Karingal (No 2) Pty Ltd v Commissioner of State Revenue [2002] VSC 431

5. The principal question in each appeal is whether a company that holds units in a land holding unit trust is liable to be assessed, pursuant to s. 51 of the Land Tax Act 1958, as an owner of an equitable estate or interest in the land.

8. In three of the appeals[2] there is a further question of whether a company which holds units in a unit trust, of which the trust fund is comprised of units in a land holding unit trust, is liable to be assessed, pursuant to s. 51, as an owner of an equitable estate or interest in the land.

11. The Commissioner relies upon established authority that a holder of units in a unit trust has an equitable estate or interest in the unit trust fund, and in each asset that comprises the fund, and contends that the equitable estate or interest is enough to make the unit holder "an owner" because, he submits, it confers on the unit holder a present entitlement to the rents and profits from a proportionate share of the fund and each asset in the fund.

14. The Appellant contends that, whatever may have been said in the past about the effect of other unit trust deeds, the unit trust deeds in these appeals do not confer any equitable estate or interest in the assets of the trust funds, and that the recent decision of the High Court in MSP Nominees Pty Ltd v Commissioner of Stamps (SA)[3] is authority that or alternatively a compelling demonstration of why earlier decisions should be regarded as wrongly decided or distinguishable.

17. The Appellant contends in the alternative that, even if the unit trust deeds in these appeals do confer an equitable estate or interest in the trust fund, it is not such as to make the unit holder an "owner" of any individual asset because, it is submitted, it does not confer a right to possession of or the rents and profits from that asset.

20. The Appellant further contends that, even if that is not so, a holder of units in a unit trust of which the assets are units in a land holding unit trust (as opposed to land itself) is not an "owner" of the land, because the rights of the unit holder to possession or rents and profits from trust assets must surely be limited to the units in the land holding unit trust (as opposed to the land itself).

25. At all relevant times, Karingal 2 Holdings Pty Ltd (Karingal) was the registered proprietor and beneficial owner of the Karingal Shopping Centre Land located at Cranbourne Road, Frankston.

28. At all relevant times, Glen Centre Pty Ltd (Glen Centre) was the registered proprietor of the Glen Shopping Centre Land located at Springvale Road, Glen Waverley and so held that land as trustee for the Glen Centre Trust.

31. At all relevant times before 3 October 1997, Centro Asset Management Pty Ltd (Centro Asset Management) was the registered proprietor of the Keilor Downs Plaza Land located at Taylors Road, Keilor Downs and so held that land as trustee for the Keilor Downs Trust.

34. At all relevant times before 3 October 1997, Warriewood Pty Ltd (Warriewood) was the registered proprietor of a 50 percent interest in the Cranbourne Park Shopping Centre Land located at High Street, Cranbourne and so held that land as trustee for the Cranbourne Park Unit Trust.

37. From 3 October 1997, Sandhurst Nominees (Victoria) Limited (later called CPT Custodian Pty Ltd) (CPT/Sandhurst) was the registered proprietor of the Keilor Downs Plaza Land and so held that land as trustee for the Keilor Downs Trust.

40. From 3 October 1997, CPT/Sandhurst was also the registered proprietor of a 50 percent interest in the Cranbourne Park Shopping Centre Land and so held that interest as trustee for the Cranbourne Park Unit Trust.

43. From 30 April 1998, CPT/Sandhurst was the registered proprietor of the Mildura Centre Plaza Land and so held that land as trustee for the Mildura Centre Plaza Unit Trust.

47. The Glen Centre Trust is a unit trust established by Deed dated 3 October 1986, and amended by supplemental deeds dated 12 February 1996 and 9 August 1996, and at all relevant times 50 percent of the units in the Glen Centre Trust were held by 333 Queen Street Pty Ltd (333 Queen Street).

50. The Keilor Downs Trust is a unit trust established by Deed made some time prior to December 1995:

(a) Prior to 15 August 1997, the trustee of the Keilor Downs Trust was Centro Asset Management. After 15 August 1997, the trustee of the Keilor Downs Trust was CPT/Sandhurst. (b) As at 31 December 1995 there were 40,533,890 issued units in the Keilor Downs Trust. As at this date, Centro Properties held 100 of the issued units in the Keilor Downs Trust on trust for Centro Asset Management Pty Ltd as trustee for the Centro Property Trust. The remaining 40,533,790 units at that date were held by Centro Asset Management Pty Ltd as trustee for the Centro Property Trust. (c) As at 31 December 1996 there were 79,954,517 issued units in the Keilor Downs Trust. As at this date, Centro Properties held 100 of the issued units in the Keilor Downs Trust on trust for Centro Asset Management Pty Ltd as trustee for the Centro Property Trust. The remaining 79,954,417 units at that date were held by Centro Asset Management Pty Ltd as trustee for the Centro Property Trust. (d) Between 15 August 1997 and 5 November 1999, 100% of the issued units in the Keilor Downs Trust were held by CPT/Sandhurst as trustee for the Centro Property Trust. 11. The Centro Property Trust, a unit trust, was established by Deed dated 31 July 1989, which was amended by supplemental deeds dated 11 April 1991, 30 November 1995, 15 August 1997, 15 August 1997, 15 August 1997 and 23 October 1997: (a) Prior to 15 August 1997, the trustee of the Centro Property Trust was Centro Asset Management. From 15 August 1997 to 5 November 1999, the trustee of the Centro Property Trust was CPT/Sandhurst. (b) As at 31 December 1995 and 31 December 1996, 100% of the issued units in the Centro Property Trust were held by Centro Properties. In September/October 1997, the units held by Centro Properties were redeemed, and new units (which were stapled to the shares in Centro Properties) were issued to the shareholders of Centro Properties. 12. The Cranbourne Park Unit Trust, a unit trust, was established by Deed dated 23 August 1996 as varied by supplemental deed dated 15 August 1997: (a) Prior to 15 August 1997, the trustee of the Cranbourne Park Unit Trust was Warriewood. After 15 August 1997, the trustee was CPT/Sandhurst. (b) At 31 December 1996, 100% of the issued units in the Cranbourne Park Unit Trust were held by Centro Asset Management as trustee for the Keilor Downs Trust. After 15 August 1997, 100% of the issued units in the Cranbourne Park Unit Trust were held by CPT/Sandhurst as trustee for the Keilor Downs Trust. 13. The Mildura Centre Plaza Unit Trust, a unit trust, was established by Deed dated 1 April 1998: (a) The trustee of the Mildura Centre Plaza Unit Trust was CPT/Sandhurst. (b) From 1 April 1998 to 5 November 1999, 100% of the issued units in the Mildura Centre Plaza Unit Trust were held by CPT/Sandhurst as trustee for the Centro Property Trust.

22. The following corporations are related corporations for the purposes of section 44 of the Act: (a) Centro and Karingal are related corporations because Centro holds more than one-half of the issued share capital of Karingal (section 44(1)(a)(iii) of the Act); (b) Centro and Luzy Pty Ltd are related corporations because Centro hold 100% of the issued share capital of Luzy Pty Ltd (section 44(1)(a)(iii) of the Act); (c) Luzy Pty Ltd and 333 Queen are related corporations because Luzy Pty Ltd holds 100% of the issued share capital of 333 Queen (section 44(1)(a)(iii) of the Act); (d) as Centro is the common member of the groups mentioned in (a) and (b) above Centro, Karingal and Luzy Pty Ltd are all related to one another pursuant to section 44(1)(d) of the Act; and (e) as Luzy Pty Ltd is the common member of the groups mentioned in (b), (c) and (d) above, Karingal, Centro, 333 Queen and Luzy Pty Ltd are all related to one another pursuant to section 44(1)(d) of the Act. 23. Under section 44(3) of the Act Karingal, Centro, 333 Queen and Luzy Pty Ltd are to be taken as a single corporation for the purposes of the Act, because: (a) the ultimate holding company of Karingal, 333 Queen and Luzy Pty Ltd is Centro; and (b) the principal activity of all of the entities is the same, ie. the investment, management or development of retail properties.

21. The 1996 Karingal Assessment assessed: (a) the 100% legal interest in the Karingal Shopping Centre Land owed by Karingal; (b) a claimed 50% equitable interest held by 333 Queen in the Glen Shopping Centre Land; and (c) a claimed 100% equitable interest held by Centro Properties in the Keilor Downs Plaza Land. 22. The 1997 Karingal Assessment assessed: (a) the 100% legal interest in the Karingal Shopping Centre Land owned by Karingal; (b) a claimed 50% equitable interest held by 333 Queen in the Glen Shopping Centre Land; (c) a claimed 100% equitable interest held by Centro Properties in the Keilor Downs Plaza Land; and (d) a claimed 50% equitable interest held by Centro Properties in the Cranbourne Park Shopping Centre Land. 23. The 1998 Karingal Assessment and the 1999 Karingal Assessment assessed: (a) the 100% interest in the Karingal Shopping Centre Land owned by Karingal; and (b) a claimed 50% equitable interest held by 333 Queen in the Glen Shopping Centre Land. 24. On 15 October 1999, the Commissioner of State Revenue (`the Commissioner') issued amended assessments of land tax to CPT/Sandhurst pursuant to Part III of the Act: (a) 1998 land tax year - Assessment No. S 020601703-2 (`1998 CPT/Sandhurst Assessment'); and (b) 1999 land tax year - Assessment No. S 020601711-2 (`1999 CPT/Sandhurst Assessment'). 25. The 1998 CPT/Sandhurst Assessment was issued to CPT/Sandhurst as trustee for the Keilor Downs Trust, and assessed: (a) a claimed 100% equitable interest held by CPT/Sandhurst as trustee for the Centro Property Trust in the Keilor Downs Plaza Land; and (b) a claimed 50% equitable interest held by CPT/Sandhurst as trustee for the Centro Property Trust in the Cranbourne Park Shopping Centre Land. 26. The 1999 CPT/Sandhurst Assessment was issued to CPT/Sandhurst as trustee for the Centro Property Trust, and assessed: (a) a claimed 100% equitable interest held by CPT/Sandhurst as trustee for the Centro Property Trust in the Keilor Downs Plaza Land; (b) a claimed 50% equitable interest held by CPT/Sandhurst as trustee for the Centro Property Trust in the Cranbourne Park Shopping Centre Land; and (c) a claimed 100% equitable interest held by CPT/Sandhurst as trustee for the Centro Property Trust in the Mildura Centre Plaza Land. 27. On 14 December 1999, Karingal and CPT/Sandhurst lodged objections pursuant to s. 24A of the Act against each of the above assessments. 28. On 29 June 2001, the Commissioner disallowed the objections in relation to each of the Karingal assessments and the CPT/Sandhurst assessments. The decision to disallow the objections in relation to each of the Karingal assessments was made on the basis that those assessments had been correctly issued pursuant to sections 8, 44 and 51 of the Act. 29. By letter dated 29 August 2001, Karingal and CPT/Sandhurst requested that the Commissioner treat the objections as appeals and cause them to be set down for hearing at the next sittings of the Supreme Court pursuant to s. 25 of the Act.

59. Each of the trust deeds is in similar form, but there are some significant differences. Beginning with the Glen Centre Trust Deed:

* Recital B provides that the Trustee has agreed to hold such cash and investments as may be paid to or vested in it upon the trusts and with the powers and authorities and on and subject to the terms and conditions of the Deed.

* Recital E provides that it is the intention that all investments shall be acquired for the purpose of earning income for distribution among Unit Holders and capital growth of Units for the benefit of Unit Holders.

* Clause 1.1.14 defines "Gross Income" as all moneys or property received or receivable by the Trust by way of dividends, interest, rents and profits in the nature of income arising out of the Trust Fund in any financial year but does not include moneys or property which the Trustee may elect to treat as capital in accordance with normal commercial practice.

* "Net Income" is defined in clause 1.1.16 as the Gross Income less all payments or provisions for outgoings on account of income made by the Trustee in accordance with the Deed as adjusted for any amount set aside to provide for depreciation and bad or doubtful debts and income yet to mature.

* Clause 2.2 provides that the Trust Fund shall consist of Authorised Investments (defined in effect as land, chattels and securities of specified quality) for the time being held by the Trustee upon the trusts of the Deed including proceeds of sale of Authorised Investments and all income for the time being.

* Clause 2.3 provides for the Beneficial Interest in the Trust Fund to be divided into Units but that a "Unit shall not confer any interest in any particular part of the Trust Fund or in any investment but only such interest in the Trust Fund as is conferred on a Unit pursuant to the provisions of this Deed".

* Clause 3.2 provides that no "Unit Holder shall be entitled to require the transfer to him of any investment forming part of the Fund or be entitled to interfere with the exercise or non-exercise by the Trustee as owner of such investment or be entitled to lodge a caveat in respect of an interest in land owned by the Trustee pursuant to the provisions of the Transfer of Land Act (Victoria) 1958 ...PROVIDED THAT nothing herein contained shall in any way prejudice the rights of a Unit Holder to bring an action against the Trustee for breach of duty".

* Clause 4.2 provides that the "Trustee at any time and from time to time may decide if it is desirable in the interest of the Unit Holders to purchase, sell or otherwise dispose of, develop or reconstruct, exchange, vary, modify or otherwise change any investment forming part of the Fund".

* Clause 4.4 provides that notwithstanding other provisions of the Deed, the Trustee shall not invest the Trust Fund in any land other than the Glen Centre.

* Clause 21.3 provides that the Trustee shall after the last day of the end of each quarter in each and every year and after such other days as may be agreed by the Unit Holders, distribute to the Unit Holders such income of the Trust Fund as the Trustee may determine.

* Clause 29 provides for the Trust to continue until the twenty-first anniversary of the death of the last survivor or King George VI living at the date of the deed or such earlier date as may result from a decision of the Unit Holders not to replace a Trustee following retirement.

* Clause 31 provides that upon the termination of the Trust the Trustee shall get in all the assets and convert them into cash and after payment of proper costs and expenses distribute the cash to Unit Holders in proportion to their Unit Holdings.

* Clause 32 confers upon the Trustee extensive powers of management and investment.

75. The provisions of the Keilor Downs Trust Deed are essentially similar but they do not include a provision like clause 4.4 of the Glen Centre Deed restricting real property investment to particular land.

78. The provisions of the Cranbourne Park Unit Trust Deed are different in the following significant respects:

* Clause 5 does not provide that a Unit "shall not confer any interest in any particular part of the Trust Fund". It provides instead that "each Unit Holder shall not be entitled to any particular asset ... of the Fund".

* There is no restriction of investment to particular specified land.

* Clause 19 provides for determination of the Trust by special resolution of Unit Holders.

* "Income" is defined as being the Accounting Income or the Taxable Income or such amount between the two as the Trustee may determine according to whether the Accounting Income exceeds or is less than the Taxable Income for the particular year.

* Clause 21.1 provides that a Unit Holder shall be presently entitled to the Income for the Financial Year in the same proportion as the number of Units of which the Unit Holder is registered as the Holder as at the expiration of the Financial Year.

* Clause 21.5 provides that unless otherwise directed by the Unit Holders by Special Resolution, the Trustee may determine to reinvest Unit Holders' shares of Income in subscribing for further Units.

87. The provisions of the Mildura Trust Deed are similar to the Keilor Downs Deed, except that:

* Clause 5.1 provides that "the Beneficial Interest is divided into Units...(but)...A Unit does not confer any interest in a particular Asset but only an interest in the Assets of the Trust as a whole, subject to the Liabilities of the Trust".

* Clause 5.4 provides that, except as otherwise indicated in the Deed, a Unit Holder may not:

* interfere with any rights or powers of the Manager on Trustee under the Deed;

* exercise a right in respect of an Asset or lodge a caveat or other notice affecting an Asset or otherwise claim any interest in an Asset; or

* require an Asset to be transferred to the Unit Holder.

* Clause 12.1 provides that a Unit Holder is presently entitled as at the end of the last day of the Distribution Period (elsewhere defined as any date between the two distribution days of 31 December and 30 June in each year) to the Income of the Trust for the Distribution Period in the proportion that the Income Entitlement of the Unit Holder bears to the aggregate of Income for the Distribution Period.

* Clause 12.7 provides for the reinvestment of income in further Units but only with the consent of individual Unit Holders.

98. Section 3 of the Act defines "land" to include all land and tenements and all interests therein. "Taxpayer" is defined in the same section as any person who is the owner of land and as including every person who, whether liable to taxation or not, is by or under the Act required to make any return relating to land or to the valuation or assessment thereof. "Owner" is defined in respect of land to mean every person entitled to any land for any estate of freehold in possession.

101. Section 6 defines the nature of land tax in terms of a tax imposed once each year upon land for every dollar of the unimproved value thereof and s. 8 imposes land tax on each owner for each year on the value of the land of which he is the "owner" at midnight on 31 December.

"51. Subject to the other provisions of this Act, the owner of any equitable estate or interest in land shall be assessed and liable in respect of tax as if the estate or interest so owned by him was legal, but there shall be deducted from the said tax so payable by him in respect of that estate or interest the amount of any tax paid in respect thereof by the legal owner of the land."

"52. Every person in whom land is vested as a trustee, shall make returns and be assessed and liable in respect of the tax as if he were beneficially entitled to such land, save that when he is the owner of different land in severalty in trust for different beneficial owners who are not, by reason of joint occupation or otherwise, liable to be jointly assessed for tax in respect of the same, the tax so payable by him shall be separately calculated and assessed in respect of each of those lands; and save also that when a trustee is also the beneficial owner of other land, he shall be separately assessed in respect of that land, and of the land of which he is a trustee, unless by reason he is liable to be jointly assessed independently of this section."

113. In the way in which these appeals have been argued four questions fall for decision:

s First, it has to be decided whether unit holders in the trusts have an equitable estate or interest in the lands the subject of the trusts.

s Secondly, if they do, it has to be decided whether the nature of their equitable estate or interest is such that s. 51 of the Act renders them liable to tax.

s Thirdly, if the first and second questions are answered affirmatively, it has to be determined whether it makes any difference that, in three cases, the equitable estate or interest is comprised of units in a unit trust of which the assets are units in a landholding unit trust rather than land itself.

s Fourthly, does s. 52 of the Act mean that separate assessments should be issued in respect of the Keilor Downs Plaza Land, the Cranbourne Park Shopping Centre Land and the Mildura Centre Plaza Land?

121. The weight of authority has been for some years that the holder of a unit in a unit trust has an equitable proprietary interest in all the property which is for the time being subject to the trust deed: see, for example, Charles v Federal Commissioner of Taxation[4]; Read v The Commonwealth[5]; Costa & Duppe Properties Pty Ltd v Duppe[6]; Ford, Unit Trusts[7]; Ford, Public Unit Trusts[8].

124. There is also a body of authority that a unit holder has a proprietary interest in each of the assets which comprise the entirety of the trust fund and that provisions in unit trust deeds to the effect that a unit holder is not entitled to any particular asset in the trust fund or to an interest in any particular asset are to be construed in context as meaning no more than that the unit holder is not entitled to have the exclusive use or ownership of any particular asset: see Costa & Duppe[9]; Commissioner of Stamps v Softcorp Holdings Pty Ltd[10]; Aust-Wide Management Ltd v Chief Commissioner of Stamp Duties (NSW)[11]; Connell v Bond Corporation Pty Ltd[12]; Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd[13]; Suncorp Insurance & Finance Commissioner of Stamp Duties[14]; McCarthy v Wheeler & Wongan Hotels Pty Ltd[15]; Trevisan v Commissioner of Taxation[16]; Arjon v Commissioner of State Revenue[17]; Bonini v Western Australian Real Estate Custodian[18].

127. Thus, in Costa the relevant provisions of the trust deed provided that:

"7(a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being. 8(a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other than in accordance with the provisions hereinafter contained."

"To my mind, having regard to the New Zealand Insurance Case, the Octavo Investments Case and what is said in Charles v Federal Commissioner of Taxation, the conclusion is inescapable that the Unit-holders in the Costa & Duppe Properties Unit Trust have a proprietary interest in all the property which is for the time being subject to the trust deed. This proprietary interest is recognized by cl. 7(a) of the deed. Clauses 7(a) and 8(a) cannot mean that the unit-holders, while having a proprietary interest in the whole, have no such interest in any of the constituent parts. If there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed: cf Smith v Layh [1953] HCA 16; (1953) 90 CLR 102 at pp.108-9. What cl. 8(a) recognises is that no unit-holder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed.... In my opinion, cl. 7(a) and cl. 8(a) do no more than recognize what the effect of the trust deed would be in the absence of express provision. A unit-holder has a proprietary interest in each asset of the trust notwithstanding the possible duration of the trust, the extremely wide powers of management given to the trustee and the possibility that the trust might lose the whole or part of its capital through unprofitable trading or speculation."[19] (Emphasis added.)

135. In Suncorp the relevant provisions of the trust deed were:

"4.1 The beneficial interest in the Trust Fund is divided into Units. 4.2 Except as provided in this deed, each Unit confers an equal interest in the Trust Fund but does not confer any interest in any particular part of the Trust Fund... 4.3 Other than as provided in this deed, including without limitation, in clause 34, the beneficial interest of a Unitholder in the Trust does not entitle the Unitholder to:

(a) interfere with any of the trusts rights, powers, authorities or discretions of the Trustee or of the Manager in respect of any Investment;

(b) interfere with or question the exercise or non-exercise by the Trustee or Manager or any of those trusts, rights, powers, authorities or discretions;

(c) exercise any rights.... in respect on any Investment including without limitation:

(i) ...

(ii) ...

(iii) lodge a caveat or other notice in respect of any Investment...

(iv) claim any estate or interest in any particular Investment...."

142. The Queensland Court of Appeal held that holders of units in the Suncorp trusts had an equitable proprietary interest in each of the trust assets.

145. After referring to Brooking J's analysis in Costa, Fitzgerald P held that:

"...The difficulty in the present case does not stem from any inherent characteristics of a unit trust but from the terms of the Suncorp Balanced Property Fund and Suncorp Retail Property Fund deeds. The most important statement in Costa & Duppe Properties Pty Ltd for present purposes is that on p. 93, quoted above, in which Brooking J. said that `...the effect of an instrument in relation to the creation of proprietary interests depends, not simply on any express provision it may contain in that regard, but on what effect the law will give to the instrument considered as a whole in the light of applicable principles'. The general principle reflected in that statement is that a clause in an instrument cannot be given effect according to its terms if they contradict the effect of the instrument as a whole. The critical question is whether the overall effect of each of the Suncorp Balanced Property Fund and Suncorp Retail Property Fund deeds was to give the appellant... an equitable estate or interest in the `Investments' comprising those `Trust Funds'... Principle and authority seem to me to indicate that a majority unitholder which has the right to have the trust deeds performed according to their terms, including the `Trust Funds' dealt with as each deed requires, and to cause the realisation of each `Trust Fund' and distribution of the proceeds, has an equitable `estate or interest' in the Trust Fund and each of the `Trust Fund' `Investments'. Further, since the appellant's `estate or interest' obviously falls short of full ownership, the minority unitholder, which also has the right to participate in the distributions, likewise has an equitable `estate or Interest' in each `Investment' held on trust by the appellant for the unitholders..."[20]

"...The deed then provides that, except as provided by the deed, each unit confers an equal interest in the trust fund. However the right of any beneficiary to property forming part of the trust fund is limited and the rights of the holder of A units are further relevantly limited to a right to participate in any distribution following termination of the trust and then to an in specie distribution. However it is not clear how there could ever be an in specie distribution on termination of the trust. Notwithstanding these limitations the holder of A units has a beneficial interest in the trust fund the interest if such a holder necessarily includes an interest in each asset of the trust fund which, of course, includes the real property..."[21]

153. Reference may also be made to the subsequent decision of the New South Wales Court of Appeal in ISPT Pty Ltd[22] in which Meagher JA and Fitzgerald AJA, Mason P dissenting, adopted a similar approach in relation to broadly comparable trust deeds.

156. Judged according to that body of authority, each of the trust deeds in the appeals before me does confer on unit holders an equitable estate or interest in each of the assets of the trusts.

159. It has, however, been submitted on behalf of the appellant that the recent decision of the High Court in MSP Nominees Pty Ltd v Commissioner of Stamps (South Australia)[23] produces a different outcome, at least in the case of those of the trust deeds before me which provide in terms that units do not confer any interest in any particular part of the trust fund or do not confer any interest in a particular asset.[24]

162. In MSP the question was whether the redemption of units by the trustee of a unit trust constituted a surrender of a beneficial interest in the fund by the holder of the units redeemed. It was held that it did not, because it was said that a redemption did not yield up the rights which the unit holder had in the fund, so as to discard those rights or swell the rights of the remaining unit holders. Rather it effectuated, fulfilled or realised those rights in accordance with their terms.

165. The relevant provisions of the trust deed were that the beneficial interest in the trust fund was to be divided into units of equal value and that no unit holder was to have an interest in the trust fund other than in its entirety, or to be entitled to interfere in the exercise or the right of the trustee as owner of the trust fund. The deed also conferred on the trustee significant discretions with respect to distributions to unit holders and redemption of units.

168. Of these provisions the majority of the High Court said in their joint judgment[25]:

"3. Clause 4 provided for the beneficial interest in the Trust Fund to be divided into units of equal value and that no Unit Holder was to have an interest in the Trust Fund other than in its entirety or to be entitled to interfere in the exercise of the right of the Trustee as owner of the Trust Fund. This clause also stipulated that, except as provided by cl 11, no Unit Holder was to be entitled to require the transfer to him of any of the investments of the Trust Fund or any part thereof or of any property comprised in the Trust Fund. Provision was made (in cl 13) for determinations by the Trustee from time to time to distribute the net income of the Trust Fund to Unit Holders or to accumulate it as an accretion to the Trust Fund. (Emphasis added.) 4. The Trust Deed specified three mechanisms for distributions from the Trust Fund. First, cl 11 dealt with the commencement and determination of the trusts created by the Trust Deed. As soon as practicable after the Vesting Day, as defined in cl 1, the Trustee was obliged to convert into money the investments in property constituting the Trust Fund and to divide the proceeds, upon the registered holders delivering up their certificates to the Trustee for cancellation, among the Unit Holders in proportion to the number of units of which they were respectively registered. At its discretion, and at the request of any Unit Holder, the Trustee was empowered to transfer to that Unit Holder any assets of the Trust Fund in specie in satisfaction or part satisfaction of its entitlement upon termination of the trust (cl 11(b)). The term `Vesting Day' was defined in cl 1(g) as meaning the first to occur of three days. The first was the twenty-first anniversary of the death of the last survivor under a Royal lives clause, the second sixty years, and the third such earlier day as the Trustee might appoint in its absolute discretion. It is conceded by the respondent, the Commissioner of Stamps (the Commissioner) that, upon a distribution in accordance with cl 11, the Unit Holders would not have `surrendered' or `renounced' their beneficial interests... 7. The significant provisions made by the Trust Deed for the exercise of powers and discretions by the Trustee with respect to distributions to Unit Holders support the description of the trusts established by the Trust Deed as discretionary trusts[26]. Clause 4 denied any entitlement to Unit Holders to require a distribution, other than pursuant to cl 11. Of the methods for distributions specified in the Trust Deed, only the first, that in cl 11 for distributions after the Vesting Date, conferred upon Unit Holders rights not dependent upon or preconditioned by a requirement of consent by the Trustee or the exercise of a power vested in the Trustee. Accordingly, any scope for the operation of the rule in Saunders v Vautier[27] was limited. (Emphasis added.) 8. However, all three methods of distribution, including that provided by cl 34, shared a significant characteristic. Within the charter of rights and obligations established by the Trust Deed, they were the only means for the working out and effectuation of the rights or interests of the Unit Holders in respect of the Trust Fund. A redemption under cl 34 did not yield up those rights and interests so as to discard them or to swell the interests of any remaining Unit Holders. Rather, the redemption effectuated, fulfilled or realised those rights and interests[28]. Upon a favourable exercise of the Trustee's discretion under cl 34, the Unit Holder in question had, at least, an absolute right to the price for the redemption... 34. The use of terms such as `beneficial interest' is apt to mislead when applied to beneficiaries' interests in a discretionary trust. As effected by cl 4 of the Trust Deed, the Unit Holders were denied any specific interest in any item of property held in the Trust Fund[29]. Rather, the rights enjoyed by Budget and Galaxy as Unit Holders were, upon favourable exercise by the Trustee of its discretion conferred by cl 34, transmuted by the redemption process into the entitlement to the price arrived at by the valuation for which cl 36 provided. This, as indicated earlier in these reasons, was in fulfilment of the rights of Budget and Galaxy, not the `surrender', in the sense of that term in the definition of `transfer' in s 71(15) of the Act, of a beneficial interest or potential beneficial interest in or in relation to the assets represented by the Trust Fund." (Emphasis added.)

172. The Appellant points to the observations made in the paragraphs of the joint judgment set out above as in effect denying any interest in any specific item of property comprising the trust fund, and the Appellant contends that what is contained in those observations implicitly overrules the conclusion reached by the Queensland Court of Appeal in Suncorp. In the Appellant's submission, the true view following MSP is that where there are provisions in a unit trust deed which give to the trustee a degree of discretion as to distributions and which in terms deny the existence of any interest in particular assets, the provision which denies the existence of an interest in particular assets is to be given effect notwithstanding that it may appear to contradict another provision in the deed that each unit holder has an interest in the totality of the fund.

175. Further support for those contentions is said to lie in the judgment of Talbot J of the New South Wales Land and Environment Court in Halloran v Parks and Wildlife[30] where his Honour expressed the view that the decision in MSP differed from the majority view in Suncorp and ISPT (although ultimately his Honour decided the case before him on the basis of differences which he discerned to exist between the deeds considered by the Queensland Court of Appeal in ISPT and those which were before him).

178. I do not accept the Appellant's contention and, with all respect to Talbot J, I do not see that there is any inconsistency between MSP and the earlier authorities on the nature of a unit holder's interest in underlying assets.

181. I do not consider that the High Court's description of the MSP trusts as "discretionary trusts" should be taken as denying to the MSP Trust Deed the character of a unit trust or, hence, as suggesting that the holders of units in the trusts did not have an interest in the whole of the trust fund. The distinction as between a unit trust, which of its nature has been held to confer on a unit holder an interest in the trust fund[31], and a discretionary trust strictly so called, which of its nature has been held to confer on objects no more than a right of due administration[32], is sufficiently ingrained in authority that the Court cannot have intended to cast it aside by means of no more than a line of passing observation.

184. Nor do I think that what was said by the High Court in paragraph 34 of the joint judgment was intended to deny that unit holders had any interest in the trust assets. The Court held that the effect of the trust deed was that unit holders "were denied any specific interest in any item of property held in the Trust Fund" (emphasis added). The adjective specific was plainly chosen with care. Since the High Court said that the effect of the clause was to deny a specific interest in any item of property, one is to proceed on the basis that the High Court meant that the effect of the clause was to deny the existence of a specific interest; not any interest.

187. I do not think it can be supposed that the Court chose the expression "specific interest in any item of property" as a substitute for the expression "any interest in any specific item of property". "Any specific item of property" is a tautology and, more importantly, it is improbable to the point of being untenable that the High Court would employ one conception in order to describe another of radically different meaning.

190. Of course each case depends on its own facts and principally upon the terms of the deed in question, and so there may be cases in which a deed describes itself as a unit trust deed but which because of its terms is a discretionary trust deed strictly so called. There may also be cases, and MSP appears to be one of them, in which the deed in question is a unit trust deed, and thus confers on each unit holder an interest in the trust fund, but nevertheless certain of the entitlements of unit holders under the deed are dependent on the discretion of the trustee and thus are appropriately described as discretionary.

193. But where, as in MSP and here, the trust deed divides the beneficial interest in the fund into units and specifically confers on each unit holder an interest in the trust fund as a whole, the fact that certain of the unit entitlements, and perhaps even most of the unit entitlements, are discretionary in one sense or another, cannot mean that the trust is to be characterised as a discretionary trust in a sense that deprives the unit holders of the interest for which the deed expressly provides; and the High Court did not say otherwise.

196. What then was intended by the High Court to be conveyed by the description of the trusts in MSP as discretionary and by use of the expression "specific interest in any item of property"? In my view, no more than that cl. 4 operated to deny a unit holder the right to have any item of property appropriated to his or her share or transferred to him or to her otherwise than in accordance with the deed.

199. I reach that view for three reasons. First, the joint judgment expressly recognised that cl. 4 of the deed provided for unit holders to have an interest in the Trust Fund, and there is not to be found in the joint judgment any suggestion of error in the cases in which previously it had been held that an interest in a trust fund cannot exist in the absence of an interest in each item of property that comprises the trust fund.

202. Secondly, there is the obvious difficulty of how one is to make sense of a trust deed that provides expressly for unit holders to have an interest in the whole of the fund unless it also has the effect of conferring on unit holders at least some sort of equitable estate or interest in each of the assets of the fund.

205. It may be possible at a theoretical level to square the notion of an interest in the whole of the fund with the absence of any interest in any specific asset of the fund. If one accepts the thesis that an equitable estate or interest is not a right in rem but rather a right in personam of such a nature that equity is prepared to treat it as equivalent to a right in rem[33], there may not be a necessary inconsistency between the possibility of equity treating rights in personam in respect of the whole of the fund as tantamount to rights in rem in respect to the whole of the fund and yet at the same time denying that the rights insofar as they affect specific assets are not tantamount to rights in rem in respect of the specific assets.

208. But at a practical level it must be asked what would be the sense of that sort of approach: why would equity be prepared to recognise rights in respect of the totality as equivalent to rights in rem in respect of the totality but refuse to recognise those rights as having the equivalent effect in respect of the specific assets which constitute the totality. The conclusion which I reach is that there is no sense in it and that it is not and will not be done.

211. Thirdly, the passage of the joint judgment containing the analysis of the effect of cl. 4 upon specific interests, is directed precisely to a demonstration of why the sort of redemption with which the Court was concerned was in fulfilment of rights which comprised the unit holder's beneficial interest; as opposed to a surrender or release of the sort of rights which might have constituted a specific interest in individual assets. In the context in which the analysis was undertaken, there appears to me to have been every reason to refer to the discretionary nature of redemption and thus to distinguish between a specific interest in individual assets and a non-specific interest in each and every asset the subject of the Trust Fund.

214. Finally, on this aspect of the matter, I should mention that a further argument advanced on behalf of the Appellants was that, because the deeds the subject of these appeals contain provisions like clause 3.2 of the Glen Centre Trust Deed, which prohibit a unit holder lodging a caveat on title in respect of any land held in the trust, it should be concluded or more readily concluded that the Deeds do not confer on a unit holder any equitable estate or interest in individual assets.

217. I do not regard that argument as persuasive. At its lowest the prohibition on caveats is no different to the stipulation that unit holders do not have an interest in any specific asset. At another level it might well be taken as an implicit recognition of the existence of an estate or interest capable of supporting a caveat, and hence the need for the prohibition.

220. Be that as it may, I consider that the Deeds do confer on unit holders an estate or interest in each of the pieces of land the subject of the trusts.

224. Having found that the unit holders have an equitable estate or interest in the lands that comprise the funds the question is whether, if that interest were a legal interest, it would render the unit holder an "owner" of the land (scil. entitled to an estate of freehold in possession).

227. I take the law on the subject to be as stated by the High Court in Glen v Federal Commissioner of Taxation[34], namely, that in order to say of the holder of an equitable estate or interest in land that he or she is to be treated as an owner pursuant to s. 51, nothing less than the ability to obtain from a court of equity an order for actual possession of the land, or receipt of the rents and profits, will suffice.

230. In my opinion, the clauses of the trust deeds which deny the existence of any specific interest in the land mean that a unit holder could not obtain from a court of equity an order for actual possession of the land, and the Commissioner does not suggest otherwise. According to the Commissioner, however, each unit holder is entitled to the profits of each piece of land, or at least to a proportionate share of them, and the Commissioner contends that that is enough to make the unit holder an owner in the relevant sense.

233. I take a different view. I accept that if land were held on trust for a taxpayer on terms that the taxpayer be entitled to the benefit of the rents and profits derived from the land, the taxpayer would be liable under s. 51 to land tax as owner of the land. But the trusts with which I am concerned do not provide that the unit holders are entitled to receive the rents and profits generated by each parcel of land that comprises the fund. They provide instead for each unit holder to receive only a proportionate share of the income of the fund however that comes finally to be constituted.

236. It may well be that the income of the fund as finally constituted and distributed will include all of the rents and profits generated by a particular parcel of land within the fund. But it is distinctly possible that it will not. Each of the deeds gives power to the trustee to provide out of receipts for future and contingent liabilities[35]; to apply receipts in the purchase of any property or business[36]; to invest receipts in authorised investments and to deal with and transpose such investments[37], and the only right of the unit holder is to a proportionate share of the income of the fund for the year.

239. The Commissioner contends that the trustees' powers of disposition and transposition make no difference. He submits that insofar as receipts from particular properties may be applied in making payments other than to a unit holder, they must be seen as made on behalf of the unit holder and in that sense as received by the unit holder. He says that it is in principle no different to the case of a simple trust of land with only one beneficiary, under the terms of which the trustee is entitled to apply receipts in the payment of obligations and in the making of provisions in connection with the management of the land. The Commissioner contends that in such a case there can be no doubt that the beneficiary would be liable to tax as "owner".

242. But I think there is a difference. In the case of a simple trust of the kind instanced by the Commissioner the entitlement of the trustee to apply part of the receipts in defined ways determines the amount of the income which the beneficiary has a right to receive. Contrastingly, in a case of a complex unit trust of the kind with which I am concerned, the entitlement of the trustee to apply receipts in defined ways informs the nature of the income that the unit holders have a right to receive: not a total of all of the receipts derived from each asset the subject of the fund but rather such if any income as may be derived from the product of the application of gross receipts in various ways.

245. It is contended by the Commissioner that to reason in that fashion is to make the mistake of treating a unit trust as if it were a corporation in the assets of which shareholders have no interest[38], whereas the hallmark of a unit trust is that unit holders do have an interest in assets. The correct view, it is said, is that the income received by unit holders is received from and by reason of the interests which they have in the assets of the trust and not from any "fund" which after all is an abstraction; not a legal personality.

248. I do not consider that to be so. To conclude that because unit holders have an interest in trust assets, it must follow that unit holders derive trust income from and by reason of their interests in individual trust assets, is to assume the answer to the question of whether the interests which they have entitle them to the income of those assets. If the interests which they have in the assets yield to them no more than rights to have their individual assets dealt with as part of a fund, the treatment of which provides no certain rights to have kept within the fund or distributed to unit holders the receipts from any one asset, then I think it must follow that the unit holders do not have the right to receive the receipts from any one asset, and if they do not have that right they are not to be treated as owners of the asset.

251. To put it another way, to accept the Commissioner's contention is to accept that unit holders do have a specific interest in particular assets despite the express provision to the contrary in the trust deeds.

254. In the recent decision of the Victorian Civil and Administrative Appeals Tribunal in Arjon Pty Ltd v Commissioner of State Revenue[39], it was held by the President and Deputy President MacNamara that it was enough to render unit holders "owners" of land the subject of the trust with which the Tribunal was concerned, that the units conferred on the unit holders an equitable estate or interest in the trust assets. That decision is contrary to my own conclusion. I take leave, however, respectfully to depart from it, because in the way in which it appears that the case was argued the Tribunal was asked to decide the question only on the basis of whether or not the unit holders had an equitable interest in the assets. The Tribunal was not asked to consider whether, and it was not suggested that, a non-specific interest in assets would not yield the right to possession of any individual asset or the receipts from any individual asset.

258. I turn now to the question of whether it makes any difference to the application of s. 51 that the assets of some of the trusts are units in another trust holding land, as opposed to land itself.

261. For the reasons already expressed in dealing with the second question, I take the view that regardless of whether the assets of the unit trust are land itself or units in another unit trust, the unit holders are not "owners" of the trust assets and, in that sense, it makes no difference whether the assets of the trust are land or units.

264. If, however, I were wrong in the view that holders of units in a landholding trust are not "owners" within the meaning of the Act, I consider that there would be a difference in the case of unit holders in a trust of which the assets were comprised of units. Whatever might be said about the ability of a unit holder in a landholding trust to obtain from equity an order to compel possession or receipt of the rents and profits from individual lands within the trust fund, I consider it to be untenable that a holder of units in a trust of which the fund was comprised of units in another, landholding, trust, could obtain from equity an order compelling in favour of that unit holder possession or receipt of the rents and profits from individual lands the subject of the landholding trust. Such a unit holder would doubtless be entitled to orders in equity compelling the trustee of the unit trust in which the holder held units duly to administer the trust fund and to account to the unit holder in accordance with the trust deed terms. But even if, contrary to the view which I have expressed in answer to the second question, the trustee of the unit holding unit trust were able in equity to obtain orders compelling the trustee of the landholding unit trust to grant to the trustee of the unit holding unit trust receipt of the rents and profits from individual lands within the landholding trust, I cannot comprehend how the holder of units in the unit holding unit trust could then succeed in equity in obtaining an order as against the trustee of the unit holding unit trust to allow the unit holder possession of a particular piece of land. Ex-hypothesi, all that the trustee of the unit holding unit trust would hold would be a fund of money for distribution to unit holders in accordance with the deed.

268. The appellant contended that if it were determined that the unit holders of the trusts were "owners" of the trust lands, and hence were assessable under s. 51, it was necessary that separate assessments be issued under s. 52 of the Act in relation to the Keilor Downs Plaza Land, the Cranbourne Park Shopping Centre Land and the Mildura Centre Plaza Land. The essence of the argument was that, because each trustee has an express right of indemnity out of trust assets, the trustee has a beneficial interest in the trust assets, and that means that "each of the trusts owns its land for `different beneficial owners' within the meaning of section 52 of the Act.'"

271. Given the conclusion I have reached about the application of s. 51, it may be unnecessary that I say much about this further argument. In case it comes to matter, however, I should say that I think it is wrong.

274. No doubt the trustee has a right of indemnity out of the trust assets and no doubt the trustee's right of indemnity out of trust assets may aptly be described as an equitable estate or interest in the assets, inasmuch as the trustee has an equitable charge or lien which secures the right of indemnity[40]. It has also been described as a beneficial interest[41], although it is more accurately described as a beneficial right[42]. But despite that appellation, a trustee's right of indemnity is not a beneficial interest in the sense in which that expression is used in s. 52. A trustee whose only claim in respect of trust assets is a right of indemnity does not in that sense hold trust assets on trust for himself beneficially. He holds the assets on trust beneficially for the beneficiaries, albeit subject to a right, which is treated in equity as proprietary, to satisfy obligations out of the trust fund. The existence of the right of indemnity, proprietary though it may be, is not sufficient to change the essential nature of the beneficial interests which are held for the beneficiaries. It may condition their receipt and enjoyment upon satisfaction of the obligations of indemnity owed to the trustee. But it does not carve out of the rights which constitute the beneficial interests of the beneficiaries so as to alter the nature of those rights. Being the security that it is, it is imposed on top of the beneficiaries' rights but only for the purposes of enforcement. If it were otherwise it would mean that even where land is held on trust for one beneficiary on fixed terms of trust, it could not be said that the beneficiary is the owner in equity of a fee simple estate in possession (whereas plainly the beneficiary would be the "owner").

277. In my view the position is that if, apart from the trustee's right of indemnity, a beneficiary would be regarded as the owner of the equitable fee simple in possession and hence the "owner" within the meaning of s. 51 of the Act, the fact of the trustee's right of indemnity will not make the beneficiary cease to be the "owner" for those purposes.

281. For those reasons I consider that the appeal should be allowed. I will hear counsel on the form of orders.

[1] These are appeals from decisions of the Commissioner of State Revenue to disallow objections against the following assessments of land tax:

"(a) 1996 land tax year - Assessment No. S 012493235-2 (`1996 Karingal Assessment');

(b) 1997 land tax year - Assessment No. S 014593439-2 (`1997 Karingal Assessment');

(c) 1998 land tax year - Assessment No. S 015758105-2 (`1998 Karingal Assessment');

(d) 1999 land tax year - Assessment No. S 018290287-2 (`1999 Karingal Assessment');

(e) 1998 land tax year - Assessment No. S 02061703-2 (`1998 CPT/Sandhurst Assessment'); and

(f) 1998 land tax year - Assessment No. S 02061711-2 (`1999 CPT/Sandhurst Assessment').

[2] The 1997 Karingal Assessment, the 1998 CPT/Sandhurst Assessment and the 1999 CPT/Sandhurst Assessment.

[3] [1999] HCA 51; (1999) 198 CLR 494

[4] [1954] HCA 16; (1954) 90 CLR 598 at p. 609

[5] [1988] HCA 26; (1988) 167 CLR 57 at pp. 61-62

[6] [1986] VicRp 9; [1986] VR 90 at p. 92

[7] (1960) 23 MLR 129

[8] Which appears as chapter 15 in the Law of Public Company Finance, ed Austin and Vann.

[10] (1987) 47 SASR 382 at 385-6

[12] (1992) 8 WAR 352 at 374

[14] [1997] QCA 225; [1998] 2 Qd R 285 at 293

[15] [1998] VSC 67 at [37]

[16] (1991) 29 FCR 157 at 160

[17] [1988] HCA 26; (1988) 167 CLR 57 at 61-62

[18] [2002] VCAT 249

[22] (1998) 45 NSWLR 630

[24] That means all the deeds the subject of these appeals except the Cranbourne Park Unit Trust Deed.

[26] see Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226 at 234

[27] [1841] EngR 629; (1841) 4 Beav 115 [49 ER 282]. See Underhill and Hayton, Law of Trusts and Trustees, 15th ed (1995), pp 95, 710-716

[28] cf Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW) [1958] HCA 22; (1958) 100 CLR 392 at 407-409

[29] Spence, The Equitable Jurisdiction of the Court of Chancery (1849), vol 2, pp 874-876

[30] [1999] NSWLEC 268; (1999) 105 LGERA 405 esp at p. 418

[31] Charles v Federal Commissioner of Taxation, supra

[32] Gartside v Commissioners of Inland Revenue [1967] UKHL 6; [1968] AC 553; Commissioner of Stamp Duties (NSW) v Buckle, supra at p.242

[33] see Glen v Federal Commissioner of Taxation [1915] HCA 57; (1915) 20 CLR 490 at p. 504 per Isaacs J, Maitland's Equity 2nd Ed at pp. 16-20 and 152 et seq; cf Meagher, Gummow and Lehane Equity, Doctrines and Remedies at [424]; but see DKLR Holding Co (No.2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431 at p. 474 per Brennan J

[34] supra, at 501 and 506, see also Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd [1999] NSWCA 471; (1999) 48 NSWLR 299 at p. 309 per Mason P.

[35] see, for example, Cranbourne cll. 6.2(c) and (e)

[36] see, for example, Cranbourne cl. 8.1(e)

[37] see, for example, Cranbourne cl. 8.1(l)

[38] Macaura v Northern Assurance Co Ltd [1925] AC 619

[39] [2002] VCAT 249

[40] Vacuum Oil Co Pty Ltd [1945] HCA 37; (1945) 72 CLR 319 at p. 324; Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 at p. 367

[42] Re Enhill Pty Ltd [1983] VicRp 52; [1983] VR 561 at pp. 566-569 per Lush J