Commissioner for State Revenue v Victoria Gardens Developments Pty Ltd [2000] VSCA 233

Commissioner for State Revenue v Victoria Gardens Developments Pty Ltd [2000] VSCA 233 - VSCA 2000 case summary — Zoe

[32]

(1) the first cumulative $8m to Staged Developments, this sum to be paid as cash becomes available from the development and sale of parts of the Land, but in any event to be paid no later than 30 June 2001[11], failure to do so constituting an event of default enabling Staged Developments to terminate the Joint Venture and have clauses 11.4 to 11.6 (mentioned below) apply;

(2) thereafter:

(A) to Taras, as to 50 per cent until Taras has received a sum equal to the price for the Taras Land in Annexure B (scil, $28.5m), to be applied:

(i) in payment for portions of Taras Land actually sold by VGPT (if any); or

(ii) on account of future sales of parts of Taras Land;

(B) as to the remaining 50 per cent to Staged Developments until (including the proportion of the sum received by Staged Developments under (1)) Staged Developments has received a sum equal to the price for the Staged Developments Land in Annexure B (scil, $11.5m), to be applied:

(i) in payment for portions of Staged Developments Land actually sold by VGPT Trustee (if any); or

(ii) on account of future sales of parts of Staged Developments Land;

(C) the balance of the 50 per cent after all payments under (2)(B), to Marpine Trustee until it has received a sum equal to the price for Marpine Land in Annexure B (scil, $25m), to be applied:

(i) in payment for portions of Marpine Land actually sold by VGPT Trustee (if any); or

(ii) on account of future sales of parts of Marpine Land.

By para.(b) any cash in excess of $65m must be distributed to the Joint Venture Parties equally. Clause 6.5 provides in substance that, where a Land Holding Party receives a cash distribution on account of future sales of land[12], the sum paid is not a loan, but the Land Holding Party shall set off that sum against the amount ultimately receivable by it for "its portion" of the Land set out in Annexure B. Importantly, clause 6.6 provides that a Land Holding Party is "only ever entitled to be paid for its portion of the Land from Cash distributed in accordance with clause 6.2." Clause 6.7 provides that upon the completion, termination or winding up of the Joint Venture, if the Land Holding Parties have not received an amount in respect of the Land equal to their respective contributions as set out in Annexure B, a special liquidator shall be appointed to sell all the assets of the Joint Venture and the provisions of clauses 11.4 to 11.6, mentioned below, shall apply in respect of such sale. Finally, with regard to profit clause 6.3 provides for an annual accounting of profit and loss, for the Joint Venture Parties to be equally entitled to any profit or loss and for VGPT Trustee to distribute the whole of the net income for accounting purposes to the Joint Venture Parties.

[45]

It is convenient to take first the second exemption relied on. In my view, the primary judge was clearly correct in holding that, on two grounds, Exemption (23) did not apply to any of the transfers. First, the exemption, in using the words "the appointment ... of any trustee", applies only to the appointment of a new trustee to perform a pre-existing trust and does not extend to the appointment of a trustee to perform a newly created trust. The Full Court so stated in the case of (for present purposes) an almost identically worded exemption under the then Heading IV(A) in Comptroller of Stamps v. Hutchins[15], and Hansen, J. so held in the case of the present exemption in Perpetual Trustee Co. Ltd. v. Commissioner of State Revenue[16]. It may well be correct, as the respondent submitted, that the Full Court's statement on the point was obiter since it was the second reason for holding the exemption in question inapplicable and the first reason had been introduced by the words, "it would be enough to say that ...". On the other hand, their Honours did introduce the second and presently relevant reason by the words, "But it should we think be said in addition that ..." and did conclude their consideration of the second reason with the words, "This is enough to dispose of the exemption". Even if they were obiter, I would be strongly inclined to follow the Full Court's considered remarks unless I considered them clearly wrong. On the contrary, however, having considered the matter for myself, I am, if I may respectfully say so, in agreement with their Honours. Clearly, the expressions "the ... retirement of any trustee" and "other change in trustees" can only apply where there is a pre-existing trust. It is true that in an appropriate context the expression "the appointment ... of any trustee" may include the appointment of a first trustee of a new trust and in particular a declaration by a person that the person will hold property as such trustee: D.K.L.R. Holding Co. (No.2) Pty. Ltd. v. Commissioner of Stamp Duties (N.S.W.)[17]. But the legislative context there was quite different. Not only did the provision under consideration by the High Court not include a phrase such as "or other change in trustees", but the sub-section in question followed a sub-section which dealt with the appointment of an additional trustee as well as of a new trustee. Moreover, the word "other" in the expression "or other change in trustees" shows that the earlier word "appointment", linked as it is with the word "retirement" by a single definite article and a disjunctive conjunction, is limited to an appointment constituting a change in trustees. The word "appointment" in effect noscitur a sociis[18]. The words "the trustees for the time being" in the second or purpose limb of the exemption point with clarity in the same direction as the words "other change in trustees" in the first or result limb. The respondent submitted that, since the relevant part of the judgment in Hutchins was obiter, it was open to this Court to consider another construction not advanced in Hutchins. This was that the exemption, or more accurately what I have called the first limb, should be treated as itself divided into two limbs, the first dealing with appointments to new trusts and the second dealing with retirements and other changes (including appointments of new trustees) to existing trusts. This was said to be supported in part by the consideration that otherwise the expression "other change in trustees" would have no meaning. Having considered the construction put forward, I am of the view, even without reference to the inclination I have mentioned earlier, that it should not be accepted. The expression "other change" does have meaning: at the least it covers the removal of a trustee. Moreover, the suggested construction severs the tightly bound expression "the appointment or retirement of any trustee" and gives the expression "any trustee" a sliding or varying denotation depending on the noun with which it is taken.

[49]

The meaning of the exemption was considered by the Full Court (Appeal Division) in Comptroller of Stamps v. Yellowco Five Pty. Ltd.[22]. Each member of the court was of the opinion that the exemption did not apply to a transfer, by the sole unit holder in a unit trust in favour of the trustee, of land which he had sold to the trustee, because under the trust deed the trustee had power to issue additional units with the prior written consent of all unit holders, so that, if that occurred and if the issuee were not the transferor, the trustee would not hold the land solely as trustee of the transferor without any change in beneficial ownership. Fullagar, J.[23] held that the first limb of the exemption made three severable requirements of the conveyance effected by the instrument. First, the conveyance must be a conveyance of the property to a trustee or nominee. Secondly, the property conveyed was to be held solely as trustee or nominee of the transferor. Thirdly, the property conveyed was to be held without any change in beneficial ownership. As to the second requirement the words "of the transferor" qualified not only "nominee" but also "trustee". The words "to be held" introduced an element of futurity necessitating an inquiry whether, immediately upon the conveyance, the trustee-transferee was seen to hold the land for the future in the capacity only of trustee for the transferor. His Honour was aware that this construction gave very little scope indeed to the exemption, but considered that to be simply the consequence of the words used by the legislature. Tadgell, J.[24] held that the exemption was not satisfied merely by showing that the beneficial ownership of the property immediately after the instrument of transfer takes effect was the same as that immediately before. The formula selected required the constancy in beneficial ownership to be referable to the particular circumstance that the property was "to be held solely as trustee or nominee of the transferor". That requirement involved an examination of the terms on which the transferee took the transfer as trustee, as disclosed by the trust deed. Phillips, J.[25] discountenanced a reading of the first limb of the exemption that divided it into three requirements (being in fact those identified by Fullagar, J.). He said that it was better understood "as a composite expression**"**[26] requiring (so far as relevant) that the transfer of real property be made to a trustee to be held solely as trustee for the transferor without any change in beneficial ownership. His Honour held that for exemption (18) to operate it must be established that the property was "to be held" by the trustee for the transferor without any change in beneficial ownership. The expression "to be held" meant "to be held thereafter". While it was true that the relevant circumstances were those attendant upon the transfer, that principle was satisfied when regard was had to the terms of the trust deed as at the date of the transfer. By operation of the trust deed itself, the present interest of the transferor in the real property might be reduced or diminished in favour of others, so that it could not be concluded that the property was to be held for the transferor without any change in beneficial ownership.

[51]

The basic structure set up by the companies, as revealed by the two documents, may, at the risk of some repetition, be summarised as follows. Staged Developments, Taras as trustee and the Marpine Trustee agreed to make their respective portions of land irrevocably available to the joint venture and to that end executed transfers in favour of Victoria Gardens as Land Trustee. It in turn declared that it held the land on trust for the respective transferors subject to the terms of the JVA and the Deed. The transferors were not permitted, except in accordance with JVA, to deal with their respective portions of land or to affect their rights and obligations in respect thereof. They were not entitled to a transfer back of their respective portions of land. They were only entitled to payment for the respective portions of land in accordance with the JVA. By it they became entitled to receive a defined "price" for their respective portions, being roughly one and a half times the then current market value. It was envisaged that Taras and the Marpine Trustee, as joint venturers, would develop the Land and that it would be sold (though it might be leased) by Victoria Gardens as a trustee. Upon the sale[31] or other disposal of any part of the land a transferor who had contributed the same or a part of it would be entitled to receive payment based on the relevant area in square metres and the dollar value per square metre of the overall land contributed by that transferor. The amount payable was to be credited to the transferor and, when cash became available, was to be paid to it, in accordance, however, with the priorities laid down by clause 6.2(a) of the JVA. Cash available in excess of $65 million was to be distributed equally to the two joint venturers. If the transferors should not receive between them $65 million for the aggregate of the land contributed or in the event of termination upon default or termination by election, the assets of the Joint Venture and the land contributed or the unsold balance thereof were to be sold and the surplus, after expenses, etc., of the moneys arising from the sale and of other moneys of the Joint Venture (under clause 11.4) or the proceeds of sale of the entirety (under clause 12.8) paid or distributed in accordance with clause 6.2.[32] Thus, in whatever way contemplated by it the JVA or the Joint Venture comes to an end and in whatever way contemplated by the JVA the Land or the balance thereof is sold[33], the proceeds or net proceeds of sale of the Land can come to the transferors only by a distribution of cash pursuant to clause 6.2.[34] Finally, subject to the provisions of the JVA, a transferor to the Land Trustee may not, without its consent and that of the other transferors, assign, mortgage or charge any interest of it in the Land. The only possible qualification in the JVA drawn to our attention is clause 10.4, whereby, when a joint venturer transfers its shares in Victoria Gardens or interest in the Joint Venture, it must instruct the Land Trustee to transfer its portion of Land to the transferee of the shares or interest in the Joint Venture (and, in the case of Marpine Trustee, procure Staged Developments to do likewise). Such a transfer seems not to be a registrable transfer or a transfer of the bare legal estate; for the Land Trustee is to be required to declare that it holds the portion on trust for the transferee. At best it is nominal or notional. Whether it is real and the effect of such a declaration may be considered later.

[52]

A number of matters can be put aside summarily. There was no suggestion that either document was a sham, even if counsel for the appellant did suggest that parts of the JVA had been "designedly" drawn to create a certain appearance. Counsel for the appellant did, at least in his written outlines, advance an argument that clause 2.10(a) prevented it from being said that the Land was, for the future, to be held without any change in beneficial ownership. But, in my view, that argument cannot be accepted; for, as the reasons of the primary judge on the point show, in the case of clause 2.10(a), in contradistinction to the clause considered in Yellowco Five, the terms of the trust documents themselves do not afford a potential for change in beneficial ownership, but rather ensure that clauses 2.3 and 6.2 are triggered and such a change does not occur. Nor in this Court did counsel argue that Victoria Gardens held the Land on trust for sale, again, I think, correctly, if only because, whatever may be the full ramifications of the definition of "trust for sale" in s.18(1) of the Property Law Act 1958, the definition of "Development" includes the purposes of retention, leasing or other disposal as well as the purpose of sale. It will, however, be necessary later to discuss considerations similar to those which would arise were there a trust for sale. The Commissioner placed no reliance upon possible borrowing by Victoria Gardens, under the authority of the JVA, on the security of the Land or upon the possibility that clauses 2.3 and 6.2 operated to create a charge, whether over Cash or the Land. Again, he was correct in this, for a charge does not alter the beneficial ownership of the property charged.[35] Despite an oblique invitation during the course of argument counsel for the appellant refrained from arguing that the second limb of the exemption bore on the interpretation of the first, in such a way that for a transfer to satisfy the first limb the real property the subject of it must at the date of it be able to be seen to be capable of re-transfer to the transferor. No such argument having been advanced, I say no more about the point.

[54]

For the respondent it was argued that the JVA merely reflected the manner in which each beneficial owner sought to enjoy or exploit its beneficial ownership of the assets. Clearly each agreed to restraints (as had occurred in English Sewing Cotton Co. and Booth v. Ellard[37]), but that was only for enjoyment of the assets. It was submitted that the JVA did permit the joint venturers to deal with their interests in the Land, reference being made particularly to clause 9.1 and clause 10.4, which it was said meant that the beneficial interest in the parcel of land could be transferred to another person. Particular reliance was placed upon clause 2.1 of the JVA and clause 2.1 of the Trust Deed, the first of which required the Land Trustee to execute a deed of trust pursuant to which it declared that it held the Land "as trustee for the respective Land Holding Parties" and by the second of which the Land Trustee did declare that it held the land on trust "for the respective Land Holding Parties"[38]. Particular stress was also laid, as was appropriate, upon the very numerous words of severance, particularly "respective" and "portion" (with reference to land), appearing throughout the JVA and the Deed.[39] Like stress was placed upon the expression "which is beneficially owned by each Land Holding Party" in the definition of element A in the formula in clause 2.3(b) of the JVA and especially upon the word "beneficially" coupled with the present tense. Clause 6.2 was said to be a contractual provision relating only to the manner of payment or simply regulating the distribution of moneys available. It did not affect beneficial ownership, but dealt only with priorities. It was clause 2.3(b) which established the entitlement (and so reflected the beneficial ownership), and there was no crediting under it until the beneficiary's portion had been sold. The mere fact that a party was not paid for its beneficial interest did not mean that it had disposed of the beneficial interest.

[57]

Secondly, disregarding the first reason entirely but taking into account all the terms of the Trust Deed and the JVA I am of opinion that their overall effect, though by no means their universal effect, is that each piece of land is on transfer not held on trust for the transferor alone, that is, is not held or to be held "solely as trustee ... of the transferor". The critical document is the JVA because the declaration of trust in the Deed is subject to the terms of the JVA. A critical provision in the latter is clause 2.2(a), whereby the transferors irrevocably make their respective portions available to the joint venture "for the purposes envisaged by" the JVA. The transferor is not entitled to a re-transfer of the land. It cannot assign, mortgage or charge it without consent. The transfer of the relevant portion of the Land that is provided for in clause 10.4 is nominal or notional, and whether the declaration of trust confirming that the Land Trustee holds the land transferred on trust for the Transferee is really about that portion of the Land or rather about the whole of the Land or in truth about a right to be paid depends upon a review and analysis of the whole document, which of course includes clause 10.4 itself. A transferor to the Land Trustee is not entitled to possession in virtue of beneficial ownership but only as a joint venturer (if it be such). Thus, even to this point of the analysis, the equitable interest (if any) of the transferor in land so transferred (whether the portion or the Land as a whole) is very limited. But there is more to consider. In return for the land transferred the transferor, by clause 6.6 together with clauses 2.2(b) and 2.3(c), is entitled only to receive a distribution of cash in accordance with clause 6.2. In whatever circumstances the land is sold and however the JVA comes to an end clause 6.2 ultimately operates. For a correct appreciation of the operation of the JVA, it is necessary to decide whether clause 6.2 is merely a contractual provision as to the manner in which a transferor's money entitlement is to be paid or is a substantive provision bearing on the transferors' entitlement in equity or in other words evidencing or constituting its proprietary rights. I have concluded that it is the latter. The universality of operation of clause 6.2 emphasises its significance in the determination of the entitlements of the parties. A transferor's essential entitlement is to receive ultimately an amount of money calculated in accordance with clause 2.3, but this is subject to the operation of clause 6.2, pursuant to which that essential entitlement may be delayed, defeated in part or (except in the case of Staged Developments) defeated in whole. Similarly, each of the three transferors is entitled, in certain circumstances depending on the order of selling[42] and the price obtained, to receive money generated by the sale of land contributed by one or both of the others. In addition, in the event of a surplus of Cash over $65m the two joint venturers alone share. Although the circumstances of this case do not bring it, strictly, within any of the established categories where the doctrine of conversion in equity applies, it is hard to resist the conclusion that the JVA treats previous rights in land as converted into rights to money. Further, equitable ownership is always commensurate with the right to relief in a court of equity[43] and it is difficult here to think of a case where a transferor would obtain relief declaring its interest to be in the land originally transferred by it or giving effect to an interest so defined. In most cases the relief would be pecuniary or would define the interest in pecuniary terms. It is artificial to view the "payment" provisions as separate from those setting out how the Land Trustee holds the land. For these reasons, it is correct to look, as his Honour did, to clause 6.2 in ascertaining the interests of a transferor.

[61]

Not a great deal of oral argument was devoted to this part of the case and in particular counsel for the appellant did not, as it seemed to me, really persist in his submission that each transfer was a conveyance on sale, though he said that he did not abandon it. I agree with his Honour's conclusions that the transfer was not a conveyance on sale and that, if that were incorrect, the consideration for the sale was the relevant price stated in Annexure B to the JVA. His Honour's conclusions were expressed, of course, in respect of the fifth transfer only, but I would apply them to all three transfers. His Honour set out the arguments of the parties and his own reasons in some detail. Since this judgment is already lengthy, I would, subject to two qualifications[45] and with some additional comments, adopt his Honour's reasons as my own. Although counsel for the appellant was able to point to words or features of the JVA which, on one reading, supplied all the elements required by judicial exposition for a "sale" and could say that, on a certain interpretation, the JVA satisfied other judicial descriptions of a sale, it is, in my opinion, unrealistic to describe the means or transactions by which Victoria Gardens acquired the several parcels of land as "sales". Considered as a whole, the JVA did not constitute or effect a sale. Victoria Gardens did not take the Land beneficially. The concept of "distribution", found in clause 6.2, is appropriate to a trust and foreign to a sale. The duties Victoria Gardens assumed as Land Trustee were those of trustee, not obligations of a purchaser. In another context it might be possible to tease out a price for a sale to an entity in the position of Victoria Gardens which was the amount of $65m and to say that that amount was not payable until it had been received by the entity from persons to whom it had in turn sold the land. But no "entitlement", and therefore, it would seem, no debt in favour of a transferor, arises until Victoria Gardens sells to a third party, which is inconsistent with a sale to Victoria Gardens. In short, Victoria Gardens took as a trustee, not as a purchaser.

At a glance

Court

Decision date

Before

Source

Judgment (101 paragraphs)

Parties