Commissioner of State Revenue v Pattison [2001] VSC 113

" Any instrument for the conveyance of real property from a nominee or trustee to the person beneficially entitled thereto where such person has contributed the purchase money therefor and a duly stamped conveyance has been executed in respect thereof to such nominee or trustee."

By s. 63(1), "conveyance" includes transfer and "real property" includes any estate or interest in real property.

7. On 14 December 2000, the Victorian Civil and Administrative Tribunal determined that exemption (17) applied to a transfer of land from Norfolk Blue Pty Ltd ("Norfolk Blue") to the respondent Anthony Joseph Pattison and accordingly reduced the assessment of duty on the transfer from $25,660 to nil. The current proceeding is an application by the Commissioner of State Revenue for leave to appeal against the Tribunal's decision, under s. 148 of the Victorian Civil and Administrative Tribunal Act 1998. The application for leave and the appeal were, in effect, heard together.

11. For the purposes of this application and appeal, the facts were agreed to be as follows.

14. By contract of sale dated 29 August 1997, the respondent purchased a property in Williamstown. His intention in doing so was to keep the property as his own or retain it as his principal residence. The purchase price stated in the contract was $350,000. The deposit was $35,000, which the respondent paid.

17. The contract allowed the respondent as purchaser to nominate a substitute purchaser before settlement. On 20 November 1997 the respondent nominated Norfolk Blue.

20. Settlement of the purchase took place on 15 January 1998. The respondent paid the balance owing under the contract. The company then became the registered proprietor. Stamp duty was paid on the transfer in the normal way.

23. Some time later, on 30 April 1999, Norfolk Blue registered a plan of subdivision, by which the property was subdivided into two lots for which new certificates of title were created. As to Lot 1, Norfolk Blue sold it and received the proceeds of sale. As to Lot 2, by transfer dated 23 June 1999 Norfolk Blue transferred it to the respondent. The consideration expressed on the transfer was "The Transferee being entitled in equity".

26. On 1 September 1999, the Commissioner assessed the transfer to duty of $25,660 based on the declared market value of $500,000. After some further correspondence, there then followed the steps of objection to the assessment (1 November 1999), rejection of the objection by the Commissioner by a notice of decision (16 May 2000), referral to the Tribunal and then the Tribunal decision from which this application is brought.

30. Exemption (17) was introduced into the Act in 1981. It is a simple provision and, I think, unambiguous in its terms. It recognises that real property is sometimes purchased by a nominee or trustee on behalf of a beneficial owner who has paid the purchase price. Where the nominee or trustee has paid duty on the purchase, no further duty is payable if the nominee or trustee transfers the real property to the beneficial owner. The evident legislative intention is to avoid "double duty" in this specific situation.

33. I was referred to exemption 5(c) under Heading IV(A) of the Third Schedule to the Act, which deals with marketable securities. It is in similar terms to exemption (17) in that it exempts from duty:

" a transfer of any marketable security or right in respect of shares from a nominee or trustee to the person beneficially entitled thereto where such person has contributed the purchase money therefor and ... a duly stamped transfer has been executed in respect thereof to such nominee or trustee ..."

but, additionally, the exemption applies if the Commissioner is of the opinion that the marketable security or right transferred to the beneficial owner represents the marketable security or right for which the beneficial owner contributed the purchase money. This allows for the situation where there is a change in the security as, for instance, where preference shares are converted into ordinary shares, options are exercised with the issue of ordinary shares in lieu, or shares are split.

38. However, such additional words are not contained in exemption (17) and their absence is telling: on the plain words of exemption (17), in order to qualify for the exemption the real property transferred to the beneficial owner must be the same real property which the nominee or trustee purchased. A further element is that "the purchase money" be contributed "therefor", that is to say, for that real property.[1]

43. Do the lots resulting from subdivision collectively constitute the same real property as the property from which they were subdivided and for which the purchase price was paid? The simple answer is no. Subdivision of real property in Victoria is achieved pursuant to the Subdivision Act 1988 and the Transfer of Land Act 1958 by registration of a plan of subdivision. Upon registration of the plan, land contained in the lots denoted upon it comes into existence, the parent title is cancelled, and in that sense the land in that former title ceases to exist.[2] By this process, although the overall legal and beneficial ownership may remain unchanged, what was one piece of real property becomes two or more different pieces of real property that may be dealt with by reference to the new plan and lot number. They are not somehow carved out of the former title; rather a new scheme of titles is created which may involve rights and burdens which were not previously present or necessary: for example, common property may be created in addition to individual lots; there may be easements; a body corporate may be formed.[3] An indicator of the changed nature of interests is that the combined value of the lots may differ from the value of the former single property. But whether such indicators are present or absent in any particular case cannot affect the construction of the exemption. Otherwise the issue of construction would, it seems, fall to be determined by comparison of the degree to which the rights or burdens affecting a subdivision were greater or lesser than those which affected the former land. Not only does exemption (17) not indicate that such an approach is to be taken, but it specifies no criteria to guide such an application; nor do the words of the exemption admit an approach by which some notion of fairness or reasonableness is the test for its operation.

46. On the plain words of the exemption interpreted in accordance with their context and purpose, that would be enough to allow the application and appeal in this case. I am confirmed in this view by reference to authority.

49. In Extra Nominees Pty Ltd v Comptroller of Stamps (Vic)[4] a trustee held land on behalf of four joint venturers, one of whom was the applicant, who between them had provided the purchase price; the applicant had contributed part of the purchase price of a hotel on the land. The land was later transferred to the applicant, who claimed inter alia that exemption (17) applied. The Victorian Administrative Appeals Tribunal rejected the argument on the basis that the applicant was not previously beneficially entitled to the property (that is, the whole of the property) that was transferred to it. In addition, the exemption did not apply because the applicant contributed only towards the purchase of the hotel, as opposed to the land. Further, the exemption did not permit any apportionment of the amounts paid in relation to the beneficial interest that the applicant had in fact held.

52. In Triantafilis v Commissioner of Stamp Duties (NSW)[5] the applicant bought a property for $73,000 of which $63,000, it was accepted, came from funds held on behalf of his two sons; the rest came from a loan taken by the applicant. He wished to transfer the property to his sons and sought a declaration that the exemption in s. 73(1)(e) of the Stamp Duties Act 1920 (NSW) (which is broadly similar to exemption (17)) applied. Hodgson J dismissed the summons, saying:

" I do not believe the evidence can justify a finding that the $10,000.00 was, in any sense, property of the sons which was actually paid by them as part of the purchase price. It seems to me further that s. 73(1)(e) only applies if the whole of the purchase price is paid by the person alleged to be the real purchaser. It may be that payment of small amounts by some other party could be disregarded as immaterial, but I do not think the payment of $10,000.00 out of a total of $73,000.00 could be disregarded." [6]

The Court of Appeal affirmed the decision at first instance. In addition, Priestley JA, with whom the other members of the Court agreed, rejected the argument that an exemption should be provided in relation to a 63/73 proportion of the purchase price: the straightforward construction of the exemption is that it relates to a conveyance where the whole of the purchase money has been paid by the "real purchaser".[7]

57. These decisions support the view that there should be identity between the real property which the nominee or trustee first purchases and then transfers, and that the beneficial owner must have paid the whole of the purchase moneys. There is no provision for apportionment based on either the proportion of the property which the transferee beneficially held or the proportion of the purchase price which the transferee paid. In other words, the decisions support a straightforward construction.

60. There is also a case more directly on point, dealing with subdivisions. In Growing Wealth Pty Ltd v Commissioner of Stamp Duties (Qld)[8] a company bought land for subdivision in a community titles scheme under the Body Corporate and Community Management Act 1997 (Qld). In doing so, it acted "as nominee of the investors ... who held their beneficial interests as tenants in common" in proportion to the amounts they subscribed. Following the subdivision, the individual lots were transferred to the investors, who sought the benefit of the exemption in s. 53(9) of the Stamp Act 1894 (Qld) (which has similar effect to exemption (17)). The Queensland Court of Appeal described the change in the nature of the interest held by the investors--from proportional interests in the whole of the land to property of a different kind that was not in existence when the company acquired the land--as raising obvious and insuperable difficulties in the application of the exemption. The Court was of the view that the change in nature arising from a "traditional subdivision" of land would have made it "difficult to bring the transfer within the terms of the section".[9]

63. Growing Wealth was relied on by the Commissioner in argument before the Tribunal in this case. In his decision, the Member distinguished it on the basis that the comments about the "traditional subdivision" situation were obiter dicta. This may be so, as also is it the case that the facts and the legislation are different. Nevertheless the case identifies the fundamental importance of a change in the interest held in land and a change of the land itself. I agree with the approach taken by the Court of Appeal.

66. Mr Lombardi for the respondent argued that in the circumstance of this case in which the respondent had paid the whole of the purchase price and was the sole beneficial owner, and hence no issue of apportionment or partial entitlement arose, it would be manifestly unfair to impose duty on the transfer. He submitted that a reasonable or commonsense view must be taken to the construction and application of the exemption. The greater (that is, the whole) should include the lesser (that is, the subdivided lot). Further, no duty would have been payable on a transfer to the respondent if the property had been subdivided after Norfolk Blue had transferred it to him. I do not find these submissions persuasive: parties are free to arrange their transactions in a way that will minimise stamp duty, but the fact that they failed to do so such as to avoid the operation of plain words in the Act does not mean that those plain words do not apply and that the resulting imposition of duty is unfair in a sense that could affect the construction of the exemption. Moreover, the submission, which was somewhat like a cry for help, offered no criteria on which future cases, varying in degree and complexity from the present case, were to be determined.

69. Finally, Mr Lombardi argued that I should be guided by the approach of the Appeal Division of this Court in Comptroller of Stamps v Christian[10] in relation to s. 72(1) of the Act, which provides:

" In determining the duty to be paid upon any conveyance executed to give effect to a partition or division of any real property, the [Commissioner] shall, before assessing the stamp duty (if any) payable on the conveyance deduct from the value of that real property the value of the beneficial interest in that real property held prior to the conveyance by the transferee."

Thus in Christian, partners who were co-owners of two approximately equal parcels of land, one of which they owned jointly and the other in common, were able to transfer one parcel to each of them absolutely without being subject to duty. This result was reached by construing the expression "any real property" to comprehend the whole of the land being partitioned, notwithstanding that it was in more than one certificate of title; the expression was apt to comprehend the totality of the land being partitioned by the parties under an agreement to do so. Counsel submitted that this reasoning established that the whole includes the lesser and that exemption (17) should be understood in the same way. However, there is a difference between treating two parcels of land as one item of "real property", as the Appeal Division considered correct to do in applying s. 72(1) where co-owners were carrying out a partition of two pieces of land, and equating two completely different interests in land as would be required for exemption (17) to apply here. In any event the two provisions are separate and distinct and exemption (17) must be construed according to its terms. I do not think Christian is of assistance in the determination of the issue in this case.

75. Following the subdivision, the property transferred to the respondent was not the same property for which he paid the purchase price; the respondent contributed the purchase money for the whole of the original real property, but was transferred one lot following a subdivision. I conclude that exemption (17) does not apply to the transfer in question and that the Tribunal erred in finding that it did. The appeal must succeed and, consequently, leave to appeal must be granted.

78. The formal orders shall be: (1) the application for leave to appeal is allowed; (2) the appeal is allowed; (3) the assessment made 1 September 1999 is affirmed; and (4) the draft notice of appeal, being exhibit JHH3 to the affidavit of James Hislop Hall sworn 11 January 2001, be placed and remain on the Court file. I will hear counsel on the question of costs.

[1] The present case does not raise for consideration the issue which might arise if there was a small difference only in the land transferred, or the beneficial owner contributed all but a small part of the purchase price. In the passage I quote below at [[] from the judgment of Hodgson J in ]Triantafilis, his Honour expressed the view obiter that the payment of a small amount by another party might be disregarded as immaterial. I mention the point only to note it. As it does not arise on the facts of the present case I do not consider it further.

[2] See Libbis, Subdivisions and Bodies Corporate (1995) at [5.7].

[3] See s. 24 of the Subdivision Act and ss. 97-98CD of the Transfer of Land Act.

[5] (1995) 95 ATC 4655; on appeal (1998) 98 ATC 4484.

[10] [1991] VicRp 52; [1991] 2 VR 129.