TRIANTIFILIS v COMMISSIONER OF STAMP DUTIES (NSW)

Judges:
Hodgson J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 5 October 1995

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Hodgson J

By an Amended Summons in these proceedings, the plaintiff is seeking essentially a declaration that a certain transfer falls within the terms of s. 73(1)(e) of the Stamp Duties Act. The defendant Commissioner of Stamp Duties for New South Wales has taken the preliminary objection that the Court cannot, or should not as a matter of discretion, deal with the matter in the way presented by the Amended Summons, because the Stamp Duties Act lays down a procedure whereby there should first be an assessment by the Commissioner, and then, if there is dissatisfaction with that assessment, an appeal process under s. 124 should be followed.

Mr. Sorensen for the defendant has referred me to the cases of
Bastone Investments Pty Ltd v Commr of Stamp Duties (NSW) 78 ATC 4439; (1977) 2 NSWLR 709, and
Commonwealth Funds Management Ltd & Anor v Commr of Stamp Duties (NSW) 93 ATC 4871.

In the former case, to avoid the possibility of the matter going off without the merits or substance being determined, at the suggestion of Shephard, J. the parties did adopt the procedure provided by s. 124 of the Stamp Duties Act. However, there was no decision made that the Court could not deal with the matter in another way.

In the latter case, Levine, J. referred to a number of cases suggesting that s. 124 provided the only means for review of an assessment by the Commissioner; but he distinguished those cases on the basis that the matter he was dealing with concerned whether a requisition of the Commissioner was properly available to the Commissioner.

In the present case, there has not yet been an assessment, but the Commissioner has expressed a firm view that the concession provided by s. 73(1)(e) of the Act did not apply. Since there has not been an assessment, in my view s. 124 does not operate to deprive the Court of the power of dealing with this matter by way of declaration, so that the matter has to be considered on the basis of discretion.

In my opinion, it is a factor in favour of the Commissioner's view that the Act does lay down a procedure which one would expect would usually be followed. However, it is not put for the Commissioner in this case that, if that procedure were to be followed, on the basis of the information presently supplied by the plaintiff, the question which would arise for decision by the Court would be any different from the question which is now being presented for decision.

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ATC 4657

For that reason, it seems that no submission is being made by the Commissioner that the following of the procedure in this case would do any more than involve additional delay and expense. Furthermore, it has been put by Mr. Neil QC for the plaintiff that other aspects of delay and expense would be involved if the Court insisted on the s. 124 procedure being followed.

Firstly, it would be necessary to go to the expense and delay involved in having a valuation of the property, which would be unnecessary if s. 73(1)(e) applies. Secondly, the plaintiff (who is the transferor) now resides in Greece and has a business in Greece. He is visiting Sydney for the purpose, it seems, of finalising the transaction involved in the transfer; and if the matter cannot be dealt with on the present summons, he would either have to delay his return to Greece, or possibly return to Greece and then return to Australia at some later stage when an appeal under s. 124 was conducted.

In those circumstances, it does seem to me appropriate, as a matter of discretion, to deal with the matter in the way it has been brought by the plaintiff, even though that would not be the usual course.

[Affidavits read and exhibits tendered]

I note that John Emmanual Rose, solicitor, undertakes to the Court that he will present the subject transfer to the Commissioner of Stamp Duties and pay the duty assessed upon it, such undertaking not to affect any rights that may arise under ss. 15 and 15B of the Act.

[Oral evidence taken]

[Addresses]

His Honour: As recounted in my earlier judgment in this case, the plaintiff seeks a declaration to the effect that a transfer of a property in Rozelle has the benefit of s. 73(1)(e) of the Stamp Duties Act, which is in the following terms:

``73(1) The following instruments are not to be charged with ad valorem duty as conveyances, namely:

• ...
• (e) A conveyance whereby the apparent purchaser of property that is vested in him upon trust for the person who was the real purchaser and who has actually paid the purchase money therefor, conveys the same to the real purchaser.''

I will briefly outline the circumstances that give rise to the problem.

On about 10th October 1978, a property in Darling Street, Rozelle owned by the plaintiff and his late wife was sold for $70,000.00. From those proceeds, a sum of $60,000.00 was paid into an account which, according to the plaintiff's evidence, was in the names of the plaintiff and his late wife and their two sons. No records of that account are now available. The plaintiff's wife died on 12th March 1979. In January 1980, the plaintiff entered into a contract to purchase the subject property in Darling Street, Rozelle. The price applicable to that property, as distinct from the goodwill and effects of the business conducted on the property, was $73,000.00. According to the plaintiff's evidence, $63,000.00 of that purchase price was provided from the account into which the proceeds of the previous property had been paid, and the balance of around $10,000.00 was provided from a loan which the plaintiff obtained from the Commonwealth Bank. The loan was in fact in an amount of $30,000.00; and according to the plaintiff, the balance was applied for the purposes of the business which he subsequently carried on on this property.

The plaintiff claims that this property was purchased by him as trustee for his two sons, and he now wishes to transfer the property to his two sons. In terms of s. 73(1)(e) of the Stamp Duties Act, the plaintiff claims that he was the apparent purchaser of this property, his sons were the real purchasers, and his sons actually paid the purchase money for the property. Further support to these propositions is given by evidence of conversations which took place between the plaintiff, his late wife and his two sons around the time of the transactions in 1979 and 1980.

It appears that the plaintiff's wife was diagnosed as having terminal cancer in about June 1978, at which time it was expected that she may only have about six to twelve months to live. At around that time, according to the plaintiff's affidavit, his wife said to him words to the effect: ``Instead of me worrying about how my half of our property can be dealt with to provide for our two sons, can we agree to sell 606 Darling Street, Rozelle and let the boys receive all the nett proceeds of that sale'', to which, according to the plaintiff, he replied: ``Of course''.

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ATC 4658

According to the plaintiff, when the net proceeds were placed into an account in the four names, he always intended that the proceeds and the account be held in trust for the two sons. The plaintiff also says that when he purchased the Darling Street property, he purchased it on behalf of his two sons with their consents. He borrowed a further $30,000.00 to fund a new business at the premises, but always regarded the property as belonging to his two sons. I interpolate here that the sons, namely John and Nicholas, were respectively born on 1st June 1962 and 10th July 1967.

The plaintiff also relies on an affidavit by the son, John, in which he gives evidence of a number of conversations.

According to this affidavit, in about July or August of 1978, his late mother said to him words to the effect: ``Your father and I have agreed to sell the property and the business at 606 Darling Street, Rozelle, and the money we obtain from this sale is for the benefit of you and your brother and will be my legacy to the both of you''. John also says that, shortly after the sale, he was shown the records of a bank account into which $60,000.00 had been deposited from the sale, the account being in the four names of his father, his late mother, himself and his brother. He says that at the time he was shown the account, his father said words to the effect: ``Your mother and I have put this account in four names so that if your mother dies or something should happen to both of us, you will know that this money is for you and your brother''.

Just before his mother died, according to this deponent, she said to him words to the effect: ``I know I haven't got long to live. Your father and I have put $60,000.00 in the bank for you and your brother Nick. Your father has promised me to use this money for the benefit of you and your brother. Please John look after yourself and your younger brother Nick''. According to the deponent, he replied: ``I promise to do so''.

At the time of purchase of the subject property, according to this deponent, his father said to him and his brother words to the following effect: ``If you both agree, I intend to purchase this property using the money that your late mother left for you. I intend to hold this money in trust for you both and I will transfer it to you when you and your brother grow up''. According to the deponent, he and his brother agreed to this.

Mr. Neil QC for the plaintiff submitted that, on this evidence, a trust was established having the effect that the whole of the money applied in the purchase of the subject property was itself the property of the sons, so that the sons were, in terms of s. 73(1)(e), the real purchasers who actually paid the purchase price.

Mr. Sorensen for the defendant submitted that, in factual terms, a trust of the $63,000.00 had not been established. He pointed to the loan application in relation to the $30,000.00 loan which showed $63,000.00 as property of the plaintiff. He pointed to evidence given orally by the plaintiff that interest received on this account was included in his tax return. He pointed to the absence of contemporary documents which may have thrown light on the issues, such as the documents concerning the probate application for the plaintiff's wife and contemporary income tax documents, none of which had been produced and in respect of which no explanation was given.

Next, Mr. Sorensen submitted that, even if the $63,000.00 was to be regarded as having been provided by the sons, the balance of $10,000.00 was provided by a loan made to the father (that is, the plaintiff); and that $10,000.00 could not, in any way, be considered as having been ``actually paid'' within the meaning of s. 73(1)(e) by the sons. In support of the proposition that the section did not apply if part of the purchase price was not actually paid by the person said to be the real purchaser, Mr. Sorensen referred me to
Crowther v Commr of Stamp Duties (NSW) 78 ATC 4127; (1978) 8 ATR 433. In that case, it was argued that the real purchaser of a property was a company. It was shown that the company was not incorporated until after the deposit had been paid. Shephard, J. held that, irrespective of whether the balance of the purchase money had or had not been paid by the company, the matter did not fall within par. 1 of Schedule 2, which is in somewhat similar terms to s. 73(1)(e), because the deposit could not conceivably have been actually paid by the company.

In reply, Mr. Neil submitted that s. 73(1)(e) was intended to deal with practical circumstances, and should be given an interpretation which has regard to the realities of the situation. He submitted that it would be unrealistic to hold that an amount could be

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ATC 4659

``actually paid'' by a person only if it came directly from that person's account, or else could be shown to have had its source in a bank account of that person. He submitted that the $10,000.00 which was borrowed as part of the $30,000.00 was, in substance and reality, merely a supplement to the trust that already existed, so that, in substance and reality, the whole of the purchase money was actually paid by the sons. It was sufficient that it was paid on behalf of them from money which was theirs. Mr. Neil referred me to the House of Lords decision in
Inland Revenue Commissioners v Mills (1975) AC 38.

In my opinion, when proceedings of this nature are brought against a party who is in no position to know or contest the basic facts, by a person with a particular interest that the facts be found in a particular way, the plaintiff should be diligent in producing all contemporary records which may bear on the facts. I think there is force in the criticism that the plaintiff has not been diligent in producing contemporary records which could bear on the matter, such as contemporary tax returns, and papers relating to the estate of the plaintiff's deceased wife. However, I do not think this consideration is sufficient in this particular case for me to disbelieve the evidence given on behalf of the plaintiff, and I will proceed on the assumption that it should be accepted in its entirety.

The first question that needs to be considered is whether that evidence shows a trust in favour of the sons of the whole of the proceeds of the sale of the first property. It would seem that such a trust would need to be completely constituted, or else supported by consideration. No consideration moved from the sons; but it is arguable that consideration was given by the plaintiff's wife on behalf of the sons, and it may be that that would be sufficient to amount to consideration on which the sons could rely.

If the sons were to rely on complete constitution of such a trust, it would not be necessary for there to be any writing, but there would need to have been a declaration of trust intended to be final and binding upon the plaintiff, made either expressly or at least inferred from conduct: see Jacobs, Law of Trusts in Australia, 5th. Ed., par. 623. Looking at the actual words used by the father at the time, it is by no means clear to me that any of them amounted to a clear declaration of trust.

Accepting the evidence that has been given, it would seem clear that the sons acquired at least a one half interest in the proceeds of sale, because they were two of the four people entitled to the account; and it may well be that upon the death of the mother, they became entitled between them to a two-thirds share of this account by survivorship. I will proceed, however, on the assumption that, regarding consideration as having been provided on their behalf by their late mother, I can take it that in equity they were entitled to the whole of this account.

The next matter that has to be considered is whether the remaining $10,000.00, or thereabouts, of the purchase price should be considered as having been actually paid by the sons. There is no evidence of any declaration of trust by the plaintiff in relation to this money, at least prior to its application as part of the purchase price for the property. Even if it is correct to regard the previous trust as being supported by consideration provided by the sons' mother on behalf of them, that cannot be consideration supporting a trust of this $10,000.00.

As noted in footnote 77 to par. 623 of the 5th edition of Jacobs, Law of Trusts in Australia, property may become subject to a trust by being treated by the trustee as an addition to a fund of which he is already trustee; and that proposal is supported by the cases of
JW Broomehead (Vic) Pty Ltd (in liq) v JW Broomehead Pty Ltd & Ors (1985) 3 ACLC 355;
Atwill v Commr of Stamp Duties (1970) 92 WN 869; and
Truesdale v FC of T 70 ATC 4056; (1970) 120 CLR 353.

It may be, therefore, that if I could find that prior to the payment of the purchase price of the property, the $10,000.00 was paid into an account together with the other $63,000.00, and the whole of that account was then applied in the purchase of the property, that could be sufficient to justify a finding that the trust applicable to the original $63,000.00 came to affect the further $10,000.00, so that the whole $73,000.00 can be considered as property of the sons prior to its application in the purchase. However, the evidence does not suggest that that happened. Although the evidence does not disclose exactly what happened, one might surmise that the whole of the $30,000.00 loan would have been paid into an account (perhaps an account into which the $63,000.00 went as

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ATC 4660

well), and from the total, $73,000.00 was applied to purchase the property, and the remaining $20,000.00 applied for the plaintiff's own purposes. If that was what happened, then it would seem that there was no declaration of trust in relation to the $10,000.00, and no conduct which indicated an implied declaration of trust intended to be final and binding upon the plaintiff, until the $10,000.00 was actually paid as part of the purchase price of the property. In that case, the trust could not have come to affect the $10,000.00 prior to its application; but at most, could have come to affect the whole of the property when it was purchased.

In those circumstances, I do not believe the evidence can justify a finding that the $10,000.00 was, in any sense, property of the sons which was actually paid by them as part of the purchase price. It seems to me further that s. 73(1)(e) only applies if the whole of the purchase price is paid by the person alleged to be the real purchaser. It may be that payment of small amounts by some other party could be disregarded as immaterial, but I do not think the payment of $10,000.00 out of a total of $73,000.00 could be disregarded. I think the decision in Crowther v Commr of Stamp Duties (NSW) supports that view.

Mr. Neil requested that if I were not minded to make the full declaration sought by the plaintiff, I should make some more limited declaration, which might support a request by the plaintiff to moderate or reduce the duty under a provision of the Act, such as s. 35C. I do not think it appropriate to do that. It seems to me that if I am unable to make the declaration sought by the plaintiff, it really is necessary to leave the matter to be dealt with by an assessment by the Commissioner, and for such assessment to be challenged, if it is to be challenged, under the provisions of s. 124.

The defendant has put on a cross-claim seeking a declaration that the executed transfer is a conveyance chargeable with ad valorem duty. On the whole, I am not inclined to make that declaration. The matter has been contested essentially on the application of s. 73(1)(e), and I think it appropriate for me to confine myself merely to refusing the declarations sought by the plaintiff.

I dismiss the summons.

I decline to make the declaration sought in the cross-claim.

I order that the plaintiff pay the defendant's costs of the proceedings.

I reserve leave to the plaintiff or the plaintiff's solicitor to relist the matter, at a time arranged with my Associate, on 2 days' notice to the defendant, if he wishes to be released from his undertaking, or have it varied.