For the reasons previously given, namely that the units which were ultimately listed on the ASX were not listed until 12 October which is the day of the acquisition I cannot accept that paragraph (a) of the definition of public unit trust scheme is met. Paragraph (c) of the definition appears to be irrelevant but the three paragraphs are disjunctive. A trust scheme which meets any of the three will fall within the definition. What then of paragraph (b)? Mr Fox on behalf of the Commissioner conceded that Wholesale Trust No. 4 was a managed investment scheme within the meaning of Chapter 5C of the Corporations Act. It is difficult to know what the word 'applies' means. I assume it is a drafting slip but does not appear to add anything or to change the meaning of the text however. For the reasons previously given as at the material date the units in Wholesale Trust No. 4 had been offered to the public and the trust had no fewer than 50 persons holding units. The result seems to be that if these definitions govern the present transaction the assessment with respect to the No. 4 Wholesale Trust should be set aside because on this view it was at the material time the public unit trust scheme and therefore not a land-rich landholder. These previous definitions will govern the present assessment only if in accordance with Clause 20(6) of Schedule 2 to the Duties Act the acquisition in 2005 'resulted from a written agreement made before that day'. I accept that the unit trust deed or the arrangements governing the issue of the units to the existing unit holders in 2005 could constitute an agreement for the purposes of the transitional provisions. Moreover, I accept that the question whether the acquisition on 12 October 2005 resulted from this agreement is a question of fact to be determined in accordance with the 'commonsense' approach to legal causation postulated by the High Court. I also accept that for legal purposes one event can be regarded as caused another or the second event can be regarded as having resulted from the first event if the first event is cause of the second event. It is not necessary to establish that to make good a finding of causation that the first event is the sole or even the predominant cause of the second. Nevertheless, the application of the criteria necessarily exclude from attribution as a legal cause of an event such relatively remote things as that one of the actors elected to get up on the relevant morning rather than merely lie in bed for the day. Obviously every background event in the life of those involved, for instance in a motor vehicle or industrial accident plays a role in bringing these individuals to a particular point at a particular time perhaps heading in particular directions on a particular speed but the events are regarded as legally irrelevant for causation purposes.
a
'commonsense'
'background'
Counsel for the taxpayer noted that Clause 28.3 of the No. 4 Wholesale Trust as amended for the 2003 issue of units precisely described the exit strategy implemented and hence the strategy 'resulted' from this part of the agreement. First the factual premise of this submission is wrong. The clause speaks of existing units being 'stapled'. These units were redeemed. It was an entirely new issue of units that were stapled in 2005. Secondly even if the clause is regarded as describing the same units the sub-clause states 'The units are intended to be stapled ...' It is a statement of intention and no more.
I previously explained why in my view the explanation of the exit strategies to be found at page 18 of the information memorandum for Wholesale Trust No. 4 are to be regarded as mere statements of intention not as in themselves constituting agreements or even arrangements. Clearly there are other elements in the information memorandum which could properly be regarded as constituting an agreement but a description of the exit strategies for the reasons already given cannot be regarded as creating any operative obligation. Hence in my view when Australand acted according to a strategy that was generally in accordance with what was described at page 18 it was doing so because at that time it seemed the appropriate thing to do rather than because it was under any form of obligation resulting from an agreement. Its action did not 'result' from the exit strategies.
The transitional provision does not operate. The earlier definition of 'public unit trust scheme' does not apply.
It follows that the assessment with respect to Wholesale Trust No. 4 must be affirmed.
[2]
Turning then to Wholesale Trust No. 5 the same conclusions would appear to flow, namely that the assessment should be affirmed. Because of the No. 5 Trust's smaller membership it could not meet the definition of 'widely held trust' which the No. 4 Wholesale Trust did meet. The contentions on behalf of Australand with respect to the No. 5 Wholesale Trust is that it became a 'listed trust''shortly before the stapling transaction'. I have already explained why I rejected that contention with regard to the No. 4 Trust and so it must likewise be rejected here. The same considerations would also exclude effective reliance upon the transitional provisions to be found at Clause 20 of Schedule 2 of the Duties Act with respect to Wholesale Trust No. 5. The assessment with respect to Wholesale Trust No. 5 should be affirmed.
Parties
Applicant/Plaintiff:
Australand Investments Ltd
Respondent/Defendant:
Commissioner of State Revenue
Legislation Cited (1)
State Taxation Acts (Tax Reform) Act 2004
Cases Cited (15)
Australand Investments Ltd v Commissioner of State Revenue (Taxation) [2008] VCAT 2267 (5 November 2008)
They said that the opportunity to acquire the units was widely publicised and anyone willing to invest would be accepted subject only to the investor satisfying the requirements set out on page 3 of the application form which are quoted above in these reasons. They referred to the marketing steps taken with respect to Wholesale Trust No. 4 including the printing of some 5,000 copies of the information memorandum, the engagement of J.B. Were Limited and other investment network companies, the appointment of Computershare Investment Services as providing the registry for the units and engaging an organisation known as Property Investment Research to prepare an investment report on Wholesale Trust No. 2 for the consideration of potential investors.
They noted that there were some 585 unit holders for Wholesale Trust No. 4 thereby meeting the 300 unit holder requirement of the definition.
They noted that the Commissioner made his determination based on a finding that the units in the trust were not issued to the public but rather to wholesale investors only. They submitted in the circumstances that the issue of units in Wholesale Trust No. 4 was to the public. They referred to Lee v Evans[1964] HCA 65; (1964) 112 CLR 276, 285 per Barwick CJ contending that an invitation was sufficiently broad section of the public would satisfy a criterion that units were offered to the public. They referred also to the judgment of Kitto J [1964] HCA 65; (1964) 112 CLR 276, 287 stating that His Honour did not express a concluded view:
Next, they referred to Australian Softwood Forests Pty Limited v Attorney-General (New South Wales) Ex rel Corporate Affairs Commission[1981] HCA 49; (1981) 148 CLR 121 referring to a dictum of Mason J (as he then was) where His Honour said, commenting upon an allegation that an offer to invest in prescribed units relating to pine forest that:
The relevant commencement date is 13 May 2004. Australand's contention is that the stapling process to quote the words of Clause 20(6) 'resulted from a written agreement' made before 13 May 2004 viz the original agreement for subscription. They submitted that this phrase was a wide one. It was not a requirement for this transitional provision to be invoked that the acquisition in question be effected under the previous written agreement. It was sufficient that it resulted from the written agreement. Again they submitted there was no requirement that the acquisition result solely from the previous agreement as long as the relevant previous agreement was a causal factor. They submitted that the terms of unit trust impose a mutual obligation upon unit holders and the trustee could constitute a written agreement. They referred to a decision of the New South Wales Court of Appeal in West Merchant Bank Limited v Rural and Agricultural Management Limited(1996) 20 ACSR 563 (a decision of the New South Wales Court of Appeal, Mahoney, Sheller and Powell JJA). They submitted that the question whether the subject acquisition resulted from the written agreement arising from the constitution of the unit trust was amended at the time of the initial offering should be analysed in accordance with the 'common sense' causation principles espoused by the High Court of Australia in March v E. & M.H. Stramare Pty Ltd[1991] HCA 12; (1991) 171 CLR 506.
As a result he submitted the transitional provisions excluded the operation of Section 89C.
They said there was a clear causal relationship between the stapling process and the original constitution of the unit trust as provided at the time of issue of units. The stapling constituted the implementation of one of the exit strategies. They submitted that read as a whole the arrangements entered into by Australand with the original unit holders imposed on Australand an obligation at least to use its best endeavours to implement one of the exit strategies. The pricing of the redemption was, they submitted, agreed, at the time that the units were originally issued. Since the terms on which the unit holders were bought out were as indicated in the exit strategy, it mattered not, they contended, that Australand had employed majority unit holder consent rather than resorting to the compulsory powers which it had by virtue of options and powers of attorney granted to itself under the issue arrangement.
He referred to Elmslie v Federal Commissioner of Taxation[1993] FCA 549; (1993) 46 FCR 576, 590, 592. He said a payment under an agreement or arrangement would be properly so characterised if the agreement or arrangement was the source of the obligation under which the payment was made. He referred to Federal Commissioner of Taxation v Sara Lee Household and Body Care (Australia) Pty Ltd (200) [2000] HCA 35; 201 CLR 520 [32, 39]. He said the information memoranda for the two trusts did not contain obligations to make redemption payments to unit holders in October 2005 nor at any other particular date. Mr Fox noted that the second limb of Clause 20(7) operated for an acquisition was made in response to an offer or invitation or arrangement entered into before 13 May 2004. He said there was nothing in the information memoranda or elsewhere which constituted an offer or invitation to Australand to acquire units or an arrangement to do such a thing.
Finally Mr Fox said that even if the transitional provisions operated and these assessments had to be judged for their validity in accordance with the Duties Act prior to 13 May 2004 the assessments should be confirmed. Avoidance of the land rich landholder acquisition provisions necessitated a finding that the trusts were public unit trust scheme as at the date of acquisition. This required a finding that some of the units were listed for quotation on the ASX and that the scheme was a management investment scheme within the meaning of Chapter 5C of the Corporations Act. The latter was conceded as established but according to Mr Fox prior to the acquisition none of the units in either of the trusts was listed on the ASX.
The Commissioner however relies upon an additional argument beyond that enunciated in his original determination, namely Section 89E of the Duties Act. I granted leave to the Commissioner to raise this new argument.
The effect of Section 89E(1) which is quoted above would appear to be that immediately prior to the stapling process, the No. 4 Wholesale Trust which for the reasons I have given was to be regarded as a public unit trust scheme became a private unit trust scheme because of the acquisition in the course of the stapling process of 20% by a single holder or associated group of holders. This process excluded it from the definition of 'widely held trust' in Section 3 of the Act (paragraph (c)(ii)). These provisions came into force as previously noted in May 2004 over a year prior to the stapling process which has given rise to the present assessments. Mr de Wijn and Mr Flynn as I understood them did not deny the effect of Section 89E as I have described it. If it applies all that they have achieved on behalf of their client in regard to Wholesale Trust No. 4 in securing a finding that units in that trust have been issued to the public would be negated by the operation of Section 89E.
Australand sought to avoid the operation of Section 89E by reliance on transitional provision Clause 20(7) of Schedule 2 to the Duties Act. This entails obtaining a finding that the acquisition constituted by the stapling transaction was 'made in response to an ... arrangement entered into before [13 May 2004]'. Mr de Wijn and Mr Flynn relied upon a decision of the Australian Industrial Court in Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd(1975) 5 ALR 465 where the Court adopted as the appropriate meaning for the word 'arrangement' in the Trade Practices Act1974 the analysis of that term by their Lordships of the Judicial Committee of the Privy Council in ; , 7 where Lord Denning speaking for the Board said:
(1975) 5 ALR 465
(1985) 157 CLR 210
(1964) 112 CLR 276
(1988) 12 NSWLR 394
(1993) 46 FCR 576
(1958) 96 CLR 1
(1985) 157 CLR 201
(1981) 148 CLR 121
(1991) 171 CLR 506
They further submitted that Clause 20(7) excluded the operation of Section 89C of the Duties Act on the basis that there was an 'arrangement' made before the relevant date in 2004, an arrangement they said was a claim arranged between two or more parties which may or may not be enforceable at law. They referred to Top Performance Motors Pty Ltd v Ira Berk(Qld) Pty Ltd(1975) 5 ALR 465: