Plaintiff v Defendant

2 Duty of some $4M was imposed in relation to a transaction involving the purchase by TCL of land at 1486-1550 Centre Road, Clayton South ("the land").

3 The complete transaction involved a series of steps orchestrated according to legal advice and to a programme principally devised by the solicitors for the entity or entities interested in the purchase of the land, who might conveniently be referred to as the Macquarie Goodman interests. Although the complete transaction was somewhat complex, the elements of the transaction that are relevant to the questions that arise in this proceeding are, I think, quite simple and can be described as follows.

4 At all relevant times Clayton Business Park Pty Ltd ("CBP") was and remained the registered proprietor of the land. At the outset of the transaction, CBP was the trustee of the Clayton Business Park Trust, a discretionary trust[1] substantially existing for the benefit of members of the Lindsay Fox family. CBP held the land and sold in its capacity as trustee of the Clayton Business Park Trust.

5 By a contract of sale in writing dated 13 December 2002, CBP sold the land to TCL for a sum in excess of $74M and the contract provided that the price should be paid in full on the same day.

6 TCL purchased the land in its capacity as trustee of the Clayton 3 Trust, which was a unit trust.[2]

7 The contract of sale incorporated Table A contained in the Seventh Schedule to the Transfer of Land Act 1958.[3] Condition 12 of Table A provides that "[u]pon payment of all purchase and other moneys payable by the purchaser under the contract the vendor shall deliver to the purchaser such registrable instrument...of transfer of the land sold as will enable the purchaser to become registered as proprietor of the land sold and shall deliver to the purchaser the Certificate of Title..." Condition 12 goes on to provide that the instrument of transfer to the purchaser should be prepared by or on behalf of the purchaser. In addition, General Condition 13.1 of the contract of sale required the purchaser to provide the instrument of transfer to the vendor or its solicitors at least 10 days prior to the settlement date.

8 However, in this transaction, TCL did not provide an instrument of transfer of the land and, when the purchase money was paid, CBP did not deliver to TCL such a transfer, or any registrable transfer, of the land sold. Nor did CBP deliver to TCL the Certificate of Title.

9 At a later stage in the series of steps taken, CBP resigned as trustee of the Clayton Business Park Trust and the shares in CBP were sold for a nominal sum to TCL.[4] The records of CBP were handed over to the "new controllers" and those records included the Certificate of Title to the land. Thus, although no registrable transfer was ever executed or made and although the "vendor" (CBP) remained the registered proprietor of the land, the complete and effective control of the land came into the hands of the interests associated with the purchaser (i.e. the Macquarie Goodman interests).

10 The transaction was said by the Commissioner to be a dutiable transaction under s.7 of the Act as constituting either "a transfer of dutiable property" within the meaning of s.7(1)(a) of the Act or a "transaction that results in a change in beneficial ownership of dutiable property" within the meaning of s.7(1)(b)(vi) of the Act.

Duties Act 2000

11 The relevant provisions of the Act were as follows.

12 Section 3(1) of the Act contains the following relevant definitions:

"dutiable property" has the meaning given by section 10;

"dutiable transaction" has the meaning given by section 7(2);

"transfer" includes an assignment, a conveyance, an exchange and a buy-back of shares...

13 Duty is imposed by s.7 of the Act which, so far as relevant, provides:

(vi) any other transaction that results in a change of beneficial ownership of dutiable property (other than a change in beneficial ownership of dutiable property as a result of the issue, transfer, redemption or cancellation of units in a unit trust scheme).

(2) Such a transfer or transaction is a "dutiable transaction" for the purposes of this Act. "

14 In relation to dutiable transactions other than transfers, s.8 of the Act relevantly provided:

"(1) The duty charged by this Chapter on a dutiable transaction referred to in section 7 (1)(b) is to be charged as if each such dutiable transaction were a transfer of dutiable property."

15 Section 8 (2) of the Act then goes on to provide how these other transactions were to be treated as transfers of dutiable property. Relevantly,[5] in the case of a transaction resulting in a change in beneficial ownership of dutiable property, the property treated as transferred is the property the beneficial ownership of which was changed (but only to the extent of the change) and the transferee is treated as being "the person who obtains the beneficial ownership or whose beneficial ownership is increased" and the transfer is taken to have occurred when the beneficial ownership changes.

16 Section 9 of the Act provides that a dutiable transaction may be effected or evidenced wholly or partly in writing or wholly or partly orally and may be effected or recorded by any means, including electronic means.

17 Section 10 (1) of the Act defines dutiable property and for present purposes the only relevant part of that section is:

"(1) "Dutiable property" is any of the following -

(a) each of the following estates in land in Victoria -

18 A liability for duty charged arises when a dutiable transaction occurs[6] and duty is payable by the transferee.[7]

Was there a transfer of dutiable property, namely, a transfer of an estate in fee simple in the land?

19 At first blush, there would appear to have been no "transfer" of an "estate in fee simple" in the land because a contract of sale is not of itself a transfer of such estate, there was no instrument of transfer and the registered proprietor never changed.

20 Mr de Wijn SC who appeared with Mr Richmond of counsel on behalf of the appellant submitted that, to constitute a transfer, there had to be a transfer of something (in this case an estate in fee simple) from A to B. In the present case, he submitted, CBP owned the legal estate in fee simple both at the commencement of the transaction and at the conclusion of the transaction, so that there was no transfer at all of the legal estate in fee simple in the land. Further, insofar as s.10(1)(a)(i) of the Act covered an equitable estate in fee simple as well as a legal estate in fee simple, CBP never held an equitable estate in fee simple (as it was a trustee) and it was not possible to identify the transfer of an equitable estate in fee simple from, or to, any identifiable entity or entities.

21 On the other hand, arguments supporting the contention that, despite the absence of an instrument of transfer, there was a transfer of an estate in fee simple within the meaning of the Act are to be found in the Commissioner's determination and in the written submissions provided on behalf of the Commissioner. However, Ms Harding, who appeared as counsel for the respondent Commissioner, made it clear that no reliance was placed upon any contention other than those advanced by her orally and that the written submissions were relevant only to the extent that they related to the contentions advanced orally.

22 Ms Harding submitted that, taking a "purposive" approach to the applicable provisions, although legal title to the property could not have been transferred in the absence of a transfer of land, that there was, as between the vendor CBP and the purchaser TCL, a "passing of the rights of ownership from one to another". She submitted that the transfer had concluded with the payment of the purchase price under the contract of sale. Ms Harding submitted that TCL had thus acquired against CBP all of the rights of ownership of the property, including the right to become registered as proprietor, if it chose to do so. Ms Harding acknowledged the effect of s.40(1) of the Transfer of Land Act 1958 to the effect that no instrument until registered was effectual to create or pass any estate of interest in land under the operation of that Act. When I pressed her as to what "estate in fee simple" had been transferred, Ms Harding said that in her submission an equitable estate in fee simple had been transferred by virtue of the contract of sale, together with the payment of the purchase money (and/or upon the completion of the other steps taken in the transaction). Ms Harding said that she was unable to refer to any authority to support this submission. It is fair to say that, although the Commissioner's primary contention may previously have been based on the existence of a transfer of an estate in fee simple, this was not the primary submission advanced on behalf of the Commissioner on the appeal[8].

23 I consider that the authorities cited on behalf of the appellant support the submission that there was no transfer of an estate in fee simple in this case. These authorities were as follows.

24 In Coles Myer Ltd v Commissioner of State Revenue,[9] Ormiston JA said:

"There are two parties to every transfer, the transferor who disposes of all rights in the transferred property and the transferee who receives or acquires them so as thereafter to have the power to exercise effectively the same rights in the future. For an instrument to be properly characterised as a "transfer" one must to be able to find that the property has passed from transferor to transferee so that the property is vested in the transferee who for all practical purposes is then capable of exercising the same rights as were capable of being exercised by the transferor before the transfer was executed."

25 Ormiston JA continued in the same case[10] to refer to dictionary definitions of "transfer" and then said:[11]

"Although the word "transfer" is not a term of art and is a word of wide connotation, to my way of thinking it is the passing of rights to another, so as to vest them in that other person, which is essential to a transfer, properly understood. It is not a mere disposition, a ridding oneself of the right of interest, it is the vesting in the transferee of that right or interest, precisely or substantially, which is necessary to effect a transfer, as ordinarily understood in the law."

26 Applying the above analysis, it is difficult to conclude that CBP transferred to TCL the legal estate in fee simple in the land, either "precisely" or "substantially", and indeed Ms Harding did not so contend.

27 In The Commissioners of Inland Revenue v Angus & Co.[12], there was a question of liability to stamp duty upon a "conveyance or transfer on sale of any property"[13] in relation to an agreement for the sale of the goodwill of a business. The Divisional Court said that the agreement did not operate as a transfer, either legally or equitably, of the property comprised therein, although no doubt it would have conferred upon the purchaser a right legally and equitably to have such a conveyance made in the event of all the conditions precedent being fulfilled at settlement.[14] The Court of Appeal upheld the decision of the court below and in the course of doing so Lord Esher MR said,[15] in substance, that an agreement for the sale of legal property, in respect of which equity would grant specific performance, did not constitute a conveyance of legal property (nor was there any equitable property to convey).

28 In Acorn Computers Ltd v MCS Microcomputer Systems Pty Ltd[16], the Federal Court was concerned with a statement of claim that alleged an agreement to purchase certain assets including certain copyrights from the legal owner of such copyrights. Smithers J said:[17]

"It is normally the consequence of such a transaction that, value having been given, an equitable interest in the subject thereof arises in the party giving it [citations omitted]. In such a case the equitable interest arises not by way of transfer but by activation in equity of the conscience of the receiver of the valuable consideration. A trust is created; there is not a transfer or assignment; there is no transmission of an equitable interest...where there is an enforceable contract to transfer property, the equitable interest arising in the proposed transferee is not the product of a transfer but an exercise in creation."

29 The above passages support the appellant's proposition that a contract of sale of legal property (here the legal estate in fee simple), capable of specific performance, does not transfer that legal property and that, insofar as such a contract results in the purchaser having equitable rights or interests, these rights or interests in equity are not transferred by the contract but are simply created thereby and arise in the purchaser. Even if that were not so, it cannot properly be said that such a contract, when dealing with land, or that the transaction however viewed, constituted the transfer of an equitable estate in fee simple.

30 The foregoing analysis is supported by other authorities in relation to the effect of a contract for the sale of land and it is convenient to refer briefly to some of them, although they were not cited by either party.

31 In Lysaght v Edwards,[18] Jessel MR said:

"It appears to me that the effect of a contract for sale has been settled for more than two centuries; certainly it was completely settled before the time of Lord Hardwicke, who speaks of the settled doctrine of the court as to it. What is that doctrine? It is that the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for security of that purchase-money, and a right to retain possession of the estate until the purchase-money is paid...In other words, the position of a vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity, (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz possession of the estate and a charge upon the estate for his purchase-money."

32 Thus, the contract for sale does not transfer an estate in fee simple (legal or equitable) but the vendor becomes a trustee for the purchaser of the legal estate. Jessel MR described this as involving the passing of the "beneficial ownership" and this aspect may be relevant to the second basis relied upon by the Commissioner (see later below).

33 The above statement by Jessel MR was referred to by Kitto J in Haque v Haque [No. 2][19] as follows:

"But by the operation of well-known equitable principles the making of the contract had to an extent transferred the beneficial ownership to the purchaser. The [vendor] was not a mere trustee for the purchaser, but his position was something between that of a mere trustee and a mortgagee...[here Kitto J refers to the above statement by Jessel MR and then continues]...Accordingly for some purposes he was in the position of a trustee, though for some he was not...[citations and references to other cases omitted]... The vendor is "in progress towards" trusteeship; and the incidents of trusteeship exist only if and so far as a Court of Equity would in all circumstances of the case grant specific performance of the contract."

34 In Bunny Industries Limited v F.S.W. Enterprises Pty Ltd,[20] Connolly J (with whom Andrews SPJ and Thomas J agreed), after referring to the above statement by Kitto J, said:

"The principles may be summed up for present purposes as follows:

1. On the execution of the contract the vendor becomes a trustee for the purchaser. He is not however a bare trustee for he has a personal and substantial interest to the extent of the unpaid purchase moneys. He is "in progress towards" bare trusteeship and finally becomes such when the whole of the purchase moneys are paid and he is bound to convey: Wall v Bright [1820] EngR 472; 1 Jac. & W. 494; 37 ER 456 per Sir Thomas Plumer MR.

2. The purchaser may devise, alienate and charge his equitable interest so that it is plainly not a mere right in contract.

3. The extent of the equitable interest is measured by the amount of the purchase moneys paid. Thus to the extent of the payments the purchaser acquires a lien exactly as if the vendor had given a mortgage to secure them: Rose v Watson [1864] EngR 300; (1864) 10 HLC 672 per Lord Cranworth at p. 684.

4. Where there is a clear and undisputed contract, the Court will not permit the vendor to transfer the legal estate to a third person and the reason for this was explained by Turner LJ in Hadley v London Bank of Scotland [1865] EngR 585; 3 De G.J. & S. 63 at p.70; [1865] EngR 585; 46 ER 562 at p. 564 as being because in equity the property was transferred to the purchaser.[21]

5. The incidents of trusteeship exist only if and so far as a Court in Equity would in all the circumstances of the case grant specific performance of the contract."

35 In K.L.D.E. Pty Ltd v Commissioner of Stamp Duties (Qld),[22] the High Court was concerned with a provision in the Queensland Stamp Act exempting duty on a transfer of property between companies where those companies were "associated companies" for the whole of the time during which that property or a substantial interest therein was "owned" by the transferor or where certain other conditions were satisfied during the whole of the time since the property came into the "ownership" of the transferor. The majority (Gibbs CJ, Mason, Wilson and Dawson JJ) said that, in the context of the particular legislation, the words "owned" and "ownership" referred to beneficial ownership. After referring to the above quoted statements by Jessel MR and Kitto J, they said[23]:

"Where the contract is capable of being specifically performed the vendor, pending payment of the balance of purchase price, is not a bare trustee (he has been described as a trustee sub modo: see Chang v Registrar of Titles). However, so far as the interest of the purchaser is concerned, this Court was clearly of the view in Reg. v Australian Broadcasting Tribunal ; ex parte Hardiman that "a purchaser who can by way of specific performance compel a transfer of shares under a contract is a beneficial owner of the shares": per Gibbs, Stevens, Mason, Aickin and Wilson JJ). More recently in Legione v Hateley, Gibbs CJ and Murphy J said:

"There is no doubt that when the purchasers executed the contract and paid the deposit the beneficial ownership of the land passed to them subject to the payment of the purchase money."

[after referring to a "slightly different view" taken by Mason and Deane JJ, they continued]

These differences of view do not detract from the force of the statement that a purchaser under a contract for the sale of land which is specifically enforceable has a beneficial ownership in the land, albeit one conditional on, amongst other things, payment of the price."

36 In the same case, Brennan J, in a dissenting judgment, said[24]:

"When [the purchaser] entered into the contract for the purchase of the property.., it acquired an equitable interest in it. That interest arose out of the contract and it was commensurate of the benefit of so much of the vendor's obligation to perform it as a court of equity would enforce [citations omitted]...

It seems to me to be inaccurate to describe as ownership the interest which a purchaser acquires on entering into a contract for the sale of land before he is entitled to call for conveyance of what he has contracted to purchase. Until the vendor is under an obligation to convey the title which the purchaser has contracted to purchaser the purchaser cannot himself show title to the property. He owns an interest in the property but he does not own the property. When a purchaser, on payment of the price becomes entitled to insist upon conveyance of title of the property he has contracted to purchase, he may rightly be described as the owner of it. [citation omitted]. If the vendor then refuses or declines to convey or is disabled from doing so, the purchaser is entitled to a vesting order [citation omitted]. Until the purchase is entitled to insist upon conveyance of title of the property which he has contracted to purchase, it may be right to describe the vendor as a trustee sub modo of the property and the purchaser as the beneficial owner of it sub modo. Thought the purchase has sometimes been described as a beneficial owner once the contract is unconditional, the effect of an unconditional contract for the sale of land is more accurately stated by Kitto J as transferred "to an extent" the beneficial ownership of the land: Haque v Haque...I would hold the interest of the purchaser to fall short of ownership unless and until a purchaser is entitled to insist upon a conveyance of title to the property.

...[the purchaser's] interest upon entering into the contract was potentially the interest of a full beneficial owner of the whole of the land. Such an interest has sometimes been described as beneficial ownership subject to the payment of the purchase money [citations omitted]."

37 It is to be noted that the majority judgment in K.L.D.E. uses the term "beneficial ownership" to refer to the position of the purchaser under a specifically enforceable contract for the sale of land but that Brennan J said that he would hold the interest of the purchaser to fall short of "ownership" unless and until the purchaser was entitled to insist upon a transfer. Again, these statements may be relevant to the second basis relied upon by the Commissioner.

38 In an earlier case of McWilliam v McWilliams Wines Pty Ltd[25] (which was cited by Ms Harding), in the course of dealing with a slightly different problem, McTiernan and Taylor JJ said[26]:

"Under a contract for the sale of land...the vendor assumes an obligation, subject to the terms of the contract, to execute a conveyance of the land sold to the purchaser or as he may direct. Further, where the purchase money specified in the contract has been paid the purchaser become entitled in equity to the land and the vendor thereafter become a bare trustee."

39 In my opinion, none of the above quoted passages support the proposition that, in the case of a contract for the sale of land, there is any transfer of an equitable fee simple in the land from the vendor to the purchaser. They are consistent with the proposition that, after the payment of the purchase money, the purchaser has an equitable interest in the land which, even if it may be described as an equitable estate in fee simple, is one that has arisen as a result of the transaction but is not an estate or interest that is transferred by the vendor to the purchaser.

40 I conclude, for these reasons, that there was no transfer of an estate in fee simple, either legal or equitable, within the meaning of s.10(1)(a)(i) of the Act.

Was there a transaction that resulted in a change of beneficial ownership of dutiable property (such dutiable property being an estate in fee simple in the land)?

41 The essence of the appellant's case on this limb was that there could not be a "change" of beneficial ownership when there were no beneficial owners of an estate in fee simple either at the commencement of the transaction or at its conclusion. At the commencement of the transaction, CBP was a trustee for a discretionary trust and hence was not the beneficial owner of the estate in fee simple. Further, having regard to the terms of the trust, there were no persons that could be identified as beneficial owners of the trust assets, and hence of the estate in fee simple in the land. At the conclusion of the transaction, TCL was entitled to a transfer of the estate in fee simple in its capacity as trustee of a unit trust. Hence TCL was not the beneficial owner of the estate in fee simple and, having regard to the terms of the trust, there were no persons that could be identified as beneficial owners of the assets of the unit trust (let alone beneficial owners of an estate in fee simple in the land). It was submitted that if one could not identify a beneficial owner of the fee simple before the transaction and a beneficial owner of the fee simple after the transaction, there could not be a change of beneficial ownership in the estate in fee simple in the land. In further support of that submission, the appellant pointed to the contents of the Table attached to s.8 of the Act. That Table provided that the person liable to pay the duty (the transferee)[27] was "the person who obtains the beneficial ownership or whose beneficial ownership is increased". This confirmed, it was submitted, the contention that a change of beneficial ownership necessarily involved the identification of a beneficial owner or owners at the conclusion of the transaction.

42 The appellant referred to Wilcox v Smith[28] in which the Vice-Chancellor said, in the context of succession duty legislation that referred to dispositions of property whereby a person became "beneficially entitled to any property", that "beneficially" meant "for his own benefit" in contradistinction to being entitled as a trustee. In White v Commissioner of Stamp Duties,[29] Gibbs J (as he then was), dealing with similar legislation in Queensland, referred with approval to the above statement in Wilcox v Smith[30] and went on to refer to the concept of "beneficial interest". Of course, these cases were concerned with the expression "beneficially entitled" rather than the term "beneficial ownership".

43 The appellant then referred to Commissioner of Taxation v Linter Textiles Australia Ltd (in liq)[31]. In that case the High Court was concerned, inter alia, with the expression "beneficially owned" in s.80A of the Income Tax Assessment Act 1936 (Cth), a provision dealing with tax losses. In that context, the question arose whether a company that was undoubtedly the beneficial owner of shares in the taxpayer remained so when it went into liquidation. The majority held that the appointment of a liquidator to the shareholder company had not resulted in these shares ceasing to be beneficially owned by it. In the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Hayden JJ it is said:[32]

"...the principal issue on this branch of the appeal becomes...one of construing the phrase "beneficially owned" in s 80A(1). The phrase is to be construed in context and must reflect the purposes of the section in which it occurs" (citation omitted).

The Commissioner submitted that in the present context "beneficially owned" meant the ability of [the shareholder company] to use its shares in [the taxpayer] for its own benefit, by selling them and applying the proceeds as it thought fit; the liquidator of [the shareholder company] had had the power to cause the transmission of the ownership of the shares of [the shareholder company] in [the taxpayer], but "beneficial ownership" by [the shareholder company] had been lost because the liquidator was bound to apply proceeds of sale in accordance with the statutory formula of distribution between creditors.

The term "beneficial" is usually employed in trust law as a cognate of "beneficiary". That term identifies those persons for whose benefit the trustee of a private trust...is bound to administer the trust property. Where A holds Blackacre on a bare trust for B, it may accurately be said that B is the beneficial owner.

But that use of the word "owner" does not entail enjoyment by B of all the rights which the law as a whole confers in relation to Blackacre. Thus, as Hope JA explained in DKLR Holding Co. (No. 2) Pty Ltd v Commissioner of Stamp Duty (NSW), although B may be entitled by equitable remedies to be put into possession, B cannot sue A in ejectment."

44 Their Honours went on to explain why the change in control of the affairs of the shareholder company had no impact upon its beneficial ownership of the shares. They said that the administration of the company by a liquidator did not carry any corollary that the shares owned by it were no longer "beneficially owned". They added:[33]

"To adapt the reasoning of Menzies J in Franklin's, the ownership of the shares was not "for the benefit of others"..."

45 McHugh J agreed with the majority judgment and said, in relation to one of the arguments put on behalf of the Commissioner, that the making of a winding up order did not create any kind of "trust" in relation to the company assets such that the company no longer beneficially owned those assets.[34]

46 The appellant then referred to CPT Custodian Pty Ltd v Commissioner of State Revenue of the State of Victoria[35]. That case was concerned with the provisions of the Land Tax Act 1958 (Vic) that imposed tax in respect of land of which a taxpayer was the owner at a given date. The definition of "owner" included "every person entitled to any land for any estate of freehold in possession". Other provisions provided for the assessment of owners of any equitable estate or interest in land as if that estate or interest was legal and also for the assessment of a person in whom land was vested as a trustee as if he were beneficially entitled to such land. Another provision provided for the joint assessment and liability of joint owners of land as if that land were owned by a single person. One of the questions in the case was whether companies who held units in unit trusts could be treated as the owners of the equitable estate of freehold in possession of the land held by the trustees of those unit trusts so as to enable them to be treated as joint owners. The High Court held that the unitholders were not owners of an estate of freehold in possession or of any equitable estate or interest in the land and therefore could not be treated as joint owners. The High Court (Gleeson CJ, McHugh, Gummow, Callinan and Hayden JJ) said[36] that a priori assumptions should not be made as to the nature of a "unit trust" (or a "discretionary trust"). It all depended on the terms of the particular trust. The trust deeds needed to be analysed to see whether unit holders had any entitlement to any estate of freehold in possession and not simply to see whether a unit holder had under the trust deed a proprietary interest in the assets comprising the trust fund. It was one thing to identify rights protected by a court of equity and another to identify an interest which had the necessary quality of definable extent which must exist before it can be taxed:[37]

"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."

47 The High Court adopted[38] the statement of Griffiths CJ in Glenn v Federal Commissioner of Land Tax[39] questioning the assumption that whenever a legal estate in land is vested in a trustee there must be some person other than the trustee entitled to it in equity for an estate of freehold in possession. They referred to this statement as the "prescient rejection of a "dogma" that, where ownership is vested in a trustee, equitable ownership must necessarily be vested in someone else."

48 The analysis in CBT Custodian shows, I think, that a unit trust of the kind existing in the present case does not give the unit holders the beneficial ownership of any land to which the unit trust is entitled. The Commissioner did not really contend to the contrary.

49 The appellant next referred to Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic)[40]. In that case, the taxpayer was the trustee of 11 discretionary trusts and one unit trust. The Commissioner assessed the taxpayer on the basis on the total value of all land held by the taxpayer as trustee of the 12 trusts. The taxpayer argued it was "the owner of different lands in severalty in trust for different beneficial owners". The Court of Appeal held that, whatever the equitable interests of the takers in default under the discretionary trust were, they were vested in interest and not vested in possession, so that there were no beneficial owners within the meaning of the Land Tax Act. The Court of Appeal further held that the nature of the discretionary beneficiary interest was such that it did not confer the required proprietary interest in the land. This case turns upon the proper construction of the particular legislation involved, in which the expression to be interpreted expressly imported the trust concept. However the case does support the contention that, subject always to the terms of the given trust deed, it is difficult to treat the beneficiaries of a discretionary trust as being the beneficial owners of land held by that trust.

50 Both parties referred to the case of Halloran v Min. National Parks[41]. That case was concerned with compensation under the land acquisition legislation of New South Wales and a question arose in it as to whether, for the purposes of the Stamp Duties Act of New South Wales, there had been "a transaction which...causes or results in a change in the beneficial ownership of an estate or interest in land". At the relevant time Sealark Pty Ld had an unregistered and hence equitable interest in the land. The directors of Sealark resolved to accept an offer by P as trustee of a trust to acquire the land in consideration of the allotment to Sealark of a number of units in the trust and these units were issued to Sealark. The High Court held that the transaction had caused or resulted in a relevant change in beneficial ownership of an estate or interest in the land.

51 In the principal judgment (that of Gleeson CJ, Gummow, Kirby and Hayne JJ), their Honours pointed out that the relevant provision in the Stamp Duties Act was contained in a Division of the Act enacted as "an anti-avoidance measure designed to strike a broad range of tax avoidance schemes".[42] Their Honours said[43] that when the units were issued to Sealark (if not earlier, when Sealark accepted P's offer) a change in the relationship between Sealark and P took place. The equitable interest in the land became vested in P as trustee of the trust. It might be convenient to describe Sealark in those circumstances as in the position of a trustee for P under a bare trust. Thus there had been a change in the "beneficial ownership". Their Honours then dealt with a further argument that, because Sealark was the sole unit holder in the trust, the "beneficial ownership" of the equitable interest in land had not changed. They rejected this argument in line with the reasoning in CBT Custodian because, having regard to the terms of the trust deed, Sealark did not have any interest in any particular part of the trust fund - there had thus been "a change" in the beneficial ownership.

52 Hayden J agreed with the majority, save that he considered that the change in beneficial ownership occurred when a constructive trust arose as a result of Sealark's acceptance of P's offer - at that moment, the beneficial ownership of Sealark's equitable interest changed, at least to some extent, he said. He said that the interest of P as purchaser was commensurate with its ability to protect that interest by obtaining specific performance.[44]

53 It was submitted on behalf of the appellant that Halloran was clearly distinguishable from the present case for at least two reasons. The first reason was that Sealark was the beneficial owner of an equitable interest in the land in question (whereas in this case CBP had not been the beneficial owner of any estate or interest in the land). Sealark therefore had the capacity to enter into a transaction that might cause or result in a change in that beneficial ownership. The second reason was that the statute there in question was concerned with a change in the beneficial ownership of any estate or interest in land, whereas s.7(1)(b)(vi) of the Duties Act was concerned only with changes of beneficial ownership of dutiable property (i.e. an estate in fee simple). Thus, in the present case, there could have been no change in beneficial ownership of the estate in fee simple because there was no beneficial owner of that estate at any relevant time, either before during or after the transaction.

54 It can be seen from the foregoing that the appellant's submission places major emphasis upon the capacities in which the vendor and the purchaser acted in this transaction. CBP sold in its capacity as a trustee and was not therefore a beneficial owner of an estate in fee simple in the land. TCL purchased in its capacity as a trustee and did not therefore become a beneficial owner of an estate in fee simple in the land. It would follow that, if CBP had sold as beneficial owner (not being a trustee) and TCL had purchased as beneficial owner (not being a trustee), the transaction would have resulted in a change of beneficial ownership. Indeed, if CBP had sold in its capacity as trustee but TCL had purchased as beneficial owner (not being a trustee) that too would have resulted in a change of beneficial ownership of the estate in fee simple, because the beneficial ownership, although not transferred from one beneficial owner to another, had nevertheless changed - this analysis is supported by Halloran. So it would appear that the key factor in the appellant's argument is that TCL purchased the land in its capacity as a trustee and not on its own behalf and therefore could not be regarded as the beneficial owner of an estate in fee simple in the land.

55 On the other hand, it was submitted on behalf of the Commissioner that Halloran supported the submission that the transaction in the present case had resulted in a change of beneficial ownership. It was submitted that when TCL paid the purchase money to CBP, TCL became entitled in equity to the land and CBP thereafter became a bare trustee for TCL. There was thus a change of beneficial ownership (of the estate in fee simple) from CBP to TCL. It was submitted, emphasising a purposive approach to the interpretation of the statute, that there could be a "change of beneficial ownership" even if the entities involved were not beneficial owners, so that there was a change of beneficial ownership despite the fact that TCL was purchasing the land in its capacity as a trustee and not on its own behalf. Further, it was irrelevant that CBP had sold the land in its capacity as a trustee, or that it subsequently became a unit holder in the Clayton 3 Trust.

56 It was submitted on behalf of the Commissioner that "beneficial ownership" was apt to cover CBP even in its capacity as trustee. CBP was the owner of the land subject to the equitable obligations imposed by the discretionary trust. Although the exercise of its rights of ownership were restricted by its obligations under the trust deed, CBP had the beneficial ownership of the property and of the estate in fee simple. It was argued that when a person holds the legal estate in fee simple on trust that person has against the world all the rights of an absolute owner but, as against the beneficiary, those rights had to be exercised in accordance with the equitable obligations. When TCL purchased the property and paid the purchase money, it was submitted, there was a change of beneficial ownership as the land was then held on constructive trust for TCL.[45]

57 The Commissioner's argument is not without its attractions. The land had been bought and sold, the purchase money was paid and the purchaser was entitled to a transfer. The authorities support the proposition that, in those circumstances, the vendor is a bare trustee for the purchaser and, as between the vendor and the purchaser, the beneficial ownership has been transferred.[46] In the present case it would seem to be irrelevant, on this analysis, that the land had been sold by CBP (an entity acting on behalf of one set of interests under a trust) to TCL (an entity acting on behalf of a different set of interests under a different trust). There would seem to be no logical reason to treat that transaction as being any different to one of the same kind in which those entities were each acting on their own behalf. As between vendor and purchaser, the legal consequences of a contract for the sale of land and the payment of the purchase money thereunder do not to depend upon whether the parties were contracting on their own behalf or in their capacity as trustees. In either case, the vendor typically becomes a bare trustee for the purchaser once the purchase money has been paid and the purchaser's entitlement to a transfer has become unconditional. That situation has been characterised as involving the transfer or passing of beneficial ownership to the purchaser and such description does not appear to depend upon the capacity in which the purchaser is buying the land.

58 A similar problem to the "beneficial ownership" problem considered in Linter had earlier been considered by the House of Lords in Ayerst (Inspector of Taxes) v C. & K. (Construction) Ltd.[47] That case was not followed by the High Court in Linter but I do not think that that detracts from the correctness of the statement by Lord Diplock in Ayerst as follows:[48]

"My Lords, the concept of legal ownership of property which did not carry with it the right of the owner to enjoy the fruits of it or dispose of it for his own benefit, owed its origin to the Court of Chancery. The archetype is the trust. The "legal ownership" of the trust property is in the trustee, but he holds it not for his own benefit but for the benefit of the cestui que trust or beneficiaries. Upon the creation of a trust in the strict sense as it was developed by equity the full ownership in the trust property was split into two constituent elements, which became vested in different persons: the "legal ownership" in the trustee, what came to be called the "beneficial ownership" in the cestui que trust. But it did not follow even in equity that a person could only be the legal owner without being at the same time the beneficial owner in cases where it was possible to identify some other person or persons in whom the beneficial ownership had become vested. Executorship of an estate in course of administration provides one example which does not owe its origin to statute. No one would suggest that an executor, who was not also a legatee, was beneficial owner as well as legal owner of any of the property which was in the full ownership of the deceased before his death. He could not enjoy the fruits of it himself or dispose of it for his own benefit. Yet because an estate while still in the course of administration was incapable of satisfying the technical requirement of a "trust" in equity that there had to be specific subjects identifiable as the trust fund, it was impossible to identify, at any rate in the case of residuary legatees, a person or persons in whim the beneficial ownership in any particular property forming part of the estate was vested: see Commissioner of Stamp Duties (Queensland) v Livingston [1964] UKPC 2; [1965] AC 694, 707-708 per Viscount Radcliffe."

59 The question is: what is meant by "beneficial ownership" in the Act? Some commentators, writing about the use of the term in tax legislation, have pointed out that "beneficial ownership" is not necessarily the same as holding a "beneficial interest" or having an entitlement to an "equitable interest".[49] Nevertheless the cases[50] at least support a presumption that when the words "beneficial ownership" are used the legislature has in mind the distinction as described by Lord Diplock in the above quoted passage, that is, a technical reference to an entitlement in equity. I think that the intent and purpose of s. 7(1)(b)(vi) of the Act was to catch transactions in which, although there was no transfer of the estate in fee simple in the land, there was a change in the underlying equitable interests so that, in substance, there was a change of "ownership". The difficulty is that, by using the term "beneficial ownership", the section arguably fails to catch transactions in relation to which no "beneficial owner" can be identified and thus arguably fails to catch changes in underlying equitable interests where the beneficiaries, say, of a discretionary trust or of a unit trust, cannot be characterised as beneficial owners of any interest in land held by the trust, or, at least, not as beneficial owners of an estate in fee simple in such land. The Table to s. 8 of the Act makes it clear that it is necessary to identity the person who "obtains" the beneficial ownership of the estate in fee simple.

60 The question in the present case comes down to whether TCL can be regarded as the "beneficial owner" because the estate in fee simple, once the purchase money was paid, was held by CBP on a bare trust for TCL and hence, as the cases suggest, "beneficial ownership has passed to the purchaser" - or, on the contrary, that TCL cannot be described as the beneficial owner of an estate in fee simple in the land if regard is had to its status as a trustee. The judicial statements speaking of the passing of beneficial ownership to a purchaser under a contract for sale of land were made in contexts in which the question of trustee capacity did not arise. I also think that Halloran is to be distinguished in the way submitted by the appellant.

61 While it may be convenient shorthand to say that, once the purchase money has been paid and the vendor holds as a bare trustee, beneficial ownership has passed, I think that it is offensive[51] to the concept of beneficial ownership to say, in the case of a trustee purchaser, that the trustee has "obtained the beneficial ownership" of an estate in fee simple in the land by paying the purchase money. The trustee holds not for itself but for the benefit of others. Not without some doubt, I do not think that the language of the statute can be stretched to capture this transaction despite the evident policy underlying the relevant provision.

62 For those reasons, I think that the appeal should be allowed and the assessment set aside. There was a further ground of appeal relating to the imposition of penalty tax which does not, in those circumstances, arise. However I should state that in my opinion the Commissioner, in exercising his discretions under s. 30 of the Taxation Administration Act 1997 took into account improper and irrelevant circumstances and I would have remitted this matter to the Commissioner for reconsideration according to law.

[1] It was common ground that it was appropriate and convenient to describe the Clayton Business Park Trust as a discretionary trust.

[2] It was common ground that it was appropriate and convenient to describe the Clayton 3 Trust as a unit trust.

[3] See General Condition 9.1 of the contract of sale

[4] In a capacity other than as trustee of the Clayton 3 Trust.

[5] See the final item in the Table to s.8(2) of the Act.

[6] Section 11 of the Act.

[7] Section 12 of the Act.

[8] Indeed, Ms Harding passed rapidly to what she said was her primary submission, that there had been a change of beneficial ownership.

[9] [1998] 4 VR 728, 730.

[10] [1998] 4 VR 728, 739-741.

[11] [1998] 4 VR 728, 740.

[12] (1889) 23 QBD 579.

[13] The Stamp Act 1870 defined "conveyance on sale" to include "every instrument...whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser".

[14] (1889) 23 QBD 579, 585 per Hawkins J.

[15] (1889) 23 QBD 579, 589-593.

[16] [1984] FCA 339; (1984) 6 FCR 277.

[17] [1984] FCA 339; (1984) 6 FCR 277, 281-282. See too Khoury v Khouri (2006) NSWLR 241, 255, per Bryson JA; Ord Forrest Pty Ltd v Commissioner of Taxation [1974] HCA 57; (1974) 130 CLR 124, 143-144, 148.

[18] (1876) 2 Ch D 499, 506; see too J Sainsbury PLC v O'Connor (Inspector of Taxes) [1991] 1 WLR 963, 978.

[19] [1965] HCA 38; (1965) 114 CLR 98, 124.

[20] [1982] Qd R 712 (the Full Court, Supreme Court of Queensland).

[21] I think that the reference by Turner LJ to the property being "transferred" in equity to the purchaser is a broad expression that must be taken in context - and it is also followed by the words "the vendor then becomes a trustee for him".

[22] [1984] HCA 63; (1984) 155 CLR 288.

[23] [1984] HCA 63; (1984) 155 CLR 288, 296-7.

[24] [1984] HCA 63; (1984) 155 CLR 288, 300-301.

[25] [1964] HCA 6; (1964) 114 CLR 656.

[26] [1964] HCA 6; (1964) 114 CLR 656, 660.

[28] (1857) Drew 40, 51; 662 ER 16,20

[29] [1968] Qd R 140.

[30] [1968] Qd R 140, 149-150.

[31] [2005] HCA 20; (2005) 220 CLR 592.

[32] [2005] HCA 20; (2005) 220 CLR 592 at [50].

[33] [2005] HCA 20; (2005) 220 CLR 592 at [58].

[34] [2005] HCA 20; (2005) 220 CLR 592 at [127].

[35] [2005] HCA 53; (2005) 224 CLR 98.

[36] [2005] HCA 53; (2005) 224 CLR 98 at [14] et seq.

[37] [2005] HCA 53; (2005) 224 CLR 98 at [17].

[38] [2005] HCA 53; (2005) 224 CLR 98 at [25].

[39] [1915] HCA 57; (1915) 20 CLR 490 at 497.

[41] [2006] HCA 3; (2006) 224 ALR 79.

[42] [2006] HCA 3; (2006) 224 ALR 79 at [19].

[43] [2006] HCA 3; (2006) 224 ALR 79 at [72].

[44] [2006] HCA 3; (2006) 224 ALR 79 at [93].

[45] The legal principles underlying this submission are not controversial - see, for example, Re: Transphere Pty Ltd (1986) 5 NSWLR 309, 311 per McLelland J - but they do not determine the question whether ownership in those circumstances can be described as "beneficial".

[46] See the statement by Kitto J in Haque v Haque [No 2] [1965] HCA 38; (1965) 114 CLR 98, 124 set out at para [35] above and to the passages quoted from K.L.D.E. Pty Ltd v Commissioner of State Revenue (Qld) [1984] HCA 63; (1984) 155 CLR 288, 296-297, 300-301, set out at paras [37-38] above; for a discussion of the doctrine of constructive trust in relation to the position of a vendor under a contract for the sale of land, see Cope: Constructive Trusts (The Law Book Company Limited, 1992) Ch. 25 esp. at pp. 899, 948-955, 970-971.

[47] [1976] AC 167.

[48] [1976] AC 167, 177-178.

[49] See Stone and Lesnie: "Some thoughts on beneficial interests and beneficial ownership in revenue law" [1996] UNSWLawJl 11; (1996) 19 UNSW Law Journal 181 and Speed: "Beneficial ownership" (1997) 26 ATR 34.

[50] See Wilcox v Smith (1857) Drew 40, 51; 662 ER 16,20; White v Commissioner of Stamp Duties [1968] Qd R 140, Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) [2005] HCA 20; (2005) 220 CLR 592 at [50], [58] and [127].

[51] Cf Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639, 655, line E, per Meagher JA.