Arjon Pty Ltd v Commissioner of State Revenue [2003] VSCA 213

Court of Appeal (Vic)|2003-12-16|Before: PHILLIPS, BUCHANAN and EAMES, JJ.A.

Taxation - Land tax - Tax on "owner" of land - Trusts - Land held as an asset of unit trust - Estate or interest of unit holder - Meaning of "owner" - Whether sole unit holder has "any freehold estate in possession" - Whether estate affected by trustee's right of indemnity out of the trust assets - Land Tax Act 1958 ss.3, 51, 52.

The appeal by Arjon was brought by leave from orders made by the Victorian Civil and Administrative Tribunal on 3 April 2002[2], affirming, on review, the earlier decisions of the Commissioner of State Revenue. The Commissioner had assessed the appellant for land tax with respect to the entire interest in the land on which a shopping centre stands at Broadmeadows ("the Broadmeadows land"), the entire interest in the land on which a shopping centre stands at Frankston ("the Frankston land") and a 50 per cent interest in the land on which the Chadstone Shopping Centre is to be found ("the Chadstone land"). The tax was levied by way of amended assessments for the years 1998[3] and 1999[4] (those assessments being dated 14 March 2000) and an assessment (dated 2 March 2000) for the year 2000[5]. Arjon lodged objections to the assessments which the Commissioner disallowed and, when Arjon sought review by the Tribunal, the assessments were affirmed as already stated.

Most of the facts are not in dispute. As formulated by counsel for the Commissioner before the Tribunal, the parties were agreed upon the following. At the time relevant to each of the assessment years:

(a) Arjon was the trustee of three family trusts called:

(i) the Gandel Market Trust No. 1;

(ii) the Gandel Z Trust; and

(iii) the Gandel Whitehorse Trust;

(collectively, "the Gandel Family Trusts");

(b) each of the Gandel Family Trusts was a conventional discretionary trust constituted by Deeds of Trust, amended from time to time;

(c) Bridgehead Pty Ltd ("Bridgehead") and Perpetual Trustees Australia Ltd (as trustee of the Gandel Retail Trust, a publicly listed trust) were the joint owners of the land on which the Chadstone Shopping Centre stands ("the Chadstone land");

(d) Bridgehead held its undivided 50 per cent of the Chadstone land as bare nominee for Arjon, in its capacity as trustee of the Gandel Family Trusts;

(e) Braybridge Pty Ltd ("Braybridge") was the owner of the land on which a shopping centre at Frankston stands ("the Frankston land");

(f) Braybridge held the Frankston land as bare nominee for Arjon, in its capacity as trustee of the Gandel Family Trusts;

(g) Gandel Seabridge Finance Pty Ltd ("Seabridge") was the owner of the land on which a shopping centre at Broadmeadows stands ("the Broadmeadows land");

(h) Seabridge held the Broadmeadows land as trustee of the Gandel Seabridge Finance Trust ("the GSF Unit Trust"). The GSF Unit Trust was a unit trust, established by Deed dated 4 May 1993. Arjon, in its capacity as trustee of the Gandel Family Trusts, held all the issued units in the GSF Unit Trust.

The chart proffered by the parties as depicting the foregoing is annexed to these reasons for judgment. Something more, however, must be said about the parties' references to the "owner" or "owners" and their use of the expression "bare nominee".

First, each reference made to the "owner" or the "owners" was a reference to the company or companies registered under the Transfer of Land Act 1958 as proprietor or proprietors of an estate in fee simple in the relevant land: in respect of the Chadstone land, Bridgehead and Perpetual Trustees Australia Ltd as to 50 per cent each; as to the Frankston land, Braybridge; and as to the Broadmeadows land, Seabridge. All, it was common ground, had been assessed to land tax under the Act for their respective interests in the Chadstone land, the Frankston land and the Broadmeadows land and, while Arjon had accordingly been given credit for the land tax paid by the registered proprietor or proprietors in each case, the aggregation of the land holdings in the hands of Arjon, for the purpose of assessing Arjon to land tax, meant that Arjon was taxed at a higher rate than any of the registered proprietors. The practical effect, according to the Tribunal, was to increase the ultimate land tax liability of the group with respect to these centres by an amount of approximately $500,000 over the three years for which these assessments were made.

As to the description by the parties of Bridgehead and Braybridge as but "bare nominee" in each case of the land held by it for Arjon, this, it turned out, cannot have meant bare trustee (in the sense of a trustee with no active duties to perform) because of the reliance placed in argument upon the significant liabilities incurred by all three registered proprietors, Bridgehead, Braybridge and Seabridge, in their respective capacities as trustee. Thus, Bridgehead, although registered as a proprietor of only a one-half share in the Chadstone land, had incurred, in its capacity as trustee of the land for Arjon, liabilities totalling more than $80 million (as at midnight on 31 December 1997), more than $95 million (as at midnight on 31 December 1998), and more than $100 million (as at midnight on 31 December 1999). Braybridge, in its capacity as trustee of the Frankston land for Arjon, had incurred liabilities exceeding $55 million or $65 million (depending upon the year at issue). It was not surprising, perhaps, that Seabridge, as active trustee of the GSF Unit Trust, had incurred liabilities of more than $8 million or $9 million (again depending upon the year at issue), but then Seabridge was not described as "bare nominee" for Arjon. In view of the liabilities incurred by both Bridgehead and Braybridge, and the nature of those liabilities as disclosed by the statements put before the Tribunal, neither, I think, could properly be regarded as a bare trustee (in the sense of a trustee without any active duties to perform): both, it seems, did have duties in and about the management and control of the shopping centres which stood on the land they owned.

In the result, in describing Braybridge and Bridgehead as "bare nominee for Arjon", I think that the parties must be taken to have intended to indicate only that the registered proprietor, either Bridgehead or Braybridge, held its interest in the land in question directly on trust for Arjon (albeit Arjon in its capacity as trustee of the Gandel Family Trusts), in contrast to the position of Seabridge which, though also registered as proprietor, held the Broadmeadows land as trustee of the GSF Unit Trust with the result that, if Arjon had any interest in the Broadmeadows land, it could be only by virtue of its holding units in that unit trust. When this was raised in argument, Mr. Merralls for the Commissioner pointed out that "bare nominee" was the description applied to both Braybridge and Bridgehead by the deponent of the affidavit upon which the appellant itself relied, and as such it had been accepted by the Commissioner below so that the appellant should not be permitted to gainsay it now, or else the Commissioner should have the right (he submitted) to re-examine the facts in that regard, should the assessments be set aside and remitted for re-consideration. However that may be, it was in that very same affidavit that one found described the significant liabilities that were incurred by both Braybridge and Bridgehead (as well as Seabridge) when acting as trustees and the one must surely be read with the other. It follows that that must have been the basis on which the Tribunal proceeded and so it must be the basis on which this appeal now falls for decision. It would surely be simplistic in the circumstances to treat either of those two registered proprietors, Braybridge and Bridgehead, as no more than bare trustee for Arjon. At the very least, the liabilities incurred by them as trustees cannot be ignored and, in the end, that is all that matters for present purposes.

In the Land Tax Act, the basic charging provision is s.6. It reads:-

"Subject to this Act there shall in the case of each owner of land be charged levied and collected by the Commissioner and paid for the use of Her Majesty in aid of the Consolidated Fund for each and every year a duty of land tax upon land for every dollar of the unimproved value thereof in accordance with the provisions of the Second Schedule."

"Subject to sub-section (2), tax on land shall in the case of each owner thereof be assessed charged levied and collected by the Commissioner for each year on the total unimproved value of all land of which he is the owner at midnight on the thirty-first day of December immediately preceding the year for which such tax is assessed charged levied and collected."

Section 14 requires returns to be furnished and s.17 permits assessments to issue.

Sections 6 and 8 were accepted in argument as the principal charging provisions, and so by reference to these appellant's counsel submitted that Arjon could be subjected to land tax only if it was first established that it was an "owner" of the relevant land on the 31st day of December of the year immediately preceding that for which the tax was assessed, charged, levied and collected. Before the Tribunal this was not contested by the Commissioner, nor was it contested before us. Central to the operation of the Act is therefore the definition of "owner" which is found in s.3. It reads, so far as relevant:-

(a) every person entitled to any land for any estate of freehold in possession; ..."

The word "land" is defined in s.3 to include "all lands and tenements and all interests therein".

Arjon was not, of course, the "owner" at law of any of the land in question at any relevant time and whether it was the equitable owner was one of the principal matters in dispute. It is convenient therefore to set out ss.51 and 52 of the Act, which deal with the division between legal and beneficial interests.

"51. Equitable owners to be liable as if legal owners subject to deduction of any tax paid by legal owner

Subject to the other provisions of this Act, the owner of any equitable estate or interest in land shall be assessed and liable in respect of tax as if the estate or interest so owned by him was legal, but there shall be deducted from the said tax so payable by him in respect of that estate or interest the amount of any tax paid in respect thereof by the legal owner of the land.

52. Trustees to be liable as if beneficially entitled

(1) Every person in whom land is vested as a trustee, shall make returns and be assessed and liable in respect of the tax as if he were beneficially entitled to such land, save that when he is the owner of different lands in severalty in trust for different beneficial owners who are not, by reason of joint occupation or otherwise, liable to be jointly assessed for tax in respect of the same, the tax so payable by him shall be separately calculated and assessed in respect of each of those lands; and save also that when a trustee is also the beneficial owner of other land, he shall be separately assessed in respect of that land, and of the land of which he is a trustee, unless by reason of joint occupancy or for any other reason he is liable to be jointly assessed independently of this section.

(2) Provided that any trustee who has paid any tax under this section shall be entitled to be repaid the amount he has so paid by the owner of any equitable estate or interest in land who is also liable to pay such tax and in addition shall have a right to be recouped out of any of the trust property in his hands subject to the same or the like trusts as the land on which the tax is charged."

Again it was common ground that neither of these sections was itself a charging provision; it was still necessary for Arjon to be an "owner" as defined by s.3, before either s.51 or s.52 was called into play.

By the assessments now under challenge, the Commissioner assessed Arjon for the three years 1998, 1999 and 2000 as trustee of the Gandel Family Trusts and, more particularly, upon the following bases (as set out by the Tribunal in its reasons for decision):-

"(a) Arjon, as trustee for [meaning `of'] the Gandel Family Trusts (for whom 50 per cent of the Chadstone Land was held upon trust by Bridgehead as bare nominee), was the owner of the equitable estate or interest in the undivided 50 per cent of that land; (b) Arjon, as trustee [of] the Gandel Family Trusts (for whom the Frankston Land was held upon trust by Braybridge as bare nominee), was the owner of the equitable estate or interest in that land; and (c) Arjon, as trustee [of] the Gandel Family Trusts (the sole unitholder of all the issued units in the GSF Unit Trust), was the owner of the equitable estate or interest in the Broadmeadows Land."

The Tribunal agreed in these conclusions and so confirmed the assessments.

Two of the six grounds taken in the notice of appeal can be quickly dispatched. Both concern the operation of s.52 in particular. Ground 1 asserts that the Tribunal erred in holding that, for the purposes of s.52(1) of the Act, land could be "vested in the appellant as trustee even though the interest of the appellant in such land was equitable only". This reflected a submission made to the Tribunal that, before Arjon could be assessed by reference to s.52(1), it was necessary to show that Arjon was the legal owner of the land, not merely the equitable owner. That submission was rejected by the Tribunal and, in the course of argument before us, counsel in substance abandoned the point. Suppose that Blackacre, of which A is the registered proprietor, is held by A on trust for B, who in turn holds on trust for C. The registered proprietor is the owner of the legal estate, quite plainly, but in equity A and B are each trustee of the whole and both A and B, counsel conceded, might be brought to tax under s.52(1) - subject of course to any credit due under s.52(2).

Ground 6 asserted that the Tribunal erred "in failing to hold that the Appellant was the owner of different lands in severalty in trust for different beneficial owners". Again this looks to s.52(1) which provides that when the person in whom land is vested as a trustee "is the owner of different lands in severalty in trust for different beneficial owners" who are not liable to be jointly assessed for tax, the tax payable by the person in whom the land is vested as a trustee "shall be separately calculated and assessed in respect of each of those lands". As I followed it, the appellant's argument was that Arjon, in so far as it held any estate or interest in the lands in question, held that estate or interest as trustee for the three discretionary trusts which collectively were referred to as "the Gandel Family Trusts" and on that basis was "the owner of different lands in severalty in trust for different beneficial owners". Mr. Merralls pointed out that, although discretionary, the beneficiaries of the three Gandel Family Trusts were the same. Nor did the appellant suggest that the respective interests of Arjon in the Chadstone land, the Frankston land and the Broadmeadows land were in any way differentiated as between the three discretionary trusts; or, if they were, in what manner and to what extent they were differentiated. Suffice it to say that in the end ground 6, too, was not a ground pursued on behalf of Arjon on this appeal.

The argument on appeal focussed on grounds 2, 3 and 4, ground 5 adding nothing to the other grounds. On the premise (which was common ground) that ss.51 and 52 were not themselves charging provisions but depended upon establishing first that the putative taxpayer was "owner" of the land in question, the critical contention of the appellant was that Arjon was not within the definition of "owner" in s.3 in that, whatever interest it held in any of the lands in question, it was not "entitled to any land for any estate of freehold in possession". In ground 2, this was simply asserted in relation to the Chadstone land, the Frankston land and the Broadmeadows land, as a conclusion, without further particulars. In ground 3, the result was asserted again, but here it was said to follow from the trustee's right to recoupment out of the trust property in respect of trust liabilities properly incurred. In ground 4, the conclusion was again repeated but in respect of the Broadmeadows land only, because here it was said to follow from the existence of the GSF Unit Trust.

In the course of argument, the court requested Mr. De Wijn to prepare a summary of his contentions in short form. In the result, in relation to the Broadmeadows land his contention came down to this: that because of the interposition of the unit trust and having regard to its terms, Arjon as merely a unit holder could not be said to be the holder of an "equitable estate of freehold in possession" in the Broadmeadows land (within the meaning of s.3). As to the Chadstone land, the Frankston land and the Broadmeadows land, his contention was that the very existence of the trustee's right of recoupment (in relation to the significant liabilities incurred in connection with those lands) "gives the trustee a prior beneficial interest in the assets of the trust fund" with the consequence that Arjon could not be said to have an "equitable estate of freehold in possession". There are thus two issues for resolution: the effect for present purposes of the interposition of the unit trust in relation to the Broadmeadows land and, in the case of all three lands, the relevance of the trustee's right of recoupment out of trust assets. I shall deal with each issue in turn, and what I say as to the first must be read and understood as subject to what follows[6] in relation to the second, the trustees' right of recoupment.

The argument about the effect of interposing the unit trust between the registered proprietor of the Broadmeadows land and Arjon necessarily turned in large part upon the provisions of the trust deed, made on 4 May 1993, establishing and governing the GSF Unit Trust. I mention some of the more important to the arguments that were put by the one side or the other.

Clauses 1 to 5 are introductory. As is customary clause 1 contains a number of definitions, but most can be supposed and I mention only two. The "Vesting Day" is defined to mean 30 June 2070 or, if earlier, the last day of the relevant perpetuity period (which clause 2 puts at 80 years); and the "Accounting Period" is fixed ordinarily as the 12 months ending on 30 June each year. Clause 4 expressly denies any relationship of principal and agent between trustees and unit holders and clause 5 declares that no unit holder shall be under any obligation "to indemnify the Trustees against any liability or obligation incurred by the Trustees in the course of" (in short) acting as such or "in the event of there being any deficiency of the assets of the Trust Fund as compared with the liabilities of the Trustees in relation thereto".

Clause 6 of the trust deed contains the declaration of trust: the trustees declare that they hold the trust fund and the income thereof upon the trusts expressed in the deed. Clauses 7 and 8 deal with the units and unit holders. Clause 7 provides:-

"(a) THE beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being. (b) Each person who becomes registered as a Unit Holder shall be deemed to have agreed to become a party to this Deed and any supplemental deed and shall be entitled to the benefit of and shall be bound by the terms and conditions of this Deed and of any supplemental deed."

Clause 8 deals more particularly with the position of each unit holder. It commences thus:-

"(a) EACH unit shall entitle the registered holder thereof together with the registered holders of all other Units to a beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund. (b) The Trust Fund as originally constituted by the said initial sum shall be divided into Units of One Dollar each which shall be classified as set out in the First Schedule and which shall be held by the Original Unit Holders the names and addresses of whom are set out in the First Schedule respectively."

In the sub-clauses that follow, provision is made for the creation by the trustees of new classes of units "with the unanimous approval of all the Unit Holders" and for the issue of additional units of any class "as the Trustees shall think fit", if first "approved by unanimous vote of all the Unit Holders" or in accordance with the more detailed provisions found in clause 8(f). Clauses 9 and 10 then deal with the register of unit holders and their certificates, while clauses 11 to 14 regulate the transfer of units (which is permitted) and their transmission.

What follow are detailed provisions, in clauses 15 to 34, for meetings of unit holders, the use of proxies, and the possibility of setting up an advisory committee to advise the trustees (the members of which may be remunerated, if authorised, out of the trust funds: see clause 33(g)). Clauses 35 to 39 make provision for the duration and termination of the trust, while clauses 40 to 42 deal with income of the trust fund and clause 43, with the trustees' powers of investment. Clauses 44 to 53 contain "general provisions relating to the trustees"; clause 54 regulates their resignation and appointment; clause 55 requires them to keep accounts and have those accounts audited regularly, and clause 56 authorises the only means by which the provisions of the trust deed may be "revoked added to or varied". Only the clauses dealing with duration of the trust and distribution of income from time to time need any further elaboration.

Clause 35(a) stipulates that the trust shall terminate "on the Vesting Day" (that is, not later than 30 June 2070) "unless it has been terminated prior to that date under the provisions of this Deed". Termination, however, is immediately, by clause 35(b), made subject to the possibility of the trust's being continued as therein provided. Clause 36 allows for previous termination by special resolution of the unit holders. By clause 37, upon termination of the trust, howsoever achieved, the trustees must sell by public auction "all property and investments constituting the Trust Fund" and "distribute the cash available in the Trust Fund to Unit Holders proportionally to their holdings until the assets of the Trust Fund have been completely turned into cash and distributed to Unit Holders", subject always, of course, to the proper payment of all costs, disbursements and the like incurred "in the liquidation of the Trust". Clause 38 confers a power upon the trustees, from time to time and at any time before termination of the trust (with the unanimous consent of all the unit holders affected), to apply cash, in certain circumstances, "in satisfaction of the interest in the Trust Fund conferred by the holding of a number of Units of any class to be determined by the Trustees". (Despite some hesitation on the part of counsel in this regard, I should have thought that clause 38 was a provision for the payment out of the unit holders in question by way of final distribution, albeit a distribution occurring before the termination of the trust as a whole.)

As to the distribution of income while the trust continues, clause 40, after providing that all income shall be got in and received in the first instance by the trustees, directs the trustees to pay "out of the gross income of the Trust Fund" all costs and disbursements, management charges and outgoings, and subject thereto (according to clause 41(a)) -

"... the Trustees shall in each Accounting Period until the Vesting Day or the date of the termination of the Trust whichever shall first occur pay apply or set aside the net income of the Trust Fund of that Accounting Period to or for the benefit of the Unit Holders in proportion to the number of Units of which they are respectively registered as Holders at the end of the Accounting Period."

Clause 41(b) permits accumulation of income "with the consent of the holders of a majority of the issued voting Units", such accumulation to be dealt with as an accretion to the trust fund if not otherwise dealt with as income; and clause 41(c) authorises the trustees to make "interim distributions of income during any Accounting Period" to unit holders "in conformity with their respective entitlements pursuant to this Deed". By clause 41(f), any income not made the subject of "a determination effectively made at or prior to the end of such Accounting Period" is to be held "in trust for the Holders of Units in proportion to the number of Units of which they are registered as holders on the last day of such Accounting Period".

On the basis of the foregoing, it cannot be doubted that the trust fund as a whole, which is vested at law in the trustee or trustees, is in equity vested in all of the unit holders for the time being: clause 7(a) says as much and it is confirmed by the opening lines of clause 8(a) (that is, until the words "but subject thereto"). The focus of the argument before us was the nature and extent of an individual unit holder's interest in the assets of the trust, given the terms of the trust deed. Although counsel took us to many cases in order to elucidate this interest by analogy, I think it may fairly be said that the starting point for the arguments on both sides was what was said of the unit holder's interest by Brooking, J. in Costa & Duppe Properties Pty Ltd v. Duppe[7], where it was held that an individual unit holder had sufficient interest in land that was an asset of the trust fund to support the lodging of a caveat. In his reasons for judgment in Karingal, Nettle, J. introduced the matter very helpfully, if I may say so, in this fashion (though the emphasis is mine)[8]:

"The weight of authority has been for some years that the holder of a unit in a unit trust has an equitable proprietary interest in all the property which is for the time being subject to the trust deed: see, for example, Charles v Federal Commissioner of Taxation[9]; Read v The Commonwealth[10]; Costa & Duppe Properties Pty Ltd v Duppe[11]; Ford_, Unit Trusts_[12]; Ford_, Public Unit Trusts_[13]. There is also a body of authority that a unit holder has a proprietary interest in each of the assets which comprise the entirety of the trust fund and that provisions in unit trust deeds to the effect that a unit holder is not entitled to any particular asset in the trust fund or to an interest in any particular asset are to be construed in context as meaning no more than that the unit holder is not entitled to have the exclusive use or ownership of any particular asset: see Costa & Duppe[14]; Commissioner of Stamps v Softcorp Holdings Pty Ltd[15]; Aust-Wide Management Ltd v Chief Commissioner of Stamp Duties (NSW)[16]; Connell v Bond Corp. Pty Ltd[17]; Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd[18]; Suncorp Insurance & Finance v.Commissioner of Stamp Duties[19]; McCarthy v Wheeler & Wongan Hotels Pty Ltd[20]; Trevisan v Commissioner of Taxation[21]; Arjon v Commissioner of State Revenue[22]; Bonini v Western Australian Real Estate Custodian[23].

Thus, in Costa the relevant provisions of the trust deed provided that:

`7(a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being. 8(a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other than in accordance with the provisions hereinafter contained.'

`To my mind, having regard to the New Zealand Insurance Case, the Octavo Investments Case and what is said in Charles v Federal Commissioner of Taxation, the conclusion is inescapable that the Unit-holders in the Costa & Duppe Properties Unit Trust have a proprietary interest in all the property which is for the time being subject to the trust deed. This proprietary interest is recognized by cl.7(a) of the deed. Clauses 7(a) and 8(a) cannot mean that the unit-holders, while having a proprietary interest in the whole, have no such interest in any of the constituent parts. If there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed: cf Smith v Layh[24]. What cl.8(a) recognises is that no unit-holder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed ... In my opinion, cl.7(a) and cl.8(a) do no more than recognize what the effect of the trust deed would be in the absence of express provision. A unit-holder has a proprietary interest in each asset of the trust notwithstanding the possible duration of the trust, the extremely wide powers of management given to the trustee and the possibility that the trust might lose the whole or part of its capital through unprofitable trading or speculation.'"

In Suncorp Insurance and Finance v. Commissioner of Stamp Duties,[25] for example, Fitzgerald, P. spoke to like effect.

For his part, Mr. Merralls submitted that what Brooking, J. said in Costa &. Duppe applied with equal force to the unit trust here in question. It followed, he said, that as each and every unit holder had a proprietary interest in each and every asset and as the trustee plainly held at law the freehold estate in possession in the Broadmeadows land, each and every unit holder had in equity a freehold estate in possession in that land. That, he submitted, was the whole nature of a trust and, a trust having been created, it was not open to those creating it to stipulate against the conclusion for which he contended. The discretions conferred by the deed were ancillary and they did not - and indeed, he said, could not - militate against that conclusion. If and insofar as they purported to do so, they should be disregarded as contrary to the essential nature of the thing established.

Mr. De Wijn put it differently, of course. He sought to distinguish Costa & Duppe on the basis that the interest needed to support the lodging of a caveat under the Transfer of Land Act fell far short of a "freehold estate in possession". He emphasised the wide powers given to the trustees to create new classes of units, to issue additional units, to invest at discretion and to accumulate income if they saw fit. He emphasised too, the restrictions imposed by the deed itself. On the rights of an individual unit holder to any particular asset within the trust fund for the time being, counsel took us in detail to what was said by the Queensland Court of Appeal in Suncorp where, after considering a complex set of events affecting two unit trusts with the same trustee, it was held that the relevant unit holder's estate or interest in the land in question, an asset of the trust fund, fell short of ownership.

Simplified, the facts in Suncorp went thus. A and B held the units in two unit trusts of which A was also trustee. A, purporting to act in a personal capacity, paid money to itself in its capacity as trustee, whereupon further units were issued to A. Acting as trustee, A then paid money to itself in its personal capacity, whereupon certain of its real property was subjected to the terms of one or other of the trusts. The court held that although A had thereby limited or restricted what had hitherto been absolute ownership by subjecting the land to the terms of the trust for unit holders (being A and B), A did not thereby (by virtue of the transaction in question) "obtain" any beneficial estate or interest in the land and hence there was no dutiable transaction under s.54AB(1) of the Stamp Act 1894 (Qld.). In the course of his reasons for judgment, Fitzgerald, P. said[26]:-

"Principle and authority seem to me to indicate that a majority unitholder which has the right to have the trust deeds performed according to their terms, including the `Trust Funds' dealt with as each deed requires, and to cause the realisation of each `Trust Fund' and distribution of the proceeds, has an equitable `estate or interest' in the Trust Fund and each of the `Trust Fund' `Investments'. Further, since the appellant's `estate or interest' obviously falls short of full ownership, the minority unitholder, which also has the right to participate in the distributions, likewise has an equitable `estate or interest' in each `Investment' held on trust by the appellant for the unit holders. If the appellant's units entitle it to an equitable `estate or interest' in the relevant land, in one sense it obtained that `estate or interest' as a result of the transaction; its `estate or interest' in the land the subject of each trust is different from, and importantly less than, its original full ownership of that land." [Footnotes omitted.]

Seizing upon this last, Mr. De Wijn submitted that the equitable estate or interest of Arjon in the Broadmeadows land was necessarily less than "an equitable estate of freehold in possession".

In the end, I think that both parties were prone to overstate their cases; for in my opinion it is not necessary in this instance to pass upon the precise nature and extent of such proprietary interest in the Broadmeadows land as may attach to each of the units in the trust. Quite simply, we are not concerned with the unit holder who is merely one of more than one, but only with a company which is, and was at all material times, the sole unit holder - that is, the holder of all of the issued units in the unit trust. And that is sufficient in itself to distinguish what the Court of Appeal said of the majority unit holder (and indeed of the minority unit holder) in Suncorp.

It is not in dispute, nor could it be, that every individual unit holder has the right to compel the trustee to administer the trust in accordance with the terms of the trust deed; that is a chose in action which is possessed by every beneficiary of a trust and it is critical to the analysis here. For any individual unit holder, that right of action, considered as a species of property, can fairly be said to be co-extensive with the rights given the unit holder in terms of the trust deed - rights to receive income on terms of the trust deed and an interest in the assets of the fund, but again on terms of the trust deed. In my opinion, the holder of all of the units in the trust is in different case; for, quite apart from the terms of the trust deed, the holder of all of the units will ordinarily have the power to bring the trust to an end and, if it so chooses, appropriate the trust assets to itself: Saunders v. Vautier (1841) 4 Beav.115; [1841] EngR 629; 49 ER 282. At one stage in the argument before us it was put that the holder of all of the units in a unit trust has no more than the conglomeration of the rights attaching to each of the units considered severally, but I reject that argument. The holder of all of the units has more than that. First, through holding all the units, it has what all of the unit holders together (if more than one) would have, which, by virtue of clause 7(a) and the opening lines of clause 8(a), is the whole beneficial interest in the entire trust fund, which surely means the full beneficial interest in each and every asset within the trust fund for the time being (subject, perhaps, to any claim that the trustee might have on the fund, the question that I have put aside for the time being). As the only person beneficially interested in the assets, it also has the power to bring the trust to an end at will and to require the transfer to it of the assets (even if only after satisfying any claim that the trustee might have to reimbursement or recoupment for expenses incurred as trustee). On this analysis, Arjon, as the sole unit holder in the GSF Unit Trust, had the full beneficial interest in the Broadmeadows land and, it follows, was the equitable owner of the land: see Chief Commissioner of Stamp Duties v. ISPT Pty. Ltd.[27], a decision of the Court of Appeal of New South Wales.

In ISPT Coles-Myer Property Investments was the absolute owner of land of which it was registered proprietor. It made an agreement, partly in writing and partly oral, with ISPT to sell the land to ISPT as trustee of a unit trust in which Coles-Myer was the sole unit holder. ISPT, having received money from Coles-Myer for the units in the trust, used that money to pay to Coles-Myer the full purchase price of the land. It was held (by a majority) that there was not thereby any "change in beneficial ownership". As analysed by the majority, the transfer of land by Coles-Myer to ISPT took place only in equity[28]. As the transfer was effected by virtue of the agreement for sale which was partly oral, the transfer by Coles-Myer was of an equitable estate in the land which, upon reaching ISPT, was immediately impressed with a trust for Coles-Myer - and so there was no change in the beneficial ownership.

Mason, P. (dissenting) considered that there was a change in beneficial ownership at the point when Coles-Myer, having accepted payment from ISPT of the purchase money for the land, agreed to hold the land as nominee for ISPT both as purchaser and as trustee of the unit trust (in which Coles-Myer held all the units). Meagher, J.A. saw it otherwise. His Honour said[29]:-

"ISPT paid the full purchase price to Coles Myer Property Investments. However, ISPT made its offer as trustee for a unit trust, all units in which were held by Coles Myer Property Investments. Could that transaction result in a transfer of the beneficial interest in the land from Coles Myer Property Investments to ISPT, as the appellant alleges? I must confess I am quite unable to see how it could. The legal estate resided in Coles Myer Property Investments both before and after [the steps involved]. Either s 23C and s 54A of the Conveyancing Act 1919, applied to nullify the ordinary effect of those two steps, or they did not. If they did, the beneficial interest remained with Coles Myer Property Investments. It they did not, the beneficial interest also remained in Coles-Myer Property Investments in its capacity as sole unit holder in ISPT." [Emphasis added]

For his part, Fitzgerald, A-J.A. reinforced what he had earlier said in Suncorp (when Fitzgerald, P.). He, too[30], could not perceive how ISPT, acting only in its capacity as trustee for the sole unit holder, Coles-Myer, could have become "full beneficial owner" of the property. He emphasised that Coles-Myer, as the holder of the legal title, became merely nominee of ISPT as trustee of the unit trust and, as holder of all the issued units, retained the beneficial ownership. As between trustee and unit holder, the question of beneficial ownership depended "primarily at least on the terms of the deed" and in this instance the question had to be determined in favour of the unit holder: it was the unit holder, not the trustee, who had the beneficial ownership. His Honour added[31]:-

"As I stated in Suncorp ... a unit holder in a unit trust commonly has an interest in the trust property and its constituent parts. It is unnecessary to consider that general proposition further in this matter. It is also unnecessary to consider the usual effect of a provision such as cl 3.2 [denying that a unit conferred any interest in a particular investment etc.] Consistently with the opinion which I expressed in Suncorp with respect to the broadly comparable trust deeds there under consideration, I am of opinion that the trust deed ... entitles a sole unit holder to the full beneficial ownership of the trust fund and its constituent assets, subject only to any rights of the trustee with respect to those assets at the particular time. It follows, of course, that ISPT as trustee ... would not ordinarily be the beneficial owner of [the land] when there is only one unit holder, and would have no estate or beneficial interest in the fund or the assets comprising the fund beyond any estate or interest derived from rights as trustee under the trust deed or the general law: cf. Suncorp[32]. The matter can be emphasised by pointing out that a sole unit holder could direct the trustee not to require a conveyance, to appoint another nominee and perhaps to resign as trustee in favour of another, and could set an immediate vesting date and require a conveyance of the property to itself. The trustee's rights under the deed ... are substantially under the effective control of a sole unit holder." [My emphasis]

Fitzgerald, A-J.A. reiterated, however, that his conclusion did not deny that the land became an asset of the trust, but denied only that there was any relevant change in the beneficial ownership of an estate or interest in the land.

So far as I can tell, the unit trust deed there in question was not significantly different in terms from the GSF Unit Trust deed here and clearly both Meagher, J.A. and Fitzgerald, A-J.A. considered that the sole holder of all the units in the trust was in equity the owner of the land once it became an asset of the trust. And so it is here. It is important to emphasise that we are not now dealing with the entitlement of one of several unit holders to property the subject of the trust. Obviously any consideration of the rights of one of many must depend upon the provisions of the trust deed and the entitlements thereby created and conferred. We are concerned with the holder of all the units whose position, as owner in equity of the trust assets, may be determined without reflecting at all upon the position of an individual unit holder who is but one of many. In my opinion Arjon was the equitable owner of the Broadmeadows land, just as in ISPT the sole unit holder Coles-Myer was considered to be the owner in equity of the land which became an asset of the trust in that case.

Mr. De Wijn submitted that the decision of the High Court in MSP Nominees Pty Ltd v. Commissioner of Stamps (S.A.)[33] dictated a different result, but I think not. In MSP, the court was concerned with the narrow problem whether, upon the redeeming of the units held in a unit trust by two of the three unit holders, there was a "transfer" within the meaning of the Stamp Duties Act 1923 (S.A.), to "transfer" being defined by the legislation to include to "surrender or renounce a beneficial interest or potential beneficial interest in, or in relation to, property". Debelle, J. had held, at first instance, that there was no "transfer" as defined; the Full Court reversed that decision and the High Court restored the decision of Debelle, J. The crux of the decision was that units, upon redemption, were cancelled but cancelled for full value: the unit holders were "paid out". Accordingly, nothing was surrendered because nothing was given up or abandoned: nor was any interest, when redeemed, subsumed in a larger interest. The remaining unit holders did not acquire the beneficial interest redeemed, nor did the beneficial interest of those remaining increase. The trustee merely paid out of the trust fund the full value of the units which were then promptly cancelled. The fund was reduced and the beneficial interests otherwise existing were not increased.

Mr. De Wijn made the point that in the course of the judgment the unit trust (which was not dissimilar to that in issue here) was called "discretionary". The Court said[34]:-

"The significant provisions made by the Trust Deed for the exercise of powers and discretions by the Trustee with respect to distributions to Unit Holders support the description of the trusts established by the Trust Deed as discretionary trusts. [See Commissioner of Stamp Duties (NSW) v. Buckle.[35]] Clause 4 denied any entitlement to Unit Holders to require a distribution other than pursuant to cl 11 [that is upon the arrival of the Vesting Day]. Of the methods for distributions specified in the Trust Deed, only the first, that in cl 11 for distributions after the Vesting Date, conferred upon Unit Holders rights not dependent upon or pre-conditioned by a requirement of consent by the Trustee or the exercise of a power vested in the Trustee. Accordingly, any scope for the operation of the rule in Saunders v. Vautier[36] was limited."

But the label "discretionary" must be properly understood. The beneficial interest in the trust fund was divided into units and clause 4 provided that no unit holder was to have an interest in the trust fund "other than in its entirety" or to be entitled to interfere in the exercise of the right of the trustee as owner of the trust fund. No unit holder could require the transfer to him of any particular investment or part thereof and distribution of income was subject always to a determination by the trustee whether to distribute or to accumulate for the time being. When the vesting day arrived, the trustee was obliged to convert the investments into money and to divide the proceeds among unit holders according to the number of units. At its discretion, the trustee could transfer to a unit holder, who so requested, a particular asset in specie in satisfaction or part satisfaction of the unit holder's "entitlement upon termination of the trust". The right given to unit holders to redeem units was found in clause 34 and redemption was possible only if the trustee said so, in its absolute discretion.

None of these powers, though vested in the trustee and in themselves allowing for the exercise of discretion, would ordinarily justify the conclusion that the unit trust was a "discretionary trust" as that expression is commonly used. In referring to Buckle, the Court picked up a statement in the joint judgment[37] which made it plain that in that case the discretion attached to "the identity of those who might receive income or capital, the amounts they might receive, the period or duration of the trusts, the content from time to time of the fund impressed with those trusts, and the very terms of the trusts themselves". That is a discretionary trust, ordinarily so-called; for, as I understand it, a discretionary trust is commonly understood as one under which the beneficiaries are not finally identified, but lie within the discretion of another, usually the trustee. (Whether there is any beneficiary "presently entitled" under a discretionary trust (in that sense) was considered in Commissioner of Sate Revenue v. Famajohn Nominees Pty Ltd[38] and whether the decision was right or wrong is of no present concern). In MSP the beneficiaries were not uncertain; they were the unit holders. Entitlement at the end of the day was solely with the unit holders, both as to capital and income (and even if interim distributions of income for the time being were the subject of discretion, they were discretionary as to amount overall, but not, it seems, as between unit holders).

Of course it must be remembered that in MSP the court was dealing with only two of the three unit holders: so much appears from the recitation of the facts[39]. And in relation to individual unit holders the discretions conferred upon the trustees were obviously of more significance than would have been so had the court been considering the position of a sole unit holder. The significance of the use of the term "discretionary trust" is perhaps best seen in the following passage where the Court, speaking of "Budget" and "Galaxy" which were the two unit holders who had redeemed their units, said this[40]:-

"In the present case, contrary to the view taken in the Full Court, the effect of the redemptions was not the receipt or acquisition by the remaining Unit Holder of any `beneficial interest' held by the Unit Holders who had obtained the redemption of their respective units. The use of terms such as 'beneficial interest' is apt to mislead when applied to beneficiaries' interests in a discretionary trust. As effected by clause 4 of the Trust Deed, the Unit Holders were denied any specific interest in any item of property held in the Trust Fund. Rather, the rights enjoyed by Budget and Galaxy as Unit Holders were, upon favourable exercise by the trustee of its discretion conferred by cl 34, transmuted by the redemption process into the entitlement to the price arrived at by the valuation for which cl 36 provided." [Footnotes omitted.]

In this passage the Court was only emphasising that Budget and Galaxy, considered as individual unit holders, had no specific interest in any item of property. So much was expressly provided by clause 4 and could not be gainsaid. It was relevant because, although the unit holders ceased to have any interest in the trust fund when the units were cancelled and so gave up such beneficial interest as they had in the trust fund as a whole, they gave that up only for value and so there was nothing that could be brought to duty.

In developing the argument, Mr. De Wijn pointed out that, when denying that any unit holder had "any specific interest in any item of property" the High Court had referred expressly (in footnote 53) to Official Receiver in Bankruptcy v. Schultz[41], a case dealing with the rights of a beneficiary in the unadministered estate of a deceased person, and he sought to align that case with this, of Arjon. But not only is there no analogy; in the very passage in Schulz cited in footnote 53 in MSP the Court made it clear that it was examining the interest of an individual beneficiary as distinct from that of the class of beneficiaries as a whole. In MSP, as here, each individual unit holder had no specific interest in any item of property within the trust fund - and so much may be accepted for present purposes. The reference to Schultz, introduced by "cf." simply said as much again, whether or not the context provided an analogy in any other respect. In Karingal, in the judgment which is under appeal, Nettle, J. said this of MSP [42]:-

"But where, as in MSP and here, the trust deed divides the beneficial interest in the fund into units and specifically confers on each unit holder an interest in the trust fund as a whole, the fact that certain of the unit entitlements, and perhaps even most of the unit entitlements, are discretionary in one sense or another, cannot mean that the trust is to be characterised as a discretionary trust in a sense that deprives the unit holders of the interest for which the deed expressly provides; and the High Court did not say otherwise."

This was recently quoted with approval by Goldberg, J. in Lock v. Commissioner of Taxation (Cth)[43], and, with respect, I too agree.

Finally, there is the decision of the full Federal Court in Kent v. The Vessel "Maria Luisa"[44] upon which Mr. De Wijn relied heavily. In Kent the ship in question was an asset of a unit trust; the registered owner of the ship was the trustee and the question was whether AFE, the sole unit holder (who, as it happened, also held all of the shares in the trustee), was the owner of the ship, albeit the equitable owner. Counsel for the Commissioner tended to dismiss this case as distinguishable on the ground that the Court there was concerned to identify "the owner" of the ship, rather than "an owner", but that point of distinction may not be valid, given that the majority (Tamberlin and Hely, JJ.) appeared to adopt[45] the view of Sheppard, J. in Malaysia Shipyard and Engineering SDN BHD v. The "Iron Shortland"[46] that in the relevant section "owner" meant or included a beneficial owner who may not be the registered owner. But I put that to one side.

In Kent Moore, J. (dissenting) held that the sole unit holder was the owner because, even under the terms of the trust, it enjoyed a bundle of rights which enabled it "to exercise control over and enjoy possession of a ship"[47], notwithstanding that any such right in the unit holder was "subject to the prior satisfaction of any liabilities of the trust"[48]. The majority, however, concluded that equitable ownership was "something greater than beneficial interest" and that, although the unit holder, the sole unit holder, had the capacity to extinguish the trust and call for the property, until it did so it was constrained by the provisions of the trust deed, including the provision that any unit holder was not entitled to any property comprised in the trust fund, prior to the vesting day.[49]

In their joint judgment, Tamberlin and Hely, JJ. said[50]:-

"On the relevant date, [the beneficiary] AFE had a contingent defeasible interest in the specific assets of the trust, including the ship. The interest was contingent on AFE being a beneficiary of the trust as at the vesting date, and was defeasible in relation to particular assets of the trust if they were disposed of by the trustee in the course of administration of the trust prior to the vesting day."

This may be correct in relation to the entitlement of a particular unit holder when there is more than one unit holder; but in a case like the present where the trust deed itself declares that the trust fund as a whole is vested in all the unit holders together and there is but one person holding all the issued units, it seems to me to follow that that sole unit holder must be regarded as in equity entitled to an interest, vested in possession, in all of the trust assets. The trustee has the legal title to the trust property, holding subject to the trust deed; and the equitable title to that property is in all of the unit holders together - or, when there is only one who holds all of the units, in that sole unit holder. To say that the sole unit holder does not have equitable title to the property unless and until the right to terminate the trust is exercised and the title called for appears to me, with respect, to confuse the right to be recognised as the owner in equity with the right to call for a transfer of the legal title. Again I emphasise that this is to speak only of the holder of all of the issued units; I am not dealing with the right of the individual unit holder who is but one of several.

Accordingly, I am not moved to any different conclusion by the cases upon which Mr. De Wijn relied in developing his argument. The Broadmeadows land was held by Seabridge as trustee of the GSF Unit Trust. Seabridge was therefore the owner at law of the Broadmeadows land and, in equity, the full beneficial interest in the Broadmeadows land was vested in Arjon. Seabridge had a freehold estate in possession in that land (as to which see Chief Commissioner of Land Tax v. Macary Manufacturing Pty Ltd[51]) and it follows, in my opinion, that Arjon did too - the former at law and the latter in equity.

A few more points remain. First, the expression "in possession" need not trouble us. As Griffith, C.J. said in Glenn v. Federal Commissioner of Land Tax[52]:-

"The term `estate in possession' is sometimes used in real property law merely to denote the first of two or more successive estates, the others being called `estates in remainder' or `estates in expectancy'. It is also used to denote an estate of which some person has the present right of enjoyment."

In that case, it was held that those entitled to income after a direction that income be accumulated for a period of time were not entitled "in possession" during the period of accumulation and so much can be readily accepted. In the definition of an "owner" in s.3 of the Act, the expression "estate in possession" is used in contradistinction to an estate in remainder or an estate in expectancy: see also Macary[53]. In this instance, there can be no doubt that the whole of the trust fund is vested in interest, expressly by clause 7(a), in all of the unit holders and such is a vesting in possession. True it is that under clause 8(a) of the trust deed no unit holder is entitled "to any particular security or investment comprised in the Trust Fund or any part thereof" or entitled "to the transfer to him of any property comprised in the Trust Fund", but whatever the effect of such restrictions upon the proprietary interest of an individual unit holder as one of many (as to which I need say nothing), they do not prejudice the conclusion that the holder of all of the issued units in the trust for the time being has the full beneficial interest in the trust assets and has that interest "in possession". The vesting achieved by clause 7(a) is immediate and absolute and accordingly is properly regarded as "in possession". That is not inconsistent, in my opinion, with the wide powers of management and investment given to the trustees by the trust deed, powers which the sole unit holder is in position to bring to an end as and when it chooses.

Secondly, although reference was made to the cases concerning the interest of the beneficiary in the unadministered estate of a deceased person (such as Commissioner of Stamp Duties (Q.) v. Livingston[54]), I think it altogether unnecessary to pursue that line. At one stage in the argument, a submission was made that the interest of a unit holder under a unit trust such as that here was no more and no less than the interest of the beneficiary in such an unadministered estate. If it is not already apparent, I say plainly that I would reject that submission: the vesting of the trust assets, achieved by clause 7(a), is altogether different. In the case of the unadministered estate, no trust has yet been brought into existence: that is the critical factor. Once the estate has been administered, a trust comes into being and, with the trust in place, the beneficial interests are vested or contingent according to the terms of the trust. In this case the beneficial interests are vested in interest and, at least so far as the sole unit holder is concerned, vested in possession.

Finally in this regard, I notice the appellant's argument that turned on the period for which the trust was established to endure. For the purposes of the argument, that may be taken to be the fixed and certain period of 80 years (for the qualifications on that do not matter for present purposes). The argument was that because the trust was established for 80 years, a finite period, no beneficiary under the trust could be entitled to a freehold estate in the Broadmeadows land because the essence of freehold was that the estate was indeterminate: Cheshire's Modern Law of Real Property[55]. This last may be so, but it does not follow that on that account the beneficiaries under the trust cannot hold an estate of freehold. That is because the period of 80 years does not mark out the end of the beneficial interest; it marks out only the end of what might be called the period of management. At the end of that period of 80 years, during which income is to be distributed from time to time as directed by the trust deed, all of the assets in the trust are to be sold and the proceeds distributed among the beneficiaries. Thus, the beneficial interests do not end with the 80 years: they continue to be recognised as interests in the assets, albeit assets that then are to be held upon trust for sale. Nor does the trust for sale matter for present purposes: for the trust for sale is to arise only at the end of the 80 years, and not before it. Until then, the assets in the trust fund are vested in the beneficiaries fro the time being and there is no reason why, as at 31 December 1997, 1998 and 1999, it should not be concluded that their interests are in each and every asset for the time being the subject of the trust, including what is still realty, the Broadmeadows land.

For the reasons given, I am clear that, subject to the one question still remaining - namely, whether the trustee's right of recoupment prejudices the result otherwise reached - at the time relevant to these three assessments to land tax Arjon was, in equity, entitled to a freehold estate in possession in the Broadmeadows land, notwithstanding the interposition of the GSF Unit Trust. The conclusion is even more obviously so in respect of the Frankston land and the Chadstone land, where no unit trust intrudes. The Frankston land, it will be recalled, was vested in Braybridge, as registered proprietor, and held by it as "bare nominee" for Arjon - meaning (I have suggested) directly for Arjon and without the interposition of a unit trust. The land on which the Chadstone Shopping Centre stood was held by Bridgehead similarly for Arjon, but in this case Bridgehead was only one of two registered proprietors, Perpetual Trustees Australia Ltd. and Bridgehead holding equally as co-owners. None the less Arjon was holding, in equity, a freehold estate in possession; for Arjon was the holder, in equity, of the very estate of freehold held by Bridgehead at law (even though that was an equal and undivided share as one of two co-owners).

I should perhaps add that no argument was put by either side to the contrary of what I have just said in respect of the Chadstone land, of which Bridgehead was only one of two co-owners. It seemed to be accepted by the parties that, as Bridgehead held at law a freehold estate in possession, Arjon, too, held a freehold estate in possession, albeit in equity. In Nullagine Investments Pty. Ltd. v. Western Australian Club Inc[56], a distinction was perceived by the majority (Deane, Dawson and Gaudron, JJ.) between the "interest or share" of one of two or more tenants in common of a freehold estate in land and the freehold estate itself.[57] But this was in the context of the Partition Act (in Western Australia, the Property Law Act 1969 s.126(1)) and in order to deny that an agreement between the co-owners, not to dispose of their respective "interest" in the land without first offering it to the other, inhibited an application under the statute for partition and sale of the land itself. Brennan, J. (dissenting in the result) regarded each of the co-owners as "seized of and holding on his own behalf an estate in fee simple in a one half share"[58], while Toohey, J., (also dissenting as to result,) found it sufficient to speak only of "the estate or interest of each co-owner"[59]. The case was plainly focussed on the particular context created by the statute in question and, as I read the majority judgment, their Honours were concerned only to distinguish between the interest or share of a single tenant in common, who "does not own the freehold estate and is unable alone to deal with the land"[60], and the land itself, the prospective subject of partition and sale. Therefore what was said in Nullagine does not prejudice the conclusion that Arjon was the holder in equity of a freehold estate in the Chadstone land, though Bridgehead was but one of two co-owners at law.

I turn now to the remaining issue for decision. In all three cases - Chadstone, Frankston and Broadmeadows - the conclusion that Arjon held an equitable estate of freehold in possession is subject, as I said at the outset,[61] to the possibility that that conclusion is denied or otherwise prejudiced because of the respective trustee's undoubted right of recoupment for the significant liabilities incurred by it as trustee. Does the existence of that right in the trustee deny or in some way prejudice the conclusion so far reached about the equitable ownership of the land?

The trustee's right of recoupment for liabilities properly incurred in its capacity as trustee was analysed by Professor Ford in 1981 in an article entitled Trading Trusts and Creditors' Rights.[62] A trustee will ordinarily have the right to recoup himself out of the trust property for amounts he has personally expended or a right to be exonerated out of the trust property in respect of a liability incurred; for it is not usually necessary that he shall have first discharged the liability out of his own funds. Thus, the expression "right of indemnity" might be the more accurate, where both recoupment and exoneration are intended. In this case, we were told only of "significant liabilities incurred" by Seabridge as trustee of the GSF Unit Trust, and by Braybridge and Bridgehead when acting as trustees of the Chadstone land and the Frankston land respectively, and no distinction was drawn in argument between a right of recoupment and a right of exoneration. Accordingly I use the term "right of recoupment" as it was in argument, supposing either that that alone is in issue or, if not, that the difference between that and the right of exoneration is of no consequence[63].

In Victoria, the Trustee Act 1958 s.36(2) authorises a trustee to reimburse itself or to pay out of the trust property all expenses properly incurred in the execution of the trusts. Quite apart from statute, the like right has always been accorded in equity to a trustee. As Professor Ford puts it[64]:-

"The trustee has an equitable charge or lien on the trust property which gives a right to retain trust property until the right to indemnity is satisfied and, if need be, to sell it. The trustee's right of indemnity has been described as a right of property in assets of the trust. That description is acceptable where the trustee has paid the debt and he has a right of recoupment but where his right is one of exoneration there can be cases where the trustee's power to apply trust property in payment of trust debts is a fiduciary power to be exercised in the interests of the beneficiary. When that is the case it seems inappropriate to describe the trustee's right as a proprietary right." [Footnotes omitted.]

This must be read in the light of the High Court's comments in Octavo Investments Pty. Ltd. v. Knight [65]which, in characterising the trustee's right of recoupment as a "beneficial interest" in the trust assets, seemed to draw no distinction between the right of recoupment (after the trustee had discharged the trust's liability out of his own moneys) and the right of exoneration (before the liability had been discharged)[66].

Because the trustees were said to have incurred liabilities, significant liabilities, in respect of the Frankston land, the Chadstone land and the Broadmeadows land respectively, Mr. De Wijn put his submission in this regard in relation to all three. The submission was described by the Tribunal this way[67]:-

"At each relevant date, the registered proprietors of each of the Chadstone Land, the Frankston Land the Broadmeadows Land had incurred trust liabilities. Until those liabilities were discharged, the entitlement of the beneficiaries of the Arjon Trusts was: (a) confined; and (b) unable to be precisely specified. As a consequence, Arjon says that it follows that, however the equitable interest be properly characterised, it is necessarily less than an `estate of freehold in possession'. As a consequence, and for that reason alone, in respect of all land assessed, Arjon cannot be assessed as an `owner'."

The submission is, to say the least, a startling one. It would apply, as I apprehend it, to a simple trust where Blackacre was held upon trust by A for B if A were to give a mortgage to X (let us say at the direction of B) and thereby incur a personal liability under the mortgage. Unless and until that mortgage was fully discharged, B would not be the holder, even in equity, of a freehold estate in possession; or so the argument runs.

The Tribunal rejected the argument and, in my opinion properly so. Assuming that "as a general proposition ... a shopping centre would generate a substantial rent roll on a monthly basis", the Tribunal pointed to the extraordinary result, if the argument were accepted, that "once the liabilities were paid off by resort to the income" Arjon's interest would return to an estate of freehold in possession, but would be relegated to an interest in remainder or reversion "once a new liability accrued" [68]. Moreover, commonly (even if not in this case) the trustee has a right to personal indemnity as against the beneficiaries, and, should the beneficiaries put the trustee in funds, was it likely, the Tribunal asked rhetorically, that the fundamental character of the equitable interest of the beneficiary changes from one `in possession' to one `in reversion or remainder' and vice versa every time a liability arises and every time it is met?". And what, then, of the holder of a life estate under a settlement of land[69]: would the life tenant, who is ordinarily regarded as having an estate in possession, not have such an estate if (and only so long as) the trustee had some right of exoneration against the trust assets?

The problems are many: the answer is clear. The argument cannot be accepted that the mere right of the trustee to indemnity out of the trust assets bears upon the proper characterisation of the beneficiary's entitlement to what otherwise is a freehold estate in possession. In developing the argument, counsel took us to a great number of cases in which the courts have, for one purpose or another, had to consider the trustee's right to indemnity. Yet it seems to me that the submission made on behalf of Arjon is inconsistent with longstanding authority as well as the more recent.

In Lord Sudeley v. Attorney General[70], it had been decided that until a deceased estate was fully administered and the residue ascertained the residuary beneficiary, though undoubtedly having a right against the executor to have the estate duly administered, had no property in particular assets in the estate, with the result that the beneficiary's interest under the will was located (for duty purposes) wholly in England although some of the assets in the unadministered estate were mortgages in New Zealand; see also Dr. Barnardo's Homes v. Special Income Tax Commissioners[71]. It was otherwise, it was decided in Baker v. Archer-Shee[72], once the estate was fully administered. In that case, the deceased testator, resident in the United States, left the residue of his property in trust for his daughter for life and the trustees, also resident in the United States, had full power of investment. The trust fund consisted of foreign property (stocks and shares and the like) and the trustee paid to the daughter from time to time, through her bank account in New York, such sums as it considered to be income after deducting expenses. The question was the character of such income for income tax purposes and it was held, by majority, that in the beneficiary's hands it had the same character as in the trustees' and the trustees' prior deducting of all costs, charges and expenses was not seen as prejudicing that result.

Viscount Summner and Lord Blanesburgh were in dissent. According to the former, the life tenant did not have "any specific right to any particular item of income" but "only an equitable right to have handed over to her the net income of the estate, subject to all proper deductions": it was "immaterial that in Lord Sudeley's Case the estate of the husband of the testatrix had not yet been administered, whereas here, no doubt, this has been long ago accomplished"[73]. Lord Blanesburgh said[74]:-

"The payments made to Lady Archer-Shee were payments of all that remained of a fund of miscellaneous income receipts after there had been paid or retained thereout sums deemed by the trustees to be sufficient to discharge the trust and other outgoings that had first to be provided for. The payments represented, in other words, the actual net residuary income available for the tenant for life ascertained and only ascertained after payment or provision had been made of or for all prior claims against the gross residuary receipts. The income the lady received was the net income of a totality, not the income of particular items of property. Such seems to me to be the meaning of the statement."

The majority, Lord Atkinson, Lord Wrenbury and Lord Carson, took the opposite view, holding that the beneficiary was entitled not to the net income but to the whole, all relevant interest in the estate being vested by then. Lord Atkinson (himself a party to the decision in Dr Barnardo's Homes) said[75]:-

"... I am utterly unable to understand how the retention by the trustees in their own hands of a portion of the income which they receive in order to pay lawful claims upon the fund .... can change the `origin or parentage' of the residue of the income received, lodged with the bankers of the beneficiaries."

"My Lords, the question is not what the trustees have thought proper to hand over and have handed over (which is [a] question of fact) but what under the will [the beneficiary] is entitled to (which is a question of law). The trustees, of course, have a first charge upon the trust funds for their costs, charges and expenses, and American income tax will be a tax which they would have to bear and which would fall upon the beneficiary. But this does not reduce the right of property of the beneficiary to a right only to a balance sum after deducting these. If an owner of shares deposits them with his banker by way of security for a loan he is not reduced to being the owner of a balance sum being the difference between the dividends on the shares and the interest on the loan. He is the owner of the equity of redemption of the whole fund. If a landowner employs an agent to collect his rents and authorizes him to deduct a commission he does not cease to be the owner of the rents. Under [the deceased testator's] will, [the beneficiary] ... is, in my opinion, as a matter of construction of the will, entitled in equity specifically during her life to the dividends upon the stocks."

"It is, I think, if the law of America is the same as our law, an equitable right in possession to receive during her life the proceeds of the shares and stocks of which she is tenant for life. Her right is not to a balance sum, but to the dividends subject to deductions as above mentioned. Her right under the will is 'property' from which income is derived."

Lord Carson spoke to like effect. He said[78]:-

"It is, I think, essential in the first place to remember that the property which it is sought to tax in this case was in the hands of the trustees, to use the words of Sargant L.J., `a definite and specific trust fund,' to the whole of the income and profits of which the respondent's wife was entitled under the will of her father Alfred Pell. Had the residue been still undetermined or had the share to which Lady Archer-Shee was entitled been a proportion only of the income or profits of the residue other questions would, no doubt, arise."

"In my opinion upon the construction of the will of Alfred Pell once the residue had become specifically ascertained, the respondent's wife was sole beneficial owner of the interest and dividends of all the securities, stocks and shares forming part of the trust fund therein settled and was entitled to receive and did receive such interest and dividends. This, I think, follows from the decision of this House in Williams v. Singer [1920] UKHL 2; [1921] 1 AC 65, and in my opinion the Master of the Rolls correctly stated the law when he said `that in considering sums which are placed in the hands of trustees for the purpose of paying income to beneficiaries, for the purposes of the Income Tax Acts, you may eliminate the trustees. The income is the income of the beneficiaries; the income does not belong to the trustees.'"

More specifically as to the trustees' deducting trust expenses before remitting the balance to the beneficiary, Lord Carson said[80]:-

"It is, in my view, in the same position as if the trustees had arranged to have the interest and dividends paid direct to the [life tenant] and she had discharged the necessary outgoings in accordance with the law. Whether the necessary outgoings according to law were discharged by the trustees or by the cestui que trust cannot, in my opinion, make any difference."

I have set out these statements at length not only because Baker v.Archer-Shee was a watershed case, but also because the speeches of the majority seem in large part to resolve the issue raised by the appellant's argument here, which (I might add) seems itself to draw significantly upon the views of the dissentients[81]. In Baker the trustees' right of indemnity did not work to the prejudice of the beneficiary's interest which was and remained a life estate in the assets, before any deduction for the trustees' liabilities. That payment was made by the trustees to the beneficiary only after the trustees had first met those liabilities was a fact, but not in any way determinative of the beneficiary's estate. So it is here, in my opinion, where the trustee is holding the relevant freehold estate directly for Arjon or is holding the freehold estate as an asset in a unit trust in which Arjon is the holder of all the issued units.

Much the same can be drawn from the judgments in Charles v. F.C.T.[82] where the beneficiaries in a unit trust were held entitled to regard distributions as having the same character of income or capital as did the receipts in the hands of the trustees. In a much quoted statement, Dixon, C.J., Kitto and Taylor, JJ. said[83]:-

"... a unit held under this trust deed is fundamentally different from a share in a company. A share confers upon the holder no legal or equitable interest in the assets of the company; it is a separate piece of property; and if a portion of the company's assets is distributed among the shareholders the question whether it comes to them as income or as capital depends upon whether the corpus of their property (their shares) remains intact despite the distribution: Inland Revenue Commissioners v. Reid's Trustees[84]. But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust deed: Baker v. Archer-Shee; so that the question whether moneys distributed to unit holders under the trust form part of their income or of their capital must be answered by considering the character of those moneys in the hands of the trustees before the distribution is made."

Again, there is no qualification by reference to the trustees' right of indemnity as diminishing or reducing the already vested estate or interest of the beneficiaries under the trust. See also New Zealand Insurance Co. Ltd. v. Commissioner of Probate Duties[85] per Smith, J. and Costa & Duppe[86]. Contrast Livingston v. Commissioner of Stamp Duties (Q) in the High Court[87] and, on appeal to the Privy Council, Commissioner of Stamp Duties (Q) v. Livingston[88] (which dealt only with the rights of beneficiaries in the unadministered estate of a deceased person) and the earlier decision in Smith v. Layh[89] (which depended more upon the construction of the will rather than upon any a priori concept of entitlement).

In 1979 the High Court decided Octavo Investments Pty. Ltd. v. Knight[90], holding that when the trustee of a trading trust himself became bankrupt, his right of recoupment for liabilities incurred for the trust was property passing to his trustee in bankruptcy. (Whether the property so passing was available to creditors generally soon gave rise to a division of opinion between the Full Courts of Victoria and South Australia: see Re Enhill Pty. Ltd.[91] and Re Suco Gold Pty. Ltd.[92]; but we are not concerned with that now.) In the course of their joint judgment in Octavo, Stephen, Mason, Aickin and Wilson, JJ. said[93]:-

"We do not understand the general principles concerning the bankruptcy of a trading trustee to be in dispute. It is common ground that a trustee who in discharge of his trust enters into business transactions is personally liable for any debts that are incurred in the course of those transactions: Vacuum Oil Co. Pty. Ltd. v. Wiltshire.[94] However, he is entitled to be indemnified against those liabilities from the trust assets held by him and for the purpose of enforcing the indemnity the trustee possesses a charge or right of lien over those assets: Vacuum Oil Co. Pty. Ltd. v. Wiltshire. The charge is not capable of differential application to certain only of such assets. It applies to the whole range of trust assets in the trustee's possession except for those assets, if any, which under the terms of the trust deed the trustee is not authorized to use for the purposes of carrying on the business: Dowse v. Gorton.[95] In such a case there are then two classes of persons having a beneficial interest in the trust assets: first, the cestuis que trust, those for whose benefit the business was being carried on; and secondly, the trustee in respect of his right to be indemnified out of the trust assets against personal liabilities incurred in the performance of the trust. The latter interest will be preferred to the former, so that the cestuis que trust are not entitled to call for a distribution of trust assets which are subject to a charge in favour of the trustee until the charge has been satisfied: Vacuum Oil Co. Pty. Ltd. v. Wiltshire." [Emphasis added.]

In argument, Mr. De Wijn emphasised the statement that, when the trustee had a right of indemnity, "there are then two classes of persons having a beneficial interest in the trust assets", the cestui que trust for whose benefit the business is being carried on and the trustee himself in respect of his right of indemnity out of the assets. But, consistently with principle, this did not mean that there were then two classes of "co-owner" of equal standing; for, as to the trustee, the Court spoke in terms of charge or lien, as indeed did the court in Vacuum Oil[96]. As was pointed out in MSP[97], the expression "beneficial interest" is apt to mislead at times, and, as I apprehend it, the right of the cestui que trust to the property held in equity for him may yet be properly characterised without the need for any "reduction" because of the trustee's right of indemnity. It is enough to acknowledge that any actual distribution of the trust assets to the beneficiary must await the satisfaction of the trust's liabilities. After all a sole beneficiary may compel the transfer upon personally paying any outstanding liability incurred by the trustee in his capacity as such.

In Kemtron Industries Pty. Ltd. v. Commissioner of Stamp Duties[98], the Full Court of the Supreme Court of Queensland held that the trustee's right of indemnity in respect of liabilities properly incurred was not properly regarded as an "encumbrance" on the trust assets. This was for the particular purpose of deciding value for duty. The holder of a one-quarter share in a trust fund by writing transferred his interest to the appellant and the Commissioner of Stamp Duties assessed the transfer to ad valorem duty by reference to the amount of the current assets of the trust without taking account of its liabilities. Not surprisingly, the Full Court held that this was error; the value for duty purposes of the property transferred was to be fixed by the worth of the net assets of the trust, and not of the assets without regard to the liabilities. Although there are references in the judgments to the trustees' right of indemnity going to "reduce" the estate or interest of the beneficiary in the assets, this was in the context that the immediate concern of the court was not so much to define the "estate or interest" of the beneficiary as simply to value the subject matter of the transfer. And, as I read it, the later case of Buckle v. Commissioner of Stamp Duties[99], in respect of a discretionary trust under a deed of settlement, was to like effect.

The case of ISPT has already been referred to, where the Court of Appeal of New South Wales (Meagher, J.A. and Fitzgerald, A-J.A., Mason, P. dissenting) held that there was no change in beneficial ownership of land when Coles-Myer, the absolute owner of the land, transferred it, in equity only, to ISPT as trustee of a unit trust in which Coles-Myer held all the issued units. It may be recalled[100], however, that in opining that under the deed in question "a sole unit holder [was entitled] to the full beneficial ownership of the trust fund and its constituent assets", Fitzgerald, A-J.A. added "subject only to any rights of the trustee with respect to those assets at the particular time"[101]. Here again the beneficiary's ownership of the trust fund was being recognised, albeit that it was "subject to" the trustee's right of recoupment, which in my opinion meant not that the beneficial ownership was somehow "reduced" to something less than ownership, but only that any call by the beneficiary for the transfer of assets must wait upon the satisfaction of the trustee's prior claim, if any, for indemnity[102].

In ISPT, Mason, P., albeit in dissent, dealt expressly with the proposition advanced by the Commissioner that the trustee's right of recoupment gave it a beneficial interest in the land, such, I suppose, as would deny full beneficial ownership to Coles-Myer (the original owner). Of this, the learned President said[103]:-

"One problem with this argument is that the value of such beneficial interest would have been much less than the whole value of the land. But there is a more fundamental misconception involved in the submission. A trustee's right of indemnity arises at the time when a liability is incurred, and it is at this stage that the lien over trust assets arises ... The reference in Chief Commissioner of Stamp Duties v. Buckle to `priority' simply means that if termination of a trust is sought by all beneficiaries in accordance with the rule in Saunders v. Vautier, the trustee has (at that stage) a right in the nature of a lien for the recoupment of any trust expenses actually incurred at that point of time, such right being superior (prior) to that of the beneficiaries to receive the trust assets: Vacuum Oil v. Wiltshire[104], Octavo Investments[105]."

It seems to me that all three judges in ISPT accepted that, notwithstanding such rights to indemnity as might be found in the trustee from time to time, the beneficial ownership in the land was at the end of the day wholly in the original owner of the land and the holder of all of the units in the unit trust.

Thus, having reviewed the cases to which we were referred, I can only

conclude that what was said by the majority in Baker v. Archer-Shee remains good law: namely, that the beneficial ownership by the beneficiary of an asset of the trust when vested in interest is unaffected by any right of recoupment that the trustee may have from to time, even if that right entitles the trustee to have resort for a limited purpose to the assets in priority to the beneficiary. One cannot deny, since Octavo, that the trustee has a "beneficial interest" in the trust assets to enforce his "charge or lien", but given the ambivalence attaching to the use of the term "beneficial interest", I do not see that as denying equitable ownership to a beneficiary who is otherwise entitled, immediately and absolutely, to the trust assets - or in the case of the Broadmeadows land, to all of the units in the unit trust of which that land is an asset. That such ownership should be treated as subject to an uncertain right in the trustee, varying from time to time in amount and effect, is one thing; that that variable right should actually deny equitable ownership to the beneficiary in whom the trust fund is otherwise presently vested in interest and possession is an altogether different matter and one that, in my opinion, should be rejected.

I have had the considerable advantage of reading in draft the judgment of Phillips, J.A. For the reasons given by his Honour, I agree that the appeal should be dismissed.

[3] Land Tax Assessment Notice No.S021122011.

[4] Land Tax Assessment Notice No.S020940961.

[5] Land Tax Assessment Notice No.S021179026A.

[8] [2002] VSC 431 at [26] to [29].

[13] Which appears as chapter 15 in the Law of Public Company Finance, ed Austin and Vann.

[22] [2002] VCAT 249 (the subject of the present appeal).

[28] This is ground for distinguishing the earlier case of DKLR Holding Co. (No.2) Pty. Ltd. v. Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431, where the transfer was of the legal estate.

[36] (1841) 4 Beav.115[1841] EngR 629; , 49 E.R. 282.

[63] If the value of the trust property is below the amount of the liability a trustee incurs, the trustee must bear the liability to the extent of the deficiency unless it has a right of indemnity against the beneficiaries. In this instance, any right of indemnity against the beneficiaries is expressly denied by clause 5 of the GSF Unit Trust deed.

[66] As Professor Ford notes (13 M.U.L.R. at 27), this gives rise to one curious aspect of the decision in Octavo. The question was the nature of the trustee's right of reimbursement out of trust assets for sums which might have been voidable preferences; so such sums must have already have been paid and presumably out of trust assets, if the payee was arguably preferred. What right, then, could the trustee have had for recoupment?

[71] [1921] 2 A.C. 1 especially at 8.

[81] As observed by Fullagar, J. in Livingston, 107 C.L.R. at 441, in an article in the Law Quarterly Review entitled A Menace to Equitable Principles ((1928) 44 L.Q.R. 468), Hanbury commended strongly the dissenting judgments [in Baker v. Archer-Shee] as upholding `Maitland's position'", a position which, as I apprehend it, was firmly rejected in Victoria by the Full Court in N.Z. Ins Co. Ltd v. Commissioner of Probate Duties [1973] VicRp 65; [1973] V.R. 659. See also Burns Philp Trustee Co. v. Viney [1981] 2 N.S.W.L.R. 216 at 223-225.

[96] [1945] HCA 37; (1945) 72 C.L.R. 319. See also, for example, Savage v. Union Bank of Australia Ltd. [1906] HCA 37; (1906) 3 C.L.R. 1170 at 1188 per Griffith, C.J.

[97] As set out in paragraph [34] above. See also what was said of "interest" by Fullagar, J. and by Kitto, J. in Livingston.

[102] See also Kent at [29]-[30] per Moore, J. dissenting (referred to in paragraph [37] above).

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