GROWING WEALTH PTY LTD & ORS v COMMR of STAMP DUTIES (QLD)

Judges:
Pincus JA
Davies JA
Chesterman J

Court:
Queensland Court of Appeal

MEDIA NEUTRAL CITATION: [2000] QCA 418

Judgment date: 10 October 2000

Pincus, Davies JJA and Chesterman J

This is an appeal by way of Case Stated against an assessment of $37,725 stamp duty upon a transfer in Form 1 under the Land Title Act 1994 of lots in a community titles scheme under the Body Corporate and Community Management Act 1997. The transfer which is dated 11 December 1998 is stated to be ``Pursuant to written authority dated 9.9.97'' but was assessed upon a consideration of $1,080,000. The transferor is stated to be Strata Representatives Australia Pty Ltd (``Strata'') and the transferees the appellants as tenants in common in the interests of one quarter, one half and one quarter respectively. The lots transferred were lots 74 to 81, 114 to 117 and 134 to 137 on SP 110136.

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2. It is common ground that the written authority referred to in the transfer is contained in a form entitled ``Application Form, Appointment and Power of Attorney'' executed on 9 September 1997 by the appellants in which they-

1. appointed Strata their agent for the purposes of:
- (i) acquiring the property (described elsewhere as lots 2 and 3 on registered plan 802814) which is to comprise the lots including all body corporate rights and entitlements attaching to those lots;
- (ii) subdividing the property so that a separate title to each of the lots would be issued from the Department of Natural Resources at Brisbane;
- (iii) constructing on each of the lots a separate residential unit including entering into all necessary contracts with builders and others;
- (iv) borrowing either alone or jointly with others finance (required over and above the capital contributed by them) for the purposes stated in points (i) to (iii) and mortgaging the land comprising the lots either alone or jointly with other land as security for the said finance;
- (v) transferring to them the titles to the lots as and when such transfer might conveniently and lawfully be carried out, and
- (vi) carrying out and performing all matters and things incidental and/or convenient to the above points (i) to (v).
2. Applied to CTM Collective Investments Limited (``CTM'')^[1] CTM was the promoter of the project and the manager under an Investors Protection Deed until settlement of all apartments: Investors Protection Deed cl 14.1. ``to become an investor in the strata development syndicate'' described in a prospectus to which the application form was attached; and applied for allotment numbers 38, 21, 22 and 39 identified in that prospectus for a total price of $1,080,000.

3. By their execution of this form the appellants acknowledged that they wished ``to acquire a separate title to each of the lots specified in paragraph (b) below... to be subdivided from the property described below and... to have constructed on each of the lots a separate residential unit in accordance with the plans already prepared and approved... by the Caboolture Shire Council''. They paid the sum of $270,000 upon application.

4. The property described as lots 2 and 3 was acquired by Strata by contract dated 16 September 1997 and the transfer pursuant to it was registered on 18 September 1997. The application contained in the form was accepted by CTM and the balance of $810,000 was paid on 11 December 1998 in exchange for the transfer the subject of the assessment under appeal, the plan of subdivision of the lots having been registered on 4 December 1998. There were, in all, 182 lots and common property.

5. What was meant by becoming an investor in the strata development syndicate is made clear by an Investor Protection Deed dated 26 May 1997 to which CTM, Strata, another company Compton's Villages Australia Pty Ltd (``CVA'')^[2] CVA undertook, pursuant to a management and construction agreement, to construct the buildings on the land and subdivide it by a building units plan. It also became the manager under the Investors Protection Deed upon settlement of all of the apartments: Investors Protection Deed cl 14.1. and two individuals William Gerard Malone and Mark Geoffrey Poulsen were parties and a prospectus dated 16 June 1997 issued by CTM as promoter of the project. The former provided that Strata agreed that it held the ``Project Fund'', defined to include the land acquired by it ``as nominee of the investors... who held their beneficial interests as tenants in common on the terms and conditions of the Deed''.^[3] Case Stated par 7(a)(i), (b). Those terms and conditions included one that the Investors were entitled to the beneficial ownership of the Project Fund and might call for the assets in the Project Fund to be transferred to them; but that Strata had all of the powers over the assets in the Project Fund which Strata would have had if Strata were the owner of those assets.^[4] Par 7(i) of the Case Stated. The Custodian, Strata, was, in turn, required to allow CVA to pledge the land and any improvements thereon as security for construction finance: Case Stated par 7(s), and to permit CVA to derive any income from the use and occupation of the apartments until settlement: Case Stated par 7(v). The beneficial interests of the investors in the Project Fund were in proportion to, in effect, the amounts agreed to be subscribed.^[5] Case Stated par 7(m).

6. The prospectus provided that, upon receipt of 25 per cent of the total cost of the investor's apartment (in the appellants' case the sum of $270,000) and on full subscription being obtained, Strata would settle the purchase of the property and enter into a project management agreement with CVA to construct ``Comptons Caboolture''. CVA would then obtain non recourse construction finance and complete the development. Upon completion the balance of 75 per cent was payable by investors in exchange for a transfer of their apartment blocks.

7. The prospectus identified lot numbers in the community titles scheme which would correspond to allotment numbers 38, 21, 22 and 39 and although the lots which were transferred

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did not have those numbers it is common ground that they were the lots which corresponded with those allotment numbers.

8. The transfer the subject of the assessment would, subject to any statutory exceptions, attract stamp duty at the ad valorem rate either on the consideration of $1,080,000 ^[6] Par 4(a) under the heading ``Conveyance or Transfer'' in Schedule 1. or on the value of the lots transferred.^[7] Par 4(b) under the heading ``Conveyance or Transfer'' in Schedule 1. However the appellants contend that they were entitled to the benefit of one or other of s 53(9), s 51D or s 55 of the Stamp Act. It is convenient to consider those contentions in that order.

9. Section 53(9) provides:

``A transfer to which this subsection applies is a transfer where the commissioner is satisfied that the transferor is a person who at the time that he or she purchased the property was acting in the purchase evidenced by a contract or agreement for sale as agent for the transferee (either as a general agent or in relation to the particular transaction) and was so acting under an authority given to him or her by such person in writing executed prior to the execution of the contract or agreement for sale.''

A transfer to which that subsection applies is not liable to duty.^[8] Proviso (iv) to par (4) under the heading ``Conveyance or Transfer'' in Schedule 1.

10. The ordinary meaning of that subsection is that the phrase ``the property'' in it is a reference to the property the subject of the transfer; that is for it to apply here the property the subject of the transfer assessed must be the property purchased by Strata, a purchase which must be evidenced by a contract or agreement for sale.

11. It may be accepted that, when it acquired the property consisting of the raw land, Strata did so by purchase, evidenced by contract of sale, as agent for all appellants as tenants in common in proportion to the amounts for which they agreed to subscribe. But in that event it was only the agent of the appellants to the extent of their proportional interests in the whole of that land. What it later transferred to each appellant by the transfer assessed was not its proportional interest in the whole of the land but property of a different kind created by acts done pursuant to the Body Corporate and Community Management Act, property which was not in existence when Strata acquired the land.

12. The difficulties which this raises for the application of s 53(9) to the transfer in this case are obvious and, in our opinion, insuperable. Even if the subdivision which had created the property transferred by the transfer had been a traditional subdivision of land it would, in our opinion, have been difficult to bring the transfer within the terms of the section. The property purchased as agent for the transferees would not have been that which was transferred to them. What would have been transferred would have been the whole interest in part of the land which the transferor had acquired as agent for the transferee and others in common.

13. However the application of the provision is made even more difficult by the nature of a subdivision under the Body Corporate and Community Management Act. Not only was what was transferred something which was not in existence when Strata acquired the land, it was property consisting of a bundle of statutory rights created by the Act upon registration of a community titles scheme. For these reasons we do not think that s 53(9) can apply to this case.

14. Section 51D provides:

``(1) In assessing the ad valorem duty payable under this Act upon a conveyance or transfer of any land (whether in fee simple or for some lesser estate under the Crown) whereon there are improvements claimed by the transferee to have been effected by the transferee, or at his or her own expense, the commissioner may exclude from the total amount or value to be assessed such an amount or value as seems reasonable to the commissioner in respect of the value as at the date of the execution of the conveyance or transfer of the improvements the subject of the aforesaid claim.

(2) However, in respect of a conveyance or transfer-

(a) the commissioner shall not be bound to make an exclusion as aforesaid; and

(b) if the commissioner makes such an exclusion, the commissioner shall be the sole judge of the amount or value thereof; and

(c) if such an exclusion as made by the commissioner is disputed or protested - the commissioner may revoke the exclusion and thereupon ad valorem duty shall be payable as if the exclusion had never been made.''

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The Commissioner did not make an exclusion under that section.

15. The principal argument for the appellants under this section appears to be that Strata was their agent for the construction of the units and therefore the units were constructed by them by their agent. The first problem facing the appellants under this section is similar to that which exists in their contention with respect to s 53(9). Even if one accepts that the effect of the project as documented is that when Strata caused the building to be constructed it did so as trustee on behalf of all of the investors including the appellants there are still two difficulties in the application of s 51D(1).

16. The first is that the section appears to envisage that the transferee has effected or claims to have effected improvements on the property transferred, not that it has made a proportional contribution to improvements on property part of which is transferred. The second is that, whilst it may be accepted that what is transferred is land under the Land Title Act^[9] Land Title Act 1994, s 27, s 28, Schedule 2, definition of ``lot''. it is nevertheless not land on which improvements have been effected but land consisting of a lot, created by a community titles scheme under the Body Corporate and Community Management Act 1997 over improved land.

17. Section 51D(2)(a) presents further difficulties for the appellants' argument. When read with s 51D(1) it, in terms, confers on the Commissioner an unfettered discretion to refuse to make an exclusion. In a procedure by way of case stated the Court is confined to supervising the exercise of such a discretion so as to ensure that it has been exercised according to law.^[10] Commissioner of Stamp Duties (NSW) v Pearse (1953) 89 CLR 51 at 60-61. No basis in law was shown for interfering with the exercise of the Commissioner's discretion here. The appellants pointed to the stated case where it is said by the Commissioner that ``even though he had... determined that there were improvements on the original land from which the relevant lots were eventually created - that such improvements were not effected by the appellants, as transferees, at their own expense''. It follows from what we have said that we do not think that that statement is wrong.

18. Section 55 relevantly provides:

``...

(1A) Where 2 or more persons (in this subsection the `proprietors' ) hold or have interests in real or personal property and by instrument convey or transfer that property or part thereof by way of partition or division to one or more of those persons (in this subsection the `transferee' ) then for the purpose of assessing the duty payable under this Act upon that instrument the full unencumbered value of the property conveyed or transferred shall be deemed to be equal to an amount that bears to the actual full unencumbered value of the property being transferred or conveyed the same proportion that the total of shares and interests of the proprietors less the share or interest of the transferee in the total property being partitioned or divided bears to that total.

...''

19. There are also a number of difficulties in the appellants' way in seeking to apply this subsection to the facts in this case. It is sufficient to refer only to one which, in our view, is fatal. The property which it is said was transferred by way of division consists of lots in the community titles scheme. However the transferor of those lots was Strata, a single transferor whereas the subsection requires that two or more persons be the transferors. The appellants seek to overcome this difficulty by saying that Strata transferred as trustee for all of the investors. That much may be accepted; but what was transferred was a legal interest held by Strata, a single transferor. There was no question of there being merely a transfer of the equitable interests held by the investors. And because Strata is the transferor it cannot be said that one or more of the transferors is also one or more of the transferees.

20. For those reasons, in our opinion, s 55 has no application to the facts of this case. It follows that the questions in the Stated Case should be answered as follows:

(a) was the Form 1 transfer an instrument whereby property was conveyed, transferred or assigned to or was vested in a person within the meaning of s 49(1)(a) of the Stamp Act?
Yes.
(b) If ``Yes'' to (a), should the appellants be entitled to the benefit of s 53(9) and proviso for (iv) in par (4) of the ``CONVEYANCE OR TRANSFER'' Head of Charge of that Act and, therefore, to ``Nil'' duty?

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No.
(c) If ``No'' to (b) should the appellants be entitled to the benefit of s 51D of that Act?
No.
(d) If ``No'' to (c) should the appellants be entitled to the benefit of s 55 of that Act?
No.
(e) If ``No'' to (d) is the assessment of the Commissioner contained in the assessment notice issued 15 December 1998 in the sum of $37,725 correct?
Yes.
(f) If ``Yes'' to (c) or (d) or both or ``No'' to (e) what duty, if any, is payable or what further order, if any, ought to be made by the court for the purposes of determining such duty, if any?
Unnecessary to answer.
(g) How should the costs of and incidental to the stating of this Case and of the appeal be borne and paid?
By the appellants.

ORDER:

The questions in the Stated Case are answered as follows:

(a) was the Form 1 transfer an instrument whereby property was conveyed, transferred or assigned to or was vested in a person within the meaning of s 49(1)(a) of the Stamp Act?
Yes.
(b) If ``Yes'' to (a), should the appellants be entitled to the benefit of s 53(9) and proviso for (iv) in par (4) of the ``CONVEYANCE OR TRANSFER'' Head of Charge of that Act and, therefore, to ``Nil'' duty?
No.
(c) If ``No'' to (b) should the appellants be entitled to the benefit of s 51D of that Act?
No.
(d) If ``No'' to (c) should the appellants be entitled to the benefit of s 55 of that Act?
No.
(e) If ``No'' to (d) is the assessment of the Commissioner contained in the assessment notice issued 15 December 1998 in the sum of $37,725 correct?
Yes.
(f) If ``Yes'' to (c) or (d) or both or ``No'' to (e) what duty, if any, is payable or what further order, if any, ought to be made by the court for the purposes of determining such duty, if any?
Unnecessary to answer.
(g) How should the costs of and incidental to the stating of this Case and of the appeal be borne and paid?
By the appellants.

Footnotes

^[1] CTM was the promoter of the project and the manager under an Investors Protection Deed until settlement of all apartments: Investors Protection Deed cl 14.1.
^[2] CVA undertook, pursuant to a management and construction agreement, to construct the buildings on the land and subdivide it by a building units plan. It also became the manager under the Investors Protection Deed upon settlement of all of the apartments: Investors Protection Deed cl 14.1.
^[3] Case Stated par 7(a)(i), (b).
^[4] Par 7(i) of the Case Stated. The Custodian, Strata, was, in turn, required to allow CVA to pledge the land and any improvements thereon as security for construction finance: Case Stated par 7(s), and to permit CVA to derive any income from the use and occupation of the apartments until settlement: Case Stated par 7(v).
^[5] Case Stated par 7(m).
^[6] Par 4(a) under the heading ``Conveyance or Transfer'' in Schedule 1.
^[7] Par 4(b) under the heading ``Conveyance or Transfer'' in Schedule 1.
^[8] Proviso (iv) to par (4) under the heading ``Conveyance or Transfer'' in Schedule 1.
^[9] Land Title Act 1994, s 27, s 28, Schedule 2, definition of ``lot''.
^[10] Commissioner of Stamp Duties (NSW) v Pearse (1953) 89 CLR 51 at 60-61.

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