Sportscorp v Chief Commissioner of State Revenue

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.

The transfer to beneficiary issue 54 The Duties Act 1997, s 57 provided for duty of $10 on transfers from trustee to beneficiary in conformity with declarations of trust upon which duty had been paid or which were exempt. It was in the following terms: "(1) Duty of $10 is chargeable in respect of a transfer for no consideration of dutiable property to a beneficiary made under and in conformity with the trusts contained in a declaration of trusts, subject to subsections (2) and (3). (2) Subsection (1) applies only to the extent that the property being transferred is property that the Chief Commissioner is satisfied is: (a) wholly or substantially the same as the property the subject of the declaration of trust and that: (i) duty charged by this Act has been paid in respect of the declaration of trust over that property, or (ii) the declaration of trust is exempt from duty, or (b) dutiable property representing the proceeds of re-investment of property referred to in paragraph (a), or (c) property to which both paragraphs (a) and (b) apply. (3) Subsection (1) applies only if the transferee was a beneficiary at the time at which duty became chargeable in respect of the declaration of trust." 55 The partners pointed out that, unlike the Duties Act 1997, s 55(1)(b), only substantial similarity between the property transferred and the property subject to trust was required. It was submitted that the lots in question bore a substantial similarity to the property the subject of the Resulting Trust Deed. 56 In my view, the partners suffer the same problem as with the Duties Act 1997, s 55(1)(b). The absence of the common property from the property transferred makes it neither wholly nor substantially the same as the property the subject of the Resulting Trust Deed. 57 The common property constituted a vital part of the strata plan. There was, as one would expect, substantial common property in the basement and level one car parking areas and substantial common property in the residential area on level one and on each of the residential areas of levels two to six. Without those areas it could not be said, in my view, that the aggregation of the lots transferred to the partners constituted a substantial identity with the properties acquired by Queenscliff, the subject of the rectified Resulting Trust Deed. 58 In my view, the Duties Act 1997, s 57(1) did not apply to the transfers.

The transfer back from nominee issue 59 The Duties Act 1997, s 56(1) provided for duty of $10 where dutiable property that had been transferred to a person to be held on trust was transferred back to the transferor and no person other than the transferor had a beneficial interest in it between its transfer and its transfer back. The provision was in the following terms: "(1) If: (a) dutiable property (other than marketable securities) that was transferred to a person to be held by that person as trustee for the transferor is transferred back to the transferor by the trustee, and (b) no person other than the transferor has had a beneficial interest in the dutiable property (other than the trustee's right of indemnity) between its transfer to the trustee and its transfer back to the transferor, the duty chargeable on the transfer of the dutiable property back to the transferor is $10." 60 The partners submitted that the word "transferor" should be given a wide interpretation to include a person who had the right to have property transferred by direction. Trust Company of Australia Ltd v Commissioner of State Revenue (2003) 77 ALJR 1019 was relied on for this proposition. Queensland legislation provided that any contract or agreement for sale or any contract or agreement whereby a person might become entitled to the conveyance or transfer of any property should be charged with the same duty as if it were an instrument of conveyance. It was further provided that where duty had been duly paid in conformity with that provision the conveyance or transfer made to the purchaser should not be chargeable with any duty. Property was purchased under a tripartite agreement between the vendor, the manager of an investment scheme, as purchaser and the taxpayer as custodian. The Commissioner assessed the contract to ad valorem duty and also assessed the transfer to the custodian to ad valorem duty. The High Court held that having regard to former provision, the "purchaser" in the latter provision was to be given a broad interpretation to cover the taxpayer as the party to whom the conveyance was directed under the tripartite agreement. 61 The decision is distinguishable. There was no tripartite agreement in the instant circumstances. The partners were not party to the transfers of the properties to Queenscliff and there were no transfers from Queenscliff to the original transferors. 62 Nor in the scheme of the Duties Act 1997, is there any necessity to give a broad interpretation to the word "transferor" in s 56(1). There was specific provision for transfers from trustee to beneficiary in s 57(1). 63 Finally, for the reasons already discussed, the transfers to the partners were not transfers of the dutiable property transferred to Queenscliff by the original transferors. The exclusion of the common property prevented such a conclusion. 64 In my view, the Duties Act 1997, s 56(1) did not apply to the transfers to the partners.

The change in trustee issue 65 A concessional rate of duty was chargeable on a transfer of dutiable property in consequence of the retirement of a trustee or the appointment of a new trustee if the trustees could not become beneficiaries and the transfer was not part of a scheme to confer an interest in a person to the detriment of the potential beneficial interest of any other person. The Duties Act 1997, s 54(3) was in the following terms: "Duty of $10 is chargeable in respect of a transfer of dutiable property to a person other than a special trustee as a consequence of the retirement of a trustee or the appointment of a new trustee, if the Chief Commissioner is satisfied that, as the case may be: (a) none of the continuing trustees remaining after the retirement of a trustee is or can become a beneficiary under the trust, and (b) none of the trustees of the trust after the appointment of a new trustee is or can become a beneficiary under the trust, and (c) the transfer is not part of a scheme for conferring an interest, in relation to the trust property, on a new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person. If the Chief Commissioner is not so satisfied, the transfer is chargeable with the same duty as a transfer to a beneficiary under and in conformity with the trusts subject to which the property is held, unless subsection (3A) applies."

The exclusion of a special trustee did not apply to the instant circumstances. 66 The partners submitted that the partnership came to an end upon the registration of the strata plan and Queenscliff's trusteeship then ended. The transfers were thus in consequence of the retirement of Queenscliff as trustee. It was submitted that the situation was similar to that considered in Dadeeton Pty Ltd v Commissioner of State Taxation (2004) 88 SASR 109. There a trustee held an authority to fish for abalone in trust for the corporate trustee of a family trust. His purported transfer of the authority to his family company was set aside and an order made for him to execute documents to effect the registration of the transfer of the authority to the corporate trustee. The court held the word "retirement" in an analogous provision included both voluntary retirement and involuntary removal from office. 67 The decision is distinguishable. In that case there was a continuing trust in favour of family members. The effect of the orders was to terminate a sub-trust. In the instant circumstances, there was no continuation of the trust once Queenscliff transferred the lots to the partners. I reject the suggestion that a trust continued by reason of the obligations owed by the partners to each other under their holding of the lots as tenants in common. That relationship arose by reason of the transfers and did not represent a continuation of an existing trust. 68 Furthermore, the Duties Act 1997, s 54(3) differs from its South Australian counterpart by emphasising the continuing nature of the trust. Hence the reference to continuing trustees and the position after appointment of a new trustee and the lack of affectation upon potential beneficial interests. 69 In my view, the Duties Act 1997, s 54(3) did not apply to the transfers.

The corporate reconstruction issue 70 Addenbrooke and Queenscliff were subsidiaries of Neforu. The Duties Act 1997 granted relief from duty for transfers of dutiable property within corporate groups. Section 281(1) provided: "Duty under this Act is not chargeable on a dutiable transaction approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer by which dutiable property is transferred by, or agreed to be transferred by, or vest in, a corporation that is a member of a group of corporations to another corporation that is a member of the same group." 71 The relevant guidelines were attached to Duty Ruling DUT O2O. It included amongst the approved dutiable transactions, a transfer of dutiable property between eligible members of a corporate group. 72 In my view, the rationale for the Duties Act 1997, s 281(1) was to avoid the imposition of duty upon transactions within a corporate group where the ultimate beneficial ownership of the assets remained unchanged. 73 Here the transfers were to all partners as tenants in common in equal shares. Sportscorp was not a member of the Neforu corporate group and by the dutiable transactions in question there was a transfer to a corporation that was not a member of that group. 74 In my view, the Duties Act 1997, s 281(1) did not apply to the transfers.

The legal estate issue 75 The partners submitted that since they held the equitable interest in the lots upon registration of the strata plan, all that was conveyed to them by the transfers was the bare legal estate and if ad valorem duty was payable on the transfers, the value of the legal estate was negligible. Reference was made to Commissioner of State Revenue (Vic) v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651. But that was a case in which rights relating to the tipping of waste on the land sold were held not to be taken into account in determining the market value of the land. 76 Reference was also made to Vopac Terminals Australia Pty Ltd v Commissioner of State Revenue (Vic) 2004 ATC 4154. That decision concerned the exclusion of tenant's fixtures from the value of land transferred and the recognition, in valuing the land, of an equitable interest enforceable against the land under a contract of sale of further fixtures on it. 77 Neither case supports the proposition that an instrument of transfer of land in registrable form is to be assessed as a transfer of the bare legal estate if the transferees held the beneficial interest in the land. If that were the case, the specific exemption from ad valorem duty for transfers from trustee to beneficiary under the Duties Act 1997, s 57(1), the transfer back from a nominee under s 56(1) and the transfer from apparent purchaser to real purchaser under s 55(1) would be otiose. 78 In DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1980) 1 NSWLR 510 a company resolved to request another company to act as trustee of certain land and to hold only the legal estate, there being no intention on the part of the first company to part with beneficial ownership. The second company executed a declaration of trust to the effect that if the land were transferred to it, the land would be held in trust for the first company. It was held that duty should be assessed on the basis that the entire estate in the land passed to the second company. At 519, Hope JA said: "…although the equitable estate is an interest in property, its essential character still bears the stamp which its origin placed upon it. Where the trustee is the owner of the legal fee simple, the right of the beneficiary, although annexed to the land, is a right to compel the legal owner to hold and use the rights which the law gives him in accordance with the obligations which equity has imposed upon him. The trustee, in such a case, has at law all the rights of the absolute owner in fee simple, but he is not free to use those rights for his own benefit in the way he could if no trust existed. Equitable obligations require him to use them in some particular way for the benefit of other persons. In illustrating his famous aphorism that equity had come not to destroy the law, but to fulfil it, Maitland, op cit , at p 17, said of the relationship between legal and equitable estates in land: "Equity did not say that the cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of the cestui que trust . There was no conflict here"." 79 In O'Sullivan v Commissioner of Stamp Duties (Qld) (1983) 14 ATR 299, trustees transferred land to the beneficiaries. Connolly J made a declaration that nominal duty was payable because the transferees took only the legal estate to the property, the full beneficial interest in which was already vested in them. On appeal, O'Sullivan v Commissioner of Stamp Duties [1984] 1 Qd R 212, the Full Court determined that when an assessment of stamp duty had issued, the exclusive avenue of appeal was set out in the legislation and the court had no jurisdiction to determine liability to duty in proceedings other than those provided by the legislation. In obiter dicta, G N Williams J disagreed with Connolly J. At 229-230 his Honour pointed out that a trust was an equitable obligation binding the trustee to deal with property in respect of which he had either legal title or control for the benefit of a beneficiary. His Honour went on to quote the above passage from DKLR and said that it was not unusual for lawyers to say that the equitable estate was vested in the beneficiary, but, at law, the fee simple in land, being trust property, was vested in the trustee. When the trustee conveyed the property to the beneficiary, thereby putting an end to the trust, he conveyed the fee simple. Particularly was this so with land subject to the Real Property Act for there could be no transfer of a bare legal interest as such. 80 In Re Transphere Pty Ltd (1986) 5 NSWLR 309 McLelland J appointed a receiver to property held on trust. His Honour analysed the nature of legal and equitable estates in property. At 311, having referred to the passage from the decision of Hope JA in DKLR set out above and having noted that it was not affected by the decision of the High Court on appeal, DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1981-1982) 149 CLR 431, his Honour went on to say: "But what is significant for present purposes is the imprecision of the notion that absolute ownership of property can properly be divided up into a legal estate and an equitable estate. An absolute owner holds only the legal estate, with all the rights and incidents that attach to that estate. Where a legal owner holds property on trust for another, he has at law all the rights of an absolute owner but the beneficiary has the right to compel him to hold and use those rights which the law gives him in accordance with the obligations which equity has imposed on him by virtue of the existence of the trust. Although this right of the beneficiary constitutes an equitable estate in the property, it is engrafted onto, not carved out of, the legal estate." 81 In Perpetual Trustee Co Ltd v Commissioner of State Revenue (2000) 44 ATR 273, Hanson J rejected a claim to exemption as an instrument made solely in consequence of the appointment or retirement of any trustee. The circumstances were that one of four entities owning a large shopping centre agreed to purchase the interests of the other three. It paid the purchase price, thereby creating a constructive trust in its favour. The appellant then replaced the three former owners as trustee of the constructive trust. Instruments of transfer were executed by the three companies in favour of the appellant. The stated consideration was: "entitled in equity". After an analysis of the authorities including the decisions of Hope JA in DKLR and McLelland J in Transphere, his Honour concluded at [81] that the fee simple, upon which the equitable estate was engrafted, was transferred: "In the end I conclude, having considered all that both counsel submitted, that the Comptroller was correct in assessing the transfers to duty on the value of the fee simple estate in the land. In my view the fact that PT was entitled in equity to the land at the time when the instruments of transfer were executed did not mean that the transfers operated to convey a mere "bare legal title". The analysis of Hope JA and McClelland J of the nature of the fee simple estate in land indicates that there is one estate on to which is engrafted the equitable estate." 82 In my view, the above authorities are compelling. Queenscliff held the legal estate in the land. Upon registration of the strata plan it held the legal estate in the lots. In each case the partners had the right to compel Queenscliff to exercise those rights for their benefit. By the transfers, Queenscliff transferred the legal estate in the lots to the partners. The value of the property transferred was the unencumbered value of each of the lots and not the unencumbered value of a bare legal title in them.

The improvements issue 83 The Duties Act 1997, s 23(3) provided that if before land was transferred to a transferee, the transferee made improvements to the land, the unencumbered value of the land was to be determined as if those improvements had not been made. 84 The partners submitted that this provision applied to them. While Queenscliff entered into the construction contract, the finance was arranged by Addenbrooke, the partners were liable for it equally and they were the transferees. 85 The Commissioner argued that Queenscliff made the improvements and the section had no operation. I reject that submission. The intention of the legislation was to reduce the value of property subject to ad valorem duty to avoid duty on the increment in value for which the transferee has been responsible. It is too narrow an approach to exclude the party that bore the financial burden of the improvements because its nominee contracted to have the improvements made. 86 The Commissioner also submitted that strata lots were the subject of the transfer and no improvements existed with respect to them. Again, I reject the submission. The strata lots were comprised within the improvements paid for by the partners. Those improvements enhanced the value of the strata lots and in this instance to differentiate between improvements effected when the title was a consolidated lot and the subdivided strata lots the subject of the transfer is too artificial. 87 While this view stands in contrast with my attitude to the other issues in this case, the difference is the perceived intention of the Parliament to relieve a transferee from duty on the increment to value resulting from improvements for the cost of which the transferee was responsible. I am fortified in this conclusion by the reasoning of the High Court in Trust Company. 88 In my view, the Commissioner should have determined the unencumbered value of the lots transferred to the partners as if the improvements on the land had not been made in terms of the Duties Act 1997, s 23(3).

The discount issue 89 The evidence included an affidavit of Andrew Brian Parkinson, a registered valuer. He valued the lots transferred to the partners at $52.9 million and that valuation was accepted by the Commissioner. He pointed out, however, that if the lots were to be sold as a single parcel, they were very likely to attract a smaller market than the market for lots sold individually. The market would likely be limited to large scale investors who, typically, would only be willing to pay an amount lower than that they considered they might be able to realise by way of subsequent individual sale. 90 That is an issue that has not been considered by the Commissioner. The matter should be remitted to him so that he may give the question of discount for bulk his consideration.

Conclusion 91 I will make orders for rectification of the Resulting Trust Deed in terms of paragraphs 1 and 2 of the further amended summons. I will confirm the Commissioner's assessments save for his determination of the unencumbered value of the lots. I will remit the matter to the Commissioner for his determination in accordance with the Duties Act 1997, s 23(3). I will remit to the Commissioner for his consideration the question whether the unencumbered market value of the lots should be reduced on the basis of a hypothetical sale of all the lots in one parcel. 92 I will hear the parties on costs and on the appropriate terms of my orders. I direct the parties to bring in short minutes of orders reflecting these reasons.

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