to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting;

252 It will be recalled from the legislative history timeline above, that when the definition of 'unit' was amended in 2004, by s 3(3) of the State Taxation (Tax Reform) Act 2004 (Vic), the Explanatory Memorandum stated:[300]

...

The definition of 'unit' is amended for the purposes of the land-rich provisions so that where it is referred to in those provisions it means a unit, the holder of which is entitled to the capital of the unit trust scheme (other types of units are disregarded, such as income units or those having other minor rights).

253 Thus, when the definition of 'unit' is read with the statement in the Explanatory Memorandum, it is clear that when dealing with the landholder provisions in Part 2 of Chapter 3, the focus of the enquiry as to whether the holder of a unit in a unit trust scheme has an 'interest' in a landholder is on whether the units so held are units which confer on the holder 'a right or interest ... to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting'. In other words, one asks whether the units held are units 'the holder of which is entitled to the capital of the unit trust scheme.'

254 It is also clear, and common ground between the parties, that the 'winding up of the landholder' referenced in s 79 is not an actual winding up of the kind performed by a liquidator in an insolvency case. Rather, this winding up, as prescribed by the statute, looks to what would happen on 'the vesting of the trust property in the beneficiaries' - here, the vesting of the trust property of the Victory Hybrid Unit Trust in the beneficiaries - and to whether, in that event, any of the Transferees 'has an entitlement ... to a distribution of property from the landholder' and thus has an 'interest' in a landholder.

255 In Snowy Hydro Ltd v Commissioner of State Revenue,[301] (Snowy Hydro), a case concerning the earlier land rich provisions, Davies J had to consider the meaning of the expression 'winding up' in the 'linked entity' provisions, where s 74(7) provided as follows:

(7) In this section -

. . .

winding up of a linked entity includes any means by which the entity's property is divested in favour of the persons entitled to it and, in the case of a linked entity that is a trust, includes the vesting of the trust property in the beneficiaries.[302]

256 In Snowy Hydro, the taxpayer contended that the unincorporated joint venture arrangement was not a 'linked entity' under s 74, but the Commissioner disagreed. Her Honour held that s 74 does not apply in the way contended for by the Commissioner. When considering the definition in the linked entity provisions Davies J said:[303]

Whether the joint venture arrangement should be treated as terminated for the purposes of determining the interest in the freehold land and other property that LVBV 'would receive' on the 'winding up' of the joint venture depends on the meaning of the expression 'winding up' as used in s 74(4). 'Winding up' for this purpose is a statutory fiction. The section is not about the consequences of actual winding up. It is a 'look through' provision to identify and bring within the scope of s 71(2) in relation to a landholder, property that is held by another entity. The function of s 74 is simply to prescribe the relevant link for the purposes of attribution of another's property to the landholder. The section requires an hypothesis about whether the landholder would be entitled to receive property of that other entity, if that entity was wound up. The stipulation is about entitlement to property, not about the consequences of winding up. Nothing turns on how the entitlement would arise as 'winding up' includes 'any means by which the entity's property is divested in favour of the person's entitled to it'. The relevant link between the landholder and the linked entity, for the purposes of s 74, is the landholder's entitlement to property of the linked entity.

257 On the Commissioner's appeal in Snowy Hydro, the Court of Appeal referred to Davies J's use of an 'hypothesis' directed to establishing any entitlement to property, and agreed with her Honour's analysis, as follows:[304]

The notional 'winding up' under s 74

At trial, the Commissioner submitted that, for the purposes of identifying the assets of VP to which LVBV would be entitled if VP were wound up, the joint venture must be treated as if it had been terminated. This was said to be so because, if VP went into liquidation, the joint venture must inevitably (have) come to an end. Hence, even if (contrary to the Commissioner's submissions) the effect of the JVA was to give CP an equitable interest in the land, that interest must be disregarded for the purposes of the 'land rich' computation. Upon termination of the joint venture, VP would hold the freehold title free of any such interest.

Her Honour rejected the Commissioner's submission, pointing out that s 74(4) of the Act is not concerned with the practicalities of an actual winding-up of the 'linked entity'. Rather, the focus is on the entitlement of the relevant entity to the assets of the linked entity. As her Honour said:

'"Winding-up" for this purpose is a statutory fiction. The section is not about the consequences of actual winding-up. It is a "look through" provision to identify and bring within the scope of s 71(2) ... property that is held by another entity. The function of s 74 is simply to prescribe the relevant link for the purposes of attribution of another's property to the landholder. The section requires an hypothesis about whether the landholder would be entitled to receive property of that other entity if that entity was wound up. The stipulation is about entitlement to property, not about the consequences of winding-up.'[305]

We respectfully agree with her Honour's analysis. . . .

258 As will be noted, the definition in s 74(7) under consideration in Snowy Hydro was an inclusive one, whereas the definition in s 79(3) under consideration in the present case is exhaustive. However, notwithstanding that difference, her Honour's analysis of the similar statutory concept, as it applied under the earlier land rich provisions, is instructive and helpful for present purposes.

259 As noted earlier, the concept of 'entitlement' as used in s 79(1) is not defined in the Duties Act. Generally speaking, an 'entitlement' according to ordinary concepts means 'a legal right or just claim to do, receive, or possess something'.[306]

260 The companion expression 'economic entitlement', which applies to the second class of 'relevant acquisition' set out in Division 2, being the acquisition of an economic entitlement, is effectively defined in sub-s 81(2) and (3), as follows (emphasis in bold italics added):

(1) Despite anything to the contrary in this Part, this section applies if a person acquires, either alone or together with an associated person, directly or indirectly, an economic entitlement, other than by a relevant acquisition dutiable under this Part.

(2) For the purposes of this section, a person acquires an economic entitlement if the person acquires shares or units in a private landholder or enters an arrangement in relation to a private landholder under which the person is entitled to all or any of the following -

(a) to participate in the dividends or income of the private landholder;

(b) to participate in the income, rents or profits derived from the land holdings of the private landholder;

(c) to participate in the capital growth of the land holdings of the private landholder;

(d) to participate in the proceeds of sale of the land holdings of the private landholder;

(e) to receive any amount determined by reference to paragraph (a), (b), (c) or (d);

(f) to acquire any entitlement described in paragraph (a), (b), (c), (d) or (e).

(3) The interest acquired under an economic entitlement is the proportion of the economic benefit referred to in subsection (2)(a), (b), (c), (d), (e) or (f) that the person is entitled to receive or acquire under the economic entitlement.

261 It follows from the fact of there being separate concepts or species of entitlement (one being an 'entitlement' and the other being an 'economic entitlement') for the purposes of the landholder provisions, that an 'entitlement' for the purposes of s 79(1) is distinct from what is an 'economic entitlement' for the purposes of s 81.

262 The starting point for duty to be exigible as a result of a relevant acquisition, is that a person has an 'interest', and thereby an 'entitlement', under s 79(1) 'to a distribution of property from the landholder on a winding up of the landholder' - meaning 'the vesting of the trust property in the beneficiaries' (s 79(3)). That is to say, such an 'entitlement' for the purposes of s 79(1) is to be understood by reference to the statutory notion of a 'winding up' under s 79(3), which is a statutory vesting, that looks to what happens upon the cessation of operation of the private landholder and the attendant rights of beneficiaries to take a portion of the property or assets available for distribution. Under s 79(1), the 'interest' concept focuses on the entitlement of the person to take a portion of the property or assets available for distribution. It is not concerned with, and is separate and distinct from, the concepts embodied in an 'economic entitlement' such as a right to 'participate' and receive monetary sums generated over time by the private landholder or from the land holdings of the private landholder.

263 In terms of 'interest', as noted above, the relevant concept of 'interest' for duty purposes is that of a 'significant interest', which is referred to in s 79(2).[307] Importantly, however, one only reaches s 79(2) if it is first demonstrated that, by virtue of sub-s (1), a person has an interest in a landholder.

264 Section 79(2) introduces a temporal component for the ascertainment of the person's 'entitlement' for duty purposes, and focusses on the entitlement of the person (or what the person 'would be entitled to') 'immediately after the interest was acquired', as follows:

(2) A person who, by virtue of subsection (1), has an interest in a landholder has a significant interest in the landholder if the person, in the event of a distribution of all the property of the landholder immediately after the interest was acquired, would be entitled to -

(a) in the case of a landholder that is a private unit trust scheme - 20% or more of the property distributed; or

265 That is to say, in the present case, a person who has an interest in a landholder by virtue of s 79(1) will be taken to have a 'significant interest' in the landholder that is a private unit trust scheme under s 79(2)(a) if, on a distribution of all the property of the Victory Hybrid Unit Trust immediately after the interest was acquired (here, relevantly, by means of the 10 October 2012 Transactions) that person would be entitled to 20% or more of the property distributed on a winding up of the landholder. The language used in s 79(2), viz, 'if the person, in the event of... would be entitled to...' serves to confirm that the 'winding up of the landholder' envisaged under s 79 is not referring to an actual winding up, but rather to an hypothetical or notional winding up created by the statutory regime.

266 The 'Note' which appears after s 79(3) is to be read and understood in that context. The 'Note' states:

Note

Section 89H is relevant to ascertaining a person's entitlements on a distribution of property.

267 While the Note draws attention to the relevance of s 89H when considering what are a person's entitlements on a distribution of property, it does not explain precisely how it applies. When one has regard to the enquiry to be made first, under s 79(1), as to whether a person has an interest, and secondly, under s 79(2), if the person does have an interest by virtue of s 79(1), whether that interest is a significant interest because the person is relevantly entitled to 20% or more of the property distributed, it seems unlikely that the procedure under s 89H would be required to be applied successively under each of s 79(1) and s 79(2).

268 As will be noted, the enquiry under s 79(1) does not involve any calculation, as there is no numerical threshold to be met. What is required under s 79(1) is to establish that the person has 'an entitlement ... whether directly or through another person, to a distribution of property from the landholder on a winding up of the landholder.' Whereas, once it is established that the person has an interest in a landholder by virtue of s 79(1), the enquiry is as to whether that interest is a 'significant interest'. In the case of a private unit trust scheme, the enquiry under s 79(2) is directed to whether, on a distribution of all of the property of the landholder immediately after the interest was acquired, the person would be entitled to 20% or more of the property distributed. That enquiry does require a calculation or 'ascertainment' of the person's entitlement, whether directly or through another person, and if it does pass the 20% threshold and qualify as a 'significant interest', then it will be a relevant acquisition under s 78(1)(a) that gives rise to a liability for duty under s 77.

269 In my view, when the 'Note' is read and construed in the context of s 79, it seems likely that it is the extent of the person's 'significant interest' under s 79(2) (what the person 'would be entitled to' on a distribution of property) that is to be ascertained, and maximised for duty purposes, through the s 89H route, rather than the ascertainment of the interest under s 79(1).

270 Here, it will be recalled the appellant's case is that none of the Transferee unit holders acquired an 'interest' when they acquired their units in the Victory Hybrid Unit Trust. The appellant accepts that the Victory Hybrid Unit Trust is a 'private unit trust scheme' and that the private unit trust is a 'landholder' but what the appellant denies is that there has been any acquisition of any 'interest' in that private unit trust scheme under s79(1).[308] In its outline of submissions, the appellant stated:[309]

In this case, the Appellant accepts that the Victory Hybrid Trust is a 'private unit trust scheme', as defined - but the Appellant is maintaining that it is not a 'unit trust scheme' in which the unit holders acquired, or could have acquired, an 'interest' as per s 79(1) of the Act, or a 'significant interest' as per s 79(2) of the Act. It is for this reason that no liability can arise under the landholder provisions.

271 In my view, the appellant's argument runs contrary to the scheme of the legislation and the statutory concepts it embodies. The companion statutory concepts of a 'unit' and a 'unit trust scheme' are central to understanding the hypothetical or notional winding up that is required by the statutory regime as a precursor to the establishment of a 'significant interest' - what the person 'would be entitled to' - that constitutes a 'relevant acquisition' from which a liability for landholder duty arises.

272 The expression 'unit trust scheme' is defined in s 3(1) of the Duties Act to mean

any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits, income or distribution of assets arising from the acquisition, holding, management or disposal of any property whatever pursuant to the trust;

273 The definition makes clear that a 'unit trust scheme' encompasses 'any arrangements' made for the purpose or effect of providing facilities for investors to participate as beneficiaries under a trust. It does not foreclose or prohibit arrangements which include discretionary features, such as those found in hybrid trust arrangements.

274 The companion expression 'private unit trust scheme' is defined in s 3(1) of the Duties Act to mean (emphasis in bold and underlined added)

a unit trust scheme that is not -

(a) a public unit trust scheme; or

(b) a wholesale unit trust scheme.

275 It follows from the express words of the definition that a private unit trust scheme is a species of 'unit trust scheme'.

276 In the present case, the three 'participants' to the agreement recorded in the MPC, Kathryn Yang, Ningjun Liu and Jiefu Zheng, agreed to jointly finance the acquisition of the Land for a sum of approximately $10 million and to pay the capital of $10 million two months prior to settlement, following which their respective shareholding in Victory would be changed to the following proportions:

a) Kathryn Yang or a nominated company - 37%;

b) Jiefu Zheng or a nominated company - 26%; and

c) Ningjun Liu or a nominated company - 37%.

277 As matters transpired, to facilitate the purchase of the Land, they interposed and adopted a unit trust structure (the Victory Hybrid Unit Trust) in addition to the (Victory) corporate structure outlined in the MPC, and Victory was appointed as trustee of the Victory Hybrid Unit Trust.

278 The Victory Hybrid Unit Trust meets the description of, and is, a 'unit trust scheme' for the purposes of the Duties Act. But if there were any doubt about that, the appellant's acceptance that the Victory Hybrid Unit Trust is a 'private unit trust scheme', which is a defined term for the purposes of the Duties Act, constitutes an acknowledgement that the Victory Hybrid Unit Trust falls within the description of the species of 'unit trust scheme' as defined in the Duties Act, and implicitly that it is also a 'unit trust scheme' for the purposes of the Duties Act.

279 Further, in my view, when the definition of 'unit in a unit trust scheme' is read and construed along with the definition of 'unit trust scheme', it informs an understanding of what is meant by the statutory winding up effected under s 79 and the relevant concept of 'entitlement', for the purposes of the landholder provisions concerning 'Acquisition of Interests in Certain Landholders'. Those provisions assist to clarify that, in circumstances where one is considering whether a person who is a beneficiary under a unit trust scheme and is the holder of a unit in a unit trust scheme has an 'interest' by virtue of s 79(1), the focus of the enquiry as to 'entitlement' under s 79(1), on a statutory winding up of the landholder, is on whether the units that the unit holder holds are units that entitle it 'to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting'. The statement in the Explanatory Memorandum for the State Taxation Acts (Tax Reform) Bill (extracted above) serves to confirm that.

280 In the present case, because s 79(2) directs that the enquiry as to whether the interest held by the unit holder is a 'significant interest' is to be determined 'in the event of a distribution of all the property of the landholder immediately after the interest was acquired', it is clear that the posited distribution of property must take place immediately following the 10 October 2012 Transactions. At that point, no directions have been given by the 'Voting Unit Holders' under cl 17.8 of the Victory Deed and the trustee has not exercised any relevant discretions. As the Commissioner submits, in that scenario 'one asks: what would happen if the trust were wound up immediately without any further action on the part of the trustee?'[310] Clause 17.1 of the Victory Deed provides the answer, namely that 'the Trustee shall hold the Trust Fund for the holders of the Capital Units'.

281 Accordingly, as each of the Transferees is the holder of C Class Units, which are the 'Capital Units' that effectively entitle the holder to participate proportionately with other holders of C Class Units (in direct proportion to the number of C Class Units held) in a distribution of the property of the Victory Hybrid Unit Trust on its vesting, each of them has the requisite 'entitlement' to a distribution of property from the landholder on a (statutory) winding up of the landholder, and thus has an 'interest' in the landholder by virtue of s 79(1).

Do each of the Transferees have a 'significant interest' in a landholder?

282 As each of the Transferees has an interest in a landholder by virtue of sub-s (1), the next step is to ask whether, as required by sub-s (2), each of them has a 'significant interest' in a landholder immediately after the interest was acquired. Relevantly, in the case of a private unit trust scheme under s 79(2)(a), one asks whether in the event of such a distribution of all of the property of the landholder each of them 'would be entitled to' 20% or more of the property distributed. At this point, because a 'calculation' of the entitlement of a person is effectively required to be undertaken, s 89H is enlivened.

283 Section 89H is headed 'Maximisation of entitlements on distribution of land holdings'. Subsection (1) provides:

(1) This section applies to any calculation, for the purposes of this Part, of the entitlement of a person (the interested person) to participate in a distribution of the property of a landholder, whether on a winding up, a vesting of trust property or otherwise.

284 As will be noted, the procedure set out in s 89H for calculating the entitlement of an 'interested person' to participate in a distribution of the property of a landholder is not limited to a winding up (as defined in s 79(3)) but applies also to a vesting of trust property or a distribution conducted by other means ('or otherwise').

285 For present purposes, as each of the Transferees has an interest in a landholder by virtue of s 79(1), the procedure under s 89H is relevant to the calculation of the entitlement of each Transferee for the purposes of s 79(2) - i.e., whether it would be entitled to '20% or more of the property distributed' - and thus is a 'significant interest' which is the 'relevant acquisition' for duty purposes. That is to say, if the interest held by a person (here, the Transferee) is of itself a significant interest in the landholder,[311] or amounts to a significant interest in the landholder when aggregated with other interests in the landholder acquired by one or more associated persons, or any other person in an 'associated transaction',[312] then the interested person (here, the Transferee) has made a 'relevant acquisition' under s 78(1)(a). A liability for duty arises under s 77 'when a relevant acquisition is made'.

286 As was explained in the 2012 EM,[313] s 89H addresses circumstances where a person who has an interest in a landholder possesses rights that if utilised may increase the person's entitlement to distribution on a winding up. If, for e.g., a unit holder has a power to change the voting rights (and thereby enhance that person's entitlement) then for the purposes of determining the unit holder's entitlement in a landholder for Part 2 of Chapter 3, s 89H enables the maximum entitlement capable of being acquired to be utilised.

287 The procedure for determining the extent of the interest a person has in the winding up of a landholder is set out in sub-ss (2)-(4). The procedure requires first, a calculation to be made under sub-s (2), based on the rules of the landholder which apply to the interest held, and then the entitlement of the interested person is to be evaluated accordingly. Subsection (2) provides:[314]

(2) A calculation is to be made based, firstly, on a distribution carried out in accordance with the constitution of the landholder, and with any law relevant to the distribution, as in force at the time of distribution, and the entitlement of the interested person is to be evaluated accordingly.

288 Subsection (5) explains what the reference to 'the constitution of the landholder' means:

(5) A reference in this section to the constitution of a landholder is a reference, if the landholder is a unit trust scheme, to the trust deed or other document that contains the rules of the trust.

289 Then, another calculation is to be made under sub-s (3), after all rights available have been exercised to maximise the entitlement of the interested person to a distribution of property from the landholder on a winding up, and the entitlement of the interested person is to be evaluated accordingly. Subsection (3) provides for the maximisation of entitlement calculation and evaluation to take place as follows:

(3) Next, a calculation is to be made based on a distribution carried out after the interested person, and any other person whom the interested person has power to direct with respect to such a distribution or who is, in relation to the interested person, an associated person, has exercised all powers and discretions exercisable by them -

(a) to effect or compel an alteration to the constitution of the landholder; and

(b) to vary the rights conferred by units or shares in the landholder; and

(c) to effect or compel the substitution or replacement of units or shares in the landholder with other units or shares in it -

in such a manner as would maximise the value of the entitlement, and the entitlement of the interested person is to be evaluated accordingly.

290 The expression 'associated person' is defined in s 3(1) in very broad terms, and means 'a person who is associated with another person in accordance with' any of the several ways set out in paragraphs (a)-(k) of the definition 'and, for the purposes of Part 2 of Chapter 3, a public company and a subsidiary of a public company are taken to be associated persons'. Relevantly, for present purposes, based on an application of the permutations set out in the definition, it seems clear that each of the Transferees is an associated person of the trustee company, Victory, and is an associated person of each of the other Transferees.

291 The Commissioner points to the wide power of amendment in cl 10 of the Victory Deed - which permits the Trustee with the consent of the Unit Holders, to vary any of the trusts, terms or conditions of the trust - and observes:[315]

Although there are some conditions on the exercise of this power, they would not prevent an amendment to the Deed to provide that the Trust Fund is held for the Unit Holders to the exclusion of all others. An amendment could even provide for one of the Unit Holders to be entitled to all of the Trust Fund.

292 The appellant responded by contending that the exercise of power contemplated by the Commissioner's example of the application of s 89H(3) 'would be a dramatic rewriting of cl 17'. However, when one looks at the steps prescribed by s 89H(3)(a) and (b) and (c), it is clear that the entitlement calculation to be undertaken thereunder is one that does involve the relevant persons (being the interested person and any associated person(s)) exercising all of their powers and discretions to effect an alteration to the constitution and to vary the rights conferred by the units in the trust and to effect or compel the substitution of units in the trust with other units in the trust, 'in such a manner as would maximise the value of the entitlement' of the interested person. That extensive process, which the appellant acknowledges is 'directed to "maximising" specific, unexercised winding-up rights that have been conferred on a ...unitholder, or associated person', is reflective of the fact that s 89H is 'anti-avoidance in nature'.[316]

293 Once those calculations and evaluations under each of sub-ss (2) and (3) have been performed, sub-s (4) requires that the results be compared, and provides that whichever entitlement is the greater is 'the correct evaluation' and the one that is used for the purposes of Part 2 of Chapter 3, unless the Commissioner determines otherwise. Subsection (4) provides:[317]

(4) The results obtained by an evaluation of the interested person's entitlement in accordance with subsections (2) and (3) are then to be compared, and whichever evaluation results in a greater entitlement is the correct evaluation, for the purposes of this Part, of the entitlement, unless the Commissioner, being satisfied that the application of this subsection in the particular case would be inequitable, determines otherwise.

294 Here, when making the Assessment, the Commissioner contended that the calculation and evaluation to be made under sub-s (2), based on the Trust Deed, produces an entitlement of the respective Transferees as being:

(a) JY Property Pty Ltd as trustee for the JYPI Trust - 37%;

(b) LBZ Pty Ltd as trustee for the LBZ Investment Trust - 37%, and

(c) ZJF Investments Pty Ltd as trustee for the ZJF Investments Trust - 26%.

295 Accordingly, he said that as each of the Transferees has acquired more than 20% of the units in the Victory Hybrid Unit Trust, and if what they acquired constituted an 'interest' under s 79(1), then it was also a 'significant interest' under s 79(2).

296 However, on the appeal, the Commissioner contends that when the calculation and evaluation to be made under sub-s (3) is performed, based on the Victory Deed but after all rights available have been exercised to maximise the entitlement of the interested person to a distribution of property from the landholder on a winding up, the entitlement arrived at for each of the respective Transferees is 100%, totalling 300% for all. But, the Commissioner now says[318] that as this would be 'an inequitable outcome' for the appellant, he would 'determine otherwise' under s 89H(4) and charge duty on the appellant under s 85(1)(b) on the basis of the acquisition of a 100% interest only. Further, he says, notwithstanding some evident inaccuracies in the Assessment, the Assessment charged the correct amount of duty (and amounts of penalty tax and interest).

297 I agree with the Commissioner's approach on the appeal as outlined above concerning the calculation and evaluation procedure to be performed under sub-ss (2) and (3) of s 89H. And if, as the Commissioner says, he is now of the view that the 'correct evaluation' produced by the comparison of the evaluation results under sub-s (4) would be an 'inequitable' outcome in this particular case, it is open to him to 'determine otherwise' under s 89H(4) and charge duty on the appellant under s 85(1)(b) on the basis of the acquisition of a 100% interest only. However, this 're-vamped' approach does not accord with the Assessment he made on 30 September 2020.

The Commissioner acknowledges that the Assessment is 'inaccurate' but says it nevertheless charged the correct amounts of duty, penalty and interest and any error in the Assessment is immaterial

298 The Commissioner acknowledges that the Assessment is inaccurate in the following ways:[319]

(a) it describes the interests acquired by each Acquirer as being less than 100%, and the aggregate of interests being 100% rather than 300%; and

(b) it does not record that the Commissioner 'determined otherwise' under s 89H(4) and he accepts that in terms he did not do so.

299 But, he submits, '[n]otwithstanding these inaccuracies, the Assessment charged the correct amounts of duty, penalty tax and interest on the Appellant' and in those circumstances, 'it would not be appropriate to remit the Assessment to the Commissioner' as '[a]ny error in the Assessment is immaterial'.[320]

300 I do not share the Commissioner's view regarding the correctness of the Assessment, nor do I agree that any error in the Assessment is immaterial. Section 77 makes clear that a liability for duty charged by Part 2 of Chapter 3 'arises when a relevant acquisition is made' and s 78 sets out what is a relevant acquisition. In circumstances where the Commissioner has moved ground and re-stated his position as to the basis on which he contends the appellant is liable for duty under the landholder provisions, the 'relevant acquisition(s)' now relied upon by the Commissioner do not accord with those 'Relevant Acquisitions' stated in the Assessment.

301 In his aide-mémoire on s 89H(3), which was prepared at the request of the Court and filed on 20 December 2024, the Commissioner posits two scenarios, each of which proceeds from the same starting point, namely that 'for each Acquirer, the amount evaluated by s 89H(3) is 100%'.[321] Under the first scenario (outlined in [6] and [7] of the aide-mémoire) the Commissioner says that in those circumstances, he could have:[322]

(a) assessed each Acquirer on the basis that it had acquired a 100% interest; or

(b) if he had been satisfied that the application of s 89H(4) would be inequitable in this particular case, determined that the interest of one of more of the Acquirers should be some amount other than 100%.

302 The second scenario (outlined in [8] and [9] of the aide-mémoire) contemplates a 'separate' assessment of Victory as trustee, under s 85(1)(b), as follows:[323]

The Commissioner could also have - separately from assessing the Acquirers - assessed the Appellant as trustee of the landholder, relying on s 85(1)(b). Since each Acquirer acquired a 100% interest, the Appellant was prima facie liable to pay duty on the equivalent of an acquisition of a 300% interest. This would be an inequitable outcome for the Appellant and so the Commissioner would 'determine otherwise' under s 89H(4) and charge duty on the Appellant on the basis of the acquisition of a 100% interest only.

This is what the Commissioner in effect did. ...

303 Neither of those scenarios accords with or reflects the 'Relevant Acquisition(s)' stated in the Assessment.[324]

304 Further, the Commissioner has acknowledged that the Assessment was 'inaccurate' inter alia because 'it does not record that the Commissioner "determined otherwise" under s 89H(4)'. This acknowledgement suggests that the Commissioner is of the view that such a determination, if made, should be recorded in the assessment. Accordingly, if the Commissioner is satisfied that the application of s 89H(3), in the second scenario that he now relies on, would be inequitable or would produce an inequitable outcome in that particular case, such that the Commissioner would 'determine otherwise' under s 89H(4) and charge duty to the appellant on the basis of a relevant acquisition of a 100% interest only, then that determination should be recorded in the Assessment.

305 In my view, in the circumstances, it is appropriate for the Court to remit the Assessment to the Commissioner. If the Commissioner is seeking to recover duty in the same amount but on the basis contended for on the appeal - reflecting 'what the Commissioner in effect did' - then the relevant acquisitions relied on must be specified and any exercise of the Commissioner's discretion to 'determine otherwise' under s 89H(4) should be recorded.

306 For the reasons set out above, the appellant's appeal will be dismissed. However, as the Commissioner has, during the appeal, with leave, moved ground and re-stated his case, and is now relying upon grounds other than those on which the Objection was disallowed, such that the Assessment made on 30 September 2020 is inaccurate, and does not accord with the 'relevant acquisition(s)' now relied on, it is appropriate for the Court to remit the Assessment to the Commissioner.

307 In due course, I will hear from the parties as to the appropriate form of orders, including as to whether a formal order is required for a grant of leave under s 109 of the TAA and as to costs.

Figure 1: Structure of the Victory Hybrid Unit Trust immediately before 10 October 2012

Figure 2: Structure of the Victory Hybrid Unit Trust immediately after 10 October 2012

[2] See Affidavit of John Yun (30.04.2024), 3 [10]. The contract of sale (CB1 Tab 35, 268-322, 270) describes the Land as being part of the land described in Certificate of Title v 8443 f 261 but the Transfer (CB2 Tab 85, 617) describes it as being the whole of the land in v 11333 f 198.

[3] Statement of Agreed Facts (Appellant's Exhibit 1), [12]. See also Affidavit of John Yun (30.04.2024), [16].

[4] At the relevant time, duty on transfers of marketable securities was at 0.6 per cent: Transcript 26.11.2024, 11 (Mr Grace).

[5] At the relevant time, the duty on transfers of land was at 5.5 per cent: Transcript 26.11.2024, 8 (Mr Grace).

[6] Transcript 26.11.2024, 10 (Mr Grace).

[7] Counsel said by reference to the evidence that 'there were also other alive class of beneficiaries beyond the unitholders': Transcript 26.11.2024, 9 (Mr Grace).

[8] Transcript 26.11.2024, 22-3 (Mr Grace).

[11] Counsel for the appellant tendered the following documents (without objection by the respondent):

(a) Corrected version of Agreed Statement of Facts with revised dates and revised transaction diagram - dated 25.11.2024 (CB1 Tab 9, 100) - Appellant's Exhibit 1;

(b) Agreed Note for the Court (13.09.2024) (CB1 Tab 10, 101) (relevant versions of the legislation and confirmation that appellant does not rely upon grounds 2, 3, 4 and 5) - Appellant's Exhibit 2;

(c) Affidavit of John Yun (18.12.2023) (CB1 Tab 3, 70) - Appellant's Exhibit 3;

(d) Affidavit of John Yun (30.04.2024) (CB1 Tab 14, 151) - Appellant's Exhibit 4;

(e) Affidavit of interpreter, Peter Pei (18.02.2023) - Appellant's Exhibit 5;

(f) Affidavit of interpreter, Yolanda Jin (30.04.2023) - Appellant's Exhibit 6;

(g) Documents Filed Pursuant to Rule 7.06 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008, filed by the Commissioner (8.12.2023) (Rule 7.06 Documents filed by the Commissioner) - Appellant's Exhibit 7.

There was no cross-examination of any of the deponents.

[12] Statement of Agreed Facts (Appellant's Exhibit 1), [4] and CB1 Tab 27, 193-228.

[15] Appellant's Exhibit 7, 69 (Schedule).

[16] Statement of Agreed Facts (Appellant's Exhibit 1), [1]-[2].

[17] Affidavit of John Yun (30.04.2024), [10]. The MPC appears as Appendix A to the Objection Filed Pursuant to Rule 7.05 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (8.12.2023) (Objection), see CB1 Tab 2, 11, 35-6. The MPC, which is dated 29.09.2011, recorded the 'Participants' as being 'Kathryn Yang, Ningjun Liu and Jiefu Zheng' and another person named 'Jiang, Shu Lin' was recorded as 'Non-voting'. Mr Yun says that the MPC was executed on 29.09.2011.

[18] MPC, CB1 Tab 2, 35-6 (emphasis in bold italics added).

[19] [Kathryn Yang only holds 51 of the 100 shares, so this figure should be 51%. This is confirmed by ASIC Form 484: Change to Company Details of Victory (CB2 Tab 66, 574) certified by John Yun. Under 'Changes to the Register of Members' of Victory on 10.10.2012, Kathryn Yang's shareholding is shown as having decreased by 51 shares and zero shares are now held by her.]

[20] At some point, it is not clear when, it appears that Victory as trustee for the Victory Hybrid Unit Trust was nominated as the purchaser under the contract. A letter from Mr Tim Chen, a director of TT Accountants, the accountants for Victory ATF Victory Hybrid Unit Trust, dated 8.06.2017, states that the contract was 'signed under the name of YANG, Kathryn on 18/11/2011 for $9,277,500, and nominated to Victory International Pty Ltd ATF Victory International Hybrid Unit Trust before the settlement date of 28/02/2013', see CB1 Tab 33, 266.

[21] Statement of Agreed Facts (Appellant's Exhibit 1), [5].

[22] Affidavit of John Yun (30.04.2024), [12]; See also CB1 Tab 35, 271.

[23] JY Property Pty Ltd was registered as a proprietary company limited by shares on 11.09.2012, see CB1 Tab 16, 161.

[24] The JYPI Trust was established as a discretionary investment trust by Deed of Settlement dated 11.09.2012, see CB2, Tab 43, 377; Tab 87, 620; Statement of Agreed Facts (Appellant's Exhibit 1), [9].

[25] ZJF Investments Pty Ltd was registered as a proprietary company limited by shares on 18.08.2009, see CB1 Tab 15, 158.

[26] The ZJF Investments Trust was established as a discretionary investment trust by Deed of Settlement dated 18.09.2009, see CB2, Tab 54, 524; Tab 86, 619; Statement of Agreed Facts (Appellant's Exhibit 1), [2].

[27] LBZ Pty Ltd was registered as a proprietary company limited by shares on 25.01.2012, see CB1 Tab 18, 168; Statement of Agreed Facts (Appellant's Exhibit 1), [6].

[28] The LBZ Investments Trust was established as a discretionary investment trust by Deed of Settlement dated 25.01.2012, see CB2, Tab 44, 402; Tab 88, 621; Statement of Agreed Facts (Appellant's Exhibit 1), [7].

[29] Statement of Agreed Facts (Appellant's Exhibit 1), [10].

[30] It is an agreed fact that at all relevant times, Kathryn Yang was a beneficiary of the JYPI Trust. Statement of Agreed Facts (Appellant's Exhibit 1), [8].

[31] It is an agreed fact that at all relevant times, Jiefu Zheng was a beneficiary of the ZJF Investments Trust. Statement of Agreed Facts (Appellant's Exhibit 1), [1].

[32] It is an agreed fact that at all relevant times, Ningjun Liu was a beneficiary of the LBZ Investments Trust. Statement of Agreed Facts (Appellant's Exhibit 1), [6].

[33] Statement of Agreed Facts (Appellant's Exhibit 1), [13]-[15].

(1) For the purposes of this Part, the vendor and purchaser under an uncompleted agreement for the sale of land are taken to be separately entitled to the whole of the land.

[35] The meaning of 'landholder' is set out in s 71 of the Duties Act.

[36] Statement of Agreed Facts (Appellant's Exhibit 1), [11].

[37] Ibid [12]. See also Affidavit of John Yun (30.04.2024), [16]. The copy of the Transfer of Land included in the Court Book (Tab 85, 617-18) is undated but it was executed by Victory in accordance with s 127 of the Corporations Act 2001, by Ningjun Liu and Kathryn Yang in their capacity as directors.

[39] Apparently a reference to the entity 'JY Property Pty Ltd' described above.

[40] Apparently a reference to the entity 'ZJF Investments Pty Ltd' described above.

[41] Apparently a reference to the entity 'LBZ Investment Pty Ltd' described above.

[42] [As cl 3.26.5 refers to 'D Class Units', this appears to be a typographical error and should be a reference to cl 3.26.4 which deals with C Class Units or 'Capital Units'.]

[43] CB2, Tab 70, 585-7, citing Act, section 85.

[45] Ibid, citing TAA, sections 24 and 29.

[46] For details of the market rates of interest for the relevant periods, see .

[48] Agreed Note for the Court (13.09.2024), 1 [2]; CB1 Tab 10, 101.

[49] Agreed Note for the Court (13.09.2024), 1 [1]; CB1 Tab 10, 101.

[50] [2016] VSC 172; (2016) 103 ATR 1 (BPG Caulfield Village).

[51] BPG Caulfield Village [2016] VSC 172; (2016) 103 ATR 1, 10 [20].

[52] Ibid, citing Taxation Acts Amendment Act 1987, inserting ss 75-75O into the Stamps Act 1958.

[53] BPG Caulfield Village [2016] VSC 172; (2016) 103 ATR 1, 10 [21].

[55] Explanatory Memorandum, Taxation Acts Amendment Bill 1987 (Vic) 1; Appendices to the Appellant's Memorandum on the Landholder Provisions (20.12.2024), Appendix 8, 378.

[56] Taxation Acts Amendment Act 1987 s 2(10).

[57] Stamps Act 1958 (Vic) ss 75G, 75L(1)-(2).

[58] Commissioner's Response to Appellant's Memorandum of 20 December 2024 (11.04.2025), 5 [14]-[16] (citations omitted) (Commissioner's Memorandum in Response (11.04.2025)).

[60] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 11 [26].

[61] Stamps (Further Amendment) Act 1961 (Vic), (No. 6791), s 2(c).

[62] Emphasis in bold italics added.

[63] I note that s 75O(b) deals with financing arrangements to which sub-division (7) is expressed not to apply to or in relation to in certain circumstances.

[64] Commissioner's Memorandum in Response (11.04.2025), 6 [20] citing s 78.

[65] Ibid, discussing Duties Act s 78.

[66] Explanatory Memorandum, Duties Bill 2000 (Vic) 1; Appendices to the Appellant's Memorandum on the Landholder Provisions (20.12.2024), Appendix 17, 684-5.

[67] See Duties Act s 3(1); cf Stamps (Further Amendment) Act 1961 (Vic), (No. 6791), s 2(c).

[68] Commissioner's Memorandum in Response (11.04.2025), 6-7 [21]-[24] (citations omitted).

[71] In the Duties Act 2000, the expression 'entitled' was defined in s 3(1) as follows:

'entitled', in Chapter 3, means beneficially entitled;

Chapter 3 was headed 'Certain transactions treated as transfers'.

[72] [Apparently a reference to the decisions of the Court of Appeal in Commissioner of State Revenue v Landrow Properties Pty Ltd [2010] VSCA 197; (2010) 79 ATR 800 (Landrow) and Commissioner of State Revenue v Challenger Listed Investments Ltd [2011] VSCA 272; (2011) 34 VR 617 (Challenger).]

[73] s 71.

[74] As noted above, the 1987 amendments that introduced subdivision (7) had provided in s 75N(3) for subdivision (7) to apply to a private unit trust scheme as if 'a reference to a winding up of a corporation were a reference to a termination of a private unit trust scheme'.

[75] Victoria, Parliamentary Debates, Legislative Assembly, 13 May 2004, 1314, 1316 (Mr John Brumby, Treasurer) (emphasis in bold italics added).

[76] Explanatory Memorandum, State Taxation Acts (Tax Reform) Bill 2004 (Vic), 1-2; Appendices to the Appellant's Memorandum on the Landholder Provisions (20.12.2024), Appendix 11, 504-5.

[77] State Taxation Acts (Tax Reform) Act 2004 s 71; Appendices to the Appellant's Memorandum on the Landholder Provisions (20.12.2024), Appendix 10, 433-40.

[78] BPG Caulfield Village [2016] VSC 172; (2016) 103 ATR 1, 10 [22] (citations omitted).

[80] Ibid citing Landrow [2010] VSCA 197; (2010) 79 ATR 800, 813 [48].

[81] Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2023 (Mr Kim Wells, Treasurer); Duties Amendment (Landholder) Bill 2012.

[82] Explanatory Memorandum, State Taxation Acts, 4, 6; (Tax Reform) Bill 2004; Appendices to the Appellant's Memorandum on the Landholder Provisions (20.12.2024), Appendix 11, 504, 507, 509 (emphasis in bold italics added).

[83] Commissioner's Memorandum in Response (11.04.2025), 9 [30]-[32].

[85] [Apparently a reference to the decisions of the Court of Appeal in Landrow [2010] VSCA 197; (2010) 79 ATR 800 and Challenger [2011] VSCA 272; (2011) 34 VR 617.]

[87] State Taxation Acts Amendment Act 2007 (Vic) No. 38 of 2012 (the 2012 Amending Act).

[88] Explanatory Memorandum, Duties Amendment (Landholder) Bill 2012 (the 2012 EM); Joint Book of Authorities, Doc 13, 404-44.

[89] Duties Amendment (Landholder) Bill 2012 (the Landholder Bill).

[90] 2012 EM, 5; Joint Book of Authorities, Doc 13, 404, 408.

[91] Victoria, Parliamentary Debates, Legislative Assembly, 2 May 2012, 2023 (Mr Kim Wells, Treasurer); Landholder Bill.

[92] Commissioner's Memorandum in Response (11.04.2025), 4 [12(e)].

[93] 2012 EM, 6; Joint Book of Authorities, Doc 13, 404, 409.

[94] Transcript 26.11.2024, 76-8 (Mr Young KC).

[95] 2012 EM, 6; Joint Book of Authorities, Doc 13, 404, 409.

[96] 2012 EM, 12; Joint Book of Authorities, Doc 13, 404, 415.

[97] Transcript 26.11.2024, 92 (Mr Young KC).

[98] Emphasis in bold italics added.

[99] Emphasis in bold italics added.

[100] 2012 EM 14-15; Joint Book of Authorities, Doc 13, 404, 417-18.

[101] 2012 EM 23; Joint Book of Authorities, Doc 13, 404, 426 (emphasis in bold italics added).

[102] 2012 EM 25; Joint Book of Authorities, Doc 13, 404, 428 (emphasis in bold and underlined added).

[103] Transcript 26.11.2024, 107-8 (Mr Young KC).

[104] This summary of the grounds was provided by the director of the appellant, Mr John Yun, in the Affidavit of John Yun (18.12.2023), [22]

[105] Affidavit of John Yun (18.12.2023), [23]

[106] The Notice of Determination appears as Document 2 in the Rule 7.06 Documents filed by the Commissioner, see CB1 Tab 7, 79-96.

[107] Determination, CB1 Tab 7, 79-96, 89.

[108] At the hearing, counsel for the appellant confirmed that the appellant no longer relies on grounds 2, 3, 4 and 5 ,as stated in the parties' Agreed Note for the Court (13.09.2024), 1 [3]; CB1 Tab 10, 101. See Transcript 26.11.2024, p 2. While the appellant's grounds concerning interest and penalty are no longer pursued, the Commissioner 'accepts that if the Court finds that no duty was chargeable then the Assessment must be wholly set aside, including insofar as it charges penalties and interest' (see Commissioner's Outline of Submissions (22.07.2024), 2 [4]).

[109] Appellant's Outline of Submissions (19.06.2024), 7 [23].

[110] Transcript 26.11.2024, 21 (Mr Grace).

[113] Appellant's Outline of Submissions (19.06.2024), 7 [23].

[116] Commissioner's Outline of Submissions (22.07.2024), 10 [25].

[118] Appellant's Reply Submissions (22.08.2024), 1 [1].

[119] Appellant's Objection (8.12.2023), 10 [34], fn 13; CB1 Tab 2, 11, 21.

[120] Determination, CB1 Tab 7, 79-96, 88-9.

[121] Ibid 85-90 (emphasis in bold italics added) (footnotes as per original).

[122] Under section 3(1) of the Act, unit trust scheme means any arrangements made for the purpose, or having the effect, of providing, for persons having funds available for investment, facilities for the participation by them, as beneficiaries under a trust, in any profits, income or distribution of assets arising from the acquisition, holding, management or disposal of any property whatever pursuant to the trust

[123] Under section 89H of the Act, the correct evaluation of a person's entitlement to a distribution of property on the winding up of a landholder is the greater of (1) a distribution carried out in accordance with the constitution of the landholder, and with any law relevant to the distribution in force at the relevant time; and (2) a distribution carried out after the interested person, and any other person whom the interested person has power to direct with respect to such a distribution or who is, in relation to the interested person, an associated person, had exercised all powers and discretions exercisable by them - (a) to effect or compel an alteration to the constitution of the landholder; and (b) to vary the rights conferred by units or shares in the landholder; and (c) to effect or compel the substitution or replacement of units or shares in the landholder with other units or shares in it - in such a manner as would maximise the value of the entitlement.

[124] The fact that the trustee of the Unit Trust has discretion as to the distribution of income and capital to persons who are beneficiaries but not unit holders does not negate its characterisation as a 'unit trust scheme' under the Act - see Goletsos v Commissioner of State Revenue [2018] VCAT 730. Furthermore the Objection does not dispute that the Unit Trust satisfies the definition of 'unit trust scheme' under the Act.

[125] Determination, CB1 Tab 7, 79-96, 85-90, citing clause 3.4 of Unit Trust deed. Furthermore, based on the statutory definition of 'unit trust scheme' in s 3(1) of the Act, the unit holders in the Unit Trust are the beneficiaries, since they are the persons having funds available for investment in the scheme and who hold units in the scheme, being a right, or a right to a right to participate proportionately with other unit holders in a distribution of the property of the trust on its vesting. The non-unit holder beneficiaries, who have not contributed any funds to the scheme and who do not have proportionate rights on a distribution, are not 'unit' holders or 'beneficiaries' entitled to any 'vesting' within the contemplation of the Act. (Emphasis in bold italics added).

[126] Commissioner's Outline of Submissions (22.07.2024), 9 [23].

[128] Ibid citing CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 (CPT Custodian).

[129] Commissioner's Outline of Submissions (22.07.2024), 12 [32], citing DA s 89H(5).

[134] Affidavit of John Yun, 30.04.2024, [27].

[135] Commissioner's Outline of Submissions (22.07.2024), 12 [36].

[137] Ibid 15 [47] (emphasis in bold italics added).

[138] Appellant's Reply Submissions (22.08.2024), 3 [8].

[140] Section 89H(3) provides that the calculation (under that provision) is to be made 'in such a manner as would maximise the value of the entitlement, and the entitlement of the interested person is to be evaluated accordingly'.

[141] Appellant's Reply Submissions (22.08.2024), 2 [5].

[142] Commissioner's Outline of Submissions (22.07.2024), 15 [47].

[143] Appellant's Reply Submissions (22.08.2024), 5-6 [14]-[16] (emphasis in bold italics added).

[144] Presumably a reference to: Commissioner's Outline of Submissions (22.07.2024), 15 [47].

[145] Appellant's Reply Submissions (22.08.2024), 5-6 [15], citing Document 1, A 001.

[146] Ibid, citing Document 2, page 11, A 018, first bullet point: '... the Acquirers as holders of C Class capital units would be beneficially entitled to 100% of the property distributed'; and the third bullet point: 'As the evaluation obtained under sections 89H(2) and (3) is 100%, this is to be treated as the correct evaluation ...'.

[147] See Document No 1, A 001, cited in Appellant's Reply Submissions (22.08.2024), 5-6 [15].

[148] Appellant's Reply Submissions (22.08.2024), 5-6 [16], citing Commissioner's Notice of Determination, Document No 2, page 11, third paragraph, A 018.

[149] Transcript 26.11.2024, 59 (Mr Grace) (emphasis in bold italics added).

[151] Determination, CB1 Tab 7, 79, 89 (emphasis in bold italics added).

[152] Ibid (emphasis in bold italics added).

[153] Transcript 26.11.2024, 88 (Mr Young KC).

[155] Referencing Authorised Version No. 131 (incorporating amendments as at 6 September 2023). Section 36, which is headed 'Headings, Schedules, marginal notes and footnotes', provides in

sub-s (3A)(b) as follows (emphasis in bold italics added):

(3A) An example (being an example at the foot of a provision under the heading "Example" or "Examples"), diagram or note (being a note at the foot of a provision and not a marginal note, footnote or endnote) in an Act or subordinate _instrument forms part of the Act or subordinate instrument if - _

(a) the Act is passed, or the subordinate instrument is made, on or after 1 January 2001; or

(b) the example, diagram or note is inserted into an Act passed, or subordinate instrument made, before 1 January 2001 by an Act passed, or subordinate instrument made, on or after that date.

[156] Transcript 26.11.2024, 89 (Mr Young KC).

[161] Ibid 92 (emphasis in bold italics added).

[163] Determination, CB 79, 88 (emphasis in bold italics added to footnote reproduced above).

[164] Transcript 26.11.2024, 96 (Mr Young KC).

[166] Ibid 95-6 (emphasis in bold italics added).

[167] Commissioner's Outline of Submissions (22.07.2024), 14 [44]-[45], where the third and final steps in the analysis under s 89H(3) is described as follows:

The third step in the analysis under s 89H(3) is to ask which theoretical exercise of rights would result in the maximising of the value of the interest of the interested person. The answer is an exercise of the amendment power to provide for the whole of the Trust Fund to be held for that person alone.

Finally, the value of that entitlement must be worked out. In this case, it is 100% of the value of the Trust Fund. The value under s 89H(3) in this case therefore is 100%.

[168] Respondent's Aide-mémoire - Duties Act Section 89H(3) (20.12.2024), [5]-[10] (emphasis in bold italics added).

[169] Appellant's response to Commissioner's note on section 89H, dated 23 December 2024 (Appellant's s 89H response).

[171] Appellant's Outline of Submissions (19.06.2024), 21-4 [54]-[59].

[172] Appellant's Reply Submissions (22.08.2024), 4-5 [11]-[14].

[173] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 6 [12].

[174] Ibid, citing Explanatory Memorandum to the Duties (Landholder Amendment) Bill 2012, page 25, and Transcript, 26 November 2024, page 47, lines 5-14, page 47 lines 27-31, page 48, lines 1-19; page 54, lines 8-28; page 55, lines 9-24; page 56, lines 8-21; page 56, lines 25-31, and page 57, lines 1-3; page 57, lines 28-31 and page 58, lines 1-19 (T Grace).

[175] Appellant's s 89H response (23.12.2024), [1].

[176] Ibid 2 'The new basis for the Commissioner's Assessment', [2]-[8].

[179] Determination, CB1 Tab 7, 79, 89.

(a) the taxpayer's case is limited to the grounds of the objection; and

(b) the Commissioner's case is limited to the grounds on which the objection was disallowed -

[181] Appellant's s 89H response, [8] (footnotes omitted).

[182] Email from the solicitor for the Commissioner to the Court sent at 10:04am on 5.02.2025, copied to appellant's solicitor.

[183] Email from the appellant's solicitor to the Court sent at 5.53pm on 5.02.2025, copied to the solicitor for the Commissioner.

[184] Email from Chambers to the respective solicitors sent at 9.19am on 7.02.2025.

[185] Transcript 14.02.2025, 5 (Mr Grace).

[186] Ibid 6 (Mr Young KC) (emphasis in bold italics added)).

[188] Commissioner's aide-mémoire on s 89H (20.12.2024).

[189] Commissioner's Memorandum in Response (11.04.2025), 3 [11].

[193] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 15 [35].

[194] Appellant's Reply to Commissioner's Memorandum in Response (9.05.2025), 1 [2].

[196] Notice of Determination, dated 29 August 2013, CB, Document 7, pp 88-9. At 89: 'As the evaluation obtained under sections 89H(2) and (3) of the Act is 100%, this is to be treated as the correct evaluation and there is no reason for the Commissioner to be satisfied that the application of s 89H(3) in the particular case would be inequitable.'

[197] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 6-7 [12].

[201] Ibid, citing Explanatory Memorandum to the Duties (Landholder Amendment) Bill 2012, page 25, and Transcript, 26 November 2024, page 47, lines 5-14, page 47 lines 27-31, page 48, lines 1-19; page 54, lines 8-28; page 55, lines 9-24; page 56, lines 8-21; page 56, lines 25-31, and page 57, lines 1-3; page 57, lines 28-31 and page 58, lines 1-19 (T Grace).

[202] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 6-7 [12].

[203] Ibid 7 [13] (emphasis in bold italics added).

[204] [A reference to the decision of the plurality of the High Court in the land rich case of Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 46-7, [47]-[48] (Hayne, Heydon, Crennan and Kiefel JJ).

[205] See also Transcript, 26.11.2024, page 44, line 31 and page 45, lines 1-4.

[206] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 7-8 [15].

[207] See also the legislative history to the discretionary trust provisions in the landholder provisions, from 1987 to 2012, set out in Part B [of the Appellant's Memorandum on the Landholder Provisions (20.12.2024)].

[208] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 7 [14].

[209] Transcript 26.11.2024, 12 (Mr Grace).

[212] The expression 'discretionary trust' is defined in s 3(1) of the Duties Act, as follows:

discretionary trust means a trust under which the vesting of the whole or any part of the capital of the trust estate, or the whole or any part of the income from that capital, or both -

(a) is required to be determined by a person either in respect of the identity of the beneficiaries or the quantum of interest to be taken, or both; or

(b) will occur if a discretion conferred under the trust is not exercised; or

(c) has occurred but under which the whole or any part of that capital or the whole or any part of that income, or both, will be divested from the person or persons in whom it is vested if a discretion conferred under the trust is exercised.

[213] Appellant's Memorandum on the Landholder Provisions (20.12.2024), 7 [14].

[216] Commissioner's Memorandum in Response (11.04.2025), 2-3 [7]-[9].

[217] Commissioner's Outline of Submissions (22.07.2024), 15-16 [51].

[220] Appellant's Outline of Submissions (19.06.2024), 23 [58].

[221] Commissioner's Memorandum in Response (11.04.2025), Part E, 15-16 [51]-[52] and Part F, 16-18 [53]-[59].