The decision of the respondent, disallowing the objection of the applicant, is confirmed.

1

This case requires consideration of the provisions of section 31 of the Duties Act 2000 ("the Act"), which deals with sub sales of land and nomination clauses.

2

On 21 December 2001 a contract of sale of real estate was executed by The People's Investment Company Pty Ltd ("the applicant"). The particulars of sale named the purchaser as "The People's Investment Company Pty Ltd ACN 004 163 035 and/or nominee". The purchase price was $1,370,000.

3

The contract contained a number of general conditions, including the following:

5 If the contract says that the property is sold to a named purchaser "and/or nominee" (or similar words), the named purchaser may, at least 14 days before settlement date, nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all of the purchaser's obligations under this contract.

4

The particulars of the sale specified the payment of a deposit of $370,000, with the balance being payable on 1 September 2002 or earlier by agreement.

5

On 7 August 2002 the applicant nominated Morgan & Griffin Pty Ltd ("the nominee") as purchaser to take a transfer of the land. There was no suggestion that the applicant received any consideration, directly or indirectly, for the nomination. The applicant and the nominee acknowledged that they were jointly and severally responsible for the due performance of the obligations of the purchaser under the contract.

6

On 7 August 2002 Nicholas John O'Donohue, a director of the applicant, signed a declaration of trust to the effect that the applicant entered into the contract as a trustee for the nominee. However it became apparent that the applicant did not wish to rely upon this declaration; and claims it was executed in error. I will not consider it further.

7

On 8 January 2003 an instrument for the transfer of the land was executed by the vendors as transferors and the nominee as transferee. The Commissioner considered the matter and issued two assessments: one directed at the applicant and another directed at the nominee. Two assessments were made because the Commissioner formed the view that the circumstances fell within section 31(1)(a) and (b) of the Act, with the consequence that duty was separately and distinctly chargeable pursuant to paragraphs (c) and (d) of that sub-section.

8

By letter dated 14 March 2003 the applicant objected to the assessment that it pay duty. On 12 November 2003 the delegate of the Commissioner disallowed the objection. The matter has now been referred to the tribunal.

9

This case turns upon the meaning of parts of section 31 of the Act. Essentially sub-section (1) sets out the circumstances in which the section operates; and this is supplemented by sub-section (6). Sub-section (3) sets out a number of circumstances where a transfer referred to in sub-section (1) is not separately and distinctly chargeable with duty. It is conceded by the applicant that none of the circumstances referred to in sub-section (3) applies in this case. Rather the proceeding is concerned with whether section 31 applies at all.

10

In the circumstances it is only necessary to set out sub-sections (1) and (6) of section 31 of the Act. These provide:

(a) a person ("the vendor") agrees to transfer any dutiable property referred to in section 10(1)(a) or (d) ("the agreement") to another person ("the first purchaser") (whether or not the agreement provides for that other person to nominate another person as purchaser); and

(b) the transfer executed by the vendor transfers the whole or any part of the property not to the first purchaser but to another person ("the transferee") who has acquired whether directly or indirectly, the whole or any part of the rights and interest under the agreement of the first purchaser in the property -

the transfer is not chargeable with duty in respect of the transfer from the vendor to the transferee but is separately and distinctly chargeable with duty in respect of -

(c) the value of the property in the agreement (whether or not the agreement has been discharged by performance, novation or agreement or has otherwise ceased to exist); and

(d) the value of the property transferred to the transferee; and

(e) if the transferee did not acquire those rights and interest directly from the first purchaser, the value of the property in each other transaction or agreement as a result of which the rights and interest of the first purchaser in the property were acquired.

(6) For the purposes of this section but without limiting the ways in which a person may be taken to acquire the rights and interest of another person in property, a person who has rights or an interest in property ("the first person") acquires the rights and interest of another person ("the second person") in that property if, as a direct or indirect result of an agreement, arrangement or understanding involving those persons (with or without other persons) -

(a) the second person acquires rights or an interest in the property; and

(b) the rights or interest of the first person in the property are increased.

11

Section 31 of the Act is an anti-avoidance provision, but it is also intended to allow the genuine use of nominee clauses. This was made clear on 10 November 1994 when the Treasurer introduced the predecessor to the section into Parliament, stating:

The provisions which relate to subpurchases of real property and the use of nominee clauses upon the purchase of real estate will be clarified. The amendment will prevent the use of nominee clauses as a device to avoid stamp duty.

However, the genuine use of a nominee clause to enable the purchase of real property on behalf of a family member, a family company or a company related to the purchaser will not be affected.

12

In making its submissions, the applicant felt constrained by the decision of Nettle J of the Supreme Court of Victoria in Commissioner of State Revenue v Politis and Politis Investments Pty Ltd[1] concerning the meaning of section 31 of the Act. The applicant submitted that the Politis decision was wrong, and should not be followed. But the applicant also emphasised that, in its submission, the Politis decision did not stand in the way of its principal argument.

13

The principal argument put by the applicant was as follows. On a proper construction of the contract, the provisions of section 31(1)(b) did not apply because the nominee was a "first purchaser". The applicant submitted that, stripped of superfluous words, section 31(1)(a) was enlivened where:

A person ... agrees to transfer any [land] ... to another person ("the first purchaser").

It said that in this case the vendor had agreed to transfer the land to "The People's Investment Company Pty Ltd and/or nominee"; and, by reason of general condition 5, this meant that the vendor had agreed to transfer the land to a person nominated by the applicant, at least 14 days before settlement date, as a substitute purchaser. As a consequence, there is no scope for section 31(1)(b) to operate as this only arises if the transfer executed by the vendor transfers the land to a person other than "the first purchaser".

14

The applicant's secondary argument was that, in any event, section 31(1)(b) could not apply as it was limited to a person "who has acquired" some part of the rights or interest of the first purchaser under the agreement. It was said that the provision contemplated a contractual arrangement between the first purchaser and the transferee. There was no contractual agreement in this case. The applicant acknowledged that this argument was directly affected by the Politis decision.

15

The Commissioner contended that both the principal argument and the secondary argument, to be accepted, required the tribunal to decide that the analysis of Nettle J in the Politis decision was erroneous.

16

In relation to the applicant's primary argument, the Commissioner also contended that the nominee in this case could not be regarded as a person to whom the vendor had agreed to transfer the land. The Commissioner submitted that the expression "another person" in section 31(1)(a) must be confined to a named person or, at least, a person who was identified or identifiable at the time of the agreement. As the transferee was not named in the contract, or even identifiable at the time of the contract, it was submitted that it could not be "the first purchaser".

17

In answer to the applicant's secondary argument, the Commissioner relied upon the Politis decision and submitted that section 31(1)(b) could apply to any circumstance where part of the interest of the first purchaser, or an equivalent interest, was obtained by the transferee.

18

As this case turns upon an interpretation of section 31 of the Act, it is appropriate that I start with some general comments as to my approach in interpreting a taxing statute.

19

It has long been established that an intention to impose a tax or duty must be shown by clear and unambiguous language and cannot be inferred from ambiguous words.[2] The reasons for this principle are explained by Deane J in Hepples v The Commissioner of Taxation of the Commonwealth of Australia[3].

20

I also adopt two comments of Justice Gibbs of the High Court of Australia. In Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation Gibbs CJ observed that the fact that an Act is a taxing statute does not make it immune to the general principles governing the interpretation of statutes, particularly the principle that the legislative intention be ascertained from the terms of the instrument viewed as a whole. Somewhat earlier, in Western Australian Trustee Executor and Agency Company Ltd v Commissioner of State Taxation of the State of Western Australia Gibbs J said:

The established rule that no tax can be imposed on a subject by an Act of Parliament without words which clearly show an intention to lay the burden upon him does not mean that the Court will strive to find loopholes where none are apparent; the words of the Act must be given a fair and reasonable construction, without leaning one way or the other. However, although, if the terms of the Act plainly impose the tax they should be given effect, equally if they do not reveal a clear intention to do so the liability should not be inferred from ambiguous words. If the words in question are words of exception or exemption the same rules of construction should be applied.[4]

21

I consider that the tribunal, however constituted, is bound by the ratio decidendi of the Politis decision, unless it is inconsistent with some other decision of a superior court above the tribunal in the judicial hierarchy.

22

The applicant submitted that, because I am a justice of the Supreme Court of Victoria, the tribunal, as presently constituted, was not so bound. But as a matter of logic I do not consider that this makes any difference. I am sitting as the tribunal; and I am exercising the powers of the tribunal. The principle of stare decisis operates by reference to institutions, not people. It is true that appeals from the tribunal, when constituted by a judge, must be heard by the Court of Appeal of the Supreme Court of Victoria. But this is a statutory courtesy designed to respect the role of a judge when exercising the jurisdiction of the tribunal and to enhance the role of the President and Vice Presidents of the tribunal. It does not change the nature of the judicial hierarchy.

23

The Politis decision was that section 31 of the Act applies where, a vendor having agreed to transfer land to a purchaser, that agreement is cancelled in consideration of another person agreeing to purchase the land from the vendor. But the ratio decidendi of the decision is broader than this.

24

The contract in the Politis case was expressed to be between the vendor and Angela Politis or her nominee. Subsequently this contract was cancelled; and a new contract, at the same price, was entered into between the vendor and Politis Investments Pty Ltd. This company had been incorporated before the initial contract was made.

25

The matter first came before this tribunal, which decided that section 31 of the Act did not apply to the Politis situation as the second purchaser had not acquired the rights of the first purchaser, even though it had acquired rights of exactly the same description and value. Nettle J agreed that, as a matter of general law, the rights acquired by the second purchaser under the second agreement could not have been the rights of the first purchaser under the first agreement. But he concluded that section 31 should be construed as embracing an acquisition by a second purchaser of, not only rights of a first purchaser, but also rights that were equivalent in character to those held by a first purchaser. His Honour reasoned that the drafter of the legislation must have supposed that "the whole or any parts of the rights and interest" included equivalent rights and interest.

26

Nettle J observed that under a typical nomination clause the nominee would not acquire any rights as against the vendor, let alone the rights of the purchaser. By reference to the Minister's second reading speech, he then observed that that the apparent basis for section 31 was to prevent the use of nominee clauses as a device to avoid stamp duty, whilst protecting the genuine use of a nominee clause. Confronted with this divergence between the Minister's intent and the application of the principles of the general law, Nettle J posed the following question and provided the following answer:

How then does one construe the terms of s.31 in order to accommodate such a case and yet give to the section the effect which it was said it was intended to have? The answer appears to me to be to construe the words "acquire ... directly or indirectly, the whole or any part of the rights or interest of the first purchaser under the agreement" as embracing not only the acquisition directly or indirectly of the very rights or interest of the purchaser (as, for example, by direct assignment or indirectly by a chain of assignments) but also the acquisition directly or indirectly of equivalent rights or interest (as, for example, by nomination or novation or perhaps even by the acquisition of shares in a company which holds the rights or interest or by acquisition of an interest in a trust of which the trustee holds the rights or interest).[5]

27

Nettle J subsequently observed that it cannot be every acquisition of rights or interest equivalent to those of a purchaser that attracts the operation of section 31. He thought that for the section to apply it was necessary that the acquisition be "from the purchaser" and be an acquisition directly or indirectly of the purchaser's rights or of rights equivalent to the purchaser's rights. He continued:

What then does it mean to say that the section is confined to the acquisition from the purchaser of the rights or interest of the purchaser or the acquisition from the purchaser of rights or interest equivalent to those of the purchaser? Simply, I think, that the section is confined to cases in which the purchaser agrees to the transfer to the transferee of the rights or interest of the purchaser or agrees to the creation in favour of the transferee (or in favour of another from whom the transferee may then directly or indirectly acquire rights or interest) of rights or interest equivalent to those which but for the purchaser's agreement would have inured under the contract of sale to the benefit of the purchaser.

Subject to that overriding limitation, I envisage that there would be an acquisition of rights or interest of the purchaser within the meaning of the section where and howsoever a purchaser might agree to the substitution for its rights or interest under the contract of equivalent rights or interest in favour of the transferee (or in favour of another from whom the transferee may then acquire rights or interest equivalent to those of the purchaser). Therefore and without attempting an exhaustive catalogue of the mechanisms that might be employed, I think that they would include a nomination clause in the original contract, an express agreement to amend the original contract, an amendment constituted of conduct, as by a direction to the vendor to transfer to the second purchaser in lieu of the first and compliance by the vendor and with the direction, and also a novation.[6]

28

Thus the ratio decidendi of the decision is that the words "acquire ... directly or indirectly, the whole or any part of the rights or interest of the first purchaser under the agreement" embraces not only the acquisition directly or indirectly of the very rights or interest of the purchaser (as, for example, by direct assignment or indirectly by a chain of assignments), but also the acquisition directly or indirectly of equivalent rights or interest.

29

But it is also implicit in the decision that the words "another purchaser ('the first purchaser')" in section 31(1)(a) of the Act do not embrace a transferee who is not named in the initial agreement to transfer the land or who was not identified, or identifiable, by reference to that agreement at the time it was made.

30

The applicant submitted that although the decision in Politis was predicated on the proposition that section 31(1)(a) of the Act applied to the circumstances of that case, the point does not appear to have been argued either before the tribunal or before Nettle J. It was said that the decision thus proceeded on an improper or erroneous assumption. Having regard to my own view of section 31(1)(a), I do not agree with this submission.

31

The applicant also submitted that the decision in Politis was erroneous because Nettle J construed section 31 in a broad manner, in order to give effect to an intention apparently expressed by the Minister in Parliament, rather than by reference to the meaning of the words actually used in the section. The applicant said:

The purpose or intent of section 31 should first be obtained from a consideration of the words used in the section. The words used require a concentration on determining if the transferee has acquired the rights of the original purchaser. This requires an examination of the relationship between those two parties. If there has been no arrangement or understanding between those two parties pursuant to which rights under the contract are to be acquired then section 31 does not apply.

According to the applicant, such an interpretation not only gives effect to the words used in section 31, but also accords with the intention stated in the Minister's second reading speech.

32

Having regard to the principle that an intention to impose a tax or duty must be shown by clear and unambiguous language, there is obviously considerable force in these arguments. But I think I should leave it to the Court of Appeal, if called upon, to decide whether the applicant's arguments are to be preferred to the approach adopted by Nettle J.

33

Normally when a parliament passes a taxing law which operates by reference to a rule of the common law, the taxing law should be understood to have been intended to apply in circumstances determined by reference to the common law.[7] If section 31(1)(b) of the Act is interpreted literally the provision would not have a broad application, having regard to the common law explained by Nettle J, although it could still apply in some circumstances. No doubt it could be argued that the Parliament should be presumed to know the law; with the consequence that section 31(1)(b) of the Act should be given its literal, and limited, meaning. The argument to the contrary relies upon the intention of the provision, including by reference to the Minister's second reading speech. Some may find the terms of second reading speech to be so general that it provides no assistance. But the purpose of the provision could still be inferred from the words used in section 31.

34

If the matter does go further, the Court of Appeal may have regard to the policy underlying section 31 of the Act. The section is clearly directed at the practice of avoiding duty by engaging in sub sales rather than new sales. But, on the basis of the Politis decision, the section operates to embrace many practices other than sub sales. It might be wondered what policy basis exists for charging double duty when the "first purchaser"[8] receives no consideration, directly or indirectly, for the transferee receiving equivalent rights to the first purchaser. If section 31(1)(b) includes "equivalent rights", it may be that the words "acquire", "acquires" and "acquired", where used in section 31, were intended to mean obtain as a consequence of some consideration passing, directly or indirectly, to or for the benefit of or at the direction of "the first purchaser".

35

I was informed by the parties that the Commissioner does not have any general discretion to allow the objection simply because it would be just to do so. Further, I was informed by the parties that the tribunal did not have any such general discretion. If this is right, it provides a further reason to be cautious before giving section 31 an extended meaning. On the basis of the Politis decision, section 31 has the potential to operate in a capricious manner, unlikely to have been contemplated by the Parliament. This is so as real estate contracts are typically completed without legal advice, let alone the expert legal advice of a lawyer skilled in the intricacies of duties law.

36

The applicant submitted that, before section 31(1) of the Act can apply, three conditions must be satisfied. It said that these conditions are:

(b) that agreement must make provision for a transfer of dutiable property to an identified person; and

(c) there must be a transfer of land, not to that identified person, but to another person who has acquired the rights and interests under the agreement of the original intended transferee.

Conditions (a) and (b) were not challenged by the Commissioner. Whether the third condition is correctly expressed depends on the Politis decision.

37

The applicant contended that the vendor had agreed to transfer the land to the following persons:

•

The People's Investment Company Pty Ltd;

•

The People's Investment Company Pty Ltd and its nominee; or

•

the nominee of The People's Investment Company Pty Ltd.

Effectively, the applicant contended that each of these persons were identified as a transferee when the contract was made.

38

The applicant relied upon Salter v Gilbertson[9], where Phillips JA in the course of giving reasons which were substantially agreed to by the other members of the Court, observed:

Ordinarily, where there is an agreement of purchase and sale expressed to be between A (the seller) and B "or the nominee of" B, B is regarded as having the power simply to nominate who shall be transferee (that is, B or another at the direction of B) and a transfer to B and a transfer to B's nominee are alike regarded as in fulfilment of the contract between A and B.

But this does not mean that the nominee in the present case was a person identified in the contract as the transferee. Rather it means that the transfer to the nominee should be regarded as in fulfilment of the contract between the vendor and the applicant.

39

The applicant emphasised the distinction between an obligation created by an agreement to transfer to a nominee and a power, vested in a purchaser, to require a vendor to transfer land to persons other than the named purchaser. It said that section 31 of the Act applies where there is no provision for nomination in the contract of sale (and hence no obligation), but the purchaser nevertheless exercises a power to require a vendor to transfer land to a person other than the named purchaser. Hence, it said, the section would apply where the named purchaser has "on sold" land to an independent third party. In support of these contentions the applicant relied upon the decision of the High Court in Vickery v Woods[10].

40

But the answer to the applicant's primary argument does not lie in the contrast between an obligation and a power. Rather it lies in what was intended by the expression "another person ('the first purchaser')" in section 31(1)(a) of the Act.

41

I do not regard the words "the first purchaser" as of assistance in answering the question of whether a person is "another person". The submission to the contrary puts the cart before the horse. The use of defined terms is a device to promote comprehension. The actual term which is used is rarely of any moment. The use of the term "the first purchaser" in section 31(1)(a) is convenient, as this will often be the case in practice, but it cannot confine the term to a person who is a purchaser or who is a first purchaser.

42

But I think the answer to the question is assisted by the following (lengthy) extract from the decision of Dixon J in Vickery v Woods, in which I have emphasised certain passages:

The contract itself was expressed as an acknowledgement of a sale to the appellant as agent for the Gunbar Pastoral Co Pty Ltd, and his signature as purchaser is qualified by the words "For Gunbar Pastoral Co Pty Ltd". As that company had not yet been registered and so did not then exist, he must be considered as contracting so as to incur the liability of a principal; otherwise the contract would be inoperative. To avoid personal liability as a consequence, a clear expression of an intention not to be bound personally is necessary; the expressions used in this contract are not sufficient for that purpose. But, while the result is to make the appellant the person liable as the contracting party, it does not follow that the references to the Gunbar Pastoral Co Pty Ltd are to be rejected from consideration for every purpose as if they were not present in the contract. They serve to indicate that the company is the intended transferee of the land and I am disposed to think that as a consequence the expression "purchaser", in the provision relating to the vendors' obligation to procure registrable transfers, should be interpreted as covering the company, on its coming into existence. "A vendor's obligation is to execute a conveyance of the land sold to the purchaser or as he shall direct" (Williams, Vendor and Purchaser, 3rd ed (1922-1927), p.579), and doubtless the appellant could, therefore, in any case, have required the vendors to execute transfers in favour of the company. But for the purposes of s. 41(4)(a) of the Stamp Duties Act 1920-1949 (NSW) there may be a difference between such a transfer and a transfer to a person named in the contract as the intended transferee, even when that person is a company yet to be incorporated. In Lake Victoria Ltd v Commissioner of Stamp Duties [1949] NSWStRp 14; (1949) 49 SR(NSW) 262, at 265 Jordan CJ distinguishes, for the purpose of the application of s.41(4)(a), the case where the conveyance to a third party is made at the purchaser's direction from the case of a contract which provides for a conveyance to the purchaser or, not to the purchaser, but to some other person. In the latter case I understand his Honour regarded the conveyance as made in conformity with the contract, within the meaning of s.41(4)(a), and therefore as not chargeable with ad valorem duty. "A conveyance is not made in conformity with the agreement, unless it is made to the purchaser, or if the agreement provides that it is to be made not to the purchaser but to some other person, to that other person". Clearly enough Jordan CJ was here speaking of a person identified in the contract as opposed to any nominee, but I am not inclined to think that it makes any difference if the identifiable person is a contemplated company yet to be clothed with legal personality. As at present advised therefore I do not see why the transfer to the company should be regarded as otherwise than in conformity with the contract. The Commissioner of Stamp Duties, however, thought otherwise and determined that the transfers to the company were liable to ad valorem duty under s.42(5), that is, as conveyances by direction of the purchaser to someone else.[11]

43

In my opinion, the Parliament intended a similar outcome in the context of section 31 of the Act. Hence the expression "another person ('the first purchaser')" in section 31(1)(a) of the Act should be interpreted as including any person to whom the vendor agrees to transfer land, provided the person is identified in the contract, or is identifiable from the contract, as a transferee. However the words should not be interpreted to embrace an unidentified or unidentifiable person, even if the person may be a person to whom the vendor may ultimately be required to transfer the land.

44

Such a conclusion is consistent with the Commissioner's submission that one must look at the matter at the time of the agreement to determine whether section 31(1)(a) applies. Ironically, it is also a conclusion which may be thought to be consistent with the applicant's written submission, set out above, that the agreement must make provision for a transfer of dutiable property to an identified person; although the applicant would argue that it is not necessary that the person be identified at the time of the agreement.

45

The nominee (Morgan & Griffin Pty Ltd) was not identified in the agreement dated 21 December 2001. Nor was it identifiable by reference to the agreement. Rather it belonged to an indeterminate class, merely being a possible nominee of the applicant. It shared this class with all other persons. It follows that the nominee should not be regarded as being "another person", and thus "the first purchaser", pursuant to section 31(1)(a) of the Act.

46

Turning to the applicant's secondary argument, I find, applying the ratio decidendi in Politis, that the transferee in this case (Morgan & Griffin Pty Ltd) obtained equivalent rights to those held by the applicant. Hence I am bound to reject the argument.

47

Section 31 of the Act applies to the transfer of the land in this case. As a consequence, the decision to disallow the applicant's objection should be confirmed.

48

If I had a general discretion to set aside the Commissioner's decision and to allow the objection I would have done so: as the applicant has not received any consideration, and the nominee has not paid any consideration, in relation to the receipt by the nominee of equivalent rights to those held by the applicant.

[1] [2004] VSC 126.

[2] Anderson v Commissioner of Taxes (Vict.) [1937] HCA 24; (1937) 57 CLR 233, at 243.

[3] [1992] HCA 3; (1992) 173 CLR 492, at 510-511.

[4] [1980] HCA 50; (1980) 147 CLR 119, at 126 to 127 (footnote in original judgment not included). See also Hepples v The Commissioner of Taxation of the Commonwealth of Australia [1992] HCA 3; (1992) 173 CLR 492 at 510-511, per Deane J; and Commissioner of State Revenue v Viewbank Properties Pty Ltd [2004] VCC 127, at [38].

[5] [2004] VSC 126, at [17].

[6] [2004] VSC 126, at [27] and [28].

[7] See Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520, at 533 per Gleeson CJ, Gaudron, McHugh and Hayne JJ.

[8] As defined in section 31(1)(a) of the Act.

[9] [2003] VSCA 1 at [17].

[10] [1952] HCA 7; (1952) 85 CLR 336.

[11] [1952] HCA 7; (1952) 85 CLR 336, at 343-344.