The transfer to the real purchaser issue
16 The Duties Act 1997, s 55(1)(b) provided for duty of $10 on a transfer of dutiable property from the apparent to the real purchaser. It was in the following terms:
"Duty of $10 is chargeable in respect of:
…
(b) a transfer of dutiable property from an apparent purchaser to the real purchaser, in a case where dutiable property is vested in an apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property."
17 The partners submitted that the dutiable property was the land acquired by Queenscliff, the partners paid for its acquisition and development, they were the real purchasers and the transfers to them from Queenscliff were transfers of the land acquired by it.
18 The Duties Act 1997, s 25(1) provided for the aggregation of dutiable transactions relating to separate items of dutiable property. It provided:
"Dutiable transactions relating to separate items of dutiable property, or separate parts of, or interests in, dutiable property are to be aggregated and treated as a single dutiable transaction if:
(a) they occur within 12 months, and
(b) the transferee is the same or the transferees are associated persons, and
(c) the dutiable transactions together form, evidence, give effect to or arise from what is, substantially, one arrangement relating to all of the items or parts of, or interests in, the dutiable property."
19 The separate transfers of lot 107 to lot 123 occurred within 12 months of the transfers of lot 1 to lot 106. The evidence was that it was an oversight that they were not transferred at the same time. The Commissioner made no point about this. In my view, the later transfers should be regarded as forming part of the one transaction.
20 The Commissioner submitted that the concession in the Duties Act 1997, s 55(1)(b) did not apply because the land transferred to the partners as strata lots was different from the land purchased by Queenscliff as lots in fee simple. Since Queenscliff did not purchase strata lots and since the partners were not the real purchasers of strata lots, the provision had no application. The Resulting Trust Deed defined the property the subject of trust as the land comprised in the lots acquired and improvements on the land together with all rights, benefits and interests attached to or arising from the land from time to time. That was a description of the land registered in the name of Queenscliff. It was not, in the Commissioner's submission, a description of the lots that came into existence upon the registration of the strata plan.
21 It was submitted that new rights and obligations were created upon the registration of the strata plan. In particular, it was submitted that the Strata Schemes (Freehold Development) Act 1973, s 8AA provided that on registration of such a plan, easements for support and shelter came into existence. That is not so. Section 8AA only applied to a "stratum parcel". That term was defined in s 5(1) as a parcel created by a subdivision permitted by s 7(2A). That provision applied to the subdivision of land including part only of a building. The strata plan here in question was for a development over six floors and a basement of a building. There was no suggestion that part only of the building would constitute a stratum parcel.
22 The Strata Schemes (Freehold Development) Act 1973, s 18(1) provided that upon registration of a strata plan, any common property in the plan vested in the body corporate. A note to the Strata Schemes Management Act 1996, s 8 said that the owners corporation established on registration of a strata plan for a strata scheme under that provision was the same as a body corporate for a strata scheme previously established under the Strata Schemes (Freehold Development) Act 1973.
23 In circumstances such as the present where the same persons are the proprietors of all of the lots the subject of the strata scheme, the Strata Schemes (Freehold Development) Act 1973, s 20(a) provided that the estate or interest of the body corporate in common property vested in it was held by it as agent for those proprietors.
24 The notion of agency in that context is odd. If common property was vested in the owners corporation for the benefit of the partners, one would expect the relationship to have been that of trustee and beneficiary rather than of agent and principal. That something more than the relationship of principal and agent was intended by the legislation, was made clear from the Strata Schemes (Freehold Development) Act 1973, s 24(2) that spoke of the beneficial interest of a proprietor of a lot in the estate or interest in the common property held by the body corporate as agent for that proprietor.
25 The nature of the interest of a lot owner in common property has been described as an equitable interest as a tenant in common with other lot owners (Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 56) and as a proprietary right (Young v Owners - Strata Plan No 3529 (2001) 54 NSWLR 60 at 64).
26 The Commissioner raised two aspects of difference between the land acquired by Queenscliff and the lots transferred to the partners. First, it was said that what was transferred to the partners differed because common property was excised and vested in the owners corporation. Secondly, it was said that the strata lots transferred to the partners differed from the land purchased by Queenscliff.
27 In answer to the first proposition, the partners pointed out that they retained the beneficial interest in the common property as a result of the transfer of all the strata lots to them and, in consequence, the land they received was the same land as acquired by Queenscliff.
28 In Breskvar v Wall (1971) 126 CLR 376 at 385-386, Barwick CJ said that a certificate of title to land did not describe the title of the former registered proprietor but vested new title in the holder:
"The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor."
29 An analysis of interests in land that attributes the creation of new rights to the issue of a new certificate of title and the cancellation of rights in the former registered proprietor does not sit well with the Duties Act 1997. If that analysis were applied, s 55(1)(b) would never relieve a real purchaser from duty upon a transfer from the apparent purchaser as the rights acquired by the real purchaser on transfer would not have been purchased by the apparent purchaser.
30 The partners submitted that the Duties Act 1997 was not concerned with changes in title to land but, rather, with changes in interests in land: the transactions that preceded registration. It was submitted, correctly in my view, that the passage from Breskvar was concerned with a change in title and not a change in interest. It was pointed out that it was the antecedent agreement evidenced by a registrable instrument and not the instrument itself that created an equitable estate or interest in land (Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 257).
31 In Ashington Holdings Pty Ltd v Wipema Services Pty Ltd (1998) 8 BPR 15,961, Young J was concerned with an exercise of an option to renew a lease followed by a conversion of part of a building to a stratum parcel with the consent of the tenant. At 15,964 Young J said that the change that occurred when property became subject to strata title legislation was more than merely nominal or cosmetic:
"The congerie ( sic) of rights that are possessed by, at least, the owner of the common property and the landlord vary. The reversion is affected in that the landlord no longer has the whole of the fee simple from the sky above to hell beneath which can support the lease, but instead only has defined rights in a particular stratum."
32 His honour's decision was set aside on appeal, Ashington Holdings Pty Ltd v Wipema Services Pty Ltd (1999) 9 BPR 17,315, on the basis that the lessee, having consented to the change in title, was estopped from rejecting the new lease tendered by the landlord.
33 His Honour further explored the matter in Ashington Holdings Pty Ltd v Wipema Services Pty Ltd (No 2) (1998) 9 BPR 16,515 at 16,518-16,519. He said to speak of land was misleading and what was required was an analysis of the congeries of rights:
"The effect of registering the strata plan was to create a stratum parcel under s 8A ( sic) of the Strata Schemes (Freehold Development) Act 1973.
There is surprisingly little legal analysis in the text books or reported cases as to what happens when land is affected by the registration of a strata plan.
In my view, the proper analysis is that to speak of "land" is to mislead oneself. What is popularly "land" is in legal analysis a right against the Crown being an estate in fee simple held in the Crown in free and common socage. The socage rent was redeemed somewhere in the 19th century by a quit rent. An estate in fee simple was a congerie ( sic) of rights with respect to the property which passed so each was inheritable and free from conditions.
The Crown grants the rights over land by issuing a Crown Grant. This grant does not dispose of the Crown's absolute olloidial property but merely grants certain rights. On transfer of those rights they become vested in the transferee. A straightforward transfer operates under s 51 of the Real Property Act to vest all the rights, powers and privileges of the holder to the transferee."
34 Having mentioned the practice of the Registerer General to issue a new certificate of title and having referred to the passage from Breskvar set out above, his Honour continued:
"It follows that when a strata plan is registered the congerie ( sic) of rights that constituted the grant of a fee simple over the whole parcel is now resubdivided so that various rights are created in different groups of cubic meterages of air space. The sum total of the whole of those rights will equal the sum total of the congerie ( sic) of rights in the original certificate of title, but they will be completely redistributed. Alternatively, the old rights in land have been cancelled and new rights whose totality is the same quantum are created. It matters little for present purposes which it is."
35 His Honour went on to say that because of the redistribution of rights, or because of other legislation, the rights of a freeholder in a strata were different to the rights of a freeholder who was, say, a tenant in common of the whole property with a contractual right to use a particular part of the building. His Honour concluded that although the land described in the schedule to the former lease and that in the new lease looked the same, "juristically they can consist of quite separate congeries of rights".
36 It is to be noted that it was unnecessary for his Honour to decide whether the new congeries of rights were attributable to a redistribution of earlier rights or were new rights substituted for old rights that had been cancelled. For the reasons already indicated, I am of the view that an analysis based upon the substitution of new rights for old rights does not apply to the Duties Act 1997.
37 The partners submitted that it was not the fact of registration that created strata because a stratum could be created at common law (Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1970-1971) 124 CLR 73 at 91, Commissioner for Railways v Valuer General [1974] AC 328 at 351-352).
38 That may be so, but the Strata Schemes (Freehold Development) Act 1973 now defines what happens upon registration of a strata plan. Land is subdivided into lots (s 7(2)). If there is common property, it vests in the owners corporation (s 18(1)). If there is no common property, the floor plan for the strata scheme must show at least part of one of the proposed lots superimposed on at least part of another lot (s 8(3)). If the strata plan creates a stratum parcel, easements of support and shelter are created both for the benefit of the lots and common property in the stratum parcel and for the benefit of other parts of the relevant building (s 8AA).
39 Of significance to the submission that the common property was held in trust for the partners and hence, together with the transfers of the strata lots, the partners obtained rights equivalent to those associated with the land acquired by Queenscliff, were the restrictions placed by the legislation upon dealings with common property. The Strata Schemes (Freehold Development) Act 1973, s 21 provided that common property was not capable of being dealt with except in accordance with the Act. The Act provided for limited dealings with common property. It could have been subdivided into lots or lots and common property (s 9 and s 5(7)); contiguous land could have been accepted by transfer or lease to create additional common property (s 19(2)); it could have been the subject of a transfer or lease if not acquired under s 19(2) (s 25(1)); if acquired under s 19(2), it could have been the subject of a transfer or a sublease if not prevented by the terms of the head lease (s 25(2)); if dealt with under s 25(1) or s 25(2) it could have been the subject of a surrender of, or re-entry under, the lease (s 25(3)); it could have been burdened by the creation of an easement or a restriction as to user or a positive covenant (s 26(1)(a)); it could have taken the benefit of an easement or a restriction as to user (s 26(1)(b)); it could have been the subject of a release or variation of the benefit of an easement or a restriction as to user (s 26(1)(c)); it could have been the subject of a release or variation of the burden of an easement or a restriction as to user (s 26(1)(d)); if acquired under s 19(2), it could have been the subject of any dealing under s 26(1)(s 26(3)); it could have been dedicated as public road, public reserve or drainage reserve (s 27(1A)) and it could have been resumed by a competent resuming authority (s 30(1)). Save for the last, each of those restricted powers required a special resolution of the owners corporation.
40 The Commissioner said that had the consolidated lot been transferred to the partners before registration of the strata plan, he would not have contended that the Duties Act 1997, s 55(1)(b) did not apply. The consolidation merely altered the boundaries of the lots acquired by Queenscliff.
41 Once the strata plan detailing lots and common property was registered, however, the Commissioner contended that which was transferred to the partners differed from the lots acquired by Queenscliff. They differed because common property was not transferred to the partners and the owners corporation in which it vested had restricted rights only with respect to it. The Commissioner argued it could not be said, therefore, that the dutiable property transferred to the partners was the dutiable property that vested in Queenscliff. It was part only of that property and, it was said, the nature of the strata lots transferred was different from the nature of the land acquired by Queenscliff.
42 I reject the latter submission. The lots transferred were subdivided lots within lots acquired by Queenscliff. With the exception of the common property, they were, in aggregation, the same area Queenscliff held and, unlike the common property, the owners of the lots were not circumscribed in the rights they could exercise with respect to their lots. The congeries of rights remained the same.
43 That was the approach adopted by Mason J, albeit upon assumption, in Moruben Gardens Pty Ltd v Federal Commissioner of Taxation 72 ATC 4147. The first limb of the Income Tax Assessment Act 1936 (Cth), s 26(a) provided that the assessable income of a taxpayer included profit arising from the sale by the taxpayer of any property acquired for the purpose of profit-making by sale. His Honour was concerned with the purchase of land and the sale of units comprised in a plan registered under the Conveyancing (Strata Titles (Act) 1961. At 4156 his Honour expressed the view that there was no lack of essential identity between what was acquired and what was sold on the assumption not challenged by the taxpayer that the sale of all the units comprised in the registered plan constituted a disposition of the entire estate in fee simple in the land.
44 However, I accept the former submission of the Commissioner. That which was transferred to the partners differed from what Queenscliff had purchased by exclusion of the common property and, notwithstanding that the common property was held in trust for the partners, the congeries of rights attached to it were vested in Queenscliff and not in the partners and those rights were restricted to the matters set forth above. There was a significant reduction in the rights acquired by the partners in comparison with the rights acquired by Queenscliff on purchase of the land.
45 There was no analysis of the legislation, no consideration of the effect of vesting common property in a body corporate and no comparison of congeries of rights before and after subdivision in Moruben Gardens. It cannot stand as authority against the above proposition.
46 The Commissioner relied upon two decisions. In Growing Wealth Pty Ltd v Commissioner of Stamp Duties [2001] 2 Qd R 603, The appellants appointed an agent to acquire property, subdivide it and construct on each lot a separate residential unit. The appellants contributed funds in accordance with the identified price for each residential unit. The transfers of individual lots to each of the appellants were subjected to ad valorem stamp duty. They claimed exemption under a provision not unlike the Duties Act 1997, s 55(1)(b): a transfer from the person who at the time of purchase was acting as agent for the transferee was exempt. The appellants failed in invoking that provision because the purchase of the land was for all the appellants as tenants in common in proportion to the amounts they had subscribed, whereas what was transferred to each appellant was the entire interest in property that consisted of a bundle of statutory rights created under the Body Corporate and Community Management Act that did not exist at the time the agent purchased the land.
47 The decision is distinguishable, as the partners submitted. The partners had an interest as tenants in common in equal shares in the land acquired by Queenscliff. The transfers in question were to them as tenants in common in equal shares.
48 The Commissioner relied upon the decision in so far as it was said that the bundle of statutory rights created by the Body Corporate and Community Management Act was different from the rights acquired by the agent upon purchase of the property. But the nature of that difference was not explained.
49 In Commissioner of State Revenue v Pattison (2001) 3 VR 520 the taxpayer entered into a contract to purchase land nominating a company as substitute purchaser. The taxpayer paid the purchase price and the land was transferred to the company and ad valorem stamp duty on the transfer was paid. The company registered a two lot plan of subdivision, sold one of the lots to a third party and transferred the other to the taxpayer. The relevant exemption was for an instrument of a conveyance of real property from a nominee or trustee to the person beneficially entitled thereto where that person had contributed the purchase money and a duly stamped conveyance had been executed in respect thereof. It was held that the provision did not apply because the process of subdivision brought into existence two different pieces of real property. At 522-523 his Honour said:
"Do the lots resulting from subdivision collectively constitute the same real property as the property from which they were subdivided and for which the purchase price was paid? The simple answer is no. Subdivision of real property in Victoria is achieved pursuant to the Subdivision Act 1988 and the Transfer of Land Act 1958 by registration of a plan of subdivision. Upon registration of the plan, land contained in the lots denoted upon it comes into existence. The parent title is cancelled, and in that sense the land in that former title ceases to exist. By this process, although the overall legal and beneficial ownership may remain unchanged, what was one piece of real property becomes two or more different pieces of real property that may be dealt with by reference to the new plan and lot number. They are not somehow carved out of the former title; rather a new scheme of titles is created which may involve rights and burdens which were not previously present or necessary: for example, common property may be created in addition to individual lots; there may be easements; a body corporate may be formed."
50 His Honour went on to conclude that the exemption only applied if the entire property that had been purchased was transferred to the person who provided the purchase moneys. In Triantafilis v Commissioner of Stamp Duties (NSW) 95 ATC 4655, Hodgson J held that the forerunner to the Duties Act 1997, s 55(1)(b) required the entire purchase price to have been provided by the transferee. There the transferee provided $63,000, the remaining $10,000 being paid by his sons. On appeal, Triantafilis v Commissioner of Stamp Duties (NSW) 98 ATC 4484 the Court of Appeal rejected the notion that the provision enabled a 63/73rd exemption. It was held that the provision spoke about one conveyance where the whole of the purchase money had been paid by the real purchaser although title been taken to the property by an apparent purchaser. Hanson J cited those authorities in support of his second conclusion that the exemption did not apply to a partial transfer of the purchased property to the person who provided the purchase price.
51 His Honour's second conclusion did not apply to the instant circumstances as all the lots were transferred to the partners as tenants in common in equal shares. As to his Honour's first conclusion, I would, with respect, approach the matter in a different way. I accept the partners' submission that the question is not one of change in title but whether the underlying transaction effects the required result. In cases where common property is created upon registration of a strata plan, there can be no transfer of rights that in aggregate are equivalent to the congeries of rights acquired on purchase of the original properties. If no common property is created, and at least a part of one lot is superimposed on at least a part of another lot, again, the congeries of rights change.
52 In Triantafilis at first instance, Hodgson J left open the question whether a de minimus rule might apply. In the instant circumstances, however, I do not regard the exclusion of the common property from the transfers as being de minimus.
53 In my view, the Duties Act 1997, s 55(1)(b) required an identity between the dutiable property transferred from the apparent purchaser with the dutiable property vested in the apparent purchaser and that identity was lacking in the instant circumstances. In my view s 55(1)(b) did not apply to the transfers.