Lygon Nominees Pty Ltd v Commissioner of State Revenue [2007] VSCA 140

**2 The appellant, the trustee of 12 separately constituted trusts, appeals against the dismissal of two appeals by it against land tax assessments issued by the Commissioner under the Land Tax Act 1958 ("the Act")[1] for the 2000 and 2001 tax years in respect of land held by the trustee as at 31 December 1999 and 31 December 2000 respectively. By each assessment the trustee was assessed for land tax on the total value of all of the land held by it as trustee of the 12 trusts. The trustee lodged objections against each assessment on the basis that it held the lands on trust for different beneficial owners and as such each of those lands should have been separately assessed in accordance with s 52 of the Act.

3 In disallowing the objections of the trustee on each assessment the Commissioner declined to apply s 52 of the Act on the basis that -**

"[A]s all of the trusts mentioned ... are wholly discretionary, in that no person or class had a vested or even contingent interest in the income available for distribution in any year, there were no 'beneficial owners' for whom any of the lands were held as at the relevant date."

4 The question raised by this appeal is whether the trustee was the owner of the lands "in severalty in trust for different beneficial owners" within the meaning of s 52 of the Act and so should have been separately assessed for the lands held upon each trust. It is not in issue that the appellant was the owner of "different lands" within the meaning of s 52 or that the lands were held on various trusts, all but one of which were discretionary trusts.[2] The remaining trust was a unit trust. It is therefore necessary to determine the meaning of the expression "beneficial owners" as it appears in s 52 of the Act and whether that term includes members of the class

of objects of the power of appointment given to the trustee under the discretionary trusts and members of the class identified as takers in default of appointment.

"s 51 Equitable owners to be liable as if legal owners subject to deduction of any tax paid by legal owner

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." (Emphasis added)

"s 52 Trustees to be liable as if beneficially entitled

(1) 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 lands 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 of joint occupancy or for any other reason he is liable to be jointly assessed independently of this section. (Emphasis added)

(2) Provided that any trustee who has paid any tax under this section shall be entitled to be repaid the amount he has so paid by the owner of any equitable estate or interest in land who is also liable to pay such tax and in addition shall have a right to be recouped out of any of the trust property in his hands subject to the same or the like trusts as the land on which the tax is charged."

**7 The composite expression "beneficial owners" used in s 52 is not defined by the Act. The term "beneficial" is recognised as usually employed in trust law as a cognate of "beneficially", denoting a person for whose benefit the trustee of a private trust is bound to administer the trust property.[3] The appellant contended that the expression "beneficial owners" as it appears in s 52 should be construed as referring to any "beneficiaries" of each trust so that lands held by a trustee on trust for different beneficiaries or classes of beneficiaries as at each assessment date should be separately assessed. The respondent contended that the term "beneficial owner" means a beneficiary of a particular character, namely one that has an equitable estate or interest in the land and who is liable to be assessed for land tax in respect of that estate or interest pursuant to s 51 of the Act.

8 To determine the meaning to be given to the expression "beneficial owners" some further examination of the scheme and purpose of the Act is required. The charging provision is to be found in s 6 which provides:**

"Subject to this Act there shall in the case of each owner of land be charged levied and collected by the Commissioner and paid for the use of Her Majesty in aid of the Consolidated Fund for each and every year a duty of land tax upon land for every dollar of the unimproved value thereof in accordance with provisions of the Second Schedule." (Emphasis added.)

**9 Sections 6, 8 and 39 of the Act impose, at rates specified in the Second Schedule, land tax to be collected as a debt owing to the Crown in right of Victoria by the Commissioner in respect of the total unimproved value of all land of which the taxpayer is "the owner" on 31 December of the immediately preceding year for which the tax is assessed. It is a progressive tax which increases as the value of the land increases. The taxing provisions of the Act do not suggest that there can only be one taxable owner of land at any one time.[4]

10 Section 8 of the Act is an aggregating provision that first appeared in the Land Tax Act 1910. Section 8(1) provides that the owner of land is to be assessed each year -**

"on the total unimproved value of all land of which he is the owner at midnight on the 31st day of December immediately preceding the year for which such tax is assessed charged levied and collected."

11 The owner of land is defined in s 3 in these terms:

"(1) In this Act, unless inconsistent with the context or subject matter - 'owner' in respect of land means, except in Part IIA, -

(a) every person entitled to any land for any estate of freehold in possession;

and includes every person who by virtue of this Act is deemed to be an owner ..."

12 Section 41 of the Act further provides that -

"the owner of any life estate in possession or of any other freehold estate less than the fee-simple shall be deemed for the purposes of this Act to be the owner of the fee-simple to the exclusion of any person entitled in the version or remainder and shall be assessed and liable for tax accordingly."

**13 There are similar deeming provisions in relation to persons entitled to any leasehold estate in land whether legal or equitable (ss 42, 43). A conveyance, declaration of trust or other disposition of the land would not exempt a person from any tax while that person remains in possession of the land or in receipt of the rents or profits thereof as such person is deemed the owner of the said land (s 50).

14 In dismissing the appeals by the trustee against the Commissioner's assessments, the trial judge concluded that there were no "beneficial owners" of any of the discretionary trusts as at each assessment date so that the trustee was not "the owner of different lands in severalty in trust for different beneficial owners" as at the assessment dates so as to enliven the operation of s 52. Her Honour held that the term "beneficial owner" appearing in s 52 has the same meaning as the expression "owner of any equitable estate or interest" which appears in s 51 and that where the land was vested in a trustee as registered proprietor, a person must have an interest that amounts to an equitable entitlement to an estate of freehold in possession. The primary submissions of the appellant are that the expressions do not have the same meaning and that the term "beneficial owner" includes any beneficiaries - not only owners of an equitable estate or interest in land that is vested in possession.**

Legislative history and Parliamentary debates

**15 Under s 3 of the Land Tax Act 1877 (Vic) the owner of a "landed estate" was liable to pay land tax at a specified rate on the capital value of the landed estate above the sum of £2,500.

16 Section 4 provided for the persons who were deemed to be owners of landed estates, including "[e]very person entitled to any landed estate for any estate of freehold in possession." The Act provided that where land was the subject of a trust, a person holding a beneficial interest was deemed to be an owner liable to pay tax. Section 8, which dealt with land tax on trust estates was in these terms:**

"Where any landed estate is vested in any trustees or trustee the same amount of land tax shall be payable in respect of such estate as if one person was the sole owner thereof and every person beneficially interested therein shall be deemed an owner thereof and shall be liable to pay a sum by way of land tax which bears the same proportion to the whole amount of land tax payable in respect of such estate which the annual value of the interest to which such person is entitled bears to the whole net rents and profits; and every such trustee shall be answerable to Her Majesty for payment of every such sum but shall not be liable to any further land tax in respect of any such landed estate." (Emphasis added)

**17 The issue of aggregation did not arise under the 1877 Act, because land tax was payable at a fixed rate on the capital value of all landed estates valued at more than £2,500. Section 8 ensured that the beneficiaries were proportionately liable for land tax in respect of a landed estate, but that the trustee was answerable for the payment of such sums on behalf of the beneficiaries. Similar provisions were contained in ss 3, 4, 5 and 9 of the Land Tax Act 1890 (Vic), the last of these sections being in the same form as s 8 of the 1877 Act.

18 The Land Tax Assessment Act 1910 (Cth) (the "1910 Commonwealth Act"), which was assented to on 17 November 1910, imposed land tax on the unimproved value of lands owned by taxpayers (see ss 10 and 11). The land tax was imposed at a progressive rate, that is, at a rate that increased according to the unimproved value of all of the lands owned by the taxpayer: see the schedules to the Land Tax Act 1910 (Cth).

19 Section 3 contained the following definition of owner:**

"'Owner', in relation to land, includes every person who jointly or severally, whether at law or in equity -

(a) is entitled to the land for any estate of freehold in possession; or

(b) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise;

and includes every person who by virtue of this Act is deemed to be the owner." (Emphasis added)

20 Section 33 of the 1910 Commonwealth Act made provision for the taxation of trustees in a manner similar to s 52 of the present Act. Section 33(1) of the 1910 Commonwealth Act relevantly provided as follows:

"Any person in whom land is vested as a trustee shall be assessed and liable in respect of land tax as if he were beneficially entitled to the land:

Provided that where he is the owner of different lands in severalty, in trust for different beneficial owners who are not for any reason liable to be jointly assessed, the tax so payable by him shall be separately assessed in respect of each of those lands:

Provided also that when a trustee is also the beneficial owner of other land, he shall be separately assessed for that land, and for the land of which he is a trustee, unless for any reason he is liable to be jointly assessed independently of this section: ..."

**21 This section in the 1910 Commonwealth Act was in turn derived from land tax legislation in New Zealand: see s 65 of the Land and Income Assessment Act 1908 (NZ) which was first introduced as s 19 of the Land and Income Assessment Act 1907 (NZ). Section 65 of the New Zealand Act was specifically concerned with the assessment of trustees for "graduated land tax." Section 65(1) of the New Zealand Act contained an equivalent provision to s 52(1) of the present Act in almost identical terms. Section 65(2) of the New Zealand Act further provided that the trustee, executor or administrator could be assessed for graduated land tax in respect of the interest of any beneficiary in the land, when by reason of the ownership of other land or for any other reason the beneficiary was liable to be assessed at a higher rate than that at which the trustee, executor or administrator would be assessed independently of s 65.

22 Both the New Zealand Act and the 1910 Commonwealth Act contained other more general provisions dealing with the assessment of trustees.**

(a) The definition of "owner" in s 2 of the New Zealand Act included a person who "whether beneficially or as trustee or mortgagee or otherwise" was seised of or entitled to land for any estate in possession (whether freehold, leasehold or otherwise) or actually received or was entitled to receive the rents or profits thereof.

(b) Section 9 of the New Zealand Act and s 62 of the 1910 Commonwealth Act made provision in relation to agents and trustees, including that the agent or trustee should be answerable as taxpayer in respect of land held by him in his representative capacity, and the payment of tax thereon; that the agent or trustee should, in respect of such land, make the returns and be assessed thereon in his representative capacity only, and each such return and assessment should be separate and distinct from any other; and that the agent or trustee was authorised to recover tax paid from the person in whose behalf he had paid it.

**23 The Land Tax Act 1910 (Vic) (the "1910 Victorian Act"), which was assented to on 26 December 1910, included a similar provision dealing with the taxation of trustees. Section 49 of the 1910 Victorian Act replaced s 9 of the 1890 Act and is the predecessor to s 52 of the present Act. To the extent that there were any differences in wording between s 65 of the New Zealand Act and s 33 of the 1910 Commonwealth Act, s 49 of the 1910 Victorian Act followed more closely the wording of the former provision. Section 49(2) also provided for the statutory entitlement of a trustee to be repaid tax by the owner of any equitable estate or interest in land who was also liable to pay such tax, and the right of recoupment out of trust property (now s 52(2) of the Act).

24 The parliamentary debates made no reference to discretionary trusts at the time when the provision first appeared in the Land Tax Act 1910 in substantially the same form as in the present Act.[5] Neither the debates or the legislative history suggests that the legislature gave any consideration to the particular circumstances of discretionary trusts in which there may be no persons presently entitled to an equitable estate or interest in the trust lands. The debate in the House of Assembly prior to the introduction of s 49 (later to become s 52) of the 1909 Bill does not support the argument that the aggregation provision was not to apply to trusts where the interests held by the trustees were for different "beneficiaries" who were not owners.[6] The debates rather suggest that the contrary was assumed. That does not appear to be surprising as the new sections continued to be based upon a scheme[7] which provided that the owner of an equitable estate or interest was liable to be taxed as though the legal owner and reflects an identity of purpose with the Commonwealth and New Zealand legislation.

25 Shortly after the trial judge had delivered judgment, the High Court gave judgment in CPT Custodian Pty Ltd v Commissioner of State Revenue[8] ("CPT Custodian") upholding the conclusions of the primary judge that the entitlement of the unit holders under a unit trust which provided for the distribution to them of periodic income entitlements, and of the proceeds of the fund upon its determination, did not make each unit holder an "owner" within the meaning of s 51 of the Act. The joint judgment observes:**

"To approach the case ... by asking first whether ... the holder of a unit 'in a unit trust' has 'a proprietary interest in each of the assets which comprise the entirety of the trust fund', and answering it in the affirmative, did not immediately assist in construing the definition of 'owner' in the Act. That definition does not speak of ownership of proprietary interests at large, but of entitlement to any estate of freehold in possession."[9]

**26 The trial judge followed an earlier decision of Balmford J in Commissioner of State Revenue v Famajohn Nominees Pty Ltd[10] in concluding that the term "beneficial owner" in s 52 has the same meaning as the term "the owner of any equitable estate or interest in land" in s 51. In Famajohn, the Commissioner, in assessing the trustee of both a bare trust and a discretionary trust, aggregated the lands held by the trustee for each trust. The Commissioner's assessment was set aside before the Victorian Civil and Administrative Tribunal. The Commissioner successfully appealed. Counsel who appeared for the respondent in the present case, and who had appeared for the Commissioner in Famajohn, informed the court that there were both objects of the power of appointment and takers in default designated in the Famajohn discretionary trust. The appellant in that case did not dispute that no members of either designated class were "beneficial owners" of the said land. The trial judge in Famajohn concluded that the trustee did not hold the land for different beneficial owners since the family discretionary trust had no beneficiary with a vested beneficial interest in the trust fund.[11]

27 The trial judge held the term "beneficial owner" to mean beneficiaries who are liable to be assessed for land tax in respect of their equitable estate or interest pursuant to s 51 and who may be liable to reimburse the trustee under s 52(2). In my view, such a construction accords with the apparent legislative intent that the trustee is only to be separately assessed under s 52 in respect of different lands held on different trusts where the beneficiaries under the different trusts hold equitable estates of freehold in possession in those lands so that they are liable to be assessed under s 51.[12]

28 To so interpret the term "beneficial owner" is consistent with the second exception within s 52(1) "that when a trustee is also the beneficial owner of other lands, he should be separately assessed in respect of that land, and other land of which he is a trustee." A trustee who is also the "beneficial owner" of the land is assessable for land tax as a beneficial owner. The appellant argues that the term "beneficial owner" has a different meaning when used in the first and second exceptions to s 52(1). Counsel for the appellant submitted that when the trustee was also "the beneficial owner of other land" the term must be wide enough to include ownership of the legal or equitable estate or both and that it thus had a different meaning to the term as it is used in the first exception to sub-s 1. That argument runs contrary to the conventional principle of statutory construction that the same words should be given the same meaning particularly where they appear in the same section of an Act.[13] I do not agree that the term has a different meaning where it appears in the second exception. A trustee who held other land absolutely would be assessed under s 6; the use of the term in the second exception is a reference to a trustee who is the owner of an equitable estate or interest in such other land and bears the same meaning as it does in the first exception. The narrower and preferred construction of the term where it appears in the second exception strongly supports the conclusion that the term, wherever it appears in s 52, means the owner of an equitable estate or interest in the land and who is liable to be taxed. If the term when used in the second exception included absolute ownership, the criterion of ownership would still define the trustee's interest in the land which renders it, as beneficial owner, assessable for tax. Such a broad construction of the term where it second appears would not advance the appellant's argument that the term "beneficial owner", where first appearing in s 52, encompasses "beneficiaries" of the trust who may not be owners of an equitable estate or interest who are assessable for tax.

29 Although the appellant's construction is at odds with the first limb of the principle of statutory construction that the same words should be given the same meaning, the appellant calls in aid the second limb of this principle to argue that as the legislature has employed different expressions within the same section - namely the expressions "beneficially entitled to such land", "beneficial owners" and "beneficial owner" and the use of the expression "the owner of any equitable estate or interest in land" in s 51 and s 52(2), it may be presumed that the legislature intended those expressions to be given different meanings.[14] The appellant argues that the terms "beneficially entitled to such land" and "the owner of any equitable estate or interest in land" are technical expressions which indicate that the legislature intended the expression "beneficial owners" to be understood in a less technical sense and as referring to the beneficiaries of the trust under consideration. It was not in issue that the term "beneficially entitled" in s 52(1) imports ownership in relation to a trustee in possession.

30 The respondent relies upon the same principle of construction to argue that as the terms "beneficiary" or "beneficiaries" under the trust are terms used elsewhere in the Act,[15] if s 52(1) had been intended to refer to "beneficiaries" the section would contain such an expression and would not have used the term "beneficial owners" which was intended to mean something different.

31 The range of matters addressed in taxing legislation is generally not conducive to careful and consistent usage of particular words.[16] This consideration underpins the reluctance of courts to assume that words are necessarily used in a consistent fashion throughout the same piece of tax legislation.[17] The principle of construction upon which both parties rely is readily rebutted,[18] courts having been ready to depart from that approach with little compunction.[19] The assumption that different words have different meanings in the same section or part of a statute, or that the same words have the same meaning, will always yield to the requirements of the context in which they are used. The assumption has even less weight in taxing legislation.[20]

32 It is common usage in relation to trusts of land to speak of a beneficiary having an equitable estate in the land so as to reflect the beneficiary's equitable rights which are sufficiently extensive to invite analogy with the rights of the holder of a legal estate in land and possess most of the characteristics of the ownership of legal title to property.[21] Rights of beneficial ownership generally import a notion of ownership for a person's benefit and the exclusion of a holding for the benefit of others. Under common law and equitable principle it may be that only the holder of a legal title to trust property can be said to be the owner of that property so that a beneficiary cannot properly be described as the beneficial owner of the trust property.[22] Hence the difficulty adverted to by some commentators in treating a beneficiary as "the owner of a trust asset" unless the beneficiary was absolutely entitled to an asset against the trustee.[23] Only limited assistance can be gained from the use and meaning of such terminology outside the statute but the proprietary characteristics of ownership are not usually to be found in such discretionary trusts.

33 The terms used in ss 51 and 52 are not to be treated as having a universal, contemporary or historical meaning, divorced from the context, particularly the statutory context, in which they are employed. So much is clear from the joint judgment in CPT Custodian.[24] The joint judgment draws no distinction between the terms "beneficial ownership", "equitable ownership" and "the holder of an equitable estate in freehold in possession" for the purposes of the Act.[25] In CPT it was held that the entitlements of the unit holders in the unit trust did not make each unit holder an "owner" within the meaning of the Act.[26] The judgment, published shortly after the trial judge had delivered her judgment in the present matter, contained the following observations concerning the Act:**

"Various provisions of the Act[27] in terms deem certain persons to be the owner of land or the owner of a fee simple of land. These provisions are not directly in issue here. Thus it is upon the operation of the definition of 'owner' that the outcome of the litigation largely turns. The Commissioner cannot prevail without success on this point.

Section 51 of the Act subjects 'the owner of any equitable estate or interest in land' to assessment 'as if the estate or interest so owned by him was legal'. Section 52 obliges trustees to make returns and to be assessed as if beneficially entitled to the trust land. The Court of Appeal noted[28] the agreement of the parties that ss 51 and 52 were not charging provisions and that no party could be brought to tax under either provision unless it answered the definition of 'owner' in s 3.

Section 3 includes as owner every person who by virtue of the Act 'is deemed to be an owner'. As indicated above, those deeming provisions are not presently relevant. The definition also states that owner 'means', among other things: (a) every person entitled to any land for any estate of freehold in possession. Upon that component of the definition the Commissioner relies. It resembles para (a) of the definition of 'owner' in s 3 of the Land Tax Assessment Act 1910 (Cth) ('the 1910 Act'). This was construed in Glenn v Federal Commissioner of Land Tax[29] and it will be necessary to return to that case.

However, the Court of Appeal first considered the characteristics of 'a unit trust'. The Court concluded with reference to the detailed reasoning in Arjon [Pty Ltd v Commissioner of State Revenue[30]] that 'the holder of all of the units in a unit trust may be said to be entitled in equity to the freehold estate in possession in land which is an asset of the trust' ...."[31]

34 A little later in the joint judgment the Court referred to the task of statutory construction in these terms:

"The first step was to ascertain the terms of the trusts upon which the relevant lands were held. The second was to construe the statutory definition to ascertain whether the rights of the taxpayers under those trusts fell within that definition."[32]

**35 Having regard to the scheme of the Act and the language employed, I consider counsel for the respondent to be correct in his submission that the expressions "beneficially entitled to such land", "beneficial owner" and "the owner of any equitable estate or interest in land" should be construed as statements of the same idea differently expressed and as all giving effect to the same legislative purpose.

36 The appellant argues that the trial judge's qualification that the term "beneficial owner" applied only to an owner with an equitable estate or interest in land that is "vested in possession" constitutes a further unjustified gloss on the operation of s 52 as the definition of "owner" in s 3 of the Act is not to be applied to the expression "the owner of any equitable estate or interest in land". It was submitted that as the definition of "owner" was included in the Act for the purpose of the charging provisions, it should not be applied to the term where it appears in a non charging provision. Further it was contended that s 3 defines "owner" only by reference to an equitable "estate", which makes its application to an equitable "interest" inappropriate.

37 The "necessary quality of definable extent which must exist" before the interest of the beneficiary can be taxed, discussed by Lord Wilberforce in Gartside v Inland Revenue Commissioner,[33] is that specified in the charging provisions, not by the terms of s 51 or s 52. The latter sections are amongst a number of provisions in the Act which are concerned with "deemed owners" and others who are capable of being assessed for tax. They appear in Part IV of the Act which is concerned with "Liability for Land Tax". By s 51 an owner of any equitable estate or interest is liable as if they were a legal owner. The definition of owner in s 3 is expressed to apply to the term "owner" "except in Part IIA" of the Act and "includes every person who by virtue of this Act is deemed to be an owner." For example s 54 provides that a mortgagee in possession, so long as possession continues, shall be deemed to be the beneficial owner of the estate or interest in the land and shall be liable for land tax. Section 52 defines the nature and the extent of the trustee's liability to be assessed for land tax and when there should be a separate assessment for lands held under different trusts. It is these provisions that attract the operation of the charging provisions and which provide for the liability of the trustee and the owner of an equitable estate or interest. The appellant did not advance any argument as to how the submission could now be maintained, in light of the decision in CPT and the reasoning of this court in Arjon,[34] that the definition of "owner" had no application to a determination of whether a person is "the owner of any equitable estate or interest in land" within the meaning of s 51.

38 In Arjon the registered proprietors of the relevant lands held their interests on trust for Arjon which in turn held the land on trust for various family trusts. The Commissioner had assessed Arjon for land tax with respect to its entire interest in all the lands. On appeal it was argued that Arjon was not the owner of any estate of freehold in possession and was not therefore an owner under s 51 or s 52. It was accepted that Arjon - as the putative taxpayer - must be an owner as defined in s 3 before s 51 or s 52 came into play, which meant that it must be the owner of an estate (whether legal or equitable) of freehold in possession.[35] The view that the definition of "owner" applied to the term where it first appeared in s 52(1) does not appear to have been questioned in CPT.[36]

39 It is also made clear from the judgment of Nettle J (as he then was) at first instance in Karingal (No 2) Pty Ltd v Commissioner of State Revenue[37] and from passages of the judgment of the Court of Appeal in Commissioner of State Revenue v CPT Custodian Pty Ltd and Karingal 2 Holdings Pty Ltd[38] that the meaning of "owner" as defined in the Act was to be applied to the term "owner" in s 51 for the purpose of determining whether the putative taxpayers (trustees) were persons liable to be assessed by virtue of s 51 as an "owner of an equitable estate or interest" in the land. At first instance Nettle J stated:**

"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).

I take the law on the subject to be as stated by the High Court in Glenn v Federal Commissioner of Taxation, 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."[39]

**40 Furthermore both Nettle J in Karingal (No 2) Pty Ltd[40] and the Court of Appeal[41] proceeded upon the basis that the definition of "owner" applied to the term when used in s 52, in the course of rejecting an argument of the trustees that their right of recoupment for liabilities gave rise to a beneficial interest in the trust's assets so that the lands could not be aggregated for land tax purposes because they were held for "different beneficial owners" within the meaning of s 52.

41 The purpose of the first exception to s 52 is to preclude aggregation where the trustee is the owner of different lands on trust for different "beneficial owners" who are capable of being taxed under the Act. The passages in the judgments in CPT and Argon, to which I have made reference, proceed on the basis that the definition and charging provisions of the Act are to be applied in determining whether the putative taxpayer is an owner of an equitable estate or interest and is liable to be taxed under the Act. The trial judge was not in error in having regard to the definition and charging provisions of the Act.

42 Both before the trial judge and in this court, the appellant argued, in the alternative, that if the burden of the tax did not fall on the beneficiaries, the Commissioner's construction of s 52(1) would prevent the trustee recouping the additional (higher) tax liability under s 52(2) or on the basis of ordinary principles concerning the trustee's right of indemnification.[42]

43 A trustee may recoup the land tax payable under s 52(1) from the owner of the equitable estate or interest or from the trust property of the relevant trust of the land from which the tax was charged: s 52(2). In addition to the indemnity provisions in the trust deed and other equitable principles that may permit a lawful recoupment, the learned trial judge considered that the statutory right of recoupment from the trust property was not limited to those circumstances where there is a beneficiary who was liable to pay the tax.[43] I do not regard it as necessary to decide whether the legislature intended by the introduction of s 52(2) to relieve the trustee of the burden of a higher aggregated tax where the beneficiary was not liable to pay the tax, as the trustee in any event has the rights of recoupment and exoneration out of the trust property discussed in Arjon[44] including rights pursuant to s 36(2) of the Trustee Act 1958 (Vic) and such rights as existed under equitable principles concerned with a trustee's right of indemnity.

44 Section 52(2) speaks of recoupment of the tax by the trustee from "the owner of any equitable estate or interest in land who is also liable to pay such tax". Counsel for the appellant further argued that the addition of the italicised words demonstrated a recognition by the legislature that there may be persons who are owners of an equitable estate or interest in land who are not liable to pay land tax and that it does not inexorably follow that "beneficial owners" means beneficiaries who may be capable of being assessed for land tax.

45 Under s 51 "the owner[45] of any equitable estate or interest" is liable to pay tax. By definition, all who satisfy that description are liable to pay tax. But at the time the land falls to be assessed for land tax there may be no separate owner of any equitable estate or interest in the land. It should not be assumed that "for all purposes and at every moment of time the law requires the separate existence of two different kinds of estate or interest in property, the legal and the equitable."[46] In the joint judgment in CPT Custodian, the "dogma" that where ownership is vested in a trustee, equitable ownership must be necessarily vested in someone else, was again rejected[47] as it had been by Griffith CJ in Glenn and more recently in Commissioner of Taxation v Linter Textiles Australia Ltd (in liq).[48] As the trial judge concluded, there may be situations in which property is held on trust but where there are no "beneficial owners" of that property.[49] Further, it was expressly recognised in Glenn's case, and in subsequent decisions of the High Court that a person may be an equitable owner of land though not be taxable as an owner under the Act.[50] Hence the trustee's statutory right of recoupment is confined to when there is an owner of the equitable estate or interest in land who is also liable to pay tax on land.[51]

46 In support of the contention that the term "beneficial owner", as it appears in s 52, applies to any beneficiary "for whose benefit the trustee .... [was] bound to administer the trust property"[52] the appellant asserts that the purpose of the Act is to separately impose and not aggregate tax on individual trusts that have different beneficiaries. The appellant argues that the construction given to the operation of s 52 by the learned trial judge subverts the purpose of the Act as revealed by the charging and aggregating sections which provide that a person should only be taxed in respect of land which he or she owns as at the assessment date. It is further said that the construction relied upon by the Commissioner produces improbable and unjust consequences as the beneficiaries of discretionary trusts which have a common trustee will have to bear the burden of the tax assessed by reference to land with which they have no connection as those unconnected beneficiaries are subjected to a higher aggregated tax because the trustee holds their land and other beneficiaries' lands pursuant to different trusts. This will be so, the appellant argues, if the trustee is able to recoup the tax from the beneficiaries or the trust funds, so that the real incidence of the tax would fall upon the beneficiaries of each trust. The appellant relies upon the judgment of Griffiths CJ in Glenn[53] that a construction should not be embraced which produces the injustice of holding persons responsible for the payment of tax in respect of land in which they have no entitlement to receive the fruits.

47 Against the appellant it was said that the construction it advances would lead to the unintended and irrational result that there would be no beneficiary who could be assessed for land tax so that the property held under the discretionary trust would not be subject to aggregation with the value of other property held by the trustee or beneficiary. Thus a class of property, the subject of discretionary trusts, could be placed outside the aggregation regime of the Act. Attention was drawn to s 71(1)(c) of the Act (inserted by the Land Tax (Amendment) Act 1993) which extends the tax avoidance provisions in s 71 of the Act to trusts. The Commissioner argues that the construction of the term "beneficial owners" as beneficiaries who are capable of being assessed for land tax is consistent with one of the legislative objectives of curtailing the use of trusts for the purpose of evading the aggregation provisions in s 8. If the beneficiary, pursuant to s 51, is capable of being assessed because he or she holds an equitable estate or interest, the trustee will be separately assessed. The respondent further submits that no person is taxed by reference to land which they do not own or to which they do not have a present entitlement. If there are different beneficial owners of land held in severalty, a separate assessment may be raised against each under 52(1). If there are no beneficial owners, only the trustee will be liable to be assessed at a higher rate by reason of aggregation of the lands for which there are no beneficial owners. Furthermore, the increased tax liability resulting from aggregation of different lands could always be avoided by vesting lands in separate trustees. The Commissioner says that whatever the effect of the exception in s 52, the trustee is required to pay land tax on the trust funds if the beneficiaries do not have a present entitlement. Even where the trustee holds land on only one trust, the rate of land tax paid by the trustee may be higher than the rate that would have been payable by each individual beneficiary on his or her beneficial share of the trust fund.[54]

48 The correct approach to the construction of fiscal legislation was usefully summarised by Nettle J in Commissioner of State Revenue v Viewbank Properties Pty Ltd:**

"In any event, taxing statutes are technical and frequently complex things and those who seek to take advantage of them, and even more those who seek to avoid them, must know that they will need to approach them accordingly. Despite developments in the law relating to the construction of taxing statutes - so that by and large one is now to approach their construction in the same way as any other statute - the starting point remains the plain natural and ordinary meaning of the words of the legislation and the discernment of the legislative intention from the terms of the legislation viewed as a whole. ... But where the words of such a provision are clear, the mere fact that a liberal construction of the provision more closely accords with subjective perceptions of what is 'equitable' will rarely if ever be sufficient basis to depart from the plain and ordinary meaning of the language that has been employed. Absent a drafting mistake of the kind which underscored the decision in Cooper Brookes or absurd irrational or capricious results or the use of language which as a matter of natural and ordinary meaning permits of a multiplicity of possibilities, or perhaps extrinsic materials which make plain that the language employed simply fails to achieve the result which was intended, it is not permissible to depart from the plain and ordinary meaning of the words."[55]

**49 In my opinion the scheme of the Act does not provide a foundation for the appellant's asserted purpose. The question that falls for determination is not to be answered by asserting the existence of any purpose or legislative intention unless that purpose or intention is found reflected in the provisions of the Act. Appeals to general notions of justice may do no more than mask the absence of the foundation in the legislation for the conclusion which is asserted.[56]

50 The suggested intention that aggregation should only occur where the land is held for the same beneficial owners is not reflected in the language of the Act. Sections 8 and 52 premise aggregation subject to the exceptions. Unless there are different beneficial owners of the various trust lands each of whom may be assessed for tax, the aggregation provision is to apply. They may only be assessed for and liable to pay tax if they have a right to possession.[57] The beneficial owner must have a taxable interest which is capable of quantification before such land becomes exempt from aggregation. The construction which is consistent with the purpose of the Act as revealed by the charging provisions, the deeming provisions and ss 51 and 52 is that "beneficial owner" means a person who falls within the definition of owner and who is presently entitled to an equitable estate or interest in the land.

51 It may be accepted that there are some less than satisfactory consequences which flow from each party's suggested construction but I do not regard such possible outcomes as requiring that a construction be given to the term which is inconsistent with its evident meaning and the recognisable purpose of the Act. To treat the term "beneficial owner" as having the same meaning as "the owner of an equitable estate or interest" does not produce consequences which require a departure from the legislature's discernible intention.

52 The term "beneficial owner" as used in the Act is intended to provide a measurable taxable interest in the trust property. The purpose and the scope of the exemption under s 52 of the aggregation of the beneficial owner's other interests would be defeated were lands, in which the beneficiary held no more than a mere expectancy under a discretionary trust, to be so exempt. Land would be exempted, not because there was a different beneficial owner, but because there was no beneficial owner.**

Whether taker in default or an object of a power of appointment under the trusts is a 'beneficial owner'

**53 Her Honour found that neither the objects of the power of appointment nor the takers in default of appointment in the discretionary trusts fell within the description of a beneficial owner because their equitable interest did not vest in possession.[58]

54 The resolution of the appeal requires consideration of the features of each of the individual trusts before examining whether there are different "beneficial owners" of the land that have been assessed for tax. The nature of each trust has been set out in some detail by the learned trial judge in a schedule of trusts which are annexed to her Honour's judgment.[59]

55 As the trial judge noted[60] the trust deeds have the following common features:**

(i) the trustee has a discretionary power to pay, apply or set aside the net income of the Fund in each year for the benefit of a specified class of objects; and

(ii) the trustee has a discretionary power to accumulate income;

(i) the trustee has power to advance capital to or for the benefit of any beneficiary prior to Vesting Day; and

(ii) on the Vesting Day, the trustee has a discretionary power of appointment among a specified class of objects, in default of which the Fund is held on trust for other classes of objects.

56 By way of illustration, in each of the "four common trusts" so described in the Schedule of Trusts:

(a) under cl 3(i), the trustee has power to pay, apply or set aside net income:

(ii) for the benefit of all or any one or more General Beneficiaries;

(b) under cl 3(ii), the trustee has power to accumulate income;

(c) under cl 6, the trustee has power to advance capital to any one or more of the General Beneficiaries;

(d) under cl 4, on the Vesting Day, the trustee stands possessed of the Fund:

(i) on trust for such charitable purposes and/or for such of the General Beneficiaries as the trustee may appoint;

(ii) in default of and subject to any such appointment:

(A) on trust for such of the Primary Beneficiaries as shall be living, or the living children of any Primary Beneficiary who dies prior to Vesting Day;

(B) if any part of the Fund is not effectively or validly disposed of:

(1) on trust for persons (other than the Settlor) who would be entitled to the estate of the Appointor if he died intestate; or

(2) if there are no such persons, upon trust for such charitable purposes as the trustee may determine.

**57 The Primary Beneficiaries in each of the "four common Trusts" are defined as "[a]ll the children of all present and future children of Fernando Luizzi and Maria Luizzi whether living at the date of this Deed or born hereafter".

58 The definition of General Beneficiaries in each of the four common trusts covers:**

(b) brothers/sisters/spouses/children of the Primary Beneficiaries;

(e) certain bodies corporate and trusts/settlements in which a beneficiary holds a share or interest;

(f) any relatives of the Appointor nominated by the trustee;

(g) any additional persons specified in the schedule.[61]

**59 Clause 1(8) provides that the class of Primary Beneficiaries and General Beneficiaries includes persons who fall within the category from time to time until the Vesting Day, notwithstanding that such persons may not be in existence or have not come into the defined category at the date of the deed.

60 The deeds in relation to the other trusts involved in the case are consistent with the position described above, subject to the following qualifications:**

(a) some deeds have a different definition of General Beneficiaries and there are slight differences in the specified Primary Beneficiaries;[62]

(b) the Fred Marghi Trust and the Fred Fonz Trust each make provision for default beneficiaries in relation to the net income (that is, in default of appointment or accumulation by the trustee);

(c) the FL Perth Trust has a slightly different position in relation to capital as on the Vesting Day, the trustee holds the fund on trust for the Primary Beneficiaries and their children (or the living descendants of any child who is dead) and in default for persons who would be entitled to the estate of the Appointor if he died intestate.

61 Ten of the discretionary trusts nominate takers in default of appointment in relation to the capital of the trust including any accumulated income. Three of the discretionary trusts also nominate takers in default of appointment in relation to the income of the trust.[63] The other trusts require the income to be either distributed or accumulated.

**62 The appellant's contention is that the nominated takers in default of appointment are "beneficial owners" of the lands held by the trustee so that in seven of the discretionary trusts the beneficial owners were different.[64]

63 The trial judge accepted the contention, which is not in issue, that members of a class entitled in default of appointment have vested but defeasible interests in the subject matter of the trust.[65] As the interest of the class came into existence at the time the trust was settled, their interest is not strictly speaking a "future interest."[66] Her Honour held that it was not possible to identify the persons who will have an interest in the fund at the Vesting Day, because all members of that class were not yet in existence or were not yet ascertained. The terms of the trust provide for the possibility of new primary beneficiaries to be born, and existing primary beneficiaries to die prior to the Vesting Day. Ultimately, if there are no persons falling within the class at the Vesting Day, the relevant deed generally provides that the fund will be held on trust for charitable purposes.

64 Whatever the equitable interests held by the takers in default might be, they were vested in interest and not vested in possession. It was not in issue that the takers in default did not have an interest that was vested in possession as none of those persons or classes of persons were presently able to claim the subject of their interest nor were they entitled to enjoyment.[67] As the trial judge held, the interest of a "beneficial owner" within s 52(1) must be vested in possession, rather than vested in interest.[68] Were it otherwise, a person could be a "beneficial owner" notwithstanding that he or she was not liable to be assessed to land tax as the owner of an equitable estate or freehold in possession.[69] As I have observed, this would be contrary to the scheme established by ss 51 and 52. The appellant's argument must on this basis alone be rejected.

65 Contrary to the principal argument that a "beneficial owner" need not have an interest in possession, the appellant argued that members of the class entitled to take in default of appointment are beneficial owners as they have a vested equitable interest in the trust property. It relies upon the Commissioner of Stamp Duties (NSW) v Sprague[70] in support of this conclusion. The date of assessment was said to be the relevant date on which the interest of the class was to be determined. It was submitted that her Honour fell into error in concluding that the class of takers in default would not be finally determined until the Vesting Day. The appellant contends that the persons who fell within that class as at the date of assessment had a present equitable interest in the trust property and were thus "beneficial owners" as at the relevant assessment date.

66 By contrast to the present trusts, in Sprague the class of takers in default was closed so that each of the members of the class had a vested but defeasible interest which became absolute upon the settlor's death. Therefore the trust property was not "disposed of by settlement containing any trust in respect of that trust property to take effect after [the settlor's] death" within s 102(2) of the Stamp Duties Act 1920-1940 (NSW). Under the trusts with which we are concerned, the class of potential beneficiaries was not closed as at the relevant dates for the assessments. It would remain uncertain, prior to the Vesting Day, whether any and if so which of the persons or class of persons specified in the deeds as "takers in default" will become entitled to the trust property. Because s 52(1) of the Act operates where different lands are held in trust for "different beneficial owners," it must be possible to identify with certainty who are the beneficial owners in question at the relevant date. The "takers in default" who are "beneficial owners" of the land cannot be identified with certainty as at the date of each of the assessments.

67 I should also refer to the appellant's argument that the trial judge was in error in concluding that the term "beneficial owner" should be construed as requiring "[a] right at least to deal with the property as one's own." In this regard, her Honour referred to the decision of Harman LJ in Wood Preservation Ltd v Prior (Inspector of Taxes).[71] The appellant submitted that Prior's case does not deal with the meaning of the expression "beneficial owner" in the context of a trust and that the meaning given to the expression in a different legislative context for different purposes was not helpful in the present context.[72] Further, the appellant contended that if it is appropriate to adopt the meaning ascribed to "beneficial ownership" by Harman LJ, of a "right at least to some extent to deal with the property as one's own"[73] the nominated takers in default of appointment and objects of the power of appointment, having the power to prevent the trust property coming into the hands of strangers and the right to transfer their respective interests, had the right "to some extent" to deal with the property as their own. It may be accepted that these classes of beneficiaries had such limited rights.

68 Under the legislative scheme of the Act in which a beneficial owner must have an interest vested in possession, subject only to the rights of the trustee, any beneficial owner must have "the right to deal with the property as one's own." This is consistent with the view expressed by Phillips JA, with whom Buchanan and Eames JJA agreed, in Arjon that the expression "estate in possession" within the definition of owner in s 3 means an estate of which some person has "the present right of enjoyment"- as stated by Griffith CJ in Glenn[74] - in contradistinction to an estate in remainder or an estate in expectancy which is the other way in which the expression has sometimes been used.[75]**

**69 The trial judge held that to be a "beneficial owner" under s 52(1), the holder of an equitable interest must have a proprietary interest in the relevant land and that the equitable rights of the object of a power of appointment were not proprietary rights. Her Honour held that neither the right to due administration of the trust nor the fiduciary obligations owed by the trustee involved the assertion of a proprietary right by the object which conferred a proprietary interest in the land.[76]

70 The appellant argues that if, contrary to its contention, "beneficial owner" in s 52(1) has the same meaning as "the owner of any equitable estate or interest in land" in s 51, the objects of a power of appointment do own an equitable interest in land as the right of the objects to have the trust properly administered does confer a proprietary interest in the trust property so that the objects are "beneficial owners." This argument is advanced upon the assumption that the interest of a beneficial owner need not be vested in possession.

71 The objects of a power of appointment have a right to the due administration of the trust which is recognisable and enforceable in equity. The right of a beneficiary to have the trust duly administered in accordance with its terms was described by Isaacs J in Glenn "for the purposes of equity as equivalent to a right in the property itself, but only commensurate with his particular right in personam."[77] The right to have the trust duly administered in accordance with its terms includes the right to require the trustee to exercise its powers as to whether and if so to whom income should be distributed.[78] Similarly, the equitable right of a residuary legatee to have the deceased's estate properly administered has been held to constitute "an equitable interest ... related to assets which included interests in lands."[79] By analogy the appellant contends that the object's equitable rights amount to an interest in land.

72 The appellant cautioned against assumptions about the characteristics of proprietary rights or interests,[80] referring to various writings to the effect that the right of a person to exercise regulatory control over the access of strangers to the income or capital of a trust was an indicium of a proprietary right.[81] It was submitted that her Honour's conclusion was at odds with the passage from the judgment of Isaacs J in Glenn to which I have made reference.

73 The Commissioner contrasts the interests of an object of a power of appointment with those of a beneficiary under a bare trust where the trustee would be bound to transfer the trust property to the beneficiary who is absolutely entitled thereto[82] and submits that the objects are not the owners of an equitable interest in land as they have no proprietary interest in the trust assets.[83]

74 The objects may possess some interest as the authors of Discretionary Trusts[84] suggest:**

"An object of a discretionary trust (not being a taker in default of appointment) may be said to be in possession of 'property' in the nature of a chose in action. The chose in action entitles him to call upon the trustee to administer the trust, to deal appropriately with the trust fund. Although an object has no right to demand an aliquot share of the trust fund - he may be said to have an expectancy in respect of its disposal - and has no interest vested or contingent in it, he may nevertheless be said to have an 'interest' in a loose sense in its totality. This 'interest' arises from his right to have the trust fund dealt with in an appropriate manner by the trustees."[85]

75 The interest, however it is to be described, is not a proprietary interest in the trust property. The authors of Jacobs Law of Trusts in Australia[86] in discussing the operation of the rule in Saunders v Vautier to discretionary trusts state:

"... the rationale formerly offered for the rule does not accommodate the modern so-called 'discretionary' trust, although the term is imprecise. There, in the place of 'beneficiaries' in the traditional sense who between them aggregate beneficial ownership of the trust property, there is a class of persons described in wide terms. This class is, in essence, the object of a trust power in the trustee to appoint either or both income or corpus and to do so periodically between members selected from the designated class on each such occasion, but reserving in the trustee a discretion as to the quantum of income or corpus appointed to any particular individual and a discretion to declare the exercise of the power on any occasion. In such cases, it is difficult to maintain that any particular object of the power has an interest in the trust fund and, indeed, the widespread use of discretionary trusts as a means of avoiding death duties assumed that there would be no such interest for the purpose of revenue legislation. Further, to say that as between all of them the objects enjoy beneficial ownership and therefore may, if all sui juris, invoke the rule in Saunders v Vautier, is to envisage a group interest greater than the aggregate of individual interests by attribution to the whole of a character not possessed in any degree by any of its parts."[87]

**76 A similar view is expressed by the authors of Trusts and Powers[88] that the objects of these powers cannot claim any entitlement to any part of the trust fund whether that be capital or income as they "do not either separately or together have a proprietary interest in the trust fund to which the particular power extends ... Nonetheless they are the owners of equitable choses in action in the sense that they have rights which are recognised and protected in a court of equity."

77 The appellant's argument must be rejected. The nature of a discretionary beneficiary's interest under a discretionary trust as a consequence of the objects' rights to have the trust properly administered, does not confer the required proprietary interest. The right of an object to take legal proceedings to prevent a disposal of income or capital by the trustee to persons outside the class of designated objects does not involve the assertion of a proprietary right by the object.[89] While the objects of the power are able to enforce the fiduciary duties of the donee of such a power, the objects will acquire no direct interest in the property which is subject to the power until such time as the power may be exercised in their favour.[90] Until the trustee elects to exercise the power of appointment in the object's favour, the interest of the object is no more than an expectancy to receive income or capital as a result of the exercise of the power by the trustee and is analogous to that of a beneficiary in the residue of an unadministered estate. While the discretionary beneficiary may enforce the terms of the trust, the beneficiary does not have an equitable proprietary interest in the trust assets which constitutes beneficial ownership of any of those trust assets.[91]

78 The interest is a mere expectancy with neither "an interest in possession" - namely a present right of present enjoyment of property - nor an immediate entitlement to income as it accrues.[92] The interest does not create or confer an interest in the property or a right of enjoyment[93] and does not constitute any form of ownership. It is not a rateable interest as it does not bear the "necessary quality of definable extent which must exist before it can be taxed."[94] The interest has in this sense been viewed as insufficient under other revenue statutes because a right to present enjoyment of corpus and income is absent.[95] In the joint judgment in CPT Custodian it was observed:**

"In Schmidt v Rosewood Trust Ltd the Privy Council recently stressed that the right to seek the intervention of a court of equity to exercise its inherent authority to supervise and, if necessary, to intervene in the administration of trusts, 'does not depend on entitlement to a fixed and transmissible beneficial interest'. In a sense, the Commissioner's submissions tend to prove too much. In any event, as Lord Wilberforce emphasised in Gartside v Inland Revenue Commissioners, it is one thing to identify rights protected by a court of equity, and another to identify an interest which has 'the necessary quality of definable extent which must exist before it can be taxed'. In the present case, the 'definable extent' is that specified by the definition in the Act. No doubt, unit holders accurately may be said to have had rights protected by a court of equity, but that does not require the conclusion that in the statutory sense they were 'owners' of the land held on the trusts in question_._"[96]

Application of the rule in Saunders v Vautier to discretionary trusts

**79 Under the various trust deeds the members of the class of objects at any given time do not have an individual or collective entitlement to the net income of the fund. The trustee has a discretion as to whether the whole or a part of the income of the fund should be distributed to any or some or all of the class of objects. Furthermore the trustee has a power to accumulate income. As the class of objects is not closed, another member of the class may possibly come into existence before a reasonable time has elapsed for the distribution of the accrued income.[97]

80 It appears that at trial it was argued that the objects of the power of appointment had a sufficient interest in the trust property to constitute them "beneficial owners" as it was claimed that they together with the takers in default could combine to terminate the trust and call for its distribution.

81 The appellant's argument was rejected at trial, her Honour having concluded that the Saunders v Vautier principle was incapable of application as the members of the class of objects could not be ascertained so that there were no identifiable persons who were able collectively to exercise the right to terminate the trust. The objects under the discretionary trusts do not individually have any vested or contingent interest of a proprietary nature in the fund.[98]

82 In CPT the following modern formulation of the rule in Saunders v Vautier as stated in Thomas on Powers, was referred to:**

"Under the rule in Saunders v Vautier, an adult beneficiary (or a number of adult beneficiaries acting together) who has (or between them have) an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation."[99]

83 In the joint judgment a caution was sounded against too readily concluding that because there was an unrealised potential for the beneficiaries to bring the trust to an end, the beneficiaries were therefore on a date of assessment entitled to an estate of freehold in possession within the meaning of the statutory definition.[100] The Court emphasised the limitation of the application of the rule in Saunders v Vautier to questions of statutory construction where, at the date and time of assessment, what could have been done by the beneficiaries in exercise of a power of termination of the trust in question had not been done. "Equity often regards as done that which ought to be done, but not necessarily that which merely could be done. In any event, what is at stake here is the operation of statutory criteria upon general law concepts of equitable ownership."[101]

Trust provision for annual income distribution

**84 The trial judge's rejection of this argument was not put in issue on appeal, although a modified form of that submission was still advanced in relation to three of the trusts[102] in which provision was made for the distribution of annual income to one or more of the members of the class of beneficiaries identified in each trust deed who were living as at the end of the financial year.[103] In each case the trustee could accumulate the whole or any part of the income of that financial year so that it thereafter formed part of the capital of the trust. If the trustee failed to make such a distribution or to exercise the power of accumulation, the income was to be held for such of the class of default beneficiaries identified in each trust deed respectively as were living at the end of that financial year. The appellant thus argues that in each trust there was a class of persons (primary and default beneficiaries) who collectively had a vested contingent interest in the income of the trust and that subject to the occurrence of the exercise of the power of accumulation, the class of persons so entitled could collectively call for the distribution of the income and were "beneficial owners" within the meaning of s 52.[104]

85 In reliance upon a passage from the judgment of Romer J in Re Smith, Public Trustee v Aspinall[105] it was submitted by the appellant that the class of persons entitled to the annual income could collectively call for the distribution of the income. No oral argument was addressed to this issue, the appellant being content to rely upon its outline of submission. It does not appear from the trial judge's reasons for judgment that the appellant relied upon this specific interest of the class of beneficiaries in those trusts in support of the contention that those trusts contained different beneficial owners of the land.

86 In Re Smith all of the beneficiaries who were entitled to have the whole or a part of the trust fund applied for their benefit came together to direct the trustee as to how it should deal with the fund. The beneficiaries whom the appellant contends had a vested contingent interest in the annual income of the trust were not the "sole objects" of the trust. They were not entitled between themselves to have the whole fund applied to them or for their benefit. Assuming, without deciding, that their interest could be described as a vested contingent interest in the income of the trust fund, such an interest did not mean that they were "beneficial owners" of the land which formed part of the assets of the trust fund. In CPT Custodian the High Court concluded that the unit holders were not the persons in whose favour alone the trust property might be applied by the trustee of the deed.[106]**

**87 The appellant contends that the unit holders of the Thornbury unit trust were the "beneficial owners" within the meaning of s 52 of the Act. The trial judge had accepted, following the decision of the Court of Appeal in Arjon that the unit holders in the Thornbury unit trust collectively held the full beneficial interest in the trust property and could therefore be regarded as the equitable owners of the lands.

88 No oral argument was advanced on the appellant's behalf in amplification of the outline of submission which was to the effect that the unit holders in the Thornbury unit trust were "beneficial owners" who were entitled to have the trustee administer the trust property for their benefit and had a vested equitable interest in the land which was to be held by the trustee upon trust for them "absolutely in proportion to the number of units held by them." It was further submitted that the unit holders had rights similar to the objects of the power of appointment in relation to the administration of the trust property that were protected by a court of equity. Finally, it was said in the outline that these unit holders collectively were empowered to terminate the trust and call for the distribution of the trust fund prior to the termination date stipulated in the trust deed and that such a right conferred upon them the status of "beneficial owners." I have already referred to passages from CPT which indicate that the rights of the unit holders, upon which the appellant relies, do not necessarily establish that they were, within the meaning of the Act, beneficial owners or the owners of an equitable estate or interest in the land. The right to have the trust properly administered, does not, as I have said, confer a proprietary interest.

89 Counsel for the respondent in their outline of submission did not seek to address the arguments advanced in the appellant's outline of submission but submitted that in light of the High Court's decision the units of the Thornbury unit trust may not have conferred on unit holders the equitable or beneficial ownership of the lands held subject to the trust. Counsel for the respondent submitted that as there were no other "beneficial owners" of any of the other lands held by the appellant subject to the discretionary trusts, it was a matter of no significance whether the unit holders in the Thornbury unit trust were "beneficial owners" as the lands owned by the trustee, including those the subject of the Thornbury unit trust, were not held on trust for "different beneficial owners." For that reason and because the matter has not been the subject of argument, I do not find it necessary to express any concluded view as to whether the unit holders in the Thornbury unit trust were the owners of an equitable estate or interest in the lands the subject of the trust or were "beneficial owners".**

90 The phrase "beneficial owners" in s 52 has the same meaning as "the owner of an equitable estate or interest" in s 51. The owner must be entitled, in equity, to the freehold estate in possession in relation to the land the subject of the trust. With the possible exception of the unit holders of the Thornbury unit trust, there were no "beneficial owners" of land held by the trustee subject to any discretionary trust. The objects of the power of appointment under the trusts did not have any equitable

estate or interest in the said lands and were not beneficial owners. The takers in default of appointment under the trusts were not beneficial owners. Accordingly, at each of the relevant dates of assessment, the appellant was not the owner of different lands in severalty in trust for different beneficial owners within the meaning of s 52

of the Land Tax Act.

[1] This appeal concerns the provisions of the Act as in force at the date of the Commissioner's assessments. The Act has since been repealed and re-enacted as the Land Tax Act 2005.

[2] As to the detail of each trust see the Schedule of Trusts annexed to the judgment of the trial judge: Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 135.

[3] Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) [2005] HCA 20; (2005) 220 CLR 592, [52] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

[4] CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 221 ALR 196 ("CPT Custodian"), 198 [5], [7].

[5] Land Tax Act 1910 s 49.

[6] Victoria, Parliamentary Debates, Legislative Assembly, 16 November 1909, 2300-2301; and 25 November 1909, 2482.

[7] Compare s 51 of the Act with s 8 of the 1877 Act and s 9 of the 1890 Act.

[8] [2005] HCA 53; (2005) 221 ALR 196.

[10] (1999) 43 ATR 29.

[12] Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 135, 139 [26]-[27] (Hollingworth J).

[13] Craig Williamson Pty Ltd v Barrowcliff [1915] VicLawRp 66; [1915] VLR 450, 452 (Hodges J); Registrar of Titles (WA) v Franzon [1975] HCA 41; (1975) 132 CLR 611, 618 (Mason J).

[14] Reliance was placed upon Scott v Commercial Hotel Merbein Pty Ltd [1930] VicLawRp 4; (1930) VLR 25, 30; Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation [1952] HCA 54; (1952) 86 CLR 335, 342.

[15] Section 3 has its definition of "special trust", s 13AA defines "discretionary trust" and "unit trust scheme"; see also s 13A to s 13J; see Barmote Pty Ltd v Commissioner of State Revenue (Taxation) [2005] VCAT 2209.

[16] D Pearce and R Geddes, Statutory Interpretation Australia (6th ed, 2006) [9.41].

[17] Littlewood's Mail Order Stores Ltd v Inland Revenue Commissioners [1963] AC 135, 150; Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1, 15-16 (Mason J).

[18] Pearce and Geddes, above n 16, [4.5].

[19] Commissioner for Taxes (Vic) v Lennon [1921] HCA 44; (1921) 29 CLR 579, 590 (Higgins J); McGraw-Hines (Aust) Pty Ltd v Smith [1979] HCA 19; (1978) 24 ALR 175, 178 (Gibbs ACJ); Murphy v Farmer [1988] HCA 31; (1988) 79 ALR 1, 7 (Deane, Dawson and Gaudron JJ).

[20] Littlewood's Mail Order Stores Ltd v Inland Revenue Commissioners (1963) AC 135, 150; Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1, 15 (Mason J).

[21] Meagher and Gummow, Jacobs' Law of Trusts in Australia (5th ed, 1986) 3.

[22] H A J Ford and W A Lee, Principles of the Law of Trusts, 1-10060.

[23] R Speed, "Beneficial Ownership" 26 Australian Tax Review 34, 50; see also Montefiore Homes v Howell & Co [1984] 2 NSWLR 406, 411.

[24] Speed, ibid; CPT Custodian [2005] HCA 53; (2005) 221 ALR 196, 204 [31].

[25] Ibid 199 [10], 202 [25], 203 [26], 206 [40], and 208 [46].

[28] (2003) 8 VR 532, 540.

[29] [1915] HCA 57; (1915) 20 CLR 490.

[30] (2003) 8 VR 502.

[31] CPT Custodian [2005] HCA 53; (2005) 221 ALR 196, 198-9 [7]-[9] (footnotes in original).

[33] [1967] UKHL 6; [1968] AC 553, 618.

[34] This aspect of Arjon was not the subject of criticism in CPT Custodian.

[35] Arjon Pty Ltd v Commissioner of State Revenue (2003) 8 VR 502, 509 [11]-[14].

[36] Sections 51 and 52 are not deeming provisions. That was made clear in CPT Custodian [2005] HCA 53; (2005) 221 ALR 196, [7]-[9].

[37] [2002] VSC 431.

[38] (2003) 8 VR 532, 535 [2]-[3],[19].

[39] Glenn [1915] HCA 57; (1915) 20 CLR 490, 496-7 cited in CPT Custodian [2005] HCA 53; (2005) 221 ALR 196, [26].

[40] [2002] VSC 431, [71]-[74].

[41] (2003) 8 VR 532, 540-1 [21].

[42] Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 135, [35].

[44] (2003) 8 VR 502, 523 [46]-[47].

[46] Commissioner of Stamp Duties (Q) v Livingston [1964] UKPC 2; [1965] AC 694, 712; [1964] UKPCHCA 2; (1964) 112 CLR 12, 22.

[47] [2005] HCA 53; (2005) 221 ALR 196, 202 [25].

[48] [2005] HCA 20; (2005) 220 CLR, 592 [30].

[49] (2005) 60 ATR 135, [41].

[50] Union Trustee Co of Australia Ltd v Federal Commissioner of Land Tax [1915] HCA 68; (1915) 20 CLR 526, 531; CPT Custodian, 203 [27].

[51] Where there is an owner of an estate or interest in possession as defined in s 3.

[52] The appellant relies upon the meaning of the term as explained in Commissioner of Taxation v Linter Textiles [2005] HCA 20; (2005) 220 CLR 592, [52] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

[53] [1915] HCA 57; (1915) 20 CLR 490, 499.

[54] Victoria, Parliamentary Debates, Legislative Assembly, 16 November 1909, 2301; 24 November 1909, 2482, 2507-2510. The debate illustrates the view that each individual beneficiary may pay tax at a higher rate on the land held by the trustee than the rate applicable to that beneficiary's proportionate interest in the land.

[55] [2004] VSC 127, [38] (footnotes omitted).

[56] See, for example, Commissioner of Taxation v Ryan [2000] HCA 4; (2002) 201 CLR 109, [19] (Gleeson CJ, Gummow and Hayne JJ).

[57] See below, [64], [68] as to the meaning of a "right to possession".

[58] Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 135, [51].

[59] Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 135, [68]-[137].

[61] There are differences in the additional persons specified in the Schedule in respect of each of the four common trusts.

[62] In each case, however, the Primary Beneficiaries are predominantly or exclusively members of the Luizzi family.

[63] The Fred Fonz Trust, the Fred Marghi Trust and the Luizzi Family Trust.

[64] The appellant concedes that the class of persons nominated as takers in default is the same in the Luizzi San Paolo Trust, the San Marco Trust, the Prince Trust and the Polenta Trust.

[65] G Thomas, Thomas on Powers (1st ed, 1998) 62; In Re Brookes' Settlement Trusts [1939] 1 Ch 993, 996-7; Commissioner of Stamp Duties (NSW) v Sprague [1960] HCA 13; (1960) 101 CLR 184.

[66] Commissioner of Stamp Duties (NSW) v Sprague [1960] HCA 13; (1960) 101 CLR 184, 193.

[67] Gartside v Inland Revenue Commissioner [1967] UKHL 6; [1968] AC 553, 607; Glenn v Federal Commissioner of Taxation [1915] HCA 57; (1915) 20 CLR 490, 496-7, 500-1, 507.

[68] An owner as defined in Section 3 must have a present interest. Cf s 41 which deems the holder of a life interest an owner - not so a remainderman.

[69] See s 51 and the definition of "owner" in s 3 of the Act.

[70] [1960] HCA 13; (1960) 101 CLR 184.

[71] [1969] 1 WLR 1077, 1096-7.

[72] CPT Custodian [2005] HCA 53; (2005) 221 ALR 196, [31]; Gartside v Inland Revenue Commissioner [1967] UKHL 6; [1968] AC 553, 617 (Lord Wilberforce).

[73] Wood Preservation Ltd v Prior (Inspector of Taxes) [1969] 1 WLR 1077, 1097.

[74] [1915] HCA 57; (1915) 20 CLR 490, 496, 498; see also Chief Commissioner Of Land Tax v Macary Manufacturing Pty Ltd [1999] NSWCA 471; (1999) 48 NSWLR 299, 310-11.

[75] [1915] HCA 57; (1915) 20 CLR 490, 520 [40].

[76] Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 144, [56]-[58].

[77] [1915] HCA 57; (1915) 20 CLR 490, 503.

[78] See Meagher, Gummow and Lehane, Equity Doctrines and Remedies (4th ed, 2002) [4-070]-[4-080].

[79] Horton v Jones [1935] HCA 7; (1935) 53 CLR 475, 486 (Rich and Dixon JJ); Livingston v Commissioner of Stamp Duties [1960] HCA 94; (1960) 107 CLR 411, 440 (Fullagar J) and 450 (Kitto J); Barnes v Barnes (2003) 214 CLR 169, 197 (Gummow and Hayne JJ).

[80] It relied upon the Commissioner of Stamp Duties (Q) v Livingston [1964] UKPC 2; [1965] AC 694, 712 (Lord Radcliffe); Meagher, Gummow and Lehane, above n 78 [4010]-[4015].

[81] Professor Gray, "Property in Thin Air" (1991) 50 Cambridge Law Journal 252, 268; Meagher, Gummow and Lehane, above n 78 [4015].

[82] Herdegen v Commissioner of Taxation (1988) 84 ALR 271, 281-2 (Gummow J); Meagher and Gummow, Jacobs Law of Trusts in Australia (7th ed, 2006) [318].

[83] The respondent refers to Meagher and Gummow, Jacobs Law of Trust in Australia (7th ed, 2006) 47, 632-633; Dal Pont and Chalmers, Equity and Trusts in Australia (3rd ed, 2004) 509-510; G Thomas, above n 65, 378, 384; Halsbury's Laws of England (4th ed, 2000) 440 [663]; Gartside v Inland Revenue Commissioners [1967] UKHL 6; [1968] AC 553, 606-7, 617; Queensland Trustees Ltd v Commissioner of Stamp Duties (Q) [1952] HCA 52; (1952) 88 CLR 54, 62-3; Re Goldsworthy [1969] VicRp 107; [1969] VR 843, 849.

[84] I Hardingham and R Baxt, Discretionary Trusts (2nd ed, 1984) 123-141.

[86] Above n 21, [2315].

[87] Citing Gartside v IRC [1967] UKHL 6; [1968] AC 553, 605-6; Re Weir [1971] Ch 145 and Sainsbury v IRC [1970] Ch 712, 725.

[88] D Maclean, Trusts and Powers (1989) 29.

[89] Commissioner of Stamp Duties (Q) v Livingston [1964] UKPC 2; [1965] AC 694, 713-4; [1964] UKPCHCA 2; (1964) 112 CLR 12, 23-4; Meagher, Gummow and Lehane, above n 78, 136.

[90] Thomas, above n 65, 378.

[91] Mowbray, Tucker, Poidevin and Simpson, Lewin on Trusts (17th ed, 2000) [1-06]-[1-08]; Meagher, Gummow and Lehane above n 78, 139-140.

[92] G E Dal Pont and D R C Chalmers, Equity and Trusts in Australia, (3rd ed, 2004) 510 [19.10]; see also Thomas, above n 65, [6-264-5], [6-272-3].

[93] Commissioner of Taxation v Linter Textiles (2005) 220 CLR 292, [52]-[54] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

[94] Gartside v IRC [1967] UKHL 6; [1968] AC 553, 602-3 (Lord Reid).

[95] Ibid 616-8; Commissioner of Stamp Duties (Qld) v Livingston [1964] UKPC 2; [1965] AC 694.

[96] [2005] HCA 53; (2005) 221 ALR 196, 200-201 [16]-[17].

[97] See In Re Trafford's Settlement [1985] 1 Ch 32, 40; Thomas, above n 65, 383-4.

[98] Re Beckett's Settlement [1940] Ch 279; cf Montefiore Homes v Howell [1984] 2 NSWLR 406, 411 where the class of objects was closed and identifiable so that the rule in Saunders v Vautier was successfully applied.

[99] [2005] HCA 53; (2005) 221 ALR 196, 208 [47].

[102] The Fred Marghi Trust, the Fred Fonz and Luizzi Family Trust.

[103] In the case of the Luizzi Family Trust income could be distributed for charitable purposes as well.

[104] The F L Perth Trust also made provision for the distribution of annual income to members of the class of "primary beneficiaries" or to "income beneficiaries" with a power conferred upon the trustee to accumulate income.

[105] [1928] 1 Ch 915, 918-9.

[106] [2005] HCA 53; (2005) 221 ALR 196, 209 [49].