Tay v Chief Commissioner of State Revenue

Events giving rise to the assessments

1. Mr Tee Peng Tay died on 30 November 2013 aged 92 domiciled in Singapore. He was survived by his wife. They had six children. His oldest son is Chwan Shih Tay ("CS Tay"). His second son is the plaintiff, CY Tay. He left four daughters, Pik Un Tay (also called Nina), Pik Jiok Tay ("Pik Jiok"), Tay Pik Tjeng and Wenny Janti.
2. Mr Tee Peng Tay had established a business in Singapore called Ocean Garments that made and sold women's fashion items. The business had developed and operated department stores in Singapore. He owned shares in a number of private companies in Singapore, Australia, Hong Kong and China. He held shares in OG Private Limited ("OG"), a company incorporated in Singapore whose assets include a factory and commercial buildings in Singapore and which conducted a manufacturing and retail business in women's garments. At the time of his death the deceased owned 51 per cent of the shares in OG. The other shares were held by his wife (as to three per cent), Nina (as to three per cent), Pik Jiok (as to three per cent), CS Tay (as to 20 per cent), and CY Tay (as to 20 per cent).
3. The deceased also owned 59.98 per cent of the shares in Memocorp. Memocorp was established in 1991 as a vehicle for investment in real estate in Australia. The other shares in Memocorp were held by the deceased's wife (5.76 per cent), Nina (5.76 per cent), Pik Jiok (5.76 per cent), CS Tay (11.26 per cent), CY Tay (11.26 per cent) and Vanessa Tay (daughter of CY Tay) (0.18 per cent).
4. The deceased also owned shares in Diocci Limited, a company incorporated in Hong Kong that owned commercial properties, residential property and shares in Hong Kong listed entities, and in Diocci Fashion (Shanghai) Limited ("Diocci Fashions"), a company incorporated in China, that owned two garment manufacturing factories and two residential properties. His estate was valued at in excess of SGD1.7 billion. His shareholdings in the above four companies represented approximately 59 per cent of the total value of his estate.
5. On 19 February 2014 the High Court of the Republic of Singapore made a grant of probate of the last will of the deceased, being a will dated 18 January 2002. The grant was re-sealed in New South Wales on 28 March 2014.
6. By his will the deceased appointed CS Tay and Nina Tay as the executor and executrix and trustees of his will. He gave pecuniary legacies to his daughters, Tay Pik Tjeng and Wenny Janti, and gave a further pecuniary legacy to the Nan Yang Technological University. He made no provision for his wife. He dealt with the balance of his estate as follows: "Subject to payment of my just debts funeral and testamentary expenses and the specific request [sic] herein, I give devise and bequeath all the rest of my movable and immovable property of whatsoever nature and wheresoever situate not hereby or by codicil hereto otherwise specifically disposed of, to my Trustees upon trust to sell call in and convert the same into money or such part thereof as shall not consist of money with full power to postpone the sale calling in and conversion thereof for so long as they shall in their absolute discretion think fit without being liable for loss and to pay and divide the net proceeds of such sale calling in and conversion and all my ready moneys which I am possessed of at the date of my death to my children named below in the shares and proportions as follows:- (i) to my said son TAY CHWAN SHIH also known as CHENG CHWAN CHING - 31/100; (ii) to my son TAY CHWAN YI also known as CHENG CHWAN WEI - 29/100; (iii) to my said daughter TAY PIK UN also known as NINA TAY - 20/100; (iv) to my daughter TAY PIK GIOK also known as CHENG PI YU - 20/100."
7. On the reading of the will, CS Tay queried whether instead of selling everything, the executors could distribute the shares in OG and the other companies amongst the beneficiaries identified in paragraph 6 of the will so they could keep them to preserve their father's legacy, rather than for everything to have to be sold. After obtaining legal advice as to the power of executors to appropriate assets in satisfaction of beneficiaries' rights to the distribution of cash pursuant to the trust for sale and conversion in clause 6 of the will, the four residuary beneficiaries, who included the trustees of the will, entered into a deed dated 15 February 2014 called a Deed of Family Agreement ("DoFA"). The parties agreed to accept property valuations in relation to Memocorp's properties and the deceased's private residence in Australia that was to be used in the calculation of Memocorp's net tangible value. The parties agreed to accept property valuations of the properties owned by OG in Singapore. They agreed to the appointment of valuers to value properties owned by Diocci Limited and Diocci Fashion and to use those valuations in the calculation of the net tangible value of those two companies. Clauses 6-12 of the DoFA provided: "It is agreed by all 4 parties that: … 6. They will accept the separation date of 31 December 2013 for the operating businesses in OG, Memocorp, Diocci Fashion and Diocci taking on the exchange rate of each currency as at 31 December 2013. Each party will bear the company's tax liabilities up to 31st December 2013 in their existing share proportions including their inherited shares through TP Tay's Will. For the avoidance of doubt, this includes but [is] not limited to capital gain[s] tax on properties. 7. CY Tay wil take all of TP Tay's shares in Memocorp and TP Tay's loan to Memocorp as part of his 29% entitlement of TP Tay's global assets under the Will and receive the remaining in S$ or its equivalent. CY Tay will buy out all the other existing shareholders' shares in Memocorp based on Memocorp's net tangible value of each share and CY Tay will sell all his existing shares in OG to CS Tay, all his existing shares in Diocci Fashion to Nina Tay based on each company's net tangible value of each share. 8. CS Tay will take all of TP Tay's shares in OG, TP Tay's loan to OG as part of his 31% entitlement of TP Tay's global assets under the Will and receive any remaining or top up any difference in S$ or its equivalent as appropriate. CS Tay will buy out all the existing shareholders' shares in OG based on OG's net tangible value of each share. CS Tay will sell [all his] existing shares in Memocorp to CY Tay and all his existing shares in Diocci Fashion to Nina Tay based on each company's net tangible value of each share. 9. Nina Tay will take all of TP Tay's shares in Diocci Fashion as part of her 20% entitlement of TP Tay's global assets under the Will and receive the remaining in S$ or its equivalent. Nina Tay will buy out all the existing shareholders in Diocci Fashion based on Diocci Fashion's net tangible value of each share. Nina Tay will sell all her existing shares in Memocorp to CY Tay and all her existing shares in OG to CS Tay based on each company's net tangible value of each share. 10. PG Tay will receive S$ or its equivalent as her 20% entitlement of TP Tay's global assets under the Will. PG Tay will sell all her existing shares in Memocorp to CY Tay, sell all her existing shares in OG to CS Tay and sell all her existing shares in Diocci Fashion to Nina Tay based on each company's net tangible value of each share. 11. TP Tay's personal cash (excluding loans to Memocorp and OG), gold and listed shares and other remaining assets will be distributed in accordance with the will. For the avoidance of doubt, joint accounts with TP Tay are excluded from this deed. 12. They will each be personally liable for any individual taxes or fees incurred due to the execution of items listed in points 7, 8, 9, 10 and 11."
8. The parties agreed that the deed would be governed by and construed in accordance with the laws of Singapore.
9. In accordance with clause 7 of the DoFA, on 26 May 2014 CS Tay, Pik Jiok Tay and Nina Tay transferred their shares in Memocorp to CY Tay or as he directed. Their mother, Mrs Tan Pao Soeng, also transferred her shares in Memocorp to CY Tay. No issue arises in these proceedings in relation to the duty payable on those transfers.
10. Also on 26 May 2014 Nina Tay and CS Tay, as executors of the estate of the late Tay Tee Peng assigned to CY Tay moneys payable by Memocorp pursuant to a loan agreement dated 23 April 2004 between Memocorp and TP Tay (the deceased), CS Tay and CY Tay. Separate consideration was provided for the assignment by the executors and the assignment by CS Tay. The price for the assignment by the executors was expressed to be $237,280,946. Counsel for CY Tay accepted, indeed submitted, that CY Tay's obligation to pay the price for the assignment of the loan was set off against his right to a distribution under clause 6 of the will in accordance with clause 7 of the DoFA. That is to say, under clause 7 it was agreed that he would take TP Tay's loan to Memocorp as part of his 29 per cent entitlement of TP Tay's global assets under the will.
11. On 28 May 2014 Nina Tay and CS Tay as executors of the estate of the late Tay Tee Peng executed a transfer of Tay Tee Peng's 33,053,508 shares in Memocorp in favour of CY Tay. The consideration for the transfer was expressed as "$nil". It is this transfer that is the subject of the assessments. It was common ground that Memocorp was a private landholder within the meaning of s 146 of the Duties Act and that the transfer of shares from the deceased's estate to the plaintiff was an acquisition of an interest in a landholder that would be dutiable at the general rate on the relevant proportion of the unencumbered value of all Memocorp's land holdings in accordance with s 155, unless an exemption applied.

Duties Act 1997 (NSW)

1. It is not disputed that marketable securities duty and landholder duty would be payable unless a relevant exemption applies. No issue is raised as to the quantum of the assessments. The plaintiff relies on s 63(1)(a)(ii) and (iii) of the Duties Act for his claim to an exemption from ad valorem marketable securities duty and on s 163A(d) for his claim to an exemption from landholder duty. He did not rely on s 63(1)(a)(i). The Chief Commissioner contended that marketable securities duty was payable in a reduced amount pursuant to s 63(2).
2. Sections 63 and 163A relevantly provide: "63 Deceased estates (1) Duty of $50 is chargeable in respect of: (a) a transfer of dutiable property by the legal personal representative of a deceased person to a beneficiary, being: (i) a transfer made under and in conformity with the trusts contained in the will of the deceased person or arising on an intestacy, or (ii) a transfer of property the subject of a trust for sale contained in the will of the deceased person, or (iii) an appropriation of the property of the deceased person (as referred to in section 46 of the Trustee Act 1925) in or towards satisfaction of the beneficiary's entitlement under the trusts contained in the will of the deceased person or arising on intestacy, and … (2) If a transfer of dutiable property is made by a legal personal representative of a deceased person to a beneficiary under an agreement (whether or not in writing) between the beneficiary and one or more other beneficiaries to vary the trusts contained in a will of the deceased person or arising on intestacy, the dutiable value of the dutiable property is to be reduced by the portion of the dutiable value that is referable to the dutiable property to which the beneficiary had an entitlement arising under the trusts contained in the will or arising on intestacy. … 163A General exemptions An acquisition by a person of an interest in a landholder is an exempt acquisition: … (b) if the interest was acquired solely as the result of the making of a compromise or arrangement with creditors under Part 5.1 of the Corporations Act 2001 of the Commonwealth that has been approved by a court, or (c) if the interest concerned is acquired solely from a pro rata increase or decrease in the interests of all unit holders or shareholders, or (d) if the interest was acquired solely as the result of the distribution of the estate of a deceased person, whether effected in the ordinary course of execution of a will or codicil or administration of an intestate estate or as the result of the order of a court, made under Chapter 3 of the Succession Act 2006 or otherwise, varying the application of the provisions of a will or codicil or varying the application of the rules governing the distribution of the property of an intestate estate, or …"

The Parties' Contentions: Marketable Securities Duty

1. In the share transfer proceeding the plaintiff contended that the share transfer executed on 28 May 2014 was a transfer of dutiable property by the legal personal representatives of the deceased to a beneficiary (the plaintiff), being an appropriation of the deceased's property as referred to in s 46 of the Trustee Act 1925 (NSW) that was made in or towards satisfaction of the plaintiff's entitlement under the trusts contained in the deceased's will, and hence liable to duty of only $50 pursuant to s 63(1)(a)(iii). The plaintiff contended that the appropriation was not made under s 46 of the Trustee Act because he contended that s 46 of the Trustee Act did not apply because the transfer involved the exercise by the trustee of powers under a trust that was governed by the law of Singapore. The plaintiff argued that the share transfer was by way of an appropriation at general law that was referred to in s 46, although not made under s 46. It was an agreed fact that insofar as Singapore law may be relevant to the issues in this case, Singapore law is the same as Australian law, save that under the law of Singapore there is no statutory provision equivalent to s 46 of the Trustee Act. It was agreed that the general law, that is the rules of equity applicable to appropriations of assets by a trustee in or towards the satisfaction of a beneficiary's entitlement, is the same in Singapore as in Australia. Section 46 did not make a material change to the general law (Re Mack (1956) 73 WN (NSW) 218 at 221; Carr v Carr (1987) 8 NSWLR 492 at 495; Long v Controller of Stamps [1964] VR 796 at 801-802; Jopling v Inland Revenue Commissioners [1940] 2 KB 282 at 285).
2. Alternatively, the plaintiff contended that the shares were property the subject of a trust for sale contained in the will and the transfer by the executors of the shares was a transfer to a beneficiary of the shares that were the subject of the trusts for sale and that s 63(1)(a)(ii) applied so as to charge duty of $50 on the transfer.
3. The Chief Commissioner disputed that the transfer of the shares was an appropriation of the property of the deceased in partial satisfaction of the plaintiff's entitlement under the will and argued that even if it were, it was not an appropriation referred to in s 46 if, as the plaintiff contended, the transfer was made in the exercise of a general law power of appropriation under the law of Singapore. The Chief Commissioner submitted that the transfer was not made in or towards satisfaction of the plaintiff's entitlement under the trusts contained in the will because the trusts in clause 6 of the will were varied by the DoFA. He argued that the transfer was made pursuant to clause 7 of the DoFA, not as an appropriation of property by a trustee, but pursuant to the agreement of the four residuary beneficiaries (that included the trustees) that required the shares in three companies to be distributed in specie to three beneficiaries.
4. The Chief Commissioner contended that as the transfer was made under the DoFA it was not a transfer of the kind referred to in s 63(1)(a)(ii) and after the DoFA the Memocorp shares could not properly be said to be property the subject of a trust for sale because the DoFA brought the sale process to an end.
5. The Chief Commissioner contended that the DoFA operated to vary the trusts contained in the will. He assessed marketable securities duty on the basis that s 63(2) applied.

The Parties' Contentions: Landholder Duty

1. The principal issue in relation to s 163A(d) was whether the plaintiff acquired the shares "solely" as the result of the distribution of the deceased's estate in the ordinary course of execution of the will. The Chief Commissioner contended that the transfer was not authorised by the will and specifically was not made pursuant to a trust in the will, but was made pursuant to the DoFA. He contended that for this reason the interest in Memocorp was not acquired solely as the result of the distribution of the estate of the deceased. He also said that the DoFA took the execution of the will out of the course it would have taken but for the DoFA.
2. A question was raised by me at a directions hearing and during the course of counsel's submissions whether, if the transfer of the shares were made as a result of the trustees' exercising a power of appropriation, the transfer was by way of sale with the purchase price being set off against the plaintiff's entitlement to share in the residuary estate, so that the transfer was in lieu of a distribution. The Chief Commissioner included in his opening submissions a contention that a view of s 163A(d) which treated the word "distribution" as not encompassing a sale with a set-off of the price sat with the legislative history of the provision and provided an additional basis for denying the exemption if the Court were to find that the estate transfer did operate as an appropriation (contrary to the Chief Commissioner's primary submission). That was where the matter was left by the Chief Commissioner. No oral submissions were made in support of the contention. The Chief Commissioner did not seek leave to amend his appeal statement to raise this contention. He argued that the transfer was effected pursuant to the DoFA and therefore the plaintiff's interest in Memocorp was not acquired solely as the result of a distribution made in the ordinary course of execution of the will.
3. Neither party contended that s 63(1)(a)(ii) or (iii) provided a further exemption from ad valorem duty on the acquisition of an interest in a landholder.
4. The plaintiff identified the key issue as being whether the DoFA was an agreement between the beneficiaries to vary the trusts contained in the deceased's will because, were it an appropriation of the shares to the plaintiff under the trust for sale in clause 6 of the will, as the plaintiff contended, it would not be a variation of the trusts of the will. He submitted that if the transfer was by way of appropriation, then the other issues should be decided in his favour.
5. There was no dispute that this was an important issue, although the Chief Commissioner did not accept that it was necessarily determinative. I agree that this question is determinative of the issues arising under s 63, and I accept the plaintiff's contentions that the assessment of marketable securities duty should be revoked. I do not accept that this characterisation of the issues is determinative of the issues in respect of landholder duty under s 163A(d). I do not accept the plaintiff's contention that his acquisition of the Memocorp shares was solely as a result of the distribution of the estate. Having regard to the way that the matter was argued, I accept that the appropriation of the Memocorp shares to CY Tay's interest under the will can be characterised as a distribution of the deceased's estate to him. As noted above the Chief Commissioner's Appeal Statement did not put that in issue. I do not accept that the shares were acquired by the plaintiff solely as a result of the distribution. An additional operative cause of the plaintiff's acquiring the shares was the agreement of the family members contained in the DoFA. Accordingly, the assessment of landholder duty should be confirmed.

Liability for Marketable Securities Duty

1. Section 63(1)(a)(iii) and s 63(2) were introduced by the State Revenue Legislation Amendment Act 2008 (NSW) (Sch 1, cll [8] and [9]). Prior to the amendments s 63 imposed duty of $10 in respect of, relevantly: "a transfer of dutiable property not made for valuable consideration by the legal personal representative of a deceased person to a beneficiary, being: (i) a transfer made under and in conformity with the trust contained in the will of the deceased person or arising on an intestacy or (ii) a transfer of property the subject of the trust for sale contained in the will of the deceased person …"
2. In the Second Reading Speech on a motion that the State Legislation Amendment Bill 2008 be agreed to in principle, the Parliamentary Secretary stated: "The bill makes two significant extensions to the duties concession for transfers out of a deceased estate. The first is where the executor, administrator or trustee of the estate appropriates property to a beneficiary in satisfaction of the beneficiary's entitlement under the will. For example, the trustee might transfer a house to a beneficiary instead of paying a cash legacy. At present the duty payable varies depending on the wording of the will. The bill provides that an appropriation of estate property in satisfaction or partial satisfaction of a beneficiary's entitlement is liable to duty of $10 in all circumstances. The second extension is when the beneficiaries agree to vary their entitlements under the will. For example, a beneficiary who is entitled to a one-half interest in a house might agree to buy the house from the estate for a purchase price of one-half its value. The amendment will impose duty on only the transfer of the one-half interest in the house that is in excess of the beneficiary's entitlement."
3. The Chief Commissioner submitted that whether or not the transfer of the Memocorp shares by the legal personal representatives of the deceased to CY Tay was a transfer falling within s 63(1)(a)(ii) or (iii), it was a transfer by the legal personal representatives of the deceased to CY Tay under an agreement between the beneficiaries under the deceased's will to vary the trusts contained in the will so that s 63(2) applied to the transfer. The Chief Commissioner submitted that as s 63(2) applied, the dutiable value of the shares was reduced by the portion referable to CY Tay's 29 per cent interest in the shares under the will, they being part of the residuary estate in respect of which he had a 29 per cent interest. He submitted that if s 63(2) applied, it did not matter whether s 63(1)(a)(ii) or (iii) also applied because s 63(2) would be the controlling provision on the principle that s 63(2) is a special provision and is not overridden by the general provisions in s 63(1), and because the later provision prevails over the earlier.
4. It is unnecessary to decide this last question because s 63(2) does not apply, whereas s 63(1)(a)(ii) or (iii) do apply. However, prima facie Parliament would not be taken to have intended that there should be an overlap between the provisions giving rise to a conflict.
5. The Chief Commissioner submitted that the DoFA was an agreement made between beneficiaries of the trusts created by the deceased's will to vary their entitlements under the will and hence was an agreement between the beneficiaries to vary the trusts contained in the will. Instead of the executors following the terms of clause 6 of the will by converting the deceased's estate into money and dividing the net proceeds of sale and all other ready moneys between the children in the proportions stated in clause 6, the beneficiaries agreed that CY Tay would receive all of the deceased's shares in Memocorp and the debt owed by Memocorp to him, CS Tay would receive all of the deceased's shares in OG and the debt owed by OG to the deceased, and Nina Tay would take all of the deceased's shares in Diocci Fashion. The Chief Commissioner submitted that the true effect of the DoFA was an agreement by all of the residuary beneficiaries under the will to resettle the deceased's estate on different trusts as provided for in the DoFA. This could be done because they were sui juris and between themselves were absolutely entitled to the residuary estate.
6. I accept that for the purposes of s 63(2), an agreement between beneficiaries to resettle property the subject of testamentary trusts may be taken to be an agreement between them to vary the trusts contained in the will or arising on intestacy, even though it may not be strictly accurate to describe such a resettlement as a variation of existing trusts (Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367 at [46]). The consents of beneficiaries to such a resettlement are not infrequently described as amounting to an agreement to vary existing trusts under the doctrine of Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (In Re Holt's Settlement; Wilson v Holt [1969] 1 Ch 100 at 120; Inland Revenue Commissioners v Holmden [1968] AC 685 at 713; Spens v Inland Revenue Commissioners; Hunt v Inland Revenue Commissioners [1970] 3 All ER 295 at 301; Goulding v James [1997] 2 All ER 239 at 246-247; Re Dion Investments Pty Ltd at [48]).
7. It may also be the case that if the beneficiaries, being sui juris and absolutely entitled, simply agreed to the trustee's distributing the estate otherwise than in accordance with the trusts of the will or the trusts arising on intestacy so as to preclude any challenge to the trustee's so acting, which would have the same effect as a resettlement, that this would also be an agreement to vary the trusts within the meaning of s 63(2).
8. But in the present case, the beneficiaries did not agree to a resettlement of the trusts of the will in so far as they affected the plaintiff. Instead, they consented to the trustee's appropriating specific assets to or towards the entitlements of three of the beneficiaries under the will. It is well settled that even where the will contains a trust for sale, as this will does, the trustee, with the consent of the beneficiary, can appropriate a specific asset in whole or partial satisfaction of the beneficiary's entitlement under the will. The principle upon which that can be done was stated by Buckley J in Re Beverly; Watson v Watson [1901] 1 Ch 681 at 685 as being that: "… where the trustee is directed to convert and to pay the beneficiary money, it must be competent for him to agree with the beneficiary that he will sell the beneficiary the property against the money which otherwise he would have to pay him." (In re Lepine Pty Ltd [1892] 1 Ch 210 at 215, 217, 218; Wigley v Crozier (1909) 9 CLR 425 at 438, 443, 448; Jopling v Inland Revenue Commissioners at 285; Re Estate Late Austin Mack (1956) 73 WN (NSW) 218 at 220-221). In the latter case Sugerman J, with whom Herron and Kinsella JJ agreed, said: "An appropriation of an asset, at a valuation, to a share of residue is equivalent to a sale of the asset to the beneficiary at a price equal to the valuation, made upon the terms that the purchase money is to be set off, pro tanto, against the amount of the share."
9. The fact that the other beneficiaries consented to the appropriation of the deceased's shares in Memocorp and debt owed to him by Memocorp to the partial satisfaction of CY Tay's claim to 29 per cent of the residuary estate does not mean that the trusts were varied. It is not necessary for a trustee who proposes to appropriate a specific asset towards satisfaction of a legacy to obtain the consents of other beneficiaries. But it may be prudent to do so to avoid a subsequent challenge to the valuation adopted for the purposes of the appropriation.
10. In the present case the DoFA not only provided for such consents, but also dealt with other matters, in particular, the agreements of the other shareholders in Memocorp, OG, and Diocci Fashion to sell their shares to CY Tay, CS Tay and Nina Tay. But this is irrelevant, to the operation of s 63. Neither the fact that the DoFA dealt with additional matters, nor the fact that all the residuary beneficiaries consented to the appropriation of specific assets in satisfaction or partial satisfaction of the residuary bequests meant that the parties agreed to an alteration of the trusts of the will.
11. There is a possible qualification to this in relation to CS Tay's entitlement under the will. Whereas the transfer of the deceased's shares in Memocorp and the debt owed him by Memocorp to the plaintiff did not completely satisfy his 29 per cent interest in the residuary estate, it appears that the value of the deceased's shares in OG transferred to CS Tay exceeded his 31 per cent interest in the residuary estate. Hence clause 8 of the DoFA provided for him to top up any difference between the value of the shares he received and his entitlement under the will. This goes beyond the exercise of a power of appropriation and is the type of arrangement described by the Parliamentary Secretary in the Second Reading Speech quoted at [28] as intended to be covered by s 63(2).
12. But this does not affect the characterisation of the transfer of the Memocrop shares to the plaintiff. That was done by the trustees' appropriating the shares towards his entitlement under the will and involved no variation of the trusts affecting him.
13. The Chief Commissioner submitted that it was only pursuant to the DoFA that the plaintiff acquired the right to all of the deceased's shares in Memocorp. He submitted that but for the DoFA each of the other residuary beneficiaries would have been entitled to call for a transfer of a percentage of the deceased's Memocorp shares that equated to that beneficiary's entitlement to the residuary estate on the principle in Saunders v Vautier. In Beck v Henley [2014] NSWCA 201; (2014) 11 ASTLR 457 Leeming JA noted (at [36]) that in Thomas & Hudson, The Law of Trusts, 2nd ed Oxford University Press, 2010 Professor Thomas stated (at p 166) that the power of beneficiaries who are absolutely and indefeasibly entitled to call for a transfer of trust property may be defeated by an exercise by the trustee of a power of appropriation. The Court of Appeal did not decide whether or not that was correct, but it may be. It does not follow, as the Chief Commissioner submitted, that because the DoFA precluded any of the other residuary beneficiaries calling for a transfer of a portion of the Memocorp shares on the principles in Saunders v Vautier that the DoFA thereby altered the trusts of the will. The right of beneficiaries who are sui juris and absolutely entitled to call for a transfer of the trust property operates to override the trusts of the will, not to enforce them. Accordingly, the surrender of such a right by agreement does not alter the trusts of the will. It does not engage s 63(2).
14. The Chief Commissioner denied that the transfer of the Memocorp shares to the plaintiff came within either subparas (ii) or (iii) of s 63(1)(a). So far as s 63(1)(a)(ii) is concerned, read literally, there can be no question but that the Memocorp shares were a dutiable property of the deceased that were transferred by the deceased's legal personal representatives to a person who was a beneficiary and that that property was the subject of a trust for sale contained in the will. The Chief Commissioner argued that having regard to the whole of the context of s 63 a purely literal interpretation of s 63(1)(a)(ii) should not be adopted. Thus, if a deceased made a will leaving a legacy of $500 to A and the rest of his estate to B, but A was prepared to buy the deceased's house that was worth $1 million and to set off his legacy of $500 against the purchase price, it would be a curious and obviously unintended result if ad valorem duty were not payable on the transfer of the $1 million property by the executor to A. The Chief Commissioner submitted that properly read, s 63(1)(a)(ii) referred only to a transfer of property the subject of a trust for sale to a beneficiary to whom the property had been specifically left. He submitted that s 63(1)(a)(i) referred to a case where under a will or on intestacy a beneficiary was entitled to call for a transfer of particular property. Section 63(1)(a)(ii) applied to such a case even though the will provided a trust for sale. Section 63(1)(a)(iii) applied only where the appropriation was made under s 46 of the Trustee Act. On the plaintiff's case, s 46 did not apply.
15. Whatever the limits of s 63(1)(a)(ii), there is nothing in the context of s 63 that precludes its applying to a transfer of property that is the subject of a trust for sale in the deceased's will to a beneficiary in, or towards, satisfaction of the beneficiary's entitlement under the will. I think the better view is that this is achieved in any event by s 63(1)(a)(iii). But if it is not (because the appropriation was not made under s 46 of the Trustee Act), then there is no reason that s 63(1)(a)(ii) should not apply. I think however that the better view of the section is that s 63(1)(a)(iii) applies not only to an appropriation made under s 46 of the Trustee Act, but also to an appropriation at general law or under a power expressly conferred by the trust instrument such as is referred to in s 46 of the Trustee Act. It is unnecessary to set out the whole of the section.
16. The words in brackets in s 63(1)(a)(iii) are used simply to identify the nature of the power of appropriation to which the provision refers and do not substantively limit the operation of the subparagraph. If this view is wrong, the matter would in any event be covered by s 63(1)(a)(ii).
17. It is not clear to me that the appropriation was not made under s 46 of the NSW Act. Although the trusts of the will are governed by Singaporean law, the exercise of the power of appropriation, which is equivalent to the exercise of the power of sale with the purchase money being set off against the beneficiary's entitlement under the will, may be considered as part of the administration of the estate to be carried out in accordance with the lex fori (Permanent Trustee Co (Canberra) Ltd v Finlayson (1968) 122 CLR 338 at 342-3).
18. But the plaintiff did not contend that the appropriation was made under s 46. The Chief Commissioner did not accept that Singapore law applied to the appropriation, but his submissions proceeded on the basis of the plaintiff's concession.
19. It is not necessary to decide whether the plaintiff's concession is correct. I will assume that it is and that the trustees were not exercising a power under s 46. Nonetheless, they were exercising a power referred to in s 46. Section 46(15) provides that: "46. Appropriation … (15) This section shall not prejudice any other power of appropriation conferred by law or by the instrument, if any, creating the trust, and the powers conferred by this section shall be in addition to any such power."
20. As the plaintiff submitted, the powers conferred by s 46 are in addition to and not in derogation of the power of appropriation at common law or under an instrument expressly conferring such a power. I accept that s 46 refers to such a power arising under the general law.
21. For these reasons I conclude that only $50 of duty was chargeable as marketable securities duty on the transfer of the Memocorp shares.

Landholder Duty

1. A different question arises under s 163A. As indicated earlier in these reasons, in the absence of argument to the contrary I am prepared to accept that CY Tay's interest in the deceased's Memocorp shares was acquired as a result of the distribution of the estate to him, even though he is taken to have acquired the shares by purchase with the purchase price being set off against his entitlement under the will. The plaintiff argued that in a substantive sense this was a distribution of the estate and in the absence of argument to the contrary I can accept that that is so.
2. The Chief Commissioner submitted that CY Tay acquired the shares not as a result of the distribution of the estate but pursuant to the DoFA. He also submitted that even if the shares were acquired as a result of the distribution of the estate, the distribution was not made in the ordinary course of execution of the will because it was made pursuant to the DoFA. He also submitted that by reason of the DoFA the shares were not acquired solely as a result of the distribution of the estate. I accept the last argument. The plaintiff acquired the Memocorp shares as a result not only of the distribution of the estate, but also the anterior DoFA under which the residuary beneficiaries agreed that he would acquire both the deceased's and the other existing shareholders' shares in Memocorp.
3. I do not accept that the parties' entering into the DoFA means that the transfer of the Memocorp shares was not as a result of the distribution of the estate in the ordinary course of execution of the will. This follows from my earlier conclusions in relation to s 63. However, in my view the plaintiff acquired the deceased's shares in Memocorp both as a result of the distribution of the estate and as a result of the other residuary beneficiaries' consenting to the transfer and thereby surrendering their right themselves to call for a transfer of a proportion of the deceased's shares in Memocorp, and also agreeing to the additional transfers for which the DoFA provided.
4. The plaintiff submitted that in s 163A(d) "solely" meant that no part of the interest was acquired other than by way of distribution from a deceased estate. He submitted that there was no other cause of his acquiring the shares other than as a distribution. However, this construction gives little operation to the use of the word "solely". The various alternatives in s 163A(d) introduced by the word "whether" do not change the fact that the acquisition of the interest in a landholder must be solely the result of the distribution of the deceased person's estate. The use of the word "solely" means that it is not enough that the direct or the immediate cause of the acquisition was the distribution of the estate. The plaintiff referred to the fact that both paragraphs (b) and (c) of s 163A apply if an interest is acquired "solely" as a result of the matters specified in those subsections. But, so it was submitted, the fact that there would be commercial considerations which would influence how an arrangement between creditors was structured or why there was an increase or decrease in the interests of unit holders or shareholders in a landholder, did not justify looking behind the source of the acquisition of the interest in the landholder to identify the commercial considerations that led to the acquisition. But this was not simply a case of the source for the acquisition of the interest in a landholder being motivated by particular commercial considerations. The DoFA was itself an operative cause of the plaintiff's acquiring the deceased's shares in Memocorp.
5. The Chief Commissioner cited a number of Victorian decisions that considered exemptions from duty where an instrument was made solely in consequence of the appointment or retirement of a trustee. In Perpetual Trustee Co Ltd v Commissioner of State Revenue [2000] VSC 177; (2000) 44 ATR 273 Hansen J said (at [54]) that: "[54] … In its common understanding in its present context the word 'solely' in conjunction with the words 'in consequence of' means that the exemption will apply only if the instruments of transfer were executed in consequence of the change in trustee and in order to vest the real property of the trust in the name of the new trustee and not in consequence of any other factor. The object is to protect the revenue when an instrument of transfer is the consequence of another factor or factors. The use of the word 'solely' indicates the extent of the legislature's concern in that regard. If the word 'solely' had not been used, the question would merely have been whether the transfers were a consequence of the change of trustee in the sense of it being sequential or following on from it. It would not matter if the transfers were also a consequence of another factor or factors. In my view however this construction, which was contended for by Perpetual, cannot stand in face of the qualifying word 'solely'. The expression 'solely in consequence of' requires that for the exemption to apply it must be established, as a matter of fact, that the transfer of real property of the trust was executed only in consequence of a change of trustee and in order the vest the real property of the trust in the name of that new trustee. The consequence is that the legislature has imposed a rigorous test of a factual nature which a taxpayer must surmount for the exemption to apply."
6. The exemption was inapplicable because the change in trustees was but one step in effecting a change of beneficial ownership of the land. The reasoning of Hansen J was approved by the Victorian Court of Appeal in Commissioner for State Revenue v Victoria Gardens Developments Pty Ltd [2000] VSCA 233 at [28]. Batt JA, with whom Ormiston and Chernov JJA agreed, held that the exemption was inapplicable because the transfers were not made solely in consequence of the appointment of a new trustee, but to give effect to the provisions of a joint venture agreement entered into between three owners of adjoining land pursuant to which the trustees of existing trusts resigned and the new trustee was appointed. The same conclusion was reached by the Victorian Court of Appeal in White Rock Properties Pty Ltd v Commissioner of State Revenue [2015] VSCA 77 where a testator left three blocks of land on five separate testamentary trusts. The property of each trust consisted of a one-fifth interest as tenant-in-common in each of the blocks. The trustees entered into a partnership agreement pursuant to which they appointed the appellant as their agent in relation to the land and transferred the land to the appellant to be held by it as trustee for the partners, that is, the testamentary trustees, on the terms set out in the partnership agreement (at [55]). The Court of Appeal held (at [136]): "The facts and circumstances of the present case are relevantly indistinguishable from those in Victoria Gardens. As in that case, the Transfers were a key element of the development and realisation of the Land. The holding of the Land by the individual Testamentary Trustees posed administrative difficulties and thus the Land was transferred to WR to facilitate its development and sale. Very wide discretionary powers were conferred on WR to enable it to achieve these commercial objectives. The Transfers were made in order to achieve these objectives rather than solely because of WR's appointment as trustee."
7. It distinguished its earlier decision in Commissioner of State Revenue v Lend Lease Funds Management Ltd (2011) 33 VR 204; [2011] VSCA 182 as follows (at [137]): "The present case can be readily distinguished from Lend Lease, where the majority held that the transfer of the Maribyrnong property was made after the completion of the commercial transaction, that is, the takeover, and was not in order to give effect to that transaction. Unlike the position in Lend Lease, the carrying into effect of the Partnership business (as defined) explains and bears upon the Transfers, and cannot be described as an independent and unnecessary step. If the Transfers had not been executed, the Partnership Agreement would not have served any useful purpose, as it was premised upon WR being the holder of the legal title to the Land and being able to deal with it as if it were the beneficial owners. In other words, the Transfers were executed to give effect to the commercial arrangements embodied in the agreement."
8. These cases, although on a different statute, are of assistance in construing s 163A. They demonstrate that where the means by which a person acquires an interest in the landholder is part of a wider transaction, then it can be said that the interest is not acquired solely as a result of the particular means by which the interest was acquired. It is unnecessary to express any concluded views as to the operation of paragraphs (b) and (c) of s 163A until the occasion to do so arises. But I see no reason to doubt that the principles discussed in the above cases would be applicable to any issue that might arise under s 163A(b) or (c).
9. In the present case, the DoFA not only provides the motive or commercial consideration for the distribution. Rather, the distribution and the DoFA formed part of an entire transaction by reason of which the plaintiff acquired the deceased's shares in Memocorp. That interest was not acquired solely as a result of the distribution of that part of the deceased's estate.
10. For these reasons the assessment of landholder duty should be confirmed.

Orders

1. For these reasons I make the following orders:

Proceeding 2015/113063

1. In this proceeding I order that the defendant's decisions dated 3 July 2014 and 16 July 2014 to assess the plaintiff as being liable to pay ad valorem marketable securities duty on the transfer of shares in Memocorp Australia Pty Ltd from the executors of the estate of the late Tee Peng Tay to the plaintiff dated 28 May 2014, be revoked.

Proceeding 2015/361534

1. In this proceeding I order that the defendant's assessment dated 14 May 2015 be confirmed.
2. I will hear the parties as to whether any consequential orders need be made and I will hear the parties on costs.

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