Kringas v Commissioner of State Revenue

Kringas v Commissioner of State Revenue - [2005] VCAT 424 - VCAT 2005 case summary — Zoe

[63]

31 In this particular instance, there is no consideration for the change of trustee, it has purely come about as a result of the family law settlement and consequent upon that the desire of the applicant and her ex-husband to have Hennasham de-registered. This is not a commercial purpose and it is not a purpose for which the revenue needs to be protected. There was no secondary transaction under which there would be change in beneficial owner of the land as in the Perpetual case where a large amount of duty was sought to be avoided.

32 I also note a general policy in the Duties Act to exempt change of property ownership relating to breakdown of marriage. See s 38(2) and 44(1) and (2). The Act extends relief to transactions of a trustee upon a marriage breakdown (s 44(2)). It must be remembered of course in this case that those sections do not apply to a corporate trustee as in this case. However, they do show the general attitude of the legislature. Thus I conclude that neither the bargain entered into because of the Family Court proceeding nor the desire to avoid ASIC fees are sufficient to take the transaction out of "solely" changing the trustee.

33 Mr Hines in his submission placed emphasis on the words used by Hansen J in paragraph 53 where he referred to the fact that there should not be a change of beneficiary. He stated that, in this case, there had been a change of beneficiary. That is, Denis was removed as a specified beneficiary of the trust and Steven Kringas was added as a special beneficiary. He said this was done contemporaneously with the change of office of trustee and is part of the same factual matrix. Mr Hines therefore concluded that a change in the beneficiary was an additional cause for the transfer.

34 In my view, it is a big jump to conclude that a change in the beneficiary was a cause of the transfer. The change in beneficiary may have been an act that did happen contemporaneously with the change of trustee and the transfer, but the change of trustee and the transfer is in no way dependent upon the change of beneficiary. The change of beneficiary is a separate and distinct act from that of changing the trustee or executing the transfer. It could just as easily have been achieved at some considerably later time after the transfer was stamped. In my view of the facts, it was done contemporaneously purely out of convenience and not as a means of any way avoiding the payment of duty. Thus I find that the word "solely" as used in the section is not affected by the change of beneficiary and I disagree with Mr Hines' submission that the transfer was made because of a change in the beneficiary. In fact, the transfer and the change of trustee had nothing to do with the change of beneficiary.

35 Thus I conclude for the above reasons that giving the word "solely" its proper meaning in the context of the statute, the transfer was not made for any other reason other than solely because of the retirement or change of trustee and the desire to vest the property in the new trustee being the applicant.

[65]

36 Mr Hines submitted that unless there has been an effective retirement, or change in trustee and appointment of new trustee, s 33(3) cannot operate.

37 He stated that once Denis "retired" as appointor, any power of appointment under the Deed vanished. For this proposition he relied on the wording of clause 10(c) of the Deed. Alternatively, he stated, if Denis did not retire because there was no notice in writing to the trustee as required by clause 10(c) of the Deed, there was no effective appointment of the applicant as the new trustee, as the appointors could not jointly exercise their powers of appointment to replace the trustee and he (Denis) never purported to exercise the power.

38 By a supplementary deed dated 23 November 2003 (prepared by the accountants and being Exhibit DCK3 herein), the trustee exercised its power of amendment under clause 5 of the deed to amend the schedule of the deed and remove Denis as appointor. This in fact amended the schedule, which left the applicant as the sole appointor of the trust.

39 Further, even if Denis was not validly removed as appointor, in my view, it would make no difference. The instrument of appointment being the second Campbell & Shaw supplementary deed, was "by and in writing and ... executed" by both the applicant and Denis in substantial compliance with what was required by clause 10(e) of the deed.

40 Mr Hines said there was in fact an additional reason why there was no effective change in trustee. He stated clause 5(a)(ii) of the Deed made it clear that the trustee had no power to delete clause (a) and (b) from the deed. It will be remembered that clause 10(a) and (b) forbade the appointment of a beneficiary as a trustee and forbade the appointment by an appointor of herself as trustee. Further, it will be remembered that clause 5(a)(ii) permits an alteration or amendment to the provisions of the Deed, however, the settlor, trustee or any other person not related to the specified beneficiaries by blood or marriage were not entitled to acquire any beneficial advantage under the trust.

41 Mr Hines further stated that the entrenched intent of the settlor and the original trustee, is that the beneficiary should under no circumstances become a trustee and for that proposition, he relied on clauses 5(a)(ii) and 10(a) of the Deed. He stated that appointing the applicant as trustee would enable the trustee to acquire a benefit or advantage from the trust fund in breach of clause 5(a)(ii) because it would enable the trustee to exercise favourably her discretion to distribute income or corpus in favour of herself as a beneficiary.

42 It is clear that the removal of paragraphs 10(a) and (b) did not confer any beneficial right or interest on the trustee, Hennasham, and did not allow the then trustee Hennasham to acquire any such interest. In my view, whether or not a person, including the trustee, is (or becomes) entitled to the beneficial right or interest under the trust is determined, by the definition of beneficiary and the definition of specific beneficiaries. Taking the meaning of beneficial right or interest in or in relation to the corpus of the trust fund or any benefit or advantage therefrom, the applicant already enjoyed such benefit as she was a named beneficiary. The amendment did not allow Hennasham which was the trustee at the time to acquire any such interest, nor could it enable any person not named as a beneficiary to acquire any interest as beneficiary. Therefore the Trust Deed did not stop the applicant becoming a trustee (see paragraph 45 hereunder).

43 In answer to this point, Mr Hines stated that a person with a vested interest in the income of a trust fund though liable to be divested by an exercise of the trustee's power to select one or more of them to the exclusion of the other, or others should be held to be beneficially entitled to those shares. In support of this proposition, he cited from the judgment of the High Court in Queensland Trustees Limited v Commissioner of Stamp Duties (1952) 88 CLR 63 where it was stated :

[67]

44 In my view, this case is not to the point here because at the particular time that it was sought to remove clauses 10(a) and (b) from the deed, no property or income had vested and the vesting date was approximately 60 years off.

45 Further, in my view, Mr Hines has taken a wrong view as to the meaning of clause 5(a)(ii) of the deed. The clause was directed to entrenching the trust for the benefit of family members and only family members. Put another way, it was directed to preventing any amendment to the definition of "beneficiary" which would allow non-family members to benefit under the trust. The clause is not referring to a person acquiring an interest by that person being placed in a position to control the distribution of trust income or capital to itself and in any event, the law of trust provides protection against such an improper action by trustees and it is likely that the draft person would have both known and presumed this fact. In my view, the clause was intended to prevent a trustee from amending the Trust Deed to allow a person who was not among the original class of beneficiaries (ie family members) from becoming beneficiaries or otherwise acquiring a vested interest in the trust property.

46 Mr Hines further submitted that the entrenched intent of the deed was that a beneficiary should under no circumstances become a trustee. In support of the submission he relied on clauses 1F, 5(a)(ii) and 10(a) of the Deed.

47 Clause 1D of the Deed recognises that a trustee may become a beneficiary. It specifically uses the words "... trustee who becomes a beneficiary ...". As I have previously stated, the only entrenched intent of the Deed is that the class of beneficiary is not to be altered so as to allow non-family members as beneficiaries.

48 Buckle v Commissioner of Stamp Duties (NSW) [1998] HCA 4; (1998) 192 CLR 226 at 237, where the High Court which was dealing with a deed similar to the present, made it clear that neither discretionary beneficiaries, nor one who has a contingent interest, has a right "to acquire" any interest or benefit, they merely have a right to be considered. As clause 5(a)(ii) is concerned to protect vested rights in persons who are not family members, in my view, that clause does not prohibit the amendments which were made to the Trust Deed relating to clause 10(a) and (b).

At a glance

Court

Decision date

Source

Judgment (81 paragraphs)

Kringas v Commissioner of State Revenue (Taxation) [2005] VCAT 424 (10 March 2005)

Parties

Cases Cited (2)