Commissioner of State Revenue v Purdale Holdings Pty Ltd [2003] VSC 289

2. This is an application for leave to appeal from a decision of the Victorian Civil and Administrative Tribunal made on 6 December 2002. By its decision the Tribunal reduced to nil an assessment to stamp duty of $82,721 under Heading VI of the Third Schedule to the Stamps Act 1958 of a transfer of land dated 28 March 2000. The transfer of land was executed by the liquidator of Byblos Holdings Pty Ltd (in liquidation) to give effect to a distribution in specie to Purdale Holdings Pty Ltd in satisfaction of its entitlement as a shareholder. Purdale Holdings Pty Ltd sought a reduction of the duty payable pursuant to s. 72(3) of the Act and the Commissioner refused the application on the basis that he was not satisfied that Byblos Holdings Pty Ltd was not being wound up as part of an arrangement or scheme devised with the collateral purpose of reducing the stamp duty payable on the conveyance of the real property. The Tribunal was satisfied that the winding up was not part of an arrangement or scheme devised with such a purpose. Hence its decision to reduce the assessment to nil.

5. The questions of law identified in the proposed notice of appeal are:

1. Whether in reaching a decision pursuant to s. 72(4) of the Stamps Act, the Commissioner is to apply a subjective or an objective test in deciding whether the company is or is not being wound up as part of an arrangement or scheme devised with the collateral purpose of reducing the stamp duty otherwise payable on the conveyance of the real property.

2. The meaning and proper construction of the expression "collateral purpose" where it appears in s. 72(4) of the Act.

3. Whether the word "purpose" in s. 72(4) of the Act is to be construed as meaning or extending to the word "effect".

11. The real substance of the Commissioner's complaint is that it was not open on the evidence before the Tribunal to find that the winding up of Byblos Holdings Pty Ltd was not part of a scheme devised with the collateral purpose of reducing the stamp duty otherwise payable on the transfer.

15. Before turning to the Tribunal's reasons for decision it is convenient to note the facts of the matter about which there is no dispute:

1. Relevantly, events began on 28 November 1967 when Byblos Holdings Pty Ltd was incorporated and 25,000 A class shares were issued to each of Louis Fleyfel and Leila Fleyfel.

2. On 28 May 1970 Saneen Investments Pty Ltd was incorporated, 1027 shares in that company were issued to Louis Fleyfel and 1026 shares were issued to Leila Fleyfel and 100 B class shares in Byblos Holdings Pty Ltd were issued to Saneen Investments Pty Ltd.

3. During the period between the incorporation of Byblos Holdings Pty Ltd and 1995 Byblos Holdings Pty Ltd acquired land at 692 Bourke Street, Melbourne, further land called "La Chateau", in Queens Road, Melbourne and further land in Acland Street, St Kilda.

4. In the same period Purdale Holdings Pty Ltd was established as the trustee of the Fleyfel Family Trust and acquired a portfolio of listed securities and term deposits.

5. In 1995 Louis and Leila Fleyfel determined to return to Lebanon, whence Mr Fleyfel had come to this country, and they appointed their solicitor, Mr John Hutchings, as their attorney to manage their affairs in Australia. During the period between 1995 and 1999 Mr Hutchings arranged for the sale by Byblos Holdings Pty Ltd of the Queens Road property and the property in Acland Street, St Kilda.

6. Between mid 1998 and 1999 Mr Fleyfel gave instructions to his solicitor that he wished to restructure the corporate group comprised of Saneen Holdings Pty Ltd, Byblos Holdings Pty Ltd, Purdale Holdings Pty Ltd and the Fleyfel Family Trust, in order to reduce the costs of maintaining the group, to avoid income tax which it was feared might become payable under Division 7 A of the Income Tax Assessment Act 1936, and to ensure that he alone was able to control the disposition of assets upon his death.

7. Pursuant to those instructions, two proposals were developed and submitted to Mr Fleyfel for his consideration, one of which would have left the corporate structure intact and the other of which was for the investments held by Purdale Holdings Pty Ltd as trustee of the Fleyfel Family Trust to be sold down progressively; any further investments to be acquired in Mr Fleyfel's name; Byblos Holdings Pty Ltd , Saneen Holdings Pty Ltd and Fleyfel Investments Pty Ltd to be wound up; and the Bourke street property to be vested in a new unit trust to be controlled by Mr Fleyfel. As it appears Mr Fleyfel chose the latter course.

8. On 24 June 1999 the Fleyfel Unit Trust was established and Purdale Pty Ltd was appointed as trustee of the trust.

9. On 25 June 1999 Purdale Pty Ltd issued 1.8million units in the Fleyfel Unit Trust (valued at $810,000) in favour of Mr Fleyfel, and advanced to him a loan of $990,000, thus creating a debt due by Mr Fleyfel to Purdale Pty Ltd in the sum of $1.8 million (being the value of the Bourke Street land).

10. On 25 June 1999 Byblos Holdings Pty Ltd issued 1.8 million shares of $1.00 each in favour of Purdale Pty Ltd in its capacity as trustee of the Fleyfel Unit Trust, and in consideration thereof Purdale Pty Ltd assigned to Byblos Holdings Pty Ltd the debt of $1.8 million owed by Mr Fleyfel to Purdale Holdings Pty Ltd.

11. On 29 June 1999 the shareholders of Byblos Pty Ltd (which is to say, Mr and Mrs Fleyfel and their company Saneen Pty Ltd) resolved that Byblos Pty Ltd be wound up and that its assets be distributed in specie.

12. On 13 October 1999 the liquidator made an interim distribution of assets comprised of cash and receivables to shareholders other than Purdale Holdings Pty Ltd, thus extinguishing the debt of $1.8 million owed by Mr Fleyfel to Byblos Holdings Pty Ltd, and apportioning the remaining cash and receivables assets between Mr and Mrs Fleyfel and Saneen Investments Pty Ltd. in satisfaction of their entitlements as shareholders.

13. On 28 March 2000 the liquidator executed the transfer of land to convey the Bourke Street property to Purdale Holdings Pty Ltd in its capacity as trustee of the Fleyfel Unit Trust, by way of distribution in specie in satisfaction of its entitlement as shareholder.

32. The Commissioner's argument before the Tribunal was that the transactions involved in the restructure constituted a scheme of which an essential part was the transfer of the Bourke Street property and that the scheme had the collateral purpose of reducing the duty which would otherwise have been payable on the transfer of the property. The Commissioner contended that s. 72(4) of the Act directed an inquiry into the purpose of the transactions comprising the scheme and that the purpose was to be established by an objective analysis of the effect of the transactions; not the subjective intention of the participants who devised and executed the scheme. In short, according to the Commissioner, purpose was to be equated with effect, and since the effect of the scheme was to avoid duty, that must be a purpose.

35. The respondent's argument before the Tribunal was that s. 72(4) calls for consideration to be directed to a range of factors, both subjective and objective, and that when regard was had to the totality of the subjective and objective evidence as to purpose it was plain that there was no scheme or arrangement of which a collateral purpose was the avoidance of duty.

38. The Tribunal considered that one is to decide the matter by asking what is the point of the scheme that has been devised and, in answering that question, that it would be wrong to exclude evidence of the subjective intention of the parties in entering into the transactions.

41. The evidence of subjective intention, or what the Tribunal described as the "evidence of what was in fact the intention of the parties", was given by Mr Moran (who acted as manager for Mr and Mrs Fleyfel), Mr Hutchings, Mr McDermott of KPMG and Mr Fleyfel. Of that evidence the Tribunal said:

"11. Four witnesses were called...Each adopted his witness statement and was cross-examined. I will not summarise the evidence. It supported the contentions on behalf of the taxpayer that I have referred to above. The inference I drew was that KPMG was behind the significant parts of the basis of the scheme which were then refined in discussions with Mr Moran, who acted as a manager for Mr & Mrs Fleyfel, and Mr Hutchings, their solicitor. Mr Moran said that the scheme was put in place to get a better management of the affairs of Mr & Mrs Fleyfel which was obviously needed because of her health, for income tax and succession purposes. Mr Hutchings itemised those objectives in his statement and said:

"During the course of the meeting I advised Louis Fleyfel that stamp duty might be payable in respect of the transfer of the property to the Unit Trust. His instructions were to proceed with the restructure regardless of whether stamp duty was payable".

Mr McDermott, the partner at KPMG, said that whether or not stamp duty was payable "was irrelevant in the sense that my advice to Louis was to proceed with the restructure regardless of whether stamp duty was payable". There was no challenge to the credit of any of the witnesses. There was no suggestion that any part of the transaction was a sham - that is , it was common ground that each part of the transaction was intended to take part according to its terms. 12 ... 13 ... 14 ...I cannot on the evidence find that the objectives of the parties were anything other than what they said those objectives were, and which are as I have set out above (in pars 9 and 11). The benefits flowing from the restructure were identified by Mr Hutchings as follows:

* Issues with the possible application of Division 7A of the Income Tax Assessment Act 1936 would be overcome.

* The annual cost of maintaining three corporations (accounting and tax) would be minimised.

* With the Fleyfels having relocated overseas, management of their affairs would be simplified and streamlined.

* With Mrs. Fleyfel being in failing health, her affairs would be simplified and her testamentary arrangements rendered less complex.

I have set out what Mr Hutchings had to say about stamp duty. In cross-examination he specifically said there was no discussion about section 72 of the Stamps Act. On the evidence I find that no participant in the transaction entered into it with the intention of trying to avoid stamp duty, or with the intention of seeking to get the benefit of section 72 of the Stamps Act."

52. The Tribunal was of opinion that when regard was paid to the subjective intention of those who devised the scheme it was plain that the scheme was not devised with a purpose of avoiding duty. The Tribunal considered that:

"21. ... According to the Australian Concise Oxford Dictionary `purpose' means `and object to be attained; a thing intended'.... You ask the question: What was the object of the exercise; what was the point. 22. The point of what? It is the point of `an arrangement or scheme' that has been `devised'. You are not inquiring about the object of any isolated part of the relevant arrangement or scheme; it would be quite wrong to focus on one part of the scheme in isolation, such as the transfer of land. In my opinion the relevant arrangement or scheme, and scheme is probably the better word, is that which led to all of the transactions that led to the liquidation and disposition under reference... If you ask what was the object of that scheme, then, on the only findings that can be made on the evidence, the object of the scheme was to resettle the affairs of Mr and Mrs Fleyfel so as to obtain the benefits identified by their professional advisers. In determining what that object is, it would in my view be wrong to exclude evidence of what was in fact the intention of the parties in entering into these transactions on the footing that the courts when considering section 260 (of the Income Tax Assessment Act 1936) felt a need to distinguish between `motive': and `purpose'. It was no object of the scheme, collateral or otherwise to avoid stamp duty." (Emphasis added.) ... 28. I do not wish to labour the point, but here an elderly couple on the repatriation of the immigrant husband restructured the affairs to achieve proper purposes on good and respectable professional advice. They are all of one mind that stamp duty had nothing to do with the scheme they settled on, except that they all agreed to take the risks that a part of the constituent scheme might be assessed for tax, but decided that the risk was worth it because their objectives were so important... A law that required me to hold in those circumstances that they had a purpose of avoiding stamp duty so that they lost the benefit of an exemption given by the legislature in respect of that stamp duty would constitute a most unhappy reflection on our jurisprudence. 29. It follows in my opinion that the Tribunal is satisfied that the relevant company was not being wound up as part of an arrangement or scheme devised with the collateral purpose of reducing the stamp duty otherwise payable on the conveyance of the real property..."

57. In argument before me, the Commissioner did not persist in the contention advanced before the Tribunal that the purpose with which a scheme is devised is to be determined solely by reference to the effect of the scheme. The Commissioner also accepted that s. 72(5)(f) of the Act allows one to have regard to both objective and subjective evidence of intention albeit, it was said, that the structure of the section suggests that primacy be given to the objective considerations which are mentioned in s. 72 sub-ss. (5)(a) to (e). The Commissioner's argument was that the Tribunal erred in its approach to the identification of the scheme and thus in its conclusion about the purpose of the scheme. It was contended that once the scheme is properly identified it can be seen that there was no evidence, objective or subjective, to support the Tribunal's finding "that the relevant company was not being wound up as part of an arrangement or scheme devised with the collateral purpose of reducing the stamp duty otherwise payable on the conveyance of the real property."

61. The structure of s. 72 sub-ss. (2) to (5) of the Stamps Act is in significant respects similar to Part IVA of the Income Tax Assessment Act 1936, upon which it seems likely that it was based. The fundamental similarity is that each set of provisions calls for the relevant Commissioner to make a determination on the basis of a number of adumbrated criteria as to whether a scheme has a purpose of tax avoidance. There are differences between the two sets of provisions. Part IVA lays down an objective test not dependent in any way upon the Commissioner of Taxation's opinion or satisfaction that there is a tax benefit or that, if there is a tax benefit, that it was obtained in connexion with a Part IVA scheme[1]. Contrastingly, s. 72 sub-ss. (2) to (5) of the Stamps Act provide for a determination to be made by the Commissioner of State Revenue upon the basis of his or her state of satisfaction of the existence of a scheme and its purpose. Section 177 A of the Income Tax Assessment Act sets out exhaustively all of the criteria to which the Commissioner of Taxation is to have regard and all of them are objective criteria. Contrastingly, s. 72(5) of the Stamps Act is drafted inclusively so that the Commissioner of State Revenue may have regard not only to the specified criteria but also to other unspecified criteria, including subjective criteria. Further, whereas the operation of Part IVA of the Income Tax Assessment Act is dependent upon the establishment of the existence of a dominant purpose of obtaining a tax benefit, it is sufficient for the purposes of s. 72 sub-ss. (2) to (5) of the Stamps Act that the avoidance of duty be the collateral purpose, and it is accepted that a collateral purpose may mean no more than a subordinate purpose[2]. But both sets of provisions are identical in the essential respect that they are predicated on the identification of a scheme and the determination of the purpose or purposes of the scheme as so identified, as opposed to the purpose or purposes of some other scheme or part or parts of a scheme.

64. The Commissioner argued before the Tribunal and before me that the scheme of which the winding up of Byblos Holdings Pty Ltd formed part was the planned sequence of transactions designed to bring about the issue of the 1.8 million units in the Fleyfel Unit Trust in favour of Mr Fleyfel and the loan to him of $990,000; the issue of the 1.8 million shares in Byblos Holdings Pty Ltd in favour of Purdale Pty Ltd in its capacity as trustee of the Fleyfel Unit Trust; the assignment to Byblos Holdings Pty Ltd of the debt of $1.8 million owed by Mr Fleyfel to Purdale Holdings Pty Ltd; and the winding up of Byblos Holdings Pty Ltd and the distribution in specie to Purdale Holdings Pty Ltd of the Bourke Street land. Evidently, the Tribunal rejected that submission. As has already been recorded, the Tribunal said that:

"In my opinion the relevant arrangement or scheme, and scheme is probably the better word, is that which led to all of the transactions that led to the liquidation and disposition under reference."

In the opinion of the Tribunal, it "would be quite wrong to focus on one part of the scheme in isolation, such as the transfer of land" in order to stamp the whole of the scheme with the purpose of reducing stamp duty. Hence, according to the Tribunal:

"If you ask what was the object of that scheme, then, on the only findings that can be made on the evidence, the object of the scheme was to resettle the affairs of Mr and Mrs Fleyfel so as to obtain the benefits identified by their professional advisers."

70. I agree with the Tribunal that it is not open to attempt identification of the purpose or purposes of a scheme by reference to only part of a scheme. Like Part IVA of the Income Tax Assessment Act, s. 72 sub-ss. (2) to (5) of the Stamps Act do not provide that a scheme includes part of a scheme and, despite the wide conception of a scheme, it is possible to conceive of a set of circumstances which constitutes only part of a scheme and not a scheme in itself. As the High Court said in Peabody,[3] that may occur where the elements identified as constituting the scheme are incapable of standing on their own without being robbed of all meaning. Therefore the fact that the relevant purpose may be the purpose of a person who carries out only part of a scheme is insufficient to enable part of a scheme to be regarded as a scheme on its own.

73. I disagree with the Tribunal, however, that those parts of the resettlement of the Fleyfels' assets which the Commissioner identified as comprising the scheme were incapable of themselves of constituting a scheme. No doubt the elements identified by the Commissioner as constituting the scheme comprise only part of the totality of transactions undertaken in order to resettle the Fleyfels' assets. But to borrow again from what the High Court said in Peabody, the fact that there may be cases where it is impossible to conceive of part of a scheme as constituting a scheme in itself "does not mean that if part of a scheme may be identified as a scheme in itself the Commissioner is precluded from relying upon it as well as the wider scheme." The Commissioner is not precluded from adopting that course unless the elements which he or she identifies as constituting the scheme are incapable of standing on their own without being "robbed of all practical meaning"[4]. In my opinion, the elements identified by the Commissioner are capable of standing on their own without being robbed of all meaning.

76. Mr Flynn who appeared for the Purdale Holdings Pty Ltd argued that even if it were open to identify part of the totality of transactions as constituting a scheme, it was still not possible to conceive of the elements identified by the Commissioner as constituting a scheme in the sense envisaged by s. 72 sub-ss. (2) to (5) of the Stamps Act. Mr Flynn submitted that in order to come within those sections it is necessary that the winding up be part of the scheme and it could not sensibly be said that the winding up of Byblos Holdings Pty Ltd was part of the scheme identified by the Commissioner. He contended that one cannot sensibly say of a scheme that a winding up forms part of the scheme unless it appears that the winding up is a sub-set of the scheme, and here the elements identified by the Commissioner were in truth a sub-set of the greater winding up and distribution in specie of the assets of Byblos Holdings Pty Ltd.

79. I do not accept that argument. Granted that the elements identified by the Commissioner were only part of the resettlement of the Fleyfels' assets achieved by the winding up of Byblos Holdings Pty Ltd and the distribution of its assets, it does not follow that the elements identified by the Commissioner were only part of the winding up of Byblos Holdings Pty Ltd or, more to the point, that it is inapposite to speak of the winding up as constituting part of the scheme identified by the Commissioner. The correct analysis, in my opinion, is that the winding up of Byblos Holdings Pty Ltd was part of both the totality of transactions constituting the resettlement and of those of the totality identified by the Commissioner as constituting the scheme. On that basis I see nothing illogical or otherwise unacceptable in regarding the winding up as part of the scheme identified by the Commissioner.

82. The question of whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law[5]. Consistently with the line of authorities which establishes that to be so, I consider that the question of whether a transaction or series of transactions comes within the description of an arrangement or scheme within the meaning of s. 72(4) of the Stamps Act is a question of law. In my opinion the elements identified by the Commissioner were capable in themselves of constituting a scheme within the meaning of the section. It follows in my opinion that the Tribunal erred in law in its determination that it was not possible to conceive of the elements identified by the Commissioner as constituting a scheme in itself.

86. Section 72(5) of the Stamps Act directs the attention of the Commissioner to those things to which he or she may have regard in determining whether a scheme may have the collateral purpose of reducing stamp duty. As noted earlier, it identifies five specific objective considerations and refers generally to such other matters as the Commissioner considers to be relevant. Despite the precise identification of the objective considerations, the manner in which the provision is drafted, and in particular the inclusion of those things which the Commissioner considers to be relevant, has the effect of vesting in the Commissioner a discretion as to the selection and weighting of the criteria. The provision is expressed in terms of the considerations to which the Commissioner "may have regard", which of itself is a significant although not necessarily conclusive indication that the provision is permissive[6], and the discretionary nature of the power is emphasised by the inclusion in paragraph (f) of the expression "he or she considers relevant"[7].

89. Consistently with that view of the matter, the Tribunal said:

* the scheme or arrangement (and these word properly have a very wide connotation);

* who devised it; and * the purpose or object of the scheme or arrangement (or, perhaps, those who devised it, if there is any difference). (4) In looking at specific transaction that have been reduced to writing, the law is reluctant to do anything other than allow the document to speak for itself (unless it is a sham). But a scheme or arrangement will commonly consist of a number of transactions where the whole of the scheme will not have been reduced to writing. Circumstantial evidence of the relevant purpose (or object) may be obtained. It may be appropriate to get evidence of the actual intention of the principals. A company may not be heard to say that it intended a lease to be only a licence, but its directors may be heard to say that in entering into the arrangement of which the lease was a part they had no intention to reduce tax. In considering this kind of evidence there will obviously be circumstances where you will have to consider the weight that needs to be given to self-serving statements made after the event."

95. In my opinion that is correct, and as matters developed in argument I did not understand the Commissioner really to contend to the contrary. If there were any difference between what the Tribunal said about the approach to the section and the approach for which the Commissioner argued, it was confined to the question of whether the objective considerations referred to in s. 72 sub-ss. (5)(a) to (e) are to be accorded primacy over the subjective considerations to which regard might be had under s. 72(5)(f). As I understood the Commissioner's contention, subjective considerations are only to be employed as a cross-check on the position established by the objective considerations and, in the event of conflict between the position established by the objective considerations and the position established by the subjective considerations, the latter should yield to the former. In case it matters, I should say that I do not think that is so. As the Tribunal stated, each case will depend upon its own facts and it is not inconceivable, although it is unlikely, that in some cases the subjective evidence of the participants' intentions may prevail over the conclusions which objective considerations would otherwise compel[8].

98. Unfortunately, that does not dispose of the question of purpose so far as it affects this case. Given that the Tribunal was entitled to have regard to the subjective evidence of the participants' purpose in devising the scheme, it remains to decide whether it was open to the Tribunal on the evidence which was before it to find that the scheme of which the winding up was part did not have the collateral purpose of reducing stamp duty on the conveyance of land from Byblos Holdings Pty Ltd to Purdale Holdings Pty Ltd.

101. In one sense, the question is answered by the conclusion to which I have already come. The Tribunal misdirected itself as to what it was that constituted the scheme. Accordingly, the Tribunal was bound to err in its conclusion about the purpose of the scheme. But, in any event, bearing in mind the way in which the scheme should properly be identified, I do not consider that it was open to the Tribunal on the evidence which was before it to find that "the relevant company was not being wound up as part of an arrangement or scheme devised with the collateral purpose of reducing the stamp duty otherwise payable on the conveyance of the real property". I see nothing in the Tribunal's recitation of the evidence capable of establishing that it was not a collateral purpose of the scheme to reduce stamp duty - the recitation suggests no more than that the Fleyfels' professional advisers were attuned to the stamp duty ramifications of the transactions and of the possibility that despite the structure which was chosen, stamp duty may apply - and when one turns to the evidence itself, that impression is confirmed. Apart from one passage in the witness statement of Mr McDermott, none of the witness statements which were before the Tribunal rises any higher than that Mr Fleyfel's professional advisers suggested that the commercial advantages of the transactions were such as to make it worthwhile proceeding despite the risk that duty would be payable, and that Mr Fleyfel was persuaded that they were correct. The only exception to that is the passage in Mr McDermott's witness statement just mentioned, which is a bare assertion that:

"Throughout the planning for the restructure and at the time of the restructure, no attempt was made to avoid stamp duty."

When read in the context of what follows immediately afterwards, that takes the matter no further:

"Indeed, whether or not stamp duty was payable as a consequence of the in specie distribution of the Paladin property from Byblos to Purdale was irrelevant in the sense that my advice to Louis was to proceed with the restructure regardless of whether stamp duty was payable." (My emphasis.)

107. The position is reinforced, in my view, by the transcript of the cross examination of the witnesses before the Tribunal. Mr Hutchings was unable to say anything of his own knowledge because he said that all of the essential elements of the restructure had already been conceived before it was brought to him for final advice. He deposed that all he did was to look at the structure and, although he considered that s. 72(3) of the Act might apply, to advise Mr Fleyfel that the commercial advantages of the transaction were such as to make it desirable to go ahead in any event.[9] Mr McDermott said no more than that the assignment of the indebtedness of Mr Fleyfel from Purdale Holdings Pty Ltd to Byblos Holdings Pty Ltd was not his idea and that "as far as he knew" (which I take to mean that he did not know) it was done primarily for something other than stamp duty.[10] Mr Moran conceded that the $1.8 million figure had been calculated to match the known value of the land, thus implying that the purpose was to ensure that that land could be distributed to Purdale Holdings Pty Ltd in satisfaction of its entitlement as shareholder in that company.[11] Mr Fleyfel said only that he proceeded with the structure because he was advised to do so.

110. Turning then to the objective considerations listed in s. 72 sub-ss. (5)(a) to (e), all of them seem to me to point in the direction that it was a purpose of the scheme to avoid duty. The duration of the shareholding was negligible. It was created on 25 June 1999, one day after the establishment of the Fleyfel Unit Trust and four days before it was resolved to wind up the company and distribute the assets in specie to the shareholders. The means by which the acquisition of the shares was funded were contrived. There was no apparent commercial efficacy in making Purdale Holdings Pty Ltd a shareholder of Byblos Holdings Pty Ltd only shortly before the planned liquidation of that company; funding the subscription with the assignment of the indebtedness created by the issue of units to Mr Fleyfel; and then distributing the land in specie to Purdale Holdings Pty Ltd. The same result could have been achieved, although attracting stamp duty, by simply transferring the land from Byblos Holdings Pty Ltd directly to Purdale Holdings Pty Ltd in satisfaction of Mr Fleyfel's shareholding, or transferring it first to Mr Fleyfel in satisfaction of his entitlement as a shareholder and then from him to Purdale Holdings Pty Ltd.

113. Doubtless it may be said that the scheme had the commercial objective of transferring the land from Byblos Holdings Pty Ltd to Purdale Holdings Pty Ltd in order to achieve the range of commercial advantages in terms of control, reduced administrative costs and the avoidance of the income tax liability to which reference has already been made. But in my opinion that in no way detracts from the conclusion that the purpose or at least the collateral purpose of the scheme was to reduce stamp duty. The High Court has held with respect to the sort of dominant purpose to which Part IVA of the Income Tax Assessment Act is directed, that:

"A person may enter into or carry out a scheme, within the meaning of Pt IVA, for the dominant purpose of enabling the relevant taxpayer to obtain a tax benefit where that dominant purpose is consistent with the pursuit of commercial gain in the course of carrying on a business. In his concurring judgment in Commissioner of Internal Revenue v Brown, Harlan J said: `[T]he tax laws exist as an economic reality in the businessman's world, much like the existence of a competitor. Businessmen plan their affairs around both, and a tax dollar is just as real as one derived from any other source.' Later, the United States Supreme Court stated that it could not `ignore the reality that the tax laws affect the shape of nearly every business transaction'. In Australia, State and Territory stamp duty laws have been a particularly significant factor in the shaping of business transactions. However, the tax laws are one part of the legal order within which commerce is fostered and protected. Another part is Pt IV of the Trade Practices Act 1974 (Cth), which regulates or proscribes certain restrictive trade practices. In this broad sense, `[t]axes are what we pay for civilised society', including the conduct of commerce as an important element of that society. A taxpayer within the meaning of the Act may have a particular objective or requirement which is to be met or pursued by what, in general terms, would be called a transaction. The `shape' of that transaction need not necessarily take only one form. The adoption of one particular form over another may be influenced by revenue considerations and this, as the Supreme Court of the United States pointed out, is only to be expected. A particular course of action may be, to use a phrase found in the Full Court judgments, both `tax driven' and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine the answer to the question whether, within the meaning of Pt IVA, a person entered into or carried out a `scheme' for the `dominant purpose' of enabling the taxpayer to obtain a `tax benefit'."[12].

The same must surely hold true, only more so, when the question is whether the collateral purpose of a scheme is the reduction of stamp duty which otherwise would be payable.

118. The question of whether a scheme has a collateral purpose is a question of fact and it is therefore one which ordinarily is to be decided by the Commissioner and if not the Commissioner then by the Tribunal on review. Where, however, it is shown that it was not open to a tribunal of fact to decide a question of fact in the way in which it has purported to decide it, the tribunal of fact commits an error of law and the question of whether it has arrived at a conclusion which was not open to it is a question of law[13]. For the reasons which I have explained, I consider that it was not open to the Tribunal to find that it was not a collateral purpose of the scheme to avoid the duty which would otherwise have been payable on the transfer to Purdale Holdings Pty Ltd. It follows in my opinion that the Tribunal committed an error of law.

122. For the reasons given I answer the questions of law set out at the beginning of these reasons as follows:

1. For the purposes of s. 72(4) of the Stamps Act, the Commissioner may take both objective and subjective considerations into account in deciding whether a company is or is not being wound up as part of an arrangement or scheme devised with the collateral purpose of reducing the stamp duty otherwise payable on the conveyance of the real property.

2. Where it appears in s. 72(4) of the Act, the expression "collateral purpose" means "a purpose".

3. For the purposes of s. 72(4) of the Act, purpose is not confined to effect but effect is a significant indicator of purpose and, depending upon the circumstances, effect may be determinative of purpose.

128. There will be leave to appeal and the appeal will be allowed. I shall hear counsel on the form of orders.

[1] Federal Commissioner of Taxation v Peabody [1994] HCA 43; (1993) 181 CLR 359 at p. 382; cf. Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; (1949) 78 CLR 353 at p. 360; Kolotex Hosiery (Australia) Pty Ltd v Federal Commissioner of Taxation [1973] HCA 28; (1973) 130 CLR 64 at pp. 81-2

[2] Stardawn Investments Pty Ltd v Comptroller of Stamps 84 ATC 4099 at p. 4100; David Securities v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at p. 364

[4] See also Federal Commissioner of Taxation v Consolidated Press Holdings Ltd [2001] HCA 32; (2001) 207 CLR 235 at p. 254 [52]

[5] Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287; Collector of Customs v Agfa-Gavaert Limited [1996] HCA 36; (1995) 186 CLR 389 at 395-6; and in a revenue context, see Hayes v Federal Commissioner of Taxation [1956] HCA 21; (1956) 96 CLR 47 at 51; the cases collected by and the observations of Hill J in Commissioner of Taxation v Roberts [1992] FCA 363; (1992) 37 FCR 246 at 252; Royal Australasian College of Surgeons v Federal Commissioner of Taxation [1943] HCA 34; (1943) 68 CLR 436 at 448, per Starke J; and Alice Springs Town Council v Mpweteyerre Aboriginal Corporation (1997) 115 NTR 25 at 32 per Mildren J

[6] Ward v Williams [1955] HCA 4; (1955) 92 CLR 496 at p. 505; cf. Julius v Bishop of Oxford (1880) 5 App Cas 214 at pp. 222-3; Finance Facilities Pty Ltd v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106; Commissioner of State Revenue v Royal Insurance Australia Ltd [1994] HCA 61; (1994) 126 ALR 1 at p.7

[7] Newarch v Atkinson [1918] HCA 53; (1918) 25 CLR 381 at p. 387; Lamb v Moss [1983] FCA 254; (1983) 49 ALR 533 at p. 550; Pearce and Geddes, Statutory Interpretation in Australia, 5th Ed. at [11.5]

[8] See, for example, albeit in another context, McLelland v Federal Commissioner of Taxation [1970] HCA 39; (1970) 120 CLR 487; cf Federal Commissioner of Taxation v Whitfords Beach Ltd [1982] HCA 8; (1981) 150 CLR 355 at 378, per Mason J

[9] See his evidence at pp. 33-34 of the transcript (exhibit A1)

[10] See his evidence at p. 36 of the transcript.

[11] See his evidence at pp. 30-31 of the transcript.

[12] Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404 at pp. 415-6; see also Federal Commissioner of Taxation v Consolidated Press Holdings Ltd supra at p. 264 [96]

[13] S v Crimes Compensation Tribunal [1998] 1 VR 83 at p. 89