D.K.L.R. Holding Company (No. 2) Pty. Limited v. Commissioner of Stamp Duties (N.S.W.)
Judges:Sheppard J
Court:
Supreme Court of New South Wales
Sheppard J.: To be dealt with are a case stated by the defendant pursuant to the provisions of sec. 124 of the Stamp Duties Act 1920 and a summons seeking declaratory relief and an injunction. The questions raised by the summons are, along with others, also raised by the stated case. It is therefore appropriate to concentrate upon the questions raised by the case, they comprising all the matters which are in issue between the parties. Those questions concern the liability to stamp duty under the Act of two instruments, a declaration of trust and a memorandum of transfer. The plaintiff contends that neither instrument is liable to duty in more than a nominal sum, whilst the defendant contends that at least one of them is liable to ad valorem duty calculated upon the value of the property which is the subject of the instruments in question.
The facts of the matter may be shortly stated. Until the execution of the instruments in question, a company 29 Macquarie (No. 14) Pty. Limited (hereinafter called ``29 Macquarie'') was at all material times the registered proprietor for an estate in fee simple of certain land situated in the County of Cook, Parish of Jamieson, being the whole of the land contained in certificate of title vol. 5723, fol. 131. On 1st June, 1976, there were held meetings of the directors of 29 Macquarie and of the plaintiff. The first meeting to be held was a meeting of the directors of 29 Macquarie at which it was resolved that that company request the plaintiff to act as trustee for it of the land in question ``on the terms of a declaration of trust which unexecuted was tabled for approval at the meeting''. It was also resolved ``that the proposed trustee would hold only the legal estate to the land there being no intention on the part of the company to part with beneficial ownership of the land''.
A few minutes later there was a meeting of the directors of the plaintiff. It was resolved that, upon request having been made to the plaintiff, that it act as trustee absolutely on behalf of 29 Macquarie of the land abovementioned, the plaintiff execute a declaration of trust in favour of 29 Macquarie in respect thereof.
Soon afterwards a further meeting of the directors of the plaintiff was held. The resolution passed at that meeting was that the company affix its seal to a transfer of the bare legal estate in the whole of the land in question.
Copies of the minutes of the meetings were tendered in evidence. The times noted on them would suggest that the meetings were not held in the order I have described. But it is agreed by all counsel that the minutes are in this respect erroneous and that the order of the meetings was as I have said it was.
After the meetings had been held the declaration of trust referred to in the resolutions was executed by the plaintiff. It was in the following terms:
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``TO ALL TO WHOM THESE PRESENTS SHALL COME D.K.L.R. HOLDING CO. (NO. 2) PTY. LIMITED a Company duly incorporated and having its registered office at 48 Macquarie Street, Parramatta SENDS GREETINGS: WHEREAS the Company has undertaken to act as Trustee absolutely for lands listed in the Schedule hereto on behalf of 29 MACQUARIE (NO. 14) PTY. LIMITED NOW BE IT KNOWN TO ALL MEN BY THESE PRESENTS that the Company declares that it will hold the lands listed in the Schedule hereto UPON TRUST absolutely for the said 29 MACQUARIE (NO. 14) PTY. LIMITED and that the Company will make execute and do all such instruments acts and things as shall be necessary to vest the lands back in the name of the said 29 MACQUARIE (NO. 14) PTY. LIMITED and further shall deal with the lands solely as the said 29 MACQUARIE (NO. 14) PTY. LIMITED shall direct and appoint.''
The schedule referred to the land in question. After the plaintiff had executed the declaration of trust both companies executed a memorandum of transfer of the land. It was in the usual form. It provided that 29 Macquarie being the registered proprietor of an estate in fee simple of the land thereinafter described, ``In consideration of Nominal'' paid to 29 Macquarie by the plaintiff thereby transferred to the plaintiff an estate in fee simple in the land in question.
The minutes of the meeting to which I have referred were not included as part of the stated case. They were, as I have said, tendered during the course of the hearing. Counsel for the defendant objected to that part of the resolution passed at the first meeting of 29 Macquarie which said:
``It was specifically resolved that the proposed trustee would hold only the legal estate to the land there being no intention on the part of the Company to part with beneficial ownership of the land.''
Counsel also objected to para. 7 of the affidavit of a Mr. Raphael who is the Chairman of both companies and was present at the meetings. That paragraph is as follows:
``At the time of execution of either Declaration or Transfer and since then the beneficial owner had and has at no time the intention of transferring to the Plaintiff a beneficial interest in the land. Rather the beneficial owner intended to transfer to the Plaintiff a bare legal estate only in the land retaining for itself the whole equitable interest in the said land but subject to the mortgage hereinbefore referred to.''
I admitted that part of the resolution which was objected to and para. 7 of the affidavit subject to the defendant's objection, leaving the significance (if any) of what was said in the two documents to be raised as a matter of substance in counsel's submissions.
Before proceeding to deal with the competing submissions of the parties it is convenient to refer to the provisions of the Act which are relevant. The general charging provision is sec. 4 which makes reference to later provisions of the Act and the second and third schedules thereto. Section 65 defines the expressions ``Conveyance'' and ``convey''. ``Conveyance'' includes any transfer, settlement, declaration of trust and every other instrument whereby any property is transferred to or vested in or accrues to any person. ``Convey'' has a meaning corresponding with that of ``conveyance''. ``Conveyance on sale'' includes every instrument whereby any property on the sale thereof is conveyed to a purchaser or other person or on his behalf or by his direction.
Section 66 provides that subject to the provisions of the Act every conveyance is to be charged with ad valorem duty in respect of the unencumbered value of the property thereby conveyed. Sub-section (2) provides for the duty payable on conveyances of sale. Neither of the instruments here in question is a conveyance on sale. Sub-section (3) of the section provides that a conveyance made without consideration is to be charged with ad valorem duty at the rates provided for in the second schedule to the Act for a conveyance on sale on the amount or value of all encumbrances subject to which the property is conveyed. Subject to that provision duty on a conveyance made without consideration in money or money's worth is to be paid at the higher rates provided for in the sixth schedule to the Act.
Section 73(1) specifies a number of instruments which are not to be charged with ad valorem duty as conveyances. It is not necessary to state exhaustively what these are, but they include instruments appointing a new trustee. In each such case the instruments not chargeable with ad valorem duty are to be charged with a fixed duty of six dollars.
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Section 73(2A) is as follows:
``A conveyance made for nominal consideration upon the appointment or the retirement of a trustee (whether the trust is expressed or implied) is to be charged with the duty of one dollar.''
Section 73(3) provides that nothing in the section is to be deemed to exempt any of the instruments with which the section deals from liability to any other duty to which it is or may be liable under the Act or to extend to any instrument referred to in para. 2 of the matter appearing in the second schedule under the heading ``Declaration of Trust''.
Before I refer to those provisions of the second schedule, I should mention that the second schedule contains extensive provisions dealing with ``Conveyances of any Property''. It is unnecessary to refer to these except to say that para. (4) of that part of the schedule contains provisions which correspond with the provisions of sec. 73(1).
The provisions of the first column of the second schedule dealing with declarations of trust are as follows: -
``(1) Any instrument declaring that a person in whom property is vested as the apparent purchaser thereof holds the same in trust for the person or persons who have actually paid the purchase-money therefor.
(2) Any instrument declaring that any property vested or to be vested in the person executing the same is or shall be held in trust for the person or persons or purpose or purposes mentioned therein notwithstanding that the beneficial owner or person entitled to appoint such property may not have joined therein or assented thereto.
(3) Any such instrument as aforesaid by which (a) the same trusts are declared as have been declared in respect of the same property by an instrument duly stamped with ad valorem duty under this Act or (b) the trusts declared are the same trusts as those upon or subject to which the same property was conveyed to the person declaring the trust by an instrument duly stamped with ad valorem duty under this Act or (c) the same trusts are declared as have been declared by a will in respect of the same property and any death duty payable in respect of that property by reason of the death of the testator who made such will has been paid.''
A fixed duty of six dollars is imposed upon instruments falling within para. (1) and (3). An instrument falling within para. (2) is subject to the same duty as if it were a conveyance of the property comprised therein.
When the defendant came to assess the duty upon the two instruments he believed that the transfer had been executed first and the declaration of trust second. He assessed duty on the transfer, pursuant to sec. 66(3) of the Act, on the value of the encumbrance to which the land was subject at the rate provided for in the second schedule to the Act and upon the balance of the value of the land at the rate provided for in the sixth schedule to the Act. He assessed duty on the declaration of trust at six dollars, treating it as falling within the provisions of para. (3)(b) under the heading Declaration of Trust in the second schedule. When he learnt that the instruments were executed in a different order he sought leave to include an additional paragraph in the stated case. It was amended by consent accordingly. In that paragraph it is said that if the order of execution were, as it was, the declaration of trust first and the transfer second, he would have assessed duty on the declaration of trust pursuant to para. (2) of that part of the second schedule relating to declarations of trust and duty on the transfer at six dollars. In an affidavit sworn shortly before the hearing began the defendant said that in the events mentioned the duty on the transfer would have been one dollar and not six dollars. Presumably he then thought that the appropriate provision to be applied in relation to it was sec. 73(2A) of the Act. Despite the amendment made to the stated case and the defendant's affidavit, the primary submission made by counsel for the defendant was that it was in fact the transfer which was liable to ad valorem duty. That submission was made notwithstanding the fact that the transfer was executed after the declaration of trust.
It was the plaintiff's submission that the declaration of trust was liable only to the fixed duty which is payable upon a deed, ``not otherwise charged'' in the schedule, that is six dollars, because, it being the first document executed, it did not operate to vest any property in the plaintiff, nor did it have any other operation in law. It had, perhaps, a potential operation in the event that the property became vested in the plaintiff, but there was no obligation upon the part of 29 Macquarie to transfer the property to it. It might never become so vested. If it did become
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vested in the plaintiff, the better view was that the plaintiff's obligation to hold it as trustee arose otherwise than by reason of the declaration of trust. It would provide no more than evidence of what the plaintiff's obligations were. No duty at all was payable upon the transfer because it did not operate as anything more than the transfer of the bare legal estate; it did not operate as a transfer of the beneficial interest in the property. Such an estate was submitted to have either no value or a negative value. There is evidence in support of that proposition if evidence be needed. I accept the evidence that has been given. Alternatively, so it was submitted, the transfer was liable to a fixed duty of one dollar pursuant to the provisions of sec. 73(2A) of the Act.It was the defendant's submission that the transfer was liable to ad valorem duty as a conveyance. The duty was to be calculated upon the full value of the property because the transfer was a transfer of an estate in fee simple in the land and not of the bare legal estate. The provisions of sec. 73(2A) did not apply to the transfer. The defendant also made submissions concerning the amount of duty payable upon the declaration of trust. I shall come to those submissions in due course. But I find it convenient to deal first of all with the question of the liability to duty of the transfer.
The primary question between the parties is the value of what was transferred. A further question is whether the transfer was a transfer to which the provisions of sec. 73(2A) of the Act applied. Counsel for the defendant developed the submission which I have mentioned as to what was transferred by saying that a memorandum of transfer of conveyance in terms of the transfer here conveys the entire property and must, in order that the conveyee may then hold the beneficial interest upon trust for the former owner, whether the conveyee holds under a resulting trust or an express trust, vest the entirety of the rights which go to make up the title to the property in the conveyee.
In my opinion counsel is supported in that submission by the decisions of the High Court in
Commr. of Stamp Duties v. Perpetual Trustee Company (Quigley's case) (1926) 38 C.L.R. 272, the House of Lords in
Oughtred v. I.R. Commrs. (1960) A.C. 206 and the New Zealand Court of Appeal in
Farm Products Co-operative v. C. of I.R., (1969) N.Z.L.R. 874.
In the latter case the shareholders of a company granted an option to the appellant to purchase their shares at a price therein provided for. The option provided that, ``with a view to protecting Farm Products' rights'' the vendors would forthwith transfer or procure to be transferred the shares to the appellant or its chairman of directors who would hold the shares thereafter in trust for the vendors and that such transfer or transfers should not operate or be deemed to operate to pass any beneficial interest in the shares. The emphasis is mine. On the same day by twelve instruments of transfer the vendors transferred the shares to the appellant ``in pursuance of the agreement of even date,'' referring thereby to the option. Shortly after the execution of the option it was exercised orally by the appellant. It was submitted by the appellant that thereafter it held the shares ``in trust for itself''. The transfers of shares were presented for stamping. The Commissioner assessed them for ad valorem duty upon the value of the shares which were transferred. It was the submission of the appellant that the value was a nominal one only.
The Court distinguished the case from the decision of the House of Lords in
William Cory & Sons Limited v. I.R. Commrs., (1965) A.C. 1088 upon the basis of differences between the New Zealand and English legislation. The English legislation only imposed ad valorem duty where the conveyance was a ``conveyance on sale''. That was not the case under the New Zealand Act, nor is it the case under the New South Wales Act (sec. 66(3) thereof). Cory's case is therefore similarly distinguishable in New South Wales.
It will be recalled that counsel for the defendant objected to that part of the first resolution passed by 29 Macquarie which referred to an intention on its part only to transfer the bare legal estate and also to para. 7 of Mr. Raphael's affidavit which I have earlier set out. Whether those pieces of evidence are admissible or not is a question which I put aside for the moment. At best they may be regarded as indications of the intention of 29 Macquarie, and thus the plaintiff, and may be compared with the indications of intention, which were in the option itself in Farm Products, that it was not intended to vest more than the legal estate in the appellant in that case.
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In the course of his judgment in Farm Products Turner J. said at p. 883:
``I have no doubt at all that what was conveyed was the shares. This is what the transfer says was transferred, and it is therefore the value of the shares with which sec. 65 is concerned. It seems to me meaningless to speak of the transfers as transferring the `bare legal estate' in the shares, or of valuing this `bare legal estate'. The shares were property. They were transferred. He who takes a transfer or conveyance of the legal estate in property takes a transfer or conveyance of that property. The property of which he takes a transfer or conveyance may be the subject of equitable interests vested in equity in another. But this does not affect the position at law; and at law he becomes the proprietor of the property of which he has taken a transfer or conveyance. It is the value of the property transferred or conveyance which determines assessment, and this is unaffected by the existence of any outstanding equitable interest.''
There is what at first sight may be thought to be a difference of substance between the facts in Farm Products and those in question here. In Farm Products the intention of the parties was to vest the properly ultimately in the transferee. The transfers to it were a first step in that exercise. Here the transferee (the plaintiff) was not intended to become the beneficial owner of the land. It was to remain a trustee; the beneficial interest was to remain vested in the transferor (29 Macquarie). But the duty is imposed upon instruments and not upon transactions. In both cases the transfers were intended by the parties to be no more than transfers of the bare legal estate. Such difference as there is between the facts of the two cases is therefore of no consequence so far as the present problem is concerned.
I am therefore of opinion that the decision in Farm Products and the passage from the decision of Turner J. I have cited cover directly the present case. They are, notwithstanding that the decision is one of the New Zealand Court of Appeal, persuasive only of what I should do, but I think I should follow the decision unless there is some sound reason why I should not. A comparison of the legislation in force in New Zealand and in New South Wales does not provide any such reason.
As I have mentioned, support for the plaintiff's proposition is also to be found in Quigley's case and in Oughtred. In Quigley's case a person who was beneficially interested in certain real and personal property, subject only to a life interest of another person in part of it, executed a deed of settlement whereby he conveyed the property to a trustee in trust for himself for life with certain remainders over in favour of others. It was contended by the person liable to pay duty upon the deed that it was within the provisions of sec. 73(1)(b) of the Act and not within sec. 66(1) thereof. The High Court rejected that submission. At pp. 277-278 Knox C.J., Gavan Duffy and Starke JJ., said:
``The learned Judges of the Supreme Court, however, were of opinion that a life interest limited to the settlor was within the exemption contained in sec. 73(1)(b) of the Act, because it was a beneficial interest that had previously existed and in substance remained unaffected; but this is inaccurate unless the limitation of a life interest to the settlor is regarded as a reservation to himself of that interest out of the property conveyed by him to the trustee upon the trusts of the settlement. Neither in form nor in our opinion, in substance, did the settlor make any such reservation. He granted and assigned unto the trustee the whole of his property, and then proceeded to create new interests including a beneficial interest for himself. He held that interest under the settlement and under no other title. The settlement is what Griffith C.J. termed the charter of his rights and obligations in respect of that interest.''
The reference to what Griffith C.J. said is a reference to his Honour's judgment in
Davidson v. Chirnside, 7 C.L.R. 324 at p. 340.
At pp. 278-9 Isaacs J. said, after referring to the legislation in question:
``In sec. 66(1) the word `property' is important. It is a word of variable import, depending here either on context or on statutory definition. In this Act it is defined thus: ``Property' includes real and personal property, and any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest' (Act No. 16 of 1924, sec. 2). It may, therefore, for the purposes of the Act mean either a tangible object - res - or some intangible right or
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rights - jura - which exist in relation to the res. Consequently, pursuant to sec. 66(1), unless some other provision is found in the Act to the contrary, the whole of the `estate and interest' of the settlor in the real and personal property dealt with by the settlement is the `property' conveyed, and therefore dutiable ad valorem. Henceforth the settlor's source of title and measure of rights are found in the settlement.Para. (b) of sub-sec. 1 of sec. 73 refers, in my opinion, to a conveyance that either does not purport to transfer a beneficial interest at all, or, if it does, is made by a person in a recognised fiduciary position under a trust in favour of the transferee. Obviously that provision does not include the present instrument.''
It is true that the case is not of direct relevance, but, so it seems to me, it points in the same direction as Farm Products. It is true that the joint judgment shows that it is possible to convey a limited interest in property by the settlor reserving to himself an interest out of the property conveyed by him. That was not done in the present case. That is what distinguishes this case from the decision of the House of Lords in Stanyforth v. I.R. Commrs. (1930) A.C. 339, a decision relied upon by the plaintiff here. But that was a case where all that was conveyed was a limited interest in property. Moreover Stanyforth has, in New South Wales, to be considered in the light of sec. 125B of the Act which was inserted therein in 1931. Obviously it was designed to overcome the effect of Stanyforth in this State.
In Oughtred a mother was tenant for life of a number of shares in a company. Her son was absolutely entitled to those shares subject to her life interest. By an oral agreement it was agreed between them that at a later date the son would exchange his interest under the settlement for certain other shares in the same company wholly owned by the mother. On that later date a deed of release between the mother and son and the trustees of the settlement was signed under which the mother and the son gave releases to the trustees. On the same day, by a deed made between the mother and the trustees, the shares in question were transferred to the mother. A majority of the House of Lords held that the transfer of the shares was subject to ad valorem duty. Lord Jenkins said (p. 239):
``... I am unable to accept the conclusion that the disputed transfer was prevented from being a transfer of the shares to the appellant on sale because the entire beneficial interest in the settled shares was already vested in the appellant under the constructive trust, and there was accordingly nothing left for the disputed transfer to pass to the appellant except the bare legal estate. The constructive trust in favour of a purchaser which arises on the conclusion of a contract for sale is founded upon the purchaser's right to enforce the contract in proceedings for specific performance. In other words, he is treated in equity as entitled by virtue of the contract to the property which the vendor is bound under the contract to convey to him. This interest under the contract is no doubt a proprietary interest of a sort, which arises, so to speak, in anticipation of the execution of the transfer for which the purchaser is entitled to call. But its existence has never (so far as I know) been held to prevent a subsequent transfer, in performance of the contract, of the property contracted to be sold from constituting for stamp duty purposes a transfer on sale of the property in question. Take the simple case of a contract for the sale of land. In such a case a constructive trust in favour of the purchaser arises on the conclusion of a contract for sale, but (as far as I know) it has never been held on this account that a conveyance subsequently executed in performance of the contract is not stampable ad valorem as a transfer on sale. Similarly, in a case like the present one, but uncomplicated by the existence of successive interests, a transfer to a purchaser of the investments comprised in a trust fund could not, in my judgment, be prevented from constituting a transfer on sale for the purposes of stamp duty by reason of the fact that the actual transfer had been preceded by an oral agreement for sale.''
A little later his Lordship said:
``This difference is of particular importance in the case of property such as shares in a limited company. Under the contract the purchaser is no doubt entitled in equity as between himself and the vendor to the beneficial interest in the shares, and (subject to due payment of the purchase consideration) to call for a transfer of them from the vendor as trustee for him. But it is
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only on the execution of the actual transfer that he becomes entitled to be registered as a member, to attend and vote at meetings, to effect transfers on the register, or to receive dividends otherwise than through the vendor as his trustee. The parties to a transaction of sale and purchase may no doubt choose to let the matter rest in contract. But if the subject matter of a sale is such that the full title to it can only be transferred by an instrument, then any instrument they execute by way of transfer of the property sold ranks for stamp duty purposes as a conveyance on sale notwithstanding the constructive trust in favour of the purchaser which arose on the conclusion of the contract.''
It is to be observed that his Lordship referred to a transfer on sale. That is again because of the terms of the English legislation, but it does not affect the matter for which I am citing his judgment. The passages I have cited were relied upon by McCarthy J., who was one of the members of the Court in Farm Products.
Again the facts in Oughtred are not the same as in this case. They are different also from those in Farm Products because the equitable interest was already vested in the transferee and it remained only to vest the legal title in her. Here, upon one view of the transaction, the beneficial interest remained with the transferor. All that was transferred was the legal title to the land. Notwithstanding those differences I regard what Lord Jenkins said as relevant to the present problem and as providing support for the defendant's submissions.
Notwithstanding the authorities to which I have referred, it was submitted by the plaintiff that the evidence plainly showed that no more was transferred than the bare legal estate in the land. That, so it was submitted, was clear from the terms of the resolution passed by 29 Macquarie and Mr. Raphael's evidence earlier referred to. There were two matters developed in the course of the plaintiff's submissions to which I should refer shortly. I do not agree with the plaintiff's contentions in respect of them, but that of itself is not a reason why the submission made by the plaintiff should fail. I deal with these two matters as follows.
Underlying the plaintiff's submission was the notion that there is at all times co-existing with a legal system of title an equitable system of title. That situation was submitted to exist even in cases where property, the legal title to which is vested in a person, is beneficially owned by him. In such case the supposed equitable system of title provides for exactly the same rights and obligations to be conferred and imposed on the legal owner so long as he retains as well the beneficial ownership. In my opinion there is no equitable estate existing in relation to property at all in such a situation. Such an estate will only arise if an equitable interest in the property needs, in the view of a court of equity, to be created to protect a person who has an equity in the property. Thus such an estate will arise if the owner enters into a contract of sale to sell the property or declares himself a trustee of it for other persons. Equitable estates will then arise and will continue to exist so long as equity considers it necessary to protect those who have beneficial interests but no legal title. Once the contract of sale is completed and a transfer registered the equitable estate of the purchaser will cease to exist. It will have become merged in his legal estate. If the persons for whose benefit a trust is declared, being able so to do, call for a transfer of the property and such a transfer is executed and registered, they will have the legal title beneficially. No occasion for their equitable estates to continue in existence remains.
The second matter to which I have referred was a submission by the plaintiff that where A conveys property to B for a nominal consideration in circumstances where there is no presumption of advancement, nor intention to make a gift, B will hold the property on trust for A. I have some reservation as to whether that proposition is universally true. But, assuming it to be so, I do not agree with counsel for the plaintiff that it would follow by reason thereof that all that passed to B was the bare legal estate. It would seem to me that the better view is, A being prior to the exectuion of the conveyance the legal and beneficial owner, that the whole of A's interest in the property passes to B, but that there then arises an obligation on his part to hold the property in trust for A with the result that there is, upon the passing of the property to him, then created an equitable estate in the property, the owner of which is A.
But my rejection of the two submissions with which I have just dealt does not dispose of the force of the plaintiff's submission that all
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that was in fact transferred to the plaintiff was the bare legal estate in the land. That was the intention of the parties as the plaintiff's evidence shows. Some of the authorities to which I have referred - Quigley's case is an example - show that it is possible to reserve to oneself a beneficial interest at the time that one conveys property with the result that one conveys the property less that interest. The line between a settlement of a partial interest only and a resettlement of the entire property with the result that the former beneficial owner looks to the resettlement for his rights may be a fine one, but the authorities do recognise that a settlor may in some circumstances reserve to himself a partial beneficial interest in the land. If one may reserve a partial beneficial interest, I do not see why in principle one cannot reserve the whole beneficial interest. In the case of land under the Real Property Act one cannot vest an estate in fee simple in a transferee otherwise than by an instrument of transfer under the Act. No reference to any trust is to be placed upon the register (Real Property Act 1900, sec. 82(1)). But there may be trusts of land under the Real Property Act. An analysis of what occurs when a transaction of the kind under consideration here takes place does not to my mind prevent the transferor from retaining for himself and never parting with the beneficial interest in the property. Such a view is, in my opinion, supported by what was said by Lord Upjohn inVandervell v. I.R. Commrs. (1967) 2 A.C. 291 at p. 311. His Lordship said:
``I cannot agree with Diplock L.J. ((1966) Ch. 261 at p. 287) that prima facie a transfer of the legal estate carries with it the absolute beneficial interest in the property transferred; this plainly is not so, e.g., the transfer may be on a change of trustee; it is a matter of intention in each case. But if the intention of the beneficial owner in directing the trustee to transfer the legal estate to X is that X should be the beneficial owner I can see no reason for any further document or further words in the document assigning the legal estate also expressly transferring the beneficial interest; the greater includes the less.''
Notwithstanding the weight which what Lord Upjohn said adds to the submission made by the plaintiff, I have difficulty in reconciling what his Lordship said with a number of the dicta which I have cited earlier from other authorities. Furthermore, what his Lordship said is contrary to the view of another distinguished judge, although at the time Diplock L.J. was a member of the Court of Appeal. What his Lordship said does not seem to me to be directly related to the decision he reached in Vandervell. That is at least so in relation to what he said in the first part of the passage I have cited.
After due consideration I do not think that I should allow what Lord Upjohn has said to govern the decision to be arrived at here. I think his opinion is overborne by the weight of the other authorities to which I have referred.
In particular, I think that what Lord Jenkins said in Oughtred concerning a transfer of land following upon the entry into a contract of sale is of importance. Upon the exchange of contracts the purchaser acquires an equitable estate in the land. Either then or after the vendor has shown a good title the vendor becomes a trustee for the purchaser and presumably the vendor thenceforth has only a bare legal estate. Nevertheless it is the plain intention of the legislature in New South Wales that the transfer is a conveyance of property for the purposes of sec. 66 but, if ad valorem duty upon the value of the consideration has been paid on the contract pursuant to the provisions of sec. 41, no further ad valorem duty is payable upon the transfer (sec. 41(4) of the Act). That is a plain indication that the legislature thought that double duty would be payable if it were not for the provisions of sec. 41(4). Furthermore, the legislature by reason of the provisions of sec. 73(2A) earlier set out thought it necessary to provide especially for the case of a conveyance made upon the appointment or the retirement of a trustee. That subsection would plainly cover the type of transfer referred to by Lord Upjohn in the passage I have cited. If the position were as he says there would have been no need for the legislature to enact sec. 73(2A). It could be said that it has been enacted in order to put the position beyond doubt but in the light of the authorities to which I first referred when beginning this discussion it would seem more likely that the view was taken by the legislature that without such a provision ad valorem duty would have to be paid upon the value of the property, there being no consideration, each time a transfer to a new trustee was made. The provision has not always been included in the Act. It was inserted in 1924, but until 1931 the opening words of sec. 73(1)(b) were, ``A conveyance
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under which no beneficial interest passes in the property conveyed''. They were words which were in the original Act when it was passed in 1920 and remained there until 1931. Thus in one way or another a conveyance upon a change of trustee has always attracted no more than a fixed or nominal duty.Unless, therefore, the transfer is properly to be regarded as a conveyance upon the appointment of a trustee within the meaning of sec. 73(2A) of the Act, the Commissioner was correct in assessing it for duty pursuant to the provisions of sec. 66(3) of the Act. I find it convenient to postpone dealing with that question until after I have considered the question of the liability to duty of the declaration of trust.
That is a matter which I can dispose of shortly. The declaration of trust did not operate to effect any change in the ownership, beneficial or otherwise, of the property. It is not therefore a conveyance within the meaning of that expression as defined in sec. 65 of the Act. Is it nevertheless to be charged with duty as a conveyance because it falls within para. (2) of that part of the second schedule to the Act which deals with declarations of trust? The Commissioner says that it is. In support of that submission he relies upon the words, ``to be vested'' in the paragraph. The significance of those words was recently considered by me in
Nev Ham Nominees Pty. Limited v. Commr. of Stamp Duties 78 ATC 4095. I do not wish to add anything to what I there said about those words. In my opinion they do not cover a declaration of trust such as this one any more than they did the declaration of trust in that case. The Commissioner contends that the words mean intended or expected to be vested. That submission was rejected in Nev Ham and I reject it here for the reasons given in my judgment given in that case. In my opinion the declaration of trust is a deed ``not otherwise charged'' in the schedule and accordingly liable to a fixed duty of six dollars.
I come back then to the question of whether the transfer is a conveyance upon the appointment of a trustee within the meaning of sec. 73(2A) of the Act. That subsection is one of the provisions in a comprehensive series of provisions providing for fixed duties to be paid upon a number of instruments which would otherwise be liable to ad valorem duty pursuant to the provisions of sec. 66 of the Act. Amongst the instruments dealt with are instruments appointing new trustees (sec. 73(1)(a)). By definition (sec. 65) the legislature regarded such an instrument as a conveyance upon the basis, I suppose, that there was a transfer of title from a settlor to the trustee or from one trustee to another. That it was regarded as a conveyance by the legislature is shown by the corresponding provisions contained in para. (4) of that part of the schedule dealing with conveyances of any property.
It is to be observed that the expression used in sec. 73(1)(a)(i) is ``An instrument appointing a new trustee''. The expression used in sec. 73(2A) is ``upon the appointment of a trustee''. Subsection (2A) is therefore intended to apply not only to cases where property needs to be transferred or conveyed after the appointment of a new trustee, although that would be one of the cases where it would apply.
But the word ``upon'' in the context in which it is used means, in my opinion, ``following''. That is amongst the dictionary meanings of the word. Therefore, although the field of application which sec. 73(2A) has is wider than one which is consequential only upon instruments of the kind referred to in sec. 73(1)(a), it can only apply in relation to instruments which follow the appointment of a trustee.
Now for the reasons already given the declaration of trust did not operate to appoint the plaintiff a trustee. It had no operation or effect whatever because at the time of its execution the property was not vested in the plaintiff nor was it entitled to call for a transfer of the property. It is true that once the transfer of the property to the plaintiff took effect it became a trustee because that was the intention of the parties. The declaration of trust provides the best evidence of that intention but there is other evidence of it as well. I refer to the first resolution of the directors of 29 Macquarie and Mr. Raphael's evidence earlier mentioned.
In my opinion that is not the sort of situation to which the subsection was intended to apply. Rather it was intended to apply either in consequence of the appointment of a new trustee or upon the settlement of property, for example where a settlor settles property upon trustees to be held by them upon new trusts. In such a case they would need to get in title to the property and any transfer or conveyance thereof from the settlor or other person holding it for him would be
ATC 4157
within the subsection. But the transfer in question here is not a conveyance upon (i.e. following) the appointment of a trustee, because until the transfer took effect there was no trust. There had been no appointment of a trustee upon which the transfer could be consequential.For the above reasons I am of opinion that the transfer does not fall within the provisions of sec. 73(2A) of the Act. It is therefore liable to ad valorem duty in accordance with the provisions of sec. 66(3) of the Act.
I answer the questions asked in the stated case as follows:
(a) No
(b) $50.16
(c) No
(d) $6.00
(e) The plaintiff
I order that the summons be dismissed. I order the plaintiff to pay the defendant's costs of it, but to the intent that the defendant should not be entitled to recover more than one set of costs in respect of the two proceedings.
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