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Extra Nominees Pty. Ltd. v. Comptroller of Stamps (Vic.)

Members:
GAA Nettle M

Tribunal:
Administrative Appeals Tribunal of Victoria

Decision date: 30 August 1990.

G.A.A. Nettle (Member)

I have before me an application to review the decision of the Comptroller of Stamps to assess to duty, under Heading VI in the Third Schedule to the Stamps Act 1958, a transfer of land executed by Lynty Pty. Ltd. as tranferor and the applicant as transferee on or about 30 August 1988.

2. The Comptroller has assessed duty on the value of the land the subject of the transfer. But the applicant contends that it was at all relevant times beneficially entitled to a 25% interest in the land and thus that the assessment should be reduced by 25%. The applicant relies on exemption (10) or exemption (17) to Heading VI as having the effect of reducing the assessment by that amount.

3. When the matter came on for hearing before me on 13 August 1990 a large number of the facts had been agreed between the parties. The facts agreed were:

  • (1) By contract of sale dated 8 November 1985 Carlton and United Breweries Limited

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    agreed to sell to Lynty Pty. Ltd. the land comprised in Certificate of Title Volume 4423 Folio 514 together with the hotel and premises on the land (known as ``Hosies Hotel''), the vendor's interest in the hotelkeeper's licence attached to the hotel, and the furniture furnishings plant and equipment chattels and effects described in the inventory annexed to the contract of sale.
  • (2) The consideration for the sale was $2,106,340.10.
  • (3) On 1 June 1986 a joint venture agreement was executed between Swanston Finance Pty. Ltd. (``the Heine interests''), Killinbin Pty. Ltd. (``the Lo Giudice interests''), the applicant (``the Baccini interests'') and Lynty Pty. Ltd. (``the trustee''). The object of that agreement was said to be to ``acquire the land and complete the improvements in relation thereto as set out in the project description annexed...and to lease the land and hold it by way of a long term investment''. The Heine interests, the Lo Giudice interests and the Baccini interests were described in the agreement as ``joint venturers''.
  • (4) By para. 3 of the joint venture agreement the trustee acknowledged to the joint venturers -
  • ``that upon taking title to the land pursuant to the contract of sale annexed hereto as the Fourth Schedule it will hold the same on trust for the venturers in accordance with the joint venturers entitlements.''
  • (5) By para. 4(c) of the joint venture agreement each of the joint venturers convenanted with the trustee and with each other that it would not require a transfer to it as owner of any part of the land.
  • (6) By para. 6(a) of the joint venture agreement the joint venturers agreed that they would be entitled to share in the property of the joint venture and to enjoy the rents and profits therefrom in the following proportions:
    • (a) the Heine interests, as to 50%;
    • (b) the Lo Giudice interests, as to 25%;
    • (c) the Baccini interests, as to 25%.
  • (7) Paragraph 15 of the joint venture agreement amongst other things prohibited the disposal of each of the joint venturer's interests in the joint venture except with the written consent of the other joint venturers.
  • (8) By contract of sale dated 1 August 1988 Lynty Pty. Ltd. agreed to sell to the applicant that part of the land comprising units 2 and 3 on a plan of Strata Subdivision prepared by K.J. Goodison & Associates, Licensed Surveyors. The consideration for the sale was $1,835,000.
  • (9) On or about 30 August 1988 a transfer of the units was executed by Lynty Pty. Ltd. as transferor, and the applicant as transferee. The expressed consideration was the $1,835,000 referred to in the contract.
  • (10) On or about 30 August 1988 the transfer was lodged for the opinion of the Comptroller of Stamps.

4. Some questions of fact remained in dispute. They were:

  • (1) Whether the applicant contributed the purchase money for the land the subject of the transfer.
  • (2) Whether the applicant was beneficially entitled to any extent to the land the subject of the transfer.
  • (3) Whether Lynty Pty. Ltd. at all relevant times held as trustee for the applicant a 25% interest in the land subject of the transfer.

5. In an attempt to answer those questions four witnesses were called on behalf of the applicant. Two of them gave evidence in the form of statutory declarations, which were tendered, and in the form of supplemental viva voce evidence. The other two witnesses gave viva voce evidence only. All four witnesses were cross-examined by counsel for the respondent.

6. The first witness was Adam Abraham Ryan, a director of Swanston Finance Pty. Ltd. The substance of his evidence was that the joint venture for the acquisition and development of Hosies Hotel was established early in 1985; at that time instructions were given to the joint venturers' solicitors, Messrs Schetzer Brott & Appel, to obtain a shelf company (Lynty Pty. Ltd.) to act as trustee for the venture, and to prepare the necessary joint venture and trust

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documents; before the documents were prepared or the hotel was acquired one of the joint venturers withdrew; as a consequence of that withdrawal the joint venturers and their shares in the joint venture became those referred to in the joint venture agreement ultimately drawn and executed; on 12 September 1985 the nominees of each of the joint venturers became directors of Lynty Pty. Ltd.; on 8 November 1985 Lynty Pty. Ltd. entered into the contract of sale of real estate to purchase Hosies Hotel from Carlton and United Breweries Ltd.; and, in order to pay for the hotel, funds were contributed as follows: 
      Extra Nominees Pty. Ltd.       $124,000
      Killinbin Pty. Ltd.            $124,000
      United Builders Pty. Ltd.      $248,000
      Mortgage loan from Heine
      Mortgage Finance Pty. Ltd.   $2,000,000

7. In his statutory declaration dated 9 August 1990 Mr Ryan also deposed that:

``Although it had been agreed and understood by all the joint venturers and directors of Lynty that Lynty would and did purchase the property as trustee for Lynty Joint Venture, the trust documents which were prepared prior to the purchase of the property, by way of oversight on behalf of our solicitor Mr S.M. Brott of Messrs Schetzer Brott and Appeal solicitors were not signed until the 1st June 1986 when the oversight was discovered.''

8. Mr Ryan impressed me as a witness of truth with an accurate recollection of most matters to which he deposed, except the time at which the documents were drawn. In the course of his cross-examination he candidly conceded that he really could not say how long before the date of execution the documents had been prepared.

9. The second witness, Samuel Michael Brott, was a member of Messrs Schetzer Brott and Appel and apparently the solicitor responsible for the preparation of the documents relating to the establishment of the joint venture and the acquisition of Hosies Hotel. Mr Brott's evidence was generally corroborative of what Mr Ryan had said but, like Mr Ryan, Mr Brott conceded in cross-examination that he could not recall when the joint venture documents were prepared. Somewhat surprisingly he was unable to produce any file note or other document which might have assisted in identifying the date on which the joint venture documents were drawn.

10. The third witness, Michael Salo Priester, was the external accountant for the joint venture and produced the financial statements for the joint venture for the year of income ended 30 June 1986. Those accounts served to confirm the evidence already given by Mr Ryan and Mr Brott that the applicant contributed $124,000 towards the purchase price of the hotel.

11. The fourth witness, Nikolai Ivanov, was the group administrator of the group of companies of which Lynty Pty. Ltd. is a member. He produced a cash book for Lynty Pty. Ltd. which showed that the applicant had contributed the sum of $124,000, by way of a payment of $106,000 on 31 October 1985 and by payment of the balance on 27 November 1985, before completion of the contract of sale with Carlton and United Breweries Ltd.

12. The evidence given by those witnesses satisfies me that the joint venture was constituted, at least orally, before the date of purchase of the hotel and that the hotel was purchased with the moneys contributed by the joint venturers as set out above. But I am not satisfied that the joint venture documentation was drawn much if at all before 1 June 1986, the date on which it was executed. If it had been executed before that date I think it is probable that Mr Brott would have had some documentary evidence of the date of execution, and the failure to produce that sort of evidence or to provide any reasonable explanation for its absence confirms the impression which I derived in the course of cross-examination that the document was probably drawn and executed almost contemporaneously.

13. Mr Rosenbaum of counsel who appeared for the applicant submitted that even if I were not satisfied that the joint venture agreement came into existence until after the hotel was purchased I should hold, on the basis of the other evidence given as to the intention of the parties to constitute the joint venture and the contributions to the purchase price made by the joint venturers, that a trust was constituted orally in accordance with the terms of the joint venture agreement, at the latest at the point at which Lynty Pty. Ltd. entered into the contract of sale with Carlton and United Breweries Ltd.

ATC 2025

14. I accept that submission. Even though sec. 53(1)(b) of the Property Law Act 1958 requires that a declaration of trust respecting land must be evidenced in writing it is sufficient for the purpose of the section that the writing come into existence after the creation of the trust:
The Perpetual Executors & Trustees Association of Australia Ltd. v. Wright (1917) 23 C.L.R. 185 at pp. 194, 198; Ford & Lee: Principles of the Law of Trust, 2nd ed. at para. 610.

15. Exemption (10) to the Third Schedule of the Stamps Act 1958 exempts from stamp duty:

``Any instrument for the conveyance of real property that is subject to a trust to a beneficiary of the trust, if the beneficiary was a beneficiary when the real property was first vested in a trustee of the trust and the trust was not created by a declaration of trust by the person in whom the real property was vested immediately before it vested in the trustee and the conveyance is -

  • (a) to the beneficiary absolutely; or
  • (b) to that beneficiary, as trustee of another trust of which all of the beneficiaries are natural persons who are beneficiaries of that other trust when the real property was first vested in a trustee of the first-mentioned trust -

if, when the property was first conveyed to a trustee of the first mentioned trust, the conveyance was duly stamped under this Act or was not liable to duty.''

16. Apart from one decision of the Victorian Taxation Board of Review to which I was referred in the course of argument there appears to be no authority on the meaning of the exemption. However that is perhaps not surprising because as counsel for the Comptroller pointed out exemption (10) only came into the Act in 1982 at the time of the change from the old system of charging duty on conveyances on sale to the current system of charging duty on conveyances. Before that change (which was effected by Act No. 9662) it was not necessary to make special provision for conveyances pursuant to trusts because they were not conveyances on sale and thus not caught by the charging provisions.

17. In the decision to which I was referred (Case No. S/2/84 (6 September 1985)) the Victorian Taxation Board of Review observed of para. (a) of exemption (10) that:

``... the relevant points for its application... may be stated as follows -

  • The transfer must be one -
    • (a) of real property subject to a trust;
    • (b) to a beneficiary of the trust if he was such when the real property was first vested in the trustee;
    • (c) to the beneficiary absolutely;
    • (d) if when the real property was first conveyed to the trustee the conveyance was duly stamped or was not liable to duty...''

18. Applying those observations to the facts of this case it may be accepted I think that the transfer executed by Lynty Pty. Ltd. in favour of the applicant was a transfer of real property, namely, units 2 and 3 on the plan of subdivision prepared by K.J. Goodison & Associates, and that the real property was subject to the trust which was later evidenced by the terms of the joint venture agreement. I think it may also be accepted that the applicant was a beneficiary of the trust when the units were vested in Lynty Pty. Ltd., whether that be the time at which Lynty Pty. Ltd. acquired the hotel or at the time at which the plan of subdivision was registered by the Registrar of Titles. That trust was created by agreement, not by declaration and, whilst there was no evidence on the point, the hearing of the reference proceeded on the basis that when Hosies Hotel was first conveyed to Lynty Pty. Ltd. the conveyance was duly stamped. On one view therefore exemption (10) might be said to apply to the facts of this case.

19. It seems to me, however, that before one can say with any certainty that exemption (10) applies to the facts of this case it is necessary to determine the results which its application would produce. On that matter Mr Rosenbaum made two submissions. The first was that the result of its application would be to subtract from the value of the land transferred to the applicant a portion representing the applicant's beneficial interest in that land. The second was that the result of the exemption's application would be wholly to exempt the transfer from duty.

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20. I reject the first of those submissions as untenable. There is no mechanism within exemption (10) for the kind of apportionment suggested (cf. sec. 72 of the Act) and to read into the exemption the words necessary to create such a mechanism would in my view go beyond the permitted ambit of purposive construction: cf.
BP Refinery (Westernport) Pty. Ltd. v. Shire of Hastings (1977) 16 A.L.R. 363 at p. 374;
Traders' Finance Corp. Ltd. (1971) 126 C.L.R. 429 at pp. 439-440;
Murphy v. Farmer (1988) 165 C.L.R. 19 at p. 29.

21. The second submission is of a different order because on one possible reading of the exemption it would produce the result suggested. But if exemption (10) does apply in that way it means that regardless of the size of the beneficial interest of a beneficiary in the land which is transferred by a trustee to the beneficiary the transfer will always be wholly exempt from duty. Thus in a case where a beneficiary has but a minuscule interest in a trust upon which land is held, say 1%, and the trustee conveys the land to the beneficiary in consideration of the beneficiary's entitlement and of the beneficiary paying to the trustee, say, 99% of the value of the land, the transfer is exempt from duty. I regard that as an extraordinary result.

22. Whilst it is readily understandable that Parliament might wish to exempt from stamp duty the conveyance of land by a trustee to the person beneficially entitled to the land - that purpose is evident in a number of provisions of the Act (see, for example, sec. 72 and exemptions (18), (19) and (20) to Heading VI) - there is no evident reason to think that Parliament would have wished wholly to exempt from duty a conveyance of land to a transferee who has but a small, even insignificant, beneficial interest in the land the subject of conveyance. The existence of provisions like sec. 72 very much suggests the contrary.

23. In those circumstances, even if a possible construction of exemption (10) is that it applies to the facts of this case, and cases like it, so as wholly to exempt the subject transfer from duty, I think that I should reject that construction if there is another construction of exemption (10) which presents as the more likely intended: cf.
Swinburne v. F.C. of T. (1920) 27 C.L.R. 377 at p. 382.

24. The construction for which Miss Lewitan of counsel contended on behalf of the Comptroller is that for the purposes of exemption (10) a conveyance is not in substance and effect a ``conveyance of real property that is subject to a trust to a beneficiary of the trust'' unless the beneficiary is beneficially entitled to all of that which is conveyed. Unless the beneficiary is beneficially entitled to that which is conveyed the conveyance is, she submitted, a conveyance on sale or some other sort of conveyance not within the meaning of exemption (10).

25. One could be more sanguine about the validity of that proposition if the exemption referred to a conveyance to the beneficiary of the trust rather than to a beneficiary of the trust, and if the requirement, in the exemption, were that the beneficiary be the beneficiary when the real property first vests in the trustee rather than simply a beneficiary at that time. The use of the indefinite article is calculated to cause uncertainty. But in the end it is because of that uncertainty that I think I should accept the Comptroller's submission. No doubt statutes are in the first place to be construed literally, and if construed literally and in isolation the words of exemption (10) up to the end of para. (a) might lead one to conclude that the exemption operates as a complete exemption on the facts of this reference. But literalism is merely the starting point, even at common law:
Tickle Industries Pty. Ltd. v. Hann & Anor (1973-1974) 130 C.L.R. 321 at p. 330;
Cooper Brookes (Wollongong) Pty. Ltd. v. F.C. of T. 81 ATC 4292 at pp. 4296, 4299-4300, 4305-4307; (1980-1981) 147 C.L.R. 297 at pp. 305, 310-311, 320-322, and more certainly in light of sec. 35 of the Interpretation of Legislation Act 1984: cf.
F.C. of T. v. Walsh & Anor 83 ATC 4415 at p. 4421; (1983) 69 F.L.R. 240 at pp. 246-247. Thus whilst the words of a statute are in the first place to be construed literally they are ultimately to be construed in their context and having regard to their purpose as discerned from the Act as a whole. That is especially so when what is in issue is the meaning of a stamp duty exemption and the words of the exemption are in themselves of uncertain meaning:
Escoigne Properties Ltd. v. IRC (1958) A.C. 549 at p. 565;
K.L.D.E. Pty. Ltd. (in liq.) v. Commr of Stamp Duties (Qld) 84 ATC 4793 at p. 4796; (1984) 155 C.L.R. 288 at p. 294.

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26. When the words of exemption (10) up to the end of para. (a) are construed in context (particularly in the context of para. (b)) it appears to me that what was intended was the exemption from duty of conveyances which effect no change in beneficial entitlements but rather are made to confirm or to give effect to beneficial entitlements. The words up to the end of para. (a) do not say so in terms but the words of para. (b) are redolent of such an intention and I cannot see why the legislature would have had a different intention when it came to enact para. (a) than when it came to enact para. (b). Both para. (a) and (b) came into the Act at the same time and presumably for a similar reason. The only logical reason which occurs to me and which is consistent with the other exemptions to Heading VI is that Parliament intended that a transferee should not pay duty on a transfer to him of that to which he was already entitled.

27. Of course there is a considerable step between discerning the evident purpose of para. (b) and concluding that the words up to the end of para. (a) are to be construed in effect as if the words ``a beneficiary'' where twice appearing were ``the beneficiary'' in each place. To take that step is to take the risk of reading into an Act of Parliament words which are not there or, worse, saying that the draftsman has erred, when there is no literal necessity to read in words and no manifest indication of error. But because to do otherwise would produce a capricious and irrational result I consider that I am bound by the principles of statutory construction enunciated by the High Court in Cooper Brookes (Wollongong) Pty. Ltd. v. F.C. of T. (supra) and particularly in the joint judgment of Mason and Wilson JJ. at ATC pp. 4305-4306; C.L.R. pp. 320-321, to take that step and thus to read the provision in the way for which the Comptroller contends. In my opinion para. (a), exemption (10) should be construed as operating only upon conveyances which convey from a trustee to a beneficiary of the trust property to all of which the beneficiary is beneficially entitled in accordance with the terms of the trust.

29. The applicant was not beneficially entitled in accordance with the terms of the joint venture agreement to all of the units the subject of the instrument of transfer. It was entitled at most to a 25% interest in them and, when one has regard to cl. 4(c), 15 and 16 of the joint venture agreement, probably not even to that. I consider that it follows that exemption (10) does not apply to the transfer the subject of this reference.

30. Exemption (17) to the Third Schedule exempts from duty:

``Any instrument for the conveyance of real property from a nominee or trustee to the person beneficially entitled thereto where such person has contributed the purchase money therefor and the duly stamped conveyance has been executed in respect thereof to such nominee or trustee.''

31. Exemption (17) is easier to construe than exemption (10). Its terms make clear that before it applies the transferee of the land must be beneficially entitled to the land the subject of the transfer and that the transferee must have contributed the purchase money for that land. The applicant was not beneficially entitled to the units which Lynty Pty. Ltd. transferred to it. As I have already observed it was entitled at most to a 25% interest in the units and probably not even to that. Nor did the applicant contribute the purchase money for the units. It contributed $124,000 towards the purchase of Hosies Hotel. In my opinion those facts are sufficient reason to conclude that exemption (17) does not apply to facts of this case.

32. It was, however, urged upon me by Mr Rosenbaum that exemption (17) called for an apportionment exercise of the kind he suggested might apply under exemption (10) and that, in any event, because the transfer the subject of the reference purported to transfer that which was already as to 25% beneficially vested in the applicant the transfer was to that extent a nullity and therefore not dutiable.

33. I reject the first of those submissions for the same reason that I have given for rejecting its application to exemption (10). In my opinion exemption (17) no more permits of an apportionment exercise, like that described in sec. 72, than does exemption (10).

34. I reject the second submission also. The transfer was not a nullity even if the units were to some extent already beneficially vested in the applicant. It was a transfer of real property and duty is charged upon such a transfer in accordance with Heading VI, whether or not the transferee has some beneficial entitlement to the land the subject of the transfer, unless there

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is an applicable exemption: cf.
Oughtred v. IRC (1960) A.C. 206 at p. 233.

35. Mr Rosenbaum submitted that the nullity argument was supported by the recent unreported judgment of Teague J. in
BTR Nylex Ltd. v. Comptroller of Stamps, No. VTA 6 of 1988, 16 February 1990. That was a case in which his Honour held that a transfer of shares had no legal effect (and therefore was not subject to duty) because the execution of the transfer was the consequence of a mutual mistake, the true intention of the parties being at all times to redeem the shares the subject of the transfer and not to transfer them. With respect I think it is sufficient to say about that decision that even if it has any application to a conveyance of real property it does not apply on the facts of this reference. There was no mistake in this case because Lynty Pty. Ltd. intended to transfer the units to the applicant and the applicant intended to take a transfer of them.

36. For those reasons I consider that the assessment should be affirmed with costs.

37. The Orders of the Tribunal will be that:

  • (1) The assessment under reference is affirmed.
  • (2) The applicant shall pay the respondent's costs of the reference fixed in the sum of $2,000.


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