Perpetual Trustee Co Ltd v Commissioner of State Revenue [2000] VSC 177

Perpetual Trustee Co Ltd v Commissioner of State Revenue [2000] VSC 177 - VSC 2000 case summary — Zoe

This latter submission has the ring of artificiality about it. Perpetual brings forward evidence of each event which occurred between the parties on 1 April 1997. The evidence is clearly relevant. It informs one as to the relationship between all the parties including the vendors and the purchaser PT as trustee of the WD Trust, and the nature of the commercial transaction they entered into on 1 April 1997. It informs one as to the nature of the constructive trust of which the vendors respectively became bare trustee and of the facts and the reason in law why such a trust arose on the payment of the purchase price and coming into existence of the Agreement. Clause 4 of the Agreement refers to and differentiates between the passing of the "beneficial title" and "the legal title" of the property. It seems a curious proposition that while evidence of the Offer and the Agreement and the background thus provided is admissible and relevant generally, for the purpose of determining whether exemption 23 operated the court is restricted to a consideration of the deeds of change of trustee and the instruments of transfer. Apart from any practical difficulties in drawing such a line, the language of the exemption provides no basis for doing so. Indeed, in my view Perpetual's approach would negative the breadth of the task which in this case is to consider whether as a matter of fact the instruments of transfer were executed solely in consequence of the change of trustee and in order to vest the real property of the trust in the name of the new trustee. If it had been the intention of the legislature that the factual inquiry thus raised should be confined to the terms of the instrument, if any, by which the change in the office of trustee was made, it would have been easy for that to have been stated. Reasons come readily to mind why the legislature did not take that course and so limit the breadth of the inquiry under the exemption. In my view acceptance of Perpetual's submission would constitute a fetter or limitation upon inquiry under the exemption which not only is not warranted by, but is contrary to, the plain meaning and intendment of the exemption.

[5]

I referred earlier to cl 4 of the Agreement. Paragraph (d) required the vendor, subject to the tenancies, to give possession of the property. That is, on completion on 1 April 1997 on payment of the purchase price the purchaser was entitled to immediate possession. Paragraphs (a), (b), (c) and (e) refer to the change of title. I referred to these sufficiently earlier. Paragraph (a) is important because it reflects that the parties had in contemplation the passing of the beneficial interest or "title" as cl 4(a) referred to it, and the legal title of the property, at different times or in different circumstances. It provides, in summary, that the vendor must on completion, subject to the Encumbrances and any legislation or regulation requiring registration for the passing of title, cause the unencumbered beneficial title to the property to pass to the purchaser. That is exactly what was done by the constructive trust, the existence of which the parties immediately recognised and acted upon. The conclusion is inescapable that the parties, and certainly the purchaser, treated the coming into existence of the constructive trust as performance or satisfaction of that requirement of par (a). The second obligation which par (a) imposed on the vendor concerned the legal title. The vendor, "if and when requested" to do so was to "cause the legal title of the Property to pass to the Purchaser". Further, by par (e) the vendor was also, on completion, to give an executed and registrable instrument of transfer for the property in favour of the purchaser. The vendor performed its obligations in this regard by providing executed instruments of transfer of the property in registrable form. It is immaterial that the transferor in each case was not PT in name but Perpetual which in that respect was acting as trustee for PT. The correct inference in my view is that the parties, in particular PT as the purchaser and the party liable for all stamp duty payable in respect of the agreement (cl 25), chose by these means to implement the agreement of sale and transfer the vendors' fee simple interest in possession to the purchaser. The obvious inference is that the purpose was to avoid stamp duty.

[30]

In the end I conclude, having considered all that both counsel submitted, that the Comptroller was correct in assessing the transfers to duty on the value of the fee simple estate in the land. In my view the fact that PT was entitled in equity to the land at the time when the instruments of transfer were executed did not mean that the transfers operated to convey a mere "bare legal title". The analysis of Hope JA and McLelland J of the nature of the fee simple estate in land indicates that there is one estate onto which is engrafted the equitable estate. As McLelland J stated, the right of PT under the trust was "to compel [the vendor] to hold and use those rights which the law [gave the vendor as the legal and absolute owner] in accordance with the obligations which equity has imposed on him by virtue of the existence of the trust". To carry into effect the transfer of ownership of the land it was necessary to transfer the legal estate to the purchaser. Such a transfer would not merely transfer "the legal title" (to use the expression in cl 4 of the Agreement). It would convey all the estate and rights of the absolute owner in fee simple in the land sold. That estate and those rights were of a different nature and more extensive than PT possessed under the equitable estate. As it turned out, the transfer of the legal estate was made not to PT but to a trustee for PT, clearly at PT's design and request as its desired way of obtaining a transfer of the legal estate. The instruments of transfer describe the estate and interest transferred as "all its estate in fee simple". That is, the transferor transferred to Perpetual (as trustee for PT) all the fee simple estate in the land, that being the legal estate on to which was engrafted the equitable estate held by PT. I refer, with respect, to Lord Jenkins' observation in Oughtred at 240 that in truth the title secured by a purchaser by means of an actual transfer is different in kind from and may well be far superior to, the special form of proprietary interest which equity conferred on a purchaser pending transfer.

Parties

Applicant/Plaintiff:

# Perpetual Trustee Co Ltd

Respondent/Defendant:

Commissioner of State Revenue \[2000\] VSC 177

Legislation Cited (5)

Civil and Administrative Tribunal Act 1998

Law of Property Act 1925

Income Tax Assessment Act 1936

Commercial Goods Vehicle Act 1958

Land Act 1958

Cases Cited (18)

[2000] VSC 177

The constructive trust referred to, and which is relied upon in the deeds is conceded by the respondent to have arisen when PT accepted the offer by paying the Purchase Price of $147M, and to have existed at the time when on 1 April 1997 the deeds were entered into. The effect of making the payment was to both bring into existence the agreement for the sale of the vendors' interests in the real estate and fully perform the purchaser's requirement to pay the Purchase Price. I note too that under cl 4 of the Agreement the vendor was required on completion to pass or transfer the beneficial and legal title to the purchaser and that the effect of cl 5 of the Agreement and the purchaser's actions is that the purchaser accepted title. In the result the "full beneficial entitlement or ownership of the properties" (to quote the respondent's counsel) passed to PT on the making and completion of the agreement in the manner stated. See McWilliam v McWilliams Wines Pty Ltd [1964] HCA 6; (1964) 114 CLR 656 at 660 per McTiernan and Taylor JJ, and Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at 521-523 per Deane and Dawson JJ for a statement of the relevant principle. In Stern at 523 their Honours said that:

The above is I think a fair summary or indication of the essence of Perpetual's written and oral submissions, to all aspects of which I have regard whether or not mentioned above. I specifically refer to the following aspects for the sake of clarity. At one point in Perpetual's written submission it was stated that the Commissioner's interpretation of exemption 23 might lead to the imposition of double duty upon a transfer by Perpetual to PT. That is not the present issue. Further, counsel put it as a "comment" without developing it as a critical consideration. As I understood it the comment was but faintly put by Perpetual's counsel as providing an answer in substance to the issues raised on this appeal. I treat the point accordingly and do not consider it further as an answer of substance to the efficacy of the assessments. I merely add without elaboration that counsel for the Commissioner submitted that exemptions 10 and 17 would provide an answer to the double duty point. Perpetual's counsel further disclaimed reliance on the balance of the references in par 31 of their written submission, namely s 64B of the Act and McKinnon Wallace Holdings Pty Ltd v Commissioner of State Revenue [1998] VSCA 59; [1999] 1 VR 397. I note too that counsel for Perpetual said that he did not wish to make much of the point in par 32 of the written submission that in the ISPT case it had not been suggested by the taxing authority that instruments of transfer executed in "relevantly similar circumstances were assessable with ad valorem duty"; see ISPT Pty Ltd v Chief Commission of Stamp Duties (NSW) (1997) 38 ATR 128, on appeal (1998) 45 NSWLR 639. That is obviously not a basis on which to rest the decision in this case.

It was submitted for the Commissioner that the Comptroller, and the Tribunal, had properly regarded the background facts or context provided by the transactions of 1 April 1997 in concluding that the instruments of transfer had not been executed solely in consequence of the change of trustee and in order to vest the real property of the trust in the name of the new trustee. In truth, counsel for the Commissioner submitted, regarding the substance and reality of the matter, the proper inference was that the steps of changing the trustee and then transferring the property to the new trustee were simply the means or method by which PT chose to carry the purchase of the property into effect. Accordingly, it was submitted, the Tribunal had been correct in drawing the inference that the transfers had not been executed solely because of the change of trustee and in order to vest the real property of the trust in the trustee for the time being. Counsel referred to several authorities as indicating that regard should be had to all relevant facts to determine what in substance occurred: Chesterfield Brewery Co v Commissioners of Inland Revenue [1899] 2 QB 7 at 13 per Wills J; Oughtred v Inland Revenue Commissioners [1959] UKHL 3; [1960] AC 206 at 233 per Lord Denning and 239-241 per Lord Jenkins; Fitch Lovell Ltd v Inland Revenue Commissioners [1962] 1 WLR 1325 at 1334 per Wilberforce J; Parinv (Hatfield) Ltd v Inland Revenue Commissioners [1998] Simon's Tax Cases 305 at 313 per Millett LJ.

Perpetual's counsel referred to two cases in which consideration had been given to the word "consequence" where it appeared in a statutory context: Reseck v Commissioner of Taxation [1975] HCA 38; (1975) 133 CLR 45 at 51 per Gibbs J and 56 per Jacobs J; American Home Assurance v Saunders (1987) 11 NSWLR 363 at 383 per Mahoney JA.

For his part counsel for the Commissioner referred to Baker v David Hose Pty Ltd [1961] VicRp 28; [1961] VR 176 and Bilney v Western Australian Transport Board [1961] HCA 2; (1961) 105 CLR 630 as providing guidance. Baker was a prosecution under the Commercial Goods Vehicle Act 1958 which imposed on the owner of a commercial goods vehicle a liability to pay a charge as compensation for wear and tear caused to the public highways. The charge was excepted while a vehicle was being used "solely for any or some of the purposes specified in" a Schedule to the Act. Those purposes included the carriage of berries and other soft fruits and certain market garden produce. The defendant argued that the exemption from the charge was attracted in the following circumstances. On its outward journey the defendant's truck carried goods for reward. When the trip commenced the owner of the truck would place one or two cases of fruit or vegetables in the cabin with instructions to the driver to transfer them to the body of the truck after the outward trip and before returning home. The purpose of doing this was to attract the exemption and thereby avoid the charge. In discharging an order nisi to review the conviction it was held by O'Bryan J that the purpose of the exemption was to benefit primary producers and not owners of commercial goods vehicles as such. The Schedule contemplated the carriage of goods for hire or reward in the course of a trade or business which the carriage in this case was not. Hence in carting the fruit and vegetables the vehicle was not being used for the carriage of goods within the meaning of the Schedule. O'Bryan would also have upheld the conviction on an alternative ground. That ground commenced with the proposition that it is always a question of fact to determine for what purpose a vehicle is at any time being used. The mere fact that articles of the prescribed type were being carried on the vehicle did not mean that the vehicle was being used for the purpose of carrying those articles within the meaning of the Act and the Schedule. In the circumstances the cases of fruit or vegetables were not carried for a commercial purpose in the course of a trade or business. O'Bryan J said that "They were merely being given a ride in the truck in the hope that thereby the tax would be avoided. It was indeed a sham 'carriage' and, in my opinion, the magistrate should have determined as a matter of fact that the vehicle was not on these occasions being used for the carriage of fruit or vegetables" (at 179). O'Bryan J referred with approval to the judgment of Virtue J in Bilney, whose decision was affirmed by the High Court on appeal subsequent to the decision of O'Bryan J. Bilney had arisen in similar circumstances under similar legislation in which the statutory expression was "used solely for the purposes mentioned in" a schedule. O'Bryan J concluded (at 180) that there must be reasonable grounds for concluding that a substantial and not merely a colourable use for one of the specified purposes had been involved. That was a matter of degree. O'Bryan J concluded that the use in question was merely colourable and that the magistrate had correctly found that the vehicle was not at the relevant time being used for any purpose stated in the Schedule.

(1964) 114 CLR 656

(1988) 165 CLR 489

(1998) 45 NSWLR 639

(1975) 133 CLR 45

(1987) 11 NSWLR 363

(1961) 105 CLR 630

(1980) 1 NSWLR 510

(1986) 5 NSWLR 309

(1993) 116 FLR 296

(1994) 50 FCR 405

(1926) 38 CLR 272

(1982) 149 CLR 431

At a glance

Court

Decision date

Before

Source

Judgment (33 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (18)