MOTION:
Procedure for acquiring a Strata Lot set out in letter of 27/9/86 of F. Budai's letter, be amended so the offer by unit holders for Strata Lots be fixed and not be varied in proportion to the achieved prices for lots sold to outside purchasers.
…"
29 By a notice to Zelino dated 17 November 1986 Mr Tesoriero offered the amount $381,111 "for special rights units" in respect of Lot 3. At the meeting of directors of Zelino on 16 December 1986 it was resolved that, there being only one bid for Lot 3, namely that of Mr Tesoriero, "the consideration for that lot be reverted to the original amount in the directors' meeting dated 14/10/86 for $380,000 [sic] . Documents be prepared to transfer to P. and T. Tesoriero Lot 3 for $380,000 less 2%" .
30 By a notice to Zelino dated 17 December 1986 Mr and Mrs Tesoriero gave "formal notice of our election to acquire strata lots 4 and 11 in the proposed Strata Plan for the Holyoak project subject to the procedures that have been agreed upon and resolved unanimously by the Board" . By notice also dated 17 December 1986 Mrs Zanin gave a notice in the same terms in respect of Lot 9 in the proposed Strata Plan.
31 At a meeting of directors of Zelino on 11 March 1987 it was resolved as follows:
"The following two motions were then both passed unanimously:
1. 'As a consequence of a notice of acceptance dated 17th December 1986 the board authorises that documents be prepared for the issue of special rights units in the Cremorne Unit Trust for proposed strata lots 11 and 4 for $620,000 and $450,000 respectively less 2% to Peter and Tonia Tesoriero on terms that will ensure that Zelino Pty Limited is in no way more disadvantaged than if it had sold these units to outside purchasers.
2. 'As a consequence of a notice of acceptance dated 17th December 1986 the board authorises that documents be prepared for the issue of special rights units in the Cremorne Unit Trust for the proposed Strata Lot 9 for $600,000 to Beila Corporation Pty Limited on terms that will ensure that Zelino Pty Limited is in no way more disadvantaged than if had [sic] sold this unit to an outside purchaser.'"
32 At a meeting of directors of Zelino on 9 July 1987 it was resolved that:
"Applicants for special rights units meet all their commitments on the 14/8/87 irrespective of the ability of the Company to deliver good title. Upon meeting their obligations they will have the right of occupancy. The purchaser of special rights units shall have the right to assume any obligations of the Company to Midlands to satisfy their commitments, so long as they accept the liabilities that those commitments encompass and upon so satisfying those commitments they shall have the right to require Zelino to procure discharges of mortgages on their respective lots."
33 The "obligations of the Company to Midlands" referred to in the resolution are in fact the obligations of the venturers themselves to Midland International Aust Ltd ("Midlands") under a contract for loan dated 15 August 1985 whereunder Midlands had advanced the sum of $2,675,000 to the venturers for the purpose of construction of the development, on the security of a first mortgage over the property. The venturers had in turn provided the money to Zelino.
34 At a meeting of directors of Zelino on 13 August 1987 the following resolutions were passed:
"… that from the funds due to be received on 14/8/87, the Company offset $240,000 due from P. Tesoriero against the funds borrowed from P. Tesoriero at 23% …
… that when Title Documents issue the Company prepare and execute mortgage documents over proposed Lot 8 for Feangil to the amount of $610,000. The mortgage to be discharged upon Feangil receiving clear title."
35 It should be noted that as at the time of this meeting Mr and Mrs Tesoriero and Mr Tesoriero's brother had advanced a total of some one million dollars to the CUT. Further, it should be noted that $610,000 had been calculated as the nett purchase price to be paid by Feangil for Lot 8 after adjustment to the agreed price of $615,000.
36 On 14 August 1987 the loan account of Mr and Mrs Tesoriero with the CUT was debited with the sum of $2,903,350, being the purchase price for Lots 3, 4, 11 and 12, and credited with the sum of $1,903,250, being the amount of the Midlands loan for which they assumed liability on that day. On the same day Zelino received $610,000 from Feangil in respect of the acquisition of Lot 8.
37 On 21 August 1987 Zelino received $510,000 from Mrs Zanin in respect of the acquisition of Lot 9 and Mrs Zanin went into occupation of that apartment. On 9 September 1987 Mr and Mrs Tesoriero took possession of Lots 3, 4, 11 and 12. They occupied Lot 12 as their residence and at some time afterwards leased Lots 3, 4 and 11 pursuant to leases entered into by Zelino as lessor, at their direction.
38 At a meeting of directors of Zelino on 19 September 1987 it was resolved that documents be prepared to transfer Lot 2 to Mr Socini for a price of $600,000, less 2%. The purchase price was apparently paid by Mr Socini assuming liability for a corresponding amount of the Midlands loan. Mr Socini took occupation of Lot 2 on the same day.
39 By early September 1988 Mr and Mrs Tesoriero had, by means of a loan from another financier, procured the discharge of the Midlands mortgage over Lots 3, 4, 11 and 12 in accordance with the liability which they had assumed on 14 August 1987. Mrs Zanin had procured the discharge of the Midlands mortgage over Lot 9, and Feangil had procured the discharge of the Midlands mortgage over Lot 8.
40 As I have noted, the Strata Plan for the development was registered on 8 September 1987. Between July and October 1987 Zelino sold to third parties those units which the venturers did not want for themselves, namely Lots 1, 5, 6, 7 and 10. Upon completion of those contracts title was transferred by Zelino to the purchasers.
Submissions
41 Despite the fact that no transfers of shares in Zelino or transfers of units in the CUT were delivered to Mr and Mrs Tesoriero on 16 December 1998, neither party disputes that on that day Mr and Mrs Tesoriero acquired the beneficial title, if not the legal title, to all shares in Zelino not already held by them and to all units in the CUT not already held by them, other than the units held by Mr Socini.
42 The Commissioner submits that on 16 December 1988 Zelino was still registered as the proprietor of Lots 2, 3, 4, 11 and 12 and that it held that land as trustee of the CUT. Accordingly, says the Commissioner, the CUT was a "designated landholder" as defined by s.99A of the Stamp Duties Act 1920 , as amended. The CUT was a "designated landholder" because, being a "private unit trust scheme" as defined by s.99A(1), it was a "landholder" for the purposes of Division 30 and Zelino, as trustee of the CUT, owned land in New South Wales in its capacity as Trustee of that private unit trust scheme, as required by s.99A(2)(b) of the Act. The unencumbered value of the land, being the five strata title units, was unquestionably not less than one million dollars, as required by the definition of "designated landholder".
43 In those circumstances, the Commissioner submits, when Mr and Mrs Tesoriero acquired at least the beneficial title to all of the units in the CUT save those of Mr Socini, they acquired a "majority interest", as defined, or an interest which resulted in them having a majority interest, in a designated landholder, within the operation of s.99E(1) of the Act. Failure by Mr and Mrs Tesoriero to lodge with the Commissioner a statement in respect of the acquisition required by s.99E within two months entitled the Commissioner to issue a default assessment in accordance with s.127B of the Act.
44 Mr and Mrs Tesoriero submit that as at 16 December 1988 Zelino held no land at all as Trustee of the CUT and as an asset of that Trust. They say that although Zelino held the legal title to Lots 2, 3, 4, 11 and 12 it did so as a bare trustee for Mr Socini and Mr and Mrs Tesoriero respectively, pursuant to contracts for sale which had been entered into prior to 16 December 1988 and in respect of which the purchase price had been paid. They rely upon the well established principle that where a vendor under a contract for the sale of land has received the purchase price from the purchaser so that the purchaser is entitled to call for a conveyance, the vendor is the trustee of the land for the purchaser. If the vendor declines to convey, the purchaser is entitled to a vesting order: Chang v Registrar of Titles (1976) 137 CLR 177, at 185; K.L.D.E. Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288, at 301.
45 Accordingly, say Mr and Mrs Tesoriero, as Zelino did not own any of the apartments in its capacity as Trustee of the CUT and as assets of that Trust, it was not a "designated landholder" to which s.99E(1) could apply.
46 The Commissioner responds that the submission of Mr and Mrs Tesoriero would succeed were it not for one point, namely, that there were no contracts between Zelino, Mr Socini and Mr and Mrs Tesoriero respectively for the sale of the apartments. The Commissioner says that what the parties were endeavouring to do in their dealings with the apartments prior to 16 December 1988 was to engage the mechanism provided by the Trust Deed for the issue or acquisition of "special rights units", i.e. units in the classes "D" to "O" as provided by Clause 2(d) and the Sixth Schedule to the Trust Deed. This they failed to do because, by late 1986 and 1987, it was impossible for Zelino to comply with the requirement of Clause 2(d) of the Trust Deed that Zelino make a determination to issue "D" to "O" class units not later than twenty-four hours after it accepted cash from the unitholders pursuant to Clause 2(a). Zelino had accepted cash from unitholders under that clause in early 1985.
The effect of the venturers' applications
47 What, precisely, was the legal result of the venturers' applications for lots in the Strata Plan and the various resolutions of Zelino's directors during 1986 and 1987? One thing is fairly apparent: none of the venturers, and perhaps even Mr Budai, had any clear idea of how the "special rights units" provisions of the Trust Deed worked. No one seems to have realised that by 1986 it was too late for Zelino to issue "special rights units" pursuant to Clause 2(d), at least without an amendment to the Trust Deed.
48 I am satisfied that when the Zelino Board resolved on 27 October 1986 that "where possible" the transfer of strata lots be achieved in accordance with Mr Budai's memorandum in respect of "special rights units", it was regarded by all parties - Zelino and the venturers alike, they being the controlling mind of Zelino - as highly desirable but not essential that strata lots be transferred to venturers by use of the "special rights units" mechanism provided by the Trust Deed, in order to avoid stamp duty if possible. However, the issue of "special rights units" was only subordinate to the main object of the parties, namely, that the venturers acquire the legal title of the apartments which they had chosen at the prices which had been determined by the Board on 14 October 1986.
49 This is evident from the terms of the application of Mr and Mrs Tesoriero on 29 October 1986 for lots 3 and 12; it is evident from the application of Feangil on 5 November 1986 for "the exclusive beneficial ownership of Lot 8" ; it is evident from the applications of Mr and Mrs Tesoriero and Mrs Zanin on 17 December 1986 to acquire lots 4 and 11 and 9 respectively.
50 It is evident from the terms of the resolutions of the Board on 12 November 1986 that documents be prepared for the transfer of lots 12 and 8, rather than that documents be prepared for the issue of "special rights units". Similarly, it is evident from the terms of the resolution of the Board on 17 November 1986 that documents be prepared to transfer lot 3 to Mr and Mrs Tesoriero; the same intention appears from the terms of the resolution of 19 September 1987 that documents be prepared to transfer lot 2 to Mr Socini "on terms that will ensure that Zelino is in no way disadvantaged had Zelino exchanged the sale to an outside purchaser on 22/9/87" . The intention is evident also from the resolution of the Board on 9 July 1987 that "applicants for special rights units meet all their commitments [i.e. in respect of the acquisition of the lots which they had selected] on 14/8/87 irrespective of the ability of the Company to deliver good title " (emphasis added). I think it is a clear inference that the inability to give good title which was referred to was understood as the consequence of the fact that the Strata Plan for the development would not be registered by 14 August 1987; it was not understood by the parties to refer to the fact, unknown to them, that Clause 2(d) of the Trust Deed could never have been satisfied.
51 It is true that on 11 March 1987 the Zelino Board resolved that "documents be prepared for the issue of special rights units" for lots 11, 4 and 9. However, it is highly significant that nothing was ever done to prepare documents attempting to issue or transfer "special rights units" before the venturers actually paid their respective purchase prices for the lots which they had selected and went into possession, clearly with the consent of Zelino. In my view, the words of these resolutions were understood by all parties to be no more than a further attempt to bolster whatever argument they may later have been able to come up with that no stamp duty on any transfer of a lot to a venturer was payable because, by some means or other which they could not understand at the time, the "special rights units" mechanism of the Trust Deed had been successfully evoked in the process of transfer.
52 In my opinion, the applications by the venturers to acquire their chosen apartments were understood by all concerned as offers to Zelino to acquire those apartments at the prices fixed by the Board on 14 October 1986. It was understood that if the acquisitions could be effected through the issue of "special rights units", then that should be done. The offers were accepted in those terms by Zelino by the resolutions for the preparation of documents for the transfer of lots to the respective venturers. Acceptance of the offers was communicated to the offerors by the very fact that the offerors, or their representatives, as directors of Zelino had voted to pass those resolutions. Binding contracts were intended to come into existence at that point and did come into existence.
53 The contracts with the venturers could be performed by Zelino by transferring the relevant lots to them directly, upon payment of the requisite purchase price, or else by some procedure involving, as an intermediary step, the issue of "special rights units" if that could validly be done - either mode of performance of the contracts by Zelino was acceptable. In fact, however, although the parties did not appreciate it at the time of the contracts, implementation of the "special rights units" mechanism in the Trust Deed was no longer possible so that the only available mode of performance of the contracts by Zelino was the transfer to the venturers directly of the titles to their strata lots, once the Strata Plan had been registered and the venturers had paid their respective purchase prices.
54 This conclusion is, in my view, supported by the traditional common lawyer's analysis of the formation of a contract by reference to "offer", "acceptance", certainty as to parties, property and price, and intention to create a binding legal relationship. However, the conclusion that such contracts came into existence is also supported by the inferences which can be drawn from the acts and conduct of the parties in all the circumstances to which I have referred: see Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523.
55 The Commissioner does not dispute that, if on proper analysis there were contracts between Zelino and the venturers for the sale of their respective apartments which existed outside the regime of the "special rights units" mechanism of the Trust Deed, those contracts were performed prior to 16 December 1988 on the part of the venturers by the payment of the requisite consideration. The Commissioner does not dispute that, in those circumstances Zelino held the apartments as at 16 December 1988 as bare trustee for the venturers.
Conclusion
56 For the above reasons, I am satisfied that as at 16 December 1988 Zelino did not hold any land in New South Wales in its capacity as Trustee of the CUT and as an asset of that Trust. Accordingly, the provisions of s.99E(1) of the Stamp Duties Act 1920 , as amended and then in force, did not apply to the acquisition on that date by Mr and Mrs Tesoriero of shares in Zelino and units in the CUT.
57 It follows that the assessment of stamp duty made by the Commissioner on 6 July 1984 in respect of that acquisition of shares and units, purportedly pursuant to s.127B of the Act, was invalid.
58 The objection of Mr and Mrs Tesoriero to that assessment is allowed and the assessment is set aside.
59 If the parties so desire, I will stand the matter over for further submissions as to interest, costs and consequential relief.
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