DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties

DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties - [1982] HCA 14 - HCA 1976 case summary — Zoe

[14]

The declaration of trust in the present case is an instrument which declares that the property to which it refers shall be held in trust for the person mentioned therein. In my opinion the property as to which that declaration is made is property "to be vested" in D.K.L.R. within the meaning of those words in par. 2. The argument on behalf of D.K.L.R. was that the words "to be vested" only apply when there is a legal obligation on the part of some third party to vest the property in the trustee, or a legally enforceable right or power in the trustee to have the property vested in himself. This was the view which Sheppard J. took in Nev. Ham Nominees Pty. Ltd. v. Commissioner of Stamp Duties [1] and in the present case, and which was accepted by Mahoney J.A. (dissenting) in the present case. The words "to be", before a past participle, and used in relation to a noun, can express obligation, intention, possibility or simple futurity; the sense must in every case depend on the context in which the words appear. With all respect to those who take the contrary view, I can see nothing in the context of par. 2 to suggest that the words "to be vested" connote an obligation on the part of a third party to vest the property or a right in the trustee to have it vested. In par. 2 the contrast between "vested" and "to be vested" suggests that it is intended to refer both to property which at the date of the instrument is vested in the person executing it and to property which, although not presently vested, becomes vested in that person in the future. The instrument described is one by which the person executing it declares that the property comprised in it, if presently vested, is held on trust and, if not presently vested, will be held on trust when it becomes vested. The words "shall be vested" in this context indicate mere futurity, although the very fact that a declaration of trust is made in respect of property not yet vested suggests that there exists an expectation, if not an intention, that it will become vested. The declaration of trust in the present case seems exactly the sort of instrument described by par. 2 in its application to property to be vested. It was argued that to construe the paragraph in this way would render it uncertain in that it is not clear what is "to be vested", and unjust, in that duty would be charged on an instrument which might never take effect, because the property referred to might never become vested. No uncertainty seems to me to result from the construction which I favour. On any view there must be property "comprised in the instrument". That property must be identifiable or ascertainable. An instrument which declares a trust in respect of property which, although not presently vested in the person executing the instrument, can be identified or ascertained, seems clearly to satisfy the words of par. 2, but is not rendered uncertain by the fact that the property is not vested in the declarant. It does not seem to me that injustice is any more likely to result from this construction than from any other. It is hardly likely that many persons will execute declarations of trust in respect of identifiable or ascertainable property not yet vested in them without having a reasonable expectation that the property will become vested. Although it may happen that such an expectation may be defeated in a particular case, it may equally happen that the property may not become vested even though there was a legal obligation to vest it, for not all obligations are satisfied and not all rights can be enforced. It does not seem to me necessary to consider whether, under s. 15 of the Act and reg. 30 of the Regulations thereunder, an allowance for "spoiled stamps" might be made when duty had been paid in respect of a declaration of trust which failed in its intended operation because the property "to be vested" never became vested.

[21]

It was next submitted on behalf of the appellant that even if the case fell within par. 2 no duty was payable, because the property comprised in the declaration was no more than the bare legal estate, or, alternatively, that the consideration for the declaration should be regarded as the transfer of the land and that there was therefore full consideration for the declaration. Neither of these arguments is correct. The property comprised in the declaration of trust was the entire property in the land in question. Before the transfer was executed 29 Macquarie was the legal owner of the land; it had the whole right of property in the land, but had no separate equitable estate in it, for its equitable estate was absorbed in the legal estate. Assuming, as we must, for the purposes of the case, that there was an effective transfer of the fee simple to D.K.L.R., the latter company then became obliged to hold the land for the benefit of 29 Macquarie. However, the property as to which the trust was declared - the property comprised in the declaration - was the whole right of property in the land, and not the bare legal estate, for it was not until the declaration of trust became operative that any separate equitable estate was created. 29 Macquarie did not transfer to D.K.L.R. the bare legal estate; indeed it could not declare itself a trustee for itself, and then transfer the bare legal estate to another. The alternative argument, that there was full consideration for the declaration of trust, is really only another way of contending that only the bare legal estate was transferred. Further, the transfer of the land to D.K.L.R. was not consideration for the creation of the trust in respect of that land. In Tooheys Ltd. v. Commissioner of Stamp Duties (N.S.W.) it was held, to use the words of Dixon J. that "(t)he placing of the trust fund in the trustees' hands was no consideration for the present or future equitable interests created" [7] . In the Supreme Court, whose decision was affirmed in this Court, Walsh J. had dealt with the same question and said [8] :

[30]

A conveyance made for nominal consideration upon the appointment or the retirement of a trustee (whether the trust is expressed or implied) is to be charged with the duty of one dollar. This question falls within a narrow compass but is not free of difficulty. In the present case the transfer was a conveyance, made for a nominal consideration, upon - in the sense of at the same time as, or on the occasion of - the declaration of trust. The question is whether the declaration of trust can be regarded as the appointment of a trustee within the meaning of sub-s. (2A). There is no doubt that when the declaration of trust took effect a trust was created and D.K.L.R. was constituted a trustee. It would in my opinion be too narrow a view to hold that D.K.L.R. was not thereby appointed a trustee within the meaning of the sub-section. There is nothing in sub-s. (2A) to suggest that its provisions should be limited to an appointment of a trustee to fill a vacancy caused by the death or retirement of the trustee of a pre-existing trust; unlike s. 73(1)(a)(i), it does not refer to the appointment of a new trustee. The words of sub-s. (2A) are undoubtedly wide enough to include a trustee appointed at the time when a trust is first created. Further, the word "appointment" is capable of referring to the act by which a person is placed in the position of trustee, even though the act takes the form of a declaration of trust by the person concerned; in other words, a person may appoint himself to be a trustee. Construed broadly rather than narrowly, the sub-section has the effect of preventing the exaction of ad valorem duty on two instruments which are brought into existence for the purpose of conveying property to a person who declares that he will hold it on trust. If the memorandum of transfer had been executed first, and had attracted ad valorem duty, par. 3(b) of the description of "Declaration of Trust" would have prevented ad valorem duty from being attracted by the declaration. The conclusion that ad valorem duty should be payable only once in circumstances such as the present seems consistent and just. For these reasons I consider that sub-s. (2A) should be given the broader meaning of which it is capable and that the duty payable on the memorandum of transfer is one dollar.

[76]

However, it does not follow that par. (2) applies to all declarations capable of creating a future trust. The description of trust property in a declaration of trust may be in perfectly general terms, viz. "Any property that I may hereafter acquire". A declaration which so describes the trust property is good and effective to create a trust when property of the class described is acquired by the declarant, despite the fact that at the time of the execution of the declaration the property is unidentified and the declarant did not then intend to acquire the particular parcel of property to which the trust ultimately attaches. Yet the class of declarations in par. (2) cannot embrace every declaration capable of operating as an effective declaration of trust in the technical sense. We have already noted that the liability of the instrument to duty is to be ascertained upon its execution. More importantly the amount of duty is equated to the amount of duty payable on a conveyance of "the property comprised therein". This indicates that the paragraph looks to a declaration affecting property which is capable of identification at the time of execution of the instrument so that it is then possible to compute the duty which would be payable on the conveyance of that property. The expression "the property comprised therein" is certainly apt to refer to a declaration which identifies a particular parcel or piece of property whether it is then vested in the declarant or whether it is intended to be vested in him sometime thereafter, even though in the latter case he has not then acquired any enforceable legal or equitable right to it. Does it also refer to a declaration which does not itself identify the property when specific property can be identified as the trust property by reference to the intention of the declarant or the person directing the declaration at the time of execution? Is specific property so identified "the property comprised therein", i.e. in the declaration of trust?

[159]

The memorandum of transfer was not registrable when it was delivered to and accepted by D.K.L.R., for it lacked the necessary endorsements relating to encumbrances upon the land, but it is common ground that nothing should turn on that circumstance. It is to be assumed that 29 Macquarie had done what was necessary to vest title to an estate in fee simple in the land mentioned in the transfer in D.K.L.R. However, it was submitted that the property transferred was the bare legal estate, and that 29 Macquarie remained throughout the beneficial owner of the land. This conclusion was said to follow from the fact that it was the common intention of transferor and transferee that, upon the transfer, D.K.L.R. should hold the land in trust for 29 Macquarie. Yet the interest which 29 Macquarie had after the transfer was not the same as it had before. Before the transfer it did not hold legal and equitable estates in the property: it held the legal estate alone. There was no equitable estate, for a person cannot be trustee for himself alone (In re Selous; Thomson v. Selous [52] ; In re Cook; Beck v. Grant [53] ; Re Heberley (dec.) [54] ; Lewin on Trusts, 16th ed. (1964), p. 4). After the transfer, D.K.L.R. held the legal estate, and it held it as trustee, and 29 Macquarie had as against D.K.L.R. what Maitland calls "the benefit of an obligation" (Equity , 2nd ed. (1947), p. 112). By virtue of the transfer, D.K.L.R. acquired the property which it holds in trust for 29 Macquarie; by virtue of the declaration 29 Macquarie became the holder of the equitable estate in that property. The declaration was not ineffectual to create the equitable estate held by 29 Macquarie merely because 29 Macquarie was the owner of the property before the transfer to D.K.L.R. (see Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (Quigley's Case) [55] ). 29 Macquarie could not except or reserve an equitable estate from the property transferred by it to D.K.L.R., nor could D.K.L.R. become a trustee of an interest excepted or reserved from the transfer. A transferee does not become a trustee by failing to acquire an interest in the property transferred; a trustee holds on trust only such interest as he acquires. An equitable interest is not carved out of a legal estate but impressed upon it. It may be convenient to say that D.K.L.R. took only the bare legal estate, but that is merely to say elliptically that 29 Macquarie transferred to D.K.L.R. the property in respect of which D.K.L.R. had declared that it would be trustee. The charter of 29 Macquarie's interest was D.K.L.R.'s declaration, not the memorandum of transfer; and D.K.L.R.'s declaration was moved by the transfer to it of the property to be held on the trust declared.

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