White Rock Properties Pty Ltd v Commissioner of State Revenue [2015] VSCA 77

TAXATION - State revenue - Duties - Whether transfers of land from testamentary trustees to corporate trustee exempt from duty under ss 35(1)(a) or 33(3) of Duties Act 2000 - Whether transfers of land made to a trustee 'to be held solely as trustee ... of the transferor' - Whether partnership agreement and transfers gave rise to a new trust - Whether transfers made 'solely ... because of ... the appointment of a new trustee' or 'other change in trustees' and 'in order to vest the property in the trustees for the time being entitled to hold it' - Exemptions held not to apply - Comptroller of Stamps v Yellowco Five Pty Ltd [1993] VicRp 90; [1993] 2 VR 529, Commissioner of State Revenue v Victoria Gardens Developments Pty Ltd [2000] VSCA 233; (2000) 46 ATR 61 applied.

TAXATION - State revenue - Duties - Dutiable value and unencumbered value of dutiable property - Duties Act 2000 ss 20(1) and 22(1) - Whether transfers conveyed 'bare legal title' with nil value - Dutiable value held not to be nil - Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue [2004] VSCA 10; (2004) 12 VR 351 distinguished - Commissioner of State Revenue v Lend Lease Funds Management Ltd [2011] VSCA 182; (2011) 33 VR 204 considered - Appeal dismissed.

1 The will of Francis Ferris Rooney ('Will'), who died on 14 June 2008, created five testamentary trusts ('Testamentary Trusts') over three blocks of land in Warrnambool (collectively, the 'Land'). Each block was on a separate title. The trust property of each trust relevantly comprised a one-fifth interest as tenants in common in each block. There were two trustees of each trust jointly holding the one-fifth interest of that trust ('Testamentary Trustees' or 'trustees').

2 On 1 February 2013, the Testamentary Trustees executed a partnership agreement ('Partnership Agreement' or 'agreement') which set out their powers and obligations as partners in relation to the Land. The Partnership Agreement appointed White Rock Properties Pty Ltd ('WR') as the agent of the partners in relation to the Land. Also on 1 February 2013, the Testamentary Trustees executed three transfers ('Transfers') by which they transferred each of the blocks of land to WR.

3 Each set of Testamentary Trustees held one of five shares in the capital of WR and they were entitled to nominate a director of WR. Three of the Testamentary Trustees, Dorothy, Brian and Bernard Rooney became the initial directors of WR.

4 Upon execution of the Partnership Agreement and the Transfers:

(a) the Land became the initial capital of the 'Rooney Family Partnership' established by the Partnership Agreement ('Partnership');

(b) each set of Testamentary Trustees held 100 units in the Partnership;

(c) WR held the Land as trustee on the terms set out in the agreement; and

(d) extensive powers were conferred on WR in relation to the Land, including power to develop and sell it.

5 On 10 May 2013, the Commissioner of State Revenue ('Commissioner') assessed each of the Transfers as liable to duty under the Duties Act 2000 ('Act').[1] On 6 June 2013, WR objected to the assessments on the ground that the Transfers were exempt from duty under s 35(1)(a) of the Act.[2] On 7 August 2013, the Commissioner disallowed the objections.

6 On 1 October 2013, WR requested that the Commissioner treat the objections as appeals and cause them to be set down for hearing in the trial division pursuant to s 106 of the Taxation Administration Act 1997.

7 At trial, WR was granted leave to add the following grounds of appeal:

(a) that the Transfers were exempt from duty under s 33(3) of the Act;[3]

(b) that the value for duty purposes of the estate that was conveyed by the Transfers was nil or nominal.

8 On 1 July 2014, the trial judge rejected WR's grounds of appeal and made an order dismissing the appeals.[4] WR has appealed to this Court against that order.

9 For the reasons set out below, we have concluded that the judge was correct to reject WR's grounds of appeal.

10 At trial, the facts were not in dispute. They were set out in affidavits sworn by Brian Rooney, who was not cross-examined. The facts relevant to the appeal are summarised below.

The Testamentary Trusts and relevant provisions of the Will

11 Under cl 3.3 of the Will, the testator devised his interest in the Land to the five Testamentary Trusts to be held by the five sets of Testamentary Trustees as tenants in common in equal shares.

12 The Testamentary Trusts were established under cl 4 of the Will. They were:

(a) the Kevin Rooney Trust, in respect of which Kevin Rooney and Dorothy Rooney are trustees;

(b) the Dorothy Rooney Trust, in respect of which Dorothy Rooney and Brian Rooney are trustees;

(c) the Brian Rooney Trust, in respect of which Brian Rooney and Bernard Rooney are trustees;

(d) the Bernard Rooney Trust, in respect of which Bernard Rooney and Catherine Riordon are trustees; and

(e) the Catherine Riordon Trust, in respect of which Catherine Riordon and Brian Rooney are trustees.

13 Kevin, Dorothy, Brian and Bernard Rooney are the testator's children and Catherine Riordon is the testator's niece.

14 Clause 4.3 of the Will described the beneficiaries of each of the Testamentary Trusts. The first-named beneficiaries of each Testamentary Trust are the abovementioned children and niece of the testator and either their descendants or their siblings.[5]

15 Following the granting of probate of the Will on 9 September 2008, in accordance with cl 3.3 of the Will, the executors executed a transfer to transfer the Land to the Testamentary Trustees. Upon registration of the transfer on 13 February 2009, the five sets of Testamentary Trustees became registered proprietors of the Land. Each set of trustees held as joint tenants a one-fifth interest as tenants in common in each of the blocks comprising the Land on trust for the beneficiaries of their respective Testamentary Trust.

16 Clause 4.1 of the Will provided that each of the Testamentary Trusts would consist of the bequests made to it pursuant to cl 3 of the Will.

17 Clause 4.5 of the Will provided that the Testamentary Trustees were to hold the income and capital of each of the Testamentary Trusts for such of the beneficiaries as the Testamentary Trustees may decide in their absolute discretion.

18 Clause 4.6 of the Will relevantly conferred a number of powers on the Testamentary Trustees in addition to the powers conferred on them by law, including:

(a) a power to retain or sell any trust assets;

(c) a power to improve, develop, alter, subdivide or construct any trust assets;

(d) a power to enter into any partnership or joint venture with any person and to be a party to the partition of the assets of any such partnership or joint venture upon its termination;

(e) a power to establish or purchase and to carry on any business alone or jointly with others, to use trust assets for the purposes of such a business and to sell any such business;

(f) a power to acquire, dispose of, exchange, mortgage, lease or otherwise deal in real or personal property or any estate or interest in such property;

(g) a power to borrow money against the security of trust assets;

(h) a power to establish, promote or acquire any company or trust;

(i) a power to appropriate any trust asset 'in full or partial satisfaction of distribution of capital or income' to a beneficiary (cls 4.6.12, 4.8 and 5); and

to enter into any contract, agreement or arrangement with any person for or with respect to the development and turning to account of any real or personal property or any interest therein and any other right, privilege or interest for the time being or with respect to the construction of any buildings, laying out or preparing land for building purposes, or in developing or turning to account real or personal property or any rights, privileges or interests.

19 Clause 4.7 of the Will required decisions of the two Testamentary Trustees of each Testamentary Trust to be unanimous and set out detailed mechanisms to resolve disagreements by the trustees, including mediation and arbitration.

20 Following the transfer of the Land from the executors of the estate of the testator to the Testamentary Trustees on 13 February 2009, the Testamentary Trusts traded as a common law partnership. There was no evidence at trial about the terms of that partnership.

21 On 6 May 2011, the Testamentary Trustees had a family meeting to discuss the partnership going forward. The issues of primary concern were the consequences following the death of a Testamentary Trustee and changes in family structure.

22 On 12 May 2011, Dorothy, Brian and Bernard Rooney met with lawyers with a view to formalising the partnership arrangements, having regard to the following issues:

(b) the illiquid nature of the trust assets held by the partnership;

(c) the potential for a partner to call for the dissolution of the common law partnership; and

(d) the onerous requirement that the consent of all Testamentary Trustees was required each time a decision was made by the partnership.

23 The Testamentary Trustees and WR executed the Partnership Agreement on 1 February 2013. The recitals of the Partnership Agreement relevantly provided:

R1. The Partners have agreed to formalise a partnership to conduct the partnership business and have agreed to appoint [WR] to manage the partnership business as their agent.

R2. [WR] has agreed to manage the partnership business for the Partners.

R3. The partnership commenced on the date of death of Francis Ferris Rooney (14 June 2008) and has continued since that date as a common law partnership. The Partners wish to formally record the terms of the partnership without extinguishing or ending the common law partnership.

24 The First Schedule to the Partnership Agreement ('First Schedule') relevantly defined:

(a) the 'Partners' as the five sets of Testamentary Trustees 'in their capacity as trustees' of their respective Testamentary Trusts ('Partners');[6]

(c) The 'partnership business' as '[c]onducting the business of the development and sale of [the Land]'.[7]

25 Clause 8 of the Partnership Agreement provided that the Land would be the initial capital of the partnership. By unanimous resolution, the Partners could agree that they be required to contribute further capital in proportion to their holding of units in the partnership.

26 Clause 9 of the Partnership Agreement was titled 'Units in the partnership' and relevantly provided:

9.1 Each Partner shall be deemed to hold units in the partnership and the beneficial interest in the partnership at the date of its commencement and as existing from time to time shall be vested in the Partners in proportion to their respective holding of units.

9.2 The unit holding of each Partner at the date of this Agreement is set out in the First Schedule as the initial unit holding.

9.3 The holding of a unit or units shall not entitle a Partner to any particular asset or part of the partnership capital.

9.4 The rights and liabilities of the Partners as members of the partnership shall be in proportion to their respective holding of units.

9.5 [WR] shall keep and maintain a register of the number of units held by each Partner and issue to each Partner a unit certificate in the form of the Second Schedule.

27 The First Schedule specified that the 'initial unit holding' of each Partner - that is, each set of Testamentary Trustees - would be 100 units.

28 Clause 10 of the Partnership Agreement provided that a Partner could only transfer its units in certain circumstances, which included:

(a) where the Partner was a trustee and the transfer of units was pursuant to a change of trustee;

(b) where both the transferor and the transferee were Partners and the transfer was to effect a change in their respective interests in the Partnership and that change had been sanctioned by a unanimous resolution of the Partners;

(c) where a new Partner was admitted to the Partnership pursuant to cl 15 and the transfer was to that new Partner;

(d) where the Partner held its interest in the partnership as the trustee of a discretionary trust and the transfer of units was to certain beneficiaries of the trust or other prescribed persons or entities; and

(e) where the transfer has been sanctioned by a unanimous resolution of the Partners.

29 Clause 12.2 of the Partnership Agreement provided that the Partners were entitled to the net income of the Partnership in accordance with their holding of units and were required to bear any net loss in the same manner.

30 Clause 15 of the Partnership Agreement outlined a procedure for the retirement of Partners and the admission of new partners. Clause 15 relevantly provided:

(a) that the partnership would not be terminated upon the retirement of a Partner if the remaining Partners determined that they would continue the partnership (cl 15.2);

(b) a means for valuing the retiring partner's interest in the partnership (cl 15.4); and

(c) a payment schedule for payment of the value determined under cl 15.4 to the retiring partner (cl 15.3).

31 Clauses 15.5 and 15.6 of the Partnership Agreement provided as follows:

15.5 [T]he units held by the retiring Partner shall be transferred to the other Partners in such proportions as they may nominate. The transfer of the units shall represent the transfer of the retiring Partner's interest in the partnership and it shall thereafter have no interest in the partnership but have a right to payment for the value of its interest for which the other Partners shall have joint and several liability.

15.6 In the event that the Partners unanimously resolve to admit a further person to the partnership with the intent that the new partnership thereby created continue the partnership business, the sum payable by the incoming partner for its interest in the partnership shall be such sum as the Partners may agree upon or failing agreement the fair value as determined [pursuant to cl] 15.4.

32 Clauses 16 to 19 of the Partnership Agreement provided procedures for the purchase by the continuing Partners of the assets of a Partner who dies. Clause 21 provided that if certain events occurred, including the commission of a breach of any condition of the Partnership Agreement by a Partner, then the other Partners may by ordinary resolution determine the Partnership with the defaulting Partner. In such a case, the other Partners had the option of purchasing the units of the defaulting Partner in proportion to their existing unit holding at a price to be determined pursuant to cl 15.4.

33 WR was appointed by the Partners 'to manage the business of the partnership as [the Partners'] agent' pursuant to cl 4.1 of the Partnership Agreement. The powers of WR were outlined in cls 4.2 and 4.3 as follows:

4.2 [WR] is authorised by the Partners to manage all of the business and undertake all transactions and do all things that the Partners can do in respect to the following properties owned by the partnership and being more specifically [the Land].

4.3 [WR] has specific authority to:

4.3.1 sell or develop [some or all of the three blocks comprising the Land] at any time in the absolute discretion of [WR] PROVIDED THAT [WR] must not sell the land at a price which is less than has been determined by an independent valuer not less than three months prior to the date of the sale without the express written consent of all of the Partners;

4.3.2 [WR] can borrow a maximum of $3 million secured against the assets of the Partnership for the purpose of subdividing and developing [some or all of the three blocks comprising the Land] for the purpose of sale.

34 Clause 4.4 of the Partnership Agreement conferred on WR a broad range of general powers, which were described in Annexure A to the Partnership Agreement ('Annexure A'), subject to the limitations specified in cls 4.3 and 5.3. Annexure A comprised a general provision headed 'General power' which provided: 'Subject to a contrary provision in any other clause of [the Partnership Agreement, WR] has all the powers over and in respect of the Partnership assets which it could exercise if it were the absolute and beneficial owner of those assets.' This was followed by a second provision headed 'To invest' which provided that WR had 'the power to apply or invest the whole or any part of the Partnership assets ... in any investment of any kind or nature and upon any terms or conditions as [WR] in its absolute discretion thinks fit'. The second provision went on to list 36 specific powers which were said not to limit the generality of the second provision. With one exception, the 36 specific powers were wide enough to encompass all the powers set out in cl 4.6 of the Will, which is summarised at [18] above. The exception relates to the power in cls 4.6.12, 4.8 and 5 of the Will to distribute a trust asset to a b[8]neficiary.8 The Partnership Agreement did not specifically include su[9]h a power.9

35 Clause 5.1 of the Partnership Agreement provided that 'all decisions of [WR] will be made by its board of directors by ordinary resolution.' However, despite the general powers granted to WR:

(a) all decisions in respect of certain matters had to be decided by an ordinary resolution of the Partners. Those matters included the incurring of expenses exceeding certain thresholds, other than expenses in respect of the sale of the Land, 'which sale [was] governed by the provision of Clause 4.3' (cl 5.3.1);

(b) all decisions in respect of certain matters had to be decided by a special resolution of the Partners. Those matters included loans, contracts between WR and any shareholder or director, and directors' remuneration (cl 5.4); and

(c) all decisions in respect of certain matters had to be decided by a unanimous resolution of the Partners. Those matters included guarantees by WR, onerous or non-arm's length transactions, encumbrances of WR's assets, shareholder loans and dealings in WR's share capital (cl 5.5).

36 Clause 6 of the Partnership Agreement was titled 'Provisions relating to [WR]' and relevantly provided:

6.1 Each Partner shall be entitled to hold one share in the capital of [WR] and to nominate one person to be a director of [WR] and to continue to hold that share and have that representative remain as a director for so long as the Partner remains a member of the partnership. In the first instance, the Partners agree that the initial directors of [WR] shall be Dorothy Rooney, Brian Rooney and Bernard Rooney. ...

...

6.4 The Partners may by Special Resolution:

6.4.1 remove [WR] or any agent subsequently appointed;

6.4.2 appoint a new agent to replace any agent of the partnership which has resigned or been removed.

6.5 [WR] may retire upon giving each of the Partners one month's notice in writing but such resignation shall not take effect until the Partners have by Special Resolution appointed a new agent who has executed an agreement to be bound by the terms of this Agreement if appointed as agent of the partnership pursuant to this Agreement.

6.6 The relationship between the Partners and [WR] is that of principal and agent and nothing in this Agreement shall be construed as establishing a unit trust.

37 Clause 7.1 of the Partnership Agreement provided that, subject to any direction given by the Partners, WR was to 'conduct the business of the partnership and administer the partnership as if [WR] was the full beneficial owner of the partnership business'. Clause 7.2 provided that each Partner 'irrevocably' appointed WR its attorney 'for the purpose of executing in the name of the Partner or of [WR] any contract of sale, instrument of transfer or other document required in the course of [WR] managing the business of the partnership including where authorised the disposal of the whole or a part of the business or other property of the partnership.'

38 Clause 23.1 of the Partnership Agreement provided that upon termination of the Partnership, 'the provisions of the Partnership Act (Victoria) concerning dissolution shall apply'.

39 On 1 February 2013, Kevin Rooney executed individual Transfers in respect of the three blocks comprising the Land. Each of the Transfers named the Testamentary Trustees as transferors and WR as transferee. The estate transferred was stated to be 'All our estate in fee simple' and the consideration specified was 'Entitled in Equity'.

40 In his affidavit sworn on 13 November 2013, Brian Rooney deposed that, by entering into the Partnership Agreement and the Transfers, the Testamentary Trustees did not intend to change the beneficial ownership of the Land. Instead, the Testamentary Trustees intended for WR to hold the Land solely for them.

Did the Partnership Agreement give rise to a new trust?

41 As set out at [112] below, the judge decided that the execution of the Partnership Agreement and the Transfers on 1 February 2013 gave rise to a new trust. The correctness of this conclusion is generally relevant to the issues on the appeal. Accordingly, we will discuss it before turning to those specific issues.

42 The most relevant authority is Commissioner of State Revenue v Lend Lease Funds Management Ltd.[10] The facts in that case were as follows.[11] On 18 December 2001, Trust Company of Australia Ltd ('TCAL') transferred all of its estate in fee simple in the land known as Highpoint Homemaker Centre ('Maribyrnong property') to Lend Lease Funds Management Ltd ('LLFML'). At the time, TCAL was the custodian trustee of the land under a custody deed made by agreement with a company which subsequently changed its name to Homemaker Retail Management Ltd ('HRML'). On 4 November 1997, a trust deed had been executed establishing a unit trust known as the Homemaker Retail Property Trust ('HRP Trust'). That deed had been approved by the Australian Securities Commission under the corporations law then in force. TCAL was the first trustee and HRML was the manager. On 12 April 2000, the HRP Trust was registered as a managed investment scheme under ch 5C of the Corporations Law ('scheme trust'). At that time TCAL retired as trustee and HRML became the responsible entity of the registered scheme. It appointed TCAL as the custodian under a custody agreement made between HRML as responsible entity and TCAL as the custodian.

43 On 27 November 2001, the unit holders of the scheme trust resolved to approve the takeover of all of their units by LLFML in its capacity as responsible entity of the General Property Trust, which was also a registered managed investment scheme. On 28 November 2001, HRML retired, and LLFML was appointed, as responsible entity of the scheme trust. On the same day LLFML, in its capacity as responsible entity of the scheme trust, directed TCAL to transfer to it all of the property of the scheme trust then held by TCAL. This was made pursuant to a decision by LLFML that it would seek to become the responsible entity of the scheme trust rather than employ an external trustee as responsible entity. It also decided to terminate the custody agreement with TCAL to ensure that all custodian responsibilities and processes were undertaken internally by LLFML. On 12 December 2001, LLFML terminated the custody agreement and on 18 December 2001 TCAL executed a transfer of the Maribyrnong property naming LLFML as transferee. The consideration for the transfer was stated to be 'pursuant to a direction dated 28 November 2001 from [LLFML] as responsible entity of the [scheme trust] ... to [TCAL] as custodian of the [scheme trust]'.

44 In Lend Lease, Tate JA held that the relationship between LLFML and TCAL under the custody agreement was not one of beneficiary and trustee of a trust that was separate from the scheme trust. At all relevant times, there was a single continuing trust of which the unit holders were beneficiaries and LLFML (or its predecessor as responsible entity) was the trustee. The custody agreement simply involved LLFML as trustee delegating to TCAL as its agent, one of LLFML's functions as trustee, namely the holding of the legal title to a particular trust asset. Although TCAL held the trust asset as trustee on behalf of LLFML, this was merely an administrative arrangement which was authorised by the trust deed of the scheme trust by which LLFML as trustee of that trust fund could perform one of its functions as trustee.

In my opinion, the circumstances of the case reveal that TCAL occupied a special or sui generis position, pursuant to the custody agreement, albeit with the status of a trustee, a 'custodian-trustee'. ...

...

TCAL acted as a trustee by means of the delegation from the responsible entity of its powers and duties.

As custodian, TCAL's primary relationship was with the responsible entity ... It performed some of the duties of the scheme trustee, the responsible entity, until [LLFML] chose not to continue with the outsourcing arrangements under the custody agreement but to perform all the duties of the trustee of the ... scheme [trust] itself.

Relevantly, there was only one trust, namely, the ... scheme [trust]. There was no distinct settlor who created a discrete trust ... [T]he trust deed [of the scheme trust] envisaged that the trustee might delegate its discretionary powers to a custodian and delegate the holding of title to any asset of the trust to a custodian. The Maribyrnong property was an asset of the scheme trust. The trust assets to be held by the custodian, under the custody agreement, were nothing other than the assets of the scheme trust. The functions associated with the office of trustee were, in a sense, divided between, on the one hand, TCAL, in carrying out its custodial responsibilities, and, on the other hand, the responsible entity and scheme trustee, [LLFML]. The orthodox position was blurred. But the responsible entity remained at all times the trustee of the scheme trust. While TCAL was in substance the responsible entity's delegate, the delegation effected by the custody agreement did not create a separate or distinct trust.

...

A consequence of a custody agreement, in the context of a registered managed investment scheme, is ... the separating out of legal and equitable title of the assets of the scheme trust so that the scheme trustee holds only the equitable title for the ultimate beneficiaries and the custodian holds, on the scheme trustee's behalf, no more than the legal (that is registered) title to the trust assets. While the separation of the interests associated with the scheme trust means that the custodian acts as a trustee, the separation does not entail that a separate and different trust has been created. [12]

46 Pagone JA also held that the custody agreement between LLFML and TCAL did not create a trust that was separate from the scheme trust. He stated:

The [scheme trust] permitted and expressly contemplated that the trustee could authorise a delegate to hold title to any asset of the [scheme trust] and to appoint an agent to do any act, matter or thing on behalf of the trustee. The custody agreement gave effect to that power by providing for TCAL (which had previously held the [Maribyrnong property] as trustee) to hold as custodian (on behalf of the trustee)... [T]he custodial agreement required TCAL to hold the assets, including the [Maribyrnong property], 'of the Trust' (namely, of the [scheme trust]), on behalf of the responsible entity. The custody agreement did not otherwise alter the terms upon which the [Maribyrnong property] was held on trust pursuant to the [scheme trust].[13]

47 Maxwell ACJ dissented. He held that there were two separate trusts, a custodianship trust between TCAL as trustee and LLFML as beneficiary on the terms of the custody agreement, and the scheme trust between LLFML as trustee and the unit holders as beneficiaries on the terms of the trust deed for the scheme trust. The custodianship trust was of a sui generis nature: it was not a trust for the benefit of unit holders but rather a trust for the benefit of the responsible entity, which in turn held the equitable title on a separate and distinct trust for the benefit of the unit holders.[14]

Parties' submissions on whether a new trust was created

48 WR relied upon the majority decision in Lend Lease in support of its submission that a separate trust did not arise upon the execution of the Partnership Agreement and the Transfers on 1 February 2013. It contended that the Testamentary Trusts established under the Will continued after that date, with the beneficiaries of those trusts retaining their equitable interests in the Land. According to WR, all that occurred on 1 February 2013 was that the bare legal title to the Land was transferred to WR to hold on trust for the Testamentary Trustees.

49 WR submitted that the Partnership Agreement should be read in the context of the terms of the Will. WR placed particular emphasis on cl 4.6 of the Will, under which the Testamentary Trustees' powers were 'extensive'. WR submitted that, given the breadth of the power of the Testamentary Trustees generally, there was nothing to prevent the trustees administering the Testamentary Trusts in the way that they did, that is, through a partnership arrangement.

50 WR also noted that, prior to the execution of the Partnership Agreement, the Testamentary Trustees had conducted the affairs of the Testamentary Trusts in a common law partnership but had not reduced the terms on which they had done so to writing. On this basis, WR submitted that the agreement did not represent the establishment of a new venture. Instead, what the Testamentary Trustees were seeking to do through the agreement was to make arrangements for the future conduct of the Testamentary Trusts.

51 WR contended that, when the Partnership Agreement was read in the context of the terms of the Will, four points emerged. First, under the agreement, the Testamentary Trustees of the pre-existing Testamentary Trusts delegated to WR some of their functions as trustees of those trusts and WR took the Land on behalf of the trustees. The functions of the office of trustees of the Testamentary Trustees were said to have been divided between the Testamentary Trustees and WR. Secondly, the agreement conferred particular powers on WR to develop and sell the Land but in doing so, the Testamentary Trustees did not give WR greater powers than they possessed under the Will. Thirdly, the Testamentary Trustees retained their rights and obligations to the beneficiaries of the Testamentary Trusts and WR did not assume fiduciary obligations to those beneficiaries on its own account. Fourthly, the agreement did not do any more than establish 'administrative arrangements' for the conduct of the Testamentary Trusts.

52 In respect of this final point WR argued that the Partnership Agreement contained the following distinct elements:

(a) First, the agreement made arrangements for the conduct of the Testamentary Trustees as between themselves, which did not alter the nature of their interests or powers in respect of the Land. WR placed particular emphasis on the terms of the First Schedule, which were said to demonstrate that the agreement made arrangements that reflected the terms and the arrangements under the Will. WR also placed emphasis on cls 15 to 18, which revealed that the purpose of the agreement was succession planning.

(b) Secondly, the agreement made agency arrangements through the appointment of WR as agent - which were described as 'management or administrative' arrangements - pursuant to which WR was required to carry out some functions on behalf of the Testamentary Trustees. WR placed particular emphasis on the terms of cls 4.3.1 and 4.3.2, which were said to demonstrate that WR's authority was subject to specific limitations regarding the price at which it had authority to sell or develop the Land and the amount which it may borrow. WR also noted that, under cls 5.3, 4.4 and 5.5, its authority was subject to the decisions of the Testamentary Trustees as Partners under the agreement in relation to specific matters. WR also placed particular emphasis on the terms of cl 6.4, which was said to demonstrate that there had been no disturbance of the status quo, being the arrangements under the Will, because the status quo was contemplated as being restored by a termination of the agency and a consequential transfer of the Land back to the trustees.

53 The Commissioner submitted that the Partnership Agreement and the Transfers had the effect of adding to the Testamentary Trusts a new trust which was governed by the provisions of the agreement. The new trust was separate from each of the Testamentary Trusts and the Land was transferred to WR under that separate trust. The Commissioner submitted that it was relevant that prior to the Transfers, each set of Testamentary Trustees held a one-fifth interest as tenants in common in the Land. After the Transfers, under the terms of the agreement, the entire fee simple estate in the Land was held by WR as the capital of a partnership in which each set of trustees held units. In support of this submission, the Commissioner drew the Court's attention to the following features of the Will and the Partnership Agreement:

(a) Under the terms of the Will, each set of Testamentary Trustees held a one-fifth interest in the Land. This limited what each set of trustees could do with the Land. For them to develop or sell the Land, they would need to join with the other Testamentary Trustees. When WR received the Land, under the terms of the Partnership Agreement, it was not subject to this inhibition. Clause 4.3 of the Partnership Agreement provided that WR 'at any time in [its] absolute discretion' could develop or sell the Land and authorised WR to borrow a maximum of $3,000,000, which could be secured against the Land. WR was also conferred with further substantial powers set out in Annexure A. These powers were immediately conferred and only their exercise was deferred.

(b) Although the Land became the capital of the Partnership and thus constituted the trust property, the nature of the rights to that trust property was altered by the creation of units in the Partnership. The Commissioner referred to cl 9.3, which was said to demonstrate that, the Testamentary Trustees, in their capacity as Partners, had no interest in a particular asset or the capital of the Partnership. Accordingly, the trustees had exchanged their proprietary interest in the Land for units in the Partnership and accepted the specification that they no longer had an interest in the Land.

(c) The Commissioner submitted that cls 6.4 and 6.5 of the Partnership Agreement provided that, when an agent was removed or retired, a new agent would need to be appointed. Thus, so it was said, the Testamentary Trustees could not effect a re-transfer of the Land to themselves.

54 The Commissioner sought to distinguish the majority decision in Lend Lease on the basis that, in that case, TCAL held the Maribyrnong property on behalf of LLFML as trustee of the pre-existing scheme trust so that the transfer from TCAL to LLFML effected a change of trustee of that trust. In the present case, so it was said, the Transfers of the Land were from the trustees (the Testamentary Trustees) of existing trusts (the Testamentary Trusts) to WR as the new trustee of a new trust (the Partnership Trust). According to the Commissioner, the Transfers did not involve a delegation of the Testamentary Trustees' functions to WR as a custodian. Rather, WR became the trustee of a new trust and became subject to wide powers and active duties in relation to that trust.

55 In our opinion, on 1 February 2013, a new trust arose on the terms set out in the Partnership Agreement. Although the agreement did not state that WR held the assets of the Partnership as trustee for the Partners (that is, the Testamentary Trustees), the relationship of trustee and beneficiaries arose as a matter of law. Upon the transfer of the Land to WR, it became a trust asset, WR became the trustee, the Testamentary Trustees as Partners became beneficiaries and the trust assets were held by WR on trust for the Partners on the terms set out in the agreement ('Partnership Trust'). The agreement did not terminate the Testamentary Trusts but it necessarily altered some features of those trusts.

56 The key differences that were effected on 1 February 2013 by the execution of the Partnership Agreement and the Transfers were as follows:

(a) Prior to 1 February 2013, there were five trusts - the Testamentary Trusts - each with two trustees and multiple beneficiaries. After that date, those trusts continued but were accompanied by a new trust - the Partnership Trust - which had a single trustee and, initially, five beneficiaries, namely the five sets of Testamentary Trustees. The Partnership Agreement did not replicate or subsume the trust arrangements in the Will but rather had the effect of superimposing upon them a new trust which for the reasons set out in (b) to (g) below, was in addition to - and very different in form, structure and substance from - the Testamentary Trusts.

(b) Prior to 1 February 2013, each set of Testamentary Trustees held a one-fifth interest as tenants in common in each block of land on trust for the testamentary beneficiaries. After 1 February 2013, the two trustees of each Testamentary Trust, as beneficiaries under the Partnership Trust, held 100 units in the Partnership on trust for the testamentary beneficiaries of their respective Testamentary Trust. The Land was the initial asset of the Partnership and provided the asset backing for the units. However, according to cl 9.3 of the Partnership Agreement, the units did not entitle the Testamentary Trustees to any particular asset of the Partnership capital.[15] As owners of units in the Partnership, the Partners had a right to receive income in proportion to their holding of units under cl 12.2,[16] a right to sell the units in the manner authorised by cls 10 and 15[17] and a right to receive the value of the units upon their sale or upon a winding up of the Partnership.[18]

(c) Prior to 1 February 2013, WR had no interest in any part of the Land. After that date, WR owned the fee simple estate in all of the Land, which it held as trustee of the Partnership Trust. The statement in cl 6.6 of the Partnership Agreement that the relationship between the Partners and WR was that of principal and agent[19] does not fully describe the parties' relationship.

(d) Prior to 1 February 2013, one set of Testamentary Trustees acting alone could not sell the entirety of any of the three blocks comprising the Land or the Land as a whole. Rather, such a sale would have required the unanimous agreement of all of the trustees. It follows that the two Testamentary Trustees of any of the one-fifth interests in any block of the Land could veto a dealing with that block. After 1 February 2013, cl 4.3 of the Partnership Agreement empowered WR, without obtaining the consent of the Testamentary Trustees, to sell the entirety of any of the three blocks comprising the Land or the Land as a whole provided that the sale price was not less than the price determined by an independent valuer within three months prior to the sale.[20] A decision to make such a sale could be made by WR by an ordinary resolution of its directors.[21] Subject to the restrictions in cls 4.3 and 5, WR could also conduct any other dealings with the Land without the specific approval of the Testamentary Trustees. No individual set of Testamentary Trustees (with the right to appoint only one of five directors of WR) could veto a decision by the directors of WR to pursue any such dealing.

(e) Prior to 1 February 2013, under the Will, one set of Testamentary Trustees could not require another set of trustees to transfer to them any part of the Land, based on the conduct of the first-mentioned set of trustees. Under cl 21 of the agreement, if a Partner committed a breach of the agreement, the other Partners could require the first-mentioned Partner to sell its units to them at a price determined in accordance with cl 15.4 of the agreement.[22]

(f) The Partnership Agreement made no provision for the Testamentary Trustees as Partners to require WR to re-transfer to them any interest in the Land of which they were previously the registered proprietors or to amend the terms of the agreement without the consent of WR. The 'irrevocable' appointment of WR as the Partners' attorney to sell the Land under cl 7.2 of the Partnership Agreement[23] and the conferral upon WR of the power to deal with the Land as if it were its 'full beneficial owner' under cl 7.1[24] and Annexure A[25] support our conclusion that the Partners could not direct WR to re-transfer to them any part of the Land. The conferral upon the Partners of a power to give a direction to WR to re-transfer an interest in the Land to them would have been inconsistent with the very purpose for which the Partnership Agreement was executed and the Partnership Trust was created. That purpose was to carry on the Partnership business of developing and selling the Land.

(g) Unlike the Will, which empowered the Testamentary Trustees to distribute a trust asset in specie to a testamentary beneficiary, the Partnership Agreement did not provide for the distribution of a Partnership asset to a Partner.

57 WR's submission that the Partnership Agreement did not have the effect of giving rise to a new trust in addition to the Testamentary Trusts but merely formalised the common law partnership that had operated since the death of the deceased on 14 June 2008 must be rejected. As discussed already, the agreement gave rise to a new trust which was very different in form, structure and substance from the Testamentary Trusts. Moreover, although the agreement stated that the Partnership commenced on 14 June 2008, and that WR is deemed to have been the agent of the Partners since that date, the agreement, when read as a whole, does not support that construction. In particular, we refer to the following:

(a) Although cl 3.1 of the Partnership Agreement stated that the partnership between the Partners 'shall be deemed to have commenced' on 14 June 2008, para 1.8 defined 'the partnership' as 'the Rooney Family Partnership of the Partners established under this Agreement'.[26] This indicates that, although the five sets of Testamentary Trustees were in partnership from 14 June 2008, that partnership was on terms which were not identical to the terms of the partnership established under the Partnership Agreement. In particular, the common law partnership did not involve a trust on the terms set out in the agreement.

(b) Clause 4.1 of the Partnership Agreement stated that the Partners 'hereby appoint' WR to manage the business of the Partnership but it then went on to say that '[w]here the partnership is deemed to have commenced before the date of [the Partnership Agreement] the Partners and [WR] acknowledge the appointment of [WR] on the commencement date.' It simply cannot be the case that WR has been the agent of the Partners on the terms set out in the Partnership Agreement since 14 June 2008, as many of those terms only came into force when the agreement and the Transfers were executed on 1 February 2013. Those terms include WR holding the Land as a Partnership asset and the Partners holding units in the Partnership with the Land providing the asset backing for the units.

(c) The phrase 'the initial directors of [WR] shall be ...' in cl 6.1 of the Partnership Agreement, the phrase 'the initial capital of the Partnership shall be [the Land]' in cl 8 and the phrase 'Initial unit holding' in the First Schedule are expressed to operate prospectively.

58 We also reject WR's submission that cl 6.4 of the Partnership Agreement[27] permitted the Partners to remove WR as the agent without appointing a new agent, with the consequence that WR would be required to re-transfer the Land to the Testamentary Trustees, who would then hold it on the terms of the Testamentary Trusts which have at all times continued to operate.

59 As discussed at [56(f)] above, the Partnership Agreement did not contain any provision enabling any part of the Land to be re-transferred to the Testamentary Trustees so as to restore the 'status quo' under the Will. Clause 6.4 of the Partnership Agreement is consistent with the scheme and purpose of the agreement described at [56] above. It dealt with a situation where WR was removed or resigned as agent and was replaced by another agent, but it did not deal with a situation where WR was removed or resigned as agent and was not replaced by another agent. Where WR was replaced by another agent, cls 6.4 and 6.5 made clear that the new agent would have all the rights and obligations that WR had while it was the agent. Necessarily, that would involve receiving a transfer of the Land from WR so that the new agent could carry on the Partnership business of developing and selling the Land. On the other hand, neither cl 6.4 nor any of the other provisions of the agreement could accommodate the removal or retirement of WR without the appointment of a replacement agent.

60 In our opinion, when cl 6.4 is read in the context of the Partnership Agreement as a whole, including cls 4.2, 4.3, 4.4, 7.1, 7.2, 10, 12 and 15 and Annexure A, it becomes obvious that the absence of a provision in cl 6.4 dealing with what was to happen where WR was removed and a new agent was not appointed was deliberate, as the agreement contemplated that there would always be an agent while the Partnership business of the development and sale of the Land subsisted. A provision authorising the removal of an agent without appointing a replacement agent such that the Land would have to be re-transferred to the Testamentary Trustees would have thwarted that business and would have been contrary to the very purpose of the Partnership Agreement. This means that on their proper construction, cls 6.4.1 and 6.4.2 must be read conjunctively, that is, where the Partners removed an agent, they had to appoint a new agent to replace the outgoing agent. On this basis, a situation could not arise where the Land was not held on trust by an agent.

61 The key purpose of the Partnership Agreement was to facilitate the carrying on of the Partnership business, namely, the development and sale of the Land. The appointment of WR as agent, the transfer of the Land to WR to hold on trust for the Testamentary Trustees and the other provisions of the agreement serve to directly or indirectly advance that purpose.

62 It follows from the above discussion that the five existing Testamentary Trusts continued to operate after 1 February 2013 but some of their features were necessarily altered by the new Partnership Trust which arose on that day. The key features of the six trusts and their interrelationship after 1 February 2013 may be summarised as follows:

(a) WR was the trustee of the Partnership Trust and each set of Testamentary Trustees as Partners were the beneficiaries. The terms of the Partnership Trust were set out in the Partnership Agreement. The Land was a trust asset and provided the asset backing for the 100 units in the Partnership which each set of trustees owned. The units entitled the trustees to receive a share of the income of the Partnership and to the proceeds of sale of any assets of the Partnership in proportion to their unit holding. According to cl 9.3 of the agreement, the units did not entitle the trustees to any particular asset of the Partnership.

(b) Each set of Testamentary Trustees remained a trustee of their respective Testamentary Trust on the terms of the Will as necessarily altered by the execution of the Partnership Agreement and the Transfers. The one-fifth interest as tenants in common in each block of the Land ceased to be the trust property and was replaced by the proprietary rights which were conferred on each set of Testamentary Trustees by the agreement (as described above) which they held on trust for the beneficiaries of their respective Testamentary Trust.

63 Contrary to WR's submissions, the analysis of the majority in Lend Lease cannot be applied to the present case. That analysis was based on the unique features of a registered managed investment scheme under the corporations legislation. Those unique features include the power of a responsible entity as scheme trustee to delegate its function of holding the trust assets to a custodian under a custody agreement. As Maxwell ACJ[28] and Tate JA[29] stated, such a delegation gives rise to a custodianship relationship which is sui generis. Tate JA and Pagone AJA concluded that, in that case, the unique features of the custodianship relationship did not create a new trust that was separate from the scheme trust but simply involved TCAL becoming a trustee for a limited purpose as delegate of LLFML while LLFML continued as trustee for all other purposes.

64 We agree with WR that the Will conferred wide powers upon the Testamentary Trustees and that they could operate as a partnership. We are also prepared to assume that, pursuant to their testamentary powers, the trustees could have executed an agency agreement and transfers of the Land pursuant to which their agent undertook to hold the Land as mere custodian and to deal with the Land as directed by the trustees. If such an agreement had been executed, perhaps it might have been arguable that the reasoning of the majority in Lend Lease had some relevance. But the trustees did not execute such an agreement. Instead, they executed the Partnership Agreement and conferred upon WR such an extensive array of powers to deal with the Land at its discretion that the relationship between the trustees and WR is not comparable to the custodianship relationship between LLFML and TCAL.

65 For the reasons already discussed, the execution of the Partnership Agreement and the Transfers on 1 February 2013 gave rise to a new trust, the Partnership Trust. Adopting the language of Tate JA in Lend Lease,[30] the Partnership Trust was an 'orthodox' trust with WR as trustee holding the trust property on trust for the Testamentary Trustees on the terms set out in the agreement. The Partnership Trust was separate and distinct from the Testamentary Trusts established under the Will.

66 The facts do not permit a conclusion that the only trusts that existed were the Testamentary Trusts and that the Partnership Agreement and the Transfers simply involved WR acquiring title to the Land as delegate of the Testamentary Trustees and performing the functions conferred on it by the agreement on their behalf. Under the agreement, WR had a wide range of powers to deal with the Land at its discretion without seeking the approval of the trustees. As the analysis at [56] above demonstrates, as trustee of the Partnership Trust, WR had greater powers than a set of trustees of any individual Testamentary Trust. The agreement did more than establish 'administrative arrangements' for the conduct of the Partnership business for the Testamentary Trusts. WR's extensive powers were exercisable without any reference to the terms of the Testamentary Trusts.

67 The decision in Trust Co of Australia Ltd v Commissioner of State Revenue (Qld)[31] and Dadeeton Pty Ltd v Commissioner of State Taxation (SA)[32] upon which WR relied do not assist it. Trust Co involved a custodianship arrangement of the type discussed in Lend Lease.[33] Dadeeton concerned a trust arrangement to give effect to a court order that was made for the purpose of setting aside particular dealings by a trustee of an abalone authority who had acted in breach of trust. For present purposes, Dadeeton does not relevantly add to the analysis in Lend Lease in relation to a transfer of legal title to property from a special purpose trustee to another person who receives the title as trustee of a continuing trust.

35 Transfers to and from a trustee or nominee

(1) No duty is chargeable ... in respect of -

(a) a transfer of dutiable property that is made by the transferor to a trustee or nominee to be held solely as trustee or nominee of the transferor, without any change in the beneficial ownership of the property; or

(b) a declaration of trust by a trustee or nominee referred to in paragraph (a) under which the dutiable property referred to in that paragraph is held on trust solely for the transferor, without any change in the beneficial ownership of the property; or

(c) a transfer made by way of re-transfer of dutiable property referred to in paragraph (a) to the transferor, without any change in the beneficial ownership of the dutiable property, if no person other than the transferor has had a beneficial interest in the property between the transfer to the trustee or nominee and the retransfer.

(2) A reference in subsection (1) to a change in beneficial ownership of dutiable property does not include a reference to the creation of a trustee's right of indemnity from the property.

(3) This section applies whether or not there has been a change in the legal description of the dutiable property.

Example

An example of a change in the legal description of dutiable property is the issuing of new certificates of title of land following a subdivision of the land.

69 The predecessor to s 35(1)(a) of the Act was Exemption (18) under Heading VI of the Third Schedule to the Stamps Act 1958 ('Exemption 18'), which exempted from duty transfers of land of the following kind:

Any instrument for the conveyance of real property which is made by the transferor to a trustee or nominee to be held solely as trustee or nominee of the transferor without any change in beneficial ownership or made by way of re-transfer to such transferor.

70 When the Act replaced the Stamps Act 1958 on 1 July 2001, Exemption 18 was re-enacted as s 35(1) in the following form:

No duty is chargeable ... in respect of a transfer of dutiable property (other than marketable securities) that is made by the transferor to a trustee or nominee to be held solely as trustee or nominee of the transferor without any change in the beneficial ownership of the dutiable property or made by way of re-transfer to the transferor.

71 The current form of s 35(1) was inserted in the Act by s 8 of the State Taxation Acts Further Amendment Act 2008 ('Amending Act').

72 The judge held that s 35(1)(a) of the Act did not apply to the Transfers for the following reasons:

I accept the Commissioner's submissions that the [Land was] not 'to be held' solely as trustee or nominee of the trustees.

I accept the construction given to the words 'to be held solely as trustee or nominee of the transferor' appearing in exemption (18) by the Court of Appeal in Victoria Gardens[34] applies to the same words appearing in s 35(1)(a). I accept the submissions of the Commissioner that s 35(1)(a) was not intended to alter the width of the exemption to duty from that applying under exemption (18).

I am not satisfied that s 35(1)(a) was enlivened. Upon the transfers [WR] was no longer bound to 'hold' the trust property solely as trustee for the [Testamentary Trustees] under the testamentary trusts. I accept, as was said in Victoria Gardens that the property was 'not to be held as trustees of the respective transferors, but rather [was] to be developed and sold or otherwise disposed of'.[35]

73 WR has appealed against the above decision on the following grounds:

1. The primary judge erred in holding that s 35(1)(a) of the Duties Act 2000 did not apply to exempt from duty the transfers of [the Land] from [the Testamentary Trustees] to [WR] made on 1 February 2013.
2. His Honour ought to have held that s 35(1)(a) applied to exempt the transfers from duty.

1. In particular, the primary judge erred in relying on [Victoria Gardens] [2000] VSCA 233; (2000) 46 ATR 61 at [38] (as to the meaning of former exemption (18) of the Stamps Act 1958) and construing the words in s 35(1)(a) 'to be held solely as trustee or nominee of the transferor' as requiring not only that the property to be held by the transferee is to be held by the transferee solely for the transferor but also that the property is not to be sold but held (Reasons, [113]-[115]).

1. approached the task of statutory construction by reference to the language of s 35(1)(a) construed in its current statutory context;

1. held that s 35(l)(a) is not concerned with whether or how the trust over the [Land] might end but with 'the terms of the trust on which the property is to be held so long as the trust exists' (cf [Yellowco] [1993] VicRp 90; [1993] 2 VR 529 at 544) [36];

1. concluded that s 35(1)(a) applied to exempt the transfers from duty because the transfer of the [Land] was made to [WR]:

1. to be held by it solely in the capacity of trustee or nominee of the transferors; and

1. without any change in the beneficial ownership of the [Land].

74 Exemption 18 was considered in Comptroller of Stamps v Yellowco Five Pty Ltd.[37] In that case, the owner of land, Mr Mapperson, transferred it to a corporate trustee of a unit trust of which he was the sole unit holder. The trust deed of the unit trust provided that the trustee could issue new units in the trust with the prior written consent of all the existing unit holders. It also provided that the trust property was held for the benefit of the unit holders for the time being in proportion to their unit holding. The Full Court, comprising Fullagar, Tadgell and J D Phillips JJ, held that Exemption 18 did not apply to the transfer because, pursuant to the transfer, the land was not conveyed to the trustee 'to be held solely as trustee ... of the transferor'. The three judges agreed that that phrase imposed an additional requirement to the requirement that was imposed by the words 'without any change in beneficial ownership'.[38] As the latter requirement is not in issue in the current appeal,[39] we will focus on the judges' separate reasons on the meaning of the requirement imposed by the words 'to be held solely as trustee ... of the transferor'.

75 Fullagar J held that Exemption 18 required not only that the transferee be a trustee for the transferor, but the result of the conveyance must be that the land is to be held by the transferee solely as trustee for the transferor.[40] He also decided that the words 'to be held' introduced an element of futurity, namely, that immediately upon the conveyance, the transferee must hold the land for the future in the capacity only of trustee for the transferor.[41] This requirement was not satisfied in Yellowco because, following the transfer, the land was held on trust for the unit holders of the trust, which could include persons other than Mr Mapperson due to the trustee's power to issue new units. The fact that Mr Mapperson could prevent that power from being exercised did not change this conclusion because it could not be established that immediately after the transfer, the land could not be held by the trustee upon any trusts other than a trust solely for the transferor.[42] Fullager J acknowledged that the construction that he placed on Exemption 18 gave it 'very little scope'.[43]

76 Tadgell J held that the power of the trustee to issue new units meant that the effect of the transfer was not that the land was to be held by the transferee solely as trustee for the transferor, as the transferee could hold the land as trustee for the transferor and others.[44] He decided that the words 'to be held solely as trustee or nominee of the transferor' were 'not tautologous or otiose,' but added to 'the requirement that there be no change in the beneficial ownership achieved by the instrument of transfer.'[45] Tadgell J acknowledged that, on his interpretation, Exemption 18 had 'a very narrow field of operation.'[46]

77 J D Phillips J decided that the words 'to be held' meant 'to be held thereafter' and that the words 'solely as trustee or nominee of the transferor' imported some requirement of exclusivity.[47] He stated that one must look to the provisions of the trust deed to see how the property is 'to be held' in consequence of the transfer. In the case then before the Court, as the property was to be held upon trust for the unit holders from time to time, it could not be said that it was 'to be held' solely on trust for the transferor. The fact that immediately after the transfer only the transferor was a unit holder was not determinative. This was because the word 'immediate' could not be read into Exemption 18 and the property would be held solely as trustee for the transferor only so long as further units were not issued.[48] As the exercise of the power to issue new units in the trust deed would result in the beneficial interest in the trust property being held for not only the transferor but also others, it could not be established that the property was to be held after the transfer solely for the transferor or without any change in beneficial ownership.[49] In relation to the contention that Mr Mapperson could terminate the trust by calling for the land to be re-transferred to him, J D Philips J held that Exemption 18 looks to the legal position as at the date of transfer to the trustee and thus the 'fate of the property if the trust were ended seems ... irrelevant to the operation of [the] exemption'.[50]

78 Yellowco was applied by the Court of Appeal in Commissioner of State Revenue v Victoria Gardens Developments Pty Ltd.[51] In that case, three owners of six large lots of land transferred their land to a trustee company for the purpose of the land being developed and sold by a joint venture. The owners and the trustee company executed a trust deed and a joint venture agreement ('JVA'). Under the trust deed, the trustee company held each transferor's portion of the land on trust for the transferor on the terms set out in the JVA. Clause 2.2 of the JVA provided that the transferors were not entitled to a transfer back of their portion of the land. Clause 6.6 of the JVA stated that the transferors were entitled to payment for their portion of the land only in accordance with cl 6.2, which provided for progressive payments as the land was developed and sold.

79 Batt JA, with whom Ormiston and Chernov JJA agreed, held that the three transfers were not exempt under Exemption 18 for two reasons. The first reason was that, although the land was transferred to a trustee, it was not 'to be held' as trustee of the respective transferors, but rather was 'to be developed and sold or otherwise disposed of, or at least possibly sold or otherwise disposed of (for it might be retained or leased).'[52] Batt JA stated that the exemption required that the trust be one to hold the real property on trust for the transferor and did not apply to 'a trust, not to hold, but to sell'. As such, the exemption had a 'very limited' scope.[53] He held that the transfers under consideration fell outside the exemption because the 'massive development and realisation purposes [were] simply not of the type which the exemption [was] designed to encompass.'[54]

80 The second reason upon which Batt JA relied was that the overall effect of the trust deed and the JVA was that each piece of land was not, upon its transfer, held or to be held 'solely as trustee ... of the transferor'. As the transferors were not entitled to a re-transfer of their portion of the land, they were not entitled to possession by virtue of beneficial ownership but only as joint venturers. If the transferors had any equitable interest in the land that they transferred, it was very limited because it consisted only of a right to receive a distribution of cash in accordance with cl 6.2 of the JVA.[55] Batt JA went on to say that, if the transferors' rights in the land were not to be treated as converted into money, they had an interest in all the land transferred as tenants in common in equity collectively. As the land the subject of each transfer was not to be held solely as trustee of the transferor, the first limb of the exemption was not satisfied.[56]

81 WR submitted that s 35(1)(a) should be read in the context of the Act. According to WR, when read in context, it was clear that, for s 35(1)(a) to apply to a transfer, only two conditions needed to be satisfied. The first condition dealt with the capacity in which the relevant property is to be held: the property was required 'to be held' by the trustee or nominee 'solely as trustee or nominee of the transferor'. The second condition dealt with the effect of the transfer: the transfer was required to be made 'without any change in the beneficial ownership of the property'. WR submitted that the judge erroneously introduced an additional condition that the property held by the trustee or nominee was not to be developed and sold, based on the observations that Batt JA made in Victoria Gardens in support of the first of his two reasons for decision.[57]

82 WR contended that the concern of the Act was with changes in beneficial ownership. This was said to be demonstrated by:

(a) Section 7(1)(b)(vi) of the Act, which provided that a duty would be charged on 'any other transaction that results in a change in beneficial ownership of dutiable property'; and

(b) the exemptions to duty contained in ss 33, 34(1)(b), 35(1)(a), 35(1)(c), 36, 36A, 36B and 41A of the Act, which either provided an exemption for transfers between trustees[58] or transfers between trustees and beneficiaries,[59] and were said to be founded on the premise that the transfer in question did not cause any change in the beneficial ownership of the land.

83 According to WR, the meaning of s 35(1)(a) was informed by ss 35(1)(b), (c), (2) and (3). WR's submissions in respect of those provisions may be summarised as follows:

(a) The use of the expression 'property ... held on trust solely for the transferor' in s 35(1)(b) clarified the work to be done by the word 'solely' in s 35(1)(a) and s 35(1)(b), that is, it imposed a requirement that the trust be for the transferor only.

(b) There was no material difference between the expression 'to be held ... on trust', which was contained in s 35(1)(a), and the expression 'is held on trust', which was contained in s 35(1)(b). The use of the latter expression demonstrated that the words 'to be' in s 35(1)(a) did not bear any additional significance.

(c) It was plain that, under s 35(1)(c), the expression 'without any change in the beneficial ownership of the dutiable property' attached to the re-transfer of dutiable property, with the effect that s 35(1)(c) provided that no duty was chargeable if a re-transfer was made without a change in the beneficial ownership of the property. As the expression 'without any change in the beneficial ownership of the dutiable property' appeared in each of the paragraphs of s 35(1), it should be read consistently. In the case of s 35(1)(a), this would mean that the expression was intended to impose a requirement that the transfer to the trustee occur without the beneficial ownership in the property changing.

(d) Section 35(1)(c) presupposed that, following a transfer to which s 35(1)(a) applied, a person may acquire a beneficial interest in the property between that transfer and the re-transfer. This was a further indication that s 35(1)(a) did not enquire about possible late changes in property interests.

(e) Subsections 35(2) and (3) supported the view that the exemptions under s 35 extended to 'active' trusts, such as those where the trustee incurred liabilities or undertook subdivision activities.

84 WR submitted that s 35(1)(a) of the Act did not contain any element of 'futurity'. Instead, so it was said, the inquiry mandated by s 35(1)(a) was simply a comparison of the beneficial ownership of the subject property immediately before and immediately after a transfer had taken effect.

85 If the Court accepted that there was an element of futurity in s 35(1)(a), however, WR contended that the limit of this element was set in Yellowco rather than Victoria Gardens. In WR's submission, it was important that the way the judges in Yellowco framed their inquiry into the applicability of s 35(1)(a) was by reference to whether, having regard to the terms upon which the property was to be held under the trust, there might be a change in the transferor while the trust existed. The judges in Yellowco were not concerned with the terms of the trust or the powers of the trustee, except to the extent that those terms affected whether the property was to be held on trust for the transferor. Further, the judges were not concerned with what might happen after the trust was terminated (such as by a sale of the trust property) as this could not affect the terms on which the property was to be held as long as the trust subsisted.

86 WR also sought to distinguish Yellowco on the basis that, unlike the unit trust in that case, the Partnership Agreement did not provide for the addition of beneficiaries by the issue of new units. WR relied on the principle of partnership law, which was reflected in the agreement, that the addition of a partner would result in the termination of the existing partnership and the creation of a new partnership. The implication was that this would have the effect that WR's role as trustee would end and that the Land would need to be re-transferred to the Testamentary Trustees.[60] A further implication was that the new partner could not become a beneficiary while the Testamentary Trust subsisted.

87 WR argued that the observations made by Batt JA in Victoria Gardens in support of his first reason for his decision[61] were of limited relevance to the present case for the following reasons:

(a) The observations, which concerned Exemption 18, did not sit comfortably with the text and context of s 35(1)(a) of the Act. Further, they did not find a footing in the language of Exemption 18 but added a gloss to it.

(b) The observations were obiter as they were not directed to a submission by any party. Further, the outcome in Victoria Gardens turned on a separate question, namely whether the instruments of transfer had effected an immediate change in beneficial ownership.

(c) Even if the observations were correct, Victoria Gardens was distinguishable on the facts because the transfers in that case were for 'massive development', whereas in the present case, WR took separate blocks of land with a power to develop or sell those blocks.

88 The Commissioner submitted that, for the purposes of determining whether the Transfers were exempt from duty under s 35(1)(a) of the Act, the Court should have regard to the terms of the Partnership Agreement, which were different to the terms of the Will. The terms of the Will also demonstrated that WR was far more than a 'nominee' of the Partners and it had not been appointed as a trustee of the Testamentary Trusts. The Land was transferred to WR subject to a separate trust which conferred wide powers on WR, including the development and sale of the Land by WR.

89 The Commissioner contended that s 35(1)(a) was couched in substantially similar terms to Exemption 18, and the decisions of Yellowco and Victoria Gardens, which considered the exemption, should be followed in this case. The Commissioner submitted that there was nothing in the legislative history of s 35(1)(a) of the Act that would render the analysis of either case redundant.

90 According to the Commissioner, Yellowco supported the proposition that the application of the exemption in s 35(1)(a) involved more than a simple comparison of the 'beneficial ownership' of the property before and after a transfer.

91 The Commissioner submitted that Victoria Gardens supported the proposition that the language of s 35(1)(a) of the Act required an examination of the terms of the trust on which the transferee was to hold the relevant property, in order to determine whether the property was to be held by the transferee immediately and for the future solely as trustee or nominee of the transferor. In respect of the applicability of Victoria Gardens, the Commissioner made the following submissions:

(a) Batt JA's observations were not obiter but instead constituted one of two 'basic reasons' why Exemption 18 was inapplicable to the transfer in that case.

(b) Batt JA's observations could not be distinguished on the basis of the scale of the development to be carried out on the Land as his reasoning on this point instead turned on the meaning of the expression 'to be held' in Exemption 18.

92 In our opinion, on its proper construction, s 35(1)(a) of the Act is not materially different from Exemption 18. This means that Yellowco and Victoria Gardens have the effect that the exemption in s 35(1)(a) cannot apply to the Transfers.

93 The only differences between Exemption 18 (and s 35(1) in its original form)[62] and s 35(1)(a) in its current form (read with s 35(1)(c)) are as follows:

(a) Exemption 18 commenced with the words '[a]ny instrument for the conveyance of real property which is made', whereas s 35(1)(a) commences with the words 'a transfer of dutiable property that is made'.

(b) Exemption 18 did not contain a comma between the words 'transfer' and 'without' or the word 'the' between the words 'in' and 'beneficial', whereas s 35(1)(a) does.

(c) Exemption 18 concluded with the words 'or made by way of re-transfer to such transferor' whereas s 35(1)(a) concludes with the words 'of the property'. The exemption regarding re-transfers is in s 35(1)(c).

94 The differences in [93(a)] above are merely formal and need not be discussed further. The differences in [93(b)] and [93(c)] above are ones of style and presentation rather than substance. The insertion of the comma was probably intended to highlight that the requirement that the property is 'to be held solely as trustee ... of the transferor' is in addition to the requirement that there not be any change in the beneficial ownership of the property. The former requirement does not simply deal with the capacity in which the property is 'to be held' by the transferee but also deals with the person for whom the property is 'to be held' by the transferee as trustee, namely, 'solely ... the transferor'. This was also the position under Exemption 18. If Parliament had intended to expand the scope of Exemption 18 when it was ultimately re-enacted as s 35(1)(a) and (c), one would have expected that the expansion would have been identified, if not highlighted, in the explanatory memorandum or the second reading speech for the Amending Act. It is common ground that these documents and other extrinsic materials do not identify any such expansion.

95 We agree with WR that s 35(1) and other provisions of the Act require that there be no change in beneficial ownership. But as Yellowco and Victoria Gardens demonstrate, notwithstanding its importance,[63] the absence of a change in beneficial ownership is not the only criterion that the Act uses to determine whether an exemption applies. The words 'to be held solely as trustee ... of the transferor' in s 35(1)(a) were held in Yellowco to impose a separate requirement to that arising from the words 'without any change in the beneficial ownership of the property'.

96 As a result of the concession made by the Commissioner that the Transfers and the Partnership Agreement did not result in the words 'without any change in beneficial ownership' in s 35(1)(a) not being satisfied,[64] the applicability of the exemption in the present case depends on whether the Transfers were made by the Testamentary Trustees to WR 'to be held solely as trustee ... of the [Testamentary Trustees]'. We will return to this issue below.

97 Contrary to WR's submission, the wording of s 35(1)(c) does not simply reinforce the importance of the absence of a change in beneficial ownership; they also serve to emphasise the requirement that the property that is transferred to the trustee is 'to be held solely as trustee ... of the transferor'. This was made clear in the following statement by Tadgell J in Yellowco:

This interpretation of exemption (18) is, I think, supported by its concluding words, viz 'or made by way of re-transfer to such transferor'. Cryptic though they are, they seem to mean something such as this: that the exemption applies to any instrument for the conveyance of real property which is made by way of re-transfer to a transferor who had made a conveyance of real property to a trustee or nominee to be held solely as trustee or nominee of the transferor without any change in beneficial ownership. These concluding words of exemption (18) cannot apply unless (a) there has been a transfer of property to a trustee or nominee to be held by the transferee solely as trustee or nominee of the transferor without any change in beneficial ownership, and (b) there is a re-transfer to the transferor. The interest in the property to be re-transferred is evidently the interest that was originally transferred. Plainly enough, therefore, (b) can be satisfied only if there has been no change in the beneficial ownership since the original transfer occurred. This suggests, rather by way of cross check, that exemption (18) as a whole is not concerned only that there be no change of beneficial ownership achieved by the original transfer. Looking beyond the mere result achieved by the instrument of transfer, the provision contemplates that the trustee or nominee who takes the original transfer will do so on the terms of taking and holding the property transferred solely as trustee or nominee of the original transferor. Putting it another way, the words 'to be held solely as trustee or nominee of the transferor' are not tautologous or otiose. They do add to the requirement that there be no change in the beneficial ownership achieved by the instrument of transfer.[65]

98 WR's submission that the words 'to be' in s 35(1)(a) are not significant would require the Court to ignore the future tense specifically employed by the legislature. The submission also flies in the face of the decision in Yellowco in which the Court emphasised that provisions of the trust documents which permit changes in the composition of the beneficiaries are relevant to the question of whether the trust property is 'to be held solely as trustee ... of the transferor.' It is in that sense that those words introduce an element of futurity.

99 We accept that sub-ss 35(2) and (3) envisage that s 35(1) can apply notwithstanding that during the time that a trustee holds the trust property as legal owner, activities such as a subdivision may result in a new title to the property being issued to the trustee, and notwithstanding that the trustee may incur expenses in respect of which it will be entitled to indemnity from the trust property. These matters go to the meanings of 'beneficial ownership' and 'dutiable property' and do not affect the question of whether the relevant property is transferred to a trustee 'to be held solely as trustee ... of the transferor'.

100 We do not read s 35(1)(c) as WR contended it should be construed. Rather, that paragraph is directed to the beneficial interest in the property remaining constant from the time of the initial transfer to the re-transfer. It does not, as WR would have it, presuppose acquisition of a beneficial interest between the two.

101 We do not accept WR's submission that the observations that Batt JA made in Victoria Gardens in support of his first reason for deciding that Exemption 18 did not apply in that case can be regarded as 'obiter' or a mere 'gloss'. As these observations were made as part of Batt JA's reasons for decision, they form part of the ratio decidendi.

102 There are three reasons for our conclusion that the Transfers of the Land were not made by the Testamentary Trustees to WR 'to be held [by WR] solely as trustee ... of the [Testamentary Trustees]', each of which on its own is sufficient to dispose of WR's claim for exemption under s 35(1)(a).

103 The first reason for our conclusion is based on Batt JA's first reason for his decision in Victoria Gardens[66] that the transfers in that case fell outside Exemption 18, namely, that the Land was not transferred to WR to hold on trust for the Testamentary Trustees, but rather to develop and sell it. Our first reason does not rely on Batt JA's observation about the scale of the development, but rather on his observations about the meaning of the expression 'to be held'. Those observations were consistent with the decision in Yellowco. The First Schedule defined the 'Partnership business' as 'the development and sale of [the Land]'. Under cl 7.2 of the Partnership Agreement,[67] the Partners 'irrevocably' appointed WR as their attorney in connection with the management of the business and the sale of the Land. Irrespective of the scale of that business, the Land was not transferred by the Testamentary Trustees to WR 'to be held [by WR] solely as trustee ... of the [Testamentary Trustees]'.

104 The second reason for our conclusion is that, based on the analysis set out at [55] to [67] above, the execution of the Transfers and the Partnership Agreement gave rise to a new trust which had one of the features of the trust that Batt JA considered in his second reason for his decision in Victoria Gardens to cause the transfers in that case to fall outside the exemption. That feature was that the Testamentary Trustees were no longer entitled to a re[68]ransfer of the Land.68 As in Victoria Gardens, the Testamentary Trustees transferred the Land to a new trust under whose terms: they were not entitled to a distribution of any part of the trust property; the trustee was irrevocably authorised to sell the Land; and, in due course, the trustee was required to distribute to them the proceeds of sale in proportion to their unit holding.

105 The third reason for our conclusion flows from our rejection of WR's submission which we summarised at [86] above. In our opinion, the Partnership Agreement contains provisions pursuant to which WR may be required to hold the Partnership assets (the Land, which provided the asset backing for the units in the Partnership) on trust for persons other than the Testamentary Trustees, namely cls 1[69]and 15.6.69 Although, as WR has pointed out, cl 15.6 contemplates that the admission of a new partner would result in a new partnership, it does not contemplate the Partnership Trust coming to an end or its terms being altered. It also does not contemplate any change in WR's status as trustee of the Partnership Trust or to the Partnership business as defined in the First Schedule (namely, 'the development and sale of [the Land]'. On the contrary, cl 15.6 refers to the admission of a new partner 'with the intent that the new partnership thereby created continue the partnership business.'

106 In our opinion, WR incorrectly sought to equate a dissolution of the initial partnership with a cessation of the Partnership Trust. While a change in the composition of a partnership may result in the dissolution of the partnership and the creation of a new partnership, a change in the composition of the beneficiaries of a trust does not have that effect on the trust.

107 The effect on the Partnership Trust of the admission of a new partner would be to add a beneficiary for whom the Partnership assets (the Land, which provided the asset backing for the units in the Partnership) would be held on trust. According to Fullagar J and J D Phillips J in Yellowco, provisions which enable a change in the pool of beneficiaries for whom a transferee of land holds the land on trust while the trust subsists have the effect of taking a transfer of the land outside the scope of the exemption. This is so even if, at the date of the transfer, the land is held on trust only for the transferor and the addition of any beneficiaries would require the consent of existing beneficiaries.[70]

108 Fullagar J and Tadgell J in Yellowco,[71] and Batt JA in Victoria Gardens[72] stressed that Exemption 18 had a very limited scope. Similarly, s 35(1)(a) of the Act has a very limited scope. The Transfers fall outside the scope of the exemption.

109 It follows from the above that grounds of appeal 1 to 4 are not made out.

33 Change in trustees

(1) In this section -

new trustee means a trustee appointed in substitution for a trustee or trustees or a trustee appointed in addition to a trustee or trustees;...

...

(3) No duty is chargeable ... in respect of a transfer of dutiable property to a person ... if the Commissioner is satisfied that the transfer is made solely -

(a) because of the retirement of a trustee or the appointment of a new trustee, or other change in trustees; and

(b) in order to vest the property in the trustees for the time being entitled to hold it.

111 The predecessor to s 33(3) of the Act was Exemption (23) under Heading VI of the Third Schedule to the Stamps Act 1958 ('Exemption 23'), which exempted from duty transfers of land of the following kind:

Any instrument for the conveyance of real property where the Comptroller of Stamps is satisfied that the instrument is made solely in consequence of the appointment or retirement of any trustee or other change in trustees and in order to vest the real property in the trustees for the time being entitled to hold the real property.

112 The judge held that s 33(3) of the Act did not apply to the Transfers for the following reasons:

[T]he trustees of the five [Testamentary Trusts] have created a new trust separate from the [T]estamentary [T]rusts.

...

In my opinion, the transfer of title to [WR] occurred in order to create a new and separate trust.

...

Under the partnership agreement, the five sets of trustees merged their title, to create single titles in respect of each property. In my opinion, the effect of this was to vest the whole legal title in a new entity.

...

The five sets of trustees held as tenants in common at law. [WR], on the other hand, held the whole of the legal title.

In my opinion, to resolve the structure established by the will, the trustees came together and created a new and separate trust. In doing so, they changed the nature of the legal title. The scheme superimposed a trust over all the existing trusts. The new trust held the whole of the legal title to the properties, and could deal with the properties without difficulty. Without the overarching trust, the trustees of the five trusts would have to agree and cooperate in every decision involved in development and sale.

...

In this case, a new trust has been created and the trustee has greater title than the old trustees (individually) and can do things alone that the former trustees could not do alone. There was no pre-existing trust over the whole of the title to the three properties.[73]

113 WR has appealed against the above decision on the following grounds:

1. The primary judge erred in holding that s 33(3) of the Duties Act 2000 did not apply to exempt the transfers from duty.

1. His Honour ought to have held that s 33(3) applied to exempt the transfers from duty.

1. Further, the primary judge erred in holding that s 33(3) did not apply because the transferors, as trustees of trusts created by the [Will], came together and created a new and separate trust superimposed over the existing trusts of the will (Reasons, [161]).

1. Further, the primary judge erred in holding that a new trust had been created because [WR] had greater title than the transferors, as trustees of the testamentary trusts, and could do things alone that the trustees could not do alone (Reasons, [163]):

1. The administrative convenience created by the transfers to [WR] does not go to the nature of the title it took.

1. Further or alternatively, the nature of the title [WR] took is irrelevant to the statutory question of whether there was a 'change in trustees'.

1. held that there was a 'change in trustees', [WR] having been appointed trustee of the title to the [Land] in place of the [Testamentary Trustees] of the [Testamentary Trusts];

1. further or alternatively, applied cases of a trust upon a trust where the exemption (or its relevant equivalent) was held to apply: Lend Lease Funds Management Ltd v Commissioner of State Revenue [2009] VSC 360; (2009) 77 ATR 374 at [43]; [Lend Lease] [2011] VSCA 182; (2011) 33 VR 204 at [171] and [145], applying [Trust Co] [2003] HCA 23; (2003) 197 ALR 297 at [29]; and [Dadeeton] [2004] SASC 88; (2004) 88 SASR 109 at [32]-[33].

114 Exemption 23 was considered in Victoria Gardens.[74] Batt JA, with whom Ormiston and Chernov JJA agreed, held that the exemption applied 'only to the appointment of a new trustee to perform a pre-existing trust and does not extend to the appointment of a trustee to perform a newly created trust.'[75] He stated that the exemption relevantly contained two limbs. The first limb (the result or consequence limb), was constituted by the words 'solely in consequence of the appointment or retirement of any trustee or other change in trustees'. The second limb (the purpose limb), was constituted by the words 'solely ... in order to vest the real property in the trustees for the time being entitled to hold the real property'. The requirements of the two limbs were cumulative. [76]

115 Batt JA held that neither of the two limbs in Exemption 23 were met by the three transfers that were relevant in Victoria Gardens. This was because the effect of the trust deed and the JVA was to create a new trust and the transfers were not made solely in consequence of the appointment of the trustee company as trustee or solely in order to vest the land in the trustee company but rather to give effect to the provisions of the JVA.[77]

116 In Lend Lease,[78] the Court of Appeal stated that the principles discussed in Victoria Gardens in relation to Exemption 23 were equally applicable to s 33(3) of the Act.[79] The Court of Appeal described the first limb of s 33(3) as the 'causation limb', which addressed the question: 'Why did the transfer take place? Was it solely because of the change in trustees?'[80] The second limb was described as the purpose limb: 'What was the purpose for which the transfer was made? Was it solely for the purpose of vesting the property in the trustees for the time being?'[81]

117 In Lend Lease, Tate JA and Pagone AJA held that both limbs of s 33(3) were satisfied in relation to the transfer of the fee simple estate from TCAL to LLFML whereas Maxwell ACJ held that neither limb was satisfied.

118 Tate JA described the inapplicability of s 33(3) to changes in trustee in a new or different trust as follows:

[T]he exemption under s 33(3) extends only to the retirement of a trustee, or the appointment of a new trustee, or other change in trustees (for example, the removal of a trustee), in relation to a pre-existing and continuing trust. It does 'not extend to the appointment of a trustee to perform a newly created trust'. So too, it does not extend to a change in trustees consequent upon the termination of a trust and a transfer of property to a trustee of a different and separate trust. ... [T]he exemption does not so extend even if the different and separate trust pre-existed the change in trustees and continued after that change, and was in this sense a 'continuing trust'.[82]

119 Tate JA held that the arrangements in Lend Lease involved a single trust, the scheme trust with only one trustee, the scheme trustee, which had rights and responsibilities with respect to the ultimate beneficiaries.[83] Although TCAL as custodian performed some trustee functions, the custody agreement did not create a new and separate trust, and certainly not a new trust of the type that Victoria Gardens held fell outside the exemption in s 33(3).[84] The termination of the custody agreement did not involve the termination of a trust but rather the withdrawal of TCAL's power to hold the Maribyrnong property as LLFML's delegate and the resumption by LLFML of the responsibility under the trust deed for the scheme trust to hold the property. The trustee functions were no longer to be divided between LLFML and TCAL, necessitating a transfer of the Maribyrnong property from TCAL and LLFML. It followed that the transfer of the Maribyrnong property from TCAL to LLFML did not involve the termination of any separate and different trust or the transfer to the trustee of a separate and different trust, as no separate and different trust existed. The scheme trust existed before the transfer of the Maribyrnong property and remained the same continuing scheme trust after the transfer.[85]

120 Tate JA stated that the transfer of the property from TCAL to LLFML was made solely because of a change in the identity of the entity performing trustee functions rather than as part of the carrying out of the overall commercial transaction. This was because the takeover had been completed before LLFML gave the direction to TCAL to transfer the Maribyrnong property. The transfer was made solely because TCAL's authority to perform the trustee function as custodian had been withdrawn and, as no successor custodian had been appointed, it was necessary for the property to be transferred to LLFML as the responsible entity of the scheme trust.[86] It followed that the transfer was made solely because of a change in trustees and in order to vest the Maribyrnong property in the trustees for the time being entitled to it.[87]

121 Pagone AJA held that, even if the custodial arrangements were sufficient to create a trust relationship, 'the exemption in s 33(3) is broad enough to cover the change (if any) in trustee effected [in the Lend Lease case] which did no more than to extinguish the custodial obligation by which TCAL held the [Maribyrnong property] pursuant to the [scheme] trust on behalf of the unit holders.[88] He went on to say:

In this case there was, at most, the removal of a trustee (TCAL as special trustee under the custody agreement) of a pre-existing (and continuing) trust. It may be that the custodial duties assumed by TCAL created a special trust but its holding pursuant to the custodial agreement was of the land on behalf of the responsible entity as trustee of the pre-existing [scheme trust]. The transfer was relevantly a change of trustee of that trust sufficient to come within the terms of s 33(3).[89]

122 Pagone AJA decided the transfer of the Maribyrnong property from TCAL to LLFML was solely because of a change in trustees. He compared the facts in Lend Lease with those in Victoria Gardens and concluded as follows:

In [Victoria Gardens], the transfers were truly a step in a joint venture agreement through which three owners of six separate lots of land sought to develop the land for commercial gain. The transfers were an incident of the wider commercial objective and not independent of the commercial objective. In this case, the subject transfer was independent of the commercial objective and need not have taken place at all. It is true that the transfer occurred in the context of the takeover and that its steps were set out in the document detailing the steps of the takeover, but that context does not answer the relevant statutory inquiry called for by s 33(3) nor does the context make the transfer fall outside the policy which s 33(3) is designed to effect. The section calls for an examination of the causal relationship between the transfer and the change in trustees. It must be the change that explains the transfer. In this case, it is the change of trustee which wholly and totally explains the transfer. It was solely the decision to remove TCAL as trustee which explains why the transfer occurred. No part of the context of the takeover in any way explains or bears upon the transfer beyond providing the commercial context in which that otherwise independent and unnecessary step was taken.[90]

123 Maxwell ACJ described the inapplicability of s 33(3) to changes in trustee upon the termination of a trust as follows:

The phrase 'the trustees for the time being' can only mean the trustees of the trust in respect of which the relevant 'change of trustees' has taken place, being the trustee(s) in office after the change. It follows that the exemption cannot have application where a trust is terminated, since in that event there are no 'trustees for the time being entitled' to the property the subject of the transfer. That the transferee might hold the property on a different trust would not, of course, suffice.[91]

124 As discussed at [47] above, Maxwell ACJ held that the custodianship relationship between LLFML and TCAL constituted a separate trust (the custodianship trust) from the scheme trust of which LLFML was the trustee and the unit holders were the beneficiaries. He held that, upon the termination of the custody agreement and the transfer of the Maribyrnong property from TCAL to LLFML, the custodianship trust ceased to exist and the legal title to the property was vested in LLFML as trustee for the unit holders. As there could be no 'trustees for the time being' of the custodianship trust, s 33(3) could have no application to th[92]transfer.92

125 Maxwell ACJ stated that, if his conclusion that the custodianship trust had come to an end was wrong, then the transfer of the Maribyrnong property from LLFML to TCAL was one of the steps in the takeover transaction and was not made solely because of a change in trustee.[93]

126 Batt JA in Victoria Gardens[94] and Maxwell ACJ in Lend Lease[95] approved of the following statement of Hansen J in Perpetual Trustee Co Ltd v Commissioner of State Revenue[96] on the meaning of the word 'solely':

In my view the purpose of the exemption is clear. It is to exempt from stamp duty a transfer of real property given in the context of a change of trustee of a pre-existing trust in order to vest the real property of the trust in the name of the trustee for the time being. In such a case the transfer is not given in consequence of a sale or other disposition of the real property for valuable consideration. In such circumstances it would be unreasonable to charge the instrument of transfer to duty. The beneficial interest has not changed. There has been a mere change in the registered proprietor ... consequent upon and because of the change in the office of trustee and the need for the trust property to be conveyed into the name of the trustee for the time being.

It is also clear why the legislature has considered it appropriate to use the word 'solely' in conjunction with the words 'in consequence of'. It aids in the achievement of the purpose. It does that by confining the operation of the exemption to instruments solely of the type described. The Oxford Dictionary includes as meanings of the word 'solely': (a) a single person or thing, without any other; without aid or assistance; (b) only, merely, exclusively. 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 to 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.

It would be artificial and contrary to the breadth of the solely in consequence test, and the nature of the inquiry thus raised, to conclude, as Perpetual submitted, that the inquiry in this case should commence with the deeds of change of trustee and exclude from consideration as the possible source of a relevant factor the immediately preceding acts constituted by the Offer and the Agreement and the commercial arrangements they embody or the background they provide. Perpetual's submissions require that the ordinary and natural meaning of the word 'solely' be disregarded and, in effect, that the word be read down to the extent that it has no practical effect. In my view there is no warrant in the plain language of the exemption or any other provision of the Stamps Act 1958 (Vic) or the Schedule, or any necessary intendment to be found therein, that would require or justify the exemption to be read in the way suggested by Perpetual. Nor in my view does any apprehended difficulty or uncertainty in operation of the exemption require or justify such an approach or a reading down of the exemption.[97]

127 As was the case with Exemption 23,[98] the exemption under s 33(3) of the Act only applies to a change of trustees in relation to a pre-existing trust and does not extend to the appointment of a trustee to perform a newly created trust. We have already summarised, and rejected, WR's submissions that the execution of the Partnership Agreement and the Transfers on 1 February 2013 did not give rise to a separate trust.[99]

128 WR relied on the reasoning of Tate JA and Pagone AJA in Lend Lease in support of the proposition that, in the present case, there were pre-existing trusts, being the Testamentary Trusts, and that the appointment of WR as agent under the Partnership Agreement effected a change of trustees in relation to those trusts for the purposes of s 33(3) of the Act. WR submitted that the agreement stood in the same relationship to the Testamentary Trusts as did the custody agreement between LLFML and TCAL to the trust deed that established the scheme trust in Lend Lease. WR contended that the reasoning of Tate JA and Pagone AJA was to the effect that, where a transfer to a trustee did not affect the powers, duties and obligations of the pre-existing trustees in respect of the trust property, this would constitute a 'change of trustees' for the purposes of s 33(3) of the Act.

129 WR relied on the reasoning in Lend Lease for the proposition that, in circumstances where:

(a) it was solely the administrative decision of the Testamentary Trustees to appoint an agent which explained why the Transfers occurred;

(b) it was not necessary for the Testamentary Trustees to appoint the agent; and

(c) the appointment of the agent to give effect to administrative arrangements necessitated the Transfers,

it could properly be said that the Transfers were 'solely' because of the appointment of WR and in order to vest the Land in it for the purposes of s 33(3)(b).

130 WR also referred the Court to the recent decision in Konann Pty Ltd v Commissioner of State Revenue.[100] It was said that Konann supported the proposition that s 33(3) was capable of application where a transfer of trust property was made to a transferee in circumstances where the transferee took the trust property subject to the existing trust.

131 WR made 'four points' in support of its contention that the judge's reasoning was wrong. First, WR did not have 'greater title' than the Testamentary Trustees; the powers conferred upon WR for administrative convenience did not go to the nature of the title WR took. Secondly, even if WR took 'greater title' than the trustees, s 33(3) is not concerned with the nature of the trustee's title. Thirdly, s 33(3) applies whether or not the case is analysed as a case of a trust upon a trust (as in Lend Lease) and whether or not the trust obligations of the newly appointed trustee (WR) can be described as 'separate' or 'distinct' from the trust obligations of the continuing trustees (the Testamentary Trustees) to the ultimate beneficiaries. Fourthly, s 33(3) is not concerned with whether a trust is a managed investment scheme or sui generis and whether the newly appointed trustee has active duties.

132 The Commissioner submitted that the Partnership Agreement and the Transfers had the effect of adding to the Testamentary Trusts a new trust which was governed by the provisions of the agreement. We have already dealt with this submission.[101]

133 The Commissioner also submitted that the Transfers did not satisfy s 33(3)(b) of the Act as they were not made 'solely' for the purpose of vesting the Land in WR who was for the time being entitled to hold it. Rather, the Transfers were made for the purpose of giving effect to the provisions of the Partnership Agreement and as an incident of the wider commercial objectives of the Partnership.

134 As discussed at [116], [118] and [123] above, Lend Lease decided that the finding in Victoria Gardens that Exemption 23 did not apply to a transfer of land to a trustee of a new trust was equally applicable to s 33(3) of the Act. Accordingly, our conclusion at [55] above that the execution of the Transfers and the Partnership Agreement gave rise to a new trust is fatal to the applicability of s 33(3). We will not repeat here what we have already said about the features of the new trust and its relatio[102]ip to the continuing Testamentary Trusts.102 The discussion that follows is only relevant if our conclusion at [55] above is wrong and the position is that WR was appointed as trustee in the context of the continuing Testamentary Trusts.

135 The key issue then becomes whether the Transfers of the Land were made solely because of the appointment of WR as a new trustee and solely in order to vest the Land in WR as the trustee entitled to hold it. In our opinion, neither limb of s 33(3) is satisfied. This is because the Transfers were made predominantly to facilitate the carrying on of the Partnership business - namely, the development and sale of the Land - rather than solely because of the appointment of WR as trustee or solely in order to vest the Land in WR as the trustee entitled to hold it.

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.

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 owner.[103] In other words, the Transfers were executed to give effect to the commercial arrangements embodied in the agreement.

138 The decision in Konann[104] upon which WR relied is distinguishable, as it concerned a continuing trust where the only relevant changes were the substitution of a new trustee for the existing trustee and a transfer of the land to the new trustee.

139 It follows from the above that grounds of appeal 5 to 9 must be rejected.

Issues relating to the value of the interest transferred by the Transfers

140 The issues relating to the value of the interest transferred by the Transfers only arise if neither ss 35(1)(a) or 33(3) applies to the Transfers.

141 The Act charges duty upon a transfer of dutiable property.[105] The interest that was the subject of the Transfers - the estate in fee simple in the Land which is located in Victoria[106] - is dutiable property for the purposes of the Act.[107] Section 20(1) of the Act provides that the dutiable value of dutiable property the subject of a dutiable transaction is:

... the greater of -

(a) the consideration (if any) for the dutiable transaction ...; and

(b) the unencumbered value of the dutiable property.

142 As no consideration was paid for the Transfers,[108] para (b) of s 20(1) of the Act applies. The phrase 'unencumbered value' is defined in s 22(1) as 'the amount for which the property might reasonably have been sold in the open market ... at the time the dutiable transaction occurred ... free from any encumbrance to which the property was subject at that time.'

143 The judge decided the following in relation to the value of the interest transferred by the Transfers:

In my opinion, the facts in this case do not give rise to special circumstances as were found in Lend Lease. Under the [Partnership] agreement, [WR] had the power to sell the [Land], if a certain minimum price was reached. The transfer to [WR] assumed that it would have full powers of ownership to sell the [Land]. In my opinion, the equitable interest was not carved out of the property interest transferred to [WR].

I accept the Commissioner's submissions that the transfer was not at nil value, but rather at the full value of the legal estate.[109]

144 WR has appealed against the above decision on the following grounds:

1. The primary judge erred in holding that the dutiable value of the property transferred was not nil or nominal.

1. His Honour ought to have held that the dutiable value of the property transferred was nil or nominal.

1. In particular, the primary judge erred as follows:

1. having apparently accepted that the [Testamentary Trustees] transferred their legal title to [WR] (Reasons, [2], [9], [155]-[161]), his Honour erred in holding that [WR] took the equitable title to the [Land] (Reasons, [175]);

1. alternatively, his Honour failed to have proper regard to the precise nature of the interest transferred by the [Testamentary Trustees];

1. further or alternatively, his Honour concluded that the equitable interest was not carved out of the [Land] because, under the [Partnership Agreement], [WR] had the full powers of ownership to sell the [Land] (Reasons, [175]). That [WR] had powers to act 'as if it was the owner of [Land] did not make it such.

1. His Honour ought to have held, having regard to [Lend Lease] [2011] VSCA 182; (2011) 33 VR 204 and [Vopak] [2004] VSCA 10; (2004) 12 VR 351 at [73]-[79], that, owing to the pre-existing and continuing trusts of the [Will] and to the pre-existing partnership, [WR] was given only the legal title to the [Land].

145 The two cases upon which WR relied were Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue[110] and Lend Lease.[111]

146 Vopak concerned the dutiability of a transfer of land on which the transferor had constructed a number of storage tanks which became fixtures. The transferor sold the storage tanks to a third party and subsequently sold the land to the transferee. Ormiston JA, with whom Warren CJ and Buchanan JA agreed, held that the third party purchaser 'had an equitable right to claim [the] fixtures and to enforce that right against the vendor of the estate in the land ... at the time of its sale of that estate or interest to the [transferee]'.[112] Accordingly, the third party's equitable right had to be taken into account in assessing the value of the estate or interest that was sold to the transferee.[113] Ormiston JA relevantly stated:

It may be accepted that an equitable interest strictly binds only the conscience of the holder of an estate or interest in land, but it is now too late to say that it does not constitute an 'interest' enforceable in the courts or that it should be distinguished or ignored when making a valuation of an estate or interest for the purposes of Heading VI. Counsel asserted that, where a conveyance or transfer was expressed to be of an 'estate' (in fee simple) in land, equitable interests could not qualify that estate or have a bearing on its value, largely again because they are not 'carved out' of the estate, so that the estate remains unimpaired for the purpose of valuation. But if both hypothetical vendor and purchaser could fairly take account of an equitable interest in fixing their price on sale, then surely it cannot be ignored because it is merely 'impressed upon' the estate. Certainly, if it amounted only to a personal equity or an obligation peculiar to the vendor not amounting to an interest, it must be ignored, but if it is an equitable interest enforceable against any holder of the estate by action or by use of the caveat procedure under the Transfer of Land Act, then it ought to be taken into account for that purpose. As the court emphasised in Pioneer Concrete, if interests are of a kind which would 'reduce the amount for which the relevant real property, that is, the estate in fee simple in the land the subject of the certificates of title, might reasonably be sold free from encumbrances at the date of sale', then they are fundamentally different from the personal contractual rights there considered.[114]

147 In Lend Lease, Pagone AJA followed Vopak, Tate JA cited it with approval in a limited manner and Maxwell ACJ distinguished it.

148 Tate JA stated that the interest of a beneficiary under a standard trust, although proprietary nature, does not qualify the trustee's title. Accordingly, if the relationship between LLFML and TCAL had 'exhibited the orthodox character of a trustee and beneficiary relationship', Tate JA would have agreed with Maxwell ACJ's analysis for concluding that the dutiable value of the Maribyrnong property that was transferred was not nil. However, 'the relationship between TCAL and [LLFML] was not the orthodox one between a trustee and a beneficiary; rather, it was a special or sui generis relationship between a custodian-trustee and a scheme trustee, the scheme trustee being the responsible entity of a managed investment scheme.' Her Honour continued:

That sui generis relationship had the result, as the High Court recognised in [Trust Co], of separating out the equitable and legal title so that the equitable title was held on trust by the scheme trustee with the custodian-trustee holding no more than the bare legal estate. In my opinion, in determining the value of what was transferred, the transfer of the legal estate in fee simple from the custodian-trustee to the scheme trustee was of nil value for duty purposes.[115]

149 Tate JA cited Vopak for the proposition that the equitable title held by LLFML as responsible entity and scheme trustee of the scheme trust 'inhibited or impaired' TCAL's legal title.[116] Tate JA continued:

In my opinion, the relationship between TCAL and [LLFML] has the result that the equitable interest was a relevant outstanding proprietary interest which was carved out from the Maribyrnong property in a manner that exhausted the whole of its value and which left only the bare legal estate to be transferred. ... [T]he subject of the transfer could not, logically or legally, be more than the interest TCAL held.[117]

150 Pagone AJA stated that Vopak held that the existence of an equitable interest enforceable against any holder of an estate ought to be taken into account if it had been carved out of an estate otherwise transferred. The analysis in Vopak requires the precise identification of that which the parties transferred by their instrument and not its diminution in assessable value by reference to encumbrances impressed upon that which is in fact transferred. Vopak supports the proposition that, in an appropriate case, an instrument of transfer of land is to be assessed as a transfer of the bare legal title if the beneficial interest in the land is held by the transferees. Pagone AJA held that, in the case before him, there had been a severance of the legal and equitable interest in the Maribyrnong property which TCAL held as custodian such that the only interest that TCAL was able to transfer was 'the totality of, and no more than, the entitlement of TCAL as custodian.'[118]

151 Maxwell ACJ reviewed a line of authorities commencing with Oughtred v Inland Revenue Commissioners[119] and ending with Perpetual.[120] The authorities included Farm Products Co-Operative (Tararua) Ltd v Inland Revenue Commissioner (NZ),[121] DKLR Holding Co [No 2] Pty Ltd v Commissioner of Stamp Duties (NSW),[122] DKLR Holding Co [No 2] Pty Ltd v Commissioner of Stamp Duties (NSW),[123] O'Sullivan v Commissioner of Stamp Duties (Qld)[124] and Re Transphere Pty Ltd.[125] Maxwell ACJ also considered Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd,[126] Sportscorp Australia Pty Ltd v Chief Commissioner of State Revenue[127] and Vopak.[128] He concluded from his review of the authorities that 'the interest of a beneficiary under a trust, although proprietary in nature, does not qualify the trustee's title' and that the 'trustee holds an unqualified estate in fee simple'.[129] Accordingly, where there is a transfer of trust property by the trustee to the beneficiary, it is the entire property which is transferred, not a 'bare legal title' in the property.[130]

152 Maxwell ACJ held that the value of the property transferred by TCAL to LLFML was that of the fee simple estate unqualified by the equitable interest of LLFML as beneficiary for the following reasons:

As between trustee and beneficiary, the trustee as legal owner of the property has all the rights of ownership. In the case of land, it is the trustee which holds the estate in fee simple. The fundamental point of the Oughtred line of authority is that the fee simple estate of the trustee is not qualified or diminished in any way by the obligation of the trustee to exercise the rights of ownership in the interests of the beneficiaries. That is the sense in which their equitable interests are 'impressed upon', rather than 'carved out of', the estate. Put another way, the existence of the trust does not affect the nature of the proprietary rights embodied in the fee simple estate. It goes instead to the manner of their exercise.[131]

153 Applying these principles, Maxwell ACJ distinguished Vopak on the basis that the Court in that case was not concerned with a situation where an equitable interest was held by a beneficiary of a trust but 'with a quite different situation, that is, where legal title is held subject to an equitable interest vested in a third party.'[132] That equitable interest qualified the legal title.[133] There was a right in the third party to 'carve out' a part of the real estate, by removing the fixtures.[134] Maxwell ACJ also distinguished DKLR on the basis that, in that case, the fee simple estate was held to be unqualified because the relevant equitable interest only came into existence after the transfer was complete (by virtue of the transferee declaring itself trustee of the property for the transferor).[135]

154 WR sought to rely on Ormiston JA's reasoning in Vopak as authority for two propositions. First, for the purpose of assessing the dutiable value of property, equitable proprietary interests are to be taken into account irrespective of whether, as a matter of 'legal theory', such an interest is 'impressed upon' or 'carved out' of the title. Secondly, that it was possible to carve out an equitable interest and transfer only the legal interest as between the transferor and the transferee.

155 WR also sought to rely on the reasoning of Croft J in Konann insofar as he followed Ormiston JA's reasoning in Vopak. WR also cited Croft J's reasoning in Konann as support for the proposition that the line of authority upon which Maxwell ACJ relied in Lend Lease had nothing to say as to the correct approach to ascertaining 'dutiable value' in circumstances where the property is not transferred from an existing trustee to an existing beneficiary or vice versa but is transferred to a purchaser subject to an equitable proprietary interest of a third party, such as a beneficiary under a pre-existing trust.[136] On this basis, WR submitted that Maxwell ACJ's reasoning was distinguishable because it did not deal with a transfer from a trustee of a pre-existing trust to a new trustee of that trust.

156 WR submitted that as, prior to the Transfers, the title to the Land held by the Testamentary Trustees was already divided between legal and equitable interests, and the trustees never purported to assign equitable title in the Land to WR or to disturb the pre-existing Testamentary Trusts, the Transfers could only have transferred legal title with either nil or nominal value.

157 WR submitted that the judge erred by focusing on WR's power to sell the Land, as this does not bear upon the proper identification of the interest that it received pursuant to the Transfers. Further, WR's powers under the Partnership Agreement to act 'as if' it were the full beneficial owner of the Land did not make WR the full beneficial owner.

158 The Commissioner submitted that, pursuant to the Transfers, the Testamentary Trustees transferred to WR the fee simple estate in the Land and that they intended to do so in order to enable WR to perform its function under the Partnership Agreement of developing and selling the Land. A transfer of the fee simple estate, rather than a bare legal title, was necessary to give effect to the agreement.[137]

159 The Commissioner contended that, in this case, the appointment of WR as agent under the Partnership Agreement and the transfer of the Land to WR under the Transfers, gave rise to a new and separate trust on the terms of the agreement. In those circumstances, the equitable interest of the Partners in the Land was said to be 'impressed upon' the fee simple estate in the Land which was transferred from the Testamentary Trustees to WR. That interest did not qualify that estate and did not render it a 'bare legal title' for duty purposes.

160 The Commissioner submitted that in Lend Lease, Maxwell ACJ had correctly distinguished the reasoning of Ormiston JA in Vopak on the basis that the proprietary interest of a beneficiary does not qualify the trustee's title. The Commissioner submitted that the reasoning of Ormiston JA in Vopak should be confined to a beneficial interest which is either a third party beneficial interest or, alternatively, more certain than any interest that the objects have under the Testamentary Trusts.

161 The Commissioner sought to rely on the dissenting judgment of Maxwell ACJ which was said to set out a long line of authority which has rejected arguments that a transfer of property from a beneficiary to a trustee or vice versa conveyed only a 'bare legal title' to the transferee. The Commissioner sought to rely on the reasoning of Tate JA in Lend Lease insofar as she accepted that the interest of a beneficiary under a standard trust, although proprietary in nature, would not qualify the trustee's title. The Commissioner sought to rely on the reasoning of Pagone AJA insofar as he placed importance on the fact that, '[a]t most TCAL was able to transfer its interest as special trustee by reason of being custodian under the custodian agreement', and that 'all that was being transferred was the totality of, and no more than, the entitlement of TCAL as custodian'.[138] The Commissioner contended that Pagone AJA's observation that, in an appropriate case, an instrument of transfer of land is to be assessed as a transfer of the bare legal title if the beneficial interest in the land is held by the transferees,[139] had no application in the present case because WR did not hold the beneficial interest in the Land prior to the Transfers.

162 In Lend Lease, Maxwell ACJ and Tate JA stated that, in a conventional or standard trust, as between the trustee and the beneficiary, there is no carving out or separation of the equitable title from the legal title and thus the value of the interest transferred from the one to the other is the full value of the fee simple estate.[140] Tate JA implicitly agreed with Maxwell ACJ that in the case of such a trust, Vopak would be inapplicable to a transfer of land as between the trustee and the beneficiary. We agree that Vopak has no application to such a transfer in the context of a conventional or standard trust. Vopak does not apply to the Transfers in the present case for the reasons set out below.

163 The Testamentary Trusts were conventional or standard trusts under which the five sets of Testamentary Trustees held their one fifth interest as tenants in common in each of the blocks comprising the Land on trust for the testamentary beneficiaries of their respective Testamentary Trust. The Partnership Trust that arose from the execution of the Transfers and the Partnership Agreement was also a conventional or standard trust under which WR held the Land as a Partnership asset on trust for the Testamentary Trustees as beneficiaries on the terms set out in the agreement. The estate that was transferred to WR was the estate in fee simple in the Land which was previously held subject to the equitable interests of the testamentary beneficiaries and which was henceforth to be held subject to the equitable interests of the Testamentary Trustees which were created upon the execution of the Transfers and the agreement and whose terms were set out in the agreement.

164 The analysis of the majority in Lend Lease as to the value of the legal estate that was transferred in that case cannot be applied to the Transfers in the present case because that analysis was based on the sui generis nature of the legal interest held by a custodian as delegate of the responsible entity of a managed investment scheme. In Lend Lease, both LLFML (as the responsible entity) and TCAL (as the custodian) were the trustees of a single trust (the scheme trust) and TCAL held the legal title to the Maribyrnong property as delegate of LLFML. These key features in Lend Lease - a single continuing trust with the trustee functions being divided between two entities - are absent from the present case.

165 In the present case, a new trust, the Partnership Trust, was added to the five continuing Testamentary Trusts. Those continuing trusts and the new Partnership Trust had different trustees - the Testamentary Trustees were the continuing trustees of the Testamentary Trusts and WR became the trustee of the new Partnership Trust. The trustee functions of each of the six trusts were not divided between different entities. The five sets of Testamentary Trustees did not hold their legal interests in the Land as anyone's delegate. While WR became the agent of the Testamentary Trustees as Partners, it did not receive the fee simple estate in the Land as a bare legal title as delegate of the Testamentary Trustees. WR became the sole trustee of the Partnership Trust and the Testamentary Trustees became the beneficiaries of that trust. The functions and responsibilities of the trustee of the Land were reposed solely in WR and were not divided between WR and the Testamentary Trustees, as was the case between TCAL and LLFML in Lend Lease.

166 The observations in Konann[141] on dutiable value were obiter, as Croft J held that the transfer in that case was exempt from duty under s 33(3) of the Act.[142] In any event, the reasoning in that case, and in Vopak upon which it is based, is inapplicable in the present case. This is because the transferors of the Land, the Testamentary Trustees, are not third parties and their equitable interest under the Partnership Trust was not a pre-existing equitable interest but one that arose under a new trust - the Partnership Trust - that came into existence upon the execution of the Transfers and the Partnership Agreement.[143] Under the agreement, the equitable interest of the Testamentary Trustees did not entitle them to call for a transfer of the Land to them.[144]

167 As already discussed,[145] the Partnership Agreement, which contained the terms of the Partnership Trust, changed some of the features of the equitable interest held by the testamentary beneficiaries under the continuing Testamentary Trusts. In particular, as the equitable interest of the Testamentary Trustees did not entitle them to call for a transfer of the Land to them, the equitable interest of the testamentary beneficiaries could not do so either.

168 It follows that the title of WR was not subject to any right by any beneficiaries to call for a transfer of the Land to them. Similarly, provided certain conditions were met,[146] neither the Testamentary Trustees nor the testamentary beneficiaries could prevent WR from selling the Land.

169 Accordingly, even if one puts to one side the fact that the beneficial interest of the beneficiaries under the Partnership Trust did not exist prior to the execution of the Partnership Agreement and the Transfers, while that interest affected the fee simple estate in the Land that was acquired by WR, that interest was not 'carved out' or 'separated' from that estate so as to qualify the latter and render it a 'bare legal interest'. Accordingly, there is no basis for ascribing to the fee simple estate in the Land that was transferred by the Testamentary Trustees to WR a value other than the full value of the fee simple estate.

170 It follows from the above that grounds of appeal 10 to 13 cannot be accepted.

171 For the above reasons, the appeal will be dismissed.

[1] All references to the Act are to the Act as in force on 1 February 2013.

[2] Section 35 is relevantly set out at [68] below.

[3] Section 33 is relevantly is set out at [110] below.

[4] White Rock Properties Pty Ltd v Commissioner of State Revenue [2014] VSC 312 ('Reasons').

[5] Clause 4.3 also described various other beneficiaries including any person employed by the respective beneficiaries, the trustee of any charitable trust, any club or unincorporated association and any school or like educational institutions that the beneficiaries attended.

[6] As the Partners were the Testamentary Trustees, we will use these expressions interchangeably when discussing the Partnership Agreement.

[7] Clause 3.2 of the Partnership Agreement provided that the business of the partnership 'shall include such other business as the partnership may subsequently undertake'. The word 'subsequently' confirms what is otherwise apparent from the context of the agreement read as a whole, namely, that any other business would follow, rather than precede or be concurrent with, the business of developing and selling the Land.

[8] See [18(i)] above.

[9] The provision that came closest to conferring such a power was cl 2.33 of Annexure A which enabled WR to permit a Partner to reside in any residence or to use any personal property which were assets of the Partnership, without consideration.

[10] [2011] VSCA 182; (2011) 33 VR 204 ('Lend Lease').

[11] The summary of the facts has been adapted from the judgment of Pagone AJA: Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 244-5 [165]-[166].

[12] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 236 [130], 238-9 [142]-[144], [146] (emphasis in original).

[13] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 245-6 [170].

[14] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 208-9 [14]-[15], 211-12 [29].

[15] See [26] above.

[16] See [29] above.

[17] See [28], [30]-[31] above.

[18] See [38] above.

[19] See [36] above.

[20] See [33] above.

[21] See [35] above.

[22] See [32] above.

[23] See [37] above.

[24] See [37] above.

[25] See [34] above.

[26] Emphasis added. It appears that 'The Rooney Family Partnership' was registered for GST purpses on 1 January 2009.

[27] See [36] above.

[28] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 208-9 [15].

[29] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 236 [130].

[30] See [148] below.

[31] [2003] HCA 23; (2003) 197 ALR 297 ('Trust Co').

[32] [2004] SASC 88; (2004) 88 SASR 109 ('Dadeeton').

[33] [2011] VSCA 182; (2011) 33 VR 204. We will not discuss the trial division decision in Lend Lease Funds Management Ltd v Commissioner of State Revenue [2009] VSC 360; (2009) 77 ATR 374 as the relevant legal principles were subsequently authoritatively dealt with in the appeal decision of the Court of Appeal in that case.

[34] Commissioner of State Revenue v Victoria Gardens Developments Pty Ltd [2000] VSCA 233; (2000) 46 ATR 61 ('Victoria Gardens'). This case is discussed in detail below.

[35] Reasons [113]-[115] (citations omitted) (emphasis in original).

[36] Comptroller of Stamps v Yellowco Five Pty Ltd [1993] VicRp 90; [1993] 2 VR 529 ('Yellowco'). This case is discussed in detail below.

[37] [1993] VicRp 90; [1993] 2 VR 529.

[38] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 531, 534-5, 541. JD Phillips J (at 541) stated that Exemption 18 should be read as a composite provision rather than being divided into separate requirements.

[39] At trial, the Commissioner did not contend that there had been a change in beneficial ownership. Such a contention was included in the Commissioner's written submissions on the appeal but it was withdrawn at the hearing of the appeal. See n 64 below.

[40] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 531.

[41] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 531.

[42] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 532.

[43] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 532.

[44] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 534.

[45] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 535.

[46] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 535.

[47] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 538-9.

[48] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 542-3.

[49] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 543.

[50] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 544.

[51] [2000] VSCA 233; (2000) 46 ATR 61.

[52] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 77 [38].

[53] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 77 [38].

[54] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 77 [38].

[55] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 77-8 [39].

[56] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 78-9 [40]-[41].

[57] See [79] above.

[59] See ss 34(1)(b), 35(1)(a), 35(1)(c), 36, 36A, 36B and 41A of the Act.

[60] This analysis was expressly relied upon at trial: see Reasons [27].

[61] See [79] above.

[62] In addition to the three identified differences, s 35(1) in its original form included a reference to marketable securities.

[63] Commissioner of State Revenue v STIC (Australia) Pty Ltd [2010] VSC 608; (2010) 81 ATR 682, 691-2 [82].

[64] See n 39 above. We need not decide whether the Commissioner's concession was correct.

[65] Yellowco [1993] VicRp 90; [1993] 2 VR 529, 534-5.

[66] See [79] above.

[67] See [37] above.

[68] See [56], [62] above.

[69] See [28] and [31] above.

[70] See [75], [77] above.

[71] See [75]-[76] above.

[72] See [79] above.

[73] Reasons [118], [154], [158], [160]-[161], [163].

[74] [2000] VSCA 233; (2000) 46 ATR 61. The facts in Victoria Gardens were summarised at [78] above.

[75] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 71 [27]. This interpretation had previously been applied in Comptroller of Stamps v Hutchins [1985] VicRp 61; [1985] VR 599, 611 and Perpetual Trustee Co Ltd v Commissioner of State Revenue [2000] VSC 177; (2000) 44 ATR 273, 286 [53] ('Perpetual').

[76] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 72 [28].

[77] Victoria Gardens [2000] VSCA 233; (2000) 46 ATR 61, 71-2 [27]-[28].

[78] [2011] VSCA 182; (2011) 33 VR 204. The facts in Lend Lease were summarised at [42]-[43] above.

[79] [2011] VSCA 182; (2011) 33 VR 204, 210 [21]-[23], 236 [129], 239 [147], 240-1 [152], [155], 242 [157], 246-7 [171].

[80] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 212 [34], 219-20 [61], 241 [154].

[81] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 212 [34].

[82] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 236 [129] (citations omitted).

[83] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 239 [147].

[84] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 239 [147].

[85] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 236 [131], 240 [150]-[151].

[86] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 240-1 [152]-[153].

[87] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 241 [156].

[88] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 246 [171].

[89] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 247 [171].

[90] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 248 [173].

[91] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 210-11 [24], 212 [31].

[92] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 211 [25]-[26].

[93] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 220-1 [65]-[67].

[94] [2000] VSCA 233; (2000) 46 ATR 61, 72 [28].

[95] [2011] VSCA 182; (2011) 33 VR 204, 214-15 [43] -[44].

[96] [2000] VSC 177; (2000) 44 ATR 273.

[97] Perpetual [2000] VSC 177; (2000) 44 ATR 273, 286-7 [53]-[55].

[98] See [114], [116], [118], [123] above.

[99] See [48]-[67] above.

[100] [2015] VSC 23 ('Konann').

[101] See [53]-[67] above.

[102] See [55]-[67] above.

[103] See [33]-[35], [37] above.

[104] [2015] VSC 23.

[106] See [39] above.

[108] See [39] above.

[110] [2004] VSCA 10; (2004) 12 VR 351 ('Vopak').

[111] [2011] VSCA 182; (2011) 33 VR 204.

[112] Vopak [2004] VSCA 10; (2004) 12 VR 351, 372 [48].

[113] Vopak [2004] VSCA 10; (2004) 12 VR 351, 383-4 [78]-[81].

[114] Vopak [2004] VSCA 10; (2004) 12 VR 351, 381 [74] (citations omitted).

[115] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 243-4 [163] (citations omitted).

[116] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 243 [161].

[117] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 243 [162] (citations omitted).

[118] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 249-50 [177]-[178].

[119] [1959] UKHL 3; [1960] AC 206.

[120] [2000] VSC 177; (2000) 44 ATR 273.

[121] (1969) 1 ATR 85.

[122] [1980] 1 NSWR 510.

[123] [1982] HCA 14; (1982) 149 CLR 431 ('DKLR').

[124] [1984] 1 Qd R 212.

[125] (1986) 5 NSWLR 309.

[126] [2002] HCA 43; (2002) 209 CLR 651.

[127] [2004] NSWSC 1029; (2004) 213 ALR 795.

[128] [2004] VSCA 10; (2004) 12 VR 351.

[129] Lend Lease (1011) 33 VR 204, 225 [87].

[130] Lend Lease (1011) 33 VR 204, 225 [87].

[131] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 233 [113].

[132] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 233 [112].

[133] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 225 [88].

[134] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 233 [114].

[135] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 222 [77].

[136] Konann [2015] VSC 23, [73]-[75].

[137] On the basis of Francis v NPD Property Development Pty Ltd [2004] QCA 343; (2005) 1 Qd R 240, 246 [4], the Commissioner also submitted that under the Torrens system, it is not possible to transfer only a bare legal title. It is not necessary for us to consider the correctness of this submission, particularly in the light of Lend Lease.

[138] Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 249-50 [177], [178].

[139] See [150] above.

[140] See [148], [151]-[153] above.

[141] [2015] VSC 23.

[142] Konann [2015] VSC 23, [63].

[143] See Lend Lease [2011] VSCA 182; (2011) 33 VR 204, 222 [77]; Konann [2015] VSC 23, [74].

[144] See [55]-[67] above.

[145] See [55]-[67] above.

[146] See [33]-[35] above.