Mason J was talking about existing property as capable of identification. The draftsman's inclusion of "identified property" in s 8(3) of the Duties Act enforces the view that the expressions in the legislation "property", "dutiable property" and "identified property" mean property in existence at the relevant time prescribed in s 12.
47 While not free from doubt, the better view, which I adopt, is that the property the subject of a declaration of trust exigible to duty under the Duties Act, must be in existence at the relevant time specified in s 12.
Were the shares in existence?
48 There is a distinction between the issue of shares and the right to an issue of shares. In National Westminster Bank Plc v Inland Revenue Commissioners [1995] 1 AC 119 at 126, Lord Templeman put it this way:
"The Act of 1985 preserves the distinction in English law between an enforceable contract for the issue of shares (which contract is constituted by an allotment) and the issue of shares which is completed by registration. Allotment confers a right to be registered. Registration confers title. Without registration, an applicant is not the holder of a share or a member of the company: the share has not been issued to him."
49 Before first execution of the share sale deed, a circulating resolution of the directors of QH was executed by which the company resolved to implement the restructure; resolved that the company execute specified documents; and resolved that any two directors were authorised to do all things necessary or desirable in connection with the restructure, including signing on the company's behalf any other document, deed or agreement that the directors in their discretion considered appropriate or desirable to be executed for giving effect to restructure.
50 Initially, the Chief Commissioner argued that by these resolutions QH appropriated or created the Consideration Shares and they were in existence before first execution of the share sale deed. In final address, however, counsel for the Chief Commissioner conceded that the time at which the shares became distinct property was the time they were entered in the register of members of QH.
51 The restructure was effected by a tightly controlled sequence of events, the order of which was set out in a completion checklist. Clause 3.3 of the share sale deed made it plain that the Consideration Shares were not to be issued until after completion of the sale of the Sale Shares. The completion checklist recognised this and provided for the issue of the Consideration Shares after completion.
52 Roger Malcolm Halstead was a director and the company secretary of QH. He knew that he could not finalise the updating of the QH register of members until he received confirmation from the solicitors that the restructure had been completed. That occurred in the evening of 5 April 2007 when he received an email from the solicitors confirming the completion of the restructure.
53 Mr Halstead went to the office on 6 April 2007, Good Friday, to attend to the making of the necessary entries in the corporate records of QH, McRae and PAPL.
54 On a register of members sheet entitled "Summary - Queens Hill Pty Ltd" where the name of a shareholder would otherwise appear, with the ABN of QH where the address of a shareholder would otherwise appear, a number of entries going back to 1990 and showing the movements in the shareholding of QH had been entered by Michele Martinez, Mr Halstead's operations manager.
55 The last entry that Ms Martinez made on the summary page with respect to certificate numbered 3, was an acquisition by Judith Lydia Patricia Neilson of 1 share, making the balance of the shares held by her 100.
56 As part of the restructure, QH split the 100 shares into 435,181,783 shares on 3 April 2007. On the summary page, Mr Halstead made an entry dated 3 April 2007: "Stock Split - JLP Neilson" with an acquisition of 435,181,683 shares giving a balance of 435,181,783 shares and a certificate numbered 4.
57 The Consideration Shares to be issued to PIML as nominee for Mr and Mrs Clifford totalled 38,793,950. The completion of the sale of the Sale Shares occurred on 4 April 2007. Mr Halstead made an entry on the summary page dated 4 April 2007: "PIML (McRae - Scrip for Scrip)" in that amount bringing the balance of the shareholding to 473,975,733 with share certificate number 5.
58 The restructure involved the staff of PAPL who held shares in QH selling those shares to QH in consideration for the allotment of QH shares to PIML as nominee for them. The number of shares to be issued by QH with respect to the staff was 87,024,267. The sale part of this restructure was completed on 5 April 2007.
59 As the last entry on the summary page, that Mr Halstead dated 5 April 2007, he put: "PIML (Balance - Scrip for Scrip)" and entered the number of shares to be issued bringing the balance to 561,000,000 with respect to share certificate number 6.
60 Mr Halstead said he regarded the summary page as part of the register of members of QH.
61 Share certificate 5 was partly completed by Ms Martinez. It was sealed and signed by Mr Halstead on 6 April 2007 and signed by Mr Neilson on 10 April 2007.
62 In the week commencing 2 April 2007, Mr Halstead asked Ms Martinez to prepare entries required to be made in the allotment journal and register of members of QH for his review and finalisation.
63 In the register of members of QH, Ms Martinez created a new sheet with the name and address of Mrs Neilson and an entry dated 3 April 2007 recording the share split and the issue of certificate number 4.
64 Ms Martinez created a sheet with the name and address of PIML showing the scrip for scrip transaction dated 4 April 2007 with respect to McRae and the 38,793,050 shares held under certificate numbered 5.
65 Ms Martinez also created a sheet with the name and address of PIML showing the scrip for scrip transaction dated 5 April 2007 with respect to PAPL staff and the 87,024,267 shares held under certificate numbered 6.
66 Ms Martinez entered a date of entry as a member of Ms Neilson of 3 April 2007, of PIML with respect to McRae of 4 April 2007 and of PIML with respect to the staff of 5 April 2007. This was appropriate. In Federal Commissioner of Taxation v Patcorp Investments Ltd (1973-1976) 140 CLR 247 at 272, Mason J said:
"The requirement in s. 151 that there should be entered in the register "(b) the date at which the name of each person was entered in the register as a member" in my view refers, not to the date on which the entry was physically made, but to the date on which he should have been entered in the register as a member, that is, in the case of a subscriber to the memorandum, the date on which he subscribed and, in the case of a transferee, the date on which the directors approved the transfer, or resolved that it be registered."
67 But that does not mean that shares come into existence retrospectively. In the case of an allotment, they come into existence when a three-stage process to which reference is made hereunder is complete.
68 Even if, contrary to my view, the effect of the entry in the register of members was that the shares came into existence at the date ascribed to the transaction in the register, that could only be by relation back to completion of the sale of the Sale Shares and that occurred late in the afternoon of 4 April 2007 and after first execution of the share sale deed.
69 Mr Halstead could not say when Ms Martinez entered these details in the register of members of QH. It might have been before the first execution of the share sale deed.
70 I do not regard the summary page on which Mr Halstead made entries on 6 April 2007 as being part of the register of members of QH for the purpose of determining when the McRae shares were issued to PIML.
71 The Corporations Act 2001 (Cth), s 169(1) requires a register of members to contain with respect to each member: the member's name and address; and the date on which the entry of the member's name in the register was made. The sheets created by Ms Martinez comply with that requirement. The summary sheet does not. It does not contain the address of the shareholders, nor their date of entry as members. It is what it purports to be, a summary of the entries in the register of members.
72 Mr Martinez was not called and no explanation for the failure to call her was given. I was invited to draw the inference that her evidence would not have assisted PIML (Jones v Dunkel (1958-1959) 101 CLR 298).
73 It was submitted that I could not be satisfied that the entries in the register of members of QH were made after the first execution of the share sale deed and PIML had failed to discharge its onus of proof that the Consideration Shares were not in existence at that time.
74 The complete allotment of shares in a company involves three stages. First, there is an executory contract with the company to take up a given number of shares, the company agreeing to appropriate that number (Ford's Principles of Corporations Law, Looseleaf Service, [17-170]). Secondly, the allotment of the shares in the sense of an enforceable contract for the issue of the shares (National Westminster, supra). And thirdly, the issue of the shares, usually by entry of the allottee in the register of members.
75 The identification of the issue of the shares with entry in the register of members is because that is usually the last act in the three-stage process. But entry in the register of members may sometimes occur before allotment and if it does, it is not the final act in the process.
76 In Central Piggery Co Ltd v McNicoll and Hurst (1949) 78 CLR 594, McNicoll and Hurst applied for shares in the company; the directors resolved to allot the shares and they were registered as shareholders. But there was no notification of acceptance of the offers to take up the shares until a later date. Dixon J held that until that later date the shares had not issued notwithstanding registration:
"In the present case it is clear that neither McNicoll nor Hurst had become parties to a binding contract before 5 th October. There had been no communication to either of them accepting their offers, and there could be no contract until there was an acceptance. They were not masters of their shares and were in the position that they could repudiate. When they became the servants of the company they were not shareholders. The transaction was inchoate and did not become effective until there was a communication of the acceptance. On communication there was a culmination of the process and the shares were issued."
77 That this was an appropriate analysis was confirmed by Aickin J in Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1980-1981) 146 CLR 336 at 427:
"It must be remembered that no person is a "member" of a company (i.e. the holder of shares therein) unless and until his name is entered in its share register - see per Bowen L.J. in Nicol's Case ((1885) 29 Ch D at 444) in the passage quoted above. That may not be conclusive for the register may be rectified, but it is essential as appears from s. 16 (5) of the Companies Ordinance 1962 (A.C.T.), a provision found in the Companies Acts of all the States and having its origin in the Companies Act 1862 (U.K.). That however is a step which may in some cases occur before allotment is complete by, e.g. communication to an applicant for shares of acceptance of his offer by "allotment" of shares to him, as was the case in Central Piggery Co Ltd v McNicoll (1949) 78 CLR 594."
78 Central Piggery was cited with approval recently by Kenny J in Handbury Holdings Pty Ltd v Commissioner of Taxation [2008] FCA 1787 at [73].
79 In the instant circumstances there could not be an allotment in the sense of an enforceable contract to issue the Consideration Shares until consideration was given by completion of the sale of the Sale Shares and that did not take place until the afternoon of 4 April 2007.
80 So that, even if Ms Martinez made her entries before completion of the sale of the Sale Shares on 4 April 2007, there was no culmination of the process by which the Consideration Shares issued until allotment in the sense of an enforceable contract for the issue of the Consideration Shares.
81 It follows that on first execution of the share sale deed the Consideration Shares were not in existence and cl 2.2 did not constitute a declaration of trust over them as dutiable property.
82 If I be wrong in that view, I conclude that Ms Martinez carried out preparatory acts for Mr Halstead and the Consideration Shares were not registered until he approved those preparatory steps on 6 April 2007.
83 It was Mr Halstead as the secretary of QH who had the authority to enter up the register of members. Ms Martinez assisted in that process in an administrative way. But her actions were to have no effect unless and until Mr Halstead approved them.
84 On this basis, as well, it follows that the Consideration Shares were not in existence at first execution of the share sale deed and there was no declaration of trust over them as dutiable property.
Right to shares
85 The Chief Commissioner raised an alternative argument that the property the subject of the declaration of trust in cl 2.2 of the share sale deed was the right to the Consideration Shares in terms of cl 2.1.
86 There is a short answer to that. The clear intention of the parties was that the trust in cl 2.2 of the share sale deed was over the Consideration Shares and nothing else.
87 An express trust is dependent upon the intention of the parties. As Mason CJ and Wilson J said in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987-1988) 165 CLR 107 at 121:
"…the courts will recognize the existence of a trust when it appears from the language of the parties, construed in its context, including the matrix of circumstances, that the parties so intended. We are speaking of express trusts, the existence of which depends on intention. In divining intention from the language which the parties have employed the courts may look to the nature of the transaction and the circumstances, including commercial necessity, in order to infer or impute intention."
88 Commercial necessity did not dictate that the clear language of cl 2.2 should be extended to include the right to the Consideration Shares.
89 As has been mentioned, PIML also executed acknowledgements of trust. In the one with respect to Mrs Clifford, PIML declared that it held 38,406,010 ordinary shares in QH and all dividends and rights attaining thereto upon trust for Mrs Clifford who provided the full consideration for the shares and was the sole beneficiary of such trust.
90 This document was executed on 4 April 2007 after completion of the sale of the Sale Shares. There was clearly no intention that the right to the Consideration Shares should be included in that trust.
91 That enforces the conclusion that arises from a consideration of the language used in cl 2.2 of the share sale deed that the subject of the trust was the Consideration Shares and not the right to them.
92 Reference was made to a number of provisions in the share sale deed and it was submitted that they were for the benefit of PIML as well as for the benefit of Mr and Mrs Clifford. I doubt that is the case with respect to cl 4.2 which provided that the Buyer warranted and represented to the Sellers as an inducement to the Seller to enter into the document that each statement in sch 5 was true. The provision means what it says. The warranties are extended to the Sellers and not to the Nominee.
93 There are provisions in the share sale deed that, arguably, are for the benefit of PIML as well as Mr and Mrs Clifford. But that does not alter the clear language of cl 2.2.
94 Reliance was placed upon an observation of Brennan J in Pendal at 167 CLR 20:
"If the shares are to be held on trust for B.T.A. when vested in P.N., P.N.'s right to enforce the contract for the sale of the Seven Hills shares is also held upon trust for B.T.A."
95 This statement was made immediately following the following observation:
"Clause 1.4 does not wait upon the vesting of the trust property before it has effect. By cl. 9, P.N. acquires a right "both for itself and as nominee for B.T.A. in its capacity as trustee of the B.T.A. Property Trust" to enforce the agreement for the sale of the Seven Hills shares."
96 If not a declaration of trust in its own right, cl 9 indicated that the parties intended that the promises in favour of PN would also be held on trust. That is not the situation in the instant circumstances.
97 The Chief Commissioner has failed to make out his alternative argument that cl 2.2 of the share sale deed is a declaration of trust of the right to the Consideration Shares.
Conclusion
98 It follows that cl 2.2 is not a declaration of trust over dutiable property and the Chief Commissioner's assessment should be revoked.
99 In light of what I have said it is unnecessary for me to deal with the other issues joined in these proceedings.
100 It is unnecessary for me to determine whether the dutiable value of the Consideration Shares was $193,969,800, upon which the Chief Commissioner raised his assessment, or some lesser amount.
101 The Duties Act, s 55(1)(a) provided for a concessional rate of duty of $50 with respect to:
"a declaration of trust made by an apparent purchaser in respect of identified dutiable property:
(i) vested in the apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property, or
(ii) to be vested in the apparent purchaser upon trust for the real purchaser, if the Chief Commissioner is satisfied that the money for the purchase of the dutiable property has been or will be provided by the real purchaser,"
102 This provision emanates from the Stamp Duties Act, 2nd Sch, Declaration of Trust, par 1. It provided for duty of $10 on:
"any instrument declaring that a person in whom property is vested as the apparent purchaser thereof holds the same in trust for the person or persons who have actually paid the purchase-money therefor."
103 The Chief Commissioner accepted that the Duties Act, s 55(1)(a) applies to consideration in kind as well as a payment of money. He relied on the decision in Pendal at 167 CLR 32 that PN was neither the purchaser nor the apparent purchaser of the shares for the purposes of the Stamp Duties Act.
104 PIML pointed out that the Duties Act, s 55(2) provides that for the purpose of the section purchase includes an allotment. It submitted that PIML was the apparent allottee.
105 In light of my reasons PIML does not need the aid of the Duties Act, s 55(1)(a) and I do not need to resolve this issue.
106 The Chief Commissioner's assessment dated 16 April 2007 is revoked. The matter is remitted to the Chief Commissioner for determination in accordance with the findings in these reasons. The Chief Commissioner is to pay PIML's costs.